UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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(Mark One)

|Q | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------

For the fiscal year ended December 31, 2012

|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 9th Street; 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:                                                                                              
|None                                                                                                                         
|                                                                                                                             
|Securities registered under Section 12(g)
        of the Act:
        Common Stock, Par Value $0.001
        (Title of class)

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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
X No ___

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, 2012 was $2,046,861, 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 April 15, 2013 was 92,460,727.

Documents incorporated by reference:
None







TABLE OF CONTENTS



|PART I     |          |                                                                                                 |   
|---------- | -------- | ----------------------------------------------------------------------------------------------- | --
|           | ITEM 1.  | DESCRIPTION OF BUSINESS                                                                         |   
|           | ITEM 1A. | RISK FACTORS                                                                                    |   
|           | ITEM 1B. | UNRESOLVED STAFF COMMENTS                                                                       |   
|           | ITEM 2.  | DESCRIPTION OF PROPERTIES                                                                       |   
|           | ITEM 3.  | LEGAL PROCEEDINGS                                                                               |   
|           | ITEM 4.  | MINE SAFETY DISCLOSURES                                                                         |   
|PART II    |          |                                                                                                 |   
|           | ITEM 5.  | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |   
|           | ITEM 6.  | SELECTED FINANCIAL DATA                                                                         |   
|           | ITEM 7.  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS           |   
|           | ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                      |   
|           | ITEM 8.  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                     |   
|           | ITEM 9.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE            |   
|           | ITEM 9A. | CONTROLS AND PROCEDURES                                                                         |   
|           | ITEM 9B. | OTHER INFORMATION                                                                               |   
|PART III   |          |                                                                                                 |   
|           | ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                          |   
|           | ITEM 11. | EXECUTIVE COMPENSATION                                                                          |   
|           | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  |   
|           | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                       |   
|           | ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                          |   
|PART IV    |          |                                                                                                 |   
|           | ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                      |   
|SIGNATURES |          |                                                                                                 | 45













1


Table of Contents




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 and our wholly-owned subsidiaries, Global Trek Xploration, LOCiMOBILE, Inc., and Code Amber News Service,
Inc.

Overview of the Business and Recent Developments

GTX Corp utilizes miniaturized, low
power consumption technology and offers a robust global positioning system (“GPS”) and cellular location platform that
answers the “where is” question. For subscribers who want to know where their grandmother, child, spouse, pet, bike,
motorcycle or any other high valued assets are located, GTX Corp has a solution that answers that question and enables subscribers
to track their whereabouts in real time. The ability to track people or property is available through GTX Corp’s complete
end to end, customizable GPS/GPRS transceiver module, wireless connectivity gateway, smartphone mobile applications (“Apps”),
middleware, and viewing portal. GTX Corp provides various interrelated and complimentary products and services in the Personal
Location Services marketplace and integrates two-way GPS tracking technologies that seamlessly integrate with consumer products
and enterprise applications. Utilizing its growing global distribution channel network, the Company provides personal location
solutions through hardware devices, software platform licensing and smartphone applications, with over 1.4 million downloads in
162 countries and distributors throughout the U.S., Canada, Mexico, Australia, Ireland and Nepal.

GTX Corp has developed and commercially
released several products including its award winning, patented GPS tracking smart shoe that can locate the wearer in real time,
a hosted and scalable backend monitoring platform, 20 smartphone and tablet Apps and a digital medical record alertag. The Company
has five revenue streams comprising of licensing, product sales, recurring subscriptions, advertising, and professional services.
These core products and services are supported by GTX’s extensive IP portfolio consisting of issued patents,patents pending, registered trademarks, copyrights, URLs and a library of custom hardware and software ready for license
and distribution to the global community.



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In order to enhance the
market acceptability of its products and services, the Company has recently reduced the size of its transponder units (by
30%) and lowered the cost of its hardware (by 25%) and monitoring services (the Company now offers plans starting as low as
$5.00 per month). The Company is also looking at longer battery lives, with some units able to retain a charge for close to
15 days (compared to 5 or 6 days with the previous generation) and exploring different charging methods from inductive to
solar. The Company is currently in discussion with an engineering company in Japan in order to develop a CDMA module for
the Japanese and Korean markets. Additionally, the Company is expanding the uses of its tracking products by looking into new
and developing markets, such as athletes and veterans suffering from traumatic brain injuries (TBI), high-end bicycles
and motorcycles and continued penetration into life sciences, specifically into the monitoring of our daily transported
national blood supply.

GTX Corp’s goal is to differentiate
itself from other providers of personal location solutions through its “white label” licensing model, innovative products
(such as the GPS tracking shoe and its various GPS tracking smartphone Apps), its brand, media and social media recognition, its
renowned strategic partners, its growing international channels of distribution, a robust and scalable platform and a large intellectual
property portfolio. The Company’s plan is to integrate customizable tracking solutions that can provide functionality and
personalized interfaces offering consumers and businesses a broad array of localized personal location solutions.

We currently conduct our operations
through three wholly-owned subsidiaries that operate in various interrelated sectors of the emerging Location-Based Services and
Proximity Marketing industry (the emerging industry for localized wireless distribution of advertising associated with a particular
place, based on the specific location of the person carrying the smartphone). Our subsidiaries are summarized as follows:

|·Global Trek Xploration (“GTX California”) focuses on hardware and software
        design and development of GPS monitoring products by offering a GPS and cellular location platform that enables subscribers to
        track in real time the whereabouts of people, pets or high valued assets. Our GPS device, 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 data 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 ability to customize, localize
        and optimize an embedded approach to the tracking and monitoring market.  GTX California believes that its ability to
        customize its products to different form factors for the specific needs of its branded partners sets it apart from its competitors.
        To date, the Company has created two custom solutions in two separate vertical markets (the monitoring of seniors and the monitoring
        of high value assets) and has on-going initiatives to develop and deploy additional custom hardware, software, monitoring and connectivity
        solutions in other vertical markets. The Company has signed several exclusive and non–exclusive licensing agreements with
        parties who in 2012 began to deploy the licensed products and services.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



| | · | Code Amber News Service, Inc. (“CANS”) is our
        wholly-owned subsidiary that is the U.S. and Canadian syndicator and content provider of all state Amber Alerts (public notifications
        of child abductions) and missing person alerts. CANS reaches close to a half a million viewers a day through its widely distributed
        Code Amber website and desktop tickers, wireless Amber Alerts and Missing Endangered Persons alerts delivered to cell phones and
        PDAs that support over 500 local and federal law enforcement agencies. To date, our CANS operations has primarily been used to
        generate goodwill for our products through its public service announcements. Our goal is to position CANS to generate revenues
        from brand licensing, sponsorships, and data feeds. In addition CANS plays a significant part in our overall outreach campaign,
        primarily used to generate awareness of our GPS products and applications. CANS provides website tickers and news feeds to merchants,
        internet service providers, affiliate partners, corporate sponsors and local, state and federal agencies.
        
        Additionally, CANS markets and sells the patent pending digital
        medical record Code Amber Alertag. The Alertag is a product and service that provides worldwide access to critical personal information
        in emergency situations for person who subscribe to the product and service. As of the date hereof, Alertag has over 2,000 annual
        subscribers. In addition, CANS recently signed up online affiliates and channel partners with nearly 300 affiliates in 61 countries
        and 25 active organizations throughout the United States to market and sell the Alertag. The Alertag is offered on an annual $29.95
        subscription based model, and complements the overall GTX business model of providing location based technologies and services.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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General. We maintain
several Internet websites including; www.gtxcorp.com, www.locimobile.com, www.gpsshoe.com, www.codeamberalertag.com and www.gpstrackingapps.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 various Internet websites 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 has developed and owns
a comprehensive, end-to-end scalable and licensable two-way GPS location enterprise platform. Unlike a one-way GPS location system
(such as the standard automobile GPS systems or personal navigation devices) 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 two-way GPS location
system enables subscribers to obtain accurate, real-time location information of persons or property through our secure, robust
consumer and enterprise portal.

GTX California provides real-time location
and tracking information to customers using GPS devices for both routine and emergency situations through GTX California's Location
Data Center and Internet infrastructures. Following the purchase of a module and the activation of the service, a subscriber can
determine the location 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 scalable and has been licensed to several partners both in the U.S. and internationally. It is a secure platform equipped
with a database, application-programming interface (API) for custom integration and communication SMS gateway software and hardware.
Subscriber internet communications are routed through GTX California’s proprietary, fault-tolerant, carrier-class, and application-specific
interface software.

GTX California’s goal is to establish
a large subscriber base for products that use the Location Data Center and then generate high margin, recurring revenues for providing
monitoring services.

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 other people or property,
whenever and wherever they choose. GTX California’s multi-pronged strategy is to penetrate vertical target markets by offering
exclusive licenses of our technology to enterprises looking to enhance their brand and product offerings. Potential target markets
that GTX California is currently in, or is exploring, include:

| | · | Families with members who have Alzheimer’s disease and developmentally challenged adults;
| | - | -----------------------------------------------------------------------------------------

| | · | Elder care support and e-health applications;
| | - | ---------------------------------------------

| | · | Adults and children with cognitive disorders such as Autism and TBI;
| | - | --------------------------------------------------------------------

| | · | High value asset tracking and location capability of bikes, motorcycles, containers, luggage, and other assets that require
monitoring or tracking;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Mobile work force;
| | - | ------------------

| | · | Field workers, first responders and law enforcement;
| | - | ----------------------------------------------------

| | · | Pet care; and
| | - | -------------

| | · | Competitive non-motorized athletes.
| | - | -----------------------------------

GTX California also offers its Location
Data Center services to non-GTX California products and hardware systems (i.e. handsets and personal electronics) of major electronics
manufacturers through the offer and sale of exclusive licenses (either geographical, regional or product categories).



4


Table of Contents




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 (tracking
portal).  Our hardware products include patented, interchangeable GPS satellite tracking and location reporting modules
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 GPS devices can be embedded into the sole of a shoe to track and report
the location of the wearer of the shoe (see discussion regarding our license with Aetrex, below).  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 bikes, backpacks, 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 GPS devices from a licensee, the subscription by the purchaser of a service plan and the subsequent
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. In addition
to these basic location reporting capabilities, our GPS devices 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 of an individual by 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/or 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 3G or 4G. 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 to 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 are supported by the existing
infrastructure for the worldwide cell network that provides coverage throughout the United States, Canada, Mexico and numerous
other countries that operate on the global GSM Wireless networks.  In addition, the personal locators will have the ability
to roam seamlessly on the networks of 290 partners in over 210 countries.



As part of the our expansion strategy/roadmap,
the Company is currently exploring the development of a CDMA module, that should open up new carrier relationships and territories
that are predominantly CDMA, such as Japan and Korea.





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Table of Contents


Multiple Applications



GTX California’s planned GPS Personal
Locator licenses are targeted to address different vertical markets, including tracking or locating adults with Alzheimer’s
disease, children with autism, pets, institutional living and life science assets.



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 outdoor 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 Alzheimer's patients along with the approximate 9 million US adults and children that have cognitive disorders. We
believe caregivers of these people would be very interested in using the location service during an emergency situation, as a combination
location service/notification and informing law enforcement if 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.



Children. Due to the emotional nature
of the benefit GTX California is offering, we view this segment as having a big 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 5-12 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. This market is especially significant in Latin America due to the growing numbers of kidnapping
and abductions for ransom.



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 national blood supplies 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 markets. We begin the process by entering into a platform test agreement with a potential
partner with the intent to transition into a long term relationship. By establishing and building partnerships, through
licensing agreements, OEM, and carrier relationships, we facilitate efficient entry into new markets leveraging each
company’s core competencies.  We enhance the value of our distribution channels by aligning our sales and
marketing efforts with strategic partners, including co-branding, distribution and marketing with telecommunication
companies, wireless carriers, national retailers and major consumer branded companies.





6


Table of Contents


Two of our primary relationships consist of
the following:



Aetrex Worldwide, Inc. 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”). The
NavistarTM GPS Shoes monitors the locations of “wandering” seniors afflicted with dementia. In order to
activate the tracking features of the NavistarTM GPS Shoe, the user of the shoes purchases a monthly cellular connection
plan from GTX California. The Company is responsible for the cellular/GPS activation, for arranging and providing cellular connection
services and for collecting the monthly fees. We 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
is also solely responsible for the manufacture, production and supply/sale to Aetrex of the licensed GPS tracking devices, and
for any repairs, replacements, after-service, and warranties pursuant to its product and services warranties.  The GPS Shoe
has been commercially released and has received significant media attention. However, while sales have recently started to increase,
overall sales to date of the GPS Shoe have not met our expectation or the expectation of Aetrex.



Midnite Air Corp. In October
2009, we 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. We successfully completed the testing in May 2010 and entered into a three year License Agreement with MNX under which we
granted MNX the right to embed our GPS tracking device into certain freight/cargo used by MNX to transport vital organs and certain
other high valued assets. During September 2012, MNX paid the Company $25,000 to renew the License Agreement for an additional
three year term upon its expiration in May 2013. MNX will also use our middleware platform and viewing portal as its complete end-to-end
tracking and monitoring solution for tracking the vital organs and other high valued assets that they transport. Each device purchased
by MNX will automatically be activated within 90 days of receipt with a monthly data monitoring and connectivity subscription fee.
We have completed the integration process between the GTX tracking platform and the MNX backend customer service portal, delivered
50 devices to MNX and activated the monthly monitoring.

