GZ6G Technologies Corp. - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2022

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

For the transition period from __________ to __________

333-256224

(Commission File Number)

GZ6G Technologies Corp.

(Exact name of registrant as specified in its charter)

(949) 872-1965

(Registrant’s telephone number, including area code)

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

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

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

GZ6G Technologies Corp.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GZ6G TECHNOLOGIES CORP.

 TABLE OF CONTENTS FOR UNAUDITED CONDENSED CONSOLIDATED

 FINANCIAL STATEMENTS 

September 30, 2022, and 2021

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

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

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

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

(Unaudited) 

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

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

(Unaudited)

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

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

Going Concern

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Consolidation

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

Use of Estimates

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents

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

Concentration of Credit Risk

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

Property and Equipment

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

Research and Development Costs

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

Revenue Recognition

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

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

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

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

Stock-Based Compensation

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

Debt Issue Costs

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

Original Issue Discount

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

Stock Settled Debt

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Leases

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

Fair Value of Financial Instruments

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

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

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

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

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

Income Taxes

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

Basic and Diluted Net Income (Loss) Per Share

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Basic and Diluted Net Income (Loss) Per Share

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

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

Recently Issued Accounting Pronouncements

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

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

NOTE 3: PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 4: PREPAID EXPENSES

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

NOTE 5: OTHER CURRENT ASSETS

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

NOTE 6: DEBT

Loan Treaty Agreement

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6: DEBT (continued)

Loan Treaty Agreement (continued)

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

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

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

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

The carrying value of funding tranches is as follows:

The interest expenses for the funding tranches are as follows:

The accrued interest payable is as follows:

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6: DEBT (continued)

Convertible Debt with Warrant Agreement

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

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

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

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

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

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

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6: DEBT (continued)

Convertible Debt with Warrant Agreement (continued)

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

The carrying value of the tranches is as follows:

 Schedule of the carrying value of the tranches

The interest expenses related to the tranches are as follows:

 Schedule of interest expenses related to tranches convertible debt

The accrued interest payable is as follows:

 Schedule of accrued interest payable convertible debt to warrants

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

 Schedule of loss related to extinguishment convertible debt to warrant

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6: DEBT (continued)

Convertible Promissory Note

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

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

 Schedule of the carrying value of this convertible promissory note

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

 Schedule of the interest expenses for the convertible promissory note

The accrued interest payable is as follows:

 Schedule of the accrued interest payable for the convertible promissory note

SBA

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

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

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 6: DEBT (continued)

SBA (continued)

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

The accrued interest payable is as follows:

PPP funds

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

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

Other Short-term loans

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 7: CUSTOMER DEPOSITS, CONTRACT RECEIVABLES AND CONTRACT LIABILITIES

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

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

Performance Obligations

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Performance Obligations (continued)

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

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

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

NOTE 8: RELATED PARTY TRANSACTIONS

Terrence Flowers

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

Coleman Smith and ELOC Holdings Corp.

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 8: RELATED PARTY TRANSACTIONS (continued)

Coleman Smith and ELOC Holdings Corp. (continued)

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

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

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

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

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

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

The interest expenses related to above loans are as follows:

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 8: RELATED PARTY TRANSACTIONS (continued)

Coleman Smith and ELOC Holdings Corp.

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

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

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

NOTE 9: OPERATING LEASE

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 10: COMMITMENTS

 Schedule of default judgement

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 10: COMMITMENTS (continued)

NOTE 11: CAPITAL STOCK

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

Common Stock

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 11: CAPITAL STOCK (continued)

Common Stock (continued)

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

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

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

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

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

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

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

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

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

Series A Preferred Stock

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

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

Series B Preferred Stock

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 11: CAPITAL STOCK (continued)

Share Purchase Warrants

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

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

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

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

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

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

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

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 11: CAPITAL STOCK (continued)

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

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

NOTE 12: SUBSEQUENT EVENTS

On October 1, 2022, the Company issued 1,800,000 shares of common stock valued at $0.020025 per share pursuant to a Notice of Conversion from Talos Victory Fund in respect to the principal on the December 16, 2021, Convertible Note.

On October 7, 2022, the Company issued 1,600,000 shares of common stock valued at $0.020025 per share pursuant to a Notice of Conversion from Mast Hill in respect to the principal on the November 3, 2021, Convertible Note.

On October 10, 2022, the Company issued 2,500,000 shares of common stock valued at $0.020025 per share pursuant to a Notice of Conversion from Talos Victory Fund in respect to $41,822.60 of the principal and $6,489.90 of unpaid and accrued interest on the December 16, 2021, Convertible Note.

On November 3, 2022, the Company entered into a Promissory Note with Fourth Man LLC, a Nevada limited liability company in which Fourth Man has agreed to lend the Company the principal amount of $160,000; the purchase price of $144,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is $0.020025, subject to adjustment. Further the Company issued the noteholder a five year common stock purchase warrant to acquire up to 2,400,000 shares at $0.10 per share. Proceeds will be used, for operating costs and further execution of GZ6G’s execution on its business plans.

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 12: SUBSEQUENT EVENTS  (continued)

On November 3, 2022 Mast Hill Fund LLP provided the Company with a Notice of conversion whereunder they agreed to convert principal of $27,506.27 and interest of $4,533.73 due and payable into 1,600,000 shares of the Company’s common stock at $0.020025 per share to reduce a total of $32,040.00 from the principal balance of certain convertible promissory note.

