Unassociated Document
As filed
with the Securities and Exchange Commission on December 8, 2009
Registration
No. ___-______
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
GTX
Corp
(Exact
name of registrant as specified in its charter)
Nevada
|
3663
|
98-0493446
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S. Employer
Identification
No.)
|
117
W. 9th
Street, #1214
Los
Angeles, CA 90015
(213)
489-3019
(Address,
including zip code and telephone
number,
including area code, of registrant’s
principal
executive offices)
|
Murray
Williams,
Chief
Financial Officer
GTX
Corp
117
W. 9th Street, #1214
Los
Angeles, California 90015
(213)
489-3019
(Name,
address, including zip code and telephone
number,
including area code, of agent for
service)
|
Copies
to:
Istvan
Benko, Esq.
TroyGould
PC
1801
Century Park East, Suite 1600
Los
Angeles, California 90067
(310)
553-4441
Approximate date of commencement of
proposed sale to public: As soon as practicable after this
registration statement becomes effective.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box: þ
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: ¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (Check one):
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
(Do
not check if a smaller
reporting
company)
|
Smaller
reporting
company
þ
|
CALCULATION
OF REGISTRATION FEE
Title of Class of
Securities to be Registered
|
|
Amount to be
Registered (1)
|
|
|
Proposed Maximum
Offering Price
Per Share (2)
|
|
|
Proposed Maximum
Aggregate Offering
Price
|
|
|
Amount of
Registration Fee
|
|
Common Stock, $0.001 par
value
|
|
|
12,000,000 |
|
|
$ |
0.19 |
|
|
$ |
2,280,000 |
|
|
$ |
127.22 |
|
(1)
|
Pursuant
to Rule 416 under the Securities Act, the shares being registered
hereunder include such indeterminate number of shares of common stock as
may be issuable with respect to the shares being registered hereunder as a
result of stock splits, stock dividends or similar
transactions.
|
(2)
|
Estimated
solely for the purpose of calculating the amount of the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 based upon the last
sale price of the common stock of the Registrant as reported on the OTC
Bulletin Board on December 4, 2009.
|
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The
information in this prospectus is not complete and may be changed. The
securities offered pursuant to this prospectus may not be sold until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
PROSPECTUS SUBJECT TO
COMPLETION, DATED ________
GTX
Corp
12,000,000
SHARES OF COMMON STOCK
This
prospectus relates to the offer and resale of up to 12,000,000 shares of our
common stock, par value $0.001 per share, by the selling stockholder, Dutchess
Opportunity Fund, II, L.P. (formerly known as Dutchess Equity Fund, LP, and
herein referred to as “Dutchess”), which Dutchess has agreed to purchase
pursuant to the investment agreement we entered into with Dutchess on November
16, 2009. Subject to the terms and conditions of the investment
agreement, which we refer to in this prospectus as the “Investment Agreement,”
we have the right to “put,” or sell, up to $10.0 million in shares of our common
stock to Dutchess. This arrangement is sometimes referred to as an
“Equity Line.” For more information on the selling stockholder,
please see the section of this prospectus entitled “Selling Stockholder”
beginning on page 17.
We will
not receive any proceeds from the resale of these shares of common stock offered
by Dutchess. We will, however, receive proceeds from the sale of
shares to Dutchess pursuant to the Equity Line. When we put an amount
of shares to Dutchess, the per share purchase price that Dutchess will pay to us
in respect of such put will be determined in accordance with a formula set forth
in the Investment Agreement. Generally, in respect of each put, Dutchess will
pay us a per share purchase price equal to ninety-four percent (94%) of the
volume weighted average price, or “VWAP,” of our common stock during the five
consecutive trading day period beginning on the trading day immediately
following the date Dutchess receives our put notice.
Dutchess
may sell the shares of common stock from time to time at the prevailing market
price on the Over-the Counter (OTC) Bulletin Board, or on an exchange if our
shares of common stock become listed for trading on such an exchange, or in
negotiated transactions. Dutchess is an “underwriter” within the
meaning of the Securities Act of 1933, as amended (the “Securities Act”), in
connection with the resale of our common stock under the Equity
Line. For more information, please see the section of this prospectus
titled “Plan of Distribution” on pages 50 through 51.
Our
common stock is quoted on the OTC Bulletin Board under the symbol “GTXO”. The
last reported sale price of our common stock on the OTC Bulletin Board on
December 4, 2009 was $0.19 per share.
Investing
in the offered securities involves risks, including those set forth in the “Risk
Factors” section of this prospectus beginning on page 6, as well as those set
forth in any prospectus supplement.
We will
be responsible for all fees and expenses incurred in connection with the
preparation and filing of this registration statement, provided, however, we
will not be required to pay any underwriters’ discounts or commissions relating
to the securities covered by the registration statement.
You
should read this prospectus and any prospectus supplement carefully before you
decide to invest. You should not assume that the information in this prospectus
is accurate as of any date other than the date on the front of this
document.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is __________,
2009.
TABLE
OF CONTENTS
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PAGE
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STATEMENT
REGARDING FORWARD LOOKING STATEMENTS
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1
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PROSPECTUS
SUMMARY
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|
2
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THE
OFFERING
|
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5
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RISK
FACTORS
|
|
6
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USE
OF PROCEEDS
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17
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SELLING
STOCKHOLDER
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17
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OUR
BUSINESS
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18
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EMPLOYEES
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30
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DESCRIPTION
OF PROPERTY
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30
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LEGAL
PROCEEDINGS
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31
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MANAGEMENT
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31
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EXECUTIVE
COMPENSATION
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33
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DIRECTOR
COMPENSATION
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36
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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37
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MANAGEMENT’S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
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39
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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47
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CORPORATE
GOVERNANCE
|
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48
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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48
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DESCRIPTION
OF SECURITIES
|
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49
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PLAN
OF DISTRIBUTION
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50
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EXPERTS
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51
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LEGAL
MATTERS
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52
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CHANGES
AND DISAGREEMENTS WITH ACCOUNTANTS
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52
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COMMISSION’S
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
|
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52
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ADDITIONAL
INFORMATION
|
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53
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PART
II — INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
II-1
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STATEMENT
REGARDING FORWARD LOOKING STATEMENTS
Some of
the statements included in this prospectus and any prospectus supplement contain
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical facts contained in this prospectus and any prospectus
supplement, including statements regarding our plans, objectives, goals,
strategies, future events, capital expenditures, future results, our competitive
strengths, our business strategy and the trends in our industry are
forward-looking statements. The words “believe,” “may,” “could,” “estimate,”
“continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “appear,”
“future,” “likely,” “probably,” “suggest,” “goal,” “potential” and similar
expressions, as they relate to our company, are intended to identify
forward-looking statements. All statements, other than statements of historical
fact, included in this prospectus and any prospectus supplement regarding our
financial position, business strategy and plans or objectives for future
operations are forward looking statements.
Forward-looking
statements reflect only our current expectations. In any forward-looking
statement, where we express an expectation or belief as to future results or
events, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will be achieved or accomplished. Our actual results,
performance or achievements could differ materially from those expressed in, or
implied by, the forward-looking statements due to a number of uncertainties,
many of which are unforeseen, including:
|
·
|
the
uncertain market acceptance of our existing and future
products;
|
|
·
|
our
need for, and the availability of, additional capital in the future to
fund our operations and the development of new
products;
|
|
·
|
rapid
changes in the telecommunications industry and the development of new
wireless technologies that may affect the utility and commercial viability
of our products;
|
|
·
|
the
timing and magnitude of expenditures we may incur in connection with our
ongoing product development
activities;
|
|
·
|
the
success, timing and financial consequences of new strategic relationships
or licensing agreements we may enter into;
and
|
|
·
|
the
level of competition from our existing and from new competitors in our
marketplace.
|
In
addition, you should refer to the “Risk Factors” section of this prospectus
beginning on page 6 for a discussion of other factors that may cause our actual
results to differ materially from those implied by our forward-looking
statements. As a result of these factors, we cannot assure you that the
forward-looking statements in this prospectus and any prospectus supplement will
prove to be accurate. Furthermore, if our forward-looking statements prove to be
inaccurate, the inaccuracy may be material. In light of the significant
uncertainties in these forward-looking statements, you should not regard these
statements as a representation or warranty by us or any other person that we
will achieve our objectives and plans in any specified time frame, if at all.
Accordingly, you should not place undue reliance on these forward-looking
statements. All subsequent written and oral forward looking statements
attributable to us or the persons acting on our behalf are expressly qualified
in their entirety by the applicable cautionary statements. We undertake no
obligation to update any of these forward looking statements, whether as a
result of new information, future events or otherwise, except as required by
applicable law or regulation.
PROSPECTUS
SUMMARY
The
following summary highlights selected information contained in this prospectus.
Because it is a summary, it does not contain all the information you should
consider before investing in our common stock. Before making any investment
decision, you should read the entire prospectus carefully, including the “Risk
Factors” section of this prospectus beginning on page 6, the financial
statements and the notes to the financial statements. Unless stated otherwise,
references in this prospectus to the terms “GTX Corp,” “Company,” “we,” “us,” or
“our” refer to the ongoing operations of GTX Corp, a Nevada corporation
(formerly known as Deeas Resources Inc.) and its wholly-owned subsidiaries,
Global Trek Xploration, LOCiMOBILE, Inc., and Code Amber News Service,
Inc.
The
Company
GTX Corp
provides various interrelated and complimentary products and services in the
Personal Location Services marketplace. The Company develops and integrates
two-way global positioning system (GPS) technologies that seamlessly integrate
with consumer products and enterprise applications. We currently provide
these personal location solutions through hardware devices and platform
licensing in the U.S. and have commenced such sales in Mexico, Guatemala, Israel
and Nepal. We also recently commenced providing personal location
smart phone applications (Apps) in the U.S. and abroad. To date,
these smart phone Apps have been uploaded in 58 countries. Our
Personal Location Services also include the location of missing children through
our Amber Alerts and location and identification products that we have commenced
marketing as part of the Amber Alert platform. We believe that GTX
Corp differentiates itself from other providers of personal location solutions
because of its ability to integrate customizable form factors with dedicated
functionality and personalized interfaces to offer consumers and businesses
localized applications that harness the full spectrum of GPS enabled Personal
Location Services.
We
currently conduct our operations through three wholly-owned subsidiaries that
operate in related sectors of the personal location-based market. In
general, our subsidiaries and operations consist of the following:
|
·
|
Global
Trek Xploration, a California corporation (“GTX California”), currently
offers a global positioning system (GPS) and cellular location platform
that utilizes the latest in miniaturized, low power consumption
technology that enables subscribers to track in real time the whereabouts
of people, pets or high valued assets through GTX California’s
customizable transceiver module, wireless connectivity gateway, smart
phone Apps, middleware and viewing portal. We launched our
initial product, GpVector™, during the third calendar quarter of 2008 on a
limited basis. During 2009, we have entered into various
development and test agreements that, if successfully consummated, are
expected to generate recurring revenues commencing in 2010. In
May 2009 we entered into a platform test agreement with Aetrex Worldwide,
Inc., a global leader in pedorthic and orthotic footwear to embed our
technology into their footwear products, to bring GPS shoes to the senior
citizens market. In September 2009, we entered into a binding
exclusive agreement with Kalika Group, one of Nepal’s largest and most
respected business conglomerates for the deployment of GTX California’s
proprietary GPS technologies and product line into Nepal, India, Pakistan,
Bangladesh, Sri Lanka, Maldives and Bhutan – a marketplace comprising of
an emerging, dynamic economy with a combined population of over 1.5
billion. In October 2009, GTX California entered into an exclusive product
test agreement with MMX to develop an industry first, proprietary GPS
enabled transport container. MMX is a worldwide provider of
specialty critical and security sensitive global transportation and
logistics services.
|
|
·
|
GTX
Corp also owns and operates LOCiMOBILE, Inc., its subsidiary that develops
applications which transform smart phones into real time
two-way GPS personal location transceivers. In April 2009,
LOCiMOBILE, Inc. launched a test version of LOCiMe, the first in a series
of geo-specific applications. In June 2009, LOCiMOBILE, Inc.
launched iLOCi2TM,
its second in a series of geo-specific applications that transform iPhones
into real time, GPS transceivers, utilizing some of the latest
technological breakthroughs of the Apple 3.0 operating
system. LOCiMOBILE, Inc. expects to release these services for
other GPS enabled handsets in the near future. LOCiMOBILE, Inc.
is currently developing more applications for the iPhone and has
begun development on other platforms such as the BlackBerry® and Google
Android® phones.
|
|
·
|
Our
Code Amber News Service, Inc. (“CANS”) subsidiary is dedicated to the
recovery of missing persons and is the leading U.S. and Canadian
syndicator of online Amber Alerts (public notifications of child
abductions), reaching an audience of 1.8 billion through its
web site ticker and point of display feeds presented by retail
merchants, Internet service providers, corporate sponsors, affiliate
partners and Federal, State and Local agencies. CANS, a member
of ONA (Online News Association) and RTNDA (Radio Television News
Directors Association), began selling Code Amber News Service
subscriptions and sponsored links in February 2009. In
September 2009, CANS launched its Code Mobile wireless alert application
and service for the iPhone ®, BlackBerry® and Google Android®
phones. Code Mobile Alerts are distributed to subscribers
in real-time and are sorted by State utilizing the phone’s GPS
capabilities. CANS is able to generate revenues through
advertising that appears on the Code Mobile Alert App and on the CANS
website portal. In November 2009, CANS signed a licensing
agreement with Verytag LLC for the rights to commercialize a secure
digital identification tag that we intend to market and sell under our
brand as the “Code Amber Alertag.” The Altertag identification
tag, which we expect to commence selling in early 2010, will be sold on
the Company’s Code Amber website. CANS has also established a
relationship with Brick House Security pursuant to which we have begun
selling Brick House Security’s child locating products on our Amber Alert
website. CANS and Brick House Security are also working to
jointly develop additional child safety and protection
programs.
|
GTX Corp
has recognized Latin America as a growing and strategically important
market. We have now engaged this market through partnerships and have
hired bilingual sales and technical support staff. In addition, to
make our products accessible in these new markets, we have localized our
software into Spanish. GTX Corp has also commenced selling personal
location solutions in Mexico, Brazil, Colombia, Peru, Chile, Venezuela and
Guatemala, through hardware devices, platform licensing and smart phone Apps. We
expect to see material growth in these territories in 2010 as we increase
marketing efforts and bring on additional customers, and as future customers
become more aware of our technology and its benefits- peace of mind by knowing
where someone or something of high value is in real time through any internet
accessible device.
Summary
Financial Data
Because
this is only a summary of our financial information, it does not contain all of
the financial information that may be important to you. Therefore, you should
carefully read all of the information in this prospectus and any prospectus
supplement, including the financial statements and their explanatory notes and
the section entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” before making a decision to invest in our
common stock. The information contained in the following summary is derived from
our financial statements for the quarters ended September 30, 2009 and 2008 and
the years ended December 31, 2008 and 2007.
|
|
Quarters ended September 30,
|
|
|
Years ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
Revenues
|
|
$ |
126,704 |
|
|
$ |
235,102 |
|
|
$ |
424,166 |
|
|
$ |
26,000 |
|
Cost
of goods sold
|
|
|
60,448 |
|
|
|
193,864 |
|
|
|
334,482 |
|
|
|
- |
|
Net
profit
|
|
|
66,256 |
|
|
|
41,238 |
|
|
|
89,684 |
|
|
|
26,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and professional fees
|
|
|
388,836 |
|
|
|
795,242 |
|
|
|
2,704,775 |
|
|
|
796,881 |
|
Research
and development
|
|
|
5,782 |
|
|
|
112,632 |
|
|
|
371,924 |
|
|
|
240,500 |
|
General
and administrative
|
|
|
115,715 |
|
|
|
133,355 |
|
|
|
402,293 |
|
|
|
280,366 |
|
Operating
expenses
|
|
|
510,333 |
|
|
|
1,041,229 |
|
|
|
3,478,992 |
|
|
|
1,317,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(444,077 |
) |
|
|
(999,991 |
) |
|
|
(3,389,308 |
) |
|
|
(1,291,747 |
) |
Other
income (expense)
|
|
|
6,837 |
|
|
|
14,000 |
|
|
|
(11,975 |
) |
|
|
(35,907 |
) |
Net
loss
|
|
$ |
(437,240 |
) |
|
$ |
(985,991 |
) |
|
$ |
(3,401,283 |
) |
|
$ |
(1,327,654 |
) |
Business
History
GTX Corp
was incorporated in the State of Nevada on April 7, 2006 under its former name
“Deeas Resources Inc.” On March 14, 2008, this company (Deeas
Resources Inc.) acquired all of the outstanding capital stock of Global Trek
Xploration, a California corporation (“GTX California”), in exchange for the
issuance of 18,000,001 shares of GTX Corp common stock (the “Exchange
Transaction”). Shortly thereafter, we changed our name to GTX
Corp.
Although
we acquired GTX California in the Exchange Transaction, for accounting purposes,
the Exchange Transaction was treated as an acquisition of GTX Corp and a
recapitalization of GTX California. Accordingly, the financial
statements contained in this prospectus, and the following description of our
results of operations and financial condition, reflect (i) the operations of GTX
California alone prior to the Exchange Transaction, and (ii) the combined
results of this company and all three of its subsidiaries since the Exchange
Transaction.
Immediately
following the closing of the Exchange Transaction, we raised a total of
$2,000,000 in a private placement through the sale to qualified investors of an
aggregate total of 2,666,668 units (“Units”) at a price of $0.75 per Unit (the
“Financing”). Each Unit consists of one share of common stock and one
warrant (“Warrant”) to purchase one share of common stock at an exercise price
of $1.25 per share. These Warrants had terms of 12 and 18 months and, as a
result, have now expired.
At
closing of the Exchange Transaction, pursuant to the Exchange Agreement, we also
converted a $1,000,000 bridge loan, plus accrued and unpaid interest, made by
Jupili Investment S.A. to GTX California (“Bridge Loan”) into Units at a
conversion price of $0.75 per Unit, based upon the same terms and conditions as
the Financing. Thus, concurrently with the Exchange Transaction, we also issued
to Jupili 1,374,334 shares of common stock and warrants to purchase an aggregate
of 1,374,334 shares of our common stock. These warrants have now
expired.
In May
2008 we completed a second private placement (the “Additional Financing”) of
1,732,000 units (“Additional Units”) of our securities. The
Additional Units were sold at a price of $1.00 per Additional Unit for aggregate
proceeds of $1,732,000. Each Additional Unit consisted of one common share and
one share purchase warrant (“Additional Warrant”). Each Additional
Warrant is exercisable at an exercise price of $1.50 per share for a three-year
term.
Our
Principal Executive Offices
Our
principal executive offices are located at 117 W. 9th Street,
Suite 1214, Los Angeles, California 90015. Our telephone number is
(213) 489-3019 and our website address is
www.GTXCorp.com. Information included or referred to on our website
is not a part of this prospectus.
THE
OFFERING
This
prospectus relates to the resale of up to 12,000,000 shares of our common stock
by Dutchess Opportunity Fund, II, L.P. (formerly known as Dutchess Equity Fund,
LP, and herein referred to as “Dutchess”). Dutchess will acquire our
common stock pursuant to the terms and conditions of the Investment
Agreement.
The
Investment Agreement with Dutchess provides that Dutchess is committed to
purchase from us, from time to time, up to $10,000,000 of our common stock over
the course of thirty-six months. We may draw on the facility from
time to time, as and when we determine appropriate in accordance with the terms
and conditions of the Investment Agreement. When we “put”, or sell,
an amount of shares to Dutchess, the per share purchase price that Dutchess will
pay to us in respect of such put will be determined in accordance with a formula
set forth in the Investment Agreement. Generally, in respect of each
put, Dutchess will pay us a per share purchase price equal to ninety-four
percent (94%) of the VWAP of our common stock during the five consecutive
trading day period beginning on the trading day immediately following our put
notice. The maximum number of shares issuable by us and purchasable
by Dutchess under the Investment Agreement is 12,000,000.
Securities
Offered
|
Up
to 12,000,000 shares of our common stock by Dutchess, the selling
stockholder.
|
|
|
Offering
Price
|
To
be determined by the prevailing market price for the shares at the time of
the sale.
|
|
|
Use
of Proceeds
|
We
will not receive any proceeds from the sale of shares by the selling
stockholder. However, we will receive proceeds from the shares
of our common stock that we sell to Dutchess under the Equity Line. See
“Use of Proceeds.”
|
|
|
Risk
Factors
|
An
investment in our common stock involves a high degree of risk. See “Risk
Factors” beginning on page 6 and the other information in this prospectus
for a discussion of the factors you should consider before you decide to
invest in the shares of common stock offered hereby.
|
OTC
Bulletin Board Symbol
|
GTXO
|
The total
number of shares of our common stock outstanding as of December 7, 2009 is
39,466,540, and excludes:
|
·
|
12,000,000
shares of common stock reserved for issuance upon puts to Dutchess
pursuant to the Equity Line;
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4,412,500
shares of common stock issuable upon exercise of outstanding stock options
at exercise prices ranging form $0.06 to $1.93 (a weighted average
exercise price of $0.60 per share);
and
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1,955,750
additional shares of common stock reserved for issuance under various
outstanding warrant agreements, at exercise prices ranging from $0.75 to
$1.50.
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Unless
otherwise specifically stated, information throughout this prospectus does not
assume the exercise of outstanding options or warrants to purchase shares of our
common stock.
RISK
FACTORS
In
addition to the other information included in this prospectus and any prospectus
supplement, the following factors should be carefully considered in evaluating
our business, financial position and future prospects. Any of the following
risks, either alone or taken together, could materially and adversely affect our
business, financial position or future prospects. If one or more of these or
other risks or uncertainties materialize, or if our underlying assumptions prove
to be incorrect, our actual results may vary materially from what we have
projected. There may be additional risks that we do not presently know or that
we currently believe are immaterial which could also materially adversely affect
our business, financial position or future prospects.
Risks
Related to Our Business
We
have had operating losses since formation and expect to continue to incur net
losses for the near term.
Although
we were formed in 2002, we have only recently commenced selling our products
and, accordingly, have a limited operating history. As of September
30, 2009, we had an accumulated deficit of approximately
$9,001,930. We have reported net losses of approximately $3,401,000
and $1,328,000 for the fiscal years ended December 31, 2008 and 2007,
respectively. We received the first order for our products in
September 2008, and we have only generated total revenues of $450,000 during the
past two fiscal years. Unless our sales increase substantially in the
near future, we anticipate that we will continue to incur net losses in the near
term, and we may never be able to achieve profitability. In order to
achieve profitable operations we need to significantly increase our revenues
from the sales of product and licensing fees. We cannot be
certain that our business will ever be successful or that we will generate
significant revenues and become profitable.
We
have no experience or extensive history of operations or sales.
To date,
we have only introduced one gpVector™ product that has been sold to a small
number of customers. Accordingly, our business model has not yet been
tested in the market and we have no operating or sales history on which an
investor can evaluate our operations and prospects. In addition, our
LOCi Mobile™ product, and its upgrade, were commercially released in mid-2009
and, accordingly, have not had substantial market
penetration. Because of the limited sales of our products to date, we
have no data to support our belief that our products will be accepted by the
market and will be able to sustain our business. Our business plan is
heavily dependent upon a number of other products that we have not yet completed
and/or commercially released. Accordingly, we are unable to
accurately forecast the market acceptance of our existing and future
products. As a result, an investment in our company is highly
speculative and no assurance can be given that the stockholders will realize any
return on their investment or that they will not lose their entire
investment.
The
nature of our business is speculative and dependent on a number of variables
beyond our control that cannot be reliably ascertained in advance.
The
revenues and profits of an enterprise involved in the location based business
are generally dependent upon many variables. Our customer appeal
depends upon factors which cannot be reliably ascertained in advance and over
which we have no control, such as unpredictable critic reviews and appeal to the
public. As with any relatively new business enterprise operating in a
specialized and intensely competitive market, we are subject to many business
risks which include, but are not limited to, unforeseen marketing difficulties,
excessive research and development expenses, unforeseen negative publicity,
competition, product liability issues, manufacturing and logistical
difficulties, and lack of operating experience. Many of the risks may
be unforeseeable or beyond our control. There can be no assurance
that we will successfully implement our business plan in a timely or effective
manner, that we will be able to generate sufficient interest in our products, or
that we will be able to market and sell enough products and services to generate
sufficient revenues to continue as a going concern.
Our
wireless location products and technology are new and may not be accepted in the
market, which would dramatically alter our financial results.
We have
had only a limited release of two of our planned wireless locator products in
the market, and are currently a party to three product development and test
agreements to determine if our products can successfully be sold in other
territories (i.e. India, Pakistan, Israel, Nepal, etc.) and incorporated into
other consumer and commercial products (such as, for example, in senior
citizens’ shoes, and in proprietary GPS enabled transport containers). There can
be no assurances that consumer or commercial demand will meet, or even approach,
our expectations. In addition, our pricing and marketing strategies may not be
successful. Lack of customer demand, a change in marketing strategy and changes
to our pricing models could dramatically alter our financial
results.
In
order for our products to be successful, we need to establish market recognition
quickly, following the introduction of our products
We
believe it is imperative to our success that we obtain significant market share
for our products quickly, before other competitors establish a significant
market share. We believe that, if a market for products like ours
develops, an early entrant that gains significant market share will dominate the
market, significantly reducing opportunities for competitors. We have
limited experience conducting marketing campaigns, and we may fail to generate
significant interest. We cannot be certain that we will be able to
expand our brand and capitalize on the commercial acceptance of our
products.
We
may encounter manufacturing or assembly problems for our products, which would
adversely affect our results of operations and financial condition.
Our
GpVectorTM
product is a new product that we recently introduced. However,
to date, we have only manufactured a limited number of that
product. In addition, we are continually redesigning and enhancing
that product and are designing new products based on that technology that we
hope to manufacture and market in the near future. The manufacture
and assembly of our products involves complex and precise processes, some of
which have subcontracted to other companies and consultants. To date, we have
manufactured a limited quantity of products and so we do not yet know whether we
will encounter any serious problems in the production of larger quantities of
our existing or new products. Any significant problems in
manufacturing, assembling or testing our products could delay the sales of our
products and have an adverse impact on our business and prospects. The
willingness of manufacturers to make the product, or lack of availability of
manufacturing capacity, may have an adverse impact on the availability of our
products and on our ability sell our products. Manufacturing
difficulties will harm our ability to compete and adversely affect our results
of operations and financial condition, and may hinder our ability to grow our
business as we expect.
We
may have substantial future cash requirements but no assured financing source to
meet such requirements.
We
currently have sufficient cash and cash equivalents to support our projected
operating needs for the current fiscal year. In addition, if we need
additional funds, we may be able to obtain such additional funds under the
Equity Line provided by Dutchess. However, with limited revenues from
sales of our products and services, our business plan that calls for us to
continue to improve our products, create new products, and more aggressively
market our existing products will require us to obtain additional working
capital. Our future capital requirements will depend on many factors,
including continued progress in product enhancements and new product development
programs, the magnitude of these programs, the time and costs involved in
completion of technological, manufacturing and market requirements, and the cost
of finalizing licensing agreements to produce licensing revenues. We
do not know whether additional financing will be available when needed, or on
terms favorable to us or our stockholders – particularly in light of current
economic conditions which have significantly impacted the availability of
credit, and other sources of capital. We may raise necessary funds
through public or private equity offerings, debt financings or additional
corporate collaboration and licensing arrangements. To the extent we
raise additional capital by issuing equity securities, our stockholders will
experience further dilution. If we raise funds through debt
financings, we may become subject to restrictive covenants. To the
extent that we raise additional funds through collaboration and licensing
arrangements, we may be required to relinquish some rights to our technologies
or products, or grant licenses on terms that are not favorable to
us.
If
adequate funds are not available, we may be required to delay, scale-back or
eliminate our product enhancement and new product development programs or obtain
funds through collaborative partners or others that may require us to relinquish
rights to certain of our potential products that we would not otherwise
relinquish. There can be no assurance that additional financing will be
available on acceptable terms or at all, if and when required.
We
currently depend upon one manufacturer for some of the components of our
principal products, and if we encounter problems with this manufacturer there is
no assurance that we could obtain products from other manufacturers without
significant disruptions to our business.
We expect
that most of the components and subassemblies of our gpVector™ module will be
initially manufactured for us by only one manufacturer. Although we could
arrange for other manufacturers to supply these components and subassemblies,
there is no assurance that we could do so without undue cost, expense and
delay. If our sole manufacturers are unable to provide us with
adequate supplies of high-quality components on a timely and cost-efficient
basis, our operations will be disrupted and our net revenue and profitability
will suffer. Moreover, if those manufacturers cannot consistently
produce high-quality products that are free of defects, we may experience a high
rate of product returns, which would also reduce our profitability and may harm
our reputation and brand. Although we believe that we could locate
alternate contract manufacturers, our operations would be impacted until
alternate manufacturers are found.
Our
markets are highly competitive, and our failure to compete successfully would
limit our ability to sell our products, attract and retain customers and grow
our business.
