TPT GLOBAL TECH, INC. - Quarter Report: 2020 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark
One)
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☒
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QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
quarterly period ended March 31, 2020
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☐
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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For the
transition period from __________ to ___________
Commission
file number: 333-222094
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TPT Global Tech, Inc.
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(Exact
name of registrant as specified in its charter)
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Florida
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81-3903357
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State
or other jurisdiction of incorporation or organization
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(I.R.S.
Employer Identification No.)
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501 West Broadway, Suite 800
San Diego, CA
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92101
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(Address
of principal executive offices)
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(Zip
Code)
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(619) 301-4200
Registrant’s
telephone number, including area code
(Former
Address and phone of principal executive offices)
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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---
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---
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---
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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 past 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to the filing requirements for the past 90
days.
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Yes
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☒ |
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No
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☐ |
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 for Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
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Yes
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☒ |
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No
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☐ |
Indicate
by check mark whether the registrant is a large accelerated file,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” and “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large
accelerated filer
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☐ |
Accelerated
filer
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☐ |
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Non-accelerated
filer
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☒ |
Smaller
reporting company
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☒ |
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Emerging
growth company
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☒ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided to
Section 7(a)(2)(B) of the Securities Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
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Yes
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☐ |
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No
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☒ |
Indicate
the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable
date.
As of
May 19, 2020, there were 853,221,966 shares of the
registrant’s common stock, $0.001 par value, issued and
outstanding.
TABLE OF CONTENTS
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Page
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PART 1 – FINANCIAL INFORMATION
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Item
1.
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Financial
Statements
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3
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Condensed
Consolidated Balance Sheets – March 31, 2020 (Unaudited) and
December 31, 2019
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3
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Condensed
Consolidated Statements of Operations - Three months ended March
31, 2020 and 2019 (Unaudited)
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5
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Condensed
Consolidated Statements of Stockholders’ Deficit –
Three Months ended March 31, 2020 and 2019 (Unaudited)
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6
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Condensed
Consolidated Statements of Cash Flows – Three months ended
March 31, 2020 and 2019 (Unaudited)
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7
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Notes
to the Condensed Consolidated Financial Statements
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9
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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28
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk – Not Applicable
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29
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Item
4.
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Controls
and Procedures
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29
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PART II- OTHER INFORMATION
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Item
1.
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Legal
Proceedings – Not
Applicable
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30
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Item
1A.
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Risk
Factors – Not
Applicable
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30
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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30
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Item
3.
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Defaults
Upon Senior Securities
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30
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Item
4.
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Mine
Safety Disclosure – Not
Applicable
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30
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Item
5.
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Other
Information – Not
Applicable
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30
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Item
6.
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Exhibits
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31
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Signatures
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32
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PART I – FINANCIAL INFORMATION
TPT
Global Tech, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
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March
31,
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December
31,
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2020
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2019
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(Unaudited)
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CURRENT
ASSETS
|
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Cash and cash
equivalents
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$238,688
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$192,172
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Accounts
receivable, net
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65,416
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379,805
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Amounts receivable,
related party
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55,510
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—
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Prepaid expenses
and other current assets
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91,233
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48,648
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Total current
assets
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$450,847
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620,625
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NON-CURRENT
ASSETS
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Property
and equipment, net
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$4,297,208
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4,423,148
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Operating
lease right of use assets
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4,484,573
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3,886,045
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Intangible
assets, net
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5,186,348
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5,369,083
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Goodwill
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1,050,366
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1,050,366
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Deposits
and other assets
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67,246
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104,486
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Total non-current
assets
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$15,085,741
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14,833,128
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TOTAL
ASSETS
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$15,536,588
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$15,453,753
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT
LIABILITIES
|
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Accounts payable
and accrued expenses
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$6,879,495
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$6,543,635
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Deferred
revenue
|
302,009
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305,741
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Customer
liability
|
338,725
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338,725
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Current
portion of loans, advances and agreements
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689,408
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344,758
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Current
portion of convertible notes payable, net of discounts
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2,216,430
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2,101,649
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Notes
payable - related parties, net of discounts
|
9,117,235
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9,297,078
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Current
portion of convertible notes payable – related parties, net
of discounts
|
653,581
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534,381
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Derivative
liabilities
|
11,755,941
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8,836,514
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Current portion of
operating lease liabilities
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2,046,943
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1,921,843
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Financing lease
liability – related party
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633,579
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626,561
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Total
current liabilities
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$34,633,346
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30,850,885
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NON-CURRENT
LIABILITIES
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Long
term portion:
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Loans,
advances and agreements, net of current portion
and discounts
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$1,000,500
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1,000,500
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Convertible
notes payable – related parties, net of current portion and
discounts
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269,300
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388,500
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Long
term portion of operating lease liabilities
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2,540,019
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2,009,737
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Total
non-current liabilities
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3,809,819
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3,398,737
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Total
liabilities
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$38,443,165
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34,249,622
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|
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Commitments and
contingencies – See Note 8
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—
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—
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See accompanying notes to condensed consolidated financial
statements.
3
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STOCKHOLDERS'
DEFICIT PREFERRED STOCK, $.001 PAR VALUE 100,000,000 SHARES
AUTHORIZED:
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Convertible
Preferred Series A, 1,000,000 designated - 1,000,000 shares issued
and outstanding as of March 31, 2020 and December 31,
2019
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$1,000
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$1,000
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Convertible
Preferred Series B, 3,000,000 designated - 2,588,693 shares issued
and outstanding as of March 31, 2020 and December 31,
2019
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2,589
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2,589
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Convertible
Preferred Series C – 3,000,000 shares designated, zero shares
issued and outstanding as of March 31, 2020 and December 31,
2019
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—
|
—
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Convertible
Preferred Series D – 20,000,000 shares designated, zero
shares issued and outstanding as of March 31, 2020 and December 31,
2019
|
—
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—
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Common stock, $.001
par value, 1,000,000,000 shares authorized, 737,324,774 and
177,629,939 shares issued and outstanding as of March 31, 2020 and
December 31, 2019, respectively
|
737,325
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177,630
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Subscriptions
payable
|
675,818
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574,256
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Additional paid-in
capital
|
14,473,982
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13,279,749
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Accumulated
deficit
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(38,797,291)
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(32,831,093)
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Total stockholders'
deficit
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(22,906,577)
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(18,795,869)
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TOTAL LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
$15,536,588
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$15,453,753
|
See accompanying notes to condensed consolidated financial
statements.
4
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the three
months ended March 31,
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2020
|
2019
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REVENUES:
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Products
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$11,151
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$18,683
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Services
|
3,064,822
|
142,793
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Total
Revenues
|
3,075,973
|
161,476
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COST OF
SALES:
|
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Products
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12,900
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20,500
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Services
|
2,293,588
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241,868
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Total Costs of
Sales
|
2,306,488
|
262,368
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Gross profit
(loss)
|
769,485
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(100,892)
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EXPENSES:
|
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Sales and
marketing
|
25,900
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—
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Professional
|
343,967
|
512,540
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Payroll and
related
|
662,002
|
197,541
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General and
administrative
|
251,372
|
222,011
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Depreciation
|
257,403
|
71,707
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|
Amortization
|
182,735
|
206,002
|
|
Total
expenses
|
1,723,379
|
1,209,801
|
|
|
|
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Loss from
operations
|
(953,894)
|
(1,310,693)
|
|
|
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OTHER INCOME
(EXPENSE)
|
|
|
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Derivative
expense
|
(3,896,672)
|
(1,540,416)
|
|
Loss on conversions
of notes payable
|
(568,875)
|
—
|
|
Interest
expense
|
(546,757)
|
(130,237)
|
|
Total
other expenses
|
(5,012,304)
|
(1,670,653)
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Net loss before
income taxes
|
(5,966,198)
|
(2,981,346)
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Income
taxes
|
—
|
—
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NET
LOSS
|
$(5,966,198)
|
$(2,981,346)
|
|
|
|
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|
Loss per common
shares-basic and diluted
|
$(0.02)
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$(0.02)
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|
|
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Weighted-average
common shares outstanding-basic and diluted
|
382,159,789
|
136,953,904
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements
5
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT
For the three months ended March 31, 2020 and 2019
(Unaudited)
|
|
Series
A
Preferred
Stock
|
Series
B
Preferred
Stock
|
Common
Stock
|
Subscriptions
|
Additional
Paid-in
|
Accumulated
|
||||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Payable
|
Capital
|
Deficit
|
Total
|
|
Balance as of
December 31, 2019
|
1,000,000
|
$1,000
|
2,588,693
|
$2,589
|
177,629,939
|
$177,630
|
$574,256
|
$13,279,749
|
$(32,831,093)
|
$(18,795,869)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
issuable for director services
|
—
|
—
|
—
|
—
|
—
|
—
|
101,562
|
—
|
—
|
101,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
for convertible promissory notes
|
—
|
—
|
—
|
—
|
559,694,835
|
559,695
|
—
|
1,194,233
|
—
|
1,753,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
$(5,966,198)
|
$(5,966,198)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March
31, 2020
|
1,000,000
|
$1,000
|
2,588,693
|
$2,589
|
737,324,774
|
$737,325
|
$675,818
|
$14,473,982
|
$(38,797,291)
|
$(22,906,577)
|
|
|
Series
A
Preferred
Stock
|
Series
B
Preferred
Stock
|
Common
Stock
|
Subscriptions
|
Additional
Paid-in
|
Accumulated
|
||||
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Payable
|
Capital
|
Deficit
|
Total
|
|
Balance as of
December 31, 2018
|
1,000,000
|
$1,000
|
2,588,693
|
$2,589
|
136,953,904
|
$136,954
|
$168,006
|
$12,567,881
|
$(18,802,928)
|
$(5,926,498)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock
and stock options for services
|
—
|
—
|
—
|
—
|
—
|
—
|
101,563
|
72,716
|
—
|
174,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
$(2,981,346)
|
$(2,981,346)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March
31, 2019
|
1,000,000
|
$1,000
|
2,588,693
|
$2,589
|
136,953,904
|
$136,954
|
$269,569
|
$12,640,597
|
$(21,784,274)
|
$(8,733,565)
|
See accompanying notes to condensed consolidated financial
statements.
