UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
  FORM
10-K
  (Mark
One)
 x
                ANNUAL REPORT UNDER SECTION 13 OR
      15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934
 For the
fiscal year ended December 31, 2009
 o
                TRANSITION REPORT UNDER SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934
  Commission
File Number 000-53046
  GTX
Corp
 (Exact
name of registrant as specified in its charter)
  Nevada
                    
                    98-0493446(State
      of incorporation)
                    
                    (I.R.S.
      Employer Identification No.)117
      W 9thStreet;
      Suite 1214, Los Angeles, CA  90015
                    
                    213-489-3019(Address
      of principal executive offices)
                    
                    (Registrant’s
      telephone number, including area
code)
  Securities
      registered under Section 12(b) of the Act:Title
      of each class registered:
                Name
      of each exchange on which
      registered:None
                NoneSecurities
      registered under Section 12(g) of the Act:
                  Common
      Stock, Par Value $0.001
                  (Title
      of class)
  Indicate
by check mark if the registrant is a well known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No þ
  Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No þ
  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 þ No o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted 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 and post such files). Yes o No o
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter)  is not contained herein
and, will not be contained, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o
  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 o
              Accelerated
      filer o
              Non-accelerated
      filer o
                (Do
      not check if a smaller reporting company)
              Smaller
      reporting company þ
 
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes
o No þ
  The
aggregate market value of the common stock held by non-affiliates as of June 30,
2009 was $3,434,568 based on the closing price of the registrant's common stock
reported by the OTC Bulletin Board on that date.  The determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
 The
outstanding number of shares of common stock as of March 30, 2010 was
40,480,699.
 Documents
incorporated by reference:  None
 
 
 
  TABLE
OF CONTENTS
  PART
      I
                                        
                                        1ITEM
      1.
                                        DESCRIPTION
      OF BUSINESS
                                        1ITEM
      1A:
                                        RISK
      FACTORS
                                        16ITEM
      1B.
                                        UNRESOLVED
      STAFF COMMENTS
                                        29ITEM
      2.
                                        DESCRIPTION
      OF PROPERTIES
                                        29ITEM
      3.
                                        LEGAL
      PROCEEDINGS
                                        29ITEM
      4.
                                        [RESERVED]
                                        29PART
      II
                                        
                                        29ITEM
      5.
                                        MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
      EQUITY SECURITIES
                                        29ITEM
      6.
                                        SELECTED
      FINANCIAL DATA
                                        31ITEM
      7.
                                        MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                        31ITEM
      7A.
                                        QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                        38ITEM
      8.
                                        FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
                                        38ITEM
      9.
                                        CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                                        38ITEM
      9A
                                        CONTROLS
      AND PROCEDURES
                                        38ITEM
      9B.
                                        OTHER
      INFORMATION
                                        39PART
      III
                                        
                                        39ITEM
      10.
                                        DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
                                        39ITEM
      11.
                                        EXECUTIVE
      COMPENSATION
                                        43ITEM
      12.
                                        SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                                        49ITEM
      13.
                                        CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                                        50ITEM
      14.
                                        PRINCIPAL
      ACCOUNTING FEES AND SERVICES.
                                        51PART
      IV
                                        
                                        52ITEM
      15.
                                        EXHIBITS  AND
      FINANCIAL STATEMENT SCHEDULES
                                        52SIGNATURES
                                        53
  
  FORWARD
LOOKING STATEMENTS
  Information
in this report contains “forward looking statements” which may be identified by
the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”,
“expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”,
“continue”, or similar terms, variations of those terms or the negative of those
terms. The forward-looking statements specified in the following information
have been compiled by our management on the basis of assumptions made by
management and considered by management to be reasonable. Our future operating
results, however, are impossible to predict and no representation, guaranty, or
warranty is to be inferred from those forward-looking statements.
  The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives requires the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. No assurance can be given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
  PART
I
  ITEM
      1.
              DESCRIPTION
      OF BUSINESS
  Unless
otherwise noted, the terms "GTX Corp", the "Company", "we", "us", and "our"
refer to the ongoing business operations of GTX Corp (formerly known as Deeas
Resources Inc.) and our wholly-owned subsidiaries, Global Trek Xploration,
LOCiMOBILE, Inc., and Code Amber News Service, Inc.
  Overview
of the Business and Recent Developments
  Organization.  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.
  Products.  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, platform licensing
and smart phone applications throughout the world.   As of March 28,
2010, our smart phone mobile applications (Apps) have been downloaded in 78
countries.  Our Personal Location Services also include the location
of missing children through our Code Amber Alerts and location and
identification products that we 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 consist of the following:
  ·
              Our
      GTX California subsidiary 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 a miniaturized transceiver module, wireless
      connectivity gateway, middleware and viewing portal.  On March
      18, 2010, GTX California entered into a four-year agreement with Aetrex
      Worldwide, Inc. (“Aetrex”) pursuant to which we granted Aetrex the right
      to embed our GPS tracking device into certain footwear products
      manufactured and sold by Aetrex.   Aetrex Worldwide, Inc.
      is a global leader in pedorthic footwear and foot
      orthotics.   Aetrex has certain exclusive and non-exclusive
      rights under this agreement.  In order to retain its exclusive
      rights, Aetrex must purchase 156,000 devices from us over the four-year
      term of the license agreement commencing with 6,000 GPS tracking devices
      in the first year, 25,000 devices during the second year, 50,000 during
      the third year, and 75,000 devices during the fourth year.  The
      end-users of the GPS enabled Aetrex shoes, predominately seniors afflicted
      with dementia, will also pay us a monthly service fee, a portion of which
      will be shared with Aetrex.
  1
  ·
                Our
      LOCiMOBILE, Inc. subsidiary has developed, and launched applications for
      the iPhone, Android  and other GPS enabled handsets that permit
      authorized users to locate and track the movement of the holder of the
      handset.  As of March 28, 2010, our seven Apps, that run on
      three different platforms (iPhone, Blackberry and Google Android), have
      been downloaded a total of over 250,000 times in 78 countries. There are
      currently several new Apps in development, scheduled for release early in
      the second quarter of 2010.
 
 ·
                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.
  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 gpVectorTM 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
gpVectorTM module to different form factors for 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 “gpVectorTM Powered Athlete Tracking
Systems,” to a licensee.  This first generation device was an
ergonomic shockproof and water resistant device designed to be 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 was designed to give the athletes the ability to
review and analyze their performance to enhance training.
  LOCiMOBILE,
Inc. has developed and owns LOCiMobile® (“LOCiMobile®”), a suite of mobile
tracking applications that turn the latest iPhone®, Blackberry and Google
Android 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 LOCiMobile® applications were first released in the
U.S. in the 2nd half of
2009 for use with the Apple iPhone®.  In September 2009, we released
an international version of this iPhone® application and by the end of fiscal
year 2009, we had released four Apps internationally that could be used on the
iPhone® and Google Android® handsets.  We currently have released
seven Apps on three different platforms (iPhone, Blackberry and Google Android)
that have been downloaded over 250,000 times in 78 countries as of March 28,
2010.  We are currently developing several additional LOCiMobile® Apps
for this market.
  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 generate revenues from the
sale of its content and from sponsorships.
  2
  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 in 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, bring on additional customers and continue to educate new
customers on our technology and its benefits including peace of mind (knowing where
someone or something of high value is in real time through any internet
accessible device).
  Financial.  We only
released our first generation gpVectorTM module at the end of 2008, and did not
release any LOCiMobile® Apps until the second half of
2009.  Accordingly, revenues from these two subsidiaries, which are
expected to be our largest revenue generating businesses, have not been
sufficient to fund our operating and other expenses.  In order to
provide us with the funds necessary, from time to time, to cover our operating
expenses, on November 16, 2009, we entered into an Investment Agreement
("Investment Agreement") with Dutchess Equity Fund, L.P. (now known as Dutchess
Opportunity Fund, II, LP).  Under that Investment Agreement, we have
the right to put (sell) to Dutchess up to $10,000,000 of our common stock over
the course of thirty-six months (this facility is herein referred to as the
"Equity Line").  The aggregate maximum number of shares that we are
entitled to sell to Dutchess during the three year terms of the Investment
agreement is 12,000,000.   Certain of the terms of the Investment
Agreement were amended on March 11, 2010.
  Under the
Equity Line as currently in effect, we may draw on the facility from time to
time at our option over a three year period by selling to Dutchess either (a)
200% of the average daily volume (U.S. market only) of the common stock for the
three (3) trading days prior to the date of delivery of the applicable put
notice, multiplied by the average of the closing prices for such trading days,
or (b) any other specified amount, up to $500,000.  The purchase price
that Dutchess will pay us for the shares that we put (sell) to Dutchess is equal
to 94% of the lowest daily 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 the applicable put
notice.  Our ability to put shares to Dutchess is dependent upon our
compliance with certain covenants and a limit that we may not sell to Dutchess
any additional shares if Dutchess’ total number of shares beneficially held at
that time would exceed 4.99% of our then outstanding number of shares, as
determined in accordance with Rule 13d-1 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”).  We have registered the shares that
we may sell to Dutchess with the SEC.  We are not permitted to draw on
the facility unless a registration statement that covers the resale by Dutchess
of the shares is then effective.
  General.  We
maintain an Internet website at http://www.gtxcorp.com. Our annual reports,
quarterly reports, current reports on Form 8-K and amendments to such reports
filed or furnished pursuant to section 13(a) or 15(d) of the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), and other information
related to this company, are available, free of charge, on our website as soon
as we electronically file those documents with, or otherwise furnish them to,
the Securities and Exchange Commission. The Company’s Internet website and the
information contained therein, or connected thereto, are not and are not
intended to be incorporated into this Annual Report on Form 10-K.
  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 a
research and development stage company to a marketing and customer driven
operating company.  GTX California developed its business as
follows:
  ·
              In
      2002, GTX California conducted technical feasibility studies and analyzed
      market data, filed patents and began developing its customizable imbedded
      technology business model.
  3
  ·
              In
      2004, GTX California built its first prototypes and began developing
      partnerships with wireless carriers, contract manufactures and topology
      partners in order to build out its proof of
  concepts.
  ·
              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.
  ·
              In
      September 2007, GTX California entered into its first license agreement
      and in September 2008, GTX California delivered its first commercial order
      of gpVectorTM modules.
  ·
              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.
  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 users location, a
2-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 the
Company calls “gpVectorTM,” combines the power of assisted GPS and digital
personal communications service (“PCS”) technologies. This miniature gpVectorTM
module can embed within lightweight enclosures, such as shoes worn by athletes,
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 gpVectorTM 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 gpVectorTM 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 include:
  ·
              Parents
      of young children (primarily 4 to 12 years of age) who desire to know the
      whereabouts of their children;
  ·
              Families
      with members who have Alzheimer’s disease and developmentally challenged
      adults;
  ·
              Elder
      Care support and applications;
  4
  ·
              Pet
      care and location capability;
  ·
              Field
      workers, first responders and law
enforcement;
  ·
              Asset
      tracking and location capability of cars, trucks, fleet management,
      luggage, and other assets; and
  ·
              Competitive
      non-motorized athletes.
  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 “gpVectorTM 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 gpVectorTM 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 gpVectorTM 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).
  5
  In
addition to these basic location reporting capabilities, our gpVectorTM modules
and location tracking services also offers several additional features and
capabilities to our subscribers, including:
  Bread-crumbing. The
subscriber is able to get a report on a series of location events through
“bread-crumbing”. 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.
  6
  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 gpVectorTM 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.
 
 On March
18, 2010, GTX California entered into a license agreement with Aetrex Worldwide,
Inc. under which we granted Aetrex the right to embed our GPS tracking device
into certain footwear products manufactured and sold by Aetrex (the “License
Agreement”).  Aetrex is as a global leader in pedorthic footwear and
foot orthotics, and the new product to be introduced is intended to monitor the
locations of “wandering” seniors afflicted with dementia by embedding our
patented location technology in Aetrex footwear.
  7
  Under the
License Agreement, we granted Aetrex certain exclusive and non-exclusive rights
to (i) embed our portable GPS tracking system device into footwear, and (ii)
manufacture, sell and distribute in the “Territory” certain footwear containing
the GPS tracking system device.  Aetrex was granted (a) the exclusive
rights to embed our GPS tracking devices into all adult (male and female)
footwear and into insoles, and (b) the non-exclusive rights to embed the
tracking devices into athletic footwear and military footwear.  The
“Territory” consists of the following:  Aetrex has the exclusive
rights to North America (USA, Canada, Mexico), the Middle East (Turkey, Qatar,
Saudi Arabia, UAE, Iraq, Israel, Jordan, Cyprus, and Egypt), the European Union,
Australia, New Zealand, Japan, and Greece, and the non-exclusive rights to all
other countries.  To the extent that Aetrex is required to possess a
license to any of our patent rights and know-how that are included in the GPS
tracking devices for the purpose of commercializing Aetrex’s footwear products,
we also granted Aetrex a license to our patent rights and know-how for this
limited purpose.
  The
rights granted to Aetrex under the License Agreement will remain in effect for
four years, commencing on the date that we ship the first GPS tracking device to
Aetrex for use in Aetrex’s footwear.  Aetrex has agreed to purchase a
substantial number of GPS tracking devices from GTX California for use with
certain of its footwear products.  In order to retain its exclusive
rights, Aetrex has agreed to purchase 6,000 GPS tracking devices from us during
the first year of the four-year period, 25,000 devices during the second year,
50,000 during the third year, and 75,000 devices during the fourth
year.  The agreement will automatically renew for an additional year
if Aetrex’s annual purchase of the number of the GPS tracking devices in the
preceding year was at least one hundred and fifteen percent (115%) of the prior
year’s minimum purchase requirement.
  In order
to activate the tracking features of the Aetrex shoes, the user of the shoes
will have to purchase a monthly cellular connection plan from GTX
California.  The Company will be responsible for the cellular/GPS
activation, for arranging and providing cellular connection services and for
collecting the monthly fees.  We will receive and retain the recurring
monthly cellular fees received from users of the Aetrex embed tracking footwear,
although we have agreed to remit a varying portion of those monthly fees to
Aetrex.   GTX California will also be solely responsible for the
manufacture, production and supply/sale to Aetrex of the licensed GPS tracking
devices, and for repairs, replacements, after-service, and warranties pursuant
to its product and services warranties.
 
 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.  GTX California designed, developed and manufactured a
module (incorporating our gpVectorTM 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.  In 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.
  We have
recently entered into four platform test agreements for the release of consumer
and enterprise products using our GPS tracking 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
and our middleware and viewing portal that will, upon the successful completion
of the testing, be licensed to the licensee for commercialization within a
defined territory and/or product category. 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 four
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. We successfully completed the
      testing in March 2010 and entered into the License Agreement with Aetrex
      Worldwide, Inc. under which we granted Aetrex the right to embed our GPS
      tracking device into certain footwear products manufactured and sold by
      Aetrex, and offer our middleware platform and viewing portal for Aetrex to
      deliver a complete end-to-end tracking and monitoring solution to the
      customers purchasing the GPS enabled
shoes.
  8
  ·
              In
      September 2009, we entered into a binding exclusive platform test
      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. Kalika is
      currently testing 3 products; the miniaturized micro LOCi, the GTX AVL and
      the Mini MT on the GTX platform and viewing portal. Upon the satisfactory
      completion of the platform test, we expect Kalika Group to commercially
      deploy our platform and begin selling multiple devices within their
      respective markets.
 
 ·
              In
      October 2009, GTX California entered into an exclusive product test
      agreement with Midnite Air Corp D/B/A MNX to develop an industry first,
      proprietary GPS enabled transport container.  MNX is a worldwide
      provider of specialty critical and security sensitive global
      transportation and logistics services. MNX has successfully concluded
      various tests throughout the globe including Great Britain, Australia and
      China. Upon the final completion of the platform test, we expected to
      grant MNX a license to use our location tracking devices in this market
      throughout the world.
 
 ·
              In
      February 2010, we entered into a platform test agreement with
      MapMyFitness, Inc. to develop, engineer and test our two-way transceivers
      and software systems for monitoring the location of non-motorized
      competitive athletes. Upon the satisfactory completion of the platform
      test, we expected to grant MapMyFitness, Inc. a license to offer and sell
      our location tracking devices to this market throughout North
      America.
  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,
2027.
 