Competition
in the wireless location services market in the U.S. and abroad is intense. The
adoption of new technology in the communications industry likely will intensify
the competition for improved wireless location technologies. The wireless
location services market has historically been dominated by large companies,
such as Siemens AG and LoJack Corporation. In addition, a number of
other companies such as Trimble Navigation, Verizon, FireFly, Disney, Mattel,
Digital Angel Corporation, Location-Based Technologies, Inc. and WebTech
Wireless Inc. either have announced plans for new products or have commenced
selling products that are similar to our wireless location products, and new
competitors are emerging both in the U.S. and abroad to compete with our
wireless location services products. Due to the rapidly evolving
markets in which we compete, additional competitors with significant market
presence and financial resources may enter those markets, thereby further
intensifying competition, adversely affecting our sales, and adversely affecting
our business and prospects.
We
expect to rely heavily on a few licensees of our technology. The loss
of, or a significant reduction in, orders from these major customers could have
a material adverse effect on our financial condition and results of
operations.
Our
current business model assumes that GTX California will license its technologies
to only a few companies who will incorporate our technologies into products that
they manufacture and market. Therefore, our revenues in the next
several years could be heavily dependent on licenses that we may grant to a
limited number of major customers in a few business
segments. Accordingly, the loss of, or a significant reduction in,
orders from these major customers could have a material adverse effect on our
financial condition and results of operations.
We
may not be successful in developing our new products and services.
The
market for telecommunications based products and services is characterized by
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards. These market
characteristics are exacerbated by the emerging nature of this market and the
fact that many companies are expected to introduce continually new and
innovative products and services. Our success will depend partially
on our ability to introduce new products, services and technologies continually
and on a timely basis and to continue to improve the performance, features and
reliability of our products and services in response to both evolving demands of
prospective customers and competitive products.
There can
be no assurance that any of our new or proposed products or services will
maintain the market acceptance already established. Our failure to
design, develop, test, market and introduce new and enhanced products,
technologies and services successfully so as to achieve market acceptance could
have a material adverse effect upon our business, operating results and
financial condition.
There can
be no assurance that we will not experience difficulties that could delay or
prevent the successful development, introduction or marketing of new or enhanced
products and services, or that our new products and services will adequately
satisfy the requirements of prospective customers and achieve significant
acceptance by those customers. Because of certain market
characteristics, including technological change, changing customer needs,
frequent new product and service introductions and evolving industry standards,
the continued introduction of new products and services is
critical. Delays in the introduction of new products and services may
result in customer dissatisfaction and may delay or cause a loss of
revenue. There can be no assurance that we will be successful in
developing new products or services or improving existing products and services
that respond to technological changes or evolving industry
standards.
Additionally,
there can be no assurance that we will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
or improved products and services, or that our new products and services will
adequately satisfy the requirements of prospective customers and achieve
acceptance by those customers. In addition, new or enhanced products
and services introduced by us may contain undetected errors that require
significant design modifications. This could result in a loss of
customer confidence which could adversely affect the use of our products, which
in turn, could have a material adverse effect upon our business, results of
operations or financial condition. If we are unable to develop and
introduce new or improved products or services in a timely manner in response to
changing market conditions or customer requirements, our business, operating
results and financial condition will be materially adversely
affected.
Our
software products are complex and may contain unknown defects that could result
in numerous adverse consequences, resulting in costly litigation or diverting
management's attention and resources.
Complex
software products such as those associated with our products often contain
latent errors or defects, particularly when first introduced, or when new
versions or enhancements are released. We have experienced and addressed errors
and defects in the software associated with our GpVectorTM
product, but do not believe these errors will have a material negative effect in
the future on the functionality of the GpVectorTM
product. However, there can be no assurance that, despite testing,
additional defects and errors will not be found in the current version, or in
any new versions or enhancements of this software or any of our products, any of
which could result in damage to our reputation, the loss of sales, a diversion
of our product development resources, and/or a delay in market acceptance, and
thereby materially adversely affecting our business, operating results and
financial condition. Furthermore, there can be no assurance that our products
will meet all of the expectations and demands of our customers. The failure of
our products to perform to customer expectations could give rise to warranty
claims. Any of these claims, even if not meritorious, could result in costly
litigation or divert management's attention and resources. Any product liability
insurance that we may carry could be insufficient to protect us from all
liability that may be imposed under any asserted claims.
Until
recently, our operations have been devoted to research and development and we
have not launched any of our products to a large number of customers, making it
difficult to evaluate our future prospects and results of
operations.
GTX
California, formed in 2002, dedicated its resources to research and development
until recently, and has only launched one gpVector™ product to a limited number
of customers. Also, we have only commercially released our LOCi
Mobile™ system. Accordingly, you should consider our future prospects
in light of the risks and uncertainties experienced by early stage companies in
evolving industries. Some of these risks and uncertainties relate to our ability
to:
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offer
new and innovative products to attract and retain a larger customer
base;
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increase
awareness of our brand and continue to develop user and customer
loyalty;
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respond
to competitive market conditions;
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manage
risks associated with intellectual property
rights;
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maintain
effective control of our costs and
expenses;
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raise
sufficient capital to sustain and expand our
business;
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attract,
retain and motivate qualified personnel;
and
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upgrade
our technology to support additional research and development of new
products.
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If we are
unsuccessful in addressing any of these risks and uncertainties, our business
may be materially and adversely affected.
Our
sales are uncertain and we can expect fluctuations in revenues and
expenses.
Since we
filled our first purchase order in September 2008 with the delivery of
approximately 900 gpVector™ units, we have had only sporadic and minor
sales. We have recently signed three product development and test
agreements pursuant to which we and our customers are developing and testing
products for release in 2010 in various markets and territories. If
these tests are successfully completed, we will, from time to time, receive
payments under these agreements. The amount of revenues we receive,
if any, will fluctuate and depend on our customer’s ability to sell the products
that contain our technology. Accordingly, it is uncertain if and when
we will receive future orders from our current and potential future
customers. Until we enter into other license agreements that provide
us with regular royalties or subscription revenues, or until our LOCi Mobile™
system has been uploaded by a significant number of users who pay our monthly
usage fees, our sales will be sporadic and dependent upon sporadic and
unpredictable orders from a limited number of customers.
Our
expense levels in the future will be based, in large part, on our expectations
regarding future revenue, and as a result net income/loss for any quarterly
period in which material orders are delayed could vary
significantly. In addition, our costs and expenses may vary from
period to period because of a variety of factors, including our research and
development costs, our introduction of new products and services, cost increases
from third-party service providers or product manufacturers, production
interruptions, changes in marketing and sales expenditures, and competitive
pricing pressures.
Fluctuations
in operating results could adversely affect the market price of our common
stock.
Because
our revenues and costs may fluctuate significantly, investors should not rely on
quarter-to-quarter comparisons of our results of operations or the pro forma
financial information as an indication of future performance. It is possible
that, in future periods, results of operations will differ from the estimates of
public market analysts and investors. Such a discrepancy could cause the market
price of our common stock to decline significantly.
There
are risks of international sales and operations.
We
anticipate that revenue from the sale of our products and services may be
derived from customers located outside the United States. As such, a
portion of our sales and operations could be subject to tariffs and other
import-export barriers, currency exchange risks and exchange controls, foreign
product standards, potentially adverse tax consequences longer payment cycles,
problems in collecting accounts receivable, political instability, and
difficulties in staffing and managing foreign operations. Although we
intend to monitor our exposure to currency fluctuations, there can be no
assurance that exchange rate fluctuations will not have an adverse effect on our
results of operations or financial condition. In the future, we could
be required to sell our products and services in other currencies, which would
make the management of currency fluctuations more difficult and expose our
business to greater risks in this regard.
Our
products may be subject to numerous foreign government standards and regulations
that are continually being amended. Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that we will be able to comply with foreign government standards and
regulations, or changes thereto, or that it will be cost effective for us to
redesign our products to comply with such standards or
regulations. Our inability to design or redesign products to comply
with foreign standards could have a material adverse effect on our business,
financial condition and results of operations.
Because
of the global nature of the telecommunications business, it is possible that the
governments of other states and foreign countries might attempt to regulate our
transmissions or prosecute us for violations of their laws. There can
be no assurance that violations of local laws will not be alleged by state or
foreign governments, that we might not unintentionally violate such law, or that
such laws will not be modified, or new laws enacted, in the future.
Any of
the foregoing factors could have a material adverse effect on our business,
results of operations, and financial condition.
If
we fail to develop and maintain an effective system of internal controls, we may
not be able to accurately report our financial results or prevent
fraud. As a result, our current and potential stockholders could lose
confidence in our financial reports, which could harm our business and the
trading price of our common stock.
Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002
requires us to evaluate and report on our internal controls over financial
reporting and may in the future require our independent registered public
accounting firm to annually attest to our evaluation, as well as issue their own
opinion on our internal controls over financial reporting. The
process of implementing and maintaining proper internal controls and complying
with Section 404 is expensive and time consuming. We cannot be
certain that the measures we will undertake will ensure that we will maintain
adequate controls over our financial processes and reporting in the future.
Furthermore, if we are able to rapidly grow our business, the internal controls
that we will need will become more complex, and significantly more resources
will be required to ensure our internal controls remain effective. Failure to
implement required controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to fail to meet our
reporting obligations. If we or our auditors discover a material
weakness in our internal controls, the disclosure of that fact, even if the
weakness is quickly remedied, could diminish investors’ confidence in our
financial statements and harm our stock price. In addition,
non-compliance with Section 404 could subject us to a variety of administrative
sanctions, including the suspension of trading, ineligibility for future listing
on one of the Nasdaq Stock Markets or national securities exchanges, and the
inability of registered broker-dealers to make a market in our common stock,
which may reduce our stock price.
We
may suffer from product liability claims.
Faulty
operation of our products may result in product liability claims brought against
us. Regardless of the merit or eventual outcome, product liability
claims may materially adversely affect our business and further result
in:
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decreased
demand for our products or withdrawal of the products from the
market;
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injury
to our reputation and significant media
attention;
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costs
of litigation; and
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substantial
monetary awards to plaintiffs.
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We have
purchased annual product liability insurance with liability limits of $1,000,000
per occurrence and $2,000,000 in the aggregate. This coverage may not
be sufficient to fully protect us against product liability
claims. We intend to expand our product liability insurance coverage
as sales of our products expand. Our inability to obtain sufficient
product liability insurance at an acceptable cost to protect against product
liability claims could prevent or limit the commercialization of our products
and expose us to liability in excess of our coverage.
Our
ability to compete could be jeopardized and our business seriously compromised
if we are unable to protect ourselves from third-party challenges or
infringement of the proprietary aspects of the wireless location products and
technology we develop.
Our
products utilize a variety of proprietary rights that are critical to our
competitive position. Because the technology and intellectual property
associated with our wireless location products are evolving and rapidly
changing, our current intellectual property rights may not adequately protect us
in the future. We rely on a combination of patent, copyright, trademark and
trade secret laws and contractual restrictions to protect the intellectual
property utilized in our products. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our products or technology. In addition, monitoring unauthorized use of
our products is difficult and we cannot be certain the steps we have taken will
prevent unauthorized use of our technology. Also, it is possible that
no additional patents or trademarks will be issued from our currently pending or
future patent or trademark applications. Because legal standards relating to the
validity, enforceability and scope of protection of patent and intellectual
property rights are uncertain and still evolving, the future viability or value
of our intellectual property rights is uncertain. Moreover, effective patent,
trademark, copyright and trade secret protection may not be available in some
countries in which we distribute or anticipate distributing our products.
Furthermore, our competitors may independently develop similar technologies that
limit the value of our intellectual property, design
or patents. In addition, third parties may at some point
claim certain aspects of our business infringe their intellectual property
rights. While we are not currently subject to nor aware of any such claim, any
future claim (with or without merit) could result in one or more of the
following:
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Significant
litigation costs;
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Diversion
of resources, including the attention of
management;
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Our
agreement to pay certain royalty and/or licensing
fees;
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Cause
us to redesign those products that use such technology;
or
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Cessation
of our rights to use, market, or distribute such
technology.
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Any of
these developments could materially and adversely affect our business, results
of operations and financial condition. In the future, we may also need to file
lawsuits to enforce our intellectual property rights, to protect our trade
secrets, or to determine the validity and scope of the proprietary rights of
others. Whether successful or unsuccessful, such litigation could result in
substantial costs and diversion of resources. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.
We
depend on our key personnel to manage our business effectively in a rapidly
changing market. If we are unable to retain our key employees, our
business, financial condition and results of operations could be
harmed.
Our
future success depends to a significant degree on the skills, efforts and
continued services of our executive officers and other key engineering,
manufacturing, operations, sales, marketing and support personnel. If
we were to lose the services of one or more of our key executive officers or
other key engineering, manufacturing, operations, sales, marketing and support
personnel, we may not be able to grow our business as we expect, and our ability
to compete could be harmed, adversely affecting our business and
prospects.
Our
products depend on continued availability of GPS and cellular wireless
telecommunications systems.
Our
products use existing GPS and cellular wireless telecommunications systems to
identify the position of our products. Any temporary or permanent
change in the availability of these systems, or any material change in the
existing infrastructure and our ability to access those systems, would
materially and adversely affect our business, operating results and financial
condition may be materially and adversely affected.
Rapid
technological change in our market and/or changes in customer requirements could
cause our products to become obsolete or require us to redesign our products,
which would have a material adverse affect on our business, operating results
and financial condition.
We expect
that the market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, uncertain product life
cycles, changing customer demands and evolving industry standards, any of which
can render existing products obsolete. We believe that our future
success will depend in large part on our ability to develop new and effective
products in a timely manner and on a cost effective basis. As a result of the
complexities inherent in our product, major new products and product
enhancements can require long development and testing periods, which may result
in significant delays in the general availability of new releases or significant
problems in the implementation of new releases. In addition, if we or our
competitors announce or introduce new products our current or future customers
may defer or cancel purchases of our products, which could materially adversely
affect our business, operating results and financial condition. Our failure to
develop successfully, on a timely and cost effective basis, new products or new
product enhancements that respond to technological change, evolving industry
standards or customer requirements would have a material adverse affect on our
business, operating results and financial condition.
Changes
in the government regulation of our wireless location products or wireless
carriers could harm our business.
Our
products, wireless carriers and other components of the communications industry
are subject to domestic government regulation by the Federal Communications
Commission (the “FCC”) and international regulatory bodies. These regulatory
bodies could enact regulations that affect our products or the service providers
which distribute our products, such as limiting the scope of the service
providers' market, capping fees for services provided by them or imposing
communication technology standards which impact our products. Changes
in these regulations could affect our products and, thereby, adversely affect
our business and operations.
Future
acquisitions or strategic investments may not be successful and may harm our
operating results.
As part
of our strategy, we have in the past acquired or established smaller businesses,
and we may do so in the future. For example, we recently
established our LOCiMOBILE, Inc. subsidiary and recently purchased our Code
Amber News Service, Inc. subsidiary. Future acquisitions or strategic
investments could have a material adverse effect on our business and operating
results because of:
• The
assumption of unknown liabilities, including employee
obligations. Although we normally conduct extensive legal and
accounting due diligence in connection with our acquisitions, there are many
liabilities that cannot be discovered, and which liabilities could be
material.
• We
may become subject to significant expenses related to bringing the financial,
accounting and internal control procedures of the acquired business into
compliance with U.S. GAAP financial accounting standards and the Sarbanes Oxley
Act of 2002.
• Our
operating results could be impaired as a result of restructuring or impairment
charges related to amortization expenses associated with intangible
assets.
• We
could experience significant difficulties in successfully integrating any
acquired operations, technologies, customers’ products and businesses with our
existing operations.
• Future
acquisitions could divert substantial capital and our management’s
attention.
• We
may not be able to hire the key employees necessary to manage or staff the
acquired enterprise operations.
Our
executive officers and directors have the ability to significantly influence
matters submitted to our stockholders for approval.
Our
executive officers and directors, in the aggregate, beneficially own shares
representing approximately 19.9% of our common stock. Beneficial ownership
includes shares over which an individual or entity has investment or voting
power and includes shares that could be issued upon the exercise of options and
warrants within 60 days after the date of determination. On matters submitted to
our stockholders for approval, holders of our common stock are entitled to one
vote per share. If our executive officers and directors choose to act together,
they would have significant influence over all matters submitted to our
stockholders for approval, as well as our management and affairs. For example,
these individuals, if they chose to act together, would have significant
influence on the election of directors and approval of any merger, consolidation
or sale of all or substantially all of our assets. This concentration of voting
power could delay or prevent an acquisition of our company on terms that other
stockholders may desire.
Risks
Related to our Capital Stock and this Offering
We
are registering the resale of a maximum of 12,000,000 shares of common stock
which may be issued to Dutchess under the Equity Line. The resale of
such shares by Dutchess could depress the market price of our common
stock.
We are
registering the resale of a maximum of 12,000,000 shares of common stock under
the registration statement of which this prospectus forms a part. We
may issue up to that number of shares to Dutchess pursuant to the Equity
Line. The sale of these shares into the public market by Dutchess
could depress the market price of our common stock. As of December 7, 2009,
there were 39,466,540 shares of our common stock issued and
outstanding.
Existing
stockholders could experience substantial dilution upon the issuance of common
stock pursuant to the Equity Line.
Our
Equity Line with Dutchess contemplates our issuance of up to 12,000,000 shares
of our common stock to Dutchess, subject to certain restrictions and
obligations. If the terms and conditions of the Equity Line are
satisfied, and we choose to exercise our put rights to the fullest extent
permitted and sell 12,000,000 shares of our common stock to Dutchess, our
existing stockholders’ ownership will be diluted by such sales.
Dutchess
will pay less than the then-prevailing market price for our common stock under
the Equity Line.
The
common stock to be issued to Dutchess pursuant to the Investment Agreement will
be purchased at a 6% discount to the volume weighted average price (VWAP) of our
common stock during the five consecutive trading day period beginning on the
trading day immediately following the date of delivery of a put notice by us to
Dutchess, subject to certain exceptions. Dutchess has a financial
incentive to sell our common stock upon receiving the shares to realize the
profit equal to the difference between the discounted price and the market
price. If Dutchess sells the shares, the price of our common stock could
decrease.
We
may not be able to access sufficient funds under the Equity Line when
needed.
Our
ability to put shares to Dutchess and obtain funds under the Equity Line is
limited by the terms and conditions in the Investment Agreement, including
restrictions on when we may exercise our put rights, restrictions on the amount
we may put to Dutchess at any one time, which is determined in part by the
trading volume of our common stock, and a limitation on Dutchess’s obligation to
purchase if such purchase would result in Dutchess beneficially owning more than
4.99% of our common stock. Accordingly, the Equity Line may be
available to satisfy all of our funding needs.
Our
common stock is thinly traded and the price of our common stock may be
negatively impacted by factors that are unrelated to our
operations.
Our
common stock is currently quoted on the OTC Bulletin Board. Trading of our stock
through the OTC Bulletin Board is frequently thin and highly volatile. The
market price of our common stock could fluctuate substantially due to a variety
of factors, including market perception of our ability to achieve our business
objectives, the results of our clinical trials, trading volume in our common
stock, changes in general conditions in the economy and the financial markets,
or other developments which affect us or our industry. In addition, the stock
market is subject to extreme price and volume fluctuations. This volatility has
had a significant effect on the market price of securities issued by many
companies for reasons unrelated to their operating performance and could have
the same effect on our common stock.
When
we issue additional shares in the future, it will likely result in the dilution
of our existing stockholders.
Our
certificate of incorporation authorizes the issuance of up to 2,071,000,000
shares of common stock with a $0.001 par value and 10,000,000 preferred shares
with a par value of $0.001, of which 39,466,540 common shares were issued and
outstanding as of December 7, 2009. From time to time we may increase
the number of shares available for issuance in connection with our equity
compensation plans. Our board of directors may fix and determine the
designations, rights, preferences or other variations of each class or series
within each class of preferred stock and may choose to issue some or all of such
shares to provide additional financing or acquire more businesses in the
future.
Moreover,
as of December 7, 2009, we had warrants and options to purchase an aggregate of
6,368,250 shares of our common stock, the exercise of which will further
increase the number of outstanding shares. The issuance of any shares
for acquisition, licensing or financing efforts, upon conversion of any
preferred stock or exercise of warrants and options, pursuant to our equity
compensation plans, or otherwise may result in a reduction of the book value and
market price of the outstanding shares of our common stock. If we issue any such
additional shares, such issuance will cause a reduction in the proportionate
ownership and voting power of all current stockholders.
Financial
Industry Regulatory Authority (FINRA) sales practice requirements may also limit
a stockholder’s ability to buy and sell our common stock.
FINRA has
adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.
We
have never paid dividends on our common stock and do not anticipate paying any
in the foreseeable future.
We have
never declared or paid a cash dividend on our common stock and we do not expect
to pay cash dividends in the foreseeable future. If we do have
available cash, we intend to use it to grow our business. Our payment
of any future dividends will be at the discretion of our board of directors
after taking into account various factors, including but not limited to our
financial condition, operating results, cash needs, growth plans and the terms
of any credit agreements that we may be a party to at that time. In addition,
our ability to pay dividends on our common stock may be limited by Nevada
corporate law. Accordingly, investors must rely on sales of their common stock
after price appreciation, which may never occur, as the only way to realize a
return on their investment. Investors seeking cash dividends should not purchase
our common stock.
Sales
of a substantial number of shares of our common stock into the public market may
result in significant downward pressure on the price of our common stock and
could affect your ability to realize the current trading price of our common
stock.
Sales of
a substantial number of shares of our common stock in the public market could
cause a reduction in the market price of our common stock. To the extent
stockholders sell shares of common stock, the price of our common stock may
decrease due to the additional shares of common stock in the
market.
Any
significant downward pressure on the price of our common stock as stockholders
sell their shares could encourage short sales of our common stock. Any such
short sales could place further downward pressure on the price of our common
stock.
The
elimination of monetary liability against our directors, officers and employees
under Nevada law and the existence of indemnification rights to our directors,
officers and employees may result in substantial expenditures by us and may
discourage lawsuits against our directors, officers and employees.
Our
Amended and Restated Bylaws contain specific provisions that eliminate the
liability of our directors for monetary damages to our company and stockholders,
and permit indemnification of our directors and officers to the extent provided
by Nevada law. We may also have contractual indemnification obligations under
our employment agreements with our officers. The foregoing indemnification
obligations could result in our company incurring substantial expenditures to
cover the cost of settlement or damage awards against directors and officers,
which we may be unable to recoup. These provisions and resultant
costs may also discourage our company from bringing a lawsuit against directors
and officers for breaches of their fiduciary duties, and may similarly
discourage the filing of derivative litigation by our stockholders against our
directors and officers even though such actions, if successful, might otherwise
benefit our company and stockholders.
Past
activities of our company and its affiliates may lead to future liability for
our company.
Prior to
our acquisition of GTX California in 2008, we engaged in businesses unrelated to
our current operations. Although certain previously controlling
stockholders of our company are providing certain indemnifications against any
loss, liability, claim, damage or expense arising out of or based on any breach
of or inaccuracy in any of their representations and warranties made regarding
such acquisition, any liabilities relating to such prior business against which
we are not completely indemnified may have a material adverse effect on our
company.
USE
OF PROCEEDS
We will
not receive any proceeds from the resale of our common stock offered by
Dutchess. However, we will receive proceeds from the sale of our
common stock to Dutchess pursuant to the Investment Agreement. The
proceeds from our exercise of the put option pursuant to the Investment
Agreement will be used to support the commercialization of our current and
future products, to fund our research and development activities, for expansion
and maintenance of our intellectual property portfolio and for general working
capital needs, or for other purposes that our board of directors, in its good
faith, deems to be in our best interest
SELLING
STOCKHOLDER
The
information provided in the table and discussions below has been obtained from
Dutchess, the selling stockholder. The selling stockholder may have sold,
transferred or otherwise disposed of, or may sell, transfer or otherwise dispose
of, at any time or from time to time since the date on which it provided the
information regarding the shares, all or a portion of the shares of common stock
beneficially owned in transactions exempt from the registration requirements of
the Securities Act. As used in this prospectus, “selling stockholder” includes
the person or persons listed in the table below, and the donees, pledgees,
transferees or other successors in interest selling shares of our common stock
received from the named selling stockholder as a gift, pledge, distribution or
other non sale-related transfer.
Beneficial
ownership is determined in accordance with Rule 13d-3(d) promulgated by the
Securities and Exchange Commission under the Exchange Act. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to the shares, subject to community property laws where
applicable.
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|
Beneficial Ownership of
Common Shares Prior to
this Offering
|
|
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Number of
Shares to be
Sold under
|
|
|
Beneficial Ownership of
Common Shares After this
Offering
|
|
Selling Stockholder
|
|
Number of
Shares
|
|
|
Percent of
Class
|
|
|
this
Prospectus
|
|
|
Number of
Shares(1)
|
|
|
Percent of
Class
|
|
Dutchess Opportunity Fund,
II, L.P. (2)
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____
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____
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12,000,000 |
(3) |
|
|
____
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____
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(1)
|
These
numbers assume the selling stockholder sells all of its shares being
offered pursuant to this
prospectus.
|
(2)
|
Dutchess
is a Delaware limited partnership. Michael Novielli and Douglas H.
Leighton are directors of Dutchess with voting and investment power over
the shares.
|
(3)
|
Represents
the maximum number of shares issuable by us and purchasable by Dutchess
under the Investment Agreement, all of which are being offered by the
selling stockholder under this
prospectus.
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OUR
BUSINESS
Overview
of the Business and Recent Developments
GTX Corp
was incorporated in the State of Nevada on April 7, 2006 under its former name
“Deeas Resources Inc.” On March 14, 2008, we acquired all of the
outstanding capital stock of Global Trek Xploration, a California corporation
(“GTX California”), in exchange for the issuance of 18,000,001 shares of GTX
Corp common stock (the “Exchange Transaction”). Prior to the Exchange
Transaction, this company was engaged in the exploration of mineral properties
located in central British Columbia, Canada. All such prior mineral
exploration activities have been halted, and the only operations we intend to
conduct in the future relate to location-based businesses conducted by our
subsidiaries as described in this Prospectus.
We
currently conduct our operations through three wholly-owned subsidiaries that
operate in related sectors of the personal location-based market specialized in
the monitoring and recovery of missing people, pets and high valued
assets. In general:
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·
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Our
GTX California subsidiary currently offers a GPS and cellular location
platform that enables subscribers to track in real time the whereabouts of
people, pets or high valued assets through the Company’s miniaturized
transceiver module, wireless connectivity gateway, middleware and viewing
portal.
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·
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Our
LOCiMOBILE, Inc. subsidiary has developed, and launched applications for
the iPhone and other GPS enabled handsets that permit authorized users to
locate and track the movement of the holder of the
handset. Three Apps on three different platforms (iPhone,
Blackberry and Google Android) have been downloaded in 58 countries. There
are several new Apps in development that we are planning to launch in
2010.
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·
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Our
Code Amber News Service, Inc. subsidiary is a U.S. and Canadian syndicator
and content provider of all state Amber Alerts (public notifications of
child abductions) and missing person
alerts.
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GTX
California, our principal operating subsidiary, has developed and patented a
personal location services platform consisting of miniaturized, assisted two-way
GPS tracking and cellular location-transmitting technologies used in consumer
products and commercial applications to locate and track persons or
assets. Our gpVector™ module, which consists of a miniature
transceiver, antenna, circuitry and battery, can be customized and
integrated into numerous products whose location and movement can be monitored
in real time over the Internet through our 24x7 location date center (“Location
Data Center”) tracking portal or on a web enabled cellular
telephone. The GTX California business model is to license its
technology platforms to branded partners who desire to deliver their own
innovative tracking solutions to consumers or their customers in a wide variety
of wearable and portable location devices. The GTX California value
proposition is its customizable and embedded approach to the
market. GTX California believes that its ability to customize its
gpVector™ module or different form factors to the specific needs of its branded
partners sets it apart from its competitors. Until the fourth quarter
of 2008, GTX California was primarily engaged in the research and development of
its technologies and products, securing an intellectual property portfolio, and
building brand and category awareness. In September 2008, GTX
California delivered its first commercial product, the “gpVector™ Powered Athlete Tracking
Systems,” to a licensee. This product is an ergonomic
shockproof and water resistant device worn by athletes so that their location
and progress can be tracked by spectators and coaches during competitive
endurance events such as running, biking and swimming. It also gives
the athletes the ability to review and analyze their performance to enhance
training.
LOCiMOBILE,
Inc. has developed and owns LOCi Mobile™ (“LOCi Mobile™”), a suite of mobile
tracking applications that turn the latest iPhone and other GPS enabled handsets
into a tracking device which can then be viewed through our Location Data Center
tracking portal and on internet capable smart phones. Our LOCi
Mobile™ was released in the U.S. earlier this year for use with the Apple
iPhone. In September 2009, we released an international version of
this iPhone application.