6
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the three
months ended March 31,
|
|
|
|
2020
|
2019
|
|
Cash flows from
operating activities:
|
|
|
|
Net
loss
|
$(5,966,198)
|
$(2,981,346)
|
|
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
Depreciation
|
257,403
|
71,707
|
|
Amortization
|
182,735
|
206,002
|
|
Amortization
of debt discounts
|
316,035
|
165,297
|
|
Derivative
expense
|
|
—
|
|
Loss on conversion
of notes payable
|
568,875
|
—
|
|
Derivative
expense
|
3,896,672
|
1,540,416
|
|
Share-based
compensation: Common stock
|
101,562
|
136,007
|
|
Stock
options
|
—
|
72,716
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
314,389
|
(22,323)
|
|
Accounts
receivable, related party
|
(55,510)
|
---
|
|
Prepaid
expenses and other assets
|
(5,346)
|
(5,084)
|
|
Accounts
payable and accrued expenses
|
425,345
|
406,130
|
|
Accrued
interest on financing lease liabilities
|
7,018
|
13,573
|
|
Net
change in operating lease assets and liabilities
|
56,854
|
---
|
|
Other
liabilities
|
(3,732)
|
27,428
|
|
Net
cash used in operating activities
|
$96,102
|
$(369,477)
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchase of
equipment
|
$(131,351)
|
$—
|
|
Net
cash used in investing activities
|
$(131,351)
|
$—
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds
from convertible notes and notes payable – related
parties
|
—
|
259,549
|
|
Proceeds
from convertible notes, loans and advances
|
590,000
|
606,300
|
|
Payment
on convertible loans, advances and agreements
|
(328,392)
|
—
|
|
Payments
on convertible notes and amounts payable – related
parties
|
(179,843)
|
(9,750)
|
|
Payments
on financing lease liabilities
|
—
|
(7,438)
|
|
Net
cash provided by financing activities
|
$81,765
|
$848,661
|
|
|
|
|
|
Net change in
cash
|
$46,519
|
$479,184
|
|
Cash and cash
equivalents - beginning of period
|
$192,172
|
$31,786
|
|
|
|
|
|
Cash and cash
equivalents - end of period
|
$238,688
|
$510,970
|
See accompanying notes to condensed consolidated financial
statements
7
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
CONTINUED
(Unaudited)
Supplemental Cash Flow Information:
Cash
paid for:
|
|
2020
|
2019
|
|
Interest
|
$88,736
|
$16,616
|
|
Taxes
|
$---
|
$---
|
Non-Cash Investing and Financing Activities:
|
|
2020
|
2019
|
|
Discount on
derivative financial instruments
|
$216,720
|
$668,000
|
|
Operating lease
liabilities and right of use assets
|
$1,166,677
|
$---
|
See accompanying notes to condensed consolidated financial
statements
8
TPT Global Tech, Inc.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2020
NOTE
1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature
of Operations
The
Company was originally incorporated in 1988 in the state of
Florida. TPT Global, Inc., a Nevada corporation formed in June
2014, merged with Ally Pharma US, Inc., a Florida corporation,
(“Ally Pharma”, formerly known as Gold Royalty
Corporation) in a “reverse merger” wherein Ally Pharma
issued 110,000,000 shares of Common Stock, or 80% ownership, to the
owners of TPT Global, Inc. in exchange for all outstanding common
stock of TPT Global Inc. and Ally Pharma agreed to change its name
to TPT Global Tech, Inc. (jointly referred to as “the
Company” or “TPTG”).
The
following acquisitions have resulted in entities which have been
consolidated into TPTG. In 2014 the Company acquired all the assets
of K Telecom and Wireless LLC (“K Telecom”) and Global
Telecom International LLC (“Global Telecom”). Effective
January 31, 2015, TPTG completed its acquisition of 100% of the
outstanding stock of Copperhead Digital Holdings, Inc.
(“Copperhead Digital”) and Subsidiaries, TruCom, LLC
(“TruCom”), Nevada Utilities, Inc. (“Nevada
Utilities”) and CityNet Arizona, LLC (“CityNet”).
Effective September 30, 2016, the company acquired 100% ownership
in San Diego Media Inc. (“SDM”). In October 2017, we
entered into agreements to acquire Blue Collar, Inc. (“Blue
Collar”) which closed as of September 1, 2018. On May 7, 2019
we completed the acquisition of a majority of the assets of
SpeedConnect, LLC, which assets were conveyed into our wholly owned
subsidiary TPT SpeedConnect, LLC (“TPT SC” or
“TPT SpeedConnect”) which was formed on April 16, 2019.
On March 6, 2020 we acquired 75% of Bridge Internet, LLC
(“BIC”).
We are
based in San Diego, California, and operate as a Media Content Hub
for Domestic and International syndication
Technology/Telecommunications company operating on our own
proprietary Global Digital Media TV and Telecommunications
infrastructure platform and also provide technology solutions to
businesses domestically and worldwide. We are a rural Broadband
Wireless Access (BWA) provider, Software as a Service (SaaS),
Technology Platform as a Service (PAAS), Cloud-based Unified
Communication as a Service (UCaaS) and carrier-grade performance
and support for businesses over our private IP MPLS fiber and
wireless network in the United States. Our cloud-based UCaaS
services allow businesses of any size to enjoy all the latest
voice, data, media and collaboration features in today's global
technology markets. We also operate as a Master Distributor for
Nationwide Mobile Virtual Network Operators (MVNO) and Independent
Sales Organization (ISO) as a Master Distributor for Pre-Paid
Cellphone services, Mobile phones, Cellphone Accessories and Global
Roaming Cellphones. In addition, we create media marketing
materials and content.
Significant
Accounting Policies
Please
refer to Note 1 of the Notes to the Consolidated Financial
Statements in the Company's most recent Form 10-K for all
significant accounting policies of the Company, with the exception
of those discussed below.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements
have been prepared according to the instructions to Form 10-Q and
Section 210.8-03(b) of Regulation S-X of the Securities and
Exchange Commission (“SEC”) and, therefore, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America
(“GAAP”) have been omitted.
In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended
March 31, 2020 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2020.
These
condensed consolidated financial statements should be read in
conjunction with the Company’s consolidated financial
statements for the year ended December 31, 2019. The condensed
consolidated balance sheet at March 31, 2020, has been derived from
the consolidated financial statements at that date, but does not
include all of the information and footnotes required by
GAAP.
Our
condensed consolidated financial statements include the accounts of
K Telecom, Copperhead Digital, SDM, Blue Collar, TPT SpeedConnect
and BIC. All intercompany accounts and transactions have been
eliminated in consolidation. Consideration has also been given to
the minority interest of 25% in BIC.
9
Revenue Recognition
On
January 1, 2018, we adopted the new accounting standard ASC
606, Revenue from Contracts
with Customers, and all of the related amendments
(“new revenue standard”). We recorded the change, which
was immaterial, related to adopting the new revenue standard using
the modified retrospective method. Under this method, we recognized
the cumulative effect of initially applying the new revenue
standard as an adjustment to the opening balance of retained
earnings. This results in no restatement of prior periods, which
continue to be reported under the accounting standards in effect
for those periods. We expect the impact of the adoption of the new
revenue standard to continue to be immaterial on an ongoing basis.
We have applied the new revenue standard to all contracts as of the
date of initial application and as such, have used the following
criteria described below in more detail for each business
unit:
Identify the contract with the
customer.
Identify the performance
obligations in the contract.
Determine the transaction
price.
Allocate the transaction price
to performance obligations in the contract.
Recognize revenue when or as we satisfy a performance
obligation.
Reserves are recorded as a reduction in net sales and are not
considered material to our consolidated statements of income for
the three months ended March 31, 2020 and 2019. In
addition, we invoice our customers for taxes assessed by
governmental authorities such as sales tax and value added taxes,
where applicable. We present these taxes on a net
basis.
The
Company’s revenue generation for the three months ended March
31, 2020 and 2019 came from the following sources disaggregated by
services and products, which sources are explained in detail
below.
|
|
For the three
months
ended March 31,
2020
|
For the three
months
ended March 31,
2019
|
|
TPT
SpeedConnect
|
$2,707,654
|
$—
|
|
Copperhead
Digital
|
—
|
67,700
|
|
K
Telecom
|
11,151
|
18,683
|
|
San Diego
Media
|
3,763
|
13,343
|
|
Blue
Collar
|
353,405
|
61,750
|
|
Total
Revenue
|
$3,075,973
|
$161,476
|
TPT SpeedConnect: ISP and Telecom Revenue
TPT
SpeedConnect is a rural Internet provider operating in 10
Midwestern States under the trade name SpeedConnect. TPT SC’s
primary business model is subscription based, pre-paid monthly
reoccurring revenues, from wireless delivered, high-speed internet
connections. In addition, the company resells third-party satellite
and DSL internet and IP telephony services. Revenue generated from
sales of telecommunications services is recognized as the
transaction with the customer is considered closed and the customer
receives and accepts the services that were the result of the
transaction. There are no financing terms or variable transaction
prices. Due date is detailed on monthly invoices distributed to
customer. Services billed monthly in advance are deferred to the
proper period as needed. Deferred revenue are contract liabilities
for cash received before performance obligations for monthly
services are satisfied. Deferred revenue at March 31, 2020 and
December 31, 2019 are $302,009 and $305,741, respectively. Certain
of our products require specialized installation and equipment. For
telecom products that include installation, if the installation
meets the criteria to be considered a separate element, product
revenue is recognized upon delivery, and installation revenue is
recognized when the installation is complete. The Installation
Technician collects the signed quote containing terms and
conditions when installing the site equipment at customer
premises.
Revenue
for installation services and equipment is billed separately from
recurring ISP and telecom services and is recognized when equipment
is delivered and installation is completed. Revenue from ISP and
telecom services is recognized monthly over the contractual period,
or as services are rendered and accepted by the
customer.
10
The
overwhelming majority of our revenue continues to be recognized
when transactions occur. Since installation fees are generally
small relative to the size of the overall contract and because most
contracts are for two years or less, the impact of not recognizing
installation fees over the contract is immaterial.
Copperhead Digital: ISP and Telecom Revenue
Copperhead
Digital is a regional internet and telecom services provider
operating in Arizona under the trade name Trucom. Copperhead
Digital operates as a wireless telecommunications Internet Service
Provider (“ISP”) facilitating both residential and
commercial accounts. Copperhead Digital’s primary business
model is subscription based, pre-paid monthly reoccurring revenues,
from wireless delivered, high-speed internet connections. In
addition, the company resells third-party satellite and DSL
internet and IP telephony services. Revenue generated from sales of
telecommunications services is recognized as the transaction with
the customer is considered closed and the customer receives and
accepts the services that were the result of the transaction. There
are no financing terms or variable transaction prices. Due date is
detailed on monthly invoices distributed to customer. Services
billed monthly in advance are deferred to the proper period as
needed. Deferred revenue are contract liabilities for cash received
before performance obligations for monthly services are satisfied.