 3.
              U.S.
      Patent No. RE40,879 title: “Footwear With GPS,” filed July 27, 2006,
      reissued August 25, 2009, expires approximately October 21,
      2022
 
 4.
              U.S.
      Patent No. RE41,087 title: “Footwear With GPS,” filed September 6,
      2006,reissued August 25, 2009, expires approximately October 21,
      2022
 
 5.
              U.S.
      Patent No. RE41,102 title: “Footwear With GPS,” filed September 7, 2006,
      reissued February 9, 2010, expires approximately October 21,
      2022
 
 6.
              U.S.
      Patent No. RE41,122 title: “Footwear With GPS,” filed August 17, 2006,
      reissued February 16, 2010, expires approximately October 21,
      2022
 
 7.
              U.S.
      Patent No. D595,484 title: “Footwear With Antenna,” filed February 7,
      2008, issued July 7, 2009, expires approximately July 7,
    2023
 
 8.
              U.S.
      Patent No. D599,102 title: “Footwear Sole With Antenna,” filed February 7,
      2008, issued September 1, 2009, expires approximately September 1,
      2023
  9
 
 9.
              U.S.
      Patent Application, Serial No. 11/517,603 title: “Footwear With GPS,”
      re-filed September 7, 2006.
 
 10.
              U.S.
      Patent Application, Serial No. 11/506,175 title: “Footwear With GPS,”
      re-filed August 17, 2006.
 
 11.
              U.S.
      Patent Application, Serial No. 11/516,805 title: “Footwear With GPS,”
      re-filed September 6, 2006
 
 12.
              U.S.
      Patent Application, Serial No.11/402,195 title: “Buoyant Tracking Device
      And Method Of Manufacture,” filed April 11,
  2006.
 
 13.
              U.S.
      Patent Application, Serial No.12/319,307 title: “Footwear With Embedded
      Tracking Device and Method Of Manufacture,” filed January 6,
      2009.
 
 14.
              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.
 
 15.
              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.
 
 16.
              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.
 
 17.
              U.S.
      Patent Application, (Serial No. is CONFIDENTIAL – Not Published by the
      USPTO)  title: “Tracking System With Separated Tracking Device,”
      filed August 8, 2008.
  Foreign
Patent Holdings
  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.
  10
  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.   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.
  11
  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 gpVectorTM product, and often also for our LOCiMobile® system, include
Location Based Technologies, Inc, Zoombak, Inc., Google Latitude, Foursquare,
Loopt, Trimble Navigation, Inc. and SOS Gps, Inc.  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.  Location devices are
gaining significant market acceptance and commercialization in part due to the
use of GPS technology in devices such as chart plotters, fitness and training
devices, fish finders, laptop computers, PDAs, etc.,.  Prices range
from less than $100 to over a thousand dollars for such items.  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
gpVectorTM  products.  Accordingly, our PC boards are
manufactured for us in China  and the US.  Once the control
boards arrive at our Los Angeles facilities, our personnel perform a visual
inspection and then assemble the components with our proprietary configuration
of the GTX firmware. 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.   Accordingly, to
date we have not experienced any significant shortages or material delays in
obtaining any of our components or subassemblies.
 
 12
  Other
Location Products
 
 In
addition to marketing our own proprietary products, we also market and sell the
“gpVector miniMT”, the GTX AVL , the Triton and the “gpVector2 micro LOCi”,
tracking devices that are manufactured by a third party.  The gpVector
miniMT is a compact, fully certified quad-band integrated device that provides
complete GSM/GPRS functionality for mobile tracking applications.  The
gpVector2 micro LOCi a more compact, fully certified quad-band integrated device
that provides complete GSM/GPRS functionality for mobile tracking
applications.  The GTX AVL is a low cost vehicle tracking device and
the Triton is a very robust highly specific shipping container monitoring and
tracking device. These products are sold under our GTX brand, and they can be
branded with other companies’ names.  All these devices operate
through, and use our middleware platform and viewing portal.  These
devices can be sold individually or as a complete solution including platform
and wireless connectivity providing us with product sales revenues and
subsequent recurring monthly service revenues.
 
 LOCiMobile®
BUSINESS
 
 LOCiMobile®
is a suite of mobile tracking applications that turn the latest iPhone® and
other GPS enabled handsets into tracking devices and mobile social networking
solutions capable of being rendered on other handsets or our Location Data
Center tracking portal.  LOCiMobile® can be deployed both business to
business, through a private label interface and as a direct to consumer
offering.  Selling mobile tracking applications for use on mobile
handsets (“Apps”) allows us to enter into new markets supported by the growing
number of worldwide GPS handsets and 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 the Android Marketplace),
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 LOCiMobile® (the LOCiMe App) was introduced in April 2009
and enhanced in June and August of 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 July
2009, we also launched our new iLOCi2TM iPhone App and in September 2009 we
launched the International Version 1.2 — initially in French and
Spanish.   The iLOCi2TM 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.  We currently intend to expand
this product’s platform to support other mobile operating systems, such as the
Android® and BlackBerry® system.
 
 In December 2009, we launched our “GPS
Tracking” App which is currently available on both the Apple iPhone and the
Google Android operating systems.  As a result, our Apps are now
available on the Apple iPhone and the entire Android platform of 30 phone
partners including Motorola's Droid along with Sprint and T-Mobile
smartphones.  GPS Tracking is our most feature-rich App in the
LOCiMobile® suite – making it even easier to locate and connect with others at
the push of a button with complete privacy.  GPS Tracking is a useful
App for anyone on the go simply letting you notify others in your contact list
where you are, or ask where they are, by pushing one button and the App allows
you to send and receive text messages with the location
notifications.  The location notifications arrive with turn-by-turn
directions from exactly where the recipient is.  The App is also
integrated with Facebook and Twitter allowing you to post your location directly
to your Facebook wall.  Our Apps are faster and safer than texting and
more accurate than phone calls, because you get to see a push pin showing
exactly where someone is on a Google map with turn-by-turn
directions.   Since December 2009 through March 28, 2010, more
than 250,000 LOCiMobile® applications have been downloaded in 78 countries
with two of our current seven apps ranking in the Apple iTunes top 25 social
networking category; with one of the Apps hitting number 6 in the Apple iTunes
top 25 social networking category.  Currently, approximately 3,000
LOCiMobile® Apps are being downloaded daily, of which 10% are paid Apps and
90% are free Apps.  Revenue from the free Apps is derived from
advertising and sponsorships. In March 2010 we have over 2.5 million impressions
on our free Apps, up from 1.25 million the month before. Advertising revenues
are expected to surpass the revenues from the paid versions. With an extensive
product roadmap and two new Apps scheduled for release in the second quarter of
2010, the LOCiMobile® suite of Apps are expected to continue penetrating
more countries and increase downloads as the product lines expands and become
available on additional handset platforms. The number of GPS-enabled mobile
phones expected to be shipped in 2010 is 376 million, or about 28 percent of the
total handset market; and the number is expected to rise to 33 percent in
2011.
 
 13
  In 2009,
people worldwide spent $4.2 billion to download more than 2.5 billion apps for
smart phones, according to a study by research firm Gartner Inc. By 2013, those
numbers are projected to grow to $29.5 billion and 21.6 billion downloads
according to Gartner Inc.. LOCiMobile® is focusing its development on off-deck
location based service application activations.  We believe that our
LOCiMobile® 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 location based service 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.  By creating an indispensable and perhaps transparent
location-based social networking (LBSN) product line LOCiMobile® is
positioned, via product extension, to participate in this value creation
landscape.
 
 The
LOCiMobile® Apps can be downloaded to the user’s smart phone from the company’s
www.locimobile.com website, the Apple iTunes online store, the Android
Marketplace and soon will be available on the RIM platform for
Blackberry
  Part of
the future evolution of the LOCiMobile® future products development may include
the implementation of Cloud Architecture, which is a style of computing in which
dynamically scalable and often virtualized 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
user.  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, 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 and
www.codeamberalertag.com
  Currently
CANS serves the Code Amber ticker to over 450,000 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. Perftech, provides alerts to over 350,000 customers of
participating internet service providers in Illinois, Ohio, Michigan and
Indiana.
 
 14
  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.  We increased the scope of viewers with the
addition of new affiliates; WildFireWeb and
Neighborhoodlink.com.   WildFireWeb offers WebSchoolPro free
websites to all 130,000 public and private K-12 schools
nationwide.  Neighborhoodlink.com connects Code Amber to 37,000 more
neighborhoods in 2,000 cities across the country generating an additional two
million page views to our alerts.
  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 gpVectorTM  and LOCiMobile®
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 supplement 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 LOCiMobile® products for use with
the iPhone and Android phones, 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 LOCiMobile® synthesize our mobile platform
strategy.
  In
November 2009, we entered into a licensing agreement for a digital
identification tag that we now offer a product and as a monthly service under
the name “Code Amber Alertag.”  Code Amber Alertag is a secure digital
identification tag and service that provides worldwide access to critical
personal information in emergency situations for children, elderly, field
workers, pets, and others that subscribe to the product and service.  The
digital identification tag fits onto a key chain and contains vital personal
information of the subscriber such as identification, allergy, chronic
conditions and other insights that are needed to adequately assess emergency
victim treatment protocols.  The digital tag can also contain a second
or "private" Alertag level that can only be accessed with an additional key code
that first responders can access, which contains a full medical history or as
much as the Alertag subscriber elects to store on device.  This
new product and annual subscription model further augments and contributes to
the multi prong revenue streams we have recently implemented.  We
began to commercially launch the Code Amber Alertag in early 2010 at a one-year
subscription price of $19.95 for a single Alertag device, and $69.95 for a
family package of devices.
 
 In the
first few months Code Amber Alertag has established 158 affiliates in 39
countries and has signed up over 40 organizations to sell the Alertag in
fundraising events. In addition, 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.
 
 15
  OVERVIEW—REVENUE SOURCES
FROM ALL LINES OF BUSINESS
  We expect
that future revenues can be generated from the following sales and revenue
sources:
  ·
                License
      fees derived from exclusive and non exclusive grants for territories and
      specific vertical markets;
 
 ·
                Product
      sales. For example, Aetrex Worldwide, Inc. is required to purchase a
      minimum of 156,000 of our GPS devices from us pursuant to the License
      Agreement;
 
 ·
                Non-recurring
      engineering fees;
 
 ·
                Professional
      services and data hosting. For example, users of the Aetrex Worldwide,
      Inc. GPS enable footwear will have to purchase a monthly subscription from
      us to use the location services;
 
 ·
                Monthly
      recurring wireless data and portal service fees. For Example, in
      order to activate the tracking features of the Aetrex shoes, the user of
      the shoes will have to purchase a monthly cellular connection plan from
      GTX California;
 
 ·
                  Sales
      of our LOCiMobile® applications to individual consumers that download our
      Apps
 ·
                Advertising
      revenues from advertisements served to the hundreds of thousands of
      customers that have downloaded our Apps and all the future customers that
      may download our Apps.
 
 ·
                Sponsorships
      and news feed fees; and
 
 ·
                Other
      Advertising revenues.
 
 EMPLOYEES AND
CONSULTANTS
  As of
December 31, 2009, GTX Corp and its subsidiaries collectively had seven (7)
employees, five (5) full-time consultants and twelve (12) 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 more key employees in the next six months, with selective and
controlled growth commensurate with significant 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.
  ITEM1A:
              RISK
      FACTORS
  Investing
in our common stock is highly speculative and involves a high degree of risk.
Any potential investor should carefully consider the risks and uncertainties
described below before purchasing any shares of our common stock.  The
risks described below are those we currently believe may materially affect
us.  If any of them occur, our business, financial condition,
operating results or cash flow could be materially harmed.  As a
result, the trading price of our stock could decline, and you might lose all or
part of your investment. Our business, financial condition and operating
results, or the value of any investment you make in the stock of our company, or
both, could be adversely affected by any of the factors listed and described
below.  These risks and uncertainties, however, are not the only ones
that we face.  Additional risks and uncertainties not currently known
to us, or that we currently think are immaterial, may also impair our business
operations or the value of your investment.
  16
  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 December
31, 2009, we had an accumulated deficit of approximately $9,567,000.
  We have reported net losses of approximately $2,125,000 and
$3,401,000 for the years ended December 31, 2009 and 2008,
respectively.  We received the first order for our products in
September 2008, and we have only generated total revenues of $677,186 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,
one gpVectorTM product has only been released for use with one product, and has
only been sold to a small number of customers.  Although we recently
entered into a license agreement with a global leader in pedorthic footwear and
foot orthotics for the manufacture and distribution of GPS tracking and location
shoe products (mostly for senior citizens), the shoes have not yet been
released.  We cannot estimate with certainty what the demand will be
for shoe product once the shoe product is manufactured and
marketed.   Accordingly, our business model has not yet been
tested in the market and we have limited operating or sales history on which an
investor can evaluate our operations and prospects.  In addition, our
LOCiMobile® products and upgrades were commercially released in mid and late
2009 and early 2010, and therefore have not been available for a sufficient
period on which to accurately predict the future growth of these product
sales.  To date, we only have preliminary 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 our business model will be successful and, therefore, that our stockholders
will realize any return on their investment or that they will not lose their
entire investment.
 
 We may have to
seek additional funding.  If additional funding is not available in
the future, we will have to limit, scale-back or cease
operations.
 
 We
currently have limited funds available from which we can fund our current and
proposed operating activities.  The amount of funds currently
available to us, the availability of the Dutchess Equity Line, and the current
monthly amount of revenues that we expect to generate collectively are expected
to be sufficient to fund our operating expenses for the next 12
months.  However, if our actual operating expenses exceed our
forecast, or if revenues do not reach our anticipated levels, we will have to
obtain additional public or private equity financings or debt financings in
order to continue our operations.  We have not identified the sources
for the additional financing that we will require.  Certain investors
may be unwilling to invest in our securities since we are traded on the OTC
Bulletin Board and not on a national securities exchange, particularly if there
is only limited trading in our common stock on the OTC Bulletin Board at the
time we seek financing.  There is no assurance that sufficient funding
through a financing will be available to us at acceptable terms or at
all.  Any additional funding that we obtain in a financing is likely
to reduce the percentage ownership of the company held by our existing
security-holders.  The amount of this dilution may be substantially
increased if the trading price of our common stock has declined at the time of
any financing from its current levels.  We may also attempt to raise
funds through 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.  There can be no assurance that financing will be
available in amounts or on terms acceptable to us, if at all.  If we
are unable to obtain the needed additional funding, we will have to reduce or
even totally discontinue our operations, which would have a significant negative
impact on our stockholders and could result in a total loss of their investment
in our stock.
 
 17
  Our
future capital requirements, and our currently projected operating and liquidity
requirements, will depend on many factors, including:
 
 ·
              Our
      ongoing general and administrative expenses related to our being a
      reporting company;
 
 ·
              Market
      acceptance of our  LOCiMobile®  products that are
      downloaded onto the iPhone, Blackberry, Android and other smartphones, and
      the revenues generated from users of our smartphone
    products;
 
 ·
              Sales
      revenues generated from the sale of our GPS devises to Aetrex Worldwide,
      Inc. under our license agreement, and the amount of monthly cellular fees
      we receive from purchasers of the Aetrex GPS shoes powered by GTX
      Corp;
 
 ·
              The
      cost of developing and improving our products and technologies;
      and
 
 ·
              The
      consummation of one or more licensing agreements with the parties
      currently considering the release of products based on our
      technologies.
 
 Funding,
especially on terms acceptable to us, may not be available to meet our future
capital needs because of the state of the credit and capital
markets.  Global market and economic conditions have been, and
continue to be, disruptive and volatile. The cost of raising money in the debt
and equity capital markets has increased substantially while the availability of
funds from those markets has diminished significantly.  Also, low
valuations and decreased appetite for equity investments, among other factors,
may make the equity markets difficult to access on acceptable terms or
unavailable altogether.
 
 If
adequate funds are not available, we may be required to delay, scale-back or
eliminate our product enhancement and new product development programs. There
can be no assurance that additional financing will be available on acceptable
terms or at all, if and when required.
 
 We
may not be able to access sufficient funds under our Equity Line with Dutchess
Equity Fund, L.P. when needed.
 