Code
Amber News Service, Inc. (“CANS”) was formed in February 2009 after we acquired
the assets of Code Amber, LLC, a U.S. and Canadian syndicator of all state Amber
Alerts (public notifications of child abductions), and the provider of website
tickers and news feeds to merchants, internet service providers, affiliate
partners, corporate sponsors and local, state and federal
agencies. CANS is using the high visibility of Amber Alerts and
missing person alerts to raise category awareness of our personal location
products and services. In addition, we have recently restructured the
operations and services provided by CANS in order to generate revenues from the
sale of its content and from sponsorships.
We
maintain an Internet website at http://www.GTXCorp.com. The company’s Internet
website and the information contained therein, or connected thereto, are not and
are not intended to be incorporated into this prospectus.
GTX CALIFORNIA
BUSINESS
GTX
California was incorporated in California on September 10, 2002. From
its inception in 2002 until the third quarter of 2008, its business was
predominantly focused on research and development, creating intellectual
property, securing strategic relationships and partnerships, and building
category and brand awareness. Through December 31, 2008, GTX
California had spent approximately $1.088 million on its research and
development activities. GTX California has transitioned from being a
research and development company to being an operating company. GTX
California developed its business as follows:
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·
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In
2002, GTX California conducted technical feasibility studies and analyzed
market data, filed patents and began developing its customizable imbedded
technology business model.
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In
2004, GTX California built its first prototypes and began developing
partnerships with wireless carriers, contract manufactures and topology
partners in order to build a proof of concept
product.
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In
2006 and 2007, GTX California developed pre-production personal location
devices, completed the proof of concept website development (i.e., mapping
interfaces and back office support), and obtained Federal Communication
Commission (“FCC”), Industry Canada (“IC”), and Conformite Europeenne
(“CE”) approvals.
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·
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In
September 2007, GTX California entered into its first license agreement
and in September 2008, GTX California delivered its first commercial order
of gpVector™ modules.
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·
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In
2008/2009 GTX California began rolling out additional product lines, for
both the business-to-business and the business-to-consumer
markets. Also, in 2009 we began the international sale of GPS
devices and evaluation kits, we entered into a number of platform test
agreements, and we expanded our intellectual property portfolio with the
addition of four new approved patents and several additional
trademarks.
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GTX
California has developed and owns a comprehensive, end-to-end two-way GPS
location system. Unlike a one-way GPS location system (such as the
standard automobile GPS systems) that informs the user of the user’s location, a
two-way GPS location system allows other parties to locate and track the
whereabouts of the user. The tested and proven GPS location
system enables subscribers to obtain accurate, real-time location information of
persons or property through the Internet or over any web enabled phone, 24
hours-a-day, seven days a week.
GTX
California’s first hardware product, a GPS locator embedded module that we call
“gpVector™,” combines the power of assisted GPS and digital personal
communications service (“PCS”) technologies. This miniature gpVector™ module can
be embedded within a lightweight enclosures, such as shoes worn by athletes or
senior citizens, collars worn by pets, or containers carrying items whose
whereabouts is critical (such as live organ transportation
containers).
GTX
California can provide real-time location and tracking information to customers
using its gpVector™ module for both routine and emergency situations through GTX
California's 24x7 location data center (“Location Data Center”) and Internet
infrastructures. Following the purchase of a module and the activation of the
service, a subscriber can determine the locations of any person or product that
carries the locator module by accessing the Internet either by computer or by a
web-enabled cellular telephone.
The
Location Data Center tracking portal is fully equipped with a database and
computer call distribution application software. Subscriber Internet
communications are routed through GTX California’s proprietary, fault-tolerant,
carrier-class, and application-specific interface software.
GTX
California’s gpVector™ modules are essentially enablers of its location service
system. We expect that the majority of GTX California’s gross margin after
subscriber buildup will come from recurring service fee revenues.
GTX
California’s objective is to be a leading provider of wireless location services
through the convergence of state-of-the-art enhanced global positioning,
wireless communications and other technologies that empower people and
businesses with the ability to locate loved-ones or property whenever and
wherever they choose. GTX California’s multi-pronged strategy is to
penetrate our target markets by offering exclusive licenses of our technology to
qualified re-sellers of products to consumers or
businesses. Potential target markets for these locator modules
include:
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·
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Parents
of young children (primarily 4 to 12 years of age) who desire to know the
whereabouts of their children;
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·
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Families
with members who have Alzheimer’s disease and developmentally challenged
adults;
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·
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Elder
care support and applications;
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·
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Pet
care and location capability;
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·
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Field
workers, first responders and law
enforcement;
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·
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Asset
tracking and location capability of cars, trucks, fleet management,
luggage, and other assets; and
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·
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Competitive
non-motorized athletes.
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GTX
California also intends to offer its Location Data Center services to non-GTX
California products and hardware systems (i.e. handsets, personal electronics)
of major electronics manufacturers as such third-party products and systems
become available through the offer and sale of exclusive licenses to either
geographical regions or product categories.
Products—Hardware;
Location Data Center
GTX
California’s location based products consist of (i) certain hardware and (ii) a
suite of subscription-based internet data-monitoring software and services (its
tracking portal). Our hardware products include patented,
interchangeable GPS satellite tracking and location reporting modules (which we
have named our “gpVector™ module”) that can be embedded into wearable consumer
items (such as footwear, clothes, backpacks, life preservers) or can be
integrated into other portable carriers. For example, our module can
be embedded into the sole of a shoe to track and report the location of the
wearer of the shoe. In addition, we also offer a wearable caddy that
houses a miniaturized, ruggedized, portable GPS tracking device enclosed in a
buoyant, waterproof, shockproof, clip-on housing. The module can be affixed to,
or embedded in other products and items that need to be located, such as trucks,
automobiles, delivery vehicles, and high value parcels.
GTX
California’s data tracking portal consists of its proprietary Location Data
Center that provides a complete array of back-end services to subscribers. Upon
purchase of a product that contains our gpVector™ module from a licensee and the
subscription by the purchaser of a service plan and activation of service, the
subscriber/purchaser can establish his own personal pass code and configure his
account services. A subscriber can have more than one product
included on his account, and can set up individual profiles for each
product.
The
subscriber initiates requests for information on his gpVector™ module's location
through the Internet via the GTX California licensee’s web site. The Location
Data Center automatically contacts the module via the local cellular
communications infrastructure, requesting the module's location. The embedded
module utilizes GSM/GPRS technology and transmits its location data on a GSM
network. The GTX California locator utilizes quad-band GSM
technology.
The
module’s GPS electronics, utilizing advanced "weak signal server-enhanced"
technology, provides rapid location identification. With this technology, the
most current satellite data (“Ephemeris data”) is delivered to the module during
the request for location. This greatly enhances GPS performance in
less-than-ideal circumstances (i.e. urban canyons, deep building interiors,
tunnels and other difficult areas), enabling the product to get a location from
GPS satellites ten times faster than with standard GPS (10 seconds versus 100
seconds). The cellular tower information is also used to augment the location
information provided.
Having
determined its location, the module then communicates the location information
to the Location Data Center. The location information is then passed to the
subscriber via the Internet (with a map and closest street address). In most
cases, the entire process takes less than 30 seconds. A copy of the event is
stored in the customer's files. The Location Data Centers use GTX California’s
proprietary application-specific interface "thin-client" software (patent
pending) equipment that is connected to existing telephone and Internet
infrastructures.
The
accuracy of the location information provided by GTX California’s products is
within 37 feet in optimum conditions, which is significantly better than that
required by the FCC (150 feet).
In
addition to these basic location reporting capabilities, our gpVector™ modules
and location tracking services also offers several additional features and
capabilities to our subscribers, including:
Breadcrumbing. The
subscriber is able to get a report on a series of location events through
“breadcrumbing”. With this feature, the user can see the location history
mapping the route of the user with the exact location of the user noted at
various times based on whatever reporting interval is selected (30-seconds, 1
minute, etc.). Parents may want to use this feature to confirm the whereabouts
of their child if he or she is in the care of a guardian and has several
appointments throughout the day. To utilize this feature, the subscriber
predetermines the number of locations he or she wishes to track, as well as the
desired time interval between locations (i.e. identify a total of 12 locations,
once every 15 minutes). Once all locations are identified, a report will be
automatically issued. The subscriber can then request a mapping of the desired
locations.
Temporary Guardians.
Through the Location Data Center, subscribers can set-up a “temporary guardian”
which will have access to location features only (no account management
functions). Parents may want to use this feature when their child is visiting a
relative and they want that person to be able to determine the child's
location.
GeoFencings.
Subscribers can establish geographic limits for each user that will be
programmed in place through the Internet access provided by the licensee to
their customers. Once these limits have been programmed into the
account, when the user crosses these boundaries, alerts are sent out to the
subscriber over the Internet through email or to a wireless cellular device by
SMS or text messaging.
Technology
The
current product design utilizes quad-band GSM telephony chip sets and can be
adapted in the future to the then-prevalent wireless technology, be it 2.5G or
3G. Our module’s GPS electronics, utilizing advanced “weak signal
server-enhanced” technology will provide rapid location
identification.
Each
module is programmed with a unique identification number and uses standard
cellular frequencies to communicate its location. The module is also programmed
with a unique subscriber identification number allowing each owner to subscribe
different services.
GTX
California has developed a “carrier-class” architecture and facility to create
and manage the proprietary Location Data Center (reliable to 99.999%). The local
service center runs on redundant off-the-shelf servers. This enables
cost-efficient expansion, without the need for application code
changes.
The
products offer wide network coverage throughout the United States and Canada on
the AT&T Wireless networks. In addition, the personal locators
will have the ability to roam seamlessly on the networks of 290 partners in over
130 countries.
Multiple
Applications
GTX
California’s planned GPS Personal Locator licenses are targeted to address
multiple major markets, including tracking or locating children, adults with
Alzheimer’s disease, automotive/commercial/payloads, pets, institutional living,
life science assets, and athletics.
Children. Due to the
emotional nature of the benefit GTX California is offering, we view this segment
as having immediate market potential. The GPS Personal Locator
license for children will target prospective licensees currently marketing their
existing products to dual-income and single parents of 4-12 year old children.
At the lower end of this age range, children are starting to gain more
independence from their parents and are more likely to be "out of the parent's
sight" for a variety of reasons (such as day care, school, playing with friends,
and field trips). We believe that both parent and child interest in the product
would level off after age 12, when a child's range of freedom and desire for
privacy increases dramatically. The service is positioned as "complementary" to
parent supervision, not a replacement for it.
Adults. We believe
the demographic segments offering the greatest opportunities are Alzheimer's
patients, seniors (65+ years of age), and active adults and teens. A primary
application is for "active adults": those who participate in recreational
activities (such as jogging, hiking and camping) that could put them at risk of
getting lost, being injured or becoming a victim to a violent crime. Other
potential users include working women, teens, couples, Alzheimer's patients and
developmentally challenged adults. For example, GTX Corp has released its first
product, the gpVector™ Powered Athlete Tracking Systems, a device worn by
athletes or hikers to track their locations. We believe these people
would be very interested in using the location service during an emergency
situation, as a combination location service/notification to law enforcement
when a crime is in process where a subscriber is the victim, and simply as a
means of communicating one's location to a friend or a loved-one.
Vehicular/Commercial/Payload
Tracking. As competitive forces continue, we believe that
bicycle, truck and motorcycle dealers will continue to look for ways of
increasing their profitability through value-added services and after-market
sales. We believe that GTX California’s products and services would offer a new
profit-building opportunity to prospective licensees now doing business with
dealers. Permanent installation for theft recovery applications would
be simplified due to the miniaturized nature of the hardware and the embedded
antenna technology. Its small size would allow it to be placed in any car, truck
or motorcycle the dealer sells. GTX California is also targeting
businesses and organizations that use fleets of vehicles. We believe GTX
California’s products would be attractive to any business owner who needs to
know the location of their vehicles and/or payload(s).
Pet
Owners. This market segment would utilize GTX California’s
technology to locate pets that have run away, been stolen or become lost. The
pet collar device can be attached to a collar or by similar means and will
utilize the same location (GPS) and communication (cellular) technologies as the
GPS Personal Locator; however, since it will not need many of the added features
(such as watch display, paging, and wearer-triggered alarm), we anticipate that
GTX California will be able to produce it at a lower unit cost.
Institutional
Living. Current technologies used to monitor individuals with
movement-restrictions often do not meet the needs of law enforcement officials.
For example, house arrest systems that utilize an "RF tether" to monitor an
individual's presence in his or her home will alert officials if the person
leaves the house, but will not provide information on where the person has gone.
We believe the increase in overcrowding in jails and prisons provides a further
incentive to utilize location and tracking products.
Life Science, Medical and
Pharmaceutical Transportation. The amount of important
and/or time sensitive medical, life science and pharmaceutical products being
transported appears to be on the rise, increasing the need to connect globally
outsourced service providers with medical and clinical research
facilities. We believe that there is an increasing desire to be able
to track these important medical, life science and pharmaceutical
products.
Strategic
Relationships and Licensing Arrangements
The goal
of GTX California is to offer location based hardware and/or its data monitoring
platform to third parties for the sale and distribution of location based
products/services in various targeted markets worldwide. Establishing
and building United States and international partnerships, licensing agreements,
OEM, and carrier relationships with major market players, utilizing GTX
California’s technologies will facilitate efficient entry into new
markets. Forging strategic partnerships including co-branding,
distribution and marketing with telecommunication companies, wireless carriers,
national retailers, major consumer brand companies and mass media aligns the
sales and marketing efforts with licensed sales channels.
We have
recently entered into three platform test agreements for the release of products
using our technology. Pursuant to each of these agreements, GTX
California and our potential licensee have agreed to jointly complete the
development and testing of one or more products that will, upon the successful
completion of the testing, be licensed to the licensee for commercialization by
the licensee. Assuming that the development and testing of these
products is successful, we could receive additional licensing fees and other
revenues under these agreements in 2010. The three recent agreements
consist of the following:
|
·
|
In
May 2009, we entered into a platform test agreement with Aetrex Worldwide,
Inc., a global leader in pedorthic footwear and foot orthotics, under
which the companies agreed to collaborate on the development and
mechanical engineering of GTX Corp’s patented PLS two-way transceivers and
software systems to monitor the locations of “wandering” seniors afflicted
with dementia by embedding its technology in Aetrex
footwear.
|
|
·
|
In
September 2009, we entered into a binding exclusive agreement with Kalika
Group, one of Nepal’s largest and most respected business conglomerates
for the deployment of this company’s proprietary GPS technologies and
product line into Nepal, India, Pakistan, Bangladesh, Sri Lanka, Maldives
and Bhutan – a marketplace comprising of an emerging, dynamic economy with
a combined population of over 1.5
billion.
|
|
·
|
In
October 2009, GTX California entered into an exclusive product test
agreement with MMX to develop an industry first, proprietary GPS enabled
transport container. MMX is a worldwide provider of specialty
critical and security sensitive global transportation and logistics
services.
|
Intellectual
Property Investment
GTX
California has invested significantly in intellectual properties, which consist
of apparatus patents and applications and system and method patents and
applications. GTX California has filed claims that cover all aspects
of the personal locator, its operating system and user interface. Set
forth below is a list of our patents and pending patent
applications.
U.S.
Patent Holdings
1.
|
U.S.
Patent No. 6,788,200 title: “Footwear With GPS,” filed October 21, 2002,
issued September 7, 2004, expires approximately October 21,
2022.
|
2.
|
U.S.
Patent No. 7,474,206 title: “Footwear With Embedded Tracking Device And
Method Of Manufacture,” filed February 6, 2006, issued January 9, 2009,
expires approximately July 23,
2007.
|
3.
|
U.S.
Patent No. RE40,879 title: “Footwear With GPS,” re-filed July 27, 2006,
issued August 25, 2009, expires approximately October 21,
2022
|
4.
|
U.S.
Patent No. D595,484 title: “Footwear With Antenna,” filed February 7,
2008, issued July 7, 2009, expires approximately July 7,
2023
|
5.
|
U.S.
Patent No. D599,102 title: “Footwear Sole With Antenna,” filed February 7,
2008, issued September 1, 2009, expires approximately September 1,
2023
|
6.
|
U.S.
Patent Application, Serial No. 11/517,603 title: “Footwear With GPS,”
re-filed September 7, 2006.
|
7.
|
U.S.
Patent Application, Serial No. 11/506,175 title: “Footwear With GPS,”
re-filed August 17, 2006.
|
8.
|
U.S.
Patent Application, Serial No. 11/516,805 title: “Footwear With GPS,”
re-filed September 6, 2006
|
9.
|
U.S.
Patent Application, Serial No.11/402,195 title: “Buoyant Tracking Device
And Method Of Manufacture,” filed April 11,
2006.
|
10.
|
U.S.
Patent Application, Serial No.12/319,307 title: “Footwear With Embedded
Tracking Device and Method Of Manufacture,” filed January 6,
2009.
|
11.
|
U.S.
Patent Application, Serial No. 12/012,088 title: “System And Method For
Monitoring The Location Of A Tracking Device,” filed January 31,
2008.
|
12.
|
U.S.
Patent Application, (Serial No. is CONFIDENTIAL – Not Published by the
USPTO) title: “System And Method For Processing Location Data,” filed
February 11, 2009.
|
13.
|
U.S.
Patent Application, (Serial No. is CONFIDENTIAL – Not Published by the
USPTO) title: “System And Method For Communication with a Tracking
Device,” filed February 9, 2009.
|
14.
|
U.S.
Patent Application, (Serial No. is CONFIDENTIAL – Not Published by the
USPTO) title: “Tracking System With Separated Tracking Device,”
filed August 8, 2008.
|
1.
|
International
Patent Application WO 2007/0120586 title: “Buoyant Tracking Device And
Method Of Manufacture,” filed April 11, 2006. Has not been
moved to National Stage at this
time.
|
2.
|
International
Patent Application WO 2007/0092381 title: “Footwear With Embedded Tracking
Device and Method of Manufacture,” filed February 6,
2007.
|
3.
|
International
Patent Application WO 2008/0094685 title: “System And Method For
Monitoring The Location Of A Tracking Device,” filed January 31,
2008.
|
4.
|
Canadian
Patent Application, Serial No. 2,641,469 title: “Footwear With Embedded
Tracking Device and Method of Manufacture,” filed August 5,
2008.
|
5.
|
Mexican
Patent Application, Serial No. MX/A/2008/010160 title: “Footwear With
Embedded Tracking Device and Method of Manufacture,” filed August 6,
2008.
|
6.
|
International
Patent Application WO 2008/0094685 title: “System And Method For
Monitoring The Location Of A Tracking Device,” filed January 31,
2008. Has not been moved to National Stage at this
time.
|
7.
|
International
Patent Application PCT/US2009/004530 title: “Tracking System with
Separated Tracking Device,” filed August 7,
2009.
|
GTX
California owns the Internet domain name www.GTXCorp.com as
well as the names of other related domains that could have use in future
business and vertical marketing initiatives. Under current domain
name registration practices, no one else can obtain an identical domain name,
but someone might obtain a similar name, or the identical name with a different
suffix, such as “.org” or with a country designation. The regulation
of domain names in the United States and in foreign countries is subject to
change, and we could be unable to prevent third parties from acquiring domain
names that infringe or otherwise decrease the value of our domain
names.
Revenue
Sources—Current Licenses
GTX
California expects that revenues it generates could be based on the following
sales and revenue sources:
|
·
|
License
fees derived from exclusive and non exclusive grants for territories and
specific vertical markets;
|
|
·
|
Non-recurring
engineering fees;
|
|
·
|
Professional
services and data hosting;
|
|
·
|
Monthly
recurring wireless data and portal service
fees;
|
|
·
|
Sponsorship
and news feed fees derived from the Code Amber News
Service.
|
In
September 2007, GTX California entered into an exclusive license with My Athlete
LLC pursuant to which GTX California granted My Athlete LLC a five-year
exclusive world-wide license to make, use and sell products that incorporate GTX
California’s products and technologies. The target market in which My
Athlete can sell those products is limited to non-motorized athletic activity
and sports. The Company designed, developed and manufactured a module
(incorporating our gpVector™ module) for My Athlete that is being sold under My
Athlete’s name. GTX California received revenues under this license
agreement for (i) designing the product, (ii) selling the completed units to
MyAthlete, and (iii) providing the cellular connection for each unit. We charged
MyAthlete a set monthly fee per device for providing the cellular connection and
tracking services. During September 2009, MyAthlete lost the
exclusive rights under the license because it failed to meet the required
minimum device purchase and activation requirements under the exclusive license
agreement.
The
Industry
After
several years of fitful industry interest, location-based services are once
again central to the wireless industry. Technological challenges have
been resolved with 2.5G and 3G network speeds now consistent with higher-speed
coverage that is widely available. In our ever-mobile society, it
helps to know where we are and where we are going. According to a
2006 study authored for International Data Corporation (“IDC”) by Rena
Bhattacharyya and Scott Ellison and entitled U.S. Market for Wireless Location
Based Studies, the demand for Global Positioning System (“GPS”) devices is
growing rapidly. Many parents desire to have the ability to know
where their children are and where they are going. Having such
information is now possible with access to real-time information delivered
on-demand through locator systems and technologies such as ours.
Since
2002, IDC research has consistently shown very high levels of consumer interest
in other location based services – especially in family/friend locator
devices. Access, controlled by the parent and permission-based among
other adults, gives the parents the means to stay connected to their children as
well as the opportunity to use the geofencing technology to control access to
particular areas. We believe that the results of this study indicate
that there is significant opportunity for GPS manufacturers and marketers
throughout multiple industries.
Target
Markets and Marketing Strategy
We
believe that the primary target market for GTX California’s products and systems
consists of prospective licensees who currently sell related products or
technology services to numerous markets including home security, child safety,
medical and elder care providers, campers, hikers, backpackers, adventure
seekers, extreme sports enthusiasts, freight and cargo carriers, delivery
services, pet owners, vehicle finance companies, auto dealerships, law
enforcement agencies, military organizations and individuals wishing to track
valuable items. In order to address these target markets, our
marketing initiatives include:
|
·
|
Establishing
licensing relationships with key industry
partners;
|
|
·
|
Utilizing
public relations outreach in special interest magazines and
newsletters;
|
|
·
|
Affinity
group marketing and outreach;
|
|
·
|
“White
label” affiliates which will target niche markets such as court controlled
parolees; and
|
|
·
|
Establishing
licensing relationships with large partners who sell every-day consumer
goods like shoes, helmets, bicycles,
etc.
|
Growth
Strategy
Our goal
is to become one of the major providers of personal and asset location services
to specific niche business channel partners and, once we hit critical mass in
pricing, to the mass consumer markets. The strategy is to establish
licensing relationships with key industry partners who will embed our technology
into their products to sell to their established customer base. Key elements of
our strategy include:
|
·
|
Providing
our Personal Locator embedded module to licensees to empower their
products with GPS tracking
capabilities;
|
|
·
|
A
monthly service fee structure variable as to the needs of the end user and
having multiple convenient access points (mobile phone, land line, or via
the Internet);
|
|
·
|
Ease
of use at the location interface point as well as with the device;
and
|
|
·
|
Rugged
design that meets the rigors of use. Our goal is to utilize our modules in
products that are waterproof and can handle weather extremes of heat and
cold.
|
Competition
Personal
location and property tracking devices are just beginning to significantly
penetrate the marketplace. We believe this condition represents a
tremendous opportunity as customers will be attracted in large numbers once the
intrinsic value of the device is recognized and mass market adoption
begins.
Competitors
for our gpVector™ product, and often also for our LOCi Mobile™ system, include
Location Based Technologies, Inc, Zoombak, Inc., gpsfootprints, Google Latitude,
Trimble Navigation, Inc., SOS Gps, Inc. and Wherify Wireless,
Incorporated. Our competitors may be better financed, or have greater
marketing and scientific resources than we can provide. We are also
aware of a number of foreign competitors that offer personal location tracking
products similar to ours, which may impact our ability to expand our products
abroad.
In
related markets, GPS devices have become widely used for automotive and marine
applications where line-of-sight to GPS satellites is not a significant
issue. Manufacturers such as Garmin, Navman, Magellan, TomTom,
Pharos, NovAtel and DeLorne are finding a market interested in using these
products for both business and leisure purposes.
As a
result, use of GPS technology in devices such as chart plotters, fitness and
training devices, fish finders, laptop computers, and PDA location devices are
gaining significant market acceptance and commercialization. Prices
range from $350 to several thousand dollars. We expect that
increasing consumer demand in these markets will drive additional applications
and lower price points.
Government
Regulation
GTX
California is subject to federal, state and local laws and regulations applied
to businesses generally as well as FCC, IC and CE wireless device regulations
and controls. We believe that GTX California is in conformity with
all applicable laws in all relevant jurisdictions. We do not believe
that GTX California’s operations are subject to any environmental laws and
regulations of the United States nor the states in which they
operate.
Research
and Development
GTX
California shifted from a research and development mode in the third quarter of
2008 with the completion of the locator device accomplished in September
2008. Prototype testing was successfully completed and the first
shipment of products was made to our customer in September
2008. Additionally, GTX California is working with several other
entities that are conducting research on key areas to improve the device
(including expanded antennae capability, battery capacity, and enhanced location
reliability and accuracy). We anticipate GTX California will continue
its ongoing involvement with such improvement activities for the foreseeable
future.
Manufacturing
and Materials Procurement
Our goal
is to acquire high quality, highly reliable components and subassemblies
manufactured by other specialized manufacturers and to integrate those
components with our technologies to produce our
gpVector™ products. Accordingly, our PC boards are
manufactured for us by a Colorado company, and most of the other parts and
components of the control board are assembled for us in
California. Once the control boards arrive at our Los Angeles
facilities, our personnel perform a visual inspection and then assemble the
control board with the radio unit. Our proprietary configuration is
then installed into the radio and the GTX firmware is loaded into the control
board’s processor. The assembled module is then tested by GTX personnel and
subsequently staged for final assembly. Final assembly and final QC testing is
performed by GTX personnel in Los Angeles, California.
Although
we currently source each of the foregoing components from a single source, we
have qualified second sources for these parts. Also, our principal
suppliers are large, established manufacturers, such as Enfora, the manufacturer
of our radio. Accordingly, to date we have not experienced any
significant shortages or material delays in obtaining any of our components or
subassemblies.
LOCi
BUSINESS
LOCi
Mobile™ is a suite of mobile tracking applications that turn the latest iPhone
and other GPS enabled handsets into a tracking device capable of being rendered
on our Location Data Center tracking portal. LOCi Mobile™ can be
deployed both business to business, through a private label interface and as a
direct to consumer offering. By being able to sell a mobile tracking
product for use with the iPhone, we are able to enter into new markets supported
by the growing number of world wide handsets and to tap into these markets
without the traditional capital requirements and long lead times associated with
building hardware. Our mobile strategy complements our overall location based
product offering by allowing us to leverage the rapid penetration and adoption
of smartphones, including the use of their data plans and distribution
capabilities (such as the Apple App Store, Blackberry App Store and Android
store), with our existing platform architecture. Our middleware is now a
complete offering able to support applications on handsets along with hardware
we make or buy for those specialized vertical markets.
Our first
release under the LOCi Mobile™ (the LOCiMe version) was introduced in
April 2009 and enhanced in June 2009. This two-way location product
is currently distributed through the Apple Application Store. The
LOCiMe software allows users to view their elevation, latitude and longitude,
and allows others to view them on either our tracking portal, or on iPhones and
on other smart phones.
In
September 2009, we also launched our new iLOCi2™ iPhone App
International Version 1.2 — initially in French and
Spanish. The iLOCi2™ has been localized for the
French market where Apple has sold one million iPhones and in Spanish for
distribution in Europe and South American markets. Since the recent
release, LOCi Apps have been downloaded in 58 countries. We currently
intend to expand this product’s platform to support other mobile operating
systems, such as the BlackBerry system, and we are currently in development on
the Android, the operating system developed by Google, which we expect to launch
in early 2010.
According
to ABI Research, off-deck location based service application downloads,
including people finder services, are expected to increase to more than 260
million in 2010 and to reach almost two billion by 2014. LOCiMOBILE
is focusing its development on off-deck LBS application
activations. We believe that our LOCi Mobile™ product offering will
benefit from these dynamic global market conditions that are currently driving
growth in the smart phone and LBS application downloads. The surging
popularity enjoyed by affordable off-deck LBS applications is creating new
momentum, a more open environment, and increased competition in a location
industry that has long been dominated by carriers offering expensive
subscription-based on-deck services.
Part of
the roadmap is to implement a Cloud Architecture, which is a style of computing
in which dynamically scalable and often virtualised resources are provided as a
service over the Internet. This type of architecture will allow our subscribers
to take location data and augment that data with other pertinent information
providing a content rich solution. This will not only enhance the
user experience but also create value to the viewers and subscribers. Knowing
the whereabouts of a loved one, friend or co -worker has value, but knowing
particulars about those whereabouts and if there are any other friends or loved
ones in the area, or if there are any potential dangers in the area, increases
the value of the information. For example, knowing the location of a child and
then augmenting that information with the known whereabouts of registered sex
offenders increases the value of the information and ultimately empowers the
viewer. More and more people use their smart phones to text, e-mail, search the
Internet or listen to music. Because these devices are becoming
smarter, growing in use and numbers and are proliferating worldwide, they create
the perfect long term environment for developing geo spatial, dynamic in real
time solutions that interact not only with each other but with other widely
adopted platforms and data bases. This in turn will create value when
intersecting information with location and proximity. Seamlessly adding location
and proximity to a common exchange of text messaging, significantly change the
dynamics of text messaging.