Certain of our products require specialized installation and
equipment. For telecom products that include installation, if the
installation meets the criteria to be considered a separate
element, product revenue is recognized upon delivery, and
installation revenue is recognized when the installation is
complete. The Installation Technician collects the signed quote
containing terms and conditions when installing the site equipment
at customer premises.
Revenue
for installation services and equipment is billed separately from
recurring ISP and telecom services and is recognized when equipment
is delivered and installation is completed. Revenue from ISP and
telecom services is recognized monthly over the contractual period,
or as services are rendered and accepted by the
customer.
The
overwhelming majority of our revenue continues to be recognized
when transactions occur. Since installation fees are generally
small relative to the size of the overall contract and because most
contracts are for a year or less, the impact of not recognizing
installation fees over the contract is immaterial.
K Telecom: Prepaid Phones and SIM Cards Revenue
K
Telecom generates revenue from reselling prepaid phones, SIM cards,
and rechargeable minute traffic for prepaid phones to its customers
(primarily retail outlets). Product sales occur at the
customer’s locations, at which time delivery occurs and cash
or check payment is received. The Company recognizes the revenue
when they receive payment at the time of delivery. There are no
financing terms or variable transaction prices.
SDM: Ecommerce, Email Marketing and Web Design
Services
SDM
generates revenue by providing ecommerce, email marketing and web
design solutions to small and large commercial businesses, complete
with monthly software support, updates and maintenance. Services
are billed monthly. There are no financing terms or variable
transaction prices. Platform infrastructure support is a prepaid
service billed in monthly recurring increments. The services are
billed a month in advance and due prior to services being rendered.
The revenue is deferred when invoiced and booked in the month the
service is provided. There is no deferred revenue at March 31 2020
and December 31, 2019. Software support services (including
software upgrades) are billed in real time, on the first of the
month. Web design service revenues are recognized upon completion
of specific projects. Revenue is booked in the month the services
are rendered and payments are due on the final day of the month.
There are usually no contract revenues that are deferred until
services are performed.
Blue Collar: Media Production Services
Blue
Collar creates original live action and animated content
productions and has produced hundreds of hours of material for the
television, theatrical, home entertainment and new media markets.
Blue Collar designs branding and marketing campaigns and has had
agreements with some of the world’s largest companies
including PepsiCo, Intel, HP, WalMart and many other Fortune 500
companies. Additionally, they create motion picture, television and
home entertainment marketing campaigns for studios including Sony,
DreamWorks, Twentieth Century Fox, Universal Studios, Paramount
Studios, and Warner Brothers. With regard to revenue recognition,
Blue Collar receives an agreement from each client to perform
defined work. Some agreements are written, some are verbal. Work
may include creation of marketing materials and/or content
creation. Some work may be short term and take weeks to create and
some work may be longer and take months to create. There are
instances where customer agreements segregate identifiable
obligations (like filming on site vs. film editing and final
production) with separate transaction pricing. The performance
obligation is generally satisfied upon delivery of such film or
production products, at which time revenue is recognized. There are
no financing terms or variable transaction prices.
11
Basic
and Diluted Net Loss Per Share
The
Company computes net income (loss) per share in accordance with ASC
260, “Earning per Share”. ASC 260 requires presentation
of both basic and diluted earnings per share (“EPS”) on
the face of thee income statement. Basic EPS is computed by
dividing net income (loss) available to common shareholder
(numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted EPS gives effect to all
dilutive potential common shares outstanding during the period
using the treasury stock method for options and warrants and using
the if-converted method for preferred stock and convertible notes.
In computing diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased
from the exercise of stock options or warrants. Diluted EPS
excludes all dilutive potential shares if their effect is
anti-dilutive. As of March 31, 2020, the Company had shares that
were potentially common stock equivalents as follows:
|
|
2020
|
|
Convertible Promissory
Notes
|
6,429,395,999
|
|
Series A Preferred Stock
(1)
|
1,039,271,144
|
|
Series B Preferred
Stock
|
2,588,693
|
|
Stock Options and
Warrants
|
4,333,333
|
|
|
7,475,589,169
|
(1)
Holder of the
Series A Preferred Stock which is Stephen J. Thomas, is guaranteed
60% of outstanding common stock upon conversion. The Company would
have to authorize additional shares for this to occur as only
1,000,000,000 shares are currently authorized.
Financial Instruments and Fair Value of Financial
Instruments
Our
primary financial instruments at March 31, 2020 and December 31,
2019 consisted of cash equivalents, accounts receivable, accounts
payable, notes payable and derivative liabilities. We apply fair
value measurement accounting to either record or disclose the value
of our financial assets and liabilities in our financial
statements. Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants
on the measurement date. A fair value hierarchy requires an entity
to maximize the use of observable inputs, where available, and
minimize the use of unobservable inputs when measuring fair
value.
Described
below are the three levels of inputs that may be used to measure
fair value:
Level 1 Quoted prices in active
markets for identical assets or liabilities.
Level 2 Observable inputs other
than Level 1 prices, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities.
Level 3 Unobservable inputs that
are supported by little or no market activity and that are
significant to the fair value of the assets or
liabilities.
We
consider our derivative financial instruments as Level 3. The
balances for our derivative financial instruments as of March 31,
2020 are the following:
|
Derivative
Instrument
|
Fair
Value
|
|
Fair value of
Auctus Convertible Promissory Note
|
$7,938,117
|
|
Fair value of
Odyssey Capital Convertible Promissory Note
|
1,634,573
|
|
Fair value of EMA
Financial Convertible Promissory Note
|
2,179,738
|
|
Fair value of
Warrants issued with the derivative instruments
|
3,513
|
|
|
$11,755,941
|
12
Use
of Estimates
The
preparation of financial statements in conformity with United
States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosures 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 materially from those
estimates. The Company’s consolidated financial statements
reflect all adjustments that management believes are necessary for
the fair presentation of their financial condition and results of
operations for the periods presented.
Recently
Adopted Accounting Pronouncements
In June
2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee
Share-Based Payment Accounting, which amends ASC 718, Compensation
– Stock Compensation. This ASU requires that most of the
guidance related to stock compensation granted to employees be
followed for non-employees, including the measurement date,
valuation approach, and performance conditions. The expense is
recognized in the same period as though cash were paid for the good
or service. The effective date is the first quarter of fiscal year
2020, with early adoption permitted, including in interim periods.
The ASU has been adopted using a modified-retrospective transition
approach. The adoption is not considered to have a material effect
on the consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and
subsequent amendments to the initial guidance: ASU 2017-13, ASU
2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively,
Topic 842). Topic 842 requires lessees to classify leases as either
finance or operating leases and to record a right-of-use asset and
a lease liability for all leases with a term greater than 12 months
regardless of the lease classification. We adopted Topic 842 using
the effective date, January 2019, as the date of our initial
application of the standard. Consequently, financial information
for the comparative periods will not be updated. Our finance and
operating lease commitments are subject to the new standard and
recognized as finance and operating lease liabilities and
right-of-use assets upon our adoption of Topic 842, which increased
our total assets and total liabilities that we report relative to
such amounts prior to adoption.
Management
has reviewed other recently issued accounting pronouncements and
have determined there are not any that would have a material impact
on the condensed consolidated financial statements.
NOTE
2 – ACQUISITIONS
TPT SpeedConnect, LLC Asset Acquisition
SpeedConnect Asset Acquisition
Effective April 2, 2019, the Company entered into an Asset Purchase
Agreement with SpeedConnect, LLC (“SpeedConnect”) to
acquire substantially all of the assets of SpeedConnect. On May 7,
2019, the Company closed the transaction underlying the Asset
Purchase Agreement with SpeedConnect to acquire substantially all
of the assets of SpeedConnect for $2 million and the assumption of
certain liabilities. The Asset Purchase Agreement required a
deposit of $500,000 made in April and an additional $500,000
payment to close. The additional $500,000 was paid and all other
conditions were met to effectuate the sale of substantially all of
the assets of SpeedConnect to the Company. As part of the closing,
the Company entered into a Promissory Note to pay SpeedConnect
$1,000,000 in two equal installments of $500,000 plus applicable
interest at 10% per annum with the first installment payable within
30 days of closing and the second installment payable within 60
days of closing (but no later than July 6, 2019). The Company paid
off the Promissory Note by June 11, 2019 and by amendment dated May
7, 2019, SpeedConnect forgave $250,000 of the Promissory
Note.
The
Company treated the asset acquisition as a business combination and
has allocated the fair market value to assets received in excess of
goodwill.
13
Purchase
Price Allocation:
|
|
TPT Global
Tech
|
|
Effective
|
May
7, 2019
|
|
|
|
|
Purchaser
|
TPT
Global Tech
|
|
|
|
|
Consideration
Given:
|
|
|
Cash
paid
|
$1,000,000
|
|
Liabilities:
|
|
|
|
|
|
Promissory
Note
|
$750,000
|
|
Deferred
revenue
|
230,000
|
|
Unfavorable
leases
|
323,000
|
|
Accounts
and other payables
|
591,964
|
|
Total
liabilities
|
$1,894,964
|
|
Total Consideration
Value
|
$2,894,964
|
|
|
|
|
Assets
Acquired:
|
|
|
Customer
base
|
$350,000
|
|
Current
assets:
|
|
|
Cash
|
201,614
|
|
Prepaid
and other receivables
|
99,160
|
|
Deposits
|
13,190
|
|
Favorable
leases
|
95,000
|
|
Property
and equipment
|
1,939,000
|
|
Total Assets
Acquired
|
$2,697,964
|
|
Goodwill
|
$197,000
|
Had the
acquisition occurred on January 1, 2019, condensed proforma results
of operations for the three months ended March 31, 2019 would be as
follows:
|
|
2019
|
|
Revenue
|
$3,619,279
|
|
Cost of
Sales
|
2,448,235
|
|
Gross
Profit
|
$1,171,044
|
|
Expenses
|
(2,478,508)
|
|
Derivative
Expense
|
(1,540,416)
|
|
Loss on debt
conversions
|
—
|
|
Interest
Expense
|
(130,237)
|
|
Income
Taxes
|
—
|
|
Net
Loss
|
$(2,978,117)
|
|
Loss per
share
|
$(0.02)
|
14
The
unaudited proforma results of operations are presented for
information purposes only. The unaudited proforma results of
operations are not intended to present actual results that would
have been attained had the asset acquisition been completed as of
January 1, 2019 or to project potential operating results as of any
future date or for any future periods. The revenue and net loss of
TPT SpeedConnect from January 1, 2020 to March 31, 2020 included in
the consolidated income statement amounted to $2,707,654 and
$286,790, respectively, for the three months ended March 31,
2020.