Intellectual Property Investment



GTX California has invested, and continues
to invest, 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 6, 2009, expires approximately July 23, 2027
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                         
|3. | U.S. Patent No. 8,077,030  title: “Tracking System With Separated Tracking Device,” filed August 8, 2008, issued December 13, 2011, expires approximately February 13, 2030             
|   |                                                                                                                                                                                         
|4. | U.S. Patent No. RE40,879 title: “Footwear With GPS,” filed July 27, 2006, reissued August 25, 2009, expires approximately October 21, 2022                                              



|5. | U.S. Patent No. RE41,087 title: “Footwear With GPS,”
        filed September 6, 2006,reissued January 26, 2010, expires approximately October 21, 2022 
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | U.S. Patent No. RE41,102 title: “Footwear With GPS,”
        filed September 7, 2006, reissued February 9, 2010, expires approximately October 21, 2022
|7. | U.S. Patent No. RE41,122 title: “Footwear With GPS,”
        filed August 17, 2006, reissued February 16, 2010, expires approximately October 21, 2022 
|8. | U.S. Patent No. D595,484 title: “Footwear With Antenna,” filed February 7, 2008, issued July 7, 2009, expires approximately July 7, 2023               



|9. | U.S. Patent No. D599,102 title: “Footwear Sole With Antenna,” filed February 7, 2008, issued September 1, 2009, expires approximately September 1, 2023
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------



|10. | U.S. Patent No. 7,920,059 title: “Footwear With Embedded Tracking Device and Method Of Manufacture,” filed January 6, 2009, Issued April 5, 2011, expires approximately February 6, 2026
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|11. | U.S. Patent No. 8,289,156 title: “Footwear With Embedded Separated Tracking Device and Method Of Manufacture,” filed April 5, 2011, Issued October 16, 2012, expires approximately February 6, 2026
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|12. | U.S. Patent No. 8,154,401 title: “System And Method For Communication with a Tracking Device,” filed February 9, 2009, Issued April 10, 2012, expires approximately February 23, 2029
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|13. | U.S. Patent No. 8,421,617 title: “Tracking System With Separated Tracking Device,” filed December 12, 2011, Issued April 16, 2013, expires approximately August 8, 2028.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|14. | U.S. Patent Application, Serial No.13/653,005 title: “Footwear With Embedded Tracking Device And Method Of Manufacture,” filed October 16, 2012. Pending         
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|15. | U.S. Patent Application, Serial No. 13/668,874 title: “Footwear
        With Embedded Tracking Device And Method Of Manufacture,” filed November 5, 2012. Pending
|16. | U.S. Patent Application, Serial No. 12/378,153 title: “System
        And Method For Processing Location Data,” filed February 11, 2009. Pending                 



|17. | U.S. Patent Application, Serial No. 13/443,180 title: “System And Method For Communication With A Tracking Device,” filed April 10, 2012. Pending
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



Foreign Patent Holdings



|1. | Canadian Patent Application, Serial No. 2,641,469 title: “Footwear With Embedded Tracking Device and Method of Manufacture,” filed August 5, 2008. Pending
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | Mexican Patent Application, Serial No. MX/A/2008/010160 title: “Footwear With Embedded Tracking Device and Method of Manufacture,” filed August 6, 2008. Pending
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------





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As part of the ongoing building of our intellectual
property portfolio, the Company owns approximately 50 Internet domain names, producing over 100,000 visitors per month. Our primary
domain, www.GTXCorp.com, as well as our other related domains, provide IP protection for current and future business and
vertical marketing initiatives. Both our flagship products have their own URL (www.gpsshoe.com and www.gpstrackingapps.com). 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. The Company has also secured corporate
social media accounts, including Facebook, Twitter, LinkedIn and YouTube.



On December 5, 2011, we entered into a multi-patent
licensing agreement with a third-party for the rights to an additional 62 domestic and international patents. This license was
entered into in order to eliminate actual or potential conflicts between our patented technologies and the licensed patents.



The Industry



Location-based services are once again central
to the wireless industry.  Technological challenges have been resolved with 3G and 4G 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.   Same with caregivers of seniors suffering from Alzheimer’s and dementia, freight forwarding companies
wanting to know where their packages are and employers wanting to know where their field workers are. 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.



The rising need for two-way GPS and location
based services is influenced by several factors, among them:





| | · | Ubiquitous awareness and expanding penetration of GPS enabled mobile smartphone & tablets (Estimated 5.5 Billion by
2013).
| | - | --------------------------------------------------------------------------------------------------------------------------

| | · | Personal and asset security concerns affecting a greater portion of the population.
| | - | -----------------------------------------------------------------------------------

| | · | Increasing numbers of elderly or memory impaired (Alzheimer’s, Autism, etc. 6 million in U.S. and growing to 100 million
worldwide).
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | · | Corporations needing to manage worker productivity and logistics.
| | - | -----------------------------------------------------------------

| | · | Government agencies, law enforcement and military personnel monitoring.
| | - | -----------------------------------------------------------------------

| | · | Massive life style adoption of Location Based Social Networking.
| | - | ----------------------------------------------------------------

| | · | Proximity Advertising - the new paradigm.
| | - | -----------------------------------------



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 various 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:





| | · | National and international media coverage;
| | - | ------------------------------------------

| | · | Channel partners;
| | - | -----------------

| | · | Industry and consumer speaking engagements including; television, radio, news outlets and conferences;
| | - | ------------------------------------------------------------------------------------------------------

| | · | Email campaigns to our 1.4 million consumer subscriber base and over 10,000 business contacts;
| | - | ----------------------------------------------------------------------------------------------

| | · | Endorsements from leading industry advocates and analysts including; universities, non-profit organizations, and research firms;
| | - | --------------------------------------------------------------------------------------------------------------------------------

| | · | Cause marketing through social media and affinity groups;
| | - | ---------------------------------------------------------

| | · | Web presence through our multiple websites and YouTube channel;
| | - | ---------------------------------------------------------------

| | · | Trade shows;
| | - | ------------

| | · | Establishing licensing relationships with key industry partners;
| | - | ----------------------------------------------------------------

| | · | Utilizing social media and public relations outreach in special interest magazines and newsletters; and
| | - | -------------------------------------------------------------------------------------------------------

| | · | “White label” affiliates which will target niche markets such as the Alzheimer’s Association for seniors
afflicted with dementia.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



Our marketing strategy has resulted in an
large amount of free coverage by National and International news agencies and television programs, such as Good Morning America,
The Early Show, Fox News Cable and The Discovery Channel.



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Growth Strategy



By approaching the market place with a business-to-business
(B2B) and business-to-consumer (B2C) strategy through our three business units, 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 two-way GPS tracking capabilities;                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | A mass market retail price under $199.00 for Personal Location
        devices;                                                                                                
| | · | A monthly service fee structure, under $20.00, as to the needs of the end user and having multiple convenient access points (mobile phone, land line, or via the Internet); and



| | · | Ease of use at the location interface point as well as with the device.
| | - | -----------------------------------------------------------------------



Competition



Personal location and property tracking devices
of various kinds and from various vendors are increasing rapidly in the marketplace.  Nevertheless, we believe this rapidly
growing market acceptance of tracking solutions represents a tremendous opportunity as the intrinsic value of the tracking solutions
is recognized and mass market adoption continues.



There are numerous competitors for our GPS
products and our LOCiMOBILE® smart phone applications, including Location Based Technologies, Inc., Google Latitude, Foursquare,
Trimble Navigation, Inc., Brick House Security and SOS Gps, Inc.  Our competitors often are 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. Our
smart phone locator apps also compete against a number of other smart phone apps, some of which have features similar to our Apps.



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.



Other Location Products



In addition to marketing our own
proprietary products, we also market and sell the line of Prime devices, the GTX AVL, and the “Micro LOCi”,
tracking devices that are manufactured by third party suppliers. The Prime is a compact, fully certified quad-band integrated
device that provides complete GSM/GPRS functionality for mobile tracking applications, which is waterproof, shock proof and
comes with an SOS button. The micro LOCi is 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. 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. In addition to hardware device sales, as part of our international expansion plans, we are also licensing
our enterprise portal and middleware platform which is contributing to an increase in monthly subscription revenues. The
Company currently has three international licensed distributors and anticipates signing on an additional five or six during
2013.





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LOCiMobile® BUSINESS



LOCiMobile® has a suite of consumer and
enterprise mobile tracking applications, social networking and proximity alerting applications that turn the latest GPS enabled
smartphones and tablets into tracking devices and mobile social networking devices capable of being viewed on other handsets or
our 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, estimated to reach 5.5 billion by
2013, and tap into these markets without the traditional capital requirements and long lead times associated with manufacturing,
selling and shipping 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.



By the end of 2012,
we had 20LOCiMOBILE Tracking Appson five platforms with over 1.4 million downloads across
162 countries.The success of the LOCiMOBILE Tracking Apps in the consumer market prompted us to launch an enterprise
version of our GPS Tracking and Tracking Pro Apps called “Track My Work Force.” A soft launch for this subscription
based, enterprise App officially kicked off during the third quarter of 2012 with a community grassroots announcement. We have
engaged a number of multinational companies across various industries who have confirmed their interest for this enterprise white
label solution, with over a dozen companies in several countries having already deployed the App.



LOCiMOBILE® is focusing its development
on enterprise and 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 smartphone and LBS application
downloads.  The 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 smartphone from the company’s www.locimobile.com website, the Apple iTunes online store, the Android
Marketplace and 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.





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CODE AMBER NEWS SERVICE, INC.



Our Code Amber News Service, Inc. (“CANS”)
subsidiary is 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.   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 480,000 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.



In November 2009, we entered into a licensing
agreement for a digital identification tag that we now offer as a product with an annual subscription service under the name “Code
Amber Alertag.”  Code Amber Alertag is a patent pending 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 the device. This new product and annual subscription model further augments
and contributes to the multi prong revenue streams we have implemented.



The tags and service are sold both direct
to the consumer and wholesale through different channel partners. As part of our cross promotion campaign the Code Amber Alertags
are also being offered by Aetrex Worldwide, our GPS Smart Shoe licensee. The Code Amber Alertag portal has been localized in Spanish
and Portuguese for the Latin market and the Company is currently in discussions with distributors in Brazil.



We acquired and intend to operate the Code
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 Code Amber Alerts and large viewing audience
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 Code Amber Alert announcements and information have an interest in locating and knowing the whereabouts of someone...a
child, a parent, a spouse, etc. Since the location products offered by our other two subsidiaries (i.e. our GPS  and
LOCiMOBILE® products) can be used by anyone to monitor the whereabouts of anyone or anything, we believe that the Code Amber
Alert platform gives us an opportunity to introduce our products to users of the Code 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 smartphones, thereby significantly increasing
our footprint and viewing 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,
Twitter, 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® helps synthesize our overall mobile platform strategy.



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EMPLOYEES AND CONSULTANTS

As of December 31, 2012, the Company had
four employees and over a dozen independent contractors. Any selling, marketing, technical, IT and/or software development work
that is not handled by our employees is outsourced to qualified contractors and consultants as deemed necessary.



| | 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.

RISKS RELATED TO OUR BUSINESS

We
will need additional funding in the near future to continue to fund our current level of operations.



As of December 31, 2012, we had a
working capital deficit of approximately $664,000 andan accumulated deficit of approximately $13,931,000.  In addition,
for the year ended December 31, 2012, we had a loss of approximately $1,218,000 and negative cash flow
from operating activities of approximately $254,000. Revenues generated from our current operations are not sufficient to pay our
on-going operating expenses. Therefore, we will have to obtain additional funding from the sale of our securities or from
strategic transactions in order to fund our current level of operations. On November 14, 2012,the Company entered into a convertible promissory note in the principal amount of $200,000 with a 10% original issue discount
(the “Convertible Note”). Upon closing of the Convertible Note, the lender made an initial $25,000 advance of consideration
to the Company. The lender may make additional loan advances to us in such amounts and at such dates as the lender chooses in its
sole discretion. The Convertible Note matures one year from the effective date of each loan advance. During February 2013, the
lender advanced the Company an additional $25,000. Aside from the Convertible Note, we have not identified the sources for additional
financing that we may require, and we do not have commitments from third parties to provide this financing. 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. Historically,
we have raised capital through the issuance of our equity securities. However, given the risks associated with our business, the
risks associated with our common stock, the worldwide financial crisis that has severely affected the capital markets, and our
status as a small, unknown public company, we expect in the near future, we will have a great deal of difficulty raising capital
through traditional financing sources. Therefore, we cannot guarantee that we will be able to raise capital, or if we are able
to raise capital, that such capital will be in the amounts needed. Our failure to raise capital, when needed, and in sufficient
amounts, will severely impact our ability to continue to develop our business as planned. In addition, if we are unable to obtain
funding as, and when needed, we may have to further reduce and/or cease our future operations. Any additional funding that we obtain
in an equity or convertible debt financing is likely to reduce the percentage ownership of the company held by our existing security
holders.



Based on the above factors, our auditors have
concluded that there is substantial doubt as to our ability to continue as a going concern.



We have had operating losses since formation and expect
to continue to incur net losses for the near term.



Although we have several revenue sources,
our 2012 business plan had assumed that sales of the NavistarTMGPS Shoes would provide a substantial amount of our
working capital during 2012, which revenues would be supplemented by revenues from our other products. To date, sales of the GPS
Shoes have significantly underperformed our expectations, and revenues from our other products have also been less than we projected.
As a result, we currently have a working capital deficit and our revenues are not sufficient to fund our operating needs. We have
reported net losses of approximately $1,218,000 and $1,467,000 for the years ended December 31, 2012 and 2011, respectively.  
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.  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.





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Our current lead product may not achieve the market success
we anticipated.



Aetrex Worldwide, Inc., a global leader in
pedorthic footwear and foot orthotics, manufactures and is marketing a GPS tracking and location shoe for use with senior citizens.
The Aetrex GPS Shoe was jointly developed by us and uses our licensed tracking technology. Although we believe that the market
for this type of location tracking product is significant, the GPS Shoe is a new technology and has never been on the market. As
a result, we are unable to predict what the actual demand will be for this GPS Shoe product ultimately will be. As of the date
of this Annual Report, we have sold approximately 4,500 tracking devices to Aetrex for use in the NavistarTMGPS Shoes.
However, approximately 130 shoes have been sold to consumers, and only approximately 60 active are currently in use by monthly
subscribers. While we still anticipate that sales of this location product aimed at the growing market of senior citizens who are
afflicted by dementia or Alzheimer’s disease will eventually increase, no assurance can be given that this product will become
a significant revenue source for this Company.



Our primary sources of funding during
2012 is no longer available to us.



In November 2009 we entered into an Investment
Agreement (the "Investment Agreement") with Dutchess Equity Fund, L.P. (now known as Dutchess Opportunity Fund, II, LP)(“Dutchess”).
Under the Investment Agreement, we had the right to put (sell) to Dutchess up to 12,000,000 shares of our common stock until November
2012 (this facility is herein referred to as the "Equity Line"). We periodically used our Equity Line to provide us with
additional working capital. In November 2012 we sold to Dutchess the remaining amount of shares available under the Equity Line
and the line has since expired. Accordingly, we will not be able to utilize it to supplement our working capital needs in the future.



Our current sources of funding are
limited, and any additional funding that we may obtain may be on unfavorable terms and may significantly dilute our existing shareholders.



We currently have limited funds available
from which we can fund our current and proposed operating activities. On November 14, 2012, we entered into a convertible promissory
note credit facility in the principal amount of $200,000. As of April 15, 2013 we have $55,000 principal amount
outstanding on our $200,000 Convertible Note. Our ability to draw down on this credit facility is limited as the lender may make
loan advances in such amounts and at such dates as the lender may choose in its sole discretion. As of the date of this Annual
Report, no payments have been made on the Convertible Note. The Convertible Note matures one year from the effective date of each
loan advance. The conversion price is the lesser of $0.025 or 70% of the lowest trade price in the 25 trading days previous to
the conversion. Unless otherwise agreed in writing by both parties, at no time will the lender convert any amount of the Convertible
Note into common stock that would result in the lender owning more than 4.99% of the common stock outstanding. The amount of funds
currently available to us under this Convertible Note facility, and the amount of revenues that we currently generate, collectively
are not sufficient to fund our operating expenses. As a result, unless our revenues increase significantly in the near future (such
as due to a significant increase in the sale of the NavistarTMGPS Shoes), we will have to obtain additional public
or private equity financings or debt financings in order to continue our operations. 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 substantial based on our current stock price, and could increase if the trading price of our common stock declines
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.