On November 4, 2022 the Company filed a follow on Registration Statement on Form S-1 in regard to an Equity Purchase Agreement entered into in November 2021, whereby Mast Hill Fund, L.P. (the “Investor”) agreed, upon the terms and subject to the conditions of the Purchase Agreement, to purchase up to Ten Million Dollars ($10,000,000.00) of Put Shares. The Company is registering another 50,000,000 shares for purchase at an estimated $0.03 per share in respect to this agreement.

On November 3, 2022, the Company entered into a Promissory Note with Fourth Man LLC, a Nevada limited liability company in which Fourth Man has agreed to lend the Company the principal amount of $160,000; the purchase price of $144,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is $0.020025, subject to adjustment. Further the Company issued the noteholder a five year common stock purchase warrant to acquire up to 2,400,000 shares at $0.10 per share. Proceeds will be used, for operating costs and further execution of GZ6G’s execution on its business plans.

The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events requiring disclosure. 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you   can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors  including the risks set forth in the section entitled “Risk Factors” in our Post-Effective Amendment to our Registration Statement on Form S-1/A Amendment No. 4, as filed with the Securities and Exchange Commission (the “SEC”) on April 28, 2022, and the following 424B filings made by the Company on June 9, 2022, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.

The management’s discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements for the nine months ended September 30, 2022, and the notes thereto appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended December 31, 2021, as filed with the SEC on Form 10-K on March 11, 2022.

William Coleman Smith as the holder of the Company’s issued and outstanding shares of the Company’s Special 2018 Series B Preferred Stock, controls 51% of the voting rights of the Company and is able to influence the outcome of all corporate actions requiring approval of our stockholders. Mr. Smith also holds a total of 12,500,000 shares of common stock and 5,000,000 shares of Series A Preferred Stock convertible into 50,000,000 shares of common stock (which is 100% of the Series A stock issued and outstanding) giving Mr. Smith voting control over the Company.

Plan of Operations

We are an emerging smart city technology growth company that provides wireless and monetization enterprise level smart solutions to cities and large venues that require multiple types of products, services and third-party solutions to fulfil client needs.  To date we have generated modest revenues from operations, and while we have various contracts in place for future development, there is no assurance of future revenues.

Results of Operations

Three Months Ended September 30, 2022 and September 30, 2021

Revenue

We generated a total of $74,890 in revenue for the three months ended September 30, 2022, and $132,000 in revenue in the comparable period ended September 30, 2021.

Net Income (Loss)

Three Months ended September 30, 2022, and 2021

Total operating expenses for the three months ended September 30, 2022, were $734,421 as compared to $455,151 for the three months ended September 30, 2021. During the three months ended September 30, 2022 and 2021, we reported costs of revenue of $3,770 and $32,722 respectively.  The Company incurred $554,248 and $293,318 in general and administrative expenses in the three months ended September 30, 2022, and 2021, respectively and general and administrative costs from fees charged by related parties of $120,000 and $90,000, respectively. General and administrative expenses include staff payroll, rent, travel, office and sundry expense, transfer agent costs, consulting, marketing, advertising and promotional expenses. The substantial increase period over period primarily relates to new employees hired in 2022 with $322,573 in payroll expenses for the three months ended September 30, 2022 as compared to $163,971 for the period ended September 30, 2021, share based compensation to officers and directors in the current period of $65,070 as compared to $0 in the prior comparative three months, transfer agent fees of $22,392 compared to $6,708 in fiscal 2021 due to the costs associated with shares issuances under our equity offerings, software expenses of $14,417 for the three months ended September 30, 2022 with as compared to $3,528 for the three month ended September 30, 2021, insurance expenses of $10,651 as compared to $2,766 in September 30, 2021, and increases to rent expenses to $59,186 for the three months ended September 30, 2022 from $48,404 for the three months ended September 30, 2021.General and administrative expenses incurred from related parties include management fees charged by our CEO, William Coleman Smith, and a company controlled by him. The increase in related party administrative costs is due to an increase in management fees payable to Mr. Smith of $10,000 per month in the period ended September 30, 2022. Professional fees in the three months ended September 30, 2022, totaled $30,000 as compared to $18,759 in the three months ended September 30, 2021, mainly due to an increase in accounting and audit fees from $8,875 for the three months ended September 30, 2021 to $22,500 for the three months ended September 30, 2022 as the Company incurred additional fees in September 2022 due to expenses associated with the filing of certain registration statements and increased financings. Depreciation increased from $17,752 during the three months ended September 30, 2021, to $26,403 during the three months ended September 30, 2022, as a result of the acquisition of a new office space and associated furnishings and equipment.

Other income (expense)

Other income and expense reported for three months ended September 30, 2022, reflected a gain of $2,379,332 for 2022 as including interest expenses and amortization of debt discounts of $1,189,022, offset by a gain on extinguishment of debt of $3,568,359. During the three months ended September 30, 2021, the Company reported other income expenses of $2,522,952 all of which related to interest expense and amortization of debt discounts.

We had a net income of $1,719,806 offset by a loss attributable to the non-controlling interest of $20,757 bringing our total net income attributable to the Company to $1,740,563 in the three months ended September 30, 2022, compared to a net loss of $2,846,103 plus a gain of $13,841 attributable to the non-controlling interest bringing our total Net Loss attributable to the Company to $2,859,944 in the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 and September 30, 2021

Revenue

We generated a total of $81,890 in gross revenue for the nine months ended September 30, 2022, with $132,000 revenue in the comparable period ended September 30, 2021.

Net Income (Loss)

Nine Months ended September 30, 2022, and 2021