On March 6, 2020, the Company executed an Acquisition and Purchase
Agreement (“BIC Agreement”) with Bridge Internet, a
Florida Limited Liability Company, formed on February 27, 2020. The
Company acquired 75% of Bridge Internet (which had no assets or
liabilities and no material operations) for 8,000,000 shares of
common stock of TPT Global Tech, Inc., 4,000,000 common shares
issued to Sydney “Trip” Camper immediately and
4,000,000 common shares which vest equally over two years. As
sufficient funding is raised by the Company, defined as
approximately $3,000,000, marketing funds of up to $200,000 per
quarter for the next year from date of signing the BIC Agreement
will be provided and a formal employment agreement will be
finalized. Tower industry Veteran, Founder and CEO of Bridge
Internet, Sydney “Trip” Camper, will retain the
remaining 25% of Bridge Internet and stay on as the CEO, as well as
become the acting CEO of TPT Speed Connect. The
Company entered into this transaction in order to expand its
revenue base.
The Company evaluated this acquisition in accordance with ASC
805-10-55-4 to discern whether the transaction met the definition
of a business. The company concluded there were not a sufficient
number of key processes that developed the inputs into outputs.
Accordingly, the Company accounted for this transaction as the
hiring of a key member of management. As such, 4,000,000 shares
valued at $6,400 were expensed and 4,000,000 additional shares
valued at $6,400 will be amortized equally over 2 years. As
operations become material, the Company will present the effects of
the 25% noncontrolling interest.
NOTE
3 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going
concern.
Cash
flows generated from operating activities were not enough to
support all working capital requirements for the three months ended
March 31, 2020 and 2019. We incurred $5,966,198 and $2,981,346,
respectively, in losses, and we generated and used $96,102 and
$369,477, respectively, in cash for operations for the three months
March 31, 2020 and 2019. Cash flows from financing activities were
$81,795 and $848,661 for the same periods. These factors raise
substantial doubt about the ability of the Company to continue as a
going concern for a period of one year from the issuance of these
financial statements. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
In December 2019, COVID-19 emerged and has subsequently spread
worldwide. The World Health Organization has declared COVID-19 a
pandemic resulting in federal, state and local governments and
private entities mandating various restrictions, including travel
restrictions, restrictions on public gatherings, stay at home
orders and advisories and quarantining of people who may have been
exposed to the virus. After close monitoring and responses and
guidance from federal, state and local governments, in an effort to
mitigate the spread of COVID-19, around March 18, 2020 for an
indefinite period of time, the Company closed its Blue Collar
office in Los Angeles, California and its TPT SpeedConnect offices
in Michigan, Idaho and Arizona. Most employees are working
remotely, however this is not possible with certain employees and
all subcontractors that work for Blue Collar. The Company continues
to monitor developments, including government requirements and
recommendations at the national, state, and local level to evaluate
possible extensions to all or part of such closures.
The Company has taken advantage of the stimulus offerings and
received $722,200 in April 2020 and will try to use these funds as
is prescribed by the stimulus offerings to have the entire amount
forgiven. The Company is also in the process of trying to
raise debt and equity financing, some of which may have to be used
for working capital shortfalls if revenues decrease significantly
because of the COVID-19 closures.
As the COVID-19 pandemic is complex and rapidly evolving, the
Company's plans as described above may change. At this point, we
cannot reasonably estimate the duration and severity of this
pandemic, which could have a material adverse impact on our
business, results of operations, financial position and cash
flows.
In
order for us to continue as a going concern for a period of one
year from the issuance of these financial statements, we will need
to obtain additional debt or equity financing and look for
companies with cash flow positive operations that we can acquire.
There can be no assurance that we will be able to secure additional
debt or equity financing, that we will be able to acquire cash flow
positive operations, or that, if we are successful in any of those
actions, those actions will produce adequate cash flow to enable us
to meet all our future obligations. Most of our existing financing
arrangements are short-term. If we are unable to obtain additional
debt or equity financing, we may be required to significantly
reduce or cease operations.
15
NOTE 4 – PROPERTY AND EQUIPMENT
Property
and equipment and related accumulated depreciation as of March 31,
2020 and December 31, 2019 are as follows:
|
|
2020
|
2019
|
|
Property and
equipment:
|
|
|
|
Telecommunications
fiber and equipment
|
$5,334,352
|
5,203,000
|
|
Film production
equipment
|
369,903
|
369,903
|
|
Office furniture
and equipment
|
85,485
|
85,485
|
|
Leasehold
improvements
|
18,679
|
18,679
|
|
Accumulated
depreciation
|
(1,511,211)
|
(1,253,919)
|
|
Property and
equipment, net
|
$4,297,208
|
4,423,148
|
Depreciation
expense was $257,403 and $71,707 for the three months ended March
31, 2020 and 2019, respectively.
NOTE
5 – DEBT FINANCING ARRANGEMENTS
Financing
arrangements as of March 31, 2020 and December 31, 2019 are as
follows:
|
|
2020
|
2019
|
|
Business loans and
advances (1)
|
$1,105,763
|
1,121,640
|
|
Convertible notes
payable (2)
|
2,216,430
|
2,101,649
|
|
Factoring
agreements (3)
|
584,145
|
223,618
|
|
Debt – third
party
|
$3,906,338
|
3,446,907
|
|
|
|
|
|
Line of credit,
related party secured by assets (4)
|
$3,043,390
|
3,043,390
|
|
Debt– other
related party, net of discounts (5)
|
5,950,000
|
5,950,000
|
|
Convertible debt
– related party (6)
|
922,881
|
922,881
|
|
Shareholder debt
(7)
|
123,845
|
303,688
|
|
Debt –
related party
|
$10,040,116
|
10,219,959
|
|
|
|
|
|
Total financing
arrangements
|
$13,946,454
|
13,666,866
|
|
|
|
|
|
Less current
portion:
|
|
|
|
Loans,
advances and agreements – third party
|
$(689,408)
|
(344,758)
|
|
Convertible notes
payable third party
|
(2,216,430)
|
(2,101,649
|
|
Debt –
related party, net of discount
|
(9,117,235)
|
(9,297,078)
|
|
Convertible notes
payable– related party
|
(653,581)
|
(534,381)
|
|
|
(12,676,654)
|
(12,277,866)
|
|
Total long term
debt
|
$1,269,800
|
1,389,000
|
(1) The
terms of $40,000 of this balance are similar to that of the Line of
Credit which bears interest at adjustable rates, 1 month Libor plus
2%, 2.99% as of March 31, 2020, and is secured by assets of the
Company, is due August 31, 2020, as amended, and included 8,000
stock options as part of the terms which options expired December
31, 2019 (see Note 7).
16
$500,500
is a line of credit that Blue Collar has with a bank, bears
interest at Prime plus 1.125%, 4.86% as of March 31, 2020, and is
due March 25, 2021.
$500,000
is a bank loan dated May 28, 2019 which bears interest at Prime
plus 6%, 9.73% as of March 31, 2020, is interest only for the first
year, thereafter payable monthly of principal and interest until
the due date of May 1, 2022. The bank loan is collateralized by
assets of the Company.
The
remaining balances generally bear interest at approximately 10%,
have maturity dates that are due on demand or are past due, are
unsecured and are classified as current in the balance
sheets.
On February 14, 2020, the Company agreed to a Secured Promissory
Note with a third party for $90,000. The Secured Promissory Note
was secured by the assets of the Company and was due June 14, 2020
or earlier in case the Company is successful in raising other
monies and carried an interest charge of 10% payable with the
principal. The Secured Promissory Note was also convertible at the
option of the holder into an equivalent amount of Series D
Preferred Stock. The Secured Promissory Note also included a
guaranty by the CEO of the Company, Stephen J. Thomas III. This
Secured Promissory Note was paid off on May 5, 2020, including
$9,000 of interest.
(2) During
2017, the Company issued convertible promissory notes in the amount
of $67,000 (comprised of $62,000 from two related parties and
$5,000 from a former officer of CDH), all which were due May 1,
2020 and bear 6% annual interest (12% default interest rate). The
convertible promissory notes are convertible, as amended, at $0.25
per share. These convertible promissory notes were not repaid May
1, 2020. Management is working to extend the due
dates.
During
2019, the Company consummated Securities Purchase Agreements dated
March 15, 2019, April 12, 2019, May 15, 2019, June 6, 2019 and
August 22, 2019 with Geneva Roth Remark Holdings, Inc.
(“Geneva Roth”) for the purchase of convertible
promissory notes in the amounts of $68,000, $65,000, $58,000,
$53,000 and $43,000 (“Geneva Roth Convertible Promissory
Notes”). The Geneva Roth Convertible Promissory Notes are due
one year from issuance, pays interest at the rate of 12% (principal
amount increases 150%-200% and interest rate increases to 24% under
default) per annum and gives the holder the right from time to
time, and at any time during the period beginning 180 days from the
origination date to the maturity date or date of default to convert
all or any part of the outstanding balance into common stock of the
Company limited to 4.99% of the outstanding common stock of the
Company. The conversion price is 61% multiplied by the average of
the two lowest trading prices for the common stock during the
previous 20 trading days prior to the applicable conversion date.
The Geneva Roth Convertible Promissory Notes may be prepaid in
whole or in part of the outstanding balance at 125% to 140% up to
180 days from origination. Geneva Roth converted a total of
$244,000 of principal and $8,680 of accrued interest through March
31, 2020 from its various Securities Purchase Agreements into
125,446,546 shares of common stock of the Company leaving no
outstanding principal balances as of March 31, 2020. On February
13, 2020, the August 22, 2019 Securities Purchase Agreement was
repaid for $63,284, including a premium and accrued
interest.
On March 25, 2019, the Company consummated a Securities Purchase
Agreement dated March 18, 2019 with Auctus Fund, LLC.
(“Auctus”) for the purchase of a $600,000 Convertible
Promissory Note (“Auctus Convertible Promissory Note”).
The Auctus Convertible Promissory Note is due December 18, 2019,
pays interest at the rate of 12% (24% default) per annum and gives
the holder the right from time to time, and at any time during the
period beginning 180 days from the origination date or at the
effective date of the registration of the underlying shares of
common stock, which the holder has registration rights for, to
convert all of the outstanding balance into common stock of the
Company limited to 4.99% of the outstanding common stock of the
Company. The conversion price is the lessor of the lowest trading
price during the previous 25 trading days prior the date of the
Auctus Convertible Promissory Note or 50% multiplied by the average
of the two lowest trading prices for the common stock during the
previous 25 trading days prior to the applicable conversion date.