 We
entered into the Equity Line with Dutchess in November 2009 in order to enable
us to obtain funding from Dutchess if and when we need additional
capital.  Our ability to put shares to Dutchess and obtain funds under
our Equity Line is limited by the terms and conditions in the Investment
Agreement with Dutchess, including restrictions on our ability to put shares to
Dutchess to the extent that it would cause Dutchess to beneficially own more
than 4.99% of our outstanding shares.  To date, we have used the
Equity Line on a limited basis, and have only obtained proceeds of approximately
$41,000 from the sale of approximately 241,000 shares of common stock to
Dutchess.  Additionally, documentation for a draw
of approximately $34,000 from the equity line was completed on March 30, 2010
for the sale of approximately 201,000 shares of common stock.The shares have not yet been issued
and the payment has not yet been received.  The Company is required to
issue the shares and Dutchess is required to submit the payment within two
business days of the completion of the documentation.
 
 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.
 
 18
  Our
wireless location products and technologies 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 our planned wireless locator products in the
market.  Although we have entered into a licensing agreement with
Aetrex Worldwide, Inc. for the manufacture and sale by Aetrex of GPS enabled
shoe products, no such products have yet been released.  In addition,
while we are currently a party to certain 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 in proprietary GPS enabled
transport containers), these agreements are still in the testing and development
phase.  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
recognition in order to compete in our various markets.  We have
numerous competitors in all of our markets, many of whom have products that
directly compete with our existing and proposed products and
services.  Accordingly, it is important that we establish market
recognition for our brands in order to be able to continue to be a material
participant in the large markets that we are addressing.  To date, we
have utilized various marketing and promotional programs and have tried to build
market recognition both directly for our products and also by tying our products
to the well known Code Amber brand that we own.  However, 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 name recognition sufficiently to capitalize on the market
acceptance of our name and brand.
  We
may encounter manufacturing or assembly problems for our products, which would
adversely affect our results of operations and financial condition.
  Our
gpVectorTMproduct 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
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 gpVectorTM 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.
  19
  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.
  20
  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.
  We
have only recently transitioned from being a research and development company to
an operating company, making it difficult to evaluate our future prospects and
results of operations.
  Although
GTX California was formed in 2002, until recently it was dedicated to the
research and development of our gpVectorTM products and
platform.  Also, since the end of 2009, we have dedicated a
significant amount of our resources and energies to the development and release
of our LOCiMobile® applications.  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:
  ·
              offer
      new and innovative products to attract and retain a larger customer
      base;
 
 ·
              increase
      awareness of our brand and continue to develop user and customer
      loyalty;
 
 ·
              respond
      to competitive market conditions;
 
 ·
              manage
      risks associated with intellectual property
  rights;
 
 ·
              maintain
      effective control of our costs and
expenses;
 
 ·
              raise
      sufficient capital to sustain and expand our
  business;
 
 ·
              attract,
      retain and motivate qualified personnel;
and
 
 ·
              upgrade
      our technology to support additional research and development of new
      products.
  21
  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.
  We have
had only sporadic and relatively minor sales.  We filled our first
purchase order in September 2008 with the delivery of approximately 900
gpVectorTM units and we filled various purchase orders in 2009 for a total of
approximately 550 gpVector2 micro LOCi devices.  We have recently
signed the Aetrex Worldwide, Inc. shoe product licensing
agreement.  However, the amount and timing of revenues, if any, that
we may derive under that licensing agreement are unknown.  In
addition, we are a party to a number of 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, from the
licensing agreement and other future agreements 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 unless our LOCiMobile® applications continue to be
uploaded by a significant number of users who pay our download 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 any pro forma
financial information that may be released 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 a substantial portion of our future 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.
  22
  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:
  ·
              decreased
      demand for our products or withdrawal of the products from the
      market;
 
 ·
              injury
      to our reputation and significant media
  attention;
 
 ·
              costs
      of litigation; and
 
 ·
              substantial
      monetary awards to plaintiffs.
  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.
  23
  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:
  ·
              Significant
      litigation costs;
 
 ·
              Diversion
      of resources, including the attention of
  management;
 
 ·
              Our
      agreement to pay certain royalty and/or licensing
  fees;
 
 ·
              Cause
      us to redesign those products that use such technology;
  or
 
 ·
              Cessation
      of our rights to use, market, or distribute such
    technology.
 
 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.
  24
  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 products, 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 acquired or established smaller businesses, and we may
do so in the future.   For example, in the past two years we
established our LOCiMOBILE, Inc. subsidiary and 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 20.74% 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.
  25
  Failure
to manage growth effectively could adversely affect our business, results of
operations and financial condition.
  The
success of our future operating activities will depend upon our ability to
expand our support system to meet the demands of our growing business. Any
failure by our management to effectively anticipate, implement, and manage
changes required to sustain our growth would have a material adverse effect on
our business, financial condition, and results of operations. We cannot assure
you that we will be able to successfully operate acquired businesses, become
profitable in the future, or effectively manage any other change.
  RISKS
RELATED TO AN INVESTMENT IN OUR SECURITIES
  In December 2009, we registered 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
recently registered for public resale a maximum of 12,000,000 shares of common
stock with the SEC.  We may issue up to that number of shares to
Dutchess pursuant to the Equity Line during the three year term of the
Investment Agreement.  The resale of these shares into the public
market by Dutchess could depress the market price of our common
stock.  As of March 30, 2010 there were 40,480,699 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 issued to Dutchess pursuant to the Investment Agreement will be
purchased at a 6% discount to the lowest daily 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’ 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.
  26
  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 40,480,699 common shares were issued and
outstanding as of  March  30, 2010.  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 March 30, 2010, we had warrants and options to purchase an aggregate of
7,336,250 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.
 
 27
  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.
 
 You
may have difficulty selling our shares because they are deemed “penny
stocks.”
 
 Our
common stock is currently quoted on the OTC Bulletin Board under the symbol
“GTXO”; our stock has been trading only since mid-March 2008.  Since
our common stock is not listed on a national securities exchange, if the trading
price of our common stock remains below $5.00 per share, trading in our common
stock will be subject to the requirements of certain rules promulgated under the
Exchange Act, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock
(generally, any non-national securities exchange equity security that has a
market price of less than $5.00 per share, subject to certain
exceptions).  The additional burdens imposed upon broker-dealers could
discourage broker-dealers from effecting transactions in our common stock, which
could severely limit the market liquidity of the common stock and the ability of
holders of the common stock to sell their shares.
 
 Stockholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through pre-arranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
 
 Exchange
transactions of the type we completed with GTX California in March of 2008 are
often heavily scrutinized by the SEC and we may encounter difficulties or delays
in obtaining future regulatory approvals which would negatively impact our
financial condition and the value and liquidity of your shares of common
stock.
  Historically,
the SEC and Nasdaq have not generally favored transactions in which a
privately-held company merges into, or is acquired by a largely inactive company
with publicly traded stock, and there is a significant risk that we may
encounter difficulties in obtaining the regulatory approvals necessary to
conduct future financing or acquisition transactions, or to eventually achieve a
listing of shares on one of the Nasdaq stock markets or other national
securities exchanges. On June 29, 2005, the SEC adopted rules dealing with
private company mergers into dormant or inactive public companies. As a result,
it is likely that we will be scrutinized carefully by the SEC and possibly by
the Financial Industry Regulatory Authority (“FINRA”) or Nasdaq, which could
result in difficulties or delays in achieving SEC clearance of any future
registration statements or other SEC filings that we may pursue, in attracting
FINRA-member broker-dealers to serve as market-makers in our common stock, or in
achieving admission to one of the Nasdaq stock markets or any other national
securities market. As a consequence, our financial condition and the value and
liquidity of your shares of our common stock may be negatively
impacted.
  28
  ITEM1B.
              UNRESOLVED
      STAFF COMMENTS
  None.
  ITEM
      2.
              DESCRIPTION
      OF PROPERTIES
  Our
executive, administrative and operating offices are located at 117 W 9th Street;
Suite 1214, Los Angeles, California 90015.  Our office space is
approximately 985 square feet and consists of administrative work space for a
base rent of $990 per month.  The lease expires on January 31,
2011.
  We have
approximately 375 square feet of office space located at 366 California Ave.,
Palo Alto, California  94306.  The base rent is $1,420 per
month and the lease expires on June 10, 2010.
  ITEM
      3.
              LEGAL
      PROCEEDINGS
  From time
to time, we may be involved in routine legal proceedings, as well as demands,
claims and threatened litigation that arise in the normal course of our
business. The ultimate amount of liability, if any, for any claims of any type
(either alone or in the aggregate) may materially and adversely affect our
financial condition, results of operations and liquidity. In addition, the
ultimate outcome of any litigation is uncertain. Any outcome, whether favorable
or unfavorable, may materially and adversely affect us due to legal costs and
expenses, diversion of management attention and other factors. We expense legal
costs in the period incurred. We cannot assure you that additional contingencies
of a legal nature or contingencies having legal aspects will not be asserted
against us in the future, and these matters could relate to prior, current or
future transactions or events. Except as described below, we are not currently a
party to any material litigation.
 
 A lawsuit
has been filed against us by a former consultant who claims we owe approximately
$24,000 plus interest and attorney fees for services rendered during
2009.  We contend that the services in question were either not
performed, not approved or not delivered and accordingly, no additional funds
are due to the former consultant.   We intend to defend this case
rigorously.
 
 We are
not a party to any material legal proceedings.  We are not aware of
any pending or threatened litigation against us that we expect will have a
material adverse effect on our business, financial condition, liquidity, or
operating results. However, legal claims are inherently uncertain, and we cannot
assure you that we will not be adversely affected in the future by legal
proceedings.
 
 ITEM
      4.
              [RESERVED]
  PART
II
  ITEM
      5.
              MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
      EQUITY SECURITIES
  Market
Information.  Since the closing of the Exchange Transaction,
our common stock has been quoted on the over-the-counter market on the OTC
Bulletin Board under the symbol “GTXO.”  Prior thereto, our common
stock was quoted 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:.
  29
  Year
      EndedDecember 31, 2009High
                    
                    
                    LowQuarter
      ended March 31, 2009
                    
                    $
                    0.24
                    
                    
                    $
                    0.04Quarter
      ended June 30, 2009
                    
                    $
                    0.40
                    
                    
                    $
                    0.05Quarter
      ended September 30, 2009
                    
                    $
                    0.39
                    
                    
                    $
                    0.09Quarter
      ended December 31, 2009
                    
                    $
                    0.24
                    
                    
                    $
                    0.16
 
 Year
      EndedDecember 31, 2008High
                    
                    
                    LowQuarter
      ended March 31, 2008
                    
                    $
                    1.65
                    
                    
                    $
                    0.95Quarter
      ended June 30, 2008
                    
                    $
                    2.71
                    
                    
                    $
                    1.46Quarter
      ended September 30, 2008
                    
                    $
                    2.42
                    
                    
                    $
                    0.33Quarter
      ended December 31, 2008
                    
                    $
                    0.65
                    
                    
                    $
                    0.11
  As of
March 30, 2010 the last reported sales price or our common stock on the OTC
Bulletin Board was $0.18.
  Holders of
Record.  As of March 30, 2010, an aggregate of 40,480,699
shares of our common stock were issued and outstanding and were owned by
approximately 120 holders of record, based on information provided by our
transfer agent.  The foregoing number of record holders does not
include any persons who hold their stock in “street name.”
  Recent
Sales of Unregistered Securities.
  Except as
set forth below, we did not issue any unregistered securities during the
twelve-month period ended December 31, 2009 that were not previously reported in
a Current Report on Form 8-K.
  From
January 1, 2009 through December 31, 2009, we issued 717,000 shares of common
stock to 26 members of the 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 $48,200. 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.
 
 Re-Purchase
of Equity Securities.
  None
  Dividends.
  None.
  Equity Compensation Plan
Information.
  On March
14, 2008, we adopted the 2008 Equity Compensation Plan (the “2008 Plan”)
pursuant to which we are authorized to grant stock options, stock awards and
stock appreciation rights of up to 7,000,000 shares of common stock to our
employees, officers, directors and consultants.  Approximately 491,000
shares are still available for issuance under the 2008 Plan as of March 30,
2010.   The 2008 Plan is administered by the Board of Directors
of the Company.  The following table provides information with respect
to outstanding options as of December 31, 2009 and 2008, pursuant to
compensation plans (including individual compensation arrangements) under which
equity securities are authorized for issuance.
  30
  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)2009Equity
      compensation plans approved by security holders
                      
                      
                      4,267,500
                      
                      
                      $
                      0.61
                      
                      
                      
                      2,120,923Equity
      compensation plans not approved by security holders
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      
                      4,267,500
                      
                      
                      $
                      0.61
                      
                      
                      
                      2,120,9232008Equity
      compensation plans approved by security holders
                      
                      
                      4,563,000
                      
                      
                      $
                      0.74
                      
                      
                      
                      1,894,423Equity
      compensation plans not approved by security holders
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
                      
                      
                      4,563,000
                      
                      
                      $
                      0.74
                      
                      
                      
                      1,894,423
 
 ITEM
      6.
              SELECTED
      FINANCIAL DATA.
  Not
applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC
Regulation S-K.
  ITEM
      7.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
  Overview
  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. During the second half
of 2009, we also commenced providing personal location smart phone Apps in the
U.S. and abroad.   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.
  On March
4, 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
Annual Report, 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.
  31
  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.
  On
November 16, 2009, we entered into an Investment Agreement ("Investment
Agreement") with Dutchess Opportunity Fund, II, LP ("Dutchess"), which agreement
was amended on March 11, 2010.  Pursuant to the Investment Agreement,
as amended, Dutchess committed to purchase up to $10,000,000 of our common stock
over the course of thirty-six months . The aggregate number of shares issuable
by us and purchasable by Dutchess under the Investment Agreement is
12,000,000.
  We may
draw on the Equity Line from time to time at our option in accordance with the
terms and conditions of the Investment Agreement. The maximum amount that the
Company is entitled to put in any one notice is either (i) 200% of the average
daily volume (U.S. market only) of the common stock for the three (3) trading
days prior to the date of delivery of the applicable put notice, multiplied by
the average of the closing prices for such trading days, or (ii) any other
specified amount, up to $500,000. The purchase price shall be set at ninety-four
percent (94%) of the lowest daily volume weighted average price (VWAP) of our
common stock during the five (5) consecutive trading day period beginning
on the trading day immediately following the date of delivery of the applicable
put notice.  We can only sell shares to Dutchess under the Investment
Agreement if a registration statement to cover the resale of the shares is in
effect at that time.
  On
December 8, 2009, we filed a Form S-1 registration statement with the Securities
and Exchange Commission ("SEC") to register the resale by Dutchess of the
12,000,000 shares of the common stock underlying the Investment
Agreement.   The registration statement was declared effective by
the SEC on December 28, 2009.
  Results
of Operations
  The
following discussion should be read in conjunction with our financial statements
and the related notes that appear elsewhere in this Annual Report.
  The
following table represents our statement of operations for the years ended
December 31, 2009 and 2008:
  Year ended December 31,2009
                        
                        
                        2008$
                        
                        
                        % of
                          Revenues
                        
                        
                        $
                        
                        
                        % of
                          RevenuesRevenues
                        
                        $
                        253,020
                        
                        
                        
                        100
                        %
                        
                        $
                        424,166
                        
                        
                        
                        100
                        %Cost
      of goods sold
                        
                        
                        171,018
                        
                        
                        
                        68
                        %
                        
                        
                        334,482
                        
                        
                        
                        79
                        %Net
      profit
                        
                        
                        82,002
                        
                        
                        
                        32
                        %
                        
                        
                        89,684
                        
                        
                        
                        21
                        %Operating
      expensesWages
      and benefits
                        
                        
                        1,081,239
                        
                        
                        
                        427
                        %
                        
                        
                        1,520,706
                        
                        
                        
                        358
                        %Professional
      fees
                        
                        
                        607,712
                        
                        
                        
                        240
                        %
                        
                        
                        1,184,069
                        
                        
                        
                        279
                        %Research
      and development
                        
                        
                        106,711
                        
                        
                        
                        42
                        %
                        
                        
                        371,924
                        
                        
                        
                        88
                        %General
      and administrative
                        
                        
                        449,299
                        
                        
                        
                        178
                        %
                        
                        
                        402,293
                        
                        
                        
                        95
                        %Total
      operating expenses
                        
                        
                        2,244,961
                        
                        
                        
                        887
                        %
                        
                        
                        3,478,992
                        
                        
                        
                        820
                        %Loss
      from operations
                        
                        
                        (2,162,959
                        )
                        
                        
                        (855
                        )%
                        
                        
                        (3,389,308
                        )
                        
                        
                        (799
                        )%Other
      income (expense)
                        