Our future capital requirements, and our
currently projected operating and liquidity requirements, will depend on many factors, including:



- The commercial success of the Aetrex NavistarTMGPS Shoes;



- 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 devices to MNX under our license agreement;



- The cost of developing and improving our products and technologies;



- The consummation of one or more licensing agreements with the parties currently considering the release of
products based on our technologies; and



- The sale of devices to our international partners and the corresponding monthly subscription fees.





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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 for smaller companies like ours 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.



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 customer and media
reviews, industry analyst commentaries, and comparisons to competitive products.  As with any relatively new business
enterprise operating in a specialized and intensely competitive market, we are subject to many business risks which include, but
are not limited to, unforeseen marketing difficulties, excessive research and development expenses, unforeseen negative publicity,
competition, product liability issues, manufacturing and logistical difficulties, and lack of operating experience.  Many
of the risks may be unforeseeable or beyond our control.  There can be no assurance that we will successfully implement
our business plan in a timely or effective manner, that we will be able to generate sufficient interest in our products, or that
we will be able to market and sell enough products and services to generate sufficient revenues to continue as a going concern.



Our wireless location products and technologies have to
continuously evolve and respond to market changes. If we are unable to commercially release products that are accepted in the market
or that generate significant revenues, our financial results will continue to suffer.



We have had only limited success with release
of our wireless locator products and our Aetrex NavistarTMGPS Shoes in their respective markets. 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 categories, vertical markets and territories and incorporated into other consumer and commercial products (such as in
proprietary GPS enabled transport containers, bicycles, backpacks, etc.), these agreements are still in the testing 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. Unless we are able to release location based products that meet a significant
market demand, we will not be able to improve our financial condition or the results of our future operations.



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.





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We may encounter manufacturing or assembly problems for
our products, which would adversely affect our results of operations and financial condition.



To date, we have only manufactured a limited
number of products.  In addition, we are continually redesigning and enhancing our products and we 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 experienced some quality issues with the limited production of some of our initial products. Although we have addressed
these issues, we have only 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 products will be initially manufactured for us by only one manufacturer. Although we could arrange for other
manufacturers to supply these components and subassemblies, there is no assurance that we could do so without undue cost, expense
and delay.  If our sole manufacturers are unable to provide us with adequate supplies of high-quality components on a
timely and cost-efficient basis, our operations will be disrupted and our net revenue and profitability will suffer.  Moreover,
if those manufacturers cannot consistently produce high-quality products that are free of defects, we may experience a high rate
of product returns, which would also reduce our profitability and may harm our reputation and brand.  Although we believe
that we could locate alternate contract manufacturers, our operations would be impacted until alternate manufacturers are found.



Our markets are highly competitive, and our failure to compete
successfully would limit our ability to sell our products, attract and retain customers and grow our business.



Competition in the wireless location
services market in the U.S. and abroad is intense. The adoption of new technology in the communications industry likely will intensify
the competition for improved wireless location technologies. The wireless location services market has historically been dominated
by large companies, such as Siemens AG, AT&T and LoJack Corporation.  In addition, a number of other companies such
as Trimble Navigation, Zoomback, 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.





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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.



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.



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 products, but
do not believe these errors will have a material negative effect in the future on the functionality of the products.  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 2009 it was dedicated to the research and development of our products and platform.  In addition, we are a small
company with a limited amount of resources and capital available to us. Accordingly, you should consider our future prospects in
light of the risks and uncertainties experienced by small, 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.
| | - | --------------------------------------------------------------------------------------



If we are unsuccessful in addressing any of
these risks and uncertainties, our business may be materially and adversely affected.





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We expect continued fluctuations in revenues and expenses.



We have had relatively minor sales to date.
We rely heavily on channel partners, a few licensees and telecommunications carriers to sell our products. If any of these relationships
change or are disrupted, we could lose a significant portion of anticipated revenue.



Our sales will continue to be uncertain and
we expect fluctuation in revenues and expenses until we commercially scale our existing contracts, enter into other license agreements
that provide us with regular royalties or subscription revenues, or our LOCiMOBILE® applications are continually downloaded
by a significant number of users who pay our download fees.



As such, the amount of revenues we receive,
if any, from licensing agreements, downloads, etc. will fluctuate and depend upon our customer’s willingness to buy or products,
and for our partner’s abilities 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.



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 negative publicity, competition, product liability 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 manner, or generate
sufficient interest in our products or services, or that we will be able to market and sell enough products and services to generate
sufficient revenues to continue as a going concern.



Our 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.



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.





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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, depending on our future growth, may 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.



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.





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We depend on our key personnel to manage our business effectively
in a rapidly changing market.  If we are unable to retain our key employees, our business, financial condition and results
of operations could be harmed.



Our future success depends to a significant
degree on the skills, efforts and continued services of our executive officers and other key engineering, manufacturing, operations,
sales, marketing and support personnel.  If we were to lose the services of one or more of our key executive officers
or other key engineering, manufacturing, operations, sales, marketing and support personnel, we may not be able to grow our business
as we expect, and our ability to compete could be harmed, adversely affecting our business and prospects.



Our products depend on continued availability of GPS and
cellular wireless telecommunications systems.



Our products use existing GPS and cellular
wireless telecommunications systems to identify the position of our products.  Any temporary or permanent change in the
availability of these systems, or any material change in the existing infrastructure and our ability to access those systems, would
materially and adversely affect our business, operating results and financial condition may be materially and adversely affected.



Rapid technological change in our market and/or changes
in customer requirements could cause our products to become obsolete or require us to redesign our products, which would have a
material adverse affect on our business, operating results and financial condition.



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. If we are unable to satisfy all of the regulations of the FCC or any
other regulatory body, we could be prevented from releasing one or more of our products, which could materially and adversely affect
our future revenues. In addition, any delay in obtaining FCC and other regulatory approval could likewise have a negative impact
on our business and on our relationships with our customers. 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 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.





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Our executive officers and directors have the ability to
significantly influence matters submitted to our stockholders for approval.



As of April 15, 2013 our executive officers
and directors, in the aggregate, beneficially own shares representing approximately 19.32% 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.



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

The resale of registered shares by our other investors could
depress the market price of our common stock.



In October 2011, we registered 11,670,000
shares of our common stock for resale, of which 5,950,000 shares are currently outstanding and were issued to certain of the investors
in a private placement. The remaining 5,720,000 shares included in the foregoing registration represent the estimated maximum number
of shares that may be issued to the investors upon the exercise of the warrants. The resale of these shares into the public market
by the investors could depress the market price of our common stock.



The Convertible Note may be converted into
shares of our common stock at less than the then-prevailing market price for our common stock if the Lender chooses to convert
the Note.



The Convertible Note is convertible at the
lesser of $0.025 or 70% of the lowest trade price in the 25 trading days previous to the conversion. Accordingly, the maximum conversion
price is $0.025 per share of common stock. Unless otherwise agreed in writing by both parties, at no time will the lender convert
any amount of the Convertible Note into common stock that would result in the Lender owning more than 4.99% of the common stock
outstanding. The lender has a financial incentive to convert the Convertible Note and realize the profit equal to the difference
between the conversion price and the market price. If the lender converts the Convertible Note, the price of our common stock could
decrease.



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.





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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 92,460,727 common shares and no preferred shares were issued and outstanding as of April 15, 2013 .  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 April 15, 2013, we had a principal
balance of $55,000 on our Convertible Note that is convertible at the lesser of $0.025 or 70% of the lowest trade price in the
25 trading days previous to the conversion and warrants and options outstanding to purchase an aggregate of 8.27 million shares
of our common stock the conversion or 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.



The Financial Industry Regulatory Authority
(“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.



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.





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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.” 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.



| | ITEM | 1B.    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
1,230 square feet and consists of administrative work space for a base rent of $1,325 per month. The lease is currently on a month-to-month
basis.

| | 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.



We are not currently 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.MINE SAFETY DISCLOSURES
| | ---- | -------------------------

Not applicable.





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PART
II

| | ITEM | 5.MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
| | ---- | -------------------------------------------------------------------------------------------------



Market Information. Our common
stock is quoted on the over-the-counter market on the OTC Bulletin Board under the symbol “GTXO.” The following table
sets forth the high and low sale prices for our common stock on the OTC Bulletin Board for the periods indicated:

|                                 |  | Year Ended       
|-------------------------------- |  | -----------------
|                                 |  | December 31, 2012
|                                 |  | High             
|Quarter ended March 31, 2012     |  | $                
|Quarter ended June 30, 2012      |  | $                
|Quarter ended September 30, 2012 |  | $                
|Quarter ended December 31, 2012  |  | $                



|                                 |  | Year Ended       
|-------------------------------- |  | -----------------
|                                 |  | December 31, 2011
|                                 |  | High             
|Quarter ended March 31, 2011     |  | $                
|Quarter ended June 30, 2011      |  | $                
|Quarter ended September 30, 2011 |  | $                
|Quarter ended December 31, 2011  |  | $                



As of April 12, 2013 the last reported
sales price or our common stock on the OTC Bulletin Board was $0.0265.

Holders of Record. As of April
15, 2013, an aggregate of 92,460,727 shares of our common stock were issued and outstanding and were owned by approximately 140
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.

During
the year ended December 31, 2012,weissued the following shares that were not previously reported on a quarterly report on Form 10-Q or in a current report on Form
8-K: During the fourth quarter of 2012, we issued 3.1 million shares of common stock to a total of four members of management and
consultants, at a price of $0.02 per share, as compensation for services rendered.
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.

We have never declared or paid cash
dividends on our capital stock and we do not anticipate declaring or paying cash dividends on our capital stock in the foreseeable
future. Any payments of cash dividends will be at the discretion of our board of directors, and will depend upon our results of
operations, earnings, capital requirements, legal and contractual restrictions, and other factors deemed relevant by our board
of directors.



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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.
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, 2012 pursuant to compensation plans (including individual compensation arrangements) under
which equity securities are authorized for issuance.

|                                                           | 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)                                                                    |  |                                                        |  |                                                                                                                                            
|2012                                                       |                                                                        |  |                                                        |  |                                                                                                                                            
|Equity compensation plans approved by security holders     | 2,348,570                                                              |  | $0.194                                                 |  | 338,800                                                                                                                                    
|Equity compensation plans not approved by security holders | --                                                                     |  | --                                                     |  | --                                                                                                                                         
|Total                                                      | 2,348,570                                                              |  | $0.194                                                 |  | 338,800                                                                                                                                    
|                                                           |                                                                        |  |                                                        |  |                                                                                                                                            



As a result of the cancellation and expiration of options subsequent
to December 31, 2012, there are approximately 572,000 options available for issuance under the 2008 Plan as of April 15, 2013.



| | 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

Business. GTX Corp and its subsidiaries,
(GTX California, LOCiMOBILE, Inc. and CANS) are engaged in businesses that design, develop and sell various interrelated and complementary
products and services in the Personal Location Services marketplace. GTX California focuses on hardware and software design and
development of products and services by offering a Global Positioning System (“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. LOCiMOBILE, Inc. has developed and owns LOCiMobileTM,
a suite of mobile tracking applications that turn the iPhone, Android, BlackBerry and other
GPS enabled handsets into a tracking device which can then be tracked from handset to handset or 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, as well as, marketing and selling
the patent pending electronic medical health record Code Amber Alertag.





24


Table of Contents


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.

Revenues for the fiscal year ended
December 31, 2012 (“fiscal 2012”) decreased by 45% compared to the fiscal year ended December 31, 2011 (“fiscal
2011”), and operating expenses in fiscal 2012 decreased by 17%. Our fiscal 2012 net loss is approximately 17% lower than
it was in fiscal 2011 and our fiscal 2011 net loss is approximately 13% lower than it was in fiscal 2010.

The following table represents our
statement of operations for the years ended December 31, 2012 and 2011:

|                                                |  | Year ended December 31,
|----------------------------------------------- |  | -----------------------
|                                                |  | 2012                   
|                                                |  | $                      
|Revenues                                        |  | $367,114               
|Cost of goods sold                              |  | 291,388                
|Gross margin                                    |  | 75,726                 
|Operating expenses                              |  |                        
|Wages and benefits                              |  | 635,622                
|Professional fees                               |  | 366,330                
|General and administrative and       impairment |  | 292,112                
|Total operating expenses                        |  | 1,294,064              
|Loss from operations                            |  | (1,218,338)            
|Other income (expense), net                     |  | 829                    
|Net loss                                        |  | $(1,217,509)           



Revenues

Revenues decreased
45% during fiscal 2012 as compared to last year due to a decrease in the number of GPS devices sold to Aetrex for use in their
NavistarTM GPS Shoe and to a decrease in revenues generated from App sales. During fiscal 2012 and 2011, we sold 1,500
and 3,000 GPS devices, respectively, to Aetrex generating revenues of approximately $157,000 and $314,000, respectively. Commercial
sales of the NavistarTM GPS Shoe, which began in December 2011, have not been at the levels anticipated by management.
Accordingly, Aetrex has not needed to purchase additional GPS devices.When the NavistarTM GPS Shoe is sold by
Aetrex, and activated by the end user, that customer is required to pay us a monthly service fee for the GPS tracking service on
the shoe. A portion of the monthly service fee is shared with Aetrex. Because of slow sales
and GPS activations of this product, we have not generated a material amount of monthly service fees during fiscal 2012. We are
exploring multiple avenues in which the NavistarTMGPS Shoe can be marketed both domestically
and internationally. As news about the NavistarTMGPS Shoe spreads, and with the recent
availability of the NavistarTMGPS Shoe in the U.K., Canada, Australia and Ireland, management anticipates the sale
of the NavistarTMGPS Shoe will increase over the next twelve months. Also contributing to our decrease in revenues
was a $126,000 or 62% decrease in our App revenues, to approximately $76,000 when compared to fiscal 2011. This decrease is attributable
to a large portion of subscriber downloads in 2012 relating to upgrades by current subscribers, which upgrades are provided free
of charge. In addition to revenues generated through the shipment of the Aetrex shoes, monthly
service fees on the shoes and from the sale of our Apps, we generate revenues from the sales of our portal services, hardware product,
portal software licensing, platform testing, monthly subscriptions, online advertising revenue, Code Amber annual news feed subscriptions,
points of display sponsorships and the sale of Code Amber Alertags.



Cost of goods sold

Cost of
goods sold for fiscal 2012 decreased 48% compared to fiscal 2011 due primarily to the decrease in the number of GPS devices sold
to Aetrex as discussed above as well as a reduction in the amount of commissions paid on the sale of our Apps.