The Auctus Convertible Promissory Note may be prepaid in full at
135% to 150% up to 180 days from origination. Auctus converted
$17,867 of principal and $127,866 of accrued interest into
260,102,808 shares of common stock of the Company prior to March
31, 2020. Subsequent to March 31, 2020, Auctus converted another
$15,313 of principal and $14,138 of accrued interest into
115,897,192 shares of common stock of the Company. 2,000,000
warrants were issued in conjunction with the issuance of this debt.
See Note 7.
On June 4, 2019, the Company consummated a Securities Purchase
Agreement with Odyssey Capital Funding, LLC.
(“Odyssey”) for the purchase of a $525,000 Convertible
Promissory Note (“Odyssey Convertible Promissory
Note”). The Odyssey Convertible Promissory Note is due June
3, 2020, pays interest at the rate of 12% ( 24% default) per annum
and gives the holder the right from time to time, and at any time
during the period beginning six months from the issuance date to
convert all of the outstanding balance into common stock of the
Company limited to 4.99% of the outstanding common stock of the
Company. The conversion price is 55% multiplied by the average of
the two lowest trading prices for the common stock during the
previous 20 trading days prior to the applicable conversion date.
The Odyssey Convertible Promissory Note may be prepaid in full at
125% to 145% up to 180 days from origination. Through March 31,
2020, Odyssey converted $43,500 of principal and $3,440 of accrued
interest into 48,621,516 shares of common stock of the
Company.
On June 6, 2019, the Company consummated a Securities Purchase
Agreement with JSJ Investments Inc. (“JSJ”) for the
purchase of a $112,000 Convertible Promissory Note (“JSJ
Convertible Promissory Note”). The JSJ Convertible Promissory
Note is due June 6, 2020, pays interest at the rate of 12% per
annum and gives the holder the right from time to time, and at any
time during the period beginning 180 days from the origination date
to convert all of the outstanding balance into common stock of the
Company limited to 4.99% of the outstanding common stock of the
Company. The conversion price is the lower of the market price, as
defined, or 55% multiplied by the average of the two lowest trading
prices for the common stock during the previous 20 trading days
prior to the applicable conversion date. The JSJ Convertible
Promissory Note may be prepaid in full at 135% to 150% up to 180
days from origination. JSJ converted $43,680 of principal into
18,500,000 shares of common stock of the Company prior to March 31,
2020.In addition, on February 25, 2020 the Company repaid for
$97,000, including a premium and accrued interest, for all
remaining principal and accrued interest balances as of that day.
333,333 warrants were issued in conjunction with the issuance of
this debt. See Note 7.
17
On June 11, 2019, the Company consummated a Securities Purchase
Agreement with EMA Financial, LLC. (“EMA”) for the
purchase of a $250,000 Convertible Promissory Note (“EMA
Convertible Promissory Note”). The EMA Convertible Promissory
Note is due June 11, 2020, pays interest at the rate of 12%
(principal amount increases 200% and interest rate increases to 24%
under default) per annum and gives the holder the right from time
to time to convert all of the outstanding balance into common stock
of the Company limited to 4.99% of the outstanding common stock of
the Company. The conversion price is 55% multiplied by the lowest
traded price for the common stock during the previous 25 trading
days prior to the applicable conversion date. The EMA Convertible
Promissory Note may be prepaid in full at 135% to 150% up to 180
days from origination. Prior to March 31, 2020, EMA converted
$35,366 of principal into 147,700,000 shares of common stock of the
Company. 1,000,000 warrants were issued in conjunction with the
issuance of this debt. See Note 7.
The
Company is in default under its derivative financial instruments
and received notice of such from Auctus for not reserving enough
shares for conversion and for not having filed a Form S-1
Registration Statement with the Securities and Exchange Commission.
It was the intent of the Company to pay back all derivative
securities prior to the due dates but that has not occurred in case
of Auctus. As such, the Company is currently in negotiations with
Auctus, EMA and Odyssey relative to extending due dates and
changing terms on the Notes.
(3) The
Factoring Agreement with full recourse, due February 29, 2020, as
amended, was established in June 2016 with a company that is
controlled by a shareholder and is personally guaranteed by an
officer of the Company. The Factoring Agreement is such that the
Company pays a discount of 2% per each 30-day period for each
advance received against accounts receivable or future billings.
The Company was advanced funds from the Factoring Agreement for
which $101,244 and $101,244 in principal remained unpaid as of
March 31, 2020 and December 31, 2019, respectively.
On May
8, 2019, the Company entered into a factoring agreement with
Advantage Capital Funding (“2019 Factoring agreement”).
$500,000, net of expenses, was funded to the Company with a promise
to pay $18,840 per week for 40 weeks until a total of $753,610 is
paid which occurred in February 2020
On February 25, 2020, the Company entered into an Agreement for the
Purchase and Sale of Future Receipts (“2020 Factoring
Agreement”). The balance to be purchased and sold is $716,720
for which the Company received $500,000, net of fees. Under the
2020 Factoring Agreement, the Company pays $14,221 per week for 50
weeks at an effective interest rate of approximately 43% annually.
The 2020 Factoring Agreement includes a guaranty by the CEO of the
Company, Stephen J. Thomas III.
(4) The
Line of Credit originated with a bank and was secured by the
personal assets of certain shareholders of Copperhead Digital.
During 2016, the Line of Credit was assigned to the Copperhead
Digital shareholders, who subsequent to the Copperhead Digital
acquisition by TPTG became shareholders of TPTG, and the secured
personal assets were used to pay off the bank. The Line of Credit
bears a variable interest rate based on the 1 Month LIBOR plus
2.0%, 2.99% as of March 31, 2020, is payable monthly, and is
secured by the assets of the Company. 1,000,000 shares of Common
Stock of the Company have been reserved to accomplish raising the
funds to pay off the Line of Credit. Since assignment of the Line
of Credit to certain shareholders, which balance on the date of
assignment was $2,597,790, those shareholders have loaned the
Company $445,600 under the similar terms and conditions as the line
of credit but most of which were also given stock options totaling
$85,120 which expired as of December 31, 2019 (see Note 7) and is
due, as amended, August 31, 2020.
During
the year ended December 31, 2019 and 2018, those same shareholders
and one other have loaned the Company money in the form of
convertible loans of $136,400 and $537,200, respectively, described
in (2) and (6).
(5)
$350,000 represents cash due to the prior owners of the technology
acquired in December 2016 from the owner of the Lion Phone which is
due to be paid as agreed by TPTG and the former owners of the Lion
Phone technology and has not been determined.
$4,000,000
represents a promissory note included as part of the consideration
of ViewMe Live technology acquired in 2017, later agreed to as
being due and payable in full, with no interest with $2,000,000
from debt proceeds and the remainder from proceeds from the second
Company public offering.
On
September 1, 2018, the Company closed on its acquisition of Blue
Collar. Part of the acquisition included a promissory note of
$1,600,000 and interest at 3% from the date of closure. The
promissory note is secured by the assets of Blue
Collar.
(6)
During 2016, the Company acquired SDM which consideration included
a convertible promissory note for $250,000 due February 29, 2019,
as amended, does not bear interest, unless delinquent in which the
interest is 12% per annum, and is convertible into common stock at
$1.00 per share. The SDM balance is $182,381 as of March 31, 2020.
As of March 1, 2020, this convertible promissory note is
delinquent.
During
2018, the Company issued convertible promissory notes in the amount
of $537,200 to related parties and $10,000 to a non-related party
which bear interest at 6% (11% default interest rate), are due 30
months from issuance and are convertible into Series C Preferred
Stock at $1.00 per share. Because the Series C Preferred Stock has
a conversion price of $0.15 per share, the issuance of Series C
Preferred Stock promissory notes will cause a beneficial conversion
feature of approximately $38,479 upon exercise of the convertible
promissory notes.
(7) The
shareholder debt represents funds given to TPTG or subsidiaries by
officers and managers of the Company as working capital. There are
no written terms of repayment or interest that is being accrued to
these amounts and they will only be paid back, according to
management, if cash flows support it. They are classified as
current in the balance sheets.
See
Lease financing arrangement in Note 7.
18
NOTE 6
DERIVATIVE FINANCIAL INSTRUMENTS
The Company previously adopted the provisions of ASC subtopic
825-10, Financial
Instruments (“ASC
825-10”). ASC 825-10 defines fair value as the price that
would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements
for assets and liabilities required or permitted to be recorded at
fair value, the Company considers the principal or most
advantageous market in which it would transact and considers
assumptions that market participants would use when pricing the
asset or liability, such as inherent risk, transfer restrictions,
and risk of nonperformance. ASC 825-10 establishes a fair value
hierarchy that requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring
fair value.
The derivative liability as of March 31, 2020, in the amount of
$11,755,941 has a level 3 classification under ASC
825-10.
The following table provides a summary of changes in fair value of
the Company’s Level 3 financial liabilities as of March 31,
2020.
|
|
Debt
Derivative Liabilities
|
|
Balance,
December 31, 2018
|
$—
|
|
Debt discount from
initial derivative
|
1,774,000
|
|
Initial fair value
of derivative liabilities
|
2,601,631
|
|
Change in
derivative liability from conversion of notes payable
|
(407,654)
|
|
Change in fair
value of derivative liabilities at end of period
|
4,868,537
|
|
Balance, December
31, 2019
|
$8,836,514
|
|
Change in
derivative liabilities from conversion of notes
payable
|
(977,245)
|
|
Change in fair
value of derivative liabilities at end of period
|
3,896,672
|
|
Balance, March 31,
2020
|
$11,755,941
|
|
Derivative expense
for the three months ended March 31, 2020
|
$3,896,672
|
Convertible notes payable and warrant derivatives
– The Company issued
convertible promissory notes which are convertible into common
stock, at holders’ option, at a discount to the market price
of the Company’s common stock. The Company has identified the
embedded derivatives related to these notes relating to certain
anti-dilutive (reset) provisions. These embedded derivatives
included certain conversion features. The accounting treatment of
derivative financial instruments requires that the Company record
fair value of the derivatives as of the inception date of debenture
and to fair value as of each subsequent reporting
date.
As of March 31, 2020, the Company marked to market the fair value
of the debt derivatives and determined a fair value of $11,755,941
($11,752,428 from the convertible notes and $3,513 from the
warrants) in Note 5 (2) above. The Company recorded a loss from
change in fair value of debt derivatives of $3,896,672 for the
three months ended March 31, 2020. The fair value of the embedded
derivatives was determined using Monte Carlo simulation method
based on the following assumptions: (1) dividend yield of 0%, (2)
expected volatility of 348.4% to 576.1%, (3) weighted average
risk-free interest rate of 0.05% to 1.56% (4) expected life of 0.72
to 5.0 years, and (5) the quoted market price of $0.0009 to $0.047
for the Company’s common stock.