                        
                        37,562
                        
                        
                        
                        15
                        %
                        
                        
                        (11,975
                        )
                        
                        
                        (3
                        )%Net
      loss
                        
                        $
                        (2,125,397
                        )
                        
                        
                        (840
                        )%
                        
                        $
                        (3,401,283
                        )
                        
                        
                        (802
                        )%
 
 32
  Revenues
  Revenues
during the year ended December 31, 2009 were generated from the sale of our
gpVectorTM Powered
Athlete Tracking Systems to My Athlete, non-recurring engineering fees, monthly
service and licensing fees paid to us by MyAthlete, revenues derived from the
sales of the miniMT and micro LOCi devices, Code Amber annual subscriptions and
points of display sales, and other payments received under our platform product
test agreements.  Although LOCiMOBILE, Inc. formally launched six
geo-specific Apps during fiscal year 2009 (LociMe, iLOCi2TM, iLOCi2
Lite, Code Mobile, GPS Tracking and GPS Tracking Lite), those products only
generated revenues of approximately $10,000.  However, sales of the
LOCiMobile® products are expected to significantly increase during the current
fiscal year as more LOCiMobile® applications have been released and newer
versions of the existing LOCiMobile® products have been released; and as those
products are now available on more smartphone platforms.  The
licensing fees were paid in fiscal year 2007 for our gpVectorTM Powered
Athlete Tracking Systems and were being amortized over the term of the licensing
agreement.  During 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.  Revenues for the year
ended December 31, 2008 consisted primarily of the sale of approximately 900
gpVectorTM Powered Athlete Tracking Systems 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.
  Cost of goods
sold
  Cost of
goods sold during the year ended December 31, 2009 consisted primarily of the
purchase and manufacturing of our gpVectorTM Powered
Athlete Tracking System devices as well as the related monthly cellular costs of
the devices and the cost to sell the LOCiMobile, Inc.
Apps.  Additionally, inventory costs totaling approximately $48,000
were written off to cost of goods sold as they were considered
obsolete.  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 gpVectorTM 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.
  Wages and
benefits
  Wages and
benefits decreased 29% in 2009 from 2008.  In an effort to cut costs
while the economy recovers from the setbacks caused by the crisis in the global
markets, we made reductions throughout our workforce.  However, as a
majority of fiscal 2009 efforts were spent on the development of the LOCiMobile®
suite of applications, the overall decrease in wages was not as much as the
overall decrease in revenues.   As a result, while wages and
benefits decreased, they increased as a percentage of sales compared to
2008.
  Professional
fees
  Professional
fees in fiscal 2009 decreased both as a percentage of sales and in absolute
dollars when compared to fiscal 2008.  Professional fees decreased 49%
in fiscal 2009 as compared to fiscal 2008. The decrease is primarily due to
legal and accounting fees incurred in the Exchange Transaction and the related
Financing in fiscal 2008 that were not incurred in fiscal 2009.
  33
  Research and
development
  Research
and development fees decreased both as a percentage of sales and in absolute
dollars when compared to fiscal 2008.  Research and development fees
decreased 71% in fiscal 2009 as compared to fiscal 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 expense increased 12% in fiscal 2009 when compared to fiscal
2008.  As a result of cost cutting measures to preserve our cash
balances, we realized decreases in various other office and administrative
expenses.  However, these reductions were offset by increases in
depreciation, the cost of maintaining of our website, insurance costs and our
allowance for doubtful accounts.
  Other income
(expense)
  During
fiscal 2009 we recognized approximately $38,000 of interest income as compared
to approximately $51,000 recognized during fiscal 2008.  This decrease
is primarily attributable to the decrease in the amounts held in certificates of
deposit and money market accounts during fiscal 2009, thus reducing the amount
of interest earned.
  No
interest expense was incurred during fiscal 2009.  However, during
fiscal 2008, we reported interest expense of approximately $63,000 primarily 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 interest at 10% per annum during the first quarter of
2008.  The Bridge Loan was converted to common stock in connection
with the Exchange Transaction in March 2008.
  Net loss
  Net loss
during fiscal 2009 decreased approximately $1,276,000 or 38% in comparison to
the net loss incurred during fiscal 2008.  The decrease in the net
loss is primarily due to a reduction in wages, professional fees, research and
development, etc. in an effort to cut costs while the economy recovers from the
setbacks caused by the crisis in the global markets.
  Liquidity
and Capital Resources
  As of
December 31, 2009, we had working capital of $216,000 and a current ratio of
1.77 to 1 as compared to working capital of $1,990,000 and a current ratio of
7.2 to 1 as of December 31, 2008.
 
 Our net
loss decreased to $2,125,000 for fiscal 2009 compared to a net loss of
$3,401,000 for fiscal 2008.  Net cash used in operating activities was
approximately $1,548,000 for fiscal 2009 compared to approximately $2,362,000
for fiscal 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 fiscal 2009.
 
 Net cash
provided by investing activities during fiscal 2009 was approximately $1,295,000
and resulted primarily from the maturing of certificates of deposits totaling
$1,500,000.  Net cash used by investing activities during fiscal 2008
was approximately $1,674,000 and resulted primarily from the purchase of several
certificates of deposit.
 
 Net cash
provided by financing activities during fiscal 2009 was $900 and resulted from
the exercise of 15,000 options at $0.06 per share.  No common or
preferred stock was sold and no warrants were exercised during fiscal
2009.  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 fiscal 2008.
 
 34
  Because
revenues from our operations have, to date, been modest, we currently rely on
the cash we received from our prior financing activities as well as the common
stock line of credit we entered into with Dutchess to fund our capital
expenditures and to support our working capital requirements.  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.   Since we
entered into the Investment Agreement with Dutchess in November 2009 in
connection with the Equity Line, we have sold to Dutchess 241,159 shares of our
common stock (at prices ranging from $0.17 - $0.1763 per share) for a total of
$41,423. Additionally,
documentation for a draw in the amount of $34,261was completed on March 30, 2010
for the sale of 201,534 shares of common stock at $0.17 per share.The shares have not yet been issued
and the payment has not yet been received.  The Company is required to
issue the shares and Dutchess is required to submit the payment within two
business days of the completion of the documentation.We
anticipate that we will continue to, from time to time, draw on the Equity Line
to provide additional funding.  The amount of such funding will depend
upon our needs and the amount that is available to us under the Equity
Line.  In the event that we do not generate the amount of revenues
that we anticipate, or if our expenses exceed our budgeted amounts, we may need
to increase our use of the Equity Line.  No assurance can be given
that we will be able to obtain sufficient funds under the Equity Line to fund
any working capital deficits.
  During
March 2010, we entered into a licensing agreement with Aetrex Worldwide, Inc. to
market and sell a GPS enabled shoe.  We expect that Aetrex will
commercially release the first line of these shoes in 2010.  The sale
of these shoes is expected to generate product sales and monthly service
revenues in 2010.  In addition, we are currently a party to three
separate platform test agreements for the development and release of additional
products.  Based on the timing of the development and testing of the
products that are the subject of these test agreements, and on the early results
of those tests, we currently anticipate that we will generate revenues from at
least two of these platform test agreements during 2010.  However,
since inception in 2002, we have generated significant losses (as of December
31, 2009, we had an accumulated deficit of approximately $9,567,000), and we
currently expect to incur continued losses until these and our other revenue
initiatives collectively generate substantial revenues.  Depending on
our current contractual arrangements and the revenues from our new LOCiMobile®
applications, 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 our various technologies and products,
including hardware, software, interface customization, and website development,
and we also expect to further develop our sales, marketing and manufacturing
programs associated with the commercialization and licensing of the gpVectorTM
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, interface
      customization and website development necessary to continue the
      commercialization of the gpVectorTM;
 ·
              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 gpVectorTM technology, the sales of the
      LOCiMobile® applications for GPS enabled handsets, and advertising sales
      from CANS.
 
 As noted
above, based on budgeted revenues and expenditures and planned sales of stock
and proceeds from the Equity Line, we believe that we will have sufficient
liquidity to satisfy our cash requirements for the next twelve
months.   However, if our actual expenses increase beyond our existing
financial resources, we will have to access funding 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.   We may draw on the Equity
Line from time to time at our option over a three year period by selling to
Dutchess either (a) 200% of the average daily volume (U.S. market only) of
common stock for the three (3) trading days prior to the date of delivery of the
applicable put notice, multiplied by the average of the closing prices for such
trading days, or (b) any other specified amount up to $500,000.  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.
 
 35
  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
  Inflation
and changing prices have had no effect on our net sales and revenues or on our
income from continuing operations over our two most recent fiscal
years.
  Critical
Accounting Policies and Estimates
  The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates which have been made using careful judgment.
  The
financial statements have, in management’s opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below.
  We have
identified the following critical accounting policies that are most important to
the portrayal of our financial condition and results of operations and that
require management’s most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The following is a review of the more critical accounting
policies and methods used by us:
  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 monthly service
fees, licensing agreements and annual subscriptions are recognized over the
respective term of the agreement.  Application revenue is recognized
when the application is purchased by the customer on the Apple Applications
Store.  Revenues generated from smart phone applications are
recognized upon receipt of payment.
 
 Revenue
from multiple-element arrangements is allocated to the elements based on the
relative fair value of each element, which is generally based on the relative
sales price of each element when sold separately. Each element’s allocated
revenue is recognized when the revenue recognition criteria for that element
have been met. If the Company cannot objectively determine the fair value of any
undelivered element included in a multiple-element arrangement, the Company
defers revenue until all elements are delivered and services have been
performed, or until fair value can objectively be determined for any remaining
undelivered elements.
 
 Product
Warranty
 
 The
Company’s warranty policy provides repair or replacement of products returned
within ninety days of purchase. Warranty liabilities are recorded at the time of
sale for the estimated costs that may be incurred under our standard warranty.
As of December 31, 2009, product returned for repair or replacement has been
immaterial.  Accordingly, a warranty liability has not been deemed
necessary.
 
 36
  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.
 
 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.
 
 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 was included in the financial statements prior to the Exchange
Transaction.
 
 As a
result of the Exchange Transaction, GTX is now considered a C corporation and as
such, we account for income taxes utilizing the liability
method.  Under such method, deferred income tax assets are recognized
for the tax consequences of temporary differences between the tax and financial
statement reporting bases of assets and liabilities.  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 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, which is generally commensurate with the vesting period. The Company
estimates forfeitures that it expects will occur and records expense based upon
the number of awards expected to vest.
 
 Recently
Issued Accounting Standards
  In
April 2009, the FASB issued an update to ASC 820, Fair Value Measurements and
Disclosures, to provide additional guidance on estimating fair value when
the volume and level of transaction activity for an asset or liability have
significantly decreased in relation to normal market activity for the asset or
liability. Additional disclosures are required regarding fair value in interim
and annual reports. These provisions are effective for interim and annual
periods ending after June 15, 2009.  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.
 
 37
  In
July 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.
  In
September 2009, the EITF reached final consensus on Issue 08-1, Revenue Arrangements with Multiple
Deliverables, or Issue 08-1, which will update ASC 605, Revenue Recognition, and
changes the accounting for certain revenue arrangements. The new requirements
change the allocation methods used in determining how to account for multiple
payment streams and will result in the ability to separately account for more
deliverables, and potentially less revenue deferrals. Additionally, Issue 08-1
requires enhanced disclosures in financial statements. Issue 08-1 is effective
for revenue arrangements enter into or materially modified in fiscal years
beginning after June 15, 2010 on a prospective basis, with early
application permitted. We are currently evaluating the impact this Issue will
have on our financial statements.
  ITEM7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
  Not
applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC
Regulation
  ITEM
      8.
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
  The
financial statements required by Item 8 are submitted in a separate section of
this report, beginning on F-1, and are incorporated herein and made a part
hereof.
  ITEM
      9.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
  None.
  ITEM9A.
              CONTROLS
      AND PROCEDURES
  Evaluation
of Disclosure Controls and Procedures
  We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports that we file with the SEC
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and that such
information is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate, to allow for timely
decisions regarding required disclosure. As required by SEC Rule 15d-15(b), we
carried out an evaluation, under the supervision and with the participation of
our management, including our principal executive and financial officers, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.  Based
on the foregoing, our principal executive and financial officers concluded that
our disclosure controls and procedures are effective to ensure the information
required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed and reported within the time periods specified in the
SEC’s rules and forms.
  38
  Management’s
Annual Report on Internal Control Over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Rule 15d-15(f) under the
Exchange Act, and for assessing the effectiveness of internal control over
financial reporting.
  Internal
control over financial reporting is intended to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.  Internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets, (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted
in the United States and that our receipts and expenditures are being made only
in accordance with authorizations of our management and directors, and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisitions, use, or disposition of our assets that could have a
material effect on our financial statements.
  Management,
with the participation of our principal executive and financial officers,
conducted an evaluation of the effectiveness of our internal control over
financial reporting, as of December 31, 2009, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).    Based on
that evaluation, management concluded that, as of December 31, 2009, our
internal control over financial reporting was effective.
  This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this annual
report.
  Changes
in Internal Control Over Financial Reporting
  There was
no change in our internal control over financial reporting during the most
recent fiscal quarter that materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
  ITEM9B.
              OTHER
      INFORMATION
  None.
  PART
III
  ITEM
      10.
              DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
  Executive Officers and
Directors.  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.
  Our chief
executive officer serves pursuant to an employment agreement which was extended
to March 14, 2011, and will automatically be extended for successive one-year
periods if not cancelled by either party.  See “Item 10, Executive
Compensation – Employment Agreements.”
  The
following table sets forth information regarding our executive officers and
directors.
  Name
                      