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Table of Contents


Wages and benefits

Wages and benefits decreased 17%
for fiscal 2012 in comparison to fiscal 2011 due to continued cost cutting efforts, which
included reductions in management positions. These reductions in overhead will remain in place as we maintain a low-overhead
approach to operations that will scale as operations require.

Professional fees

Professional
fees consist of costs attributable to consultants and contractors who primarily spend their time on sales, marketing and the development
of technology; investor relations; legal fees relating to general corporate matters and our patent applications; and accounting
expenses. Such costs decreased 28% in fiscal 2012 compared to fiscal 2011 due primarily to reductions in marketing and public
relations services.

General and administrative
and impairment

General and administrative
costs during fiscal 2012 increased 4% in comparison to fiscal 2011 due tothe impairment of capitalized software development
costs. Management re-assessed the value of our capitalized App software development costs and determined that, based on the revenues
generated from our Apps, that the capitalized assets had been impaired. Accordingly, we wrote-down the software development costs
to the estimated net realizable value of approximately $44,000 and recognized an impairment charge of $103,000 during fiscal 2012.
General and administrative expenses also consist of corporate administrative costs, depreciation, occupancy
costs, insurance, website development, trade shows and travel which, when excluding the impairment charge, decreased 33% during
fiscal 2012 in comparison to fiscal 2011 due primarily to reductions in depreciation expense, insurance and travel, as well as,
the implementation of various general cost cutting measures.



Other income (expense),
net

Other income (expense), net for fiscal
2012 consists primarily of costs associated with our debt financing during the year. We incurred finance costs totaling
$6,500 resulting from our line of credit entered into on June 27, 2012. In accordance with the line of credit agreement, a
15% finance charge is applied to each advance. We drew $30,000 on the line resulting in finance costs of $4,500 and paid
$2,000 of administrative costs to the lender of the line of credit (see further discussion in the Liquidity and Capital
Resources discussion below). The accounting treatment for the bifurcation of the derivative liability embedded in our
Convertible Note resulted in interest expense of approximately $23,000, derivative income of approximately $17,000 and
discount amortization of approximately $4,000. The derivative income represents the net unrealized change during the period
in the fair value of the derivative liability. Also included is $16,250 of other income recognized from the reversal of a
litigation accrual relating to a lawsuit filed against us by a former consultant that was dismissed in May 2012.



Other income (expense), net for fiscal 2011
is primarily attributable to discount amortization, derivative income and the gain on conversion of our convertible promissory
notes. As of December 31, 2011, all the then convertible promissory notes were extinguished in full, leaving the Company with no
outstanding debt.



Net loss

Net loss during fiscal 2012 decreased
approximately 17% in comparison to the net loss incurred during fiscal 2011. The decrease is primarily due to our efforts to maintain
and/or cut costs in regards to wages, professional fees and general and administrative expenses.



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Liquidity and Capital Resources

As of December 31, 2012, we had approximately
$31,000 in cash, $15,000 of other current assets and $710,000 of current liabilities, resulting in a working capital deficit of
approximately $664,000 compared to approximately $92,000 in cash and a working capital deficit of approximately $190,000 as of
December 31, 2011.



Our net loss decreased to $1,218,000 for fiscal
2012 compared to a net loss of $1,467,000 for fiscal 2011.  Net cash used in operating activities was approximately $254,000
for fiscal 2012 compared to approximately $666,000 for fiscal 2011. The resulting decrease of approximately $412,000 is due to
the decrease in our net loss, as well as the impairment charge related to capitalized software development costs, a reduction in
accounts receivable, the shipment of GPS devices to Aetrex, and the continued accrual of portions of wages payable to members of
management and various officers in an effort to preserve cash for working capital needs.



Net cash used in investing activities during
fiscal 2012 and 2011 was approximately $15,000 and $68,000, respectively and consisted primarily of
payments for the purchase of equipment.



Net cash provided by financing activities
during fiscal 2012 and 2011 was approximately $208,000 and $759,000, respectively, and primarily consists
of proceeds received from the sale of shares from the equity line financing agreement that we had with Dutchess Equity Fund, L.P.
(now known as Dutchess Opportunity Fund, II, L.P.). During fiscal 2012 and 2011, we sold 2,756,142 and 6,905,022 shares of common
stock, respectively to Dutchess resulting in proceeds of approximately $164,000 and $472,000, respectively. The equity line
expired in November 2012 and accordingly is not longer available for our use. The remaining net cash provided by financing activities
in fiscal 2012 relates to proceeds from our $200,000 Convertible Note, a $55,000 line of credit and a $10,000 short-term loan from
Aetrex as discussed below. During 2011 we also received proceeds totaling $297,500 from the sale of
5,950,000 units in a private placement. The units consisted of 5,950,000 shares of our common stock and 5,720,000 warrants to purchase
additional shares of common stock, exercisable at $0.08 per warrant. In October 2011, we registered the resale by the investors
of the foregoing securities that were sold in the private placement.



Because revenues from our operations have,
to date, been insufficient to fund our working capital needs, we currently rely on the cash we receive from our financing activities
to fund our capital expenditures and to support our working capital requirements.  Although we anticipate (i) that revenues
from the NavistarTM GPS Shoe that was released at the end of fiscal 2011 will increase during 2013, and (ii) that we
will receive additional revenues under our other licenses, the amount and timing of such revenues is unknown. For our internal
budgeting purposes, we have assumed that such revenues will not be sufficient to fund all of our planned operating and other expenditure.
In addition, 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.   Accordingly,
we anticipate that we will have to raise additional capital in order to fund our operations in 2013.



On June 27, 2012, the Company entered into
an agreement with an unrelated third party (the “Holder”) for a $55,000 line of credit (the “Line Agreement”).
In accordance with the Line Agreement, the Company is required to repay 115% of each amount advanced (the “Advance Amount”)
and must make mandatory payments on each Advance Amount every 30 days from the date the Advance Amount is requested in an amount
equal to 1/3 of the Advance Amount. All Advance Amounts are required to be repaid in full by the maturity date, November 27, 2012.
The Company issued the Holder 250,000 shares of its common stock as an incentive for entering into the Line Agreement. The stock
was valued at the current market price of $0.04 per share or $10,000. The Company paid the Holder administrative fees totalling
$2,000 for due diligence, document creation expense, closing costs, and transaction administration expenses. In accordance with
the Line Agreement, the Company is obligated to issue up to 640,645 shares to secure the re-payment of the Advance Amounts. The
Company was unable to make the mandatory payments or repay the Advance Amounts by the November 27, 2012 maturity date. As of December
31, 2012, we had borrowed $30,000 under the Line Agreement, recognized an additional $4,500 in finance costs and made payments
to the Holder totalling $21,000 resulting in a net amount owed under the Line Agreement of $13,500 at December 31, 2012.



On January 14, 2013, the Holder of the Line
Agreement entered into assignment agreement with an unrelated third party (the “Assignee”) whereby the Assignee assumed
all of the Holder’s right, title, and interest in and to the Line Agreement in the aggregate amount of $13,500 (the “Note”).
As consideration for the assignment of the Note, on January 15, 2013 we paid the Assignee 2,459,355 shares of common stock and
the Assignee paid the Holder $13,500. The market value of the 2,459,355 shares of common stock on the date of the assignment was
approximately $49,000, or $0.02 per share resulting in the Company incurring finance costs of approximately $35,500.





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Table of Contents


On September 19, 2012, Aetrex loaned the Company
$10,000 to fund working capital needs as the initial sales of the NavistarTM GPS Shoes have been slow. The
loan is non-interest bearing and was due on November 30, 2012. As of December 31, 2012, the Company has not repaid the Aetrex loan
and $9,500 remains outstanding. In addition to the Aetrex loan, as of December 31, 2012 the Company owes Aetrex approximately $15,000
primarily related to payments received by the GTX for sales of the NavistarTMGPS Shoes, as
well as, Aetrex’s portion of monthly service fees related to the NavistarTMGPS Shoes.



On November 14, 2012, the Company entered
into a convertible promissory note in the principal amount of $200,000 with a 10% original issue discount (the “Convertible
Note”). Upon closing of the Convertible Note, the lender made an initial $25,000 advance of consideration to the Company.
The lender may pay additional consideration to the Company as loan advances in such amounts and at such dates as the lender may
choose in its sole discretion. On February 27, 2013, the lender advanced the Company an additional $25,000. The Convertible Note
matures one year from the effective date of each payment. If the Company repays the amount advanced within 90 days, the interest
rate will be 0%, otherwise a one-time interest charge of 10% shall be applied to the principal sum outstanding. The Company may
repay the amount advanced within 180 days from the date received, after which we may not make further payments on that advance
amount without written approval from the lender. The Convertible Note is convertible into shares of common stock of the Company
at a price equal to the lesser of $0.025 or 70% of the lowest trade price in the 25 trading days previous to the conversion. Unless
otherwise agreed in writing by both parties, at no time will the lender convert any amount of the Note into common stock that would
result in the lender owning more than 4.99% of the common stock outstanding. As of the date of this Annual Report, the Company
had not made any payments on the Convertible Note.





We are currently a party to two licensing
agreements (with Aetrex and MNX) and five international distributor agreements. During 2013, we anticipate that we will generate
increased revenues from these licensing agreements and from our current and potential domestic and international distributors that
are currently evaluating our platform. However, we expect to incur continued losses until these and our other revenue initiatives
collectively generate substantial revenues.  No assurance can be given that our current contractual arrangements and the revenues
from our GPS Shoes, device sales, subscriptions, Alertags, software licensing, or our smart phone or tablet Apps will be sufficient
to fund our anticipated working capital needs by the end of calendar year 2013.



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, licensing and sales of our GPS devices and technology, and the
commercialization of the LOCiMOBILE® applications for GPS enabled handsets. Our funding requirements for these projects 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 our products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The costs of licensing activities, including product marketing
        and advertising; and                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Revenues derived from product sales and the licensing of our technology, the sale of GPS enabled shoes in conjunction with the Aetrex Licensing Agreement, the sales of our other GPS devices and monitoring services, the LOCiMobile® applications for GPS enabled handsets, the sale of Alertags and advertising sales from CANS.





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As noted above, based on budgeted revenues
and expenditures, unless revenues increase significantly, we believe that our existing and projected sources of liquidity may not
be sufficient to satisfy our cash requirements for the next twelve months.   Accordingly, we will need to raise additional
funds during 2013.  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.  We have not identified the sources for the additional financing that we will require, and 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 substantial based on our current stock price, and could increase if the trading price of our
common stock declines 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 that we raise additional funds through collaboration and licensing
arrangements, we may be required to 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 may have to further reduce our current level of operations, or may even have to totally discontinue our operations.



We are subject to many risks associated with
early 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.



Contractual Obligations
and Commercial Commitments

The following table sets forth our
contractual obligations as of December 31, 2012:

|                 | Payments due by period
|---------------- | ----------------------
|                 | Total                 
|Line Agreement   | $ 13,500              
|Convertible Note | 27,500                
|Aetrex Loan      | 9,500                 
|Total            | $ 50,500              



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.



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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:

Going Concern

The consolidated financial statements have
been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities
in the normal course of business for the foreseeable future.  The Company has incurred net losses of $1,217,509 and $1,466,743
for the years ended December 31, 2012 and 2011, respectively, has incurred losses since inception resulting in an accumulated deficit
of $13,930,955 as of December 31, 2012, and has negative working capital of $663,722 at December 31, 2012. A significant part of
our negative working capital position at December 31, 2012 consisted of $392,834 of amounts due to officers and management
of the Company for accrued wages.  The Company anticipates further losses in the development of its business.



The ability to continue as a going concern
is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to
raise additional capital through the future issuances of debt or equity is unknown. The obtainment of additional financing, the
successful development of the Company’s contemplated plan of operations, or its transition, ultimately, to the attainment
of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors
raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements
of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.



Revenue Recognition

Revenues consist primarily of the sale of
our GPS device to Aetrex International Worldwide, Inc. “Aetrex” for use in the Aetrex NavistarTM GPS Shoe
and the related monthly service fee from subscribers, our mobile tracking applications sold via the Apple iTunes Store and the
Google Marketplace, the sale of GPS tracking devices and the related monthly service fees, licensing agreements, and the
sale of Code Amber Alertags.



The Company recognizes revenue from product
sales when the product is shipped to the customer and title has transferred. The Company recognizes application revenue when the
application is purchased by the customer. 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 both for the GPS
Shoes and GPS tracking devices, licensing agreements and annual subscriptions are recognized over the respective terms of the agreements.



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 (excluding GPS Shoe devices) returned for defects 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, 2011,
products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary.
The GPS Shoe devices are covered under the manufacturer’s standard limited warranty which covers any defects in materials
and workmanship for a period of 12 months following the purchase of the device by the customer.





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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.



Derivative Instruments

Our debt or equity instruments may contain
embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from
the associated host instrument and accounted for separately as a derivative instrument liability.



The identification of, and accounting for,
derivative instruments is complex.  Our derivative instrument liabilities are re-valued at the end of each reporting
period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which
the changes occur.  For bifurcated conversion options that are accounted for as derivative instrument liabilities, we
determine the fair value of these instruments using the Black -Scholes option pricing model.  That model requires assumptions
related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend
yield, and the expected volatility of our Common Stock price over the life of the option.





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 July 2012, the FASB issued ASU 2012-02,
Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, on testing
for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in
value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting
for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses
and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to
U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The Company’s adoption of this accounting
guidance does not have a material impact on the consolidated financial statements and related disclosures.

There were other updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to have a material impact on the Company’s financial position, results of operations or cash flows.



31


Table of Contents




| | ITEM | 7A.    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 page 46, and are incorporated herein and made a part
hereof.





| | ITEM | 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
| | ---- | --------------------------------------------------------------------------------------

None.

| | ITEM | 9A.     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.



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, 2012, 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 has concluded that
our internal control over financial reporting was effective as of December 31, 2012.

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 have been no changes in our internal
controls over financial reporting that occurred during the annual reporting period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



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| | ITEM | 9B.     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 or compensation committee at this time.

Our Chief Executive Officer serves
pursuant to an employment agreement that was automatically extended for one year on March 14, 2013, and that 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 Appointed
|-------------------- | ------------------------------------------------------------------- | --- | --------------------
|Patrick E. Bertagna  | President, Chief Executive Officer and Chairman of the Board        | 49  | March 14, 2008      
|Alex McKean          | Interim Chief Financial Officer                                     | 49  | October 3, 2011     
|Christopher M. Walsh | Chief Operating Officer                                             | 63  | March 14, 2008      
|Louis Rosenbaum      | Director                                                            | 62  | March 14, 2008      
|Andrew Duncan        | Director, Audit Committee Member, Corporate Secretary and Treasurer | 48  | April 2, 2010       
|Greg Provenzano      | Director, Audit Committee Member                                    | 51  | April 2, 2010       
|Patrick Aroff        | Director                                                            | 51  | March 14, 2008      



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.