See
Financing lease arrangements in Note 8.
NOTE 7 - STOCKHOLDERS' DEFICIT
Preferred Stock
As of
March 31, 2020, we had authorized 100,000,000 shares of Preferred
Stock, of which certain shares had been designated as Series A
Preferred Stock, Series B Preferred Stock, Series C and Series D
Preferred Stock.
19
Series A Convertible Preferred Stock
In
February 2015, the Company designated 1,000,000 shares of Preferred
Stock as Series A Preferred Stock.
The
Series A Preferred Stock was designated in February 2016, has a par
value of $.001, is redeemable at the Company’s option at $100
per share, is senior to any other class or series of outstanding
Preferred Stock or Common Stock and does not bear dividends. The
Series A Preferred Stock has a liquidation preference immediately
after any Senior Securities, as defined and amended, of an amount
equal to amounts payable owing, including contingency amounts where
Holders of the Series A have personally guaranteed obligations of
the Company. Holders of the Series A Preferred Stock shall,
collectively have the right to convert all of their Series A
Preferred Stock when conversion is elected into that number of
shares of Common Stock of the Company, determined by the following
formula: 60% of the issued and outstanding Common Shares as
computed immediately after the transaction for conversion. For
further clarification, the 60% of the issued and outstanding common
shares includes what the holders of the Series A Preferred Stock
may already hold in common shares at the time of conversion. The
Series A Preferred Stock, collectively, shall have the right to
vote as if converted prior to the vote to an number of shares equal
to 60% of the outstanding Common Stock of the Company.
In
February 2015, the Board of Directors authorized the issuance of
1,000,000 shares of Series A Preferred Stock to Stephen Thomas,
Chairman, CEO and President of the Company, valued at $3,117,000
for compensation expense.
Series B Convertible Preferred Stock
In
February 2015, the Company designated 3,000,000 shares of Preferred
Stock as Series B Convertible Preferred Stock. There are 2,588,693
shares of Series B Convertible Preferred Stock outstanding as of
March 31, 2020.
The
Series B Preferred Stock was designated in February 2015, has a par
value of $.001, is not redeemable, is senior to any other class or
series of outstanding Preferred Stock, except the Series A
Preferred Stock, or Common Stock and does not bear dividends. The
Series B Preferred Stock has a liquidation preference immediately
after any Senior Securities, as defined and currently the Series A
Preferred Stock, and of an amount equal to $2.00 per share. Holders
of the Series B Preferred Stock have a right to convert all or any
part of the Series B Preferred Shares and will receive and equal
number of common shares at the conversion price of $2.00 per share.
The Series B Preferred Stockholders have a right to vote on any
matter with holders of Common Stock and shall have a number of
votes equal to that number of Common Shares on a one to one
basis.
Series C Convertible Preferred Stock
In May
2018, the Company designated 3,000,000 shares of Preferred Stock as
Series C Convertible Preferred Stock. There are no shares of Series
C Convertible Preferred Stock outstanding as of March 31,
2020.
The
Series C Preferred Stock was designated in May 2018, has a par
value of $.001, is not redeemable, is senior to any other class or
series of outstanding Preferred Stock, except the Series A and
Series B Preferred Stock, or Common Stock and does not bear
dividends. The Series C Preferred Stock has a liquidation
preference immediately after any Senior Securities, as defined and
currently the Series A and B Preferred Stock, and of an amount
equal to $2.00 per share. Holders of the Series C Preferred Stock
have a right to convert all or any part of the Series C Preferred
Shares and will receive an equal number of common shares at the
conversion price of $0.15 per share. The Series C Preferred
Stockholders have a right to vote on any matter with holders of
Common Stock and shall have a number of votes equal to that number
of Common Shares on a one to one basis.
On
January 14, 2020, TPT Global Tech, Inc. ("the Company") filed an
Amendment to its Articles of Incorporation to designate the Series
D Convertible Preferred Stock. The Amendment designates 20,000,000
shares of the authorized 100,000,000 shares of the Company's $0.001
par value preferred stock as the Series D Convertible Preferred
Stock ("the Series D Preferred Shares.")
As of
the date hereof, there are no Series D Preferred shares
outstanding. Series D Preferred shares have the following features:
(i) 8% Cumulative Annual Dividends payable on the purchase value in
cash or common stock of the Company at the discretion of the Board
and payment is also at the discretion of the Board, which may
decide to cumulate to future years; (ii) Optional Conversion to
common stock at the election of the holder @ 80% of the 30 day
average market closing price (for previous 30 business days)
divided into $2.00. This election may be made at any time after 18
months from issuance; (iii) Automatic conversion of the Series D
Preferred Stock shall occur without consent of holders upon any
national exchange listing approval and the registration
effectiveness of common stock underlying the conversion rights. The
automatic conversion to common from Series D Preferred shall be on
a one for one basis, which shall be post-reverse split as may be
necessary for any Exchange listing (iv) Registration Rights –
the Company has granted Piggyback Registration Rights for common
stock underlying conversion rights in the event it files any other
Registration Statement (other than an S-1 that the Company may file
for certain conversion common shares for the convertible note
financing that was arranged and funded in 2019). Further, the
Company will file and pursue to effectiveness a Registration
Statement or offering statement for common stock underlying the
Automatic Conversion event triggered by an exchange listing. (v)
Liquidation Rights - $2.00 per share plus any accrued unpaid
dividends – subordinate to Series A, B, and C Preferred Stock
receiving full liquidation under the terms of such series. The
Company has redemption rights for the first year following the
Issuance Date to redeem all or part of the principal amount of the
Series D Preferred Stock at between 115% and 140%.
20
Common Stock and Capital Contributions
As of
March 31, 2020, we had authorized 1,000,000,000 shares of Common
Stock, of which 737,324,774 common shares are issued and
outstanding.
Common Stock Payable
As of
March 31, 2020, 16,667 of common shares were subscribed to in 2018
for a note payable of $2,000.
In
2018, a majority of the outstanding voting shares of the Company
voted through a consent resolution to support a consent resolution
of the Board of Directors of the Company to add two new directors
to the Board. As such, Arkady Shkolnik and Reginald Thomas (family
member of CEO) were added as members of the Board of Directors. The
total members of the Board of Directors after this addition is
four. In accordance with agreements with the Company for his
services as a director, Mr. Shkolnik is to receive $25,000 per
quarter and 5,000,000 shares of restricted common stock valued at
approximately $692,500 vesting quarterly over twenty-four months.
The quarterly cash payments of $25,000 will be paid in unrestricted
common shares if the Company has not been funded adequately to make
such payments. Mr. Thomas is to receive $10,000 per quarter and
1,000,000 shares of restricted common stock valued at approximately
$120,000 vesting quarterly over twenty-four months. The quarterly
payment of $10,000 may be suspended by the Company if the Company
has not been adequately funded. As of March 31, 2020, $147,500 and
$50,000 has been accrued in the balance sheet for Mr. Shkolnik and
Mr. Thomas, respectively. For the three months ended March 31, 2020
and 2019, $101,562 and $101,562, respectively, have been expensed
under these agreements.
Effective
November 1 and 3, 2017, an officer of the Company contributed
9,765,000 shares of restricted Common Stock to the Company for the
acquisition of Blue Collar and HRS. These shares were subsequently
issued as consideration for these acquisitions in November 2017. In
March 2018, the HRS acquisition was rescinded and 3,625,000 shares
of common stock are being returned by the recipients. The other
transaction involved 6,500,000 shares for the acquisition of Blue
Collar which closed in 2018. As such, as of March 31, 2020 the
3,265,000 shares for the HRS transaction are reflected as
subscriptions receivable based on their par value.
21
Stock Options
|
|
Options
Outstanding
|
Vested
|
Vesting
Period
|
Exercise Price
Outstanding and Exercisable
|
Expiration
Date
|
|
December 31,
2018
|
3,093,120
|
1,954,230
|
100% at issue and
12 to 18 months
|
$0.05 to $0.22
|
12-31-19 to
3-21-21
|
|
Expired
|
(93,120)
|
|
|
$0.05 to $0.22
|
12-31-19
|
|
December 31,
2019
|
3,000,000
|
3,000,000
|
12 to 18
months
|
$0.10
|
3-1-20 to
3-21-21
|
|
Expired
|
(2,000,000)
|
|
|
|
|
|
March 31,
2020
|
1,000,000
|
1,000,000
|
12
months
|
$0.10
|
3-1-20 to
3-21-21
|
During
the year ended December 31, 2018, the company entered into
consulting arrangements primarily for legal work and general
business support that included the issuance of stock options to
purchase 3,000,000 options to purchase common shares at $0.10 per
share. 2,000,000 of these expired. The remaining 1,000,000 are
fully vested as of March 31, 2020. The Black-Scholes options
pricing model was used to value the stock options. The inputs
included the following:
|
(1)
|
Dividend
yield of 0%
|
|
(2)
|
expected
annual volatility of 307% - 311%
|
|
(3)
|
discount
rate of 2.2% to 2.3%
|
|
(4)
|
expected
life of 2 years, and
|
|
(5)
|
estimated
fair value of the Company’s common $0.125 to $0.155 per
share.
|
93,120
of options expired in 2019. Expense recorded in the three months
ended March 31, 2020 and 2019 was $0 and 72,716 related to stock
options. No further expense will be incurred to the consolidated
statement of operations for the existing stock
options.
Warrants
As of March 31, 2020, there were 3,333,333 warrants outstanding
that expire in five years or in the year ended December 31, 2024.
As part of the Convertible Promissory Notes payable – third
party issuance in Note 5, the Company issued 3,333,333 warrants to
purchase 3,333,333 common shares of the Company at 70% of the
current market price. Current market price means the average
of the three lowest trading prices for our common stock during the
ten-trading day period ending on the latest complete trading day
prior to the date of the respective exercise notice. However, if a
required registration statement, registering the underlying shares
of the Convertible Promissory Notes, is declared effective on or
before June 11, 2019 to September 11, 2019, then, while such
Registration Statement is effective, the current market price shall
mean the lowest volume weighted average price for our common stock
during the ten-trading day period ending on the last complete
trading day prior to the conversion date.
The
warrants issued were considered derivative liabilities valued at
$3,513 of the total $11,755,941, derivative liabilities as of March
31, 2020. See Note 5.
Common Stock Reservations
The
Company has reserved 1,000,000 shares of Common Stock of the
Company for the purpose of raising funds to be used to pay off debt
described in Note 5.