CODE AMBER NEWS SERVICE,
INC.
Our Code
Amber News Service, Inc. (“CANS”) subsidiary is a member of ONA-Online News
Association and RTNDA (Radio Television News Directors Association), the leading
U.S. and Canadian syndicator of online Amber Alerts and the primary content
provider for non amber alert missing persons. An Amber alert is a
public notification of a child abduction. On December 5, 2008, we
acquired the assets of Code Amber, LLC, which assets are now held and used by
CANS. To date CANS has reached an audience of 1.9 billion through its
website tickers and point of display feeds presented by other media outlets,
retail merchants, internet service providers, corporate sponsors, affiliate
partners, federal, state and local agencies and concerned
citizens. The size of the potential audience for amber alerts was
recently significantly increased with the launch during 2009 of Code Mobile
alerts that are now available on iPhone, Blackberry and Google smart
phones. CANS is designed to support law enforcement efforts in the
recovery of missing persons across the United States and Canada by directly
distributing missing people notifications to millions of subscribers and
viewers. CANS maintains a website at www.codeamber.com.
Currently
CANS serves the Code Amber ticker to over 500,000 websites and desktops, which
includes hundreds of law enforcement agencies, members of Congress and a list of
corporate sponsors. In addition to the pre-packaged consumer ticker, Code Amber
provides a commercial news feed to many media outlets and hundreds of additional
corporate and private news and information distribution services. Code Amber has
cultivated relationships with organizations such as CBS, NBC, ABC, MSNBC, CNN,
Google, O’Reilly and Facebook, as well as many smaller broadcasters, all of
which receive information about missing persons from
CANS. Enterprises such as Walgreens display CANS alerts on over 3,000
changeable message signs. AAC displays alerts on over 20,000 Cisco VOIP display
telephones by ZIP code. Perftech, provides alerts to over 350,000 customers of
participating internet service providers in Illinois, Ohio, Michigan and
Indiana. And VeriFone distributes alerts in various formats to a
variety of point of sale credit and debit card devices at retail locations
across the U.S. The monthly reach of the CANS news stream through its
wide and diverse network reaches an audience of over 21,000,000 and increases to
an even higher level during an alert state. As part of our ongoing effort to
expand our reach we are developing technology to make Code Amber available on
Radio Data Systems (or RDS, a communications protocol for sending
small amounts of digital information using conventional FM radio broadcasts),
and high definition radio dials, enabling our information to be viewed on car
radios, further expanding our multimedia footprint and reach.
In
October 2009, we increased the scope of viewers with the addition of a new
affiliate; WildFireWeb which offers WebSchoolPro free school websites to all
130,000 public and private K-12 schools nationwide.
We
acquired and intend to operate the Amber Alert business (i) to raise awareness
of our company’s other technologies for locating persons, and (ii) to create a
new source of revenues. We believe that the strong media presence of
Amber Alerts gives us a platform to communicate with a large audience having
specific interest in our core business of personal location
solutions. Persons who access the Amber Alert announcements and
information have an interest in locating and knowing the whereabouts of
important persons (children). Since the location products offered by
our other two subsidiaries (i.e. our gpVector™ and LOCi Mobile™
products) can be used by parents to monitor the whereabouts of their children,
we believe that the Amber Alert platform gives us an opportunity to introduce
our products to users of the Amber Alert system. In addition, the operations of
CANS supplements the GTX brand as a company that provides technology for
monitoring and assisting in the recovery of missing persons. We
also have structured the operations to become a new revenue
source. We intend to generate future revenues from sales of
information distributed by CANS and by revenues from sponsors/advertisers who
want to address the target audiences that view the CANS
information.
Our
expansion plans for CANS intersects with our mobile platform
strategy. With the introduction of LOCi Mobile for use with the
iPhone, we can now offer CANS Mobile on the iPhone, Blackberry and Google web
enabled cell phones, thereby significantly increasing our footprint and
audience. This new mobile capability will help expand CANS into a
dynamic, real time, intelligent, geo-location aware, altruistic disseminator of
vital information. Leveraging our relationships and two-way GPS
technology, we plan to introduce our patent pending data augmentation platform
that will cross reference data located at sites such as Facebook, MySpace, Code
Amber Alertag etc., allowing CANS to distribute in real time, including photos,
pertinent geo specific information to web enabled phones. A
subscriber is now able to view on their phone all relevant data and a picture of
a missing person that was last seen near their current
location. Moreover, cell phone cameras and Geo-Tagged photos captured
by participating subscribers will assist in the information gathering process
and hence allow the user to become active participants in the news as opposed to
passive observers of events that affect our lives. We believe CANS Mobile will
become the digital milk carton, giving every viewer the sum of all known
knowledge at the right time and right place, all at the tip of their fingers.
CANS along with LOCi Mobile synthesizes our mobile platform
strategy.
In
November 2009, we entered into a licensing agreement for a digital
identification tag that we intend to sell as a product and as a monthly service
under the name “Code Amber Alertag.” Code Amber Alertag is a secure
digital identification tag and service which will provide worldwide access to
critical personal information in emergency situations for children, elderly,
field workers, pets, and others that subscribe to the product and
service. This new product and annual subscription model will further
augment and contribute to the multi prong revenue streams we have implemented in
2009. We are planning to commercially launch the Code Amber Altertag
in early 2010.
CANS has
established a strategic relationship with Brick House Security pursuant to which
we have begun selling Brick House Security’s child locating products on our
Amber Alert website. CANS and Brick House Security also are working
to jointly develop additional child safety and protection programs.
EMPLOYEES
As of
December 7, 2009, GTX Corp and its subsidiaries collectively had seven (7)
employees, two (2) full-time consultants and ten (10) part-time consultants. The
employees are not represented by a labor union. We believe that our employee
relations are good. We anticipate that we will hire one or two
key employees in the next six months, with selective and controlled growth
commensurate with increases in revenues. We anticipate that our
subsidiaries will continue to extensively use the services of independent
contractors and consultants to support expansion, customer service, and business
development activities.
DESCRIPTION
OF PROPERTY
We have
approximately 710 square feet of office space located at 366 California Ave.,
Palo Alto, California 94306. The base rent is $2,425 per
month and the lease expires on June 10, 2010. We are currently
subleasing approximately 145 square feet of our 710 square feet to a third party
pursuant to a sublease that expires on December 31, 2009.
LEGAL
PROCEEDINGS
To our
knowledge, we are not a party to any pending or threatened material legal
proceedings. To our knowledge, no governmental authority is contemplating
commencing a legal proceeding in which we would be named as a
party.
MANAGEMENT
The
following table sets forth the respective names, ages and positions of our
executive officers and directors as of December 7, 2009:
Name
|
|
Age
|
|
Position(s)
|
Patrick
E. Bertagna
|
|
46
|
|
President,
Chief Executive Officer and Chairman of the Board
|
Murray
Williams
|
|
39
|
|
Chief
Financial Officer, Treasurer, Secretary
|
Christopher
M. Walsh
|
|
60
|
|
Chief
Operating Officer
|
Patrick
Aroff
|
|
47
|
|
Director
|
Louis
Rosenbaum
|
|
59
|
|
Director
|
Jeffrey
Sharpe
|
|
38
|
|
Director
|
Executive
Officers and Directors
Patrick
E. Bertagna – Chief Executive Officer, President and Chairman of the
Board
Mr.
Bertagna founded GTX California in September 2002. Following the
Exchange Transaction in March 2008, Mr. Bertagna became this company’s Chief
Executive Officer, President and Chairman of the Board of
Directors. He is co-inventor of the Company’s patented GPS
footwear technology. His career spans over 27 years in building
companies in both technology and consumer branded products. In 1993,
Mr. Bertagna founded Barcode World, Inc. a supply chain software company,
enabling accurate tracking of consumer products from design to retail. After
selling Barcode World in June 2002, Mr. Bertagna founded GTX
California. Born in the South of France, Mr. Bertagna is fluent in
French and Spanish.
Murray
Williams - Chief Financial Officer, Treasurer and Secretary
Mr.
Williams became this company’s Chief Financial Officer, Treasurer and Secretary
on March 14, 2008. From February 15, 2007 until he became our Chief
Financial Officer, Mr. Williams was an independent business and financial
consultant to individuals and development stage companies. From
June 2005 to February 15, 2007, Mr. Williams was the Chief Financial Officer of
Interactive Television Networks, Inc. ("ITVN"), a public company and a leading
provider of Internet Protocol Television hardware, programming software and
interactive networks. Prior to joining ITVN, from September 2001, Mr.
Williams was a consultant for and investor in a number of companies, including
ITVN. In January 1998, Mr. Williams was one of the founding members
of Buy.com, Inc. Mr. Williams developed the finance, legal, business
development and human resource departments of Buy.com and last served as its
Senior Vice President of Global Business Development until August
2001. Prior to joining Buy.com, from January 1993 to January 1998,
Mr. Williams was employed with KPMG Peat Marwick, LLP and last served as a
manager in their assurance practice. Mr. Williams also serves on the
board of directors of Beyond Commerce, Inc., a public company that operates a
social Web site and an internet advertising business. Mr.
Williams is a CPA and received degrees in both Accounting and Real Estate from
the University of Wisconsin-Madison.
Christopher
M. Walsh - Chief Operating Officer
Mr. Walsh
joined this company as its Chief Operating Officer in March 2008. Mr.
Walsh began his career with Nike in 1974 and subsequently established and
implemented Nike’s first manufacturing operation in the Far East. In
1989, Mr. Walsh joined Reebok International as Vice President of
Production. In that role he established the Company's inaugural Asian
organization headquartered in Hong Kong with satellite organizations across
Asia. After leaving Reebok, Mr. Walsh joined to LA Gear in 1992,
where he served as Chief Operating Officer until 1995. Upon leaving
LA Gear in 1995, Mr. Walsh founded CW Resources, a Los Angeles based firm
providing design, development, manufacturing and licensing consulting services
to both domestic and international clients within the footwear, apparel,
textile, sporting goods and action sports industries. Since January
2005, he has served as an advisor to GTX California spearheading our
subsidiaries’ footwear research and development and marketing
practices. Mr. Walsh received a B.S. in Marketing from Boston College
in 1973 and previously served on numerous organizational boards within the
footwear and textile industries including The Two Ten International Footwear
Foundation and The Footwear Distributors and Retail Association.
Patrick
Aroff - Director
Mr. Aroff
served as a member of GTX California’s Board of Directors from October 2007
until March 14, 2008, at which time he became a director of GTX
Corp. Mr. Aroff has worked and held positions in most every facet of
marketing and advertising, including producing and directing commercials for
television and radio. Mr. Aroff has won numerous awards nationally and
internationally for marketing, design, advertising and art
direction. After leaving a successful advertising career of 18 years
in June 2003, Mr. Aroff started The Aroff Company, a residential and commercial
real estate development company. In June 2004, Mr. Aroff founded
Encore Brands, LLC, a beverage company, where he serves as its Chief Executive
Officer and a Managing Member. Mr. Aroff received his education at
the Art Center College Of Design in Pasadena and has garnered numerous awards
during his career, including: Clio, Belding, New York Ad Club, Best in the West,
Cannes International Ad Festival, and an OBIE.
Louis
Rosenbaum - Director
Mr.
Rosenbaum served as a member of GTX California’s Board of Directors from
September 2002 until June 2005 and then again from October 2007 until March
2008, at which time he became a director of GTX Corp. Mr. Rosenbaum
was a founder of GTX California and an early investor in GTX
California. Mr. Rosenbaum has been the President of Advanced
Environmental Services since July
1997. His responsibilities at Advanced Environmental
Services encompass supervising all administrative and financial activities,
including all contractual aspects of the business. Mr. Rosenbaum has
been working in the environmental and waste disposal industry for the past
eighteen years. He started with Allied Waste Services, a division of
Eastern Environmental (purchased by Waste Management Inc. in 1998) in
1990. Mr. Rosenbaum founded and was President of Elements, a clothing
manufacturer that produced a line of upscale women’s clothing in Hong Kong,
China, Korea and Italy, from 1978 to 1987.
Jeffrey
Sharpe - Director
Mr.
Sharpe was the President, Secretary, Treasurer and a director of our company
from its formation on April 7, 2006 until the Exchange Transaction on March 14,
2008, at which time he resigned all positions other than his position as a
member of the Company’s Board of Directors. Mr. Sharpe co-founded a
privately held health and wellness company, No Excuse Inc., based in Canada, and
his principal occupation over the past five years has been serving as President
and Chief Executive Officer of No Excuse Inc. Mr. Sharpe has
also served on the Advisory Board of several not-for-profit organizations
including the Canadian Cancer Society and Diamond Ball. Mr. Sharpe
was granted a Bachelor’s in Human Kinetics from the University of British
Columbia in 1995.
Executive
officers of GTX Corp are appointed annually by the board of directors of GTX
Corp. All directors of GTX Corp are elected at each annual meeting of
the stockholders, to hold office until the next annual meeting of stockholders
and until their successor is elected and qualified, or until such director’s
earlier death, resignation or removal.
EXECUTIVE
COMPENSATION
The
following summary compensation table sets forth information concerning
compensation for services rendered in all capacities for the years ended
December 31, 2008 and 2007 awarded to, earned by, or paid to : (i)Jeffrey
Sharpe, who served as our President during 2007 and part of 2008, (ii) Murray
Williams, who served as our Chief Financial Officer and Corporate Secretary
during 2008, and (iii) our most highly paid executive officers (as determined
based on total compensation) other than our Chief Executive Officer and Chief
Financial Officer as of December 31, 2008 who earned more than $100,000 (these
individuals are referred to in this report as the Named Executive
Officers). GTX Corp acquired GTX California, our primary operating
subsidiary, on March 14, 2008. The table below sets forth all
compensation to the Named Executive Officers of GTX Corp in 2007 and 2008 by
either GTX Corp or GTX California.
Name
and
Principal
Position
|
|
Fiscal
Year
Ended
12/31
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)(8)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Patrick Bertagna(1)
|
|
2008
|
|
|
118,750 |
|
|
|
– |
|
|
|
152,975 |
(4)
|
|
|
83,940 |
(4)
|
|
|
– |
|
|
|
355,665 |
|
|
|
2007
|
|
|
67,000 |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
67,000 |
|
Jeffrey Sharpe(1)
|
|
2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2007
|
|
|
12,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
12,000 |
|
Murray Williams(2)
|
|
2008
|
|
|
118,750 |
|
|
|
– |
|
|
|
152,975 |
(5)
|
|
|
70,406 |
(5)
|
|
|
– |
|
|
|
342,131 |
|
|
|
2007
|
|
|
12,000 |
(7)
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
12,000 |
(7)
|
Christopher Walsh(3)
|
|
2008
|
|
|
95,000 |
|
|
|
– |
|
|
|
37,975 |
(6)
|
|
|
70,406 |
(6)
|
|
|
– |
|
|
|
203,381 |
|
|
|
2007
|
|
|
35,750 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
35,750 |
|
|
Patrick
Bertagna became the registrant’s Chief Executive Officer and Chairman of
the Board on March 14, 2008. Jeffrey Sharpe was the
registrant’s President (principal executive officer) and sole Director in
2007 and in 2008 until the closing of the Exchange Transaction on March
14, 2008.
|
|
Mr.
Williams has been the Chief Financial Officer and Secretary since the
closing of the Exchange Transaction on March 14, 2008.
|
|
Mr.
Walsh has been the Chief Operating Officer since the closing of the
Exchange Transaction on March 14, 2008.
|
(4)
|
150,000
shares and 900,000 options were granted on March 16, 2008 with an exercise
price of $0.75; 300,000 of the options vested on March 16, 2009 and the
remaining 600,000 options vest monthly thereafter at a rate of 25,000 per
month. 2,500 shares and 25,000 options were granted on December
5, 2008 with an exercise price of $0.19 as a holiday bonus; the 25,000
options vested immediately. As a bonus for the successful
completion of over $1,000,000 of Additional Financing, 40,000 shares of
our common stock were granted on May 12, 2008.
|
(5)
|
150,000
shares and 750,000 options were granted on March 16, 2008 with an exercise
price of $0.75; 250,000 of the options vested on March 16, 2009 and the
remaining 500,000 options vest monthly thereafter at a rate of 20,833 per
month. 2,500 shares and 25,000 options were granted on December
5, 2008 with an exercise price of $0.19 as a holiday bonus; the 25,000
options vested immediately. As a bonus for the successful
completion of over $1,000,000 of Additional Financing, 40,000 shares of
our common stock were granted on May 12, 2008.
|
(6)
|
50,000
shares and 750,000 options were granted on March 16, 2008 with an exercise
price of $0.75; 250,000 of which vested on March 16, 2009 and the
remaining 500,000 vest monthly thereafter at a rate of 20,833 per
month. 2,500 shares and 25,000 options were granted on December
5, 2008 with an exercise price of $0.19 as a holiday bonus; the 25,000
options vested immediately.
|
(7)
|
Mr.
Williams provided part-time consulting services to GTX California in 2007
before becoming an officer of GTX Corp in
2008.
|
(8)
|
This
column represents the dollar amount recognized for financial statement
reporting purposes for the fair value of stock options granted to the
named executive, in accordance with SFAS 123R. Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For additional
information on the valuation assumptions with respect to the option
grants, refer to Note 7 of our financial statements in this
prospectus. These amounts reflect our accounting expense for
these awards, and do not correspond to the actual value that will be
recognized by the named executive from these
awards.
|
Outstanding Equity
Awards. The following table sets forth information as of
December 31, 2008 concerning unexercised options, unvested stock and equity
incentive plan awards for the Named Executive Officers.
Outstanding
Equity Awards at Fiscal Year-End
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
rights
That
Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|
Patrick
|
|
|
25,000 |
(3)
|
|
|
— |
|
|
|
— |
|
$.19/share
|
|
12/5/2011
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Bertagna
|
|
|
— |
|
|
|
750,000 |
(1)
|
|
|
— |
|
$.75/share
|
|
2012-2014
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
150,000 |
(2)
|
|
|
— |
|
$.75/share
|
|
2012-2014
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Murray
|
|
|
25,000 |
(3)
|
|
|
— |
|
|
|
— |
|
$.19/share
|
|
12/5/2011
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Williams
|
|
|
— |
|
|
|
750,000 |
(1)
|
|
|
— |
|
$.75/share
|
|
2012-2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
|
|
|
25,000 |
(3)
|
|
|
— |
|
|
|
— |
|
$.19/share
|
|
12/5/2011
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Walsh
|
|
|
— |
|
|
|
750,000 |
(1)
|
|
|
— |
|
$.75/share
|
|
2012-2014
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
|
|
|
— |
|
|
|
150,000 |
(2)
|
|
|
— |
|
$.75/share
|
|
2012-2014
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Sharpe
|
|
|
10,000 |
(4)
|
|
|
|
|
|
|
— |
|
$.19/share
|
|
12/5/2011
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
(1)
|
Each
executive officers holds an option to purchase up to 750,000 shares of
common stock at $0.75 per share. Options to purchase 250,000
shares are exercisable beginning on March 16, 2009, and the remaining
options to purchase 500,000 vest at a rate of 20,833 each month for the 23
months beginning on April 16, 2009 and the remaining 20,841 options shall
vest on March 16, 2011. The options expire on the third
anniversary of the vesting date.
|
|
|
(2)
|
For
their services as members of the board of directors, Patrick Bertagna and
Jeffrey Sharpe also received an option to purchase up to 150,000 shares of
common stock at $0.75 per share. Options to purchase 50,000
shares each are exercisable on March 16, 2009, and the remaining options
to purchase 100,000 vest at a rate of 4,167 each month for the 23 months
beginning on April 16, 2009 and the remaining 4,159 options shall vest on
March 16, 2011. The options expire on the third anniversary of
the vesting date.
|
|
|
(3)
|
On
December 5, 2008, this officer received an option to purchase up to 25,000
shares of common stock at $0.19 per share. The 25,000 options
vested on December 5, 2008 and are currently
exercisable.
|
(4)
|
On
On December 5, 2008, this officer received an option to purchase up to
10,000 shares of common stock at $0.19 per share. The 10,000
options vested on December 5, 2008 and are currently
exercisable.
|
Long-Term
Incentive Plans
There are
no arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers.
Employment
Agreements
The
following are summaries of the employment agreements with the Company’s
executive officers that became effective at the closing of the Exchange
Transaction on March 14, 2008:
Patrick E. Bertagna,
our Chief Executive Officer and President, is employed pursuant to a written
agreement dated as of March 14, 2008. The agreement is has a term of
two years; provided however, that it is automatically extended for additional
one-year periods unless either party provides written notice to the contrary at
least 60 days prior to the end of the term then in effect. Mr.
Bertagna receives a base salary of $150,000 per year. He is entitled
to adjustments to his base salary based on certain performance standards, at the
Company’s discretion, as follows: (i) a bonus in an amount
not less than fifteen percent (15%) of yearly salary, to be paid in
cash or stock, if the Company has an increase in annual revenues and Mr.
Bertagna performs his duties within the time frame budgeted for such duties at
or below the cost budgeted for such duties, and (ii) a bonus, to be paid in cash
or stock at the Company’s sole discretion, equal to $12,500 for every one
million of the Company’s outstanding common stock purchase warrants that are
exercised.
As a
signing bonus, Mr. Bertagna was granted 150,000 shares of the Company’s common
stock pursuant to the Company’s 2008 Equity Compensation Plan. In
addition, he was granted Incentive Stock Options to purchase up to 750,000
shares of our common stock pursuant to the 2008 Equity Compensation
Plan. These options vest over 36 months with one-third vesting on
March 16, 2009, two-thirds vesting at a rate of 20,833 each month for the 23
months beginning on April 16, 2009 and the remaining 20,841 Options shall vest
on March 16, 2011.
Mr.
Bertagna may also participate in any and all benefits and perquisites as are
generally provided for the benefit of executive employees. The
agreement terminates on his death, incapacity (after 180 days), resignation or
cause as defined in the agreement. If he is terminated without cause,
he is entitled to base salary, all bonuses otherwise applicable, and medical
benefits for twelve months.
Murray Williams, our
Chief Financial Officer, Treasurer and Secretary, is employed pursuant to a
written agreement dated as of March 16, 2008. The agreement has a
term of two years; provided however, that it is automatically extended for
additional one-year periods unless either party provides written notice to the
contrary at least 60 days prior to the end of the term then in
effect. Mr. Williams receives a base salary of $150,000 per year. He
is entitled to adjustments to his base salary based on certain performance
standards, at the Company’s discretion, as follows: (i) a
bonus in an amount not less than fifteen percent (15%) of yearly salary, to be
paid in cash or stock, if the Company has an increase in annual revenues and Mr.
Williams performs his duties within the time frame budgeted for such duties and
at or below the cost budgeted for such duties and (ii) a bonus, to be paid in
cash or stock at the Company’s sole discretion, equal to $12,500 for every one
million of the Company’s outstanding common stock purchase warrants that are
exercised.
As a
signing bonus, Mr. Williams was granted 150,000 shares of the Company’s common
stock pursuant to the Company’s 2008 Equity Compensation Plan. In
addition, he was granted Incentive Stock Options to purchase up to 750,000
shares of our common stock pursuant to the 2008 Equity Compensation
Plan. These options vest over 36 months with one-third vesting on
March 16, 2009, two-thirds vesting at a rate of 20,833 each month for the 23
months beginning on April 16, 2009 and the remaining 20,841 Options shall vest
on March 16, 2011.
Mr.
Williams may also participate in any and all benefits and perquisites as are
generally provided for the benefit of executive employees. The
agreement terminates on his death, incapacity (after 180 days), resignation or
“cause,” as that term defined in the Agreement. If he is terminated
without cause, he is entitled to base salary, all bonuses otherwise applicable,
and medical benefits for twelve months.
Christopher M. Walsh,
our Chief Operating Officer, is employed pursuant to a written agreement dated
as of March 14, 2008. The agreement has a term of two years; provided
however, that it is automatically extended for additional one-year periods
unless either party provides written notice to the contrary at least 60 days
prior to the end of the term then in effect. Mr. Walsh shall receive
a base salary of $120,000 per year during the first year of employment and
$150,000 per year during the second year of employment. He is entitled to
adjustments to his base salary based on certain performance standards, at the
Company’s discretion, as follows: (i) a bonus in an amount not to
exceed fifty percent (50%) of yearly salary, to be paid in cash or
stock, if the Company has in increase in annual revenues and Mr. Walsh performs
his duties within the time frame budgeted for such duties at or below the cost
budgeted for such duties and (ii) a bonus, to be paid in cash or stock at the
Company’s sole discretion, equal to $10,000 for every one million of the
Company’s outstanding common stock purchase warrants that are
exercised.
As a
signing bonus, Mr. Walsh was granted 50,000 shares of the Company’s common stock
pursuant to the Company’s 2008 Equity Compensation Plan. In addition,
he was granted Incentive Stock Options to purchase up to 750,000 shares of our
common stock pursuant to the 2008 Equity Compensation Plan. These
options vest over 36 months with one-third vesting on March 16, 2009, two-thirds
vesting at a rate of 20,833 each month for the 23 months beginning on April 16,
2009 and the remaining 20,841 Options shall vest on March 16, 2011.
Mr. Walsh
may also participate in any and all benefits and perquisites as are generally
provided for the benefit of executive employees. The agreement
terminates on his death, incapacity (after 180 days), resignation or “cause,” as
that term is defined in the Agreement. If he is terminated without
cause, he is entitled to base salary, all bonuses otherwise applicable, and
medical benefits for twelve months.
DIRECTOR
COMPENSATION
We
reimburse our directors for expenses incurred in connection with attending board
meetings. We did not pay director’s fees or other cash compensation
for services rendered to our directors in the year ended December 31,
2007.
We have
no other formal plan for compensating our directors for their service in their
capacity as directors although such directors are expected to receive options in
the future to purchase common shares as awarded by our Board of Directors or (as
to future options) a compensation committee which may be established in the
future. Directors are entitled to reimbursement for reasonable travel
and other out-of-pocket expenses incurred in connection with attendance at
meetings of our Board of Directors. Our Board of Directors may award
special remuneration to any director undertaking any special services on behalf
of our company other than services ordinarily required of a
director.
The
following table summarizes the compensation of each of our directors who is not
also a Named Executive Officer for their service as a director for the fiscal
year ended December 31, 2008.
DIRECTOR
COMPENSATION
Name
|
|
Fees
Earned
or Paid
in Cash
($)(1)
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
($)
|
|
|
|
|
Patrick
Aroff
|
|
|
18,000 |
|
|
|
-0- |
|
|
|
1,096 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
19,096 |
|
Louis
Rosenbaum
|
|
|
18,000 |
|
|
|
-0- |
|
|
|
1,096 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
19,096 |
|
Jeffrey
Sharpe
|
|
|
-0- |
|
|
|
-0- |
|
|
|
1,096 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
1,096 |
|
(1) Reflects
cash compensation earned during the fiscal year ended December 31, 2008 for
special services rendered to the Company.
(2) Reflects
the fair value calculated using the Black Scholes option pricing model of vested
options as of December 31, 2008.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows information known to us about beneficial ownership of our
common stock by:
|
·
|
each
of our directors and director
nominees;
|
|
·
|
each
of our Named Executive Officers as identified in the Summary Compensation
Table;
|
|
·
|
all
of our directors and executive officers as a group;
and
|
|
·
|
each
person known by us to beneficially own 5% or more of our common
stock.
|
To our
knowledge, except as indicated in the footnotes to the following table and
subject to state community property laws where applicable, all beneficial owners
named in this table have sole voting and investment power with respect to all
shares shown as beneficially owned by them. Percentage of ownership is based on
39,466,540 shares of common stock outstanding as of December 7,
2009.