                      Position
      Held
                      
                      Age
                      
                      Date
      First AppointedPatrick
      E. Bertagna
                      
                      President,
      Chief Executive Officer and Chairman of the Board
                      
                      46
                      
                      March
      14, 2008Murray
      Williams
                      
                      Chief
      Financial Officer, Treasurer and Secretary
                      
                      39
                      
                      March
      14, 2008Christopher
      M. Walsh
                      
                      Chief
      Operating Officer
                      
                      60
                      
                      March
      14, 2008Patrick
      Aroff
                      
                      Director
                      
                      47
                      
                      March
      14, 2008Louis
      Rosenbaum
                      
                      Director
                      
                      59
                      
                      March
      14, 2008Jeffrey
      Sharpe
                      
                      Director
                      
                      38
                      
                      April
      7, 2006
  39
  Biographical
Information
  The
following describes the backgrounds of current executive officers and
directors.  Our Board of Directors has determined that all of our
directors other than Mr. Bertagna are independent directors as defined in the
Nasdaq rules governing members of boards of directors.  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.
  Mr.
Bertagna is the sole director and the Chief Executive Officer of GTX California,
LOCiMOBILE, Inc. and Code Amber News Service, Inc., and Mr. Williams is the
Chief Financial Officer of each of those subsidiaries.
  Patrick
E. Bertagna – Chief Executive Officer, President and Chairman of the
Board
  Mr.
Bertagna was the founder of GTX California in September 2002 and has since
served as its Chief Executive Officer, President and Chairman of the Board of
Directors of GTX.  He is co-inventor of the company’s patented GPS
footwear technology.  His career spans over 28 years in building
companies in both technology and consumer branded products.
  Mr.
Bertagna began his career in consumer products importing apparel from Europe and
later went on to import and manufacture apparel, accessories and footwear in
over 20 countries. In 1993, Mr. Bertagna transitioned into technology and
founded Barcode World, Inc. a supply chain software company, enabling accurate
tracking of consumer products from design to retail. In June 2002 after selling
this company, Mr. Bertagna combined his two past careers in consumer products
and tracking technology and founded GTX.
  Mr.
Bertagna was born in the South of France and is fluent in French and Spanish,
has formed alliances with Fortune 500 companies such as IBM, AT&T, Sports
Authority, Federated Stores, Netscape and GE. He has been a keynote speaker and
has been awarded several patents.
  Murray
Williams - Chief Financial Officer, Treasurer and Secretary
  Mr.
Williams became the Company’s Chief Financial Officer, Treasurer and Secretary
on March 14, 2008.  Mr. Williams’ finance career spans over 17
years.  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 and investor in numerous 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 managed a team of over 20 professionals
specializing in financial services with an emphasis on public offerings, private
financings and mergers/acquisitions. 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.
  40
  Christopher
M. Walsh - Chief Operating Officer
  Mr. Walsh
joined this company as its Chief
Operating Officer in March 2008.  Mr. Walshbegan 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, and also played a critical role on the Reebok Pump
Task Force directing the manufacturing initiatives associated with the unique
components of the Pump system. After Reebok, Mr. Walsh moved to LA Gear in 1992
and, as Chief Operating Officer, became a critical figure in the turnaround team
assembled by LA Gear and was responsible for all research and development,
design, manufacturing, sourcing, quality control, distribution and
logistics.
  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 an extensive client base, both domestic and international, within
the footwear, apparel, textile, sporting goods and action sports industries.
Since January 2005, he has served as an advisor to GTX California spearheading
their 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 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 successful clothing
manufacturer that produced a line of upscale women’s clothing in Hong Kong,
China, Korea and Italy, from 1978 to 1987.
  41
  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 six 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.
  Director Qualifications and Diversity
  Our Board
of Directors has not adopted a formal policy with regard to the consideration of
diversity when evaluating candidates for election to the
Board.  However, our Board believes that membership should reflect
diversity in its broadest sense, but should not be chosen nor excluded based on
race, color, gender, national origin or sexual orientation.  In this
context, the Board does consider a candidate’s experience, education, industry
knowledge, history with the Company, and differences of viewpoint when
evaluating his or her qualifications for election to the
Board.  Whenever our Board evaluates a potential candidate, the Board
considers that individual in the context of the composition of the Board as a
whole.
  The
standards that our Board considers in selecting candidates (although candidates
need not possess all of the following characteristics, and not all factors are
weighted equally) include the director’s or nominee’s, Industry knowledge and
contacts in industries served by the Company, independent judgment, ability to
broadly represent the interests of all stockholders and other constituencies,
maturity and experience in policy making decisions, business skills, background
and relevant expertise that are useful to the company and its future needs, and
other factors determined to be relevant by the Board.
  Family
Relationships
  There are
no family relationships among the Company’s directors, executive officers, or
persons nominated or chosen by the Company to become directors or executive
officers.
  Code
of Business Conduct and Ethics.
  We have
adopted a Code of Business Conduct and Ethics (the “Code”) that applies to our
directors, officers and employees, including our principal executive officer and
principal financial and accounting officer.    A copy of our
code of ethics will be furnished without charge to any person upon written
request.  Requests should be sent to:  Secretary, GTX Corp,
117 W. 9th Street, #1214 Los Angeles, California 90015.
  Compliance
with Section 16(a) of the Exchange Act.
  Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who own more than 10% of a registered class of the
company’s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission
(“SEC”).  Executive officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the company with copies
of all Section 16(a) forms they file.
  Based
solely on its review of the copies of reporting forms received by the company,
the company believes that the following Forms 3 and 4 were filed later than is
required under Section 16(a) of the Securities Exchange Act of
1934:
  ·
              Multi-Media
      Technology Ventures, Ltd was late in filing twenty six Form 4s in
      connection with its sale of 332,362 shares of our common stock from March
      31, 2009 through December 9, 2009.  Multi-Media Technology
      Ventures, Ltd filed a Form 5 disclosing these sales with the SEC on
      February 26, 2010;
 ·
              Patrick
      Aroff was late in filing six Form 4s in connection with his sales of our
      common stock on August 20, 2009 (50,000 shares), August 26, 2009 (10,000)
      shares, September 1, 2009 (15,000 shares),  September 9, 2009
      (30,000 shares), September 11, 2009 (20,000 shares), September 15, 2009
      (75,000 shares).  A Form 4 for these sales was filed with the
      SEC on November 18, 2009.
  42
 
 ITEM
      11.
              EXECUTIVE
      COMPENSATION
  Summary Compensation
Table.  The following table sets forth the compensation for the
fiscal years ended December 31, 2009 and December 31, 2008 for services rendered
to us (including our subsidiary, GTX California) by all persons who served as
our Chief Executive Officer and our Chief Financial Officer during 2009, and our
two most highly compensated executive officers other than our Chief Executive
Officer and Chief Financial Officer (collectively, 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 following officers of GTX Corp in 2008 and 2009 by either
GTX Corp or GTX California.
  Summary
Compensation Table
  Name and
                                          Principal
                                          Position
                                        
                                        Fiscal
                                          Year
                                          Ended
                                          12/31
                                        
                                        Salary
                                          ($)
                                        
                                        Bonus
                                          ($)
                                        
                                        Stock Awards
                                          ($)(7)
                                        
                                        Option
                                          Awards
                                          ($)(8)
                                        
                                        All Other
                                          Compensation
                                          ($)
                                        
                                        
                                        Total
                                          ($)PatrickBertagna(1)
                                        
                                        2009
                                        
                                        
                                        135,000
                                        
                                        
                                        –
                                        
                                        
                                        11,025
                                        (4)
                                        
                                        4,988
                                        (4)
                                        
                                        –
                                        
                                        
                                        
                                        151,0132008
                                        
                                        
                                        118,750
                                        
                                        
                                        –
                                        
                                        
                                        152,975
                                        (4)
                                        
                                        310,441
                                        (4)
                                        
                                        –
                                        
                                        
                                        
                                        582,166Murray
      Williams(2)
                                        
                                        2009
                                        
                                        
                                        135,000
                                        
                                        
                                        –
                                        
                                        
                                        4,725
                                        (5)
                                        
                                        4,988
                                        (5)
                                        
                                        –
                                        
                                        
                                        
                                        144,7132008
                                        
                                        
                                        118,750
                                        
                                        
                                        –
                                        
                                        
                                        152,975
                                        (5)
                                        
                                        259,157
                                        (5)
                                        
                                        –
                                        
                                        
                                        
                                        530,882Christopher
      Walsh(3)
                                        
                                        2009
                                        
                                        
                                        108,000
                                        
                                        
                                        –
                                        
                                        
                                        4,725
                                        (6)
                                        
                                        4,988
                                        (6)
                                        
                                        –
                                        
                                        
                                        
                                        117,7132008
                                        
                                        
                                        95,000
                                        
                                        
                                        –
                                        
                                        
                                        37,975
                                        (6)
                                        
                                        259,157
                                        (6)
                                        
                                        –
                                        
                                        
                                        
                                        392,132
 
 (1)
              Patrick
      Bertagna became our Chief Executive Officer and Chairman of the Board upon
      the closing of the Exchange Transaction on March 14,
  2008.
 
 (2)
              Chief
      Financial Officer and Secretary since the closing of the Exchange
      Transaction on March 14, 2008.
 
 (3)
              Chief
      Operating Officer since the closing of the Exchange Transaction on March
      14, 2008.
 
 (4)
              175,000
      shares of common stock valued at $0.063 per share were granted on February
      19, 2009.  Options for 54,000 shares were granted on November
      17, 2009 with a strike price of $0.18; options for 4,500 shares vest
      monthly beginning January 1, 2010 through December 1,
      2010.  150,000 shares and 900,000 option shares were granted on
      March 16, 2008 with a strike price of $0.75; options for 300,000 of the
      foregoing 900,000 shares 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 options for 25,000 shares were granted
      on December 5, 2008 with a strike price of $0.19 as a holiday bonus; the
      options for 25,000 shares vested immediately.  As a bonus for
      the successful completion of over one million dollars of Additional
      Financing, 40,000 shares of our common stock valued at $1.00 per share
      were granted on May 12, 2008.
 
 (5)
              75,000
      shares of common stock valued at $0.063 per share were granted on February
      19, 2009.  Options for 54,000 shares were granted on November
      17, 2009 with a strike price of $0.18; options for 4,500 shares vest
      monthly beginning January 1, 2010 through December 1,
      2010.  150,000 shares and options for 750,000 shares were
      granted on March 16, 2008 with a strike price of $0.75;  options
      for 250,000 of the foregoing shares 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 options for 25,000 shares were granted
      on December 5, 2008 with a strike price of $0.19 as a holiday bonus; the
      25,000 options vested immediately.  As a bonus for the
      successful completion of over one million dollars of Additional Financing,
      40,000 shares of our common stock were granted on May 12,
      2008.
 
 (6)
              75,000
      shares of common stock valued at $0.063 per share were granted on February
      19, 2009.  Options for 54,000 shares were granted on November
      17, 2009 with a strike price of $0.18; options for 4,500 shares vest
      monthly beginning January 1, 2010 through December 1, 2010. 50,000 shares
      and options for 750,000 shares were granted on March 16, 2008 with a
      strike price of $0.75; 250,000 of the foregoing options shares vested on
      March 16, 2009 and the remaining 500,000 shares vest monthly thereafter at
      a rate of 20,833 per month.  2,500 shares and options for 25,000
      shares were granted on December 5, 2008 with a strike price of $0.19 as a
      holiday bonus; the 25,000 option shares vested
  immediately.
  43
 
 (7)
              The
      values shown in this column represent the aggregate grant date fair value
      of stock awards granted during the fiscal year, in accordance with FASB
      ASC Topic 718.  For additional information on the valuation
      assumptions with respect to the stock awards, refer to Notes 2 and 7 of
      our financial statements in this Annual
Report.
 
 (8)
              The
      values shown in this column represent the aggregate grant date fair value
      of equity-based awards granted during the fiscal year, in accordance with
      FASB ASC Topic 718.  For additional information on the valuation
      assumptions with respect to the option grants, refer to Notes 2 and 7 of
      our financial statements in this Annual Report. These amounts reflect our
      accounting expense for these awards, which is being expensed over the
      three-year vesting period of the 2008 option awards and over the one-year
      vesting period of the 2009 option awards, and do not correspond to the
      actual value that may be recognized by the named executive from these
      awards.
 
 Outstanding
Equity Awards
  The
following table sets forth information as of December 31, 2009 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
                                                                        ($)PatrickBertagna
                                                                      
                                                                      
                                                                      25,000
                                                                      (3)
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .19/share
                                                                      
                                                                      12/5/2011
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —437,497
                                                                      (1)
                                                                      
                                                                      312,503
                                                                      (1)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .75/share
                                                                      
                                                                      2012-2014
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —87,503
                                                                      (2)
                                                                      
                                                                      62,497
                                                                      (2)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .75/share
                                                                      
                                                                      2012-2014
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      ——
                                                                      
                                                                      
                                                                      54,000
                                                                      (4)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .18/share
                                                                      
                                                                      2013
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —Murray
      Williams
                                                                      
                                                                      
                                                                      25,000
                                                                      (3)
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .19/share
                                                                      
                                                                      12/5/2011
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —437,497
                                                                      (1)
                                                                      
                                                                      312,503
                                                                      (1)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .75/share
                                                                      
                                                                      2012-2014
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      ——
                                                                      
                                                                      
                                                                      54,000
                                                                      (4)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .18/share
                                                                      
                                                                      2013
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —Christopher
      Walsh
                                                                      
                                                                      
                                                                      25,000
                                                                      (3)
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .19/share
                                                                      
                                                                      12/5/2011
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —437,497
                                                                      (1)
                                                                      
                                                                      312,503
                                                                      (1)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .75/share
                                                                      
                                                                      2012-2014
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      ——
                                                                      
                                                                      
                                                                      54,000
                                                                      (4)
                                                                      
                                                                      —
                                                                      
                                                                      $
                                                                      .18/share
                                                                      
                                                                      2013
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
                                                                      
                                                                      
                                                                      —
 
 (1)
              Each
      officer holds an option to purchase up to 750,000 shares of common stock
      at $0.75 per share.  Options to purchase 250,000 shares vested
      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
      his services as a member of the board of directors, Patrick Bertagna 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 vested 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.
  44
 
 (3)
              On
      December 5, 2008, each 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.  The
      options expire on the third anniversary of the vesting
    date.
 
 (4)
              On
      November 17, 2009, each officer received an option to purchase up to
      54,000 shares of common stock at $0.18 per share.  The 54,000
      options vest at a rate of 4,500 each month for the 12 months beginning on
      January 1, 2010.  The options expire on the third anniversary of
      the vesting date.
  Long-Term
Incentive Plans
  There are
no arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers.
  Director
Compensation
  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 year
ended December 31, 2009.  The compensation of Mr. Bertagna, who
serves as a director and as our Chief Executive Officer, is described above in
the Summary Compensation Table.
  DIRECTOR
COMPENSATION
  Name
                                
                                Fees
                                    Earned
                                    or Paid
                                    in Cash
                                    ($)(1)
                                
                                Stock
                                    Awards
                                    ($)
                                
                                Option
                                    Awards
                                    ($)(2)
                                
                                Non-Equity
                                    Incentive Plan
                                    Compensation
                                    ($)
                                
                                Change in
                                    Pension Value
                                    and
                                    Nonqualified
                                    Deferred
                                    Compensation
                                    Earnings
                                
                                All Other
                                    Compensation
                                    ($)
                                
                                Total
                                    ($)Patrick
      Aroff(4)
                                
                                
                                24,000
                                
                                
                                3,150
                                
                                
                                2,771
                                (3)
                                
                                N/A
                                
                                
                                N/A
                                
                                
                                N/A
                                
                                
                                29,921Louis
      Rosenbaum(5)
                                
                                
                                24,000
                                
                                
                                3,150
                                
                                
                                2,771
                                (3)
                                
                                N/A
                                
                                
                                N/A
                                
                                
                                N/A
                                
                                
                                29,921Jeffrey
      Sharpe(6)
                                
                                
                                -0-
                                
                                
                                3,150
                                
                                
                                2,771
                                (3)
                                
                                N/A
                                
                                
                                N/A
                                
                                
                                N/A
                                
                                
                                5,921
 
 (1)
              Reflects
      cash compensation earned for special services rendered to the
      company.
 