We have
reserved 20,000,000 shares of Common Stock of the Company to grant
to certain employee and consultants as consideration for services
rendered and that will be rendered to the Company.
There
are Transfer Agent common stock reservations that have been
approved by the Company relative to the outstanding derivative
financial instruments, the outstanding Form S-1 Registration
Statement and general treasury of 146,778,034.
22
NOTE
8 - COMMITMENTS AND CONTINGENCIES
Accounts
Payable and Accrued Expenses
|
Accounts
payable:
|
2020
|
2019
|
|
Related
parties (1)
|
$1,131,430
|
$1,141,213
|
|
General
operating
|
3,191,090
|
3,342,952
|
|
Accrued interest on
debt (2)
|
854,754
|
793,470
|
|
Credit card
balances
|
181,884
|
183,279
|
|
Accrued payroll and
other expenses
|
675,003
|
207,108
|
|
Taxes and fees
payable
|
633,357
|
633,357
|
|
Unfavorable lease
liability
|
211,977
|
242,256
|
|
Total
|
$6,879,495
|
$6,543,635
|
(1)
Relates to amounts
due to management and members of the Board of Directors according
to verbal and written agreements that have not been paid as of
period end.
(2)
Portion relating to
related parties is $535,279 and $481,942 for March 31, 2020 and
December 31, 2019, respectively.
Operating
lease obligations
We have various non-cancelable lease agreements for certain of our
tower locations with original lease periods expiring between 2020
and 2044. Our lease terms may include options to extend or
terminate the lease when it is reasonably certain we will exercise
that option. Certain of the arrangements contain escalating rent
payment provisions. The Company has determined that the identified
operating leases did not contain non-lease components and require
no further allocation of the total lease cost. Additionally, the
agreements in place did not contain information to determine the
rate implicit in the leases, so we used our estimated incremental
borrowing rate as the discount rate. Our weighted average discount
rate is 12.0% and the weighted average lease term of 6
years. Our Michigan main office lease and an equipment lease
described below and leases with an initial term of twelve months
have not been recorded on the consolidated balance sheets. We
recognize rent expense on a straight-line basis over the lease
term.
As of March 31, 2020, operating lease right-of-use assets and
liabilities arising from operating leases were $4,484,573 and
$4,586,962, respectively. During the three months ended March 31,
2020, cash paid for amounts included for the measurement of lease
liabilities was $678,059 and the Company recorded lease expense in
the amount of $686,864 in general and administrative
expenses.
The following is a schedule showing the future minimum lease
payments under operating leases by years and the present value of
the minimum payments as of March 31, 2020.
|
2020
|
$1,688,002
|
|
2021
|
1,681,008
|
|
2022
|
1,065,718
|
|
2023
|
560,703
|
|
2024
|
337,638
|
|
Thereafter
|
194,383
|
|
Total operating
lease liabilities
|
$5,527,452
|
|
Amount representing
interest
|
$(940,490)
|
|
Total net present
value
|
$4,586,962
|
23
Office lease used by CEO
The
Company entered into a lease of 12 months or less for living space
which is occupied by Stephen Thomas, Chairman, CEO and President of
the Company. Mr. Thomas lives in the space and uses it as his
corporate office. The company has paid $7,000 and $0 in rent and
utility payments for this space for the three months ended March
31, 2020 and 2019, respectively.
Financing
lease obligations
Future
minimum lease payments are as follows:
|
Obligation
|
2020
|
In
Default
|
Total
|
|
Telecom Equipment
Finance (1)
|
$449,103
|
—
|
$449,103
|
(1) The
Telecom Equipment Lease is with an entity owned and controlled by
shareholders of the Company and is due August 31, 2020, as
amended.
Other
Commitments and Contingencies
The
Company has employment agreements with certain employees of SDM and
K Telecom. The agreements are such that SDM and K Telecom, on a
standalone basis in each case, must provide sufficient cash flow to
financially support the financial obligations within the employment
agreements.
The
Company has been named in a lawsuit by a former employee who was
terminated by management in 2016. The employee was working under an
employment agreement but was terminated for breach of the
agreement. The former employee is suing for breach of contract and
is seeking around $75,000 in back pay and benefits. Management
believes it has good and meritorious defenses and does not believe
the outcome of the lawsuit will have any material effect on the
financial position of the Company.
As of
March 31, 2020, the company has collected $338,725 from one
customer in excess of amounts due from that customer in accordance
with the customer’s understanding of the appropriate billings
activity. The customer has filed a written demand for repayment by
the Company of amounts owed. Management believes that the customer
agreement allows them to keep the amounts under dispute. Given the
dispute, the Company has reflected the amounts in dispute as a
customer liability on the consolidated balance sheet as of March
31, 2020 and December 31, 2019 and does not believe the outcome of
the dispute will have a material effect on the financial position
of the Company.
NOTE
9 – RELATED PARTY ACTIVITY
Accounts
Payable and Accrued Expenses
There
are amounts outstanding due to related parties of the Company of
$1,131,430 and $1,141,213, respectively, as of March 31, 2020 and
December 31, 2019 related to amounts due to employees, management
and members of the Board of Directors according to verbal and
written agreements that have not been paid as of period end which
are included in accounts payable and accrued expenses on the
balance sheet. See Note 8.
As is
mentioned in Note 7, Reginald Thomas was appointed to the Board of
Directors of the Company in August 2018. Mr. Thomas is the brother
to the CEO Stephen J. Thomas III. According to an agreement with
Mr. Reginald Thomas, he is to receive $10,000 per quarter and
1,000,000 shares of restricted common stock valued at approximately
$120,000 vesting quarterly over twenty-four months. The quarterly
payment of $10,000 may be suspended by the Company if the Company
has not been adequately funded.
Leases
See
Note 8 for office lease used by CEO.
24
Debt
Financing and Amounts Payable/Receivable
As of
March 31, 2020, there are amounts due to management/shareholders of
$123,845 included in financing arrangements, of which $107,645 is
payable from the Company to Stephen J. Thomas III, CEO of the
Company. See note 5. In addition, as of March 31, 2020 and December
31, 2019, amounts receivable from Mark Rowen, CEO of Blue Collar
were $55,510 and $0, respectively, consisting of a net balance in
advances and reimbursable expenses.
Revenue
Transactions
Blue
Collar provided production services to an entity controlled by the
Blue Collar CEO (355 LA, LLC or “355”) for which it
recorded revenues of $235,149 and $0, respectively, for the three
months ended March 31, 2020 and 2019. 355 was formed in October
2019 by the CEO of Blue Collar for the purpose of production of
certain additional footage for a 355 customer. 355 has opportunity
to engage with other production relationships outside of using Blue
Collar. Accounts receivable from 355 as of March 31, 2020 and
December 31, 2019 is $0 and $169,439, respectively.
Other
Agreements
On
April 17, 2018, the CEO of the Company, Stephen Thomas, signed an
agreement with New Orbit Technologies, S.A.P.I. de C.V., a Mexican
corporation, (“New Orbit”), majority owned and
controlled by Stephen Thomas, related to a license agreement for
the distribution of TPT licensed products, software and services
related to Lion Phone and ViewMe Live within Mexico and Latin
America (“License Agreement”). The License Agreement
provides for New Orbit to receive a fully paid-up, royalty-free,
non-transferable license for perpetuity with termination only under
situations such as bankruptcy, insolvency or material breach by
either party and provides for New Orbit to pay the Company fees
equal to 50% of net income generated from the applicable
activities. The transaction was approved by the Company’s
Board of Directors in June 2018. There has been no activity on this
agreement.
NOTE 10 – GOODWILL AND INTANGIBLE ASSETS
Goodwill and
intangible assets are comprised of the following:
March
31, 2020
|
|
Gross carrying
amount (1)
|
Accumulated
Amortization
|
Net Book
Value
|
Useful
Life
|
|
Customer
Base
|
$1,197,200
|
(390,030)
|
807,170
|
3-10
|
|
Developed
Technology
|
$4,595,600
|
(1,234,007)
|
3,361,593
|
9
|
|
Film
Library
|
$957,000
|
(122,950)
|
834,050
|
11
|
|
Trademarks and
Tradenames
|
$132,000
|
(18,025)
|
113,975
|
12
|
|
Favorable
leases
|
$95,000
|
(25,440)
|
69,560
|
3
|
|
|
$6,976,800
|
(1,790,452)
|
5,186,348
|
|
|
|
|
|
|
|
|
Goodwill
|
$1,050,366
|
—
|
1,050,366
|
—
|
Amortization
expense was $182,735 and $206,002 for the three months ended March
31, 2020 and 2019, respectively.
December
31, 2019
|
|
Gross carrying
amount (1)
|
Accumulated
Amortization
|
Net Book
Value
|
Useful
Life
|
|
Customer
Base
|
$1,197,200
|
(364,383)
|
832,817
|
3-10
|
|
Developed
Technology
|
$4,595,600
|
(1,106,351)
|
3,489,249
|
9
|
|
Film
Library
|
$957,000
|
(104,900)
|
852,100
|
11
|
|
Trademarks and
Tradenames
|
$132,000
|
(15,123)
|
116,877
|
12
|
|
Favorable
leases
|
$95,000
|
(16,960)
|
78,040
|
3
|
|
|
$6,976,800
|
(2,707,717)
|
5,369,083
|
|
|
|
|
|
|
|
|
Goodwill
|
$1,050,366
|
—
|
1,050,366
|
—
|
25
Remaining
amortization of the intangible assets is as following for the next
five years and beyond:
|
|
2020
|
|
2020
|
$539,696
|
|
2021
|
732,431
|
|
2022
|
732,431
|
|
2023
|
729,063
|
|
2024
|
712,079
|
|
Thereafter
|
1,740,648
|
|
|
$5,186,348
|
NOTE 11 – SEGMENT REPORTING
ASC 280, “Segment Reporting”, establishes standards for
reporting information about operating segments on a basis
consistent with the Company's internal organizational structure as
well as information about geographical areas, business segments and
major customers in financial statements for details on the
Company's business segments.
The Company's chief operating decision maker (“CODM”)
has been identified as the CEO who reviews the financial
information of separate operating segments when making decisions
about allocating resources and assessing performance of the group.
Based on management's assessment, the Company considers its most
significant segments for 2020 and 2019 are those in which it is
providing Broadband Internet through TPT SpeedConnect and Media
Production services through Blue Collar.