Name
and Address
of
Beneficial Owner
|
|
Amount
and Nature
of
Beneficial Ownership(1)
|
|
Percent
of
Common Stock
|
|
Patrick
E. Bertagna(2)
CEO
and Chairman of the Board
|
|
3,944,628
shares
|
|
|
9.85 |
% |
|
|
|
|
|
|
|
Murray
Williams(3)
Chief
Financial Officer/Secretary
|
|
605,330
shares
|
|
|
1.52 |
% |
|
|
|
|
|
|
|
Christopher
Walsh(4)
Chief
Operating Officer,
|
|
784,666
shares
|
|
|
1.96 |
% |
|
|
|
|
|
|
|
Louis
Rosenbaum(5)
Director
|
|
2,124,335
shares
|
|
|
5.37 |
% |
|
|
|
|
|
|
|
Patrick
Aroff(6)
Director
|
|
371,143
shares
|
|
|
0.94 |
% |
|
|
|
|
|
|
|
Jeffrey
Sharpe(7)
Director
|
|
154,170
shares
|
|
|
0.39 |
% |
Other
5% Stockholders:
|
|
|
|
|
|
|
Ron
Paxson (8)
30872
S. Coast Hwy. #191
Laguna
Beach, CA 92651
|
|
4,672,896
shares
|
|
|
11.78 |
% |
|
|
|
|
|
|
|
All
directors and named executive officers as a group (6
persons)
|
|
7,984,272
shares
|
|
|
19.94 |
% |
(1)
|
Under
Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the
date as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually
outstanding.
|
(2)
|
The
3,944,628 shares beneficially owned include 3,365,128 shares and 579,500
stock options, of which: 500,000 have vested as of December 7, 2009 with
an exercise price of $0.75 per share, 25,000 vested on December 5, 2008
with an exercise price of $0.19 per share, 50,000 will vest within 60 days
with an exercise price of $0.75 per share and 4,500 will vest within 60
days with an exercise price of $0.18 per
share.
|
(3)
|
The
605,330 shares beneficially owned include 117,500 shares and 487,830 stock
options, of which: 416,664 have vested as of December 7, 2009 with an
exercise price of $0.75 per share, 25,000 vested on December 5, 2008 with
an exercise price of $0.19 per share, 41,666 will vest within 60 days with
an exercise price of $0.75 per share and 4,500 will vest within 60 days
with an exercise price of $0.18 per
share.
|
(4)
|
The
784,666 shares beneficially owned include 296,836 shares and 487,830 stock
options, of which: 416,664 have vested as of December 7, 2009 with an
exercise price of $0.75 per share, 25,000 vested on December 5, 2008 with
an exercise price of $0.19 per share, 41,666 will vest within 60 days with
an exercise price of $0.75 per share and 4,500 will vest within 60 days
with an exercise price of $0.18 per
share.
|
(5)
|
The
2,124,335 shares beneficially owned include 2,020,165 shares and 104,170
stock options, of which: 83,336 have vested as of December 7, 2009 with an
exercise price of $0.75 per share, 10,000 vested on December 5, 2008 with
an exercise price of $0.19 per share, 8,334 will vest within 60 days with
an exercise price of $0.75 per share and 2,500 will vest within 60 days
with an exercise price of $0.18 per
share.
|
(6)
|
The
371,143 shares beneficially owned include 266,973 shares and 104,170 stock
options, of which: 83,336 have vested as of December 7, 2009 with an
exercise price of $0.75 per share, 10,000 vested on December 5, 2008 with
an exercise price of $0.19 per share, 8,334 will vest within 60 days with
an exercise price of $0.75 per share and 2,500 will vest within 60 days
with an exercise price of $0.18 per
share.
|
(7)
|
The
154,170 shares beneficially owned include 50,000 shares and 104,170 stock
options, of which: 83,336 have vested as of December 7, 2009 with an
exercise price of $0.75 per share, 10,000 vested on December 5, 2008 with
an exercise price of $0.19 per share, 8,334 will vest within 60 days with
an exercise price of $0.75 per share and 2,500 will vest within 60 days
with an exercise price of $0.18 per
share.
|
(8)
|
The
4,672,896 shares beneficially owned include 3,832,274 shares and 175,000
warrants having an exercise price of $1.50 per share owned of record by
Multi-Media Technology Ventures Ltd; 23,450 warrants having an exercise
price of $1.50 per share owned of record by Hillside Enterprises, Inc. and
642,172 shares personally owned by Mr. Paxson. Mr. Paxson is
the general partner for Multi Media Technology Ventures
Ltd. Mr. Paxson has the sole voting and dispositive power over
the shares of Multi-Media Technology Ventures Ltd and Hillside
Enterprises, Inc.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements including the notes thereto. This discussion
and analysis may contain forward-looking statements based upon current
expectations that involve risks and uncertainties. Our actual results may differ
materially as a result of various factors, including those set forth under “Risk
Factors” or elsewhere in this prospectus.
Overview
GTX Corp
was incorporated in the State of Nevada on April 7, 2006 under its former name
“Deeas Resources Inc.” On March 14, 2008, we acquired all of the
outstanding capital stock of Global Trek Xploration, a California corporation
(“GTX California”), in exchange for the issuance of 18,000,001 shares of GTX
Corp common stock (the “Exchange Transaction”).
Although
we acquired GTX California in the Exchange Transaction, for accounting purposes,
the Exchange Agreement was treated as an acquisition of GTX Corp and a
recapitalization of GTX California. Accordingly, the financial
statements contained in this prospectus, and the following description of our
results of operations and financial condition, reflect (i) the operations of GTX
California alone prior to the Exchange Transaction, and (ii) the combined
results of this company and all three of its subsidiaries since the Exchange
Transaction.
Operations
GTX Corp
is in the Personal Location Services business. The Company develops and
integrates 2 way GPS people finding technologies which seamlessly integrate
with consumer products and enterprise applications. We currently conduct
our operations through three wholly-owned subsidiaries that operate in related
sectors of the personal location-based market. In
general:
|
·
|
GTX
California sold our initial global positioning system (GPS) product, a
“GpVector™” product for use
by athletes, during the third calendar quarter of 2008 on a limited
basis. During 2009, we have entered into a number of platform
test agreements which, if the development and testing required by the
agreements is successfully completed, will commence generating revenues in
2010. These platform test agreements include (i) an agreement
we entered into in May 2009 with a global leader in pedorthic and orthotic
footwear to embed our technology into their footwear products to bring GPS
shoes to the senior citizens market; (ii) an agreement we entered into in
September 2009 with one of Nepal’s largest business conglomerates for the
deployment of the Company’s proprietary GPS technologies and product line
to the territories of Nepal, India, Pakistan, Bangladesh, Sri Lanka,
Maldives and Bhutan; and (iii) an agreement we entered into in October
2009 with a worldwide provider of specialty critical and security
sensitive global transportation and logistics services to develop an
industry first, proprietary GPS enabled transport
container.
|
|
·
|
Our
LOCiMOBILE, Inc. subsidiary test launched a version of LOCiMe for use with
the iPhone. In June 2009, LOCiMOBILE, Inc. launched iLOCi2TM,
its second in a series of geo-specific
applications. LOCiMOBILE, Inc. expects to release these
services for other GPS enabled handsets in the near future, including
Blackberry and Google’s Android. In September 2009, we also
launched our new iLOCi2™ iPhone App International Version 1.2, which
version has, to date, been downloaded in 34 other countries. As
a result of these recent releases, LOCiMOBILE, Inc. has recently commenced
generating revenues, which revenues are expected to increase as the mobile
location technology continues to be downloaded by additional users
worldwide.
|
|
·
|
Code
Amber News Service, Inc. (“CANS”) began selling Code Amber News Service
subscriptions and sponsored links in February 2009. During
September 2009, CANS launched its Code Mobile wireless alert application
and service for the iPhone ®, BlackBerry® and Google Android®
phones. During the fourth quarter of 2009, CANS acquired the
rights to market a new CANS product known as the “Code Amber Alertag,” and
CANS commenced selling a third party’s child locating products on its
website. These two new complimentary offerings are expected to
generate revenues for the Company during
2010.
|
Results
of Operations
The
following discussion should be read in conjunction with our consolidated
financial statements and the related notes that appear elsewhere in this
prospectus.
Three-months and nine-months
ended September 30, 2009 compared to the and nine-months three-months ended
September 30, 2008
The
information in the tables below represents our statement of operations data for
the three and nine months ended September 30, 2009 and 2008:
|
|
Three
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
$
|
|
|
%
of Revenues
|
|
|
$
|
|
|
%
of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
126,704 |
|
|
|
100 |
% |
|
$ |
235,102 |
|
|
|
100 |
% |
Cost
of goods sold
|
|
|
60,448 |
|
|
|
48 |
% |
|
|
193,864 |
|
|
|
82 |
% |
Net
profit
|
|
|
66,256 |
|
|
|
52 |
% |
|
|
41,238 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and professional fees
|
|
|
388,836 |
|
|
|
307 |
% |
|
|
795,242 |
|
|
|
338 |
% |
Research
and development
|
|
|
5,782 |
|
|
|
5 |
% |
|
|
112,632 |
|
|
|
48 |
% |
General
and administrative
|
|
|
115,715 |
|
|
|
91 |
% |
|
|
133,355 |
|
|
|
57 |
% |
Operating
expenses
|
|
|
510,333 |
|
|
|
403 |
% |
|
|
1,041,229 |
|
|
|
443 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(444,077 |
) |
|
|
(350 |
)% |
|
|
(999,991 |
) |
|
|
(425 |
)% |
Other
income
|
|
|
6,837 |
|
|
|
5 |
% |
|
|
14,000 |
|
|
|
6 |
% |
Net
loss
|
|
$ |
(437,240 |
) |
|
|
(345 |
)% |
|
$ |
(985,991 |
) |
|
|
(419 |
)% |
|
|
Nine
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
$
|
|
|
%
of Revenues
|
|
|
$
|
|
|
%
of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
185,227 |
|
|
|
100 |
% |
|
$ |
374,165 |
|
|
|
100 |
% |
Cost
of goods sold
|
|
|
88,321 |
|
|
|
48 |
% |
|
|
302,461 |
|
|
|
81 |
% |
Net
profit
|
|
|
96,906 |
|
|
|
52 |
% |
|
|
71,704 |
|
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and professional fees
|
|
|
1,293,351 |
|
|
|
698 |
% |
|
|
2,272,581 |
|
|
|
607 |
% |
Research
and development
|
|
|
91,109 |
|
|
|
49 |
% |
|
|
307,288 |
|
|
|
82 |
% |
General
and administrative
|
|
|
306,621 |
|
|
|
166 |
% |
|
|
310,175 |
|
|
|
83 |
% |
Operating
expenses
|
|
|
1,691,081 |
|
|
|
913 |
% |
|
|
2,890,044 |
|
|
|
772 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,594,175 |
) |
|
|
(861 |
)% |
|
|
(2,818,340 |
) |
|
|
(753 |
)% |
Other
income (expense)
|
|
|
34,172 |
|
|
|
18 |
% |
|
|
(30,852 |
) |
|
|
(8 |
)% |
Net
loss
|
|
$ |
(1,560,003 |
) |
|
|
(842 |
)% |
|
$ |
(2,849,192 |
) |
|
|
(761 |
)% |
Revenues
Revenues
during the three and nine months ended September 30, 2009 consisted of service
and licensing fees of approximately $30,000 and $80,000, respectively, charged
to a re-seller of our gpVectorTM Powered
Athlete Tracking Systems. The licensing fees were received in fiscal
year 2007 and were being amortized over the term of the licensing
agreement. In September 2009 we recognized the remaining portion of
the licensing agreement ($77,500) into revenue as the re-seller failed to meet
the required minimum device purchase and activation requirements under the
exclusive license agreement. Also during September 2009, we began
platform tests with two new customers resulting in revenues of
$12,500. We also recognized some revenues from the sale of CANS
subscriptions and the sale of sample miniaturized transceiver modules to
prospective new customers of GTX California. LOCiMOBILE, Inc.
recently launched iLOCi2TM, its
second in a series of geo-specific applications that transform iPhones into real
time GPS transceivers, utilizing some of the latest technological breakthroughs
of the Apple 3.0 operating system. Revenues during the three and nine
months ended September 30, 2008 consisted primarily of the sale of approximately
900 GpVector™ Powered Athlete Tracking Systems in September 2008 as well as
various one-time design and enhancement services billed to the same re-seller to
allow our GPS technology to better integrate into the re-seller’s
product.
Cost
of goods sold
Cost of
goods sold during the three and nine months ended September 30, 2009 consisted
primarily of monthly cellular costs incurred on our gpVectorTM Powered
Athlete Tracking System devices. Additionally, inventory costs that
totaled $41,000 were written off to cost of goods sold as they were considered
obsolete. Cost of goods sold during the three and nine months ended
September 30, 2008 consisted primarily of the cost of raw materials utilized in
the manufacturing of the gpVector™ Powered Athlete Tracking Systems that were
sold during September 2008. Additionally, the cost of the design and
enhancement services we provided to the re-seller to allow our GPS technology to
better integrate into their products and the cost to provide the re-seller
website design and functionality services are included in cost of goods sold as
of September 30, 2008.
Salaries
and professional fees
Salaries
and professional fees consist of costs attributable to employees, consultants
and contractors who primarily spend their time on sales, marketing, technology
and corporate administrative services; legal fees relating to general corporate
matters and our patent applications; and accounting
expenses. Salaries and professional fees during the three and nine
months ended September 30, 2009 decreased approximately $406,000 or 51% and
$979,000 or 43%, respectively in comparison to the same periods in 2008 due
primarily to lower legal and accounting fees in 2009 and our overall cost
cutting efforts to preserve our cash position while the economy recovers from
the setbacks caused by the crisis in the global financial
markets. During the nine months ended September 30, 2009, legal and
accounting fees were approximately $314,000 less than that incurred during the
nine months ended September 30, 2008. The decrease was due to legal
and accounting fees incurred in the Exchange Transaction and the related
Financing in 2008 that were not incurred in 2009. Additionally,
during the nine months ended September 30, 2008, in conjunction with the
creation of the 2008 Equity Compensation Plan, we granted options to purchase a
total of 4,568,000 shares of common stock and we issued 737,116 shares of common
stock, resulting in an expense of approximately $670,000. These
equity based costs were either not incurred or were substantially less in the
nine months ended September 30, 2009.
Research
and development
Research
and development expense consists of costs attributable to employees, consultants
and contractors who primarily spend their time on the design, engineering and
process development of our personal location services platform and LOCiMobile™
applications for GPS enabled handsets. Research and development
during the three and nine months ended September 30, 2009 decreased
approximately $107,000 or 95% and $216,000 or 70%, respectively in comparison to
the same periods in 2008 due primarily to our gpVectorTM Powered
Athlete Tracking System moving substantially out of the research and development
stage during the latter part of fiscal 2008.
General
and administrative
General
and administrative expenses consist primarily of corporate administrative costs,
depreciation, occupancy costs, insurance and travel and
entertainment. General and administrative expenses during the three
and nine months ended September 30, 2009 remained relatively unchanged,
decreasing approximately $18,000 and $4,000, respectively in comparison to the
same periods in 2008. Such changes were primarily due to cost cutting
measures in the areas of postage, printing, travel and entertainment,
miscellaneous computer and office expenses and website development as well as
reductions in corporate filing fees that were not required in 2009. These
decreases were partially offset by increases in the allowance for doubtful
accounts, depreciation, insurance and recruiting.
Other
Income (Expense)
During
the three and nine months ended September 30, 2009, we recognized approximately
$7,000 and $34,000, respectively, of interest income, compared to $14,000 and
$32,000 during the same periods in 2008. The slight increase in
interest income during the nine month period is attributable to the Company
receiving better interest rates on its cash, cash equivalents and certificates
of deposit held during the nine months ended September 30, 2009 compared to the
same period in 2008.
No
interest expense was incurred during the three or nine months ended September
30, 2009, or during the three month period ended September 30,
2008. However, we incurred $62,511 of interest expense during the
nine months ended September 30, 2008 as a result of a $40,000 fee paid in
conjunction with the Financing, which closed on March 14, 2008, as well as
interest expense on the Bridge Loan payable to Jupili accruing at 10% per annum
during the first quarter of 2008. The Bridge Loan was converted to
common stock in connection with the Exchange Transaction during March
2008.
Net
Loss
Net loss
for the three and nine months ended September 30, 2009 decreased approximately
$548,000 or 56% and $1,289,000 or 45%, respectively, in comparison to the net
loss during the same periods in 2008. The decrease in the net loss is
primarily due to a reduction in salaries and professional fees, research and
development, and our overall cost cutting efforts to preserve our cash position
during the current economic downturn caused by the global financial
crisis.
Year ended December 31, 2008
compared to year ended December 31, 2007
The
following table represents our statement of operations for the years ended
December 31, 2008 and 2007:
|
|
Year
ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
$
|
|
|
% of
Revenues
|
|
|
$
|
|
|
% of
Revenues
|
|
Revenues
|
|
$ |
424,166 |
|
|
|
100 |
% |
|
$ |
26,000 |
|
|
|
100 |
% |
Cost
of goods sold
|
|
|
334,482 |
|
|
|
79 |
% |
|
|
- |
|
|
|
- |
% |
Net
profit
|
|
|
89,684 |
|
|
|
21 |
% |
|
|
26,000 |
|
|
|
100 |
% |
Operating
expenses
|
|
|
3,478,992 |
|
|
|
820 |
% |
|
|
1,317,747 |
|
|
|
5,068 |
% |
Loss
from operations
|
|
|
(3,389,308 |
) |
|
|
(799 |
)% |
|
|
(1,291,747 |
) |
|
|
(4,968 |
)% |
Other
income (expense)
|
|
|
(11,975 |
) |
|
|
(3 |
)% |
|
|
(35,907 |
) |
|
|
(138 |
)% |
Net
loss
|
|
$ |
(3,401,283 |
) |
|
|
(802 |
)% |
|
$ |
(1,327,654 |
) |
|
|
(5,106 |
)% |
Revenues
Revenues
for the year ended December 31, 2008 consisted primarily of the sale of
approximately 900 gpVector™ Powered Athlete Tracking Systems, at a price of $239
per unit, to a re-seller, as well as monthly service and licensing fees charged
to the re-seller with respect to the units sold to the re-seller. We
also recognized some revenues from various design and enhancement services
provided by us to the re-seller to allow our GPS technology to better integrate
into the re-seller’s products. The re-seller also purchased website
design and functionality services from GTX in anticipation of their launch in
the third quarter of 2008. We had no active customers in 2007
and the revenue recognized during the year ended December 31, 2007 was received
from one customer in connection with a licensing agreement which has since been
terminated.
Cost of goods
sold
Cost of
goods sold during the year ended December 31, 2008 consisted of (i) the cost of
raw materials utilized in the manufacturing of the 900 gpVector™ Powered Athlete
Tracking Systems that we sold during the year, (ii) the cost of the design and
enhancement services we provided to allow our GPS technology to better integrate
into the re-seller’s products, and (iii) the cost to provide this customer with
website design and functionality services.
Operating
expenses
Operating
expenses consist of salaries and professional fees, stock based compensation
expense, research and development and general and administrative costs. Total
operating expenses for the year ended December 31, 2008 (“fiscal 2008) increased
by approximately $2,161,000 or 164% as compared to total operating expenses for
the year ended December 31, 2007 (“fiscal 2007”). The increase in operating
expenses is primarily attributed to the following:
|
·
|
Stock
based compensation expense was approximately $1,025,000 for fiscal 2008
compared to $181,000 for fiscal 2007. Following the adoption by
this Company of the 2008 Stock Compensation Plan (the “2008 Plan”), we had
granted options to purchase a total of 4,913,000 shares of common stock
during fiscal 2008, resulting in stock based compensation expense of
approximately $342,000, net of estimated pre-vesting forfeitures, for
fiscal 2008. Additionally, we granted a total of 542,577 shares
of common stock from the 2008 Plan, valued at approximately $432,000
during the year ended December 31, 2008 to various employees and
consultants. We also granted stock to employees and consultants (outside
of the 2008 Plan) for services rendered resulting in stock based
compensation expense of approximately $254,000 during the year ended
December 31, 2008. Stock based compensation expense was inconsequential
during fiscal 2007.
|
|
·
|
Professional
fees in fiscal 2008 totaled approximately $758,000 compared to $265,000
for fiscal 2007. The increase is primarily due to legal and
accounting fees related to the Exchange Transaction, the Financing, the
Additional Financing, the filing of a registration statement with the SEC
in May 2008, as well the legal fees related to the filing of applications
for our various patents.
|
|
·
|
Research
and development fees totaled approximately $372,000 for fiscal 2008
compared to $240,000 for fiscal 2007. These fees for both
fiscal years relate to the continued development of our two-way GPS™
tracking and location aware
technology.
|
|
·
|
Salaries
totaled approximately $949,000 for fiscal 2008, compared to approximately
$481,000 for fiscal 2007. The increase in salaries was
primarily due to the hiring of additional employees during the later part
of 2007 and the first quarter of 2008 in anticipation of the completion of
the development of certain of our technologies and the commercial release
of our first product, as well as an increase in the salaries of many of
our existing employees.
|
Other income
(expense)
During
fiscal 2008, we recognized approximately $51,000 of interest income as compared
to approximately $2,000 recognized during fiscal 2007. This increase
is primarily attributable to our increase in cash and cash equivalents and
certificates of deposit resulting from the Financing and Additional
Financing.
During
fiscal 2008, we reported interest expense of approximately $63,000 as compared
to approximately $38,000 for fiscal 2007. The increase is primarily
attributed to a $40,000 fee paid in conjunction with the Financing, as well as
interest expense on the $1,000,000 Bridge Loan held by Jupili Investment
S.A.. The Bridge Loan accrued interest at 10% per
annum. The Bridge Loan was converted into common stock in connection
with the Exchange Transaction in March 2008.
Net loss
During
fiscal 2008, we reported a net loss of approximately $3,401,000 as compared to a
net loss of approximately $1,328,000 for fiscal 2007 due primarily to an
increase in operating expenses as discussed above.
Liquidity
and Capital Resources
Our net
loss decreased to $1,560,000 for the nine months ended September 30, 2009
compared to a net loss of $2,849,000 for the nine months ended September 30,
2008. Net cash used in operating activities was approximately
$1,180,000 for the nine months ended September 30, 2009 compared to
approximately $2,028,000 for the same period in 2008. The decrease in
cash used in operating activities is primarily attributable to a reduction in
the amounts paid for accounting and legal services, employees and contractors
during the nine months ended September 30, 2009.
Net cash
provided by investing activities during the nine months ended September 30, 2009
was approximately $828,000 and resulted primarily from the maturing of
certificates of deposits totaling $1,000,000. Net cash used by
investing activities during the nine months ended September 30, 2008 was
approximately $70,000 and consisted primarily of the purchase of property and
equipment.
Net cash
provided by financing activities during the nine months ended September 30, 2009
and 2008 was approximately $0 and $4,007,000, respectively. The net
cash provided by financing activities during 2008 primarily represents the
Financing and Additional Financing transactions in which we raised
$3,732,000. We also received approximately $399,000 from the exercise
of warrants during the nine months ended September 30, 2008. No
shares were sold and no warrants were exercised during the nine months ended
September 30, 2009.
Because
revenues from our operations have, to date, been modest, we currently rely on
the cash we received from our prior financing activities to fund our capital
expenditures and to support our working capital requirements. We
believe that we have sufficient capital resources to fund our operations for at
least the next four fiscal quarters, assuming that there are no unanticipated
material adverse developments. Although we believe that have
sufficient cash to operate for the next four fiscal quarters, our actual cash
expenditures may exceed our planned expenditures, particularly if we invest in
the development of improved versions of our existing products and
technologies, and if we increase our marketing expenses. In order to
enable us to fund these currently unplanned expenditures, we have entered into
the common stock line of credit with Dutchess. In the event that our
actual capital uses and requirements exceed our current expectations, we intend
to utilize the Dutchess common stock line of credit facility to fund certain of
these expenditures.
During
2009 we entered into three separate platform test agreements. Based
on the timing of the development and testing of the products that are the
subject of these test agreements, we anticipate that we will generate revenues
from at least two these products during 2010, as well as from sales to other
pending customers. However, since inception in 2002, we have
generated significant losses (as of September 30, 2009, we had an accumulated
deficit of approximately $9,002,000), and we currently expect to incur
continuous losses until these and our other revenue initiatives collectively
generate substantial revenues. Depending on our current contractual
arrangements and the revenues our new LOCiMobile™ applications generate, we
currently anticipate that our losses will continue until at least the second
half of calendar year 2010.
In
addition to continuing to incur normal operating expenses, we intend to continue
our research and development efforts for various of our technologies and
products, including hardware, software and interface customization, and website
development, and also expect to further develop our sales, marketing and
manufacturing programs associated with the commercialization and licensing of
the GpVector™ technology and the commercialization of the LOCiMobile™
applications for GPS enabled handsets and CANS.
Our
funding requirements will depend on numerous factors, including:
|
·
|
Costs involved in
the completion of the hardware, software and interface
customization, and website necessary to continue the commercialization of
the GpVector™;
|
|
·
|
The
costs of outsourced manufacturing;
|
|
·
|
The
costs of licensing activities, including product marketing and
advertising; and
|
|
·
|
Revenues
derived from product sales and the licensing of the GpVector™ technology,
the sales of the LOCiMobile™ applications for GPS enabled handsets, and
advertising sales from CANS.
|
As noted
above, based on budgeted expenditures, we believe that we will have sufficient
liquidity to satisfy our cash requirements for the next twelve
months. In addition, we expect to be able to supplement our cash
requirements, if and when needed, under the Equity Line. However, if our actual
expenses increase beyond our existing financial resources, we will have to
access funding through the Equity Line and/or otherwise through the sale of
additional equity or debt securities. In any event, we expect that
unless our sales increase significantly, we will need to raise additional funds
during 2010, either through the Equity Line or otherwise. The sale of
additional equity securities will result in additional dilution to our existing
stockholders. Sale of debt securities could involve substantial operational and
financial covenants that might inhibit our ability to follow our business
plan. Additional financing may not be available in amounts or on
terms acceptable to us or at all. The Dutchess Equity Line is
only available to us under certain circumstances, and the amount of proceeds
that we are entitled to receive under the Dutchess Equity Line is dependent on
the trading volume of our shares. Accordingly, we may not be able to
obtain funding through the Equity Line if and when needed, or the amount of such
funding may not be sufficient for our needs. If we are unable to
obtain additional financing (through the Equity Line, or otherwise), we may be
required to reduce the scope of, delay or eliminate some or all of our planned
research, development and commercialization activities, which could harm our
financial conditions and operating results.
We are
subject to many risks associated with development-stage businesses, including
the above-discussed risks associated with the ability to raise capital. Please
see the section entitled “Risk Factors” for more information regarding risks
associated with our business.
Off-Balance
Sheet Arrangements
There are
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Inflation
We do not
believe our business and operations have been materially affected by
inflation.
Critical
Accounting Policies and Estimates
The
preparation of our Consolidated Financial Statements in conformity with
accounting principles generally accepted in the United States requires
management to adopt critical accounting policies and to make estimates and
assumptions that affect the amounts reported in our Consolidated Financial
Statements and accompanying notes. These critical accounting policies and
estimates have been reviewed by our Audit Committee. The principal items in our
Consolidated Financial Statements reflecting critical accounting policies or
requiring significant estimates and judgments are as follows:
Revenue
Recognition
The
Company recognizes revenue from product sales when the product is shipped to the
customer and title has transferred. The Company assumes no remaining significant
obligations associated with the product sale other than that related to its
warranty program. Revenue related to licensing agreements is
recognized over the term of the agreement. Revenues for services are
recognized as the services are rendered.
Inventory
Inventory
consists of finished units and various components that go into the final product
such as antennas, batteries, control boards, SIM card holders, etc. Inventory is
valued at the lower of cost (first-in, first-out) or net realizable value. The
Company evaluates its inventory for excess and obsolescence on a regular basis.
In preparing the evaluation the Company looks at the expected demand for the
product, as well as changes in technology, in order to determine whether or not
a reserve is necessary to record the inventory at net realizable value. If
actual market conditions are less favorable than those projected by management,
inventory write-downs may be required.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Recently
Issued Accounting Standards
In
March 2008, the FASB issued new disclosure requirements regarding
derivative instruments and hedging activities. Entities must now provide
enhanced disclosures on an interim and annual basis regarding how and why the
entity uses derivatives; how derivatives and related hedged items are accounted
for, and how derivatives and related hedged items affect the entity’s financial
position, financial results and cash flow. Pursuant to the transition
provisions, the Company adopted these new requirements on January 1, 2009.
The adoption of this standard did not have a material effect on our consolidated
financial statements.
In June
2008, the FASB issued new requirements which provide that an entity should use a
two step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the
instrument’s contingent exercise and settlement provisions. It also clarifies
the impact of foreign currency denominated strike prices and market-based
employee stock option valuation instruments on the evaluation. –The guidance
specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to this company's own stock and (b)
classified in stockholders' equity in the statement of financial position would
not be considered a derivative financial instrument. The guidance is effective
for fiscal years beginning after December 15, 2008. The adoption of this
guidance did not have an impact on this company’s consolidated financial
statements.
In
May 2009, the FASB issued guidelines on subsequent event accounting which
sets forth: 1) the period after the balance sheet date during which management
of a reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; 2) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and 3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This disclosure should alert all users of
financial statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being presented. The adoption of
this guidance did not have an impact on this company’s consolidated financial
statements.
On
July 1, 2009, the FASB issued the FASB Accounting Standards
Codification (the “Codification”). The Codification became the single source of
authoritative nongovernmental U.S. GAAP, superseding existing FASB, American
Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force
(“EITF”) and related literature. The Codification eliminates the previous US
GAAP hierarchy and establishes one level of authoritative GAAP. All other
literature is considered non-authoritative. However, rules and interpretive
releases of the Securities Exchange Commission (“SEC”) issued under the
authority of federal securities laws will continue to be sources of
authoritative GAAP for SEC registrants. The Codification was effective for
interim and annual periods ending after September 15, 2009. The Company
adopted the Codification for the quarter ending September 30,
2009. There was no impact to the consolidated financial results as
this change is disclosure-only in nature.