Mr. Bertagna is the sole director and
the Chief Executive Officer of GTX California, LOCiMOBILE, Inc. and Code Amber News Service, Inc., and Mr. McKean is the Interim
Chief Financial Officer of each of those subsidiaries.

Patrick E. Bertagna – Director, 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 30 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.

Mr. Bertagna has extensive knowledge of: the
manufacturing industry, internet software development, building intellectual property and overall experience in growing early stage
high-tech companies. As a founder of GTX California and co-inventor of the GPS Shoe, this knowledge enables Mr. Bertagna to be
uniquely qualified to be on the Board of Directors.





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Table of Contents


Alex McKean – Interim Chief Financial Officer

Mr.
McKean was appointed as our Interim Chief Financial Officer in October 2011, a position that he has agreed to hold until a replacement
CFO is identified. He is currently also the Chief Financial Officer of Encore Brands, Inc., a position he has held since October
2009.  Previous to that, he acted as an independent management consultant under his own firm, McKean Financial Consulting
as well as an independent contractor with Robert Half International and Ajilon Finance. Prior to establishing his own firm, during
2004-2007 Mr. McKean was with Parson Consulting working in such areas as: strategy, financial modeling, SEC filings, process management
and Sarbanes Oxley. Mr. McKean has held positions as a Controller and VP of Finance at 24:7 Film from 2002-2004, VP of Finance
at InternetStudios.com from 2000-2002, Director of FP&A/SVP at Franchise Mortgage Acceptance Company from 1998-2000, as Corporate
Accounting Manager/Treasurer of Polygram Filmed Entertainment from 1996-1998 and Assistant Treasurer/Controller for State Street
Bank from 1989-1996.

Mr.
McKean holds an International MBA from Thunderbird's School of Global Management and undergraduate degrees in Finance and Political
Science from Trinity University.

Christopher M. Walsh - Chief Operating Officer

Mr. Walsh joined this company as its
Chief Operating Officer in March 2008. Mr. Walsh began his career with Nike in 1974 and subsequently established and implemented
Nike’s first manufacturing operation in the Far East. In 1989, Mr. Walsh joined Reebok International as Vice President of
Production. In that role he established the Company's inaugural Asian organization headquartered in Hong Kong with satellite organizations
across Asia, 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.

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.

Mr. Rosenbaum has a long history in the consumer
products industry, electronics and software sales and development. Mr. Rosenbaum is a co-founder of GTX Corp, was the first large
investor and has assisted in the overall vision and development of the Company since inception. Mr. Rosenbaum has served on numerous
private and community public boards and this unique blend of experience and history, combined with his strategic and tactical insight,
makes Mr. Rosenbaum an asset to the GTX Corp Board.





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Table of Contents


Andrew Duncan – Director, Member of Audit Committee,
Corporate Secretary and Treasurer

Mr.
Duncan has been working in the consumer electronics and technology licensing business for over 20 years.  Since 2006
he has been the CEO of ClearPlay International, a software licensing company.  Prior thereto, he founded Global TechLink
Consultants Inc., a technology consultancy company, specializing in technology licensing, multimedia, communication and application
technology on a global basis, including Interactive TV, Digital downloads/streaming and Consumer Electronics.  From 1994
to 2001, Mr. Duncan worked as Vice President Consumer Electronics for Gemstar TV Guide International (Los Angeles USA).

Mr.
Duncan earned his honors degree in Chemistry from Nottingham University and postgraduate qualifications in Marketing and Direct
Marketing from London University (Kings College). He also has a Certificate of Business Management from the Anderson School of
Business UCLA.

Mr. Duncan’s experience in global intellectual
property, branding and licensing, uniquely qualifies him to serve on our Board. Mr. Duncan’s long involvement in global business
development, with an extensive background working in both Europe and Asia as a business strategist for major corporations, directly
assists the Board in its international strategic planning objectives and activities.



Greg Provenzano – Director, Member of Audit
Committee

Mr. Provenzano has spent over 30
years in the electronic components and design solutions business. He currently is the Vice President of Global Engineering at
Arrow Electronics. Prior to his current position, he was President at WPG Americas and from July 2002 until July 2005, Mr.
Provenzano served as Senior Vice President and Regional President of Memec Americas (now AVNET Electronics Company). From
1997 until 2002, he was President and Chief Executive Officer of Memec Insight, Inc.

Mr. Provenzano holds a B.A. from the
University of California, Santa Barbara and an M.B.A. from Pepperdine University.

Mr. Provenzano is currently working in the
hardware, computer and electronics industry and brings to the board a long career and deep knowledge of the electronics hardware
business, sourcing, manufacturing and finance. Mr. Provenzano is a valuable and strategic member of the GTX Board and brings direct
expertise in operations, contract negotiations, human resource recruiting and management.



Patrick Aroff - Director

Mr. Aroff was an initial investor in
GTX California and has been an advisor to GTX California since September 2002. He 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 co-founded Encore Brands, LLC, a beverage company, where he served as its Chief Executive Officer and a Managing Member
until October 2008. Since 2008 Mr. Aroff has been providing brand consulting and development services to the beverage industry
including formula concepts, brand names, packaging and marketing.

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.

Mr. Aroff has experience in both small
entrepreneurial start-up companies and large corporations. He has founded several companies and has over 18 years of marketing
and advertising experience in large companies, which assists the board as the company commercialized its current and future products.



35


Table of Contents


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:

| | · | On April 4, 2012, several of our directors and officers were granted shares for services, for which Form 4s were not timely
filed. On June 26, 2012, Form 4s were filed for each officer and director for the issuances: Patrick Bertagna – 931,250 shares,
Patrick Aroff – 181,250 shares, Andrew Duncan – 181,250 shares, Greg Provenzano 181,250. On February 19, 2013 a Form
5 was filed for 181,250 shares granted to Louis Rosenbaum.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On June 22, 2012, Chris Walsh was granted 200,000 shares of our common stock for services rendered, however a Form 4 was not
timely filed. On June 26, 2012 a Form 4 was filed for Mr. Walsh.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | During the period from April 23, 2012 through May 9, 2012 Louis Rosenbaum sold a total of 100,000 shares of common stock for
which a Form 4 was not timely filed. On May 11, 2012 a Form 4 was filed for Mr. Rosenbaum
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On January 23, 2013, Louis Rosenbaum and Alex McKean were each granted 200,000 shares of common stock for services rendered
for which a Form 4 was not timely filed. On February 19, 2013 Form 4s were filed for Mr. Rosenbaum and Mr. McKean.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On February 11, 2013, several of our directors and officers were granted shares for services, for which Form 4s were not timely
filed. On February 19. 2013, Form 4s were filed for each officer and director for the issuances: Patrick Bertagna – 200,000
shares, Patrick Aroff – 200,000 shares, Andrew Duncan – 200,000 shares, Louis Rosenbaum 200,000. On April 5, 2013 a
Form 4 was filed for 200,000 shares granted to Greg Provenzano.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36


Table of Contents


ITEM 11.EXECUTIVE
COMPENSATION

Summary Compensation Table.
The following table sets forth the compensation for the fiscal years ended December 31, 2012 and 2011 for services rendered to
us by all persons who served as our Chief Executive Officer and our Chief Financial Officer
and most highly compensated executive officers other than our Chief Executive Officer and
Chief Financial Officer (collectively, the “Named Executive Officers”) who received compensation in excess of $100,000
in 2012.

Summary Compensation Table

|Name andPrincipal Position |      | Fiscal Year Ended 12/31 |        | Salary
        ($) |   | Bonus
        ($) |        | Stock Awards
        ($) |   | Option Awards
        ($) |  |   | All Other Compensation
        ($)(4) |         | Total
        ($)
|-------------------------- | ---- | ----------------------- | ------ | ------------------ | - | ----------------- | ------ | ------------------------ | - | ------------------------- |  | - | ------------------------------------- | ------- | -----------------
|Patrick Bertagna(1)        |      | 2012                    |        | 150,000            |   | 33,933            |        | 37,287                   |   | –                         |  |   | 12,995                                |         | 121,080          
|                           |      | 2011                    |        | 150,000            |   | –                 |        | 104,493                  |   | –                         |  |   | 17,210                                |         | 271,703          
|                           |      |                         |        |                    |   |                   |        |                          |   |                           |  |   |                                       |         |                  
|Alex McKean(2)             |      | 2012                    |        | 20,502             |   | –                 |        | –                        |   | –                         |  |   | –                                     |         | 20,502           
|                           |      | 2011                    |        | 7,815              |   | –                 |        | 8,000                    |   | –                         |  |   | –                                     |         | 15,815           
|                           |      |                         |        |                    |   |                   |        |                          |   |                           |  |   |                                       |         |                  
|Christopher Walsh(3)       |      | 2012                    |        | 96,000             |   | –                 |        | 8,000                    |   | –                         |  |   | –                                     |         | 104,000          
|                           | 2011 |                         | 94,000 |                    | – |                   | 75,225 |                          | – |                           |  | – |                                       | 169,225





|(1) | Mr. Bertagna, our Chief Executive Officer has agreed to accrue portions of his salary in an effort to preserve cash for other working capital needs of the Company.  As of December 31, 2012 and 2011 $135,250 and $51,250, respectively, of Mr. Bertagna’s salary was accrued for such purposes.  Mr. Bertagna was granted 931,250 shares of common stock (of which 750,000 shares represented a bonus) on April 15, 2012 which vested ratably throughout 2012 with a weighted average fair value of $0.046 per share, 200,000 shares of common stock valued at $0.04 per share on June 22, 2012, and 1,000,000 shares of common stock valued at $0.02 per share on October 2, 2012.  During 2011, Mr. Bertagna was granted 250,000 shares of common stock valued at $0.0561 per share on January 25, 2011, 509,000 shares of common stock valued at $0.0575 per share on April 1, 2011, 1,200,000 shares of common stock valued at $0.05 per share on June 23, 2011 and 15, 000 shares of common stock valued at $0.08 per shares on December 23, 2011.  The shares issued to Mr. Bertagna on June 22, 2012, October 2, 2012 and June 23, 2011  noted above were issued as payment for accrued wages valued at $28,000 for the 2012 issuances and $60,000 for the 2011 issuances.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. McKean, our Interim Chief Financial Officer has agreed to accrue portions of his salary in an effort to preserve cash for other working capital needs of the Company.  As of December 31, 2012 $12,170 was owed to Mr. McKean for his services as our Interim Chief Financial Officer.  Mr. McKean was granted 100,000 shares of common stock valued at $0.08 per share on December 2, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(3) | Mr. Walsh, our Chief Operating Officer,has agreed to accrue portions of his salary in an effort to preserve cash for other working capital needs of the Company.  As of December 31, 2012 and 2011, $117,000 and $43,500, respectively of Mr. Walsh’s salary was owed to Mr. Walsh for his services as COO.  Mr. Walsh was granted 200,000 shares of common stock valued at $0.04 per share on June 22, 2012 as payment for accrued wages.  During 2011, Mr. Walsh was granted 250,000 shares of common stock valued at $0.0561 per share on January 25, 2011, 1,200,000 shares of common stock valued at $0.05 per share on June 23, 2011 and 15,000 shares of common stock valued at $0.08 per shares on December 23, 2011.  The 1,200,000 shares of common stock granted on June 23, 2011 noted above were issued as payment for accrued wages valued at $60,000.                                                                                                                                                                                                                                                                                                                                                                                                               
|(4) | The values shown in this column include additional employee benefits paid including travel, health insurance, auto lease payments and cellular phone service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



Subsequent to December 31, 2012, the
Board of Directors authorized a $75,000 bonus to Mr. Bertagna, which as of the date of the Annual Report has not been paid, for
his services as Chief Executive Officer and granted him 500,000 shares of common stock valued at $16,000 as payment for accrued
wages.



37


Table of Contents


Outstanding Equity Awards

The following table sets forth information
as of December 31, 2012 concerning unexercised options, unvested stock and equity incentive plan awards for the Named Executive
Officers.

Outstanding Equity Awards at Fiscal
Year-End

|Name        |  | Number of Securities Underlying Unexercised Options
        (#) Exercisable |  | Number of Securities Underlying Unexercised Options
        (#) Unexercisable |  | Equity
        Incentive
        Plan Awards: Number of Securities Underlying
        Unexercised Unearned
        Options
        (#) |  | Option Exercise
        Price
        ($) |  | Option Expiration Date |  | Number of Shares or Units of
        Stock That Have Not Vested
        (#) |  | Market
        Value of
        Shares or
        Units of
        Stock That
        Have Not
        Vested
        ($) |  | Equity
        Incentive Plan Awards: Number
        of Unearned
        Shares, Units
        or Other rights
        That Have
        Not Vested
        (#) |  | Equity
        Incentive Plan Awards: Market
        or Payout Value
        of Unearned
        Shares, Units
        or Other Rights
        That Have
        Not Vested
        ($)
|----------- |  | --------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- |  | ---------------------- |  | --------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Patrick     |  | 62,497(1)                                                                   |  | --                                                                            |  | --                                                                                                                                     |  | $.75/share                                |  | 2012-2014              |  | --                                                                          |  | --                                                                                                                        |  | --                                                                                                                                                              |  | --                                                                                                                                                                                     
|Bertagna    |  | 54,000(2)                                                                   |  | --                                                                            |  | --                                                                                                                                     |  | $.18/share                                |  | 2013                   |  | --                                                                          |  | --                                                                                                                        |  | --                                                                                                                                                              |  | --                                                                                                                                                                                     
|            |  | 120,000(3)                                                                  |  | --                                                                            |  | --                                                                                                                                     |  | $.17/share                                |  | 2013-2014              |  | --                                                                          |  | --                                                                                                                        |  | --                                                                                                                                                              |  | --                                                                                                                                                                                     
|            |  | 75,000(4)                                                                   |  | --                                                                            |  | --                                                                                                                                     |  | $.17/share                                |  | 2013-2014              |  | --                                                                          |  | --                                                                                                                        |  | --                                                                                                                                                              |  | --                                                                                                                                                                                     
|Christopher |  | 54,000(2)                                                                   |  | --                                                                            |  | --                                                                                                                                     |  | $.18/share                                |  | 2013                   |  | --                                                                          |  | --                                                                                                                        |  | --                                                                                                                                                              |  | --                                                                                                                                                                                     
|Walsh       |  | 120,000(3)                                                                  |  | --                                                                            |  | --                                                                                                                                     |  | $.17/share                                |  | 2013-2014              |  | --                                                                          |  | --                                                                                                                        |  | --                                                                                                                                                              |  | --                                                                                                                                                                                     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For his services as a member of the board of directors, on March 16, 2008 Patrick Bertagna 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 vested on March 16, 2011.  The options expire on the third anniversary of the vesting date. From March 16, 2012 through December 31, 2012 87,503 of the options have expired.

| | (2) | 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 vested 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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | On March 24, 2010, each officer received an option to purchase up to 120,000 shares of common stock at $0.17 per share. The
120,000 options vested at a rate of 10,000 each month for the 12 months beginning on April 1, 2010. The options expire on the third
anniversary of the vesting date.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(4)For his services
as a member of the board of directors, on March 24, 2010 Patrick Bertagna received an option to purchase up to 75,000 shares of
common stock at $0.17 per share. The 75,000 options vest at a rate of 6,250 each month for the 12 months beginning on April 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.