 (2)
              This
      column represents the aggregate grant date fair value of options awarded
      computed in accordance with FASB ASC Topic 718, excluding the effect of
      estimated forfeitures related to service-based vesting
      conditions.  For additional information on the valuation
      assumptions with respect to the option grants, refer to Notes 2 and 7 of
      our financial statements in this Annual Report.  These amounts
      do not correspond to the actual value that will be recognized by the named
      directors from these awards.
  (3)
              Represents
      the total grant date fair value of options to purchase 30,000 shares of
      common stock granted to this director on November 17,
      2009.  These amounts reflect our accounting expense for these
      awards, which is being amortized over the twelve-month vesting period of
      the option award, and do not correspond to the actual value that may be
      recognized from these awards by the named
  Directors.
  45
  (4)
              Mr.
      Aroff had 266,973 shares of common stock and 190,000 options outstanding
      as of December 31, 2009.
  (5)
              Mr.
      Rosenbaum had 2,020,165 shares of common stock and 190,000 options
      outstanding as of December 31,
2009.
  (6)
              Mr.
      Sharpe had 50,000 shares of common stock and 190,000 options outstanding
      as of December 31, 2009.
  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 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.  Neither
party provided such notice thus the agreement will automatically extend through
March 13, 2011.  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.  Neither party provided such notice thus the agreement will
automatically extend through March 13, 2011.  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.
  46
  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 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.  Neither party provided
such notice thus the agreement will automatically extend through March 13,
2011.  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
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.
  2008
Equity Compensation Plan
  We have
adopted an equity incentive plan, the 2008 Equity Compensation Plan (the “2008
Plan”), pursuant to which we are authorized to grant options, restricted stock,
unrestricted stock, and stock appreciation rights to purchase up to 7,000,000
shares of common stock to our employees (as such term is defined in the 2008
Plan), officers, directors and consultants.  Awards under the 2008
Plan may consist of stock options (both non-qualified options and options
intended to qualify as “Incentive Stock Options” under Section 422 of the
Internal Revenue Code of 1986, as amended), restricted and unrestricted stock
awards and stock appreciation rights.
  The 2008
Plan is administered by our Board of Directors or a committee appointed by the
Board (the “Committee”).  If appointed by the Board, the committee
would consist of at least two members of the Board whose members shall, from
time to time, be appointed by the Board. The Committee has the authority to
interpret the 2008 Plan, to prescribe, amend, and rescind rules and regulations
relating to it, to determine the persons to whom awards will be granted, the
type of award to be granted, the number of awards to be granted, and the terms
and provisions of stock options granted pursuant to the 2008 Plan, including the
vesting thereof, subject to the provisions of the 2008 Plan, and to make all
other determinations necessary or advisable for the administration of the 2008
Plan.
  The 2008
Plan provides that the purchase price of each share of common stock subject to
an incentive stock option may not be less than 100% of the fair market value (as
such term is defined in the 2008 Plan) of a share of our common stock on the
date of grant (or not less than 110% of the fair market value in the case of a
grantee holding more than 10% of our outstanding common stock).  The
aggregate fair market value (determined at the time the option is granted) of
the common stock with respect to which incentive stock options are exercisable
for the first time by the employee during any calendar year (under all such
plans of the grantee’s employer corporation and its parent and subsidiary
corporation) shall not exceed $100,000.  No incentive stock option
shall be exercisable later than the tenth anniversary of its grant; provided,
however, that an incentive stock option granted to an employee holding more than
10% of our outstanding common stock shall not be exercisable later than the
fifth anniversary of its grant.
  47
  The
Committee shall determine the purchase price of each share of common stock
subject to a non-qualified stock option.  Such purchase price,
however, shall not be less than 100% of the fair market value of the common
stock on the date of grant.  No non-qualified stock option shall be
exercisable later than the tenth anniversary of its grant.
  The plan
also permits the grant of stock appreciation rights in connection with the grant
of an incentive stock option or a non-qualified stock option, or unexercised
portion thereof held by the grantee.  The grant price of a stock
appreciation right shall be at least at the fair market value of a share on the
date of grant of the stock appreciation right, and be subject to such terms and
conditions, not inconsistent with the provisions of the 2008 Plan, as shall be
determined by the Committee.  Each stock appreciation right may
include limitations as to the time when such stock appreciation right becomes
exercisable and when it ceases to be exercisable, which may be more restrictive
than the limitations on the exercise of the stock option to which it
relates.  No stock appreciation right shall be exercisable with
respect to such related stock option or portion thereof unless such stock option
or portion shall itself be exercisable at that time.  A stock
appreciation right shall be exercised only upon surrender of the related stock
option or portion thereof in respect of which the stock appreciation right is
then being exercised.  Upon the exercise of a stock appreciation
right, a grantee shall be entitled to receive an amount equal to the product of
(i) the amount by which the fair market value of a share of common stock on the
date of exercise of the stock appreciation right exceeds the option price per
share specified in the related incentive or non-qualified stock option and (ii)
the number of shares of common stock in respect of which the stock appreciation
right shall have been exercised.  Further, a stock appreciation right
shall be exercisable during the grantee’s lifetime only by the
grantee.
  The 2008
Plan also provides us with the ability to grant shares of common stock that are
subject to certain transferability, forfeiture or other
restrictions.  The recipient of restricted stock grants, the type of
restriction, the number of shares of restricted stock granted and other such
provisions shall be determined by the Committee.  The Board, in good
faith and in its sole discretion, shall determine the fair market value with
regards to awards of restricted stock.
  The 2008
Plan also provides us with the ability to grant shares of unrestricted
stock.  The Committee shall determine and designate from time to time
those persons who are to be granted unrestricted stock and number of shares of
common stock subject to such grant.  The Board, in good faith and in
its sole discretion, shall determine the fair market value with regards to
awards of unrestricted stock.  The grantee shall hold common stock
issued pursuant to an unrestricted stock award free and clear of all
restrictions, except as otherwise provided in the 2008 Plan.
  Unless
otherwise determined by the Committee, awards granted under the 2008 Plan are
not transferable other than by will or by the laws of descent and
distribution.
  The 2008
Plan provides that in the event of a merger or change of control, the Committee
may substitute stock options, stock awards and stock appreciation rights of the
acquired company.  Alternatively, the Committee may provide that the
stock options, stock awards and stock appreciation rights shall terminate
following notice by the Committee.
  The Board
may, at any time, alter, amend, suspend, discontinue, or terminate the 2008
Plan; provided, however, that such action shall not adversely affect the right
of grantees to stock awards or stock options previously granted and no
amendment, without the approval of the stockholders of the Corporation, shall
increase the maximum number of shares which may be awarded under the 2008 Plan
in the aggregate, materially increase the benefits accruing to grantees under
the 2008 Plan, change the class of employees eligible to receive options under
the 2008 Plan, or materially modify the eligibility requirements for
participation in the 2008 Plan.
  48
  ITEM
      12.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
  The
following table sets forth certain information as of March 30, 2010, regarding
the beneficial ownership of our common stock by (i) each stockholder known by us
to be the beneficial owner of more than five percent of our common stock, (ii)
by each of our executive officers named in the Summary Compensation Table and
our directors and (iii) by all of our executive officers and directors as a
group.  Each of the persons named in the table has sole voting and
investment power with respect to common stock beneficially
owned.  Unless otherwise noted in the table, the address for each of
the persons identified is 117 W 9th Street;
Suite 1214, Los Angeles, CA  90015.  Beneficial ownership is
calculated based upon 40,480,699 shares of common stock issued and outstanding
as of March 30, 2010.
  Name and Address
                              of Beneficial Owner
                            
                            Amount and Nature
                              of Beneficial Ownership(1)
                            
                            Percent
                              of Common StockPatrick
      E. Bertagna(2)
                              CEO
      and Chairman of the Board
                            
                            4,232,628
      shares
                            
                            
                            10.27
                            %Murray
      Williams(3)
                              Chief
      Financial Officer/Secretary
                            
                            826,662shares
                            
                            
                            2.01
                            %Christopher
      Walsh(4)
                              Chief
      Operating Officer,
                            
                            1,005,998
      shares
                            
                            
                            2.45
                            %Louis
      Rosenbaum(5)
                              Director
                            
                            2,198,503
      shares
                            
                            
                            5.41
                            %Patrick
      Aroff(6)
                              Director
                            
                            435,311
      shares
                            
                            
                            1.07
                            %Jeffrey
      Sharpe(7)
                              Director
                            
                            180,838
      shares
                            
                            
                            0.45
                            %All
      directors and named executive officers as a group (6
    persons)
                            
                            8,879,940
      shares
                            
                            
                            21.55
                            %Other
      5% Stockholders:Ron
      Paxson (8)
                              30872
      S. Coast Hwy. #191
                              Laguna
      Beach, CA  92651
                            
                            4,109,590
      shares
                            
                            
                            10.10
                            %
  
 (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.
  49
  (2)
              The
      4,232,628 shares beneficially owned include 3,515,128 shares and 717,500
      stock options, of which: 600,000 have vested as of March 30, 2010 with an
      exercise price of $0.75 per share, 13,500 have vested as of March 30, 2010
      with an exercise price of $0.18 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, 9,000 will vest within 60
      days with an exercise price of $0.18 per share and 20,000 will vest within
      60 days with an exercise price of $0.17 per
  share.
 (3)
              The
      826,662 shares beneficially owned include 217,500 shares and 609,162 stock
      options, of which: 499,996 have vested as of March 30, 2010 with an
      exercise price of $0.75 per share, 13,500 have vested as of March 30, 2010
      with an exercise price of $0.18 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, 9,000 will vest within 60
      days with an exercise price of $0.18 per share and 20,000 will vest within
      60 days with an exercise price of $0.17 per share.
 (4)
              The
      1,005,998 shares beneficially owned include 396,836 shares and 609,162
      stock options, of which: 499,996 have vested as of March 30, 2010 with an
      exercise price of $0.75 per share, 13,500 have vested as of March 30, 2010
      with an exercise price of $0.18 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, 9,000 will vest within 60
      days with an exercise price of $0.18 per share, and 20,000 will vest
      within 60 days with an exercise price of $0.17 per
  share.
 
 (5)
              The
      2,198,503 shares beneficially owned include 2,045,165 shares and 153,338
      stock options, of which: 100,004 have vested as of March 30, 2010 with an
      exercise price of $0.75 per share, 7,500 have vested as of March 30, 2010
      with an exercise price of $0.18 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, 5,000 will vest within 60
      days with an exercise price of $0.18, 10,000 will vest within 60 days with
      an exercise price of $0.16 per share and 12,500 will vest within 60 days
      with an exercise price of $0.17 per
share.
 
 (6)
              The
      435,311 shares beneficially owned include 291,973 shares and 143,338 stock
      options, of which: 100,004 have vested as of March 30, 2010 with a strike
      price of $0.75 per share, 7,500 have vested as of March 30, 2010 with an
      exercise price of $0.18 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, 5,000 will vest within 60 days with
      an exercise price of $0.18 and 12,500 will vest within 60 days with an
      exercise price of $0.17 per share.
 
 (7)
              The
      180,838 shares beneficially owned include 50,000 shares and 130,838 stock
      options, of which: 100,004 have vested as of March 30, 2010 with an
      exercise price of $0.75 per share, 7,500 have vested as of March 30, 2010
      with an exercise price of $0.18 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 5,000 will vest within
      60 days with an exercise price of
$0.18
 
 (8)
              The
      4,109,590 shares beneficially owned include 3,321,774 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.
 
 Changes in
Control.  We are not aware of any arrangements which may result
in “changes in control” as that term is defined by the provisions of Item 403 of
Regulation S-B.
  ITEM
      13.
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
  Director
Independence.  Three of our four directors are independent
within the definition of “independence” as defined in the Nasdaq rules governing
members of boards of directors.
  Related Party
Transactions.  There have been no related party transactions,
or any other transactions or relationships required to be disclosed pursuant to
Item 404 of Securities and Exchange Commission Regulation S-K.
  50
  With
regard to any future related party transaction, we plan to fully disclose any
and all related party transactions in the following manner:
  ·
              disclosing
      such transactions in reports where
required;
  ·
              disclosing
      in any and all filings with the SEC, where
  required;
  ·
              obtaining
      disinterested directors consent;
and
  ·
              obtaining
      stockholder consent where required.
  ITEM
      14.
              PRINCIPAL
      ACCOUNTING FEES AND SERVICES.
  The Audit
Committee has appointed LBB & Associates Ltd., LLP as our independent
registered public accounting firm.  The following table shows the fees
that were paid or accrued by us for audit and other services provided by LBB
& Associates Ltd., LLP
  2009
                    
                    
                    2008Audit
      Fees (1)
                    
                    $
                    73,000
                    
                    
                    $
                    66,000Audit-Related
      Fees (2)
                    
                    
                    1,000
                    
                    
                    
                    600Tax
      Fees (3)
                    
                    
                    -
                    
                    
                    
                    -All
      Other Fees
                    
                    
                    -
                    
                    
                    
                    -Total
                    
                    $
                    73,000
                    
                    
                    $
                    66,600
 
 (1)
              Audit
      fees represent fees for professional services provided in connection with
      the audit of our annual financial statements and the review of our
      quarterly financial statements and those services normally provided in
      connection with statutory or regulatory filings or engagements including
      comfort letters, consents and other services related to SEC
      matters.  This information is presented as of the latest
      practicable date for this annual
report.
 (2)
              Audit-related
      fees represent fees for assurance and related services that are reasonably
      related to the performance of the audit or review of our financial
      statements and not reported above under “Audit Fees.” This category
      primarily includes services relating to accounting-related
      consulting.
 (3)
              LBB
      & Associates Ltd., LLP does not provide us with tax compliance, tax
      advice or tax planning services.
 
 All audit
related services, tax services and other services rendered by LBB &
Associates Ltd., LLP  were pre-approved by our Board of Directors or
Audit Committee.  The Audit Committee has adopted a pre-approval
policy that provides for the pre-approval of all services performed for us by
LBB & Associates Ltd., LLP   The policy authorizes the Audit
Committee to delegate to one or more of its members pre-approval authority with
respect to permitted services.  Pursuant to this policy, the Board
delegated such authority to the Chairman of the Audit
Committee.
  51
  PART
IV
  ITEM
      15.
              EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
  EXHIBIT
INDEX
  The
Company’s financial statements and related notes thereto are listed and included
in this Annual Report beginning on page F-1.   The following
exhibits are filed with, or are incorporated by reference into, this Annual
Report.
  Exhibit
                      Number
                    
                    Description2.1
                    
                    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)3.2
                    
                    Amended
      and Restated Bylaws of the Registrant(3)10.1
                    
                    Amended
      Lease Agreement between Bar Code World Inc. and  Patrick E.
      Bertagna, on the one hand, and Anjac Fashion Buildings dated January 22,
      2010*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
      Modification Agreement between Global Trek Xploration and the Mock Family
      Limited Partnership dated December 14, 2009*10.11
                    
                    Investment
      Banking Advisory Agreement between Meyers Resources LP and GTX Corp dated
      May 6, 2008(4)10.12
                    
                    Investment
      Agreement by and between GTX Corp and Dutchess Equity Fund, LP dated
      November 16, 2009(6)10.13
                    
                    Registration
      Rights Agreement by and between GTX Corp and Dutchess Equity Fund, LP
      dated November 16, 2009(6)10.14
                    
                    Amendment,
      dated March 11, 2010 to Investment Agreement by and between GTX Corp and
      Dutchess Equity Fund, LP dated November 16, 2009(7)14.1
                    
                    Code
      of Business Conduct and Ethics(3)17.1
                    
                    Resignation
      letter of Jeffrey Sharpe dated March 14, 2008(3)21.1
                    
                    Subsidiaries(5)23.1
                    
                    Consent
      of LBB & Associates Ltd., LLP*31.1
                    
                    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act*31.2
                    
                    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act*32.1
                    
                    Certification
      Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002*
  
 *
      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)
              Incorporated
      by reference to the Registrant’s Registration Statement on Form S-1 dated
      May 12, 2008.
 (5)
              Incorporated
      by reference to the Registrant’s Annual Report on Form 10-K dated March
      20, 2009.
 (6)
              Incorporated
      by reference to the Registrant’s Current Report on Form 8K dated November
      18, 2009.
 (7)
              Incorporated
      by reference to the Registrant’s Current Report on Form 8K dated March 17,
      2010.
  52
  Signatures
  In
accordance with Section 13 or 15(d) of the Exchange Act, the company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  GTX
      Corp
                  (Registrant)Date:
      March 30, 2010
                By:
                /s/ Patrick E. BertagnaPatrick E BertagnaChief Executive Officer
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
  Name
                      
                      Title
                      
                      Date/s/ Patrick E. Bertagna
                      
                      Chief
      Executive Officer and Director (Principal Executive
    Officer)
                      
                      March
      30, 2010/s/ Murray Williams
                      
                      Chief
      Financial Officer, Treasurer, Secretary (Principal
    Accounting
                      
                      March
      30,2010Officer)/s/ Jeffrey Sharpe
                      
                      Director
                      
                      March
      30, 2010/s/ Patrick Aroff
                      
                      Director
                      
                      March
      30, 2010/s/ Louis Rosenbaum
                      
                      Director
                      
                      March
      30,
2010
  53
  Report of Independent
Registered Public Accounting Firm
 
 To the
Board of Directors of
 GTX
Corp
 Los
Angeles, CA
 
 We have
audited the accompanying consolidated balance sheets of GTX Corp (the “Company”)
as of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the two
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, 2009 and 2008, and the results of its operations and its cash flows
for each of the two years then ended in conformity with accounting principles
generally accepted in the United States of America.
  