On
January 1, 2009, the Company adopted the revised FASB guidance regarding
business combinations which was required to be applied to business combinations
on a prospective basis. The revised guidance requires that the acquisition
method of accounting be applied to a broader set of business combinations,
amends the definition of a business combination, provides a definition of a
business, requires an acquirer to recognize an acquired business at its fair
value at the acquisition date and requires the assets and liabilities assumed in
a business combination to be measured and recognized at their fair values as of
the acquisition date (with limited exceptions). There was no impact upon
adoption and the effects of this guidance will depend on the nature and
significance of business combinations occurring after the effective date.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than compensation agreements and other arrangements with our executive officers
and directors and the transactions described below, during our last three fiscal
years, there has not been, and there is not currently proposed, any transaction
or series of similar transactions to which we were or will be a party in which
the amount involved exceeded or will exceed the lesser of $120,000 or one
percent of the average of our total assets at year-end for the last two
completed fiscal years and in which any of our directors, nominees for director,
executive officers, holders of more than five percent of any class of our voting
securities or any member of the immediate family of the foregoing persons had or
will have a direct or indirect material interest.
CORPORATE
GOVERNANCE
Each of
our directors was elected by the stockholders and serves until his or her
successor is elected and qualified. The board of directors currently
has no nominating, audit or compensation committee at this time.
Independence
of Directors
In
determining the independence of our directors, we apply the definition of
“independent director” provided under the rules of the NASDAQ rules. Pursuant to
the NASDAQ rules, after considering all relevant facts and circumstances, the
Board affirmatively determined that three of the four directors serving on the
Board are independent pursuant to the NASDAQ rules regarding director
independence, with the exception of Patrick Bertagna, who serves as our
President, Chief Executive Officer and Chairman of the Board. With
the exception of Mr. Sharpe, our officers and directors assumed their current
offices with GTX Corp upon the closing of the Exchange Transaction on March 14,
2008.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Since the
closing of the Exchange Transaction, our common stock has been traded in the
over-the-counter market on the OTC Bulletin Board under the symbol
“GTXO.” Prior thereto, our common stock was listed on the OTC
Bulletin Board over-the-counter market under the symbol “DEEA.”
To our
knowledge, there was limited or no trading in our common stock prior to the
Exchange Transaction on March 14, 2008. Accordingly, the following
table only sets forth the high and low bid information for our common stock for
the periods indicated since the Exchange Transaction. The following
price information reflects inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions:
|
Year
Ended December 31,
|
|
2009
|
|
High
|
|
Low
|
First
Quarter
|
$
|
0.24
|
|
$
|
0.04
|
|
Second
Quarter
|
$
|
0.40
|
|
$
|
0.05
|
|
Third
Quarter
|
$
|
0.39
|
|
$
|
0.09
|
|
October
1, 2009 – December 7, 2009 |
$
|
0.247
|
|
$
|
0.16
|
|
|
Year
Ended December 31,
|
|
2008
|
|
High
|
|
Low
|
First
Quarter
|
$
|
1.65
|
|
$
|
0.95
|
|
Second
Quarter
|
$
|
2.71
|
|
$
|
1.46
|
|
Third
Quarter
|
$
|
2.42
|
|
$
|
0.33
|
|
Fourth
Quarter
|
$
|
0.65
|
|
$
|
0.11
|
|
As of
December 4, 2009, the last reported sales price of our common stock on the OTC
Bulletin Board was $0.19 per share.
Holders
of Record
Dividends
Since our
inception in September 2002, we have not paid or declared any cash dividends on
our common stock. We currently intend to retain any earnings for future growth
and, therefore, do not expect to pay cash dividends on our common stock in the
foreseeable future.
Equity
Compensation Plan Information
The
following table sets forth, as of December 31, 2008, information concerning the
2008 Equity Compensation Plans under which up to 7,000,000 shares of common
stock are authorized for issuance. The table does not reflect grants,
awards, exercises, terminations or expirations since that date.
|
|
Number
of
securities
to
be
issued
upon
exercise
of
outstanding
options
|
|
|
Weighted-
average
exercise
price
of
outstanding
options
|
|
|
Number
of securities
remaining
available
for
future issuance
under
equity
compensation
plans
(excluding
securities
reflected
in column
(a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
4,563,000 |
|
|
$ |
0.74 |
|
|
|
1,894,423 |
|
Equity
compensation plans not approved by security holders
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
|
4,563,000 |
|
|
$ |
0.74 |
|
|
|
1,894,423 |
|
DESCRIPTION
OF SECURITIES
Capital
Stock
We are
authorized to issue 2,071,000,000 shares of common stock, par value $0.001 per
share, of which 39,466,540 shares were issued and outstanding as of December 7,
2009, and 10,000,000 shares of preferred stock, par value $0.001 per share, of
which no shares were issued and outstanding as of December 7, 2009.
Common
Stock
Each
stockholder of our common stock is entitled to a pro rata share of cash
distributions made to stockholders, including dividend payments. The
holders of our common stock are entitled to one vote for each share of record on
all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of our directors or any other
matter. Therefore, the holders of more than 50% of the shares voted
for the election of those directors can elect all of the
directors. The holders of our common stock are entitled to receive
dividends when, as and if declared by our Board of Directors from funds legally
available therefore. Cash dividends are at the sole discretion of our
Board of Directors. In the event of our liquidation, dissolution or
winding up, the holders of common stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of our
liabilities and after provision has been made for each class of stock, if any,
having any preference in relation to our common stock. Holders of
shares of our common stock have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to our common
stock.
Preferred
Stock
We have
10,000,000 authorized shares of preferred stock. $.001 par value, authorized. No
shares of preferred stock are issued or outstanding. Our Board of Directors is
authorized to determine the number of series into which the preferred stock may
be divided, to determine the designations, powers, preferences, voting and other
rights of each series.
Warrants
We issued
1,850,750 warrants to purchase shares of our common stock at an exercise price
of $1.50 per share, in connection with the Additional Financing in May
2008. These warrants expire on May 11, 2011.
PLAN
OF DISTRIBUTION
The
purpose of this prospectus is to permit the selling stockholder to offer and
resell up to an aggregate of 12,000,000 shares of our common stock at such times
and at such places as they choose. In this section of the prospectus,
the term “selling stockholder” includes the partners, pledgees, donees,
transferees or other successors-in-interest of the selling stockholder, which
may sell shares received after the date of this prospectus from the selling
stockholder as a pledge, gift, partnership or similar distribution or other
non-sale related transfer. To the extent required, we may amend and supplement
this prospectus from time to time to describe a specific plan of distribution.
The decision to sell any shares offered pursuant to this prospectus is within
the sole discretion of the selling stockholder.
The
distribution of the common stock by the selling stockholder may be effected from
time to time in one or more transactions. Any of the common stock may
be offered for sale, from time to time, by the selling stockholder at prices and
on terms then obtainable, at fixed prices, at prices then prevailing at the time
of sale, at prices related to such prevailing prices, or in negotiated
transactions at negotiated prices or otherwise. The common stock may be sold by
one or more of the following:
— On
the OTC Bulletin Board or any other national common stock exchange or automated
quotation system on which our common stock is traded, which may involve
transactions solely between a broker-dealer and its customers which are not
traded across an open market and block trades.
— Through
one or more dealers or agents (which may include one or more underwriters),
including, but not limited to:
|
o
|
Block
trades in which the broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this
prospectus.
|
|
o
|
Purchases
by a broker or dealer as principal and resale by such broker or dealer for
its account pursuant to this
prospectus.
|
|
o
|
Ordinary
brokerage transactions.
|
|
o
|
Transactions
in which the broker solicits
purchasers.
|
— Directly
to one or more purchasers.
— Combination
of these methods.
Dutchess
and any broker-dealers who act in connection with the sale of its shares are
“underwriters” within the meaning of the Securities Act, and any discounts,
concessions or commissions received by them and profit on any resale of the
shares as principal may be deemed to be underwriting discounts, concessions and
commissions under the Securities Act. Because the selling stockholder is an
“underwriter” within the meaning of the Securities Act, it will be subject to
the prospectus delivery requirements of the Securities Act, including Rule 172
thereunder.
The
selling stockholder or its underwriters, dealers or agents may sell the common
stock to or through underwriters, dealers or agents, and such underwriters,
dealers or agents may receive compensation in the form of discounts or
concessions allowed or reallowed. Underwriters, dealers, brokers or
other agents engaged by the selling stockholder may arrange for other such
persons to participate. Any fixed public offering price and any
discounts and concessions may be changed from time to
time. Underwriters, dealers and agents who participate in the
distribution of the common stock may be deemed to be underwriters within the
meaning of the Securities Act, and any discounts or commissions received by them
or any profit on the resale of shares by them may be deemed to be underwriting
discounts and commissions thereunder. The proposed amounts of the
common stock, if any, to be purchased by underwriters and the compensation, if
any, of underwriters, dealers or agents will be set forth in a prospectus
supplement.
Unless
granted an exemption by the SEC from Regulation M under the Exchange Act, or
unless otherwise permitted under Regulation M, the selling stockholder will not
engage in any stabilization activity in connection with our common stock, will
furnish each broker or dealer engaged by the selling stockholder and each other
participating broker or dealer the number of copies of this prospectus required
by such broker or dealer, and will not bid for or purchase any common stock of
our or attempt to induce any person to purchase any of the common stock other
than as permitted under the Exchange Act.
We will
not receive any proceeds from the sale of these shares of common stock offered
by the selling stockholder. We shall use our reasonable efforts to prepare and
file with the SEC such amendments and supplements to the registration statement
and this prospectus as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of the common stock covered by the registration statement for
the period required to effect the distribution of such common
stock.
We are
paying certain expenses (other than commissions and discounts of underwriters,
dealers or agents) incidental to the offering and sale of the common stock to
the public, which are estimated to be approximately $18,000. If we are required
to update this prospectus during such period, we may incur additional expenses
in excess of the amount estimated above.
In order
to comply with certain state securities laws, if applicable, the common stock
will be sold in such jurisdictions only through registered or licensed brokers
or dealers. In certain states the shares of common stock may not be sold unless
they have been registered or qualify for sale in such state or an exemption from
registration or qualification is available and is complied with.
EXPERTS
The
consolidated financial statements as of December 31, 2008 and 2007 included in
this Prospectus have been audited by LBB & Associates Ltd., LLP, an
independent registered public accounting firm, as stated in their report
appearing herein. Such consolidated financial statements have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
LEGAL
MATTERS
Certain
legal matters in connection with the securities will be passed upon for us by
the law firm of TroyGould PC, Los Angeles, California.
CHANGES
AND DISAGREEMENTS WITH ACCOUNTANTS
None.
COMMISSION’S
POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The
Nevada Revised Statutes authorizes indemnification of a director, officer,
employee or agent of the Company against expenses incurred in connection with
any action, suit, or proceeding to which he or she is named a party by reason of
his or her having acted or served in such capacity, except for liabilities
arising from his or her own misconduct or negligence in performance of his or
her duty. In addition, even a director, officer, employee, or agent
of the Company who was found liable for misconduct or negligence in the
performance of his or her duty may obtain such indemnification if, in view of
all the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to indemnification.
Section
78.7502 of the Nevada Revised Statutes provides that we may indemnify any person
who was or is a party, or is threatened to be made a party, to any action, suit
or proceeding brought by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other entity. The expenses that are subject to this indemnity
include attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnified party in connection with the
action, suit or proceeding. In order for us to provide this statutory indemnity,
the indemnified party must not be liable under Nevada Revised Statutes section
78.138 or must have acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation. With respect
to a criminal action or proceeding, the indemnified party must have had no
reasonable cause to believe his conduct was unlawful.
Section
78.7502 also provides that we may indemnify any person who was or is a party, or
is threatened to be made a party, to any action or suit brought by or on behalf
of the corporation by reason of the fact that he is or was serving at the
request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses actually or reasonably incurred by him in connection with the
defense or settlement of such action or suit if he is not liable under Nevada
Revised Statutes section 78.138 of if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. We may not indemnify a person if the person is adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which such action or suit was
brought or another court of competent jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity.
Section
78.7502 requires us to indemnify our directors or officers against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection
with his defense, if he has been successful on the merits or otherwise in
defense of any action, suit or proceeding, or in defense of any claim, issue or
matter.
Further,
pursuant to the Nevada Revised Statutes, the Company has adopted the following
indemnification provisions in its Amended and Restated Bylaws for its directors
and officers:
“The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, including
all appeals (other than an action, suit, or proceeding by or in the right of the
Corporation) by reason of the fact that he or she is or was a director or
officer of the Corporation (and the Corporation, in the discretion of the Board
of Directors, may so indemnify a person by reason of the fact that he or she is
or was an employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees), judgments, decrees,
fines, penalties, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit, or proceeding if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful; provided, however, the Corporation shall be
required to indemnify an officer or director in connection with an action, suit,
or proceeding initiated by such person only if such action, suit, or proceeding
was authorized by the Board of Directors. The termination of any action, suit,
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith or in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.”
“The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit,
including all appeals, by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director
or officer of the Corporation (and the Corporation, in the discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he or
she is or was an employee or agent of the Corporation or is or was serving at
the request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been finally adjudged
to be liable for gross negligence or willful misconduct in the performance of
his or her duty to the Corporation unless and only to the extent that the court
in which such action or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such court
shall deem proper. Notwithstanding the foregoing, the Corporation shall be
required to indemnify an officer or director in connection with an action, suit,
or proceeding initiated by such person only if such action, suit, or proceeding
was authorized by the Board of Directors.”
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to our directors, officers and controlling persons pursuant to the
Nevada Revised Statutes, our Amended and Restated Bylaws or otherwise, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. No pending material litigation or proceeding involving our
directors, executive officers, employees or other agents as to which
indemnification is being sought exists, and we are not aware of any pending or
threatened material litigation that may result in claims for indemnification by
any of our directors or executive officers.
ADDITIONAL
INFORMATION
We have
filed with the SEC this Registration Statement on Form S-1 under the Securities
Act covering the sale by the selling stockholder of the securities offered by
this prospectus. This prospectus, which is a part of the Registration Statement,
does not contain all of the information in the Registration Statement and the
exhibits filed with it, portions of which have been omitted as permitted by the
SEC rules and regulations. For further information concerning us and the
securities offered by this prospectus, please refer to the Registration
Statement and to the exhibits filed therewith.
The
Registration Statement, including all exhibits, may be inspected without charge
at the SEC’s Public Reference Room at the SEC’s principal office at Room 1580,
100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of this public reference room by calling 1-800-SEC-0330. The
Registration Statement, including all exhibits and schedules and amendments, has
been filed with the SEC through the Electronic Data Gathering Analysis and
Retrieval system and is available to the public from the SEC’s web site
at http://www.sec.gov .
GTX
CORP AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
CONTENTS
|
|
Page
|
|
Consolidated
Balance Sheets at September 30, 2009 (unaudited) and December 31,
2008
|
|
|
F-2
|
|
|
|
|
|
|
Consolidated
Statements Of Operations for the Three and Nine Months Ended September 30,
2009 and 2008 (unaudited)
|
|
|
F-3
|
|
|
|
|
|
|
Consolidated
Statements Of Cash Flows for the Nine Months Ended September 30, 2009 and
2008 (unaudited)
|
|
|
F-4
|
|
|
|
|
|
|
Notes
To Consolidated Financial Statements (Unaudited)
|
|
|
F-5
|
|
PART
I
ITEM
1. FINANCIAL STATEMENTS
GTX
CORP AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
September
30, 2009
|
|
|
December
31, 2008
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
354,741 |
|
|
$ |
706,873 |
|
Certificates
of deposit
|
|
|
500,000 |
|
|
|
1,500,000 |
|
Accounts
receivable, net
|
|
|
52,925 |
|
|
|
36,630 |
|
Inventory,
net
|
|
|
14,659 |
|
|
|
36,862 |
|
Other
current assets
|
|
|
26,183 |
|
|
|
29,408 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
948,508 |
|
|
|
2,309,773 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
259,901 |
|
|
|
151,220 |
|
Other
assets
|
|
|
16,641 |
|
|
|
19,745 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,225,050 |
|
|
$ |
2,480,738 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
277,709 |
|
|
$ |
319,961 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
277,709 |
|
|
|
319,961 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
277,709 |
|
|
|
319,961 |
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares
|
|
|
|
|
|
|
|
|
authorized;
no shares issued and outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, $0.001 par value; 2,071,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
39,451,540
and 38,680,540 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively
|
|
|
39,452 |
|
|
|
38,680 |
|
Additional
paid-in capital
|
|
|
9,909,819 |
|
|
|
9,564,024 |
|
Accumulated
deficit
|
|
|
(9,001,930 |
) |
|
|
(7,441,927 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
947,341 |
|
|
|
2,160,777 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
1,225,050 |
|
|
$ |
2,480,738 |
|
See
accompanying notes to consolidated financial statements
GTX
CORP AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
Months Ended September 30,
|
|
|
Nine
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
126,704 |
|
|
$ |
235,102 |
|
|
$ |
185,227 |
|
|
$ |
374,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
60,448 |
|
|
|
193,864 |
|
|
|
88,321 |
|
|
|
302,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
profit
|
|
|
66,256 |
|
|
|
41,238 |
|
|
|
96,906 |
|
|
|
71,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and professional fees
|
|
|
388,836 |
|
|
|
795,242 |
|
|
|
1,293,351 |
|
|
|
2,272,581 |
|
Research
and development
|
|
|
5,782 |
|
|
|
112,632 |
|
|
|
91,109 |
|
|
|
307,288 |
|
General
and administrative
|
|
|
115,715 |
|
|
|
133,355 |
|
|
|
306,621 |
|
|
|
310,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
510,333 |
|
|
|
1,041,229 |
|
|
|
1,691,081 |
|
|
|
2,890,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(444,077 |
) |
|
|
(999,991 |
) |
|
|
(1,594,175 |
) |
|
|
(2,818,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
6,837 |
|
|
|
14,000 |
|
|
|
34,172 |
|
|
|
31,659 |
|
Interest
expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(62,511 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(437,240 |
) |
|
$ |
(985,991 |
) |
|
$ |
(1,560,003 |
) |
|
$ |
(2,849,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding - basic and diluted
|
|
|
39,365,638 |
|
|
|
38,540,772 |
|
|
|
39,185,848 |
|
|
|
32,138,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.09 |
) |
See
accompanying notes to consolidated financial statements
GTX
CORP AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
Months Ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,560,003 |
) |
|
$ |
(2,849,192 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
63,419 |
|
|
|
11,193 |
|
Bad
debt expense
|
|
|
40,284 |
|
|
|
- |
|
Stock
based compensation
|
|
|
359,108 |
|
|
|
953,149 |
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(56,579 |
) |
|
|
(127,486 |
) |
Inventory
|
|
|
22,203 |
|
|
|
(1,145 |
) |
Other
assets
|
|
|
(6,212 |
) |
|
|
(43,934 |
) |
Accounts
payable and accrued expenses
|
|
|
(42,252 |
) |
|
|
29,625 |
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,180,032 |
) |
|
|
(2,027,790 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds
from certificates of deposit
|
|
|
1,000,000 |
|
|
|
- |
|
Proceeds
from disposal of property and equipment
|
|
|
2,612 |
|
|
|
- |
|
Purchase
of property and equipment
|
|
|
(174,712 |
) |
|
|
(69,539 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
827,900 |
|
|
|
(69,539 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
- |
|
|
|
3,732,000 |
|
Proceeds
from exercise of stock warrants
|
|
|
- |
|
|
|
398,800 |
|
Commissions
paid in relation to May 2008 Financing
|
|
|
- |
|
|
|
(123,750 |
) |
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
- |
|
|
|
4,007,050 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(352,132 |
) |
|
|
1,909,721 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
706,873 |
|
|
|
735,937 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
354,741 |
|
|
$ |
2,645,658 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
Interest
paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplementary
disclosure of noncash financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of common stock for repayment of note payable and accrued
interest
|
|
$ |
- |
|
|
$ |
1,030,750 |
|
Issuance
of common stock for repayment of shareholder note payable and accrued
interest
|
|
$ |
- |
|
|
$ |
118,511 |
|
Issuance
of common stock for repayment of accounts payable
|
|
$ |
- |
|
|
$ |
33,750 |
|
See
accompanying notes to consolidated financial statements
GTX
CORP AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2009
(Unaudited)
1. BASIS OF
PRESENTATION
GTX Corp
and subsidiaries (the “Company” or “GTX”) develops and integrates miniaturized
Global Positioning System (GPS) tracking and cellular location technology for
consumer products and service applications. GTX Corp owns 100% of the issued and
outstanding capital stock of Global Trek Xploration, acquired on March 14, 2008,
LOCiMOBILE, Inc, incorporated in the State of Nevada on October 14, 2008, and
Code Amber News Service, Inc. (“CANS”) incorporated in the State of Nevada on
February 11, 2009. LOCiMOBILE, Inc. has developed and owns
LOCiMobile™, a suite of mobile tracking applications that turn the iPhone and
other GPS enabled handsets into a tracking device which can then be tracked
through our Location Data Center tracking portal and which allows the user to
send a map to the recipient’s phone showing the user’s location. CANS
is a U.S. and Canadian syndicator of all state Amber Alerts providing website
tickers and news feeds to merchants, internet service providers, affiliate
partners, corporate sponsors and local, state and federal agencies.
The
accompanying unaudited consolidated financial statements of GTX Corp have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and applicable regulations of
the U.S. Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair statement of financial position and results of
operations have been included. Our operating results for the three
and nine months ended September 30, 2009 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009. The
accompanying unaudited consolidated financial statements should be read in
conjunction with our audited consolidated financial statements for the year
ended December 31, 2008, which are included in this Prospectus, and the risk
factors contained therein.
The
preparation of the accompanying unaudited consolidated financial statements
requires the use of estimates that affect the reported amounts of assets,
liabilities, revenues, expenses and contingencies. These estimates
include, but are not limited to, estimates related to revenue recognition,
allowance for doubtful accounts, inventory valuation, tangible and intangible
long-term asset valuation, warranty and other obligations and commitments.
Estimates are updated on an ongoing basis and are evaluated based on historical
experience and current circumstances. Changes in facts and circumstances
in the future may give rise to changes in these estimates which may cause actual
results to differ from current estimates.
The
consolidated financial statements reflect the accounts of GTX Corp and its
wholly owned subsidiaries; Global Trek Xploration, LOCiMOBILE, Inc. and Code
Amber News Service, Inc. All significant inter-company balances and transactions
have been eliminated in consolidation.
Fair Value
Measurement
In
September 2006, the Financial Accounting Standards Board issued Financial
Accounting Standard Number 157 (“SFAS 157”), Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair
value and enhances disclosure about fair value measurements. SFAS 157 was
effective for financial assets and financial liabilities for fiscal years
beginning after November 15, 2007. Where the measurement objective
specifically requires the use of “fair value”, the Company has adopted the
provisions of SFAS 157 related to financial assets and financial liabilities as
of December 30, 2007. Effective January 1, 2009, the Company adopted the
provisions of SFAS 157 with respect to non-financial assets and non-financial
liabilities.
Recently
Adopted and Recently Issued Accounting Guidance
In
March 2008, the FASB issued new disclosure requirements regarding
derivative instruments and hedging activities. Entities must now provide
enhanced disclosures on an interim and annual basis regarding how and why the
entity uses derivatives; how derivatives and related hedged items are accounted
for, and how derivatives and related hedged items affect the entity’s financial
position, financial results and cash flow. Pursuant to the transition
provisions, the Company adopted these new requirements on January 1, 2009.
The adoption of this standard did not have a material effect on our consolidated
financial statements.
In June
2008, the FASB issued new requirements which provide that an entity should use a
two step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the
instrument’s contingent exercise and settlement provisions. It also clarifies
the impact of foreign currency denominated strike prices and market-based
employee stock option valuation instruments on the evaluation. –The guidance
specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to this company's own stock and (b)
classified in stockholders' equity in the statement of financial position would
not be considered a derivative financial instrument. The guidance is effective
for fiscal years beginning after December 15, 2008. The adoption of this
guidance did not have an impact on this company’s consolidated financial
statements.
In
May 2009, the FASB issued guidelines on subsequent event accounting which
sets forth: 1) the period after the balance sheet date during which management
of a reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; 2) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and 3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This disclosure should alert all users of
financial statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being presented. The adoption of
this guidance did not have an impact on this company’s consolidated financial
statements.
On
July 1, 2009, the FASB issued the FASB Accounting Standards
Codification (the “Codification”). The Codification became the single source of
authoritative nongovernmental U.S. GAAP, superseding existing FASB, American
Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force
(“EITF”) and related literature. The Codification eliminates the previous US
GAAP hierarchy and establishes one level of authoritative GAAP. All other
literature is considered non-authoritative. However, rules and interpretive
releases of the Securities Exchange Commission (“SEC”) issued under the
authority of federal securities laws will continue to be sources of
authoritative GAAP for SEC registrants. The Codification was effective for
interim and annual periods ending after September 15, 2009. The Company
adopted the Codification for the quarter ending September 30,
2009. There was no impact to the consolidated financial results as
this change is disclosure-only in nature.
On
January 1, 2009, the Company adopted the revised FASB guidance regarding
business combinations which was required to be applied to business combinations
on a prospective basis. The revised guidance requires that the acquisition
method of accounting be applied to a broader set of business combinations,
amends the definition of a business combination, provides a definition of a
business, requires an acquirer to recognize an acquired business at its fair
value at the acquisition date and requires the assets and liabilities assumed in
a business combination to be measured and recognized at their fair values as of
the acquisition date (with limited exceptions). There was no impact upon
adoption and the effects of this guidance will depend on the nature and
significance of business combinations occurring after the effective date.
2. EQUITY
Common
Stock
During
the three and nine months ended September 30, 2009, the Company issued 146,000
and 771,000 shares of common stock, respectively, to various members of
management, employees and consultants at values ranging from $0.054 to $0.15 per
share as compensation for services rendered. The grant-date fair
value was $16,470 and $56,700, respectively.
During
May 2008, the Company entered into a one year agreement with a third-party
public relations firm. The terms of the agreement include the
issuance of 17,500 shares of common stock to be paid to the public relations
firm in 4 equal installments. The 17,500 shares of common stock were
issued and held by the Company in escrow to be delivered to the public relations
firm in four equal quarterly installments during the 1-year term of the
agreement. The fair value of these shares was estimated to be $37,625
based on the market
price of the securities, as quoted on the OTCBB on the date of
issuance. During the three and nine months ended September 30, 2009,
$0 and $12,542, respectively, has been expensed in the accompanying consolidated
financial statements related to this agreement. As of September 30,
2009, the 17,500 shares have been fully earned, delivered and
expensed.
Common Stock
Warrants
Since
inception, the Company has issued numerous warrants to purchase shares of the
Company’s common stock to shareholders, consultants and employees as
compensation for services rendered.
A summary
of the Company’s warrant activity and related information for the nine months
ended September 30, 2009 is provided below:
|
|
|
|
|
Number of
|
|
|
|
Exercise Price
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at December 31, 2008
|
|
$ |
0.75 – 1.50 |
|
|
|
5,996,752 |
|
Warrants
exercised
|
|
|
|
|
|
|
- |
|
Warrants
granted
|
|
|
|
|
|
|
- |
|
Warrants
expired
|
|
$ |
1.25 |
|
|
|
(4,041,002 |
) |
Outstanding
and exercisable at September 30, 2009
|
|
$ |
0.75
- 1.50 |
|
|
|
1,955,750 |
|
Stock Warrants as of September 30, 2009
|
|
Exercise
|
|
|
Warrants
|
|
|
Remaining
|
|
|
Warrants
|
|
Price
|
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Exercisable
|
|
$ |
1.50 |
|
|
|
1,850,750 |
|
|
|
1.67 |
|
|
|
1,850,750 |
|
$ |
1.25 |
|
|
|
80,000 |
|
|
|
1.67 |
|
|
|
80,000 |
|
$ |
0.75 |
|
|
|
25,000 |
|
|
|
0.50 |
|
|
|
25,000 |
|
|
|
|
|
|
1,955,750 |
|
|
|
|
|
|
|
1,955,750 |
|
Common Stock
Options
For the
three and nine months ended September 30, 2009, the Company recorded
compensation expense related to options granted under the 2008 Equity
Compensations Plan (the “2008 Plan”) of $97,003 and $292,116,
respectively. For the three and nine months ended September 30, 2008,
the Company recorded compensation expense related to options granted under the
2008 Plan of $150,631 and $284,163, respectively.
The fair
value of our stock options granted during the nine months ended September 30,
2009 and 2008, respectively, was estimated at the date of grant using the
following assumptions:
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
Expected
dividend yield
|
|
|
0.00 |
% |
|
|
0.00 |
% |
Risk-free
interest rate
|
|
|
1.9-2.25 |
% |
|
|
2-3.3 |
% |
Expected
volatility
|
|
|
73-152 |
% |
|
|
40-50 |
% |
Expected
life (in years)
|
|
|
4-5 |
|
|
|
4-5 |
|
The 2008
Plan provides for the issuance of a maximum of 7,000,000 shares of which, after
adjusting for estimated pre-vesting forfeitures, approximately 2,580,000 were
still available for issuance as of September 30, 2009.