38


Table of Contents


Director Compensation

We have no formal plan for compensating
our directors for their service in their capacity as directors although such directors are expected to receive shares of common
stock and/or 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, 2012. 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
        ($) | Stock
        Awards
        ($) | Option
        Awards
        ($) | Non-Equity
        Incentive Plan
        Compensation
        ($) | Change in
        Pension Value
        and
        Nonqualified
        Deferred
        Compensation
        Earnings | All Other
        Compensation
        ($) | Total
        ($)
|------------------ |  | -- | --------------------------------------------------------------- | -------------------------------- | --------------------------------- | ------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -----------------
|                   |  |    |                                                                 |                                  |                                   |                                                                    |                                                                                                                         |                                            |                  
|Louis Rosenbaum(1) |  | -- | 9,287                                                           | 8,204                            | N/A                               | N/A                                                                | N/A                                                                                                                     | 17,491                                     |                  
|                   |  |    |                                                                 |                                  |                                   |                                                                    |                                                                                                                         |                                            |                  
|Andrew Duncan(2)   |  | -- | 9,287                                                           | --                               | N/A                               | N/A                                                                | N/A                                                                                                                     | 33,287                                     |                  
|                   |  |    |                                                                 |                                  |                                   |                                                                    |                                                                                                                         |                                            |                  
|Greg Provenzano(3) |  | -- | 9,287                                                           | --                               | N/A                               | N/A                                                                | N/A                                                                                                                     | 9,287                                      |                  
|                   |  |    |                                                                 |                                  |                                   |                                                                    |                                                                                                                         |                                            |                  
|Patrick Aroff(4)   |  | -- | 9,287                                                           | --                               | N/A                               | N/A                                                                | N/A                                                                                                                     | 9,287                                      |                  
|                   |  |    |                                                                 |                                  |                                   |                                                                    |                                                                                                                         |                                            |                  

---

| | (1) | Mr. Rosenbaum had 2,471,415 shares of common stock and 477,497 options outstanding as of December 31, 2012.
| | --- | -----------------------------------------------------------------------------------------------------------

| | (2) | Mr. Duncan had 2,051,579 shares of common stock and 75,000 options outstanding as of December 31, 2012. Mr. Duncan also provides
consulting services to the Company for our international operations. During 2012, Mr. Duncan earned $62,024 relating to such services
of which $39,500 remained accrued as of December 31, 2012 in an effort to conserve cash for working capital needs. During 2012,
Mr. Duncan was granted 1,150,000 shares of common stock valued at $22,024 as payment for accrued wages.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Mr. Provenzano had 431,908 shares of common stock and 82,500 options outstanding as of December 31, 2012.
| | --- | ---------------------------------------------------------------------------------------------------------

| | (4) | Mr. Aroff had 677,825 shares of common stock and 167,497 options outstanding as of December 31, 2012.
| | --- | -----------------------------------------------------------------------------------------------------



On February 11, 2013, the Company issued a
total of 1,100,000 shares of common stock to its board of directors for their continued service on the Board during 2013. The shares
include repurchase rights whereby the Company retains the rights to acquire the shares from the
stock recipients. Such repurchase rights lapse ratably over twelve months at a rate of 1/12th per month beginning on
January 1, 2013.





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Employment Agreements

The following are summaries of the
employment agreements with the Company’s executive officers:

Patrick E. Bertagna, our Chief
Executive Officer and President, is employed pursuant to a written agreement dated as of March 14, 2008. The agreement was for
a term of two years, but contained a provision under which the agreement is automatically extended for additional one-year periods
unless either party provides written notice to the contrary at least 60 days prior to the end of the term then in effect. Mr. Bertagna
has requested that his employment agreement be reviewed and revised by the Board of Directors. Until his new employment agreement
is completed, Mr. Bertagna will remain employed under the current agreement. As such, Mr. Bertagna receives a base salary of $150,000
per year; however, in order to preserve cash for other working capital needs, Mr. Bertagna has agreed to accrue portions of his
salary in the past and he is continuing to do so in 2013. 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.

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.

Alex McKean,
became the Company’s Interim Chief Financial Officer on October 3, 2011 and is not employed pursuant to a formal employment
agreement. As a signing bonus, Mr. McKean was granted 100,000 shares of our common stock. Mr. McKean has agreed to serve as our
interim CFO until a new CFO is identified.

Christopher M. Walsh, our Chief
Operating Officer, is employed pursuant to a written agreement dated as of March 14, 2008. The agreement has a term of two years;
provided however, that it is automatically extended for additional one-year periods unless either party provides written notice
to the contrary at least 60 days prior to the end of the term then in effect. Mr. Walsh accrued a salary of $96,000 during 2012
and 2011 however, in order to preserve cash for other working capital needs, Mr. Walsh has agreed to accrue portions of his salary
and he is continuing to do so in 2013. 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.

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.



40


Table of Contents


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.

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.



41


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ITEM 12.	SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain
information as of April 15, 2013, 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 92,460,727 shares of common stock issued and outstanding as of April 15, 2013.

|Name and Address
        of Beneficial Owner                         |  | Amount and Nature
        of Beneficial Ownership(1) |  | Percent
        of Common Stock
|-------------------------------------------------------------------- |  | ---------------------------------------------------- |  | -------------------------------
|Patrick E. Bertagna(2)
        CEO and Chairman of the Board         |  | 8,081,123 shares                                     |  | 8.72%                          
|                                                                     |  |                                                      |  |                                
|Alex McKean(3)
        Interim Chief Financial Officer               |  | 320,000 shares                                       |  | 0.35%                          
|                                                                     |  |                                                      |  |                                
|Christopher Walsh(4)
        Chief Operating Officer                 |  | 2,028,836 shares                                     |  | 2.19%                          
|                                                                     |  |                                                      |  |                                
|Louis Rosenbaum(5)
        Director                                  |  | 3,375,160 shares                                     |  | 3.63%                          
|                                                                     |  |                                                      |  |                                
|Andrew Duncan(6)
        Director, Corporate Secretary and Treasurer |  | 2,407,829 shares                                     |  | 2.60%                          
|                                                                     |  |                                                      |  |                                
|Greg Provenzano(7)
        Director                                  |  | 694,908 shares                                       |  | 0.75%                          
|                                                                     |  |                                                      |  |                                
|Patrick Aroff(8)
        Director                                    |  | 986,570 shares                                       |  | 1.07%                          
|                                                                     |  |                                                      |  |                                
|All directors and named executive officers as a group (8 persons)    |  | 17,908,176 shares(9)                                 |  | 19.32%                         
|                                                                     |  |                                                      |  |                                



---

| | (1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the
power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the
disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons
share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person
if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which
the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As
a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual
ownership or voting power with respect to the number of shares of common stock actually outstanding.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The 8,081,123 shares beneficially owned include 7,870,378 shares of common stock, and 210,745 stock
options.
| | --- | ------------------------------------------------------------------------------------------------------------

(3)The 320,000 shares beneficially owned consist solely of common stock.

| | (4) | The 2,028,836 shares beneficially owned include 1,911,836 shares of common stock and 117,000 stock
options.
| | --- | -----------------------------------------------------------------------------------------------------------

| | (5) | The 3,375,160 shares beneficially owned include 2,971,415 shares of common stock and 403,745 stock
options.
| | --- | -----------------------------------------------------------------------------------------------------------

| | (6) | The 2,407,829 shares beneficially owned include 2,351,579 shares of common stock and 56,250 stock
options.
| | --- | ----------------------------------------------------------------------------------------------------------

| | (7) | The 694,908 shares beneficially owned include 634,908 shares of common stock and 60,000 stock options.
| | --- | ------------------------------------------------------------------------------------------------------

| | (8) | The 986,570 shares beneficially owned include 877,825 shares of common stock and 108,745 stock
options.
| | --- | -------------------------------------------------------------------------------------------------------

| | (9) | Includes 970,235 shares of our common stock issuable upon exercise of options.
| | --- | ------------------------------------------------------------------------------



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-K.



42


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| | ITEM | 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
| | ---- | ----------------------------------------------------------------------------

Director Independence. Four
of our five 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.

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:

|                       | 2012    |  | 2011   
|---------------------- | ------- |  | -------
|Audit Fees (1)         | $44,590 |  | $50,550
|Audit-Related Fees (2) | -       |  | 2,725  
|Tax Fees (3)           | -       |  | -      
|All Other Fees         | -       |  | -      
|Total                  | $44,590 |  | $53,275



| | (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 our Registration Statement filed with the Securities Exchange Commission during 2011.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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.



43


Table of Contents


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 46. The following exhibits are filed
with, or are incorporated by reference into, this Annual Report.



|Exhibit Number  |                                                                                               | Description                                                                                                    
|--------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------
|                |                                                                                               |                                                                                                                
|3.1             |                                                                                               | Articles of Incorporation of the Registrant filed with the State of Nevada on April 7, 2006 (2)                
|3.2
        4.1 |                                                                                               | Amended and Restated Bylaws of the Registrant(3)
        2008 Equity Compensation Plan(7)                      
|10.1            |                                                                                               | Employment Agreement between the Registrant and Patrick E. Bertagna dated March 14, 2008(3)                    
|10.2            |                                                                                               | Employment Agreement between the Registrant and Christopher M. Walsh dated March 14, 2008(3)                   
|10.4            |                                                                                               | Registration Rights Agreement, dated November 16, 2009, between the Registrant and Dutchess Equity Fund, LP.(6)
|10.5            |                                                                                               | Form of Securities Purchase Agreement (August 2011 Private Placement)(8)                                       
|10.6            |                                                                                               | Form of Warrant Agreement (August 2011 Private Placement)(8)                                                   
|10.7            |                                                                                               | Form of Subscription Application (August 2011 Private Placement)(8)                                            
|14.1            |                                                                                               | Code of Business Conduct and Ethics(3)                                                                         
|21.1            |                                                                                               | Subsidiaries(4)                                                                                                
|23.1            |                                                                                               | Consent of LBB & Associates Ltd., LLP(1)                                                                       
|31.1            |                                                                                               | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act(1)                  
|31.2            | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act(1)
|32.1            | Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002(1)                   
|101.INS         |                                                                                               | XBRL Instance Document(9)                                                                                      
|101.SCH         |                                                                                               | XBRL Taxonomy Extension Schema(9)                                                                              
|101.CAL         |                                                                                               | XBRL Taxonomy Extension Calculation(9)                                                                         
|101.DEF         |                                                                                               | XBRL Taxonomy Extension Definition(9)                                                                          
|101.LAB         |                                                                                               | XBRL Taxonomy Extension Label(9)                                                                               
|101.PRE         |                                                                                               | XBRL Taxonomy Extension Presentation(9)                                                                        



---

|(1)                                  | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 8-K dated March 20, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4)                                  | Incorporated by reference to the Registrant’s Annual Report on Form 10-K dated March 20, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(5)                                  | Incorporated by reference to the Registrant’s Current Report on Form 8-K dated November 18, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                              
|(6)
        (7)
        
        (8) | Incorporated by reference to the Registrant’s Current Report
        on Form 8-K dated March 17, 2010.
        Previously filed on May 22, 2008 as an exhibit to our Registration
        Statement on Form S-8, File No. 333-151114 and incorporated herein by reference.
        Previously filed on October 3, 2011 as part of the Registrant’s
        Registration Statement on Form S-1 (File No. 333-177146) and incorporated herein by reference.                                                                      
|(9)                                  | In accordance with Rule 406T of Regulation
        S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K is furnished and shall not be deemed to be
        “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section,
        and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except
        as shall be expressly set forth by specific reference in such filing.







44


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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: April 15, 2013 | By:                           | /s/ Patrick E. Bertagna
|                     |                               | Patrick E Bertagna     
|                     |                               | Chief 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.

|3                       |                                                                    |               
|----------------------- | ------------------------------------------------------------------ | --------------
|Name                    | Title                                                              | Date          
|/s/ Patrick E. Bertagna | Chief Executive Officer and Director (Principal Executive Officer) | April 15, 2013
|/s/ Alex McKean         | Interim Chief Financial Officer (Principal Accounting Officer)     | April 15, 2013
|/s/ Patrick Aroff       | Director                                                           | April 15, 2013
|/s/ Louis Rosenbaum     | Director                                                           | April 15, 2013
|/s/ Greg Provenzano     | Director                                                           | April 15, 2013
|/s/ Andrew Duncan       | Director , Treasurer, Secretary                                    | April 15, 2013
|                        |                                                                    |               
|                        |                                                                    |               
|                        |                                                                    |               
|                        |                                                                    |               



45


Table of Contents




LBB & ASSOCIATES LTD., LLP

10260 Westheimer Road, Suite 310

Houston, TX 77042

Phone: (713) 800-4343 Fax: (713) 456-2408



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, 2012 and 2011, and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for each of the two years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
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 audits
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,
2012 and 2011, 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.



As discussed in Note 1 to the financial
statements, the Company’s recurring losses from operations and its likely need for additional financing in order to meet
its financial obligations for 2013 raise substantial doubt about its ability to continue as a going concern. The 2012 financial
statements do not include any adjustments that might result from the outcome of this uncertainty.