 LBB &
Associates Ltd., LLP
 
 Houston,
Texas
 March 30,
2010
  F-1
  GTX
CORP AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 
 December 31,2009
                          
                          
                          2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          $
                          454,667
                          
                          
                          $
                          706,873Certificates
      of deposit
                          
                          
                          -
                          
                          
                          
                          1,500,000Accounts
      receivable, net
                          
                          
                          5,206
                          
                          
                          
                          36,630Inventory,
      net
                          
                          
                          1,482
                          
                          
                          
                          36,862Other
      current assets
                          
                          
                          34,049
                          
                          
                          
                          29,408Total
      current assets
                          
                          
                          495,404
                          
                          
                          
                          2,309,773Property
      and equipment, net
                          
                          
                          253,100
                          
                          
                          
                          151,220Other
      assets
                          
                          
                          10,459
                          
                          
                          
                          19,745Total
      assets
                          
                          $
                          758,963
                          
                          
                          $
                          2,480,738LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                          
                          $
                          279,152
                          
                          
                          $
                          319,961Total
      current liabilities
                          
                          
                          279,152
                          
                          
                          
                          319,961Total
      liabilities
                          
                          
                          279,152
                          
                          
                          
                          319,961Commitments
      and contingenciesStockholders’
      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;39,466,540
      and 38,680,540 shares issued and outstanding atDecember
      31, 2009 and 2008, respectively
                          
                          
                          39,466
                          
                          
                          
                          38,680Additional
      paid-in capital
                          
                          
                          10,007,669
                          
                          
                          
                          9,564,024Accumulated
      deficit
                          
                          
                          (9,567,324
                          )
                          
                          
                          (7,441,927
                          )Total
      stockholders’ equity
                          
                          
                          479,811
                          
                          
                          
                          2,160,777Total
      liabilities and stockholders’ equity
                          
                          $
                          758,963
                          
                          
                          $
                          2,480,738
 
 See
accompanying notes to consolidated financial statements
 
 F-2
  GTX
CORP AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
  Years Ended December 31,2009
                    
                    
                    2008Revenues
                    
                    $
                    253,020
                    
                    
                    $
                    424,166Cost
      of goods sold
                    
                    
                    171,018
                    
                    
                    
                    334,482Gross
      margin
                    
                    
                    82,002
                    
                    
                    
                    89,684Operating
      expensesWages
      and benefits
                    
                    
                    1,081,239
                    
                    
                    
                    1,520,706Professional
      fees
                    
                    
                    607,712
                    
                    
                    
                    1,184,069Research
      and development
                    
                    
                    106,711
                    
                    
                    
                    371,924General
      and administrative
                    
                    
                    449,299
                    
                    
                    
                    402,293Total
      operating expenses
                    
                    
                    2,244,961
                    
                    
                    
                    3,478,992Loss
      from operations
                    
                    
                    (2,162,959
                    )
                    
                    
                    (3,389,308
                    )Other
      income (expense)Interest
      income
                    
                    
                    37,562
                    
                    
                    
                    50,661Interest
      expense
                    
                    
                    -
                    
                    
                    
                    (62,636
                    )Net
      loss
                    
                    $
                    (2,125,397
                    )
                    
                    $
                    (3,401,283
                    )Weighted
      average number of commonshares
      outstanding - basic and diluted
                    
                    
                    39,255,200
                    
                    
                    
                    33,778,909Net
      loss per share - basic and diluted
                    
                    $
                    (0.05
                    )
                    
                    $
                    (0.10
                    )
 
 See
accompanying notes to consolidated financial statements
 
 F-3
  GTX CORP AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
  Common
      Stock
                              
                              
                              Additional
                              
                              
                              AccumulatedShares
                              
                              
                              Amount
                              
                              
                              Paid-In Capital
                              
                              
                              Deficit
                              
                              
                              TotalBalance,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
                              
                              
                              
                              -
                              
                              
                              
                              398,799Cashless
      issuance of common stock from exercise of stock warrants
                              
                              
                              1,165,879
                              
                              
                              
                              1,166
                              
                              
                              
                              202
                              
                              
                              
                              -
                              
                              
                              
                              1,368Issuance
      of common stock for payment of accounts payable
                              
                              
                              76,112
                              
                              
                              
                              76
                              
                              
                              
                              33,674
                              
                              
                              
                              -
                              
                              
                              
                              33,750Conversion
      of shareholder note payable and accrued interest into common
      stock
                              
                              
                              280,652
                              
                              
                              
                              281
                              
                              
                              
                              118,230
                              
                              
                              
                              -
                              
                              
                              
                              118,511Issuance
      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
                              
                              
                              
                              -
                              
                              
                              
                              1,030,750Issuance
      of common stock in conjunction with private placement
                              
                              
                              2,666,668
                              
                              
                              
                              2,667
                              
                              
                              
                              1,997,333
                              
                              
                              
                              -
                              
                              
                              
                              2,000,000Stock
      option compensation
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              341,992
                              
                              
                              
                              -
                              
                              
                              
                              341,992Issuance
      of common stock in conjunction with PIPE II, net
                              
                              
                              1,862,000
                              
                              
                              
                              1,862
                              
                              
                              
                              1,606,388
                              
                              
                              
                              -
                              
                              
                              
                              1,608,250Issuance
      of common stock for services
                              
                              
                              777,577
                              
                              
                              
                              777
                              
                              
                              
                              695,038
                              
                              
                              
                              -
                              
                              
                              
                              695,815Net
      loss
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (3,401,283
                              )
                              
                              
                              (3,401,283
                              )Balance,December
      31, 2008
                              
                              
                              38,680,540
                              
                              
                              
                              38,680
                              
                              
                              
                              9,564,024
                              
                              
                              
                              (7,441,927
                              )
                              
                              
                              2,160,777Issuance
      of common stock for services
                              
                              
                              771,000
                              
                              
                              
                              771
                              
                              
                              
                              53,679
                              
                              
                              
                              -
                              
                              
                              
                              54,450Issuance
      of common stock from exercise of stock options
                              
                              
                              15,000
                              
                              
                              
                              15
                              
                              
                              
                              885
                              
                              
                              
                              -
                              
                              
                              
                              900Stock
      option compensation
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              389,081
                              
                              
                              
                              -
                              
                              
                              
                              389,081Net
      loss
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              (2,125,397
                              )
                              
                              
                              (2,125,397
                              )Balance,December
      31, 2009
                              
                              
                              39,466,540
                              
                              
                              $
                              39,466
                              
                              
                              $
                              10,007,669
                              
                              
                              $
                              (9,567,324
                              )
                              
                              $
                              479,811
 
 See
accompanying notes to consolidated financial statements
 
 F-4
  GTX CORP AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
  Years Ended December 31,2009
                      
                      
                      2008Cash
      flows from operating activitiesNet
      loss
                      
                      $
                      (2,125,397
                      )
                      
                      $
                      (3,401,283
                      )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
                      
                      
                      102,970
                      
                      
                      
                      34,484Bad
      debt expense
                      
                      
                      84,284
                      
                      
                      
                      26,600Stock
      based compensation
                      
                      
                      443,531
                      
                      
                      
                      1,025,264Changes
      in operating assets and liabilitiesAccounts
      receivable
                      
                      
                      (52,860
                      )
                      
                      
                      (63,230
                      )Inventory
                      
                      
                      35,380
                      
                      
                      
                      (21,550
                      )Other
      current and non-current assets
                      
                      
                      4,645
                      
                      
                      
                      (36,611
                      )Accounts
      payable and accrued expenses
                      
                      
                      (40,809
                      )
                      
                      
                      74,107Net
      cash used in operating activities
                      
                      
                      (1,548,256
                      )
                      
                      
                      (2,362,219
                      )Cash
      flows from investing activitiesProceeds
      from certificates of deposit
                      
                      
                      1,500,000
                      
                      
                      
                      -Proceeds
      from disposal of property and equipment
                      
                      
                      2,612
                      
                      
                      
                      -Purchase
      of certificates of deposit
                      
                      
                      -
                      
                      
                      
                      (1,500,000
                      )Purchase
      of property and equipment
                      
                      
                      (207,462
                      )
                      
                      
                      (173,894
                      )Net
      cash provided by (used in) investing activities
                      
                      
                      1,295,150
                      
                      
                      
                      (1,673,894
                      )Cash
      flows from financing activitiesProceeds
      from issuance of common stock
                      
                      
                      -
                      
                      
                      
                      3,732,000Proceeds
      from exercise of stock options
                      
                      
                      900
                      
                      
                      
                      -Proceeds
      from issuance of common stock from exercise of stock
    warrants
                      
                      
                      -
                      
                      
                      
                      398,799Commissions
      paid in relation to May 2008 Financing
                      
                      
                      -
                      
                      
                      
                      (123,750
                      )Net
      cash provided by financing activities
                      
                      
                      900
                      
                      
                      
                      4,007,049Net
      decrease in cash and cash equivalents
                      
                      
                      (252,206
                      )
                      
                      
                      (29,064
                      )Cash
      and cash equivalents, beginning of period
                      
                      
                      706,873
                      
                      
                      
                      735,937Cash
      and cash equivalents, end of period
                      
                      $
                      454,667
                      
                      
                      $
                      706,873Supplemental
      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
                      
                      $
                      -
                      
                      
                      $
                      1,030,750Issuance
      of common stock for repayment of shareholder note payable and accrued
      interest
                      
                      $
                      -
                      
                      
                      $
                      118,511Issuance
      of common stock for repayment of accounts payable
                      
                      $
                      -
                      
                      
                      $
                      33,750Issuance
      of common stock for other asset
                      
                      $
                      -
                      
                      
                      $
                      37,625
 
 See
accompanying notes to consolidated financial statements
 
 F-5
  GTX
CORP
 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 Systems, (“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 (“GTX California”), acquired on March 14, 2008 in an
exchange transaction (hereafter referred to as the “Exchange Transaction”),
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.   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.  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.  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.
  F-6
 
 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.
 
 2.           SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 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.
 
 Revenue
Recognition
 Revenues
consist primarily of the sale of GPS tracking devices, the related monthly
service fees and licensing agreements, CANS annual subscriptions and points of
display and our mobile tracking applications sold via the iTunes
Store.
 
 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 monthly service
fees, licensing agreements and annual subscriptions are recognized over the
respective terms of the agreements.  Application revenue is recognized
when the application is purchased by the customer on the iTunes
Store.  Revenues generated from smart phone applications are
recognized upon receipt of payment.
 
 Revenue
from multiple-element arrangements is allocated to the elements based on the
relative fair value of each element, which is generally based on the relative
sales price of each element when sold separately. Each element’s allocated
revenue is recognized when the revenue recognition criteria for that element
have been met. If the Company cannot objectively determine the fair value of any
undelivered element included in a multiple-element arrangement, the Company
defers revenue until all elements are delivered and services have been
performed, or until fair value can objectively be determined for any remaining
undelivered elements.
 
 Revenues
recognized during the year ended December 31, 2008 were received from one
customer primarily for the sale of approximately 900 gpVectorTM Powered Athlete
Tracking Systems.
 
 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.  Our allowance for
doubtful accounts for the year ended December 31, 2009 and 2008 was $110,600 and
$26,600, respectively.
  F-7
 
 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’s warranty policy provides for repair or replacement of products
returned within ninety days of purchase. Warranty liabilities are recorded at
the time of sale for the estimated costs that may be incurred under our standard
warranty. As of December 31, 2009, no products were returned for repair or
replacement.  Accordingly, a warranty liability has not been deemed
necessary.
 
 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 ASC No. 820, “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.  This guidance defines fair value as the price that would be
received to sell an asset or the price paid to transfer a liability in an
orderly transaction between market participants at the measurement date and
establishes a hierarchy for inputs used in measuring fair value that maximizes
the use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available. Observable
inputs are inputs that market participants would use in pricing the asset or
liability developed based on market data obtained from sources independent of
the Company. Unobservable inputs are inputs that reflect the Company’s
assumptions about the assumptions market participants would use in pricing the
asset or liability developed based on the best information available in the
circumstances. The hierarchy is broken down into three levels based on the
reliability of inputs as follows:
 
 Level
1—Inputs are unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date. Examples of the assets carried at Level 1
fair value generally are equities listed in active markets and investments in
publicly traded mutual funds with quoted market prices.
 Level
2—Inputs (other than quoted prices included in Level 1) are either directly or
indirectly observable for the asset or liability through correlation with market
data at the measurement date and for the duration of the asset/liability’s
anticipated life.
 Level
3—Inputs reflect management’s best estimate of what market participants would
use in pricing the asset or liability at the measurement date. Consideration is
given to the risk inherent in the valuation technique and the risk inherent in
the inputs to the model.
 
 The
availability of observable inputs can vary and is affected by a wide variety of
factors, including, for example, the type of a security, whether the security is
new and not yet established in the marketplace, and other characteristics
particular to a transaction. To the extent that valuation is based on models or
inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Accordingly, the degree of judgment
exercised by the Company in determining fair value is greatest for instruments
categorized in Level 3. When observable prices are not available, the Company
either uses implied pricing from similar instruments or valuation models based
on net present value of estimated future cash flows, adjusted as appropriate for
liquidity, credit, market and/or other risk factors. Fair value is a
market-based measure considered from the perspective of a market participant
rather than an entity-specific measure. Therefore, even when market assumptions
are not readily available, the Company’s own assumptions are set to reflect
those it believes market participants would use in pricing the asset or
liability at the measurement date.
  F-8
 
 The
carrying values for cash and cash equivalents, certificates of deposit, accounts
receivable, prepaid assets, accounts payable and accrued liabilities approximate
their fair value due to their short maturities.
 
 Reclassifications
 For
comparability, certain prior period amounts have been reclassified, where
appropriate, to conform to the financial statement presentation used in
2009.
 
 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 had maturity dates ranging from three to
twelve months from the date of issue and were 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.  For the years ending December 31, 2009 and 2008 the Company
incurred charges to expense of approximately $51,000 and $6,000, respectively,
associated with excess and obsolete inventory cost adjustments.
 
 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 by expensing all costs
associated with the planning of the website as incurred and capitalizing the
costs to develop the website.  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.
  F-9
  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 Accounting Standards Codification
(“ASC”) No. 260 “Earnings Per Share”.  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, 2009 and 2008.
 
 Research and
Development
 Research
and development costs are clearly identified and are expensed as incurred in
accordance with ASC No. 730, "Research and Development "  For the
years ended December 31, 2009 and 2008, the Company incurred approximately
$106,700 and $371,900 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 was included in the financial statements prior to the Exchange
Transaction.
 
 GTX is
now considered a C corporation and as such, we account for income taxes
utilizing the liability method.  Under such method, deferred income
tax assets are recognized for the tax consequences of temporary differences
between the tax and financial statement reporting bases of assets and
liabilities.  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 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, which is generally commensurate with the vesting period. The Company
estimates forfeitures that it expects will occur and records expense based upon
the number of awards expected to vest.
 
 Recently
Issued Accounting Pronouncements
 In
April 2009, the FASB issued an update to ASC 820, Fair Value Measurements and
Disclosures, to provide additional guidance on estimating fair value when
the volume and level of transaction activity for an asset or liability have
significantly decreased in relation to normal market activity for the asset or
liability. Additional disclosures are required regarding fair value in interim
and annual reports. These provisions are effective for interim and annual
periods ending after June 15, 2009.  The adoption of this
guidance did not have an impact on this company’s consolidated financial
statements.
  F-10
 
 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.
 
 In
July 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.
  In
September 2009, the EITF reached final consensus on Issue 08-1, Revenue Arrangements with Multiple
Deliverables, or Issue 08-1, which will update ASC 605, Revenue Recognition, and
changes the accounting for certain revenue arrangements. The new requirements
change the allocation methods used in determining how to account for multiple
payment streams and will result in the ability to separately account for more
deliverables, and potentially less revenue deferrals. Additionally, Issue 08-1
requires enhanced disclosures in financial statements. Issue 08-1 is effective
for revenue arrangements entered into or materially modified in fiscal years
beginning after June 15, 2010 on a prospective basis, with early
application permitted. The adoption of this guidance did not have an impact on
this company’s consolidated financial statements.
 