Stock
option activity under the 2008 Plan for the nine months ended September 30, 2009
is summarized as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted Average
Remaining Contractual
Life (in years)
|
|
|
Grant Date
Fair Value
|
|
Outstanding
at December 31, 2008
|
|
|
4,563,000 |
|
|
$ |
0.80 |
|
|
|
3.52 |
|
|
$ |
1,626,361 |
|
Options
granted
|
|
|
605,000 |
|
|
$ |
0.09 |
|
|
|
3.55 |
|
|
|
39,918 |
|
Options
exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
|
|
Options
cancelled/ forfeited/ expired
|
|
|
(1,345,000 |
) |
|
$ |
0.89 |
|
|
|
- |
|
|
|
(618,756 |
) |
Outstanding
at September 30, 2009
|
|
|
3,823,000 |
|
|
$ |
0.65 |
|
|
|
3.12 |
|
|
$ |
1,047,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at September 30, 2009
|
|
|
1,869,754 |
|
|
$ |
.70 |
|
|
|
2.48 |
|
|
$ |
603,045 |
|
As of
September 30, 2009, after adjusting for estimated pre-vested forfeitures, there
was approximately $547,000 of unrecognized compensation cost related to unvested
stock options which is expected to be recognized monthly over approximately 3
years. The Company intends to issue new shares to satisfy share option
exercises.
Share-Based Compensation
Payments
Total
non-cash compensation expense related to the issuance of stock, warrants, and
options was as follows:
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Stock
compensation
|
|
$ |
16,470 |
|
|
$ |
237,205 |
|
|
$ |
66,992 |
|
|
$ |
663,476 |
|
Warrant
compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,510 |
|
Options
compensation
|
|
|
97,003 |
|
|
|
150,631 |
|
|
|
292,116 |
|
|
|
284,163 |
|
|
|
$ |
113,473 |
|
|
$ |
387,836 |
|
|
$ |
359,108 |
|
|
$ |
953,149 |
|
3. DEFERRED
REVENUE
During
fiscal year 2007, the Company entered into an exclusive license agreement
with a reseller of its gpVectorTM Powered
Athlete Tracking Systems and received payment for the exclusive
license in advance. The exclusive license fee was recorded as
deferred revenue and was amortized over the term of the exclusive license
agreement. During September 2009 we recognized the remaining portion
of the unamortized exclusive license fee ($77,500) into revenue as the
re-seller failed to meet the required minimum device purchases and activation
requirements pursuant to the exclusive license agreement.
4. SUBSEQUENT
EVENTS
Management
evaluated subsequent events of the Company through October 29, 2009 (the
available for issuance date of the Financial Statements) and concluded that no
subsequent events have occurred that would require recognition in the Financial
Statements or disclosure in the Notes to the Consolidated Financial Statements,
except as follows:
In
October 2009, the Company granted 10,000 shares of common stock (valued at
$1,900) and stock options to purchase 30,000 shares of common stock (which
options were valued at approximately $5,000) to a consultant for services
rendered.
GTX
CORP
(Formerly
Deeas Resources, Inc.)
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2008
CONTENTS
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
F-12
|
|
|
Consolidated
Balance Sheets at December 31, 2008 and 2007
|
F-13
|
|
|
Consolidated
Statements of Operations for the Years Ended December 31, 2008 and
2007
|
F-14
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity (Deficit) from December 31,
2006 to December 31, 2008
|
F-15
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and
2007
|
F-16
|
|
|
Notes
to Consolidated Financial Statements
|
F-17
|
Report of Independent
Registered Public Accounting Firm
To the
Board of Directors of
GTX
Corp
(Formerly
Deeas Resources, Inc.)
Los
Angeles, CA
We have
audited the accompanying consolidated balance sheets of GTX Corp (the “Company”)
as of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of GTX Corp as of
December 31, 2008 and 2007, and the results of its operations and its cash flows
for each of the years then ended in conformity with accounting principles
generally accepted in the United States of America.
LBB &
Associates Ltd., LLP
Houston,
Texas
March 6,
2009
GTX
CORP
(Formerly
Deeas Resources, Inc.)
CONSOLIDATED
BALANCE SHEETS
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
706,873 |
|
|
$ |
735,937 |
|
Certificates
of deposit
|
|
|
1,500,000 |
|
|
|
- |
|
Accounts
receivable, net
|
|
|
36,630 |
|
|
|
- |
|
Inventory,
net
|
|
|
36,862 |
|
|
|
15,312 |
|
Other
current assets
|
|
|
29,408 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
2,309,773 |
|
|
|
751,249 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
151,220 |
|
|
|
11,810 |
|
Other
assets
|
|
|
19,745 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
2,480,738 |
|
|
$ |
763,059 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
319,961 |
|
|
$ |
351,849 |
|
Shareholder
note payable
|
|
|
- |
|
|
|
78,385 |
|
Convertible
note payable
|
|
|
- |
|
|
|
1,000,000 |
|
Total
current liabilities
|
|
|
319,961 |
|
|
|
1,430,234 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
319,961 |
|
|
|
1,430,234 |
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
no
shares issued and outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, $0.001 par value; 2,071,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
38,680,540
and 15,605,879 shares issued and outstanding at
|
|
|
|
|
|
|
|
|
December
31, 2008 and 2007, respectively
|
|
|
38,680 |
|
|
|
15,606 |
|
Additional
paid-in capital
|
|
|
9,564,024 |
|
|
|
3,357,863 |
|
Accumulated
deficit
|
|
|
(7,441,927 |
) |
|
|
(4,040,644 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity (deficit)
|
|
|
2,160,777 |
|
|
|
(667,175 |
) |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$ |
2,480,738 |
|
|
$ |
763,059 |
|
See
accompanying notes to consolidated financial statements
GTX
CORP
(Formerly
Deeas Resources Inc.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
424,166 |
|
|
$ |
26,000 |
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
334,482 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
89,684 |
|
|
|
26,000 |
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Salaries
and professional fees
|
|
|
2,704,775 |
|
|
|
796,881 |
|
Research
and development
|
|
|
371,924 |
|
|
|
240,500 |
|
General
and administrative
|
|
|
402,293 |
|
|
|
280,366 |
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
3,478,992 |
|
|
|
1,317,747 |
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(3,389,308 |
) |
|
|
(1,291,747 |
) |
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
50,661 |
|
|
|
1,685 |
|
Interest
expense
|
|
|
(62,636 |
) |
|
|
(37,592 |
) |
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(3,401,283 |
) |
|
$ |
(1,327,654 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of common
|
|
|
|
|
|
|
|
|
shares
outstanding - basic and diluted
|
|
|
33,778,909 |
|
|
|
15,101,450 |
|
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$ |
(0.10 |
) |
|
$ |
(0.09 |
) |
See
accompanying notes to consolidated financial statements
(Formerly
Deeas Resources Inc.)
STATEMENT
OF STOCKHOLDERS' EQUITY (DEFICIT)
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-In Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2006
|
|
|
14,766,986 |
|
|
$ |
14,768 |
|
|
$ |
2,805,973 |
|
|
$ |
(2,712,990 |
) |
|
$ |
107,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash
|
|
|
327,373 |
|
|
|
327 |
|
|
|
191,673 |
|
|
|
- |
|
|
|
192,000 |
|
Issuance
of common stock from exercise of stock warrants
|
|
|
426,267 |
|
|
|
426 |
|
|
|
179,574 |
|
|
|
- |
|
|
|
180,000 |
|
Issuance
of common stock for services
|
|
|
85,253 |
|
|
|
85 |
|
|
|
49,915 |
|
|
|
- |
|
|
|
50,000 |
|
Stock
warrant compensation
|
|
|
- |
|
|
|
- |
|
|
|
130,728 |
|
|
|
- |
|
|
|
130,728 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,327,654 |
) |
|
|
(1,327,654 |
) |
Balance,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
15,605,879 |
|
|
|
15,606 |
|
|
|
3,357,863 |
|
|
|
(4,040,644 |
) |
|
|
(667,175 |
) |
Issuance
of common stock for cash from exercise of warrants
|
|
|
871,479 |
|
|
|
871 |
|
|
|
397,928 |
|
|
|
- |
|
|
|
398,799 |
|
Cashless
issuance of common stock from exercise of stock warrants
|
|
|
1,165,879 |
|
|
|
1,166 |
|
|
|
202 |
|
|
|
- |
|
|
|
1,368 |
|
Issuance
of common stock for payment of accounts payable
|
|
|
76,112 |
|
|
|
76 |
|
|
|
33,674 |
|
|
|
- |
|
|
|
33,750 |
|
Conversion
of shareholder note payable and accrued interest into common
stock
|
|
|
280,652 |
|
|
|
281 |
|
|
|
118,230 |
|
|
|
- |
|
|
|
118,511 |
|
Issuance
of common stock in connection with recapitalization
|
|
|
13,999,960 |
|
|
|
14,000 |
|
|
|
(14,000 |
) |
|
|
- |
|
|
|
- |
|
Conversion
of note payable and accrued interest into common stock
|
|
|
1,374,334 |
|
|
|
1,374 |
|
|
|
1,029,376 |
|
|
|
- |
|
|
|
1,030,750 |
|
Issuance
of common stock in conjunction with private placement
|
|
|
2,666,668 |
|
|
|
2,667 |
|
|
|
1,997,333 |
|
|
|
- |
|
|
|
2,000,000 |
|
Stock
option compensation
|
|
|
- |
|
|
|
- |
|
|
|
341,992 |
|
|
|
- |
|
|
|
341,992 |
|
Issuance
of common stock in conjunction with PIPE II, net
|
|
|
1,862,000 |
|
|
|
1,862 |
|
|
|
1,606,388 |
|
|
|
- |
|
|
|
1,608,250 |
|
Issuance
of common stock for services
|
|
|
777,577 |
|
|
|
777 |
|
|
|
695,038 |
|
|
|
- |
|
|
|
695,815 |
|
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,401,283 |
) |
|
|
(3,401,283 |
) |
Balance,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
38,680,540 |
|
|
$ |
38,680 |
|
|
$ |
9,564,024 |
|
|
$ |
(7,441,927 |
) |
|
$ |
2,160,777 |
|
See
accompanying notes to consolidated financial statements
(Formerly
Deeas Resources Inc.)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(3,401,283 |
) |
|
$ |
(1,327,654 |
) |
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
34,484 |
|
|
|
2,618 |
|
Bad
debt expense
|
|
|
26,600 |
|
|
|
- |
|
Stock
based compensation
|
|
|
1,025,264 |
|
|
|
180,728 |
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(63,230 |
) |
|
|
- |
|
Inventory
|
|
|
(21,550 |
) |
|
|
(15,312 |
) |
Other
current and non-current assets
|
|
|
(36,611 |
) |
|
|
- |
|
Accounts
payable and accrued expenses
|
|
|
74,107 |
|
|
|
289,033 |
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(2,362,219 |
) |
|
|
(870,587 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of certificates of deposit
|
|
|
(1,500,000 |
) |
|
|
- |
|
Purchase
of property and equipment
|
|
|
(173,894 |
) |
|
|
(10,937 |
) |
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(1,673,894 |
) |
|
|
(10,937 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
3,732,000 |
|
|
|
192,000 |
|
Proceeds
from issuanace of note payables
|
|
|
- |
|
|
|
1,000,000 |
|
Proceeds
from issuance of common stock from exercise of stock
warrants
|
|
|
398,799 |
|
|
|
180,000 |
|
Commissions
paid in relation to May 2008 Financing
|
|
|
(123,750 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
4,007,049 |
|
|
|
1,372,000 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(29,064 |
) |
|
|
490,476 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
735,937 |
|
|
|
245,461 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
706,873 |
|
|
$ |
735,937 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
Interest
paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplementary
disclosure of noncash financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of common stock for repayment of note payable and accrued
interest
|
|
$ |
1,030,750 |
|
|
$ |
- |
|
Issuance
of common stock for repayment of shareholder note payable and accrued
interest
|
|
$ |
118,511 |
|
|
$ |
- |
|
Issuance
of common stock for repayment of accounts payable
|
|
$ |
33,750 |
|
|
$ |
- |
|
Issuance
of common stock for other asset
|
|
$ |
37,625 |
|
|
$ |
- |
|
See
accompanying notes to consolidated financial statements
GTX
CORP
(Formerly
Deeas Resources Inc.)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
ORGANIZATION AND
NATURE OF OPERATIONS
|
GTX Corp
and subsidiaries (the “Company” or “GTX”) develops and integrates miniaturized
Global Positioning System (GPS) tracking and cellular location technology for
consumer products and service applications. Formerly known as Deeas Resources
Inc., GTX owns 100% of the issued and outstanding capital stock of Global Trek
Xploration, acquired on March 14, 2008 in an exchange transaction (hereafter
referred to as the “Exchange Transaction”), and LOCiMOBILE, Inc, incorporated in
the State of Nevada on October 14, 2008. On September 22, 2008, the
Company dissolved 0758372 B.C. Ltd, a former subsidiary of Deeas Resources
Inc. Concurrent with the March 14, 2008 Exchange Agreement described
below, the Company changed its name from Deeas Resources Inc. to GTX
Corp. As of December 31, 2008, all of the Company's operations are
conducted through Global Trek Xploration. Unless the context indicates
otherwise, references herein to “we,” “our,” or the "Company" during periods
prior to March 14, 2008 refer solely to Global Trek Xploration, while references
to “we,” “our,” “GTX” or the "Company" after March 14, 2008 refer to both GTX
Corp and its subsidiaries. All references to "Deeas" refer to Deeas Resources
Inc. on a stand-alone basis prior to March 14, 2008.
On
December 24, 2008, GTX acquired the assets of Code Amber, a web based Amber
Alert system providing web site owners with a JavaScript news feed ticker that
displays active Amber Alerts on their web pages. The acquisition was
not considered material.
Exchange
Transaction
On March
4, 2008, Deeas entered into the Share Exchange Agreement, (the “Exchange
Agreement”), with Global Trek Xploration, the shareholders of Global Trek
Xploration (the “Global Trek Shareholders”), and Jupili Investment S.A., a
company incorporated under the laws of the Republic of Panama
(“Jupili”).
Under the
Exchange Agreement, the Company agreed to acquire all of the outstanding capital
stock of Global Trek Xploration, following a 20.71 forward common stock split of
Deeas. The closing of the transactions contemplated by the Exchange Agreement
and the closing of the March 2008 Financing described below occurred on March
14, 2008 (the “Closing” or the “Closing Date”). Pursuant to the
Exchange Agreement, at the Closing, Deeas issued 18,000,001 post forward split
common shares of Deeas for all of the issued and outstanding shares of Global
Trek Xploration on the basis of 0.8525343 shares of Deeas for every one share of
Global Trek Xploration. As a result, Global Trek Xploration became a
wholly-owned subsidiary of Deeas. Concurrent with the Exchange
Transaction, Deeas changed its name to GTX Corp.
As a
result of this Exchange Agreement, the Global Trek Shareholders acquired
approximately 50% of the issued and outstanding common shares of the
Company. For accounting purposes, the Exchange Transaction was
treated as an acquisition of Deeas and a recapitalization of Global Trek
Xploration. Global Trek Xploration is the accounting acquirer and the
results of its operations carryover. Accordingly, the operations of
Deeas are not carried over and have been adjusted to $0.
Concurrent
with the closing of this transaction, the Company cancelled 31,065,000 post
forward split common shares (1,500,000 pre split common shares) which had been
held by the sole director and officer of the Company prior to the Exchange
Transaction, completed a $2,000,000 private placement of units of the Company at
$0.75 per unit (the “March 2008 Financing”) and converted a $1,000,000 Global
Trek Xploration bridge loan and interest into units of the Company at $0.75 per
unit.
Basis of
Presentation
The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. The
accompanying consolidated financial statements reflect the accounts of GTX Corp
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
Revenue
Recognition
The
Company recognizes revenue from product sales when the product is shipped to the
customer and title has transferred. The Company assumes no remaining significant
obligations associated with the product sale other than that related to its
warranty program discussed below. Revenue related to licensing
agreements is recognized over the term of the agreement. Revenue for
services is recognized as the services are rendered.
Revenues
recognized during the year ended December 31, 2008 were received from one
customer primarily for the sale of approximately 900 gpVector™ Powered Athlete
Tracking Systems. The Company’s reliance on this one customer during the year
ended December 31, 2008 makes us vulnerable to the risk of a near-term severe
impact. Revenues recognized during the year ended December 31, 2007 were
received from one customer in connection with a licensing agreement which was
terminated.
Allowance for Doubtful
Accounts
We extend
credit based on our evaluation of the customer’s financial condition. We
carry our accounts receivable at net realizable value. We monitor our exposure
to losses on receivables and maintain allowances for potential losses or
adjustments. We determine these allowances by (1) evaluating the aging of our
receivables; and (2) reviewing high-risk customers financial condition. Past due
receivable balances are written off when our internal collection efforts have
been unsuccessful in collecting the amount due.
Shipping and Handling
Costs
Shipping
and handling costs are included in cost of goods sold in the accompanying
consolidated financial statements.
Product
Warranty
The
Company provides for estimated warranty costs at the time of sale. The warranty
period is generally for one year from the date the device is
activated. Defects that occur within this warranty period, under
normal use and care will be repaired or replaced, solely at our discretion, with
no charge for parts or labor.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Fair Value
Estimates
Pursuant
to SFAS No. 107, “Disclosures
About Fair Value of Financial Instruments”, the Company is required to
estimate the fair value of all financial instruments included on its balance
sheet. The fair value of an asset or liability is the amount at which
it could be exchanged or settled in a current transaction between willing
parties. The carrying values for cash and cash equivalents, certificates
of deposit, prepaid assets, accounts payable and accrued liabilities approximate
their fair value due to their short maturities.
In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be fully recoverable. The carrying amount of a
long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. That assessment is based on the carrying amount of the asset
at the date it is tested for recoverability. An impairment loss is
measured as the amount by which the carrying amount of a long-lived asset
exceeds its fair value.
Reclassifications
For
comparability, certain prior period amounts have been reclassified, where
appropriate, to conform to the financial statement presentation used in
2008.
Cash and Cash
Equivalents
Cash
equivalents consist of highly liquid investments with insignificant rate risk
and with original maturities of three months or less at the date of
purchase. At various times, the Company had deposits in excess
of the Federal Deposit Insurance Corporation limit. The Company has experienced
no losses related to these uninsured amounts.
Certificates of
Deposit
The
Company’s certificates of deposits have maturity dates ranging from three to
twelve months from the date of issue and are maintained at various financial
institutions in order to ensure coverage under the Federal Deposit Insurance
Corporation.
Inventory
Inventory
consists of raw materials, work in process and finished goods and is valued at
the lower of cost (first-in, first-out) or net realizable value. The Company
evaluates its inventory for excess and obsolescence on a regular basis. In
preparing the evaluation the Company looks at the expected demand for the
product, as well as changes in technology, in order to determine whether or not
a reserve is necessary to record the inventory at net realizable
value. After performing a review of the inventory as of December 31,
2008, we determined that the net realizable value is greater than the cost thus
inventory is recorded at cost as of December 31, 2008.
Property and
Equipment
Property
and equipment are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are calculated using the straight-line method over
the estimated two year useful lives of the assets. When property and equipment
are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is
included in operations. Expenditures for maintenance and repairs are expensed as
incurred.
Website
Development
The
Company accounts for the development of its website under the guidance of EITF
00-2, “Accounting for Website Development Costs” (“EITF 00-2”) which provides
that all costs relating to software used to operate a website be accounted for
under AICPA SOP 98-1 “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use” unless a plan exists or is being developed to market
the software externally. As such, all costs associated with the
planning of the website are expensed as incurred and the costs to develop the
website are generally capitalized. Depreciation is calculated using
the straight-line method over the estimated two year useful lives of the
assets.
Software
Development Costs
Software
development costs include payments made to independent software developers under
development arrangements. Software development costs are capitalized once
technological feasibility of a product is established and it is determined that
such costs should be recoverable against future revenues. For products where
proven technology exists, this may occur early in the development cycle.
Technological feasibility is evaluated on a product-by-product basis. Amounts
related to software development that are not capitalized are charged immediately
to product research and development costs.
Commencing
upon the related product’s release, capitalized software development costs are
amortized to cost of sales based upon the higher of (i) the ratio of
current revenue to total projected revenue or (ii) the straight-line
method. The amortization period is two years from the initial release of the
product. The recoverability of capitalized software development costs is
evaluated based on the expected performance of the specific products for which
the costs relate. The following criteria are used to evaluate expected product
performance: historical performance of comparable products using comparable
technology and orders for the product prior to its release.
Significant
management judgments and estimates are utilized in the assessment of when
technological feasibility is established, as well as in the ongoing assessment
of the recoverability of capitalized costs. If revised forecasted or actual
product sales are less than and/or revised forecasted or actual costs are
greater than the original forecasted amount utilized in the initial
recoverability analysis, the net realizable value may be lower than originally
estimated in any given quarter, which could result in an impairment
charge.
Net Loss Per Common
Share
Net loss
per common share is computed pursuant to Statement of Financial Accounting
Standards No. 128 “Earnings Per Share” (“SFAS No. 128”). Basic
net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period. Diluted net loss
per share is computed by dividing net loss by the weighted average number of
shares of common stock and potentially outstanding shares of common stock during
each period. There were no dilutive shares outstanding as of December 31,
2008.
Research and
Development
Research
and development costs are clearly identified and are expensed as incurred in
accordance with FASB statement No. 2, "Accounting for Research and Development
Costs." For the years ended December 31, 2008 and 2007, the Company
incurred $371,924, and $240,500 of research and development costs,
respectively.
Income
Taxes
Prior to
the Exchange Transaction, Global Trek Xploration elected under the Internal
Revenue Code to be an S corporation. In lieu of corporation income taxes,
the shareholders of an S corporation are taxed on their proportionate share of
the company’s taxable income. Therefore, no provision or liability for federal
income taxes is included in the financial statements as of December 31,
2007.
As a
result of the Exchange Transaction, GTX is now considered a C corporation and as
such, the Company began following SFAS No. 109, “Accounting for Income Taxes”
during the year ended December 31, 2008. Under the asset and liability method of
SFAS No. 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. A valuation allowance can be provided for a net deferred tax asset, due
to uncertainty of realization.
Stock-based
Compensation
Stock
based compensation expense is recorded in accordance with SFAS 123R (Revised
2004), Share-Based
Payment, for stock and stock options awarded in return for services
rendered. The expense is measured at the grant-date fair value of the award and
recognized as compensation expense on a straight-line basis over the service
period, which is the vesting period. The Company estimates forfeitures that it
expects will occur and records expense based upon the number of awards expected
to vest.
Development Stage
Company
During
the three months ended March 31, 2008, the Company no longer met the
qualifications as a development stage company as defined in Financial Accounting
Standards Board Statement No. 7. Accordingly, reporting as a
development stage company is no longer deemed necessary.
Recently
Issued Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS
No. 141R broadens the guidance of SFAS No. 141, extending its applicability to
all transactions and other events in which one entity obtains control over one
or more other businesses. It broadens the fair value measurement and recognition
of assets acquired, liabilities assumed, and interests transferred as a result
of business combinations; and stipulates that acquisition related costs be
expensed rather than included as part of the basis of the acquisition. SFAS No.
141R expands required disclosures to improve the ability to evaluate the nature
and financial effects of business combinations. SFAS No. 141R is effective for
all transactions entered into, on or after January 1, 2009. We believe that the
adoption of this standard will not have a material effect on our consolidated
financial statements.
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities – an Amendment of FASB Statement No. 133.
SFAS No. 161 enhances required disclosures regarding derivative
instruments and hedging activities, including enhanced disclosures regarding how
an entity uses derivative instruments, how derivative instruments and related
hedged items are accounted for under SFAS No. 133 and the impact of derivative
instruments and related hedged items on an entity’s financial position,
financial performance and cash flows. SFAS No. 161 is effective on January 1,
2009. We believe that the adoption of this standard will not have a material
effect on our consolidated financial statements.
In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with GAAP for nongovernmental entities. SFAS
No. 162 is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.” We do not expect the adoption of this statement to have a material
impact on the Company’s results of operations, financial position or cash
flows.
The
components of inventory consist of the following:
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Raw
materials
|
|
$ |
10,455 |
|
|
$ |
15,312 |
|
Work
in process
|
|
|
26,407 |
|
|
|
- |
|
Finished
goods
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$ |
36,862 |
|
|
$ |
15,312 |
|
4.
|
PROPERTY AND
EQUIPMENT
|
Property
and equipment, net, consists of the following:
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Computer
and office equipment
|
|
$ |
81,407 |
|
|
$ |
18,018 |
|
Software
|
|
|
13,749 |
|
|
|
- |
|
Website
development
|
|
|
59,896 |
|
|
|
- |
|
Software
development
|
|
|
36,860 |
|
|
|
- |
|
Less:
accumulated depreciation
|
|
|
(40,692 |
) |
|
|
(6,208 |
) |
|
|
|
|
|
|
|
|
|
Total
property and equipment, net
|
|
$ |
151,220 |
|
|
$ |
11,810 |
|
Depreciation
expense for the years ended December 31, 2008 and 2007 was $34,484 and $2,618,
respectively.
5.
|
SHAREHOLDER NOTE
PAYABLE
|
During
fiscal years 2002 and 2003, a shareholder (also a Director of the Company)
loaned the Company a total of $78,385, bearing interest at 10% per annum, to be
used in developing the Company’s product. For the years ended
December 31, 2008 and 2007 the Company incurred interest expense of $880 and
$7,838, respectively. The Shareholder Note Payable plus all accrued
interest of $40,126 was converted into 280,652 shares of common
stock.
The
provision for refundable Federal income tax consists of the following as of
December 31, 2008:
Refundable
Federal income tax calculated at statutory rate of 35%
|
|
$ |
1,200,000 |
|
Less: Stock
based compensation expense
|
|
|
(185,000 |
) |
Change
in valuation allowance
|
|
|
(1,015,000 |
) |
Net
refundable amount
|
|
$ |
- |
|
The
cumulative tax effect at the expected rate of 35% of significant items
comprising our net deferred tax amount at December 31, 2008 is as
follows:
Deferred
tax asset attributable to:
|
|
|
|
Net
operating losses carried forward
|
|
$ |
1,015,000 |
|
Less: Valuation
allowance
|
|
|
(1,015,000 |
) |
Net
deferred tax asset
|
|
$ |
- |
|
The
Company established a full valuation allowance in accordance with the provision
of SFAS No. 109, “Accounting for Income Taxes.” The Company continually reviews
the adequacy of the valuation allowance and recognizes a benefit from income
taxes only when reassessment indicates that it is more likely than not that the
benefits will be realized.
At
December 31, 2008, the Company had an unused net operating loss carryover
approximating $2,900,000 that is available to offset future taxable income; it
expires beginning in 2028.
No
provision was made for federal income tax since the Company has net operating
losses. The provision for income taxes included in the accompanying
financial statements consists of the state minimum tax imposed on
corporations.
March
2008 Financing
On March
13, 2008, concurrent with the Exchange Transaction described in Note 1, we
completed the sale of 2,666,668 units at $0.75 per unit, each unit consisting of
one share of common stock and one stock purchase warrant. Each
warrant is exercisable into an additional common share at $1.25 per
share.
Jupili
provided bridge financing to Global Trek Xploration of $1,000,000 pursuant to a
convertible loan agreement. The $1,000,000 loan plus accrued interest
of $30,750 was converted into 1,374,334 units of the Company on the same terms
and conditions as the private placement noted above.
The
Company paid Jupili a success fee of 2% of the aggregate amount of the March
2008 Financing and the Bridge Financing of $60,000.
The
issuance of the units in connection with the March 2008 Financing and upon
conversion of the Jupili bridge loan is intended to be exempt from registration
under the Securities Act pursuant to Regulation S. As such, these issued
securities may not be offered or sold in the United States unless they are
registered under the Securities Act, or an exemption from the registration
requirements of the Securities Act is available.
We filed
a Registration Statement on May 12, 2008 with the SEC to register the shares of
common stock and the shares issuable upon exercise of the Warrants issued in the
March 2008 Financing and to register the shares issued upon conversion of the
Jupili bridge loan (the “Registration Statement”). This Registration
Statement was subsequently amended and filed with the SEC on August 12, 2008.
The Prospectus was filed on August 14, 2008 and Prospectus Supplements were
filed on August 15, 2008 to incorporate the financial information for the period
ended June 30, 2008 and on November 10, 2008 to incorporate the financial
information for the period ended September 30, 2008.
May 2008
Financing
In May
2008 we completed a private placement (“May 2008 Financing”) of 1,732,000 units
(“May 2008 Units”) of the Company’s securities at a price of $1.00 per
unit. Each of the May 2008 Units consisted of one common share and
one share purchase warrant (“May 2008 Warrant”). Each May 2008
Warrant is exercisable at an exercise price of $1.50 per share for a three-year
term. The common stock and common shares underlying the May
2008 Warrants sold in this May 2008 Financing have piggy-back registration
rights.