LBB & Associates Ltd., LLP

Houston, Texas

April 12, 2013



46


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|GTX CORP AND SUBSIDIARIES                                                                                                                                             
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                                                                                                                                           
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|                                                                                                                                                                      
|ASSETS                                                                                                                                                                
|                                                                                                                                                                      
|Current assets:                                                                                                                                                       
|Cash and cash equivalents                                                                                                                                             
|Accounts receivable, net                                                                                                                                              
|Inventory                                                                                                                                                             
|Other current assets                                                                                                                                                  
|                                                                                                                                                                      
|Total current assets                                                                                                                                                  
|                                                                                                                                                                      
|Property and equipment, net                                                                                                                                           
|Intangible assets                                                                                                                                                     
|                                                                                                                                                                      
|                                                                                                                                                                      
|Total assets                                                                                                                                                          
|                                                                                                                                                                      
|LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                        
|                                                                                                                                                                      
|Current liabilities:                                                                                                                                                  
|Accounts payable and accrued expenses                                                                                                                                 
|Accrued expenses - related parties                                                                                                                                    
|Deferred revenue                                                                                                                                                      
|Short-term debt                                                                                                                                                       
|Convertible promissory note, net of discount                                                                                                                          
|Derivative liability                                                                                                                                                  
|                                                                                                                                                                      
|Total current liabilities                                                                                                                                             
|                                                                                                                                                                      
|Total liabilities                                                                                                                                                     
|                                                                                                                                                                      
|Commitments and contingencies                                                                                                                                         
|                                                                                                                                                                      
|Stockholders’ equity (deficit):                                                                                                                                       
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding                                                                     
|Common stock, $0.001 par value; 2,071,000,000 shares authorized; 85,401,372 and 72,688,980  shares issued and outstanding at December 31, 2012 and  2011, respectively
|Additional paid-in capital                                                                                                                                            
|Accumulated deficit                                                                                                                                                   
|                                                                                                                                                                      
|Total stockholders’ equity (deficit)                                                                                                                                  
|                                                                                                                                                                      
|Total liabilities and stockholders’ equity (deficit)                                                                                                                  
|                                                                                                                                                                      
|See accompanying notes to consolidated financial statements                                                                                                           







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|GTX CORP AND SUBSIDIARIES                                  
|-----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS                      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Revenues                                                   
|                                                           
|Cost of goods sold                                         
|                                                           
|Gross margin                                               
|                                                           
|Operating expenses                                         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Total operating expenses                                   
|                                                           
|Loss from operations                                       
|                                                           
|Other income (expense)                                     
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Total other income (expense)                               
|                                                           
|Net loss                                                   
|                                                           
|Weighted average number of common                          
|                                                           
|                                                           
|Net loss per common
    share - basic and diluted          
|                                                           
|                                                           
|See accompanying notes to consolidated financial statements





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|GTX
    CORP AND SUBSIDIARIES                              
|-----------------------------------------------------------
|CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)   
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Balance, December 31, 2010                                 
|Issuance of common stock for services                      
|Issuance of common stock for assets                        
|Issuance of common stock for accrued expenses              
|Issuance of common
    stock in conjunction for cash       
|Issuance of warrants for services                          
|Conversion of Asher note payable                           
|Stock option compensation                                  
|Net loss                                                   
|Balance, December 31, 2011                                 
|Issuance of common stock for services                      
|Issuance of common stock for accrued expenses              
|Issuance of common
stock for cash                          
|Issuance of warrants for services                          
|Stock option compensation                                  
|Net loss                                                   
|Balance,  December 31, 2012                                
|                                                           
|                                                           
|See accompanying notes to consolidated financial statements
|                                                           





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|GTX CORP AND SUBSIDIARIES                                                 
|--------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                     
|                                                                          
|                                                                          
|                                                                          
|Cash flows from operating activities                                      
|Net loss                                                                  
|Adjustments to reconcile net loss to net cash used in operating activities
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Changes in operating assets and liabilities                               
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Net cash used in operating activities                                     
|                                                                          
|Cash flows from investing activities                                      
|                                                                          
|                                                                          
|Net cash used in investing activities                                     
|                                                                          
|Cash flows from financing activities                                      
|                                                                          
|                                                                          
|                                                                          
|Net cash provided by financing activities                                 
|                                                                          
|Net increase (decrease) in cash and cash equivalents                      
|                                                                          
|Cash and cash equivalents, beginning of year                              
|                                                                          
|Cash and cash equivalents, end of year                                    
|                                                                          
|Supplemental disclosure of cash flow information:                         
|Income taxes paid                                                         
|Interest paid                                                             
|                                                                          
|Supplementary disclosure of  noncash financing activities:                
|Issuance of common stock for development of Apps (Property & equipment)   
|Issuance of common stock for other current  and non-current assets        
|Issuance of common stock for accrued wages – related parties              
|Issuance of common stock for conversion of notes payable                  
|                                                                          
|See accompanying notes to consolidated financial statements               









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GTX CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012



1.	ORGANIZATION AND BASIS
OF PRESENTATION

GTX Corp and subsidiaries (the “Company”
or “GTX”) are engaged in businesses that design, develop and sell various interrelated and complementary products and
services in the Personal Location Services marketplace. GTX owns 100% of the issued and outstanding capital stock of Global Trek
Xploration (“GTX California”), LOCiMOBILE, Inc., and Code Amber News Service, Inc. (“CANS”).



GTX California focuses on hardware and software
design and development of products and services by offering a Global Positioning System (“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. LOCiMOBILE, Inc. developed and owns LOCiMobileTM,
a suite of mobile tracking applications that turn the iPhone, iPad, Android, BlackBerry and
other GPS enabled handsets into a tracking device which can then be tracked from handset to handset or 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, as
well as, marketing and selling the patent pending electronic personal health record Code Amber Alertag.



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.



Going Concern

The consolidated financial statements have
been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities
in the normal course of business for the foreseeable future.  The Company has incurred net losses of $1,217,509 and $1,466,743
for the years ended December 31, 2012 and 2011, respectively, has incurred losses since inception resulting in an accumulated deficit
of $13,930,955 as of December 31, 2012, and has negative working capital of $663,722 as of December 31, 2012.  A significant
part of our negative working capital position at December 31, 2012 consisted of $392,834 of amounts due to officers and management
of the Company for accrued wages.  The Company anticipates further losses in the development of its business.



The ability to continue as a going concern
is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to
raise additional capital through the future issuances of debt or equity is unknown. The obtainment of additional financing, the
successful development of the Company’s contemplated plan of operations, or its attainment of profitable operations are necessary
for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s
ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that
may result from the outcome of these aforementioned uncertainties.





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2.	SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES



Revenue Recognition

Revenues consist primarily of the sale of our
GPS device to Aetrex International Worldwide, Inc. “Aetrex” for use in the Aetrex NavistarTM GPS Shoe (the
“GPS Shoe”) and the related monthly service fee from subscribers, our mobile tracking applications sold via the Apple
iTunes Store and the Google Marketplace, the sale of GPS tracking devices and the related monthly service fees, licensing agreements,
and the sale of Code Amber Alertags.



The Company recognizes revenue from product
sales when the product is shipped to the customer and title has transferred. The Company recognizes application revenue when the
application is purchased by the customer. 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 both for the GPS
Shoes and GPS tracking devices, licensing agreements and annual subscriptions are recognized over the respective terms of the agreements.



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.



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
was $116,180 as of December 31, 2012 and 2011.



Shipping and Handling Costs

Shipping and handling costs are included in
cost of goods sold in the accompanying consolidated statement of operations.



Product Warranty

The Company’s warranty policy provides
repair or replacement of products (excluding GPS Shoe devices) returned for defects 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, 2012,
products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary.
The GPS Shoe devices are covered under the manufacturer’s standard limited warranty which covers any defects in materials
and workmanship for a period of 12 months following the purchase of the device by the customer.



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 the Accounting Standards Codification
(“ASC”) No. 820, “Disclosures About Fair Value of
Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides
a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes
the inputs used in the valuation methodologies in measuring fair value:



Level 1—Inputs
are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

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 carrying values for cash and cash equivalents,
accounts receivable, other current assets, accounts payable and accrued liabilities approximate their fair value due to their short
maturities.



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Reclassifications

For comparability, certain prior period amounts
have been reclassified, where appropriate, to conform to the financial statement presentation used in 2012.



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.



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, 2012 and 2011 the Company did not recognize any charges to expense 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

Under ASC 350-50 – Intangibles –
Goodwill and Other – Website Development Costs, costs and expenses incurred during the planning and operating stages
of the Company’s website development are expensed as incurred. 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 primarily for the development of our
smart-phone mobile applications (“Apps”). Software development costs are capitalized once technological feasibility
of a product is established and it is determined that such costs should be recoverable against future revenues. For products where
proven technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product
basis. Amounts related to software development that are not capitalized are charged immediately to product research and development
costs.



Commencing upon the related product’s
release, capitalized software development costs are amortized to cost of sales based upon the higher of (i) the ratio of current
revenue to total projected revenue or (ii) the straight-line method. The 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.



During the year ended December 31, 2012, management
assessed the value of our capitalized software development costs and determined that, based on the revenues generated from our
Apps, that the capitalized assets had been impaired. Accordingly, we wrote-down the software development costs to the estimated
net realizable value of approximately $44,000 and recognized an impairment charge of $103,000 in the accompanying consolidated
financial statements for the year ended December 31, 2012.



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Intangible Assets

The Company records identifiable intangible
assets acquired from other enterprises or individuals in an “arm’s length” transaction at cost. Intangible assets
consist primarily of a licensing agreement enabling the Company to sell its GPS-related vehicle tracking software and services
and the purchase price of Code Amber, LLC in 2008. The Company evaluates its intangible assets for impairment on a regular basis
and writes down the assets to net realizable value as deemed necessary. As of December 31, 2012 and 2011, the Company had capitalized
approximately $25,000 related to intangible assets. In accordance with ASC 350-30 “Intangibles – Goodwill and Other,
General Intangibles Other Than Goodwill” there has been no amortization of intangible assets as the assets have an infinite
useful life.





Derivative Instruments

Our debt or equity instruments may contain
embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from
the associated host instrument and accounted for separately as a derivative instrument liability.



Our derivative instrument liabilities are re-valued
at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits
to income, in the period in which the changes occur.  For bifurcated conversion options that are accounted for as derivative
instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model.  This
model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock
price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.



Net Loss Per Common 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, 2012 and 2011.



Research and Development

Research and development costs are clearly
identified and are expensed as incurred.  Included in general and administrative expenses in the accompanying consolidated
financial statements for the years ended December 31, 2012 and 2011, the Company incurred approximately $5,000 and $10,000 of
research and development costs, respectively.



Income Taxes

The Company uses the liability method of accounting
for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in
effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities
are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected
to be realized.



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 July 2012, the FASB issued ASU 2012-02,
Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, on testing
for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in
value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting
for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses
and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to
U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The Company’s adoption of this accounting
guidance does not have a material impact on the consolidated financial statements and related disclosures.

There were other updates recently issued, most
of which represented technical corrections to the accounting literature or application to specific industries and are not expected
to have a material impact on the Company’s financial position, results of operations or cash flows.



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3.	RELATED PARTY TRANSACTIONS





In order to preserve cash for other working capital needs various
members of management and Board Members agreed to accrue portions of their wages since 2011. As of December 31, 2012 and 2011,
the Company owed $392,834 and $121,820 for such accrued wages.



4.	INVENTORY



The components of inventory consist of the
following:



|                | December 31,
|--------------- | ------------
|                | 2012        
|Raw materials   | $           
|Work in process |             
|Finished goods  |             
|                |             
|Inventory       | $           



5.	PROPERTY AND EQUIPMENT



Property and equipment, net, consists of the
following:



|                                  |  | December 31,
|--------------------------------- |  | ------------
|                                  |  | 2012        
|Computer and office equipment     |  | $           
|Equipment                         |  |             
|Software                          |  |             
|Website development               |  |             
|Software development              |  |             
|Less: accumulated depreciation    |  |             
|                                  |  |             
|Total property and equipment, net |  | $           



Depreciation expense for the years ended December
31, 2012 and 2011 was $102,139 and $196,437, respectively.



During the year ended December 31, 2012, management
assessed the value of our capitalized software development costs and determined that, based on the revenues generated from our
Apps, that the capitalized assets had been impaired. Accordingly, we wrote-down the software development costs to the estimated
net realizable value of approximately $44,000 and recognized an impairment charge of $103,000 in the accompanying consolidated
financial statements.



6.	CONCENTRATIONS



Customer Concentrations

During January 2012, the Company delivered
1,500 GPS tracking devices to Aetrex Worldwide, Inc. (“Aetrex”) thereby increasing the total number of devices sold
to Aetrex to 4,500 and recognizing approximately $158,000 of revenue or 43% of total revenues during the year ended December 31,
2012. In accordance with its license agreement dated March 18, 2010 (the “License Agreement”) Aetrex has been granted
the right to embed our GPS tracking device into its Aetrex NavistarTM GPS Shoe (the “NavistarTM GPS
Shoe”) and has the inventory available for immediate delivery to consumers and channel partners. As these shoes are shipped
and activated GTX will realize, on average, $32.50 of gross revenue per month per pair. The License Agreement stipulates a one-year
warranty from the date of product acceptance by Aetrex. Based on management’s estimates, no accrual for warranty liability
is necessary as of December 31, 2012. The NavistarTM GPS Shoes are currently targeted at senior citizens afflicted with
dementia. The principal source of revenues from these shoes is expected to be realized from the monthly service fees (a portion
of which will be shared with Aetrex) that the owners of the NavistarTM GPS Shoes are required to pay.



Vendor Concentrations

We currently rely on one manufacturer to supply
us with our GPS tracking devices.



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7.	DEBT



Convertible Promissory Note - 2012

On November 14, 2012, the Company entered into
a convertible promissory note in the principal amount of $200,000 with a 10% original issue discount (the “Convertible Note”).
Upon closing of the Convertible Note, the lender made an initial $25,000 advance of consideration to the Company. The lender may
pay additional consideration to the Company as loan advances in such amounts and at such dates as the lender may choose in its
sole discretion. The principal amount of $27,500 outstanding on the note as of December 31, 2012, includes the payment of $25,000
plus the unamortized original issue discount of $2,500. The Convertible Note matures one year from the effective date of each payment.
If the Company repays the amount advanced within 90 days, the interest rate will be 0%, otherwise a one-time interest charge of
10% shall be applied to the principal sum outstanding. The Company may repay the amount advanced within 180 days from the date
received, after which we may not make further payments on that advance amount without written approval from the Lender. The Convertible
Note is convertible into shares of common stock of the Company at a price equal to the lesser of $0.025 or 70% of the lowest trade
price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will the
Lender convert any amount of the Note into common stock that would result in the Lender owning more than 4.99% of the common stock
outstanding. As of December 31, 2012, the Company had not made any payments on the Convertible Note.



In connection with the issuance of the Convertible
Note, the Company has applied the guidance of FASB ASC Topic No. 815-40. Accordingly, the conversion feature is accounted for as
a derivative liability at the date of issuance and adjusted to fair value through earnings at each reporting date. At the time
of conversion, any remaining derivative liability will be charged to additional paid-in capital.



For purpose of determining the fair market
value of the derivative liability, the Company used the following significant assumptions in the Black Scholes option valuation
model: expected dividend yield of 0%; expected volatility of 439%; risk-free interest rate of 1.59% and an expected holding period
of 1 year. The resulting values, at the date of issuance, were allocated to the proceeds received and applied as a discount to
the face value of the Notes.