 3.           INVENTORY
 
 The
components of inventory consist of the following:
 
 December 31,2009
                                  
                                  
                                  2008Raw
      materials
                                  
                                  $
                                  537
                                  
                                  
                                  $
                                  10,455Work
      in process
                                  
                                  
                                  -
                                  
                                  
                                  
                                  26,407Finished
      goods
                                  
                                  
                                  945
                                  
                                  
                                  
                                  -Inventory
                                  
                                  $
                                  1,482
                                  
                                  
                                  $
                                  36,862
  F-11
  4.           PROPERTY AND
EQUIPMENT
 
 Property
and equipment, net, consists of the following:
 
 December 31,2009
                      
                      
                      2008Computer
      and office equipment
                      
                      $
                      83,805
                      
                      
                      $
                      81,407Software
                      
                      
                      18,744
                      
                      
                      
                      13,749Website
      development
                      
                      
                      110,889
                      
                      
                      
                      59,896Software
      development
                      
                      
                      183,329
                      
                      
                      
                      36,860Less:
      accumulated depreciation
                      
                      
                      (143,667
                      )
                      
                      
                      (40,692
                      )Total
      property and equipment, net
                      
                      $
                      253,100
                      
                      
                      $
                      151,220
 
 Depreciation
expense for the years ended December 31, 2009 and 2008 was $102,970 and $34,484,
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, 2009 and 2008 the Company incurred interest expense of $0 and $880,
respectively.  The Shareholder Note Payable plus all accrued interest
of $40,126 was converted into 280,652 shares of common stock during the year
ended December 31, 2008
 
 6.           INCOME
TAXES
 
 The
provision for refundable Federal income tax consists of the following as of
December 31:
 
 2009
                        
                        
                        2008Refundable
      Federal income tax calculated at statutory rate of 35%
                        
                        $
                        744,000
                        
                        
                        $
                        1,200,000Less:  Stock
      based compensation expense
                        
                        
                        (22,000
                        )
                        
                        
                        (185,000
                        )Change
      in valuation allowance
                        
                        
                        (722,000
                        )
                        
                        
                        (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 is as follows at December
31:
  2009
                        
                        
                        2008Deferred
      tax asset attributable to:Net
      operating losses carried forward
                        
                        $
                        1,737,000
                        
                        
                        $
                        1,015,000Less:  Valuation
      allowance
                        
                        
                        (1,737,000
                        )
                        
                        
                        (1,015,000
                        )Net
      deferred tax asset
                        
                        $
                        -
                        
                        
                        $
                        -
 
 The
Company established a full valuation allowance in accordance with the provision
of ASC No. 760, “Deferred Tax Assets and Liabilities.” 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.
  F-12
  At
December 31, 2009, the Company had an unused net operating loss carryover
approximating $4,937,000 that is available to offset future taxable income and
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.
  7.           EQUITY
  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.
  F-13
 
 
 Dutchess Investment
Agreement
 On
November 16, 2009, the Company entered into an Investment Agreement ("Investment
Agreement") with Dutchess Opportunity Fund, II, LP (“Dutchess”). Pursuant to the
Investment Agreement, Dutchess committed to purchase up to $10,000,000 of the
Company's common stock, over the course of thirty-six months (the "Equity Line
Financing"). The aggregate number of shares issuable by the Company and
purchasable by Dutchess under the Investment Agreement is
12,000,000.
  The
Company may draw on the facility from time to time, as and when it determines
appropriate in accordance with the terms and conditions of the Investment
Agreement. The maximum amount that the Company is entitled to put in any one
notice is 200% of the average daily volume (U.S. market only) of the common
stock for the three (3) trading days prior to the date of delivery of the
applicable put notice, multiplied by the average of the closing prices for such
trading days. The purchase price shall be set at ninety-four percent (94%) of
the volume weighted average price (VWAP) of the Company's common stock during
the five (5) consecutive trading day period beginning on the trading day
immediately following the date of delivery of the applicable put notice. There
are put restrictions applied on days between the put notice date and the closing
date with respect to that particular put. During this time, the Company shall
not be entitled to deliver another put notice. In addition, Dutchess will not be
obligated to purchase shares if Dutchess’s total number of shares beneficially
held at that time would exceed 4.99% of the number of shares of the Company's
common stock as determined in accordance with Rule 13d-1 of the Securities
Exchange Act of 1934, as amended. In addition, the Company is not permitted to
draw on the facility unless there is an effective registration statement to
cover the resale of the shares.
  On
December 8, 2009 the Company filed on Form S-1 a registration statement with the
Securities and Exchange Commission ("SEC") to register the resale by Dutchess of
the 12,000,000 shares of the common stock underlying the Investment
Agreement.   The registration statement was declared effective by
the SEC on December 28, 2009.
  In
connection with the preparation of the Investment Agreement and the Registration
Rights Agreement, the Company paid Dutchess a document preparation fee in the
amount of $10,000.
 
 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
were issued 80,000 units valued at $0.75 per unit.
  F-14
  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 years ended December 31, 2009 and 2008, the Company issued 50,000 and
510,000 shares of common stock, respectively, from the 2008 Equity Compensation
Plan to various members of management and consultants as compensation for
services rendered, the grant-date fair value of which was estimated at $5,770
and $408,000, respectively.  Additionally, 15,000 stock options were
exercised at $0.06 per share during fiscal year 2009 resulting in the issuance
of 15,000 shares of stock valued at $900.
  During
July 2008, the Company’s Board of Directors reserved for issuance a pool of
40,000 shares of common 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 the years ended
December 31, 2009 and 2008, 4,000 shares valued at $480 and 32,577 shares valued
at $24,000, respectively were granted from the Award Pool.
  During
the years ended December 31, 2009 and 2008, the Company issued 717,000 and
209,500 shares of common stock, respectively, subject to restrictions upon
transfer pursuant to Rule 144, as promulgated under the Securities Act of 1933,
as amended, to various members of management, employees and consultants as
compensation for services rendered, the grant-date fair value of which was
estimated at $48,200 and $203,930, respectively.
  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 the year
ended December 31, 2008, the Company issued 8,000 shares of common stock to
various consultants as compensation for services rendered, the grant-date fair
value of which was estimated at $12,800.  No shares were issued from
the Restricted Stock Award Pool during the year ended December 31,
2009.
  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 years ended December 31, 2009 and 2008 $12,543
and $25,082, respectively, has been expensed in the accompanying consolidated
financial statements related to this agreement.  As of December 31,
2009, the 17,500 shares have been fully earned, delivered and
expensed.
  F-15
 
 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 the 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 period from
December 31, 2007 through December 31, 2009 is provided below:
  Number ofExercise Price
                            
                            
                            WarrantsOutstanding
      and exercisable at December 31, 2007
                            
                            $
                            0.42 – 0.59
                            
                            
                            
                            4,721,877Warrants
      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
                            
                            
                            
                            5,996,752Outstanding
      and exercisable at December 31, 2008
                            
                            
                            0.75 - 1.50
                            
                            
                            
                            5,996,752Warrants
      exercised
                            
                            
                            
                            
                            
                            
                            -Warrants
      granted
                            
                            
                            
                            
                            
                            
                            -Warrants
      expired
                            
                            
                            1.25
                            
                            
                            
                            (4,041,002
                            )Outstanding
      and exercisable at December 31, 2009
                            
                            $
                            0.75 - 1.50
                            
                            
                            
                            1,955,750
  F-16
  Stock Warrants as of December 31, 2009Exercise
                                  
                                  
                                  Warrants
                                  
                                  
                                  Remaining
                                  
                                  
                                  WarrantsPrice
                                  
                                  
                                  Outstanding
                                  
                                  
                                  Life (Years)
                                  
                                  
                                  Exercisable$
                                  1.50
                                  
                                  
                                  
                                  1,850,750
                                  
                                  
                                  
                                  1.36
                                  
                                  
                                  
                                  1,850,750$
                                  1.25
                                  
                                  
                                  
                                  80,000
                                  
                                  
                                  
                                  1.36
                                  
                                  
                                  
                                  80,000$
                                  0.75
                                  
                                  
                                  
                                  25,000
                                  
                                  
                                  
                                  0.25
                                  
                                  
                                  
                                  25,0001,955,750
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,955,750
 
 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 its
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 years ended December 31, 2009 and 2008, the Company
recorded compensation expense related to options granted under the 2008 Plan of
$389,081 and $341,992, respectively.
 
 The
fair value of option grants was estimated using the Black-Scholes option-pricing
model with the following weighted average assumptions:
  Year Ended December 31,2009
                    
                    
                    2008Expected
      dividend yield
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %Risk-free
      interest rate
                    
                    
                    2.21
                    %
                    
                    
                    2.28
                    %Expected
      volatility
                    
                    
                    95.00
                    %
                    
                    
                    50.00
                    %Expected
      life (in years)
                    
                    
                    3.5
                    
                    
                    
                    5.0
  F-17
 
 The Plan
provides for the issuance of a maximum of 7,000,000 shares of which, after
adjusting for estimated pre-vesting forfeitures, approximately 2.1 million were
still available for issuance as of February 19, 2010.
  Stock
option activity under the Plan for the year ended December 31, 2009 is
summarized as follows:
  Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Weighted
                      Average
                      Remaining
                      Contractual
                      Life
                      (in years)
                    
                    
                    Grant
                      Date Fair
                      ValueOutstanding
      at December 31, 2007
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    -Options
      granted
                    
                    
                    4,913,000
                    
                    
                    $
                    0.80
                    
                    
                    
                    3.77
                    
                    
                    
                    1,746,024Options
      exercised
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Options
      cancelled/forfeited/ expired
                    
                    
                    (350,000
                    )
                    
                    $
                    0.75
                    
                    
                    
                    -
                    
                    
                    
                    (119,663
                    )Outstanding
      at December 31, 2008
                    
                    
                    4,563,000
                    
                    
                    $
                    0.80
                    
                    
                    
                    3.77
                    
                    
                    
                    1,626,361Options
      granted
                    
                    
                    1,134,500
                    
                    
                    $
                    0.13
                    
                    
                    
                    3.50
                    
                    
                    
                    88,979Options
      exercised
                    
                    
                    (15,000
                    )
                    
                    $
                    0.06
                    
                    
                    
                    -
                    
                    
                    
                    (497
                    )Options
      cancelled/forfeited/ expired
                    
                    
                    (1,415,000
                    )
                    
                    $
                    0.84
                    
                    
                    
                    -
                    
                    
                    
                    (504,483
                    )Outstanding
      at December 31, 2009
                    
                    
                    4,267,500
                    
                    
                    $
                    0.61
                    
                    
                    
                    3.19
                    
                    
                    $
                    1,210,360Vested
      and expected to vest at December 31, 2009 (1)
                    
                    
                    4,267,500
                    
                    
                    $
                    0.61
                    
                    
                    
                    3.19
                    
                    
                    $
                    1,210,360Exercisable
      at December 31, 2009
                    
                    
                    2,207,422
                    
                    
                    $
                    0.95
                    
                    
                    
                    2.58
                    
                    
                    $
                    699,754
 
 (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, 2009, after adjusting for estimated pre-vested forfeitures, there
was approximately $491,926 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.
  F-18
 
 Share-Based Compensation
Payments
 Total
non-cash compensation expense related to the issuance of stock, warrants, and
options was as follows:
 
 December 31,2009
                  
                  
                  2008Stock
      compensation
                  
                  $
                  54,450
                  
                  
                  $
                  677,762Warrant
      compensation
                  
                  
                  -
                  
                  
                  
                  5,510Options
      compensation
                  
                  
                  389,081
                  
                  
                  
                  341,992Total
                  
                  $
                  443,531
                  
                  
                  $
                  1,025,264
 
 During
the year ended December 31, 2009 an additional $12,543 of stock compensation
expense was recognized relating to stock granted to a third-party public
relations firm during fiscal 2008 for services that were not rendered until
fiscal 2009.  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.
  8.           COMMITMENTS &
CONTINGENCIES
 
 Operating
Leases
 The
Company maintains non cancelable leases for its primary office space in Los
Angeles, California as well as an office in Palo Alto, California which expire
on January 31, 2011 and June 5, 2010, respectively.  Future minimum
lease payments as of December 31, 2009 under these lease agreements are as
follows:
 
 2010
                    
                    $
                    19,2522011
                    
                    
                    990$
                    20,242
 
 Bonuses
 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.
 
 Contingencies
  From time
to time, we may be involved in routine legal proceedings, as well as demands,
claims and threatened litigation that arise in the normal course of our
business. The ultimate amount of liability, if any, for any claims of any type
(either alone or in the aggregate) may materially and adversely affect our
financial condition, results of operations and liquidity. In addition, the
ultimate outcome of any litigation is uncertain. Any outcome, whether favorable
or unfavorable, may materially and adversely affect us due to legal costs and
expenses, diversion of management attention and other factors. We expense legal
costs in the period incurred. We cannot assure you that additional contingencies
of a legal nature or contingencies having legal aspects will not be asserted
against us in the future, and these matters could relate to prior, current or
future transactions or events. Except as described below, we are not currently a
party to any material litigation.
  F-19
 
 A lawsuit
has been filed against the Company by a former consultant who claims we owe
$23,912 plus interest and attorney fees for services rendered during
2009.  We contend that the services in question were either not
performed, not approved or not delivered and accordingly, no additional funds
are due to the former consultant.  We are in the process of
countersuing the former consultant and intend to defend this case
rigorously.
 
 9.           SUBSEQUENT
EVENTS
 
 Management
evaluated subsequent events of the Company through the date the financial
statements were issued 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
connection with the Company’s Equity Line Financing, four (4) draws were
submitted to Dutchess resulting in proceeds of $41,423 and the sale of 241,159
shares of common stock to Dutchess at prices ranging from $0.17 - $0.1763 per
share.  Additionally, documentation for a fifth draw in the amount of
$34,261 was completed on March 30, 2010 for the sale of 201,534 shares of common
stock.  The shares have not yet been issued and the payment has not
yet been received.  The Company is required to issue the shares and
Dutchess is required to submit the payment within two business days of the
completion of the draw.
  During
February and March 2010, the Company granted a total of 773,000 shares of common
stock (valued at approximately $131,000) and 1,113,000 options (value at
approximately $77,000) to various members of management, employees and
consultants for services rendered.
 
 On March
11, 2010, the Company amended its Investment Agreement (the “Amended Investment
Agreement”) with Dutchess.   Under the Amended Investment
Agreement, we may draw on the facility from time to time at our option over a
three year period by selling to Dutchess either (a) 200% of the average daily
volume (U.S. market only) of the common stock for the three (3) trading days
prior to the date of delivery of the applicable put notice, multiplied by the
average of the closing prices for such trading days, or (b) any other specified
amount, up to $500,000.  The purchase price that Dutchess will pay us
for the shares that we put (sell) to Dutchess is equal to 94% of the lowest
daily 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 the applicable put notice.
  On March
18, 2010, the Company entered into a license agreement with Aetrex Worldwide,
Inc. under which we granted Aetrex the right to embed our GPS tracking device
into certain footwear products manufactured and sold by Aetrex (the “License
Agreement”).  Aetrex is as a global leader in pedorthic footwear and
foot orthotics, and the new product to be introduced is intended to monitor the
locations of “wandering” seniors afflicted with dementia by embedding our
patented location technology in Aetrex footwear.
  F-20
  Under the
License Agreement, we granted Aetrex certain exclusive and non-exclusive rights
to (i) embed our portable GPS tracking system device into footwear, and (ii)
manufacture, sell and distribute in the “Territory” certain footwear containing
the GPS tracking system device.  Aetrex was granted (a) the exclusive
rights to embed our GPS tracking devices into all adult (male and female)
footwear and into insoles, and (b) the non-exclusive rights to embed the
tracking devices into athletic footwear and military footwear.  The
“Territory” consists of the following:  Aetrex has the exclusive
rights to North America (USA, Canada, Mexico), the Middle East (Turkey, Qatar,
Saudi Arabia, UAE, Iraq, Israel, Jordan, Cyprus, and Egypt), the European Union,
Australia, New Zealand, Japan, and Greece, and the non-exclusive rights to all
other countries.
  The
rights granted to Aetrex under the License Agreement will remain in effect for
four years, commencing on the date that we ship the first GPS tracking device to
Aetrex for use in Aetrex’s footwear.  Aetrex has agreed to purchase a
substantial number of GPS tracking devices from us for use with certain of its
footwear products.  In order to retain its exclusive rights, Aetrex
has agreed to purchase 6,000 GPS tracking devices from us during the first year
of the four-year period, 25,000 devices during the second year, 50,000 during
the third year, and 75,000 devices during the fourth year.  The
agreement will automatically renew for an additional year if Aetrex’s annual
purchase of the number of the GPS tracking devices in the preceding year was at
least one hundred and fifteen percent (115%) of the prior year’s minimum
purchase requirement.
  In order
to activate the tracking features of the Aetrex shoes, the user of the shoes
will have to purchase a monthly cellular connection plan from the
Company.  The Company will be responsible for the cellular/GPS
activation, for arranging and providing cellular connection services and for
collecting the monthly fees.  We will receive and retain the recurring
monthly cellular fees received from users of the Aetrex embed tracking footwear,
although we have agreed to remit a varying portion of those monthly fees to
Aetrex.
 
 On March
24, 2010, the Company’s Board of Directors authorized the sale of  up
to $1,000,000 in common stock and warrants through a private placement financing
(the “Financing”) and also pay up to 3% of the maximum offering amount in cash
and pay up to 3% of the maximum offering amount in common stock and up to 3%
warrant coverage in finder’s fees to finders.  The Financing consists
of up to 6,666,666 units (“Units”) at a purchase price per Unit of
$0.15.  Each Unit shall consist of one share of the Company’s common
stock and one warrant (“Warrant”) to purchase one share of common stock at an
exercise price of $0.40.  Each Warrant shall be exercisable for one
share of common Stock at a price of $0.40 per share for a period of 3 years from
the date of issuance.  The Financing is being made on a “best efforts”
basis, the minimum subscription amount per investor is $10,000 and the Financing
terminates on June 30, 2010.  As of March 30, 2010 the Company has
received subscription applications and $82,500 for the purchase 550,000 Units,
however, the sale has not yet closed and thus, the 550,000 shares of common
stock and warrants have not yet been issued.
  F-21