We agreed to pay up to 10%
cash and 10% warrant coverage as commissions to registered broker-dealers or
unregistered finders in connection with the May
2008 Financing. Mr. Matthew Williams, the brother
of our Chief Financial Officer, Murray Williams, received $20,300 and 20,300 May
2008 Warrants from GTX Corp for his services as a finder. We paid an aggregate
of $26,950 and issued 26,950 May 2008 Warrants as commissions to three (3) other
unregistered finders. In addition we paid Meyers Associates LP, a registered
broker-dealer, $76,500 in cash commission and 71,500 May 2008 Warrants for the
May 2008 Financing that they arranged for us. Thus, in total we paid $123,750
and 118,750 May 2008 Warrants to registered broker-dealers or unregistered
finders in connection with the May 2008 Financing. The commissions are deemed
a cost of capital and have been recorded at fair value as a reduction in
additional paid-in capital in the accompanying consolidated financial
statements.
Common
Stock
In
conjunction with the Exchange Transaction, all of the issued and outstanding
shares of Global Trek Xploration at March 14, 2008 were exchanged to GTX Corp
common shares on the basis of 0.8525343 common shares of GTX Corp for every one
share of Global Trek Xploration.
As a
result of the Exchange Transaction and the associated March 2008 Financing, (i)
13,999,960 shares of Deeas Resources common shares were recapitalized into GTX
Corp, (ii) the Jupili bridge loan of $1,000,000 plus accrued interest of $30,750
was converted into 1,374,334 shares of common stock (as part of an
above-described “Unit”) at $0.75 per unit and (iii) 2,666,668 shares of common
stock (as part of an above-described “Unit”) were issued at $0.75 per unit in
the March 2008 Financing. In addition, as partial consideration for
their work on the Exchange Agreement and the March 2008 Financing, our
attorneys, Richardson & Patel, were issued 80,000 units valued at $0.75 per
unit.
In addition to the
1,732,000 shares of stock sold to investors in connection with the May 2008
Financing, as a bonus for raising more than $1,000,000 of proceeds in
this financing, Patrick E. Bertagna, our Chief Executive Officer and Chairman,
Murray Williams, our Chief Financial Officer, and Patrick Aroff, a member of our
board of directors, were each issued 40,000 shares of our common stock, and
Louis Rosenbaum, a member of our board of directors, was issued 10,000 shares of
our common stock. The grant-date fair value of these shares was $130,000 and is
recorded as a cost of capital in the accompanying consolidated financial
statements.
During
the year ended December 31, 2008, the Company issued 510,000 shares of common
stock from the 2008 Equity Compensation Plan at values ranging from of $0.65 to
$1.60 per share to various members of management and consultants as compensation
for services rendered, the grant-date fair value of which was estimated at
$408,000.
During
the year ended December 31, 2008, the Company issued 209,500 shares of common
stock subject to restrictions upon transfer pursuant to Rule 144, as promulgated
under the Securities Act of 1933, as amended, to various member of management,
employees and consultants at values ranging from $0.19 to $1.60 per share as
compensation for services rendered, the grant-date fair value of which was
estimated at $203,930.
During
May 2008, the Company entered into a one year agreement with a third-party
public relations firm. The terms of the agreement include the
issuance of 17,500 shares of common stock to be paid to the public relations
firm in 4 equal installments. The 17,500 shares of common stock have
been issued and are held by the company in escrow to be delivered to the public
relations firm in four equal quarterly installments during the 1-year term of
the agreement. The fair value of these shares was estimated to be
$37,625 based on the
market price of the securities, as quoted on the OTCBB on the date of
issuance. During the year ended December 31, 2008, $25,082 has been
expensed in the accompanying consolidated financial
statements.
During
July 2008, the Company entered into an agreement with a third-party consultant
to assist in the development and promotion of the GTX technology. The
terms of the agreement provide for the issuance of 10,000 shares of common stock
for services rendered from July to December 2008. The shares are not
to be granted until January 2009. The fair value of these shares was
estimated to be $3,950 based on the market price
of the securities, as quoted on the OTCBB, over the term of the
agreement.
During
July 2008, the Company’s Board of Directors reserved for issuance a pool of
40,000 shares of “Unrestricted Stock” of the Company under the 2008 Equity
Compensation Plan for grant and issuance to various consultants and/or employees
in lieu of paying them cash for their services (the “Award Pool”). The Company’s
Board of Directors created a Stock Award Committee that has the authority to
grant and issue awards from the Award Pool. During August 2008, the
Company engaged a consultant to perform research and development
work. The number of shares the consultant received for each
particular month during the term equaled $12,000 divided by the closing price of
the Company’s common stock on the last day of each month the consultant provided
the services. As of December 31, 2008,
32,577 shares of common stock valued at $24,000 had been issued to the
consultant.
During
July 2008, the Company’s Board of Directors reserved for issuance a pool of
35,000 shares of the Company’s common stock (“Restricted Stock Award Pool”) for
grant and issuance to various consultants and/or employees in lieu of paying
them cash for their services. These shares of common stock are
subject to restrictions upon transfer pursuant to Rule 144, as promulgated under
the Securities Act of 1933, as amended. The Company’s Board of
Directors created a Stock Award Committee that has the authority to grant and
issue awards from the Restricted Stock Award Pool. During August
2008, the Company issued 8,000 shares of common stock at $1.60 per share from
the Restricted Stock Award Pool to various consultants as compensation for
services rendered, the grant-date fair value of which was estimated at
$12,800.
Common Stock
Warrants
Since
inception, the Company has issued numerous warrants to purchase shares of the
Company’s common stock to shareholders, consultants and employees as
compensation for services rendered. Prior to the Exchange
Transaction, there were 4,721,877 warrants outstanding. All of the
4,721,877 warrants were exercised prior to the Exchange Transaction in exchange
for 2,394,121 shares of its $.001 par value common stock. The Company
offered a cashless exercise option to all of the warrant holders that did not
want to pay cash to exercise all of their warrants. Various warrant
holders opted to accept the cashless exercise option resulting in the exercise
of 3,493,635 warrants. In addition, 356,763 warrants were
exchanged in consideration for the settlement of $152,000 of indebtedness and
related accrued interest. Finally, 871,479 warrants were exercised
for cash for proceeds of $398,799.
Of the
2,666,668 warrants sold in connection with March 2008 Financing, 1,000,002 and
1,666,666 are exercisable until March 14, 2009 and September 14, 2009,
respectively. The fair value of the 2,666,668 warrants was estimated
to be $158,000 using the Black-Scholes option pricing model based on the
following assumptions: expected dividend yield 0%, expected volatility 50%,
risk-free interest rate 2%, and expected life of 12-18 months.
The fair
value of the 1,374,334 warrants issued to Jupili in connection with the March
2008 Financing was estimated to be $97,000 using the Black-Scholes option
pricing model based on the following assumptions: expected dividend yield 0%,
expected volatility 50%, risk-free interest rate 2%, and expected life of 18
months.
On March
16, 2008, the Company issued 25,000 warrants to purchase 25,000 common shares at
$0.75 per share, to a consultant for services rendered. The warrants
expire on March 31, 2010. The fair value of the 25,000 warrants was
estimated to be $5,510 using the Black-Scholes option pricing model based on the
following assumptions: expected dividend yield 0%, expected volatility 50%,
risk-free interest rate 2%, and expected life of 24 months and is recorded as
compensation expense in the accompanying consolidated financial
statements.
The fair
value of the 80,000 warrants issued to our attorneys in conjunction with the
March 2008 Financing units was estimated to be $12,000 using the Black-Scholes
option pricing model based on the following assumptions: expected dividend yield
0%, expected volatility 50%, risk-free interest rate 3.0%, and expected life of
3 years.
The fair
value of the 1,732,000 warrants issued in connection with the sale of the May
2008 Financing units was estimated to be $324,000 using the Black-Scholes option
pricing model based on the following assumptions: expected dividend yield 0%,
expected volatility 43%, risk-free interest rate 2.9%, and expected life of 3
years.
The fair
value of the 118,750 warrants granted as commissions in connection with the May
2008 Financing was estimated to be $22,350 using the Black-Scholes option
pricing model based on the following assumptions: expected dividend yield 0%,
expected volatility 43%, risk-free interest rate 2.9%, and expected life of 3
years.
A summary
of the Company’s warrant activity and related information for the twelve months
ended December 31, 2008 is provided below:
|
|
|
|
|
Number
of
|
|
|
|
Exercise
Price
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
Outstanding
and exercisable at December 31, 2007
|
|
$ |
0.42
– 0.59 |
|
|
|
4,721,877 |
|
Warrants
exercised for cash
|
|
|
0.42
– 0.59 |
|
|
|
(871,479 |
) |
Cashless
exercise of warrants
|
|
|
0.00 |
|
|
|
(3,493,635 |
) |
Warrants
exercised as settlement of liabilities
|
|
|
0.42
– 0.59 |
|
|
|
(356,763 |
) |
Warrants
granted
|
|
|
0.75
– 1.50 |
|
|
|
5,996,752 |
|
Outstanding
and exercisable at December 31, 2008
|
|
|
0.75
- 1.50 |
|
|
|
5,996,752 |
|
Stock Warrants as of December 31,
2008
|
|
Exercise
|
|
Warrants
|
|
Remaining
|
|
Warrants
|
|
Price
|
|
Outstanding
|
|
Life (Years)
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
$
|
1.50
|
|
|
1,850,750
|
|
2.42
|
|
|
1,850,750
|
|
$
|
1.25
|
|
|
80,000
|
|
2.42
|
|
|
80,000
|
|
$
|
1.25
|
|
|
1,000,002
|
|
0.25
|
|
|
1,000,002
|
|
$
|
1.25
|
|
|
3,041,000
|
|
0.75
|
|
|
3,041,000
|
|
$
|
0.75
|
|
|
25,000
|
|
1.25
|
|
|
25,000
|
|
|
|
|
5,996,752
|
|
|
|
|
5,996,752
|
|
Common Stock
Options
On March
14, 2008, we adopted the 2008 Equity Compensation Plan, the “2008 Plan,”
pursuant to which we are authorized to grant stock options intended to qualify
as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue
Code of 1986, as amended, non-qualified options, restricted and unrestricted
stock awards and stock appreciation rights to purchase up to 7,000,000 shares of
common stock to our employees, officers, directors and consultants, with the
exception that ISOs may only be granted to employees of the Company and it’s
subsidiaries, as defined in the 2008 Plan. The 2008 Plan shall be
administered by a committee consisting of two or more members of the Board of
Directors or if a committee has not been elected, the Board of Directors of the
Company shall serve as the committee.
The
Company recognizes option expense ratably over the vesting
periods. For the year ended December 31, 2008, the Company recorded
compensation expense related to options granted under the 2008 Plan of
$341,992.
The
fair value of option grants was estimated using the Black-Scholes option-pricing
model with the following assumptions for the year ended December 31,
2008:
Expected
dividend yield
|
|
|
0.00 |
% |
Risk-free
interest rate
|
|
|
1.5-3.3 |
% |
Expected
volatility
|
|
|
40-70 |
% |
Expected
life (in years)
|
|
|
4-6 |
|
The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company’s employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management’s
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock
options.
The Plan
provides for the issuance of a maximum of 7,000,000 shares of which, after
adjusting for estimated pre-vesting forfeitures, approximately 2.9 million were
still available for issuance as of March 13, 2009.
Stock
option activity under the Plan for the year ended December 31, 2008 is
summarized as follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
|
|
Grant Date
Fair Value
|
|
Outstanding
at December 31, 2007
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
|
Options
granted
|
|
|
4,913,000 |
|
|
$ |
0.80 |
|
|
|
3.77 |
|
|
$ |
1,746,024 |
|
Options
exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
|
|
|
Options
cancelled/forfeited/ expired
|
|
|
(350,000
|
) |
|
$ |
0.75 |
|
|
|
- |
|
|
|
(119,663
|
) |
Outstanding
at December 31, 2008
|
|
|
4,563,000 |
|
|
$ |
0.80 |
|
|
|
3.77 |
|
|
$ |
1,626,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
and expected to vest at December 31, 2008 (1)
|
|
|
3,433,000 |
|
|
$ |
0.74 |
|
|
|
3.77 |
|
|
$ |
1,154,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2008
|
|
|
246,922 |
|
|
$ |
1.64 |
|
|
|
2.77 |
|
|
$ |
65,719 |
|
(1)
|
The
expected to vest options are the result of applying the pre-vesting
forfeiture rate assumptions to total outstanding
options.
|
As of
December 31, 2008, after adjusting for estimated pre-vested forfeitures, there
was approximately $812,000 of unrecognized compensation cost related to unvested
stock options which is expected to be recognized monthly over approximately 3
years. The Company intends to issue new shares to satisfy share option
exercises.
Share-Based Compensation
Payments
Total
non-cash compensation expense related to the issuance of stock, warrants, and
options was as follows:
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Stock
compensation
|
|
$ |
677,762 |
|
|
$ |
50,000 |
|
Warrant
compensation
|
|
|
5,510 |
|
|
|
130,728 |
|
Options
compensation
|
|
|
341,992 |
|
|
|
- |
|
Total
|
|
$ |
1,025,264 |
|
|
$ |
180,728 |
|
Additionally,
warrants valued at $22,350 and common stock valued at $130,000 were recorded as
Additional Paid in Capital as a cost of raising capital during the year ended
December 31, 2008.
On
December 27, 2007, the Company renegotiated the month to month lease agreement
for office space in Los Angeles, California and entered into a two year lease
agreement. During September 2008, this agreement was amended to
include an additional office. Additionally, in June 2008, the Company
entered into a two year lease agreement for office space in Palo Alto,
California and paid the first six months of the lease in advance. Future minimum
lease payments as of December 31, 2008 under these lease agreements are as
follows:
During
February 2009, GTX sublet a portion of the office space in Palo Alto for $2,325
per month. The term of the sublease is for the period from March 2009
to December 2009 and can be terminated by the lessee upon 90-days
notification.
On May
16, 2008, the Company entered into an agreement with a public relations firm to
provide quarterly research reports to both the Company and the public (upon
approval by the Company) and to provide market intelligence, as well as feedback
from investor meetings, emails and conversations initiated by the public
relations firm. In exchange for the services rendered, the public
relations firm was granted 17,500 shares of the Company’s common stock valued at
the closing price on May 7, 2008 of $2.15 per share (see Footnote
#7). In addition to the shares of common stock, the public relations
firm is paid $2,500 per month. The agreement will automatically
renew on its one year anniversary unless cancelled at any time, by either
party.
Several
executive members of management have employment agreements which, among other
provisions, provide for the payment of a bonus, as determined by the Board of
Directors, in an amounts ranging from 15% to 50% of the executive’s yearly
compensation, to be paid in cash or stock at the Company’s sole discretion, if
the Company has an increase in year over year revenues and the Executive
performs his duties (i) within the time frame budgeted for such duties and (ii)
at or below the cost budgeted for such duties.
The
Company has various consulting agreements totaling approximately $50,000 per
month, which can be terminated at will.
On
February 11, 2009, GTX incorporated Code Amber News Service, Inc. (“CANS”) in
the State of Nevada with 75,000,000 authorized shares of common stock with a par
value of $0.001 per share. CANS is 100% owned and operated by
GTX. CANS is a U.S. and Canadian syndicator of all state Amber Alerts
providing website tickers and news feeds to merchants, internet service
providers, affiliate partners, corporate sponsors and local, state and federal
agencies.
Subsequent
to December 31, 2008, 675,000 shares of common stock were granted to employees,
members of our management and consultants at a price equal to the fair market
value of the common stock on the date of issuance and 120,000 options were
granted to consultants at a price equal to the fair market value of the common
stock on the date of grant.
PART
II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of
Issuance and Distribution.
The
following table sets forth the costs and expenses, other than underwriting
discounts and commissions, if any, payable by the Company relating to the sale
of common stock being registered. All amounts are estimates except the SEC
registration fee:
SEC
Registration Fee
|
|
$ |
89.60 |
|
Printing
and Engraving Expenses
|
|
$ |
-0- |
|
Legal
Fees and Expenses
|
|
$ |
15,000 |
|
Accounting
Fees and Expenses
|
|
$ |
1,250 |
|
Miscellaneous
Expenses
|
|
$ |
1,000 |
|
Total
|
|
$ |
17,339.60 |
|
Item
14. Indemnification of Directors and
Officers.
The
Nevada Revised Statutes authorizes indemnification of a director, officer,
employee or agent of the Company against expenses incurred in connection with
any action, suit, or proceeding to which he or she is named a party by reason of
his or her having acted or served in such capacity, except for liabilities
arising from his or her own misconduct or negligence in performance of his or
her duty. In addition, even a director, officer, employee, or agent
of the Company who was found liable for misconduct or negligence in the
performance of his or her duty may obtain such indemnification if, in view of
all the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to
indemnification.
Section
78.7502 of the Nevada Revised Statutes provides that we may indemnify any person
who was or is a party, or is threatened to be made a party, to any action, suit
or proceeding brought by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other entity. The expenses that are subject to this indemnity
include attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnified party in connection with the
action, suit or proceeding. In order for us to provide this statutory indemnity,
the indemnified party must not be liable under Nevada Revised Statutes section
78.138 or must have acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation. With respect
to a criminal action or proceeding, the indemnified party must have had no
reasonable cause to believe his conduct was unlawful.
Section
78.7502 also provides that we may indemnify any person who was or is a party, or
is threatened to be made a party, to any action or suit brought by or on behalf
of the corporation by reason of the fact that he is or was serving at the
request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses actually or reasonably incurred by him in connection with the
defense or settlement of such action or suit if he is not liable under Nevada
Revised Statutes section 78.138 of if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. We may not indemnify a person if the person is adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which such action or suit was
brought or another court of competent jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity.
Section
78.7502 requires us to indemnify our directors or officers against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection
with his defense, if he has been successful on the merits or otherwise in
defense of any action, suit or proceeding, or in defense of any claim, issue or
matter.
Further,
pursuant to the Nevada Revised Statutes, the Company has adopted the following
indemnification provisions in its Amended and Restated Bylaws for its directors
and officers:
“The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, including
all appeals (other than an action, suit, or proceeding by or in the right of the
Corporation) by reason of the fact that he or she is or was a director or
officer of the Corporation (and the Corporation, in the discretion of the Board
of Directors, may so indemnify a person by reason of the fact that he or she is
or was an employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees), judgments, decrees,
fines, penalties, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit, or proceeding if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful; provided, however, the
Corporation shall be required to indemnify an officer or director in connection
with an action, suit, or proceeding initiated by such person only if such
action, suit, or proceeding was authorized by the Board of Directors. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith or in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.”
“The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit,
including all appeals, by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director
or officer of the Corporation (and the Corporation, in the discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he or
she is or was an employee or agent of the Corporation or is or was serving at
the request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been finally adjudged
to be liable for gross negligence or willful misconduct in the performance of
his or her duty to the Corporation unless and only to the extent that the court
in which such action or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such court
shall deem proper. Notwithstanding the foregoing, the Corporation shall be
required to indemnify an officer or director in connection with an action, suit,
or proceeding initiated by such person only if such action, suit, or proceeding
was authorized by the Board of Directors.”
The
indemnification provisions described above provide coverage for claims arising
under the Securities Act and the Exchange Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. No pending material litigation or proceeding
involving our directors, executive officers, employees or other agents as to
which indemnification is being sought exists, and we are not aware of any
pending or threatened material litigation that may result in claims for
indemnification by any of our directors or executive officers.
Item
15. Recent Sales of Unregistered
Securities.
The
following table provides information about the sales of unregistered securities
for the past three years.
A. On
March 14, 2008, pursuant to the Exchange Agreement, the Company issued
18,000,001 shares of its common stock to 60 shareholders in exchange for 100% of
the outstanding shares of Global Trek Xploration. The issuance of
these securities was exempt from registration under Section 4(2) and Regulation
D of the Securities Act of 1933, as amended (“Securities Act”). The
Company made this determination based on the representations of the
shareholders, which included, in pertinent part, that such shareholders were
either (a) “accredited investors” within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act, (b) not a “U.S. person” as that term is
defined in Rule 902(k) of Regulation S under the Securities Act, or (c) had a
pre-existing or personal relationship with the Company. Each shareholder further
represented that he or she was acquiring our common stock for investment
purposes not with a view to the resale or distribution thereof and understood
that the shares of our common stock may not be sold or otherwise disposed of
without registration under the Securities Act or an applicable exemption
therefrom. A legend was included on all offering materials and documents which
stated that the shares have not been registered under the Securities Act and may
not be offered or sold unless the shares are registered under the Securities
Act, or an exemption from the registration requirements of the Securities Act is
available.
B. In
connection with the closing of the Exchange Agreement, on March 14, 2008 the
Company also issued $2,000,000 of units (“Units”) of the Company at $0.75 per
Unit to seven investors (the “Financing”). Each of the 2,666,668
Units consisted of one share of common stock and one common stock purchase
warrant (the “Warrants”). Each Warrant was exercisable into an
additional common share for a period of twelve or eighteen months at an exercise
price of $1.25 per share.
On March
14, 2008, Jupili Investment S.A. converted a $1,000,000 bridge loan, plus
accrued interest issued by GTX California into Units at $0.75 per Unit, based
upon the same terms and conditions as the Financing (the “Note
Conversion”). As a result of the conversion, we issued to Jupili
1,374,334 shares of common stock and Warrants to purchase an aggregate of
1,374,334 shares of our common stock.
The
Financing and Note Conversion were offshore transactions exempt from
registration in reliance on Rule 903 of Regulation S of the Securities Act. None
of the subscribers were U.S. persons at that term is defined in Regulation S. No
directed selling efforts were made in the United States by the Company, any
distributor, any of their respective affiliates or any person acting on behalf
of any of the foregoing. In issuing these securities, we relied on the exemption
from the registration requirements of the Securities Act provided by Regulation
S, promulgated thereunder. A legend was included on all offering materials and
documents which stated that the securities have not been registered under the
Securities Act and may not be offered or sold in the United States or to U.S.
persons unless the shares are registered under the Securities Act, or an
exemption from the registration requirements of the Securities Act is available.
The offering materials and documents also contained a statement that hedging
transactions involving the securities may not be conducted unless in compliance
with the Securities Act.
C. In
May 2008 we completed a sale to thirty-two (32) investors (“Additional
Financing”) of 1,732,000 units (“Additional Units”) of the Company’s securities
at a price of $1.00 per Additional Unit. Each Additional Unit consisted of one
share of common stock and one three-year common stock purchase warrant having an
exercise price of $1.50 per share (“Additional Warrant”). In
connection with the Additional Financing, we also issued 130,000 shares to
officers and directors of our Company. Each Warrant is exercisable at
an exercise price of $1.50 per share. We agreed to pay up to 10% cash
and 10% warrant coverage as commissions to registered broker-dealers or finders
in connection with the Additional Financing. As a result we paid an
aggregate of $123,750 and 118,750 Additional Warrants as commissions. The common
stock and common shares underlying the Additional Warrants sold in this
Additional Financing have piggy-back registration rights. The issuance of these
securities was exempt from registration under Section 4(2) and Regulation D of
the Securities Act.
D. On
May 16, 2008, we entered into a consulting agreement with Vista Partners, LLC
for consulting services whereby we agreed to issue an aggregate of 17,500 shares
of our common stock valued at an aggregate of $37,625 to Vista Partners LLC as
consideration for services. Services were rendered from May 16, 2008 until May
15, 2009. Four separate certificates for 4,375 shares each were delivered to
Vista Partners, LLC during July 2008, October 2008, January 2009 and April
2009. The Company
is relying upon exemption from registration requirements pursuant to Section
4(2) of the Securities Act for the issuance of these shares.
E. During
the year ended December 31, 2008, we issued 217,500 shares of common stock to a
total of 18 employees, vendors and consultants in exchange for services
rendered. The services were valued at approximately
$217,000. The foregoing securities were issued without an underwriter
or placement agent in a private transaction in reliance on the exemption from
registration available pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
F. From
January 1, 2009 through December 7, 2009, we issued 717,000 shares of common
stock to 26 members of this Company’s management, employees and consultants, at
values ranging from $0.054 to $0.15 per share, as compensation for services
rendered, the grant-date fair value of which was $50,450. An additional 100,000
shares of common stock were issued to a consultant whose services were not
utilized and as such, the common stock was returned and cancelled during April
2009. The foregoing shares were issued in reliance upon an exemption
from the registration requirements pursuant to Section 4(2) of the Securities
Act of 1933, as amended.
Item
16. Exhibits.
Exhibit
Number
|
|
Description
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2.1
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|
Share
Exchange Agreement dated March 4, 2008 by and among the Registrant, Global
Trek Xploration, the stockholders of Global Trek Xploration and Jupili
Investment S.A. (1)
|
3.1
|
|
Articles
of Incorporation of the Registrant filed with the State of Nevada on April
7, 2006 (2)
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3.2
|
|
Amended
and Restated Bylaws of the Registrant(3)
|
5.1
|
|
Legal
opinion of TroyGould PC*
|
10.1
|
|
Lease
Agreement between Bar Code World Inc. and Patrick E. Bertagna, on the one
hand, and Anjac Fashion Buildings dated December 27, 2007(3)
|
10.2
|
|
Employment
Agreement between the Registrant and Patrick E. Bertagna dated March 14,
2008(3)
|
10.3
|
|
Employment
Agreement between the Registrant and Christopher M. Walsh dated March 14,
2008(3)
|
10.4
|
|
Employment
Agreement between the Registrant and Murray Williams dated March 14,
2008(3)
|
10.5
|
|
Form
of Subscription Agreement(3)
|
10.6
|
|
License
Agreement between Global Trek Xploration and My Athlete LLC dated
September 15, 2007(3)
|
10.7
|
|
GTX
Corp 2008 Equity Compensation Plan(3)
|
10.8
|
|
Form
of Securities Purchase Agreement and Warrant Agreement (Additional
Financing Transaction)
(4)
|
10.9
|
|
Form
of Securities Purchase Agreement and Warrant Agreement (Financing
Transaction) (3)
|
10.10
|
|
Lease
Agreement between Global Trek Xploration and the Mock Family Limited
Partnership dated June 3, 2008 (5)
|
10.11
|
|
Investment
Banking Advisory Agreement between Meyers Resources LP and GTX Corp dated
May 6, 2008 (5)
|
10.12
|
|
Investment
Agreement, dated November 16, 2009, between the Registrant and Dutchess
Equity Fund, LP.
(6)
|
10.13
|
|
Registration
Rights Agreement, dated November 16, 2009, between the Registrant and
Dutchess Equity Fund, LP.
(6)
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14.1
|
|
Code
of Business Conduct and Ethics(3)
|
17.1
|
|
Resignation
letter of Jeffrey Sharpe dated March 14, 2008(3)
|
21.1
|
|
Subsidiaries
(3)
|
23.1
|
|
Consent
of LBB & Associates Ltd.,
LLP*
|
* Filed
herewith.
(1)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8K dated March 10,
2008.
|
(2)
|
Incorporated
by reference to the Registrant's Registration Statement on Form SB-2 as
filed December 12, 2006.
|
(3)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8K dated March 20,
2008.
|
(4)
|
Previously
filed as part of the Registrant’s Registration Statement on Form S-1 (File
No. 333-15086) and incorporated herein by reference.
|
(5)
|
Previously
filed as part of the Amendment to Registrant’s Registration Statement on
Form S-1/A (File No. 333-15086) and incorporated herein by
reference.
|
(6)
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Incorporated
by reference to the Registrant’s Current Report on Form 8K dated November
16, 2009.
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Item
17. Undertakings.
(a)
|
The
undersigned registrant hereby
undertakes:
|
To file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933, as amended;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of this registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in the effective
registration statement;
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act of 1933
to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of
a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however , that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
|
(b)
|
Insofar
as indemnification for liabilities arising under the Securities Act of
1933, may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such
issue.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, in Los Angeles, California on December 7, 2009.
GTX
CORP
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|
|
|
|
By:
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/s/ Patrick E. Bertagna
|
Name:
|
Patrick
E. Bertagna
|
Title:
|
President
& Chief Executive Officer
|
|
(principal
executive officer)
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Patrick E. Bertagna and Murray Williams and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
GTX Corp) to sign any or all amendments (including post-effective amendments) to
this registration statement and any and all additional registration statements
pursuant to rule 462(b) of the Securities Act of 1933, as amended, and to file
the same, with all exhibits thereto, and all other documents in connection
therewith, with the SEC, granting unto each said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.
|
|
|
|
|
|
|
|
|
|
/s/ Patrick E. Bertagna
|
|
Chief
Executive Officer and Director (Principal Executive
Officer)
|
|
December
7, 2009
|
/s/ Murray Williams
|
|
Chief
Financial Officer, Treasurer, Secretary (Principal Accounting
Officer)
|
|
December
7, 2009
|
/s/ Jeffrey Sharpe
|
|
Director
|
|
December
7, 2009
|
/s/ Patrick Aroff
|
|
Director
|
|
December
7, 2009
|
/s/ Louis Rosenbaum
|
|
Director
|
|
December
7, 2009
|