The following table summarizes the convertible
debt activity for the period from November 13, 2012 to December 31, 2012:



|Description                     |  | Convertible Notes |         |   | Derivative Liability |   |         | Total | 
|------------------------------- |  | ----------------- | ------- | - | -------------------- | - | ------- | ----- | 
|                                |  |                   |         |   |                      |   |         |       | 
|Fair value at November 13, 2012 |  | $                 | -       |   |                      | $ | -       |       | 
|Proceeds from Convertible Note  |  |                   | 25,000  |   |                      |   | -       |       | 
|Original Issue Discount         |  |                   | 2,500   |   |                      |   | -       |       | 
|Discount on Convertible Note    |  |                   | (27,500 | ) |                      |   | -       |       | 
|Derivative liability            |  |                   | -       |   |                      |   | 47,594  |       | 
|Amortization of debt discount   |  |                   | 3,541   |   |                      |   | -       |       | 
|Change in fair value            |  |                   | -       |   |                      |   | (17,214 | )     | 
|Fair value at December 31, 2012 |  | $                 | 3,541   |   |                      | $ | 30,380  |       | 
|                                |  |                   |         |   |                      |   |         |       | 



Line Agreement

On June 27, 2012, the Company entered into
an agreement with an unrelated third party (the “Holder”) for a $55,000 line of credit (the “Line Agreement”).
In accordance with the Line Agreement, the Company is required to repay 115% of each amount advanced (the “Advance Amount”)
and must make mandatory payments on each Advance Amount every 30 days from the date the Advance Amount is requested in an amount
equal to 1/3 of the Advance Amount. All Advance Amounts are required to be repaid in full by the maturity date, November 27, 2012.
The Company issued the Holder 250,000 shares of its common stock as an incentive for entering into the Line Agreement. The stock
was valued at the current market price of $0.04 per share or $10,000. The Company paid the Holder administrative fees totalling
$2,000 for due diligence, document creation expense, closing costs, and transaction administration expenses. In accordance with
the Line Agreement, the Company is obligated to issue up to 640,645 shares to secure the re-payment of the Advance Amounts. The
Company was unable to make the mandatory payments or repay the Advance Amounts by the November 27, 2012 maturity date. As of December
31, 2012, we had borrowed $30,000 under the Line Agreement, accrued an additional $4,500 in finance costs and made payments to
the Holder totalling $21,000 resulting in a net amount owed under the Line Agreement of $13,500 at December 31, 2012.



On January 14, 2013, the Holder of the Line
Agreement entered into an assignment agreement with an unrelated third party (the “Assignee”) whereby the Assignee
assumed all of the Holder’s right, title, and interest in and to the Line Agreement in the aggregate amount of $13,500 (the
“Note”). As consideration for the assignment of the Note, on January 15, 2013 we paid the Assignee 2,459,355 shares
of common stock and the Assignee paid the Holder $13,500. The market value of the 2,459,355 shares of common stock on the date
of the assignment was approximately $49,000, or $0.02 per share resulting in the Company incurring finance costs of approximately
$35,500.



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Aetrex Loan

On September 19, 2012, Aetrex loaned the Company
$10,000 to fund working capital needs as the initial sales of the GPS Shoes have been slow. The loan
is non-interest bearing and was due on November 30, 2012. As of December 31, 2012, the Company has not repaid the Aetrex loan and
$9,500 remains outstanding. In addition to the Aetrex loan, as of December 31, 2012 the Company owes Aetrex approximately $15,000
primarily related to payments received by GTX for sales of theGPS Shoes, as well as, Aetrex’s
portion of monthly service fees related to theGPS Shoes.



8.	INCOME TAXES



The provision for refundable Federal income
tax consists of the following as of December 31:



|                                                               |           |           | 2012          |           | 2011        
|-------------------------------------------------------------- | --------- | --------- | ------------- | --------- | ------------
|                                                               |           |           |               |           |             
|Federal
income tax benefit calculated at statutory rate of 35% | $ 425,000 |           | $  513,000   
|Less:  Stock based compensation expense                        |           | (110,000) |               | (151,000)
|Change in valuation allowance                                  |           | (315,000) |               | (362,000)
|Net income tax provision                                       |           |           | $           - |           | $          -



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:



|                                     |  |             | 2012           |            | 2011           
|------------------------------------ |  | ----------- | -------------- | ---------- | ---------------
|Deferred tax asset attributable to:  |  |             |                |           
|Net operating losses carried forward |  | $ 2,968,000 |                | $2,653,000
|Less:  Valuation allowance           |  |             | (2,968,000)    |            | (2,653,000)    
|Net deferred tax asset               |  |             | $            - |            | $     
       -



The Company established a full valuation allowance. The Company continually reviews the adequacy of the valuation allowance
and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will
be realized.



At December 31, 2012, the Company had
an unused net operating loss carryover approximating $8,481,000 that is available to offset future taxable income, which 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.



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9.	EQUITY



Common Stock

The Company
issued the following shares of common stock:

|                                     | 2012            |         | 2011       
|------------------------------------ | --------------- | ------- | -----------
|                                     | Value of Shares |         | # of shares
|Shares issued for services rendered  | $               | 175,500 |            
|Shares issued for accrued expenses   |                 | 76,000  |            
|Shares issued with repurchase rights |                 | 67,867  |            
|Shares issued for financing          |                 | 10,000  |            
|                                     |                 |         |            
|Total restricted shares issued       | $               | 329,367 |            



Shares
issued for services rendered were to various members of management, employees and consultants and are expensed as Stock-Based
Compensation in the accompanying consolidated statement of operations. Shares issued for accrued expenses were granted to our
Chief Executive Officer, Chief Operating Officer, a Board Member and a member of management as payment for portions of
amounts owed to them for services rendered that had been accrued since 2011 (See Note 2). Shares issued with repurchase
rights relate to shares granted to members of management and the Board of Directors whereby the Company retained the rights
to acquire the shares from the stock recipients and such repurchase rights lapsed ratably over twelve months at a rate of
1/12th per month beginning on January 1, 2012. Upon vesting, the shares are revalued based on the average stock
price during the respective month and the related stock based compensation expense is recognized. Shares issued for financing
relate toshares issued as an incentive for the Holder to enter into the Line Agreement (see Note 7).



In
addition to the restricted shares of common stock discussed above,the
Company issued the following shares of stock from its 2008 Equity Compensation Plan (the “2008 Plan”):



|                                                           | 2012            |   | 2011       
|---------------------------------------------------------- | --------------- | - | -----------
|                                                           | Value of Shares |   | # of shares
|Shares issued for development of mobile phone applications | $               | - |            
|Shares issued for services rendered                        |                 | - |            
|                                                           |                 |   |            
|Total shares issued from 2008 Plan                         | $               | - |            



The shares issued
for services related to the development of our mobile phone applications were to one consultant, have been capitalized as Property
and Equipment in the accompanying consolidated balance sheet and will be depreciated through cost of goods sold. The shares issued
for services rendered were to various members of management, employees and consultants and were expensed as Stock-Based Compensation
in the accompanying consolidated statement of operations.

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.

On September
10, 2012, the Company entered into a six-month consulting agreement for corporate advisory services and granted the consulting
firm 2,000,000 shares of common stock (valued at $40,000) and a warrant to purchase up to 2,000,000 shares of common stock. The
warrant has a three-year term and may be exercised at an exercise price of $0.02 per share.Thefair value of the warrant is estimated to be $29,006 using the Black-Scholes option pricing model based on the following assumptions:
expected dividend yield 0%, expected volatility 126%, risk-free interest rate 0.25%, and expected life of 36 months. The value
of the common stock shares and warrant totaling $69,000 has been expensed as stock based compensation during the year ended December
31, 2012.



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A summary of the Company’s warrant activity
and related information is provided below:



|                                                 |  | Exercise Price |             | Number of
        Warrants | 
|------------------------------------------------ |  | -------------- | ----------- | -------------------------- | 
|Outstanding and exercisable at December 31, 2010 |  | $              | 0.75 – 1.50 | 3,201,750                  | 
|Warrants exercised                               |  |                |             | -                          | 
|Warrants granted                                 |  |                | 0.08        |                            | 
|Warrants expired                                 |  |                | 1.50        |                            | 
|Outstanding and exercisable at December 31, 2011 |  |                | 0.08 - 0.40 |                            | 
|Warrants exercised                               |  |                |             |                            | 
|Warrants granted                                 |  |                | 0.02        |                            | 
|Warrants expired                                 |  |                |             |                            | 
|Outstanding and exercisable at December 31, 2012 |  | $              | 0.02 - 0.40 |                            | 
|                                                 |  |                |             |                            | 





|Stock Warrants as of December 31, 2012 | 
|-------------------------------------- | 
|Exercise                               | 
|Price                                  | 
|                                       | 
|$0.02                                  | 
|$0.08                                  | 
|$0.40                                  | 
|                                       | 



Common Stock Options

Under the Company’s
2008 Plan, 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 Company recognizes option expense ratably
over the vesting periods. During 2012 and 2011, the Company recorded compensation expense related to options granted under the
2008 Plan of $15,974 and $38,913, respectively.



The fair value of option grants was estimated
using the Black-Scholes option-pricing model with the following weighted average assumptions:



|                         | 2012  | 2011
|------------------------ | ----- | ----
|Expected dividend yield  | 0.00% | N/A 
|Risk-free interest rate  | 0.50% | N/A 
|Expected volatility      | 60%   | N/A 
|Expected life (in years) | 3     | N/A 



No options were granted during 2011.



The Plan provides for the issuance of a maximum
of 7,000,000 shares of which, after adjusting for estimated pre-vesting forfeitures, approximately 572,000 were still available
for issuance as of April 10, 2013.





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Stock option activity under the Plan for the
period from December 31, 2010 to December 31, 2012 is summarized as follows:



|                                     |  | Shares    |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (in years) |  | Grant Date Fair Value
|------------------------------------ |  | --------- |  | ------------------------------- |  | ------------------------------------------------------ |  | ---------------------
|Outstanding at December 31, 2010     |  | 2,915,500 |  | $0.61                           |  | 1.23                                                   |  | 458,201              
|Options granted                      |  | -         |  | $      -                        |  | -                                                      |  | -                    
|Options exercised                    |  | -         |  | $      -                        |  | -                                                      |  | -                    
|Options cancelled/forfeited/ expired |  | (338,922) |  | $0.85                           |  | -                                                      |  | (131,884)            
|Outstanding at December 31, 2011     |  | 2,576,578 |  | $0.34                           |  | 2.23                                                   |  | $326,317             
|Options granted                      |  | 450,000   |  | $0.08                           |  | -                                                      |  | 14,768               
|Options exercised                    |  | -         |  | $      -                        |  | -                                                      |  | -                    
|Options cancelled/forfeited/ expired |  | (698,008) |  | $0.41                           |  | -                                                      |  | (135,851)            
|Outstanding at December 31, 2012     |  | 2,328,570 |  | $0.20                           |  | 1.02                                                   |  | $205,234             
|                                     |  |           |  |                                 |  |                                                        |  |                      
|Exercisable at December 31, 2012     |  | 2,328,570 |  | $0.20                           |  | 1.02                                                   |  | $205,234             
|                                     |  |           |  |                                 |  |                                                        |  |                      



As of December 31, 2012, after adjusting for
estimated pre-vested forfeitures, there was $0 of unrecognized compensation cost related to unvested stock options. The Company
intends to issue new shares to satisfy share option exercises.



Registration Statement

During June 2011, we received
proceeds totaling $297,500 from seven accredited investors for an aggregate of 5,950,000 units in a private placement. Included
with the investors isthe Company’s former Chief Financial Officer who purchased 200,000 units.
The foregoing units consisted of 5,950,000 shares of our common stock and warrants (See “Common Stock Warrants” above)
to purchase additional shares of common stock that were granted to the investors during August 2011. On October 3, 2011, the Company
filed a Form S-1 registration statement (the “Registration Statement”) with the Securities and Exchange Commission
(“SEC”) to register 11,670,000 shares of our common stock for resale by the investors, of which 5,950,000 shares are
currently outstanding and were issued to certain of the investors in the private placement. The remaining 5,720,000 shares included
in the Registration Statement represent the estimated maximum number of shares that may be issued to the investors upon the exercise
of the warrants. The warrants were also issued in private transactions. The Registration Statement was declared effective by the SEC on October 28, 2011.





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Dutchess Investment Agreement

On November 16, 2009, the Company entered into
an Investment Agreement with Dutchess Equity Fund, L.P. (now known as Dutchess Opportunity Fund, II, LP) (“Dutchess”),
which was subsequently amended on March 11, 2010 (the "Investment Agreement"). Pursuant to the Investment Agreement,
Dutchess committed to purchase up to $10,000,000 of the Company's common stock, until November 2012 (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.



During 2012 and 2011
the Company sold 2,756,142 shares and 6,905,022 shares, respectively of common stock to Dutchess valued at $164,050 and $471,820,
respectively.

During November 2012 we sold to Dutchess the
remaining amount of shares available under the Equity Line and the line has since expired.



10.	COMMITMENTS
& CONTINGENCIES



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 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.



11.	SUBSEQUENT
EVENTS

On January 23, 2013, the Company issued a total
of 750,000 shares of common stock to our Chief Financial Officer (200,000 shares of common stock; valued at $4,000), a Board Member
(200,000 shares of common stock; valued at $4,000) and two consultants (350,000 shares of common stock; valued at $7,000) for services
rendered during 2012. The shares were valued at the estimated fair value of the stock at the time the services were rendered and
recorded as a stock-based compensation at December 31, 2012 in the accompanying consolidated financial statements.



On February 10, 2013, a Board Member loaned
the Company $10,000 to funds its working capital. On March 7, 2013, the Company repaid $5,000 of the loan and on March 28, 2013
issued the Board Member 100,000 shares of common stock valued at the estimated grant date fair value of $3,200 as payment for interest
on the loan.





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On February 11, 2013, the Company issued a
total of 2,400,000 shares of common stock to members of management (100,000 shares of common stock; valued at $2,100), Board Members
(1,100,000 shares of common stock) and three consultants (1,200,000 shares of common stock; valued at $25,200). The shares of stock
issued to the Board Members are for their continued service on the Board during 2013 and include repurchase rightswhereby
the Company retains the rights to acquire the shares from the stock recipients. Such repurchase rights lapse ratably over twelve
months at a rate of 1/12th per month beginning on January 1, 2013. The remaining shares granted on February 11, 2013
are for services rendered and are granted at their estimated grant date fair value.



On March 28, 2013, the Company issued a total
of 1,350,000 shares of common stock of which a total of 1,000,000 shares valued at $32,000 were granted to the Company’s
Chief Executive Officer and an employee for wages accrued during 2012. The remaining shares 350,000 shares valued at $11,200 were
granted to an employee and three consultants for services rendered. The above shares were valued at the estimated grant date fair
value.





On February 13, 2013, the Board of Directors
authorized a $75,000 bonus, which has not yet been paid, to our Chief Executive Officer.

On February 28, 2013, the Company was advanced
an additional $25,000 under our Convertible Note agreement.





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