The following table presents summary information by segment for the
three months ended March 31 and 2020 and 2019
respectively:
|
2020
|
|
|
|
|
|
|
TPT
SpeedConnect
|
Blue
Collar
|
Corporate and
other
|
Total
|
|
Revenue
|
$2,707,654
|
$353,405
|
$14,914
|
$3,075,973
|
|
Cost of
revenue
|
$1,717,386
|
$148,095
|
$441,007
|
$2,306,488
|
|
Net income
(loss)
|
$286,790
|
$(58,095)
|
$6,423,588
|
$(5,966,198)
|
|
Depreciation and
amortization
|
$127,194
|
$27,834
|
$285,110
|
$440,138
|
|
Derivative
expense
|
$—
|
$—
|
$3,896,672
|
$3,896,672
|
|
Interest
expense
|
$54,004
|
$10,218
|
$482,535
|
$546,757
|
|
2019
|
|
|
|
|
|
|
TPT
SpeedConnect
|
Blue
Collar
|
Corporate and
other
|
Total
|
|
Revenue
|
$—
|
$61,750
|
$99,726
|
$161,476
|
|
Cost of
revenue
|
$—
|
$140,979
|
$121,389
|
$262,368
|
|
Net
loss
|
$—
|
$(257,728)
|
$(2,723,618)
|
$(2,981,346)
|
|
Depreciation and
amortization
|
$—
|
$5,141
|
$272,568
|
$277,709
|
|
Interest
expense
|
$—
|
$16,072
|
$114,165
|
$130,237
|
26
NOTE
12 – SUBSEQUENT EVENTS
Subsequent to March 31, 2020, Auctus converted another $15,313 of
principal and $14,138 of accrued interest into 115,897,192 shares
of common stock of the Company. See Note 7.
On May
6, 2020, the Company entered into an agreement with Steve and
Yuanbing Caudle for the acquisition of the Media One Live platform
for $1,000,000 in the form of a promissory note due after funding
has been received by the Company from its various investors and
other sources. Mr. Caudle is a principal with the ViewMe technology
that is being developed by the Company. This technology is
considered to be the social media add on to the ViewMe live
streaming engine platform. In addition, the Company in conjunction
with this agreement, entered into an agreement to employ Ms. Caudle
as Vice President of Product Development of the Media One Live
platform for an annual salary of $250,000 for five years, including
customary employee benefits.
In December 2019, COVID-19 emerged and has subsequently spread
worldwide. The World Health Organization has declared COVID-19 a
pandemic resulting in federal, state and local governments and
private entities mandating various restrictions, including travel
restrictions, restrictions on public gatherings, stay at home
orders and advisories and quarantining of people who may have been
exposed to the virus. After close monitoring and responses and
guidance from federal, state and local governments, in an effort to
mitigate the spread of COVID-19, around March 18, 2020 for an
indefinite period of time, the Company closed its Blue Collar
office in Los Angeles, California and its TPT SpeedConnect offices
in Michigan, Idaho and Arizona. Most employees are working
remotely, however this is not possible with certain employees and
all subcontractors that work for Blue Collar. The Company continues
to monitor developments, including government requirements and
recommendations at the national, state, and local level to evaluate
possible extensions to all or part of such closures.
The Company has taken advantage of the stimulus offerings and
received $722,200 in April 2020 and will try to use these funds as
is prescribed by the stimulus offerings to have the entire amount
forgiven. The Company is also in the process of trying to
raise debt and equity financing, some of which may have to be used
for working capital shortfalls if revenues decrease significantly
because of the COVID-19 closures.
As the COVID-19 pandemic is complex and rapidly evolving, the
Company's plans as described above may change. At this point, we
cannot reasonably estimate the duration and severity of this
pandemic, which could have a material adverse impact on our
business, results of operations, financial position and cash
flows.
Subsequent
events were reviewed through the date the financial statements were
issued.
27
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements and Associated Risks.
This Form 10-Q contains certain statements that are forward-looking
within the meaning of the Private Securities Litigation Reform Act
of 1995. For this purpose, any statements contained in this Form
10-Q that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, words
such as “may,” “will,”
“expect,” “believe,”
“anticipate,” “estimate,” or
“continue” or comparable terminology are intended to
identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, and actual
results may differ materially depending on a variety of factors,
many of which are not within our control. These factors include but
are not limited to economic conditions generally and in the
industries in which we may participate; competition within our
chosen industry, including competition from much larger
competitors; technological advances and failure to successfully
develop business relationships.
Based
on our financial history since inception, our auditor has expressed
substantial doubt as to our ability to continue as a going concern.
As reflected in the accompanying financial statements, as of March
31, 2020, we had an accumulated deficit totaling $38,797,291. This
raises substantial doubts about our ability to continue as a going
concern.
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2020 Compared to the Three
Months Ended March 31, 2019
During
the three months ended March 31, 2020, we recognized total revenues
of $3,075,973 compared to the prior period of $161,476. The
increase is attributed to the acquisition of the assets of
SpeedConnect on May 7, 2019.
Gross
profit (loss) for the three months ended March 31, 2020 was
$769,485 compared to $(100,892) for the prior period. The increase
of $870,377 is largely attributable to the acquisition of the
assets of SpeedConnect.
During
the three months ended March 31, 2020, we recognized $1,723,379 in
operating expenses compared to $1,209,801 for the prior period. The
increase of $513,578 was in large part attributable to the
acquisition of the assets of SpeedConnect.
Derivative
expense of $3,896,672 and $1,540,416 results from the accounting
for derivative financial instruments during the three months ended
March 31, 2020 and 2019.
Interest
expense increased for the three months ended March 31, 2020
compared to the prior period by $416,520. Increases from higher
interest rates and increased debt, including debt classified as
derivative financial instruments and the resulting accounting of
those considered in default was the primary reason for the
increase.
During
the three months ended March 31, 2020, we recognized a net loss of
$5,966,198 compared to a loss of $2,981,346 for the prior period.
The difference of $2,984,852 was primarily a result of the
derivative expenses from the valuation of debt classified as
derivative financial instruments.
LIQUIDITY
AND CAPITAL RESOURCES
Cash
flows generated from operating activities were not enough to
support all working capital requirements for the three months ended
March 31, 2020 and 2019. We incurred $5,966,198 and $2,981,346,
respectively, in losses, and we generate and used $96,102 and
$369,477, respectively, in cash for operations for the three months
ended March 31, 2020 and 2019. Cash flows from financing activities
were $81,765 and $848,661 for the same periods. These factors raise
substantial doubt about the ability of the Company to continue as a
going concern for a period of one year from the issuance of these
financial statements. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
In December 2019, COVID-19 emerged and has subsequently spread
worldwide. The World Health Organization has declared COVID-19 a
pandemic resulting in federal, state and local governments and
private entities mandating various restrictions, including travel
restrictions, restrictions on public gatherings, stay at home
orders and advisories and quarantining of people who may have been
exposed to the virus. After close monitoring and responses and
guidance from federal, state and local governments, in an effort to
mitigate the spread of COVID-19, around March 18, 2020 for an
indefinite period of time, the Company closed its Blue Collar
office in Los Angeles, California and its TPT SpeedConnect offices
in Michigan, Idaho and Arizona. Most employees are working
remotely, however this is not possible with certain employees and
all subcontractors that work for Blue Collar. The Company continues
to monitor developments, including government requirements and
recommendations at the national, state, and local level to evaluate
possible extensions to all or part of such closures.
28
The Company has taken advantage of the stimulus offerings and
received $722,200 in April 2020 and will try to use these funds as
is prescribed by the stimulus offerings to have the entire amount
forgiven. The Company is also in the process of trying to
raise debt and equity financing, some of which may have to be used
for working capital shortfalls if revenues decrease significantly
because of the COVID-19 closures.
As the COVID-19 pandemic is complex and rapidly evolving, the
Company's plans as described above may change. At this point, we
cannot reasonably estimate the duration and severity of this
pandemic, which could have a material adverse impact on our
business, results of operations, financial position and cash
flows.
In
order for us to continue as a going concern for a period of one
year from the issuance of these financial statements, we will need
to obtain additional debt or equity financing and look for
companies with cash flow positive operations that we can acquire.
There can be no assurance that we will be able to secure additional
debt or equity financing, that we will be able to acquire cash flow
positive operations, or that, if we are successful in any of those
actions, those actions will produce adequate cash flow to enable us
to meet all our future obligations. Most of our existing financing
arrangements are short-term. If we are unable to obtain additional
debt or equity financing, we may be required to significantly
reduce or cease operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
We are
a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure
controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our
reports filed or submitted under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported, within the
time period specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under
the Securities Exchange Act of 1934 is accumulated and communicated
to management including our principal executive officer/principal
financial officer as appropriate, to allow timely decisions
regarding required disclosure.
Management
has carried out an evaluation of the effectiveness of the design
and operation of our company’s disclosure controls and
procedures. Due to the lack of personnel and outside directors,
management concluded that the Company’s disclosure controls
and procedures are not effective as of such date. The Company
anticipates that with further resources, the Company will expand
both management and the board of directors with additional officers
and independent directors in order to provide sufficient disclosure
controls and procedures.
Changes in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting
(as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter
ended March 31, 2020 that have materially affected, or are
reasonably likely to materially affect, our internal controls over
financial reporting.
29
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 1A. RISK FACTORS
No
Material Changes in Risk Factors since the disclosure contained in
the Form 10-K for the year ended December 31, 2019.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Aside
from what has been disclosed in our Registration Statement on Form
S-1/A dated February 13, 2019, amended December 10, 2019, and in
the Company’s Form 10-K for the year ended December 31, 2019,
and which has been issued pursuant to conversions of amounts due
under convertible promissory notes as reflected below, we have not
sold unregistered securities in the past 2 years without
registering the securities under the Securities Act of
1933.
|
2020
Conversions
|
|
Accrued
|
Share
|
Price
|
|
|
|
Date
|
Principal
|
Interest
|
Amounts
|
Per
Share
|
|
Auctus
|
4/6/2020
|
3,536
|
3,536
|
27,936,930
|
0.0003
|
|
-
|
4/9/2020
|
1,006
|
6,066
|
27,936,930
|
0.0003
|
|
|
4/15/20
|
5,574
|
3,536
|
30,725,000
|
0.0003
|
|
|
4/21/20
|
5,197
|
2,257
|
29,298,332
|
0.0003
|
We have
filed Forms 8-K dated April 22, 2019, May 28, 2019, June 20, 2019,
September 19, 2019, and September 30, 2019, related to convertible
promissory notes for which the underlying common shares have not be
registered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The
Company is in default under its derivative financial instruments
and received notice of such from Auctus for not reserving enough
shares for conversion and for not having filed a Form S-1
Registration Statement with the Securities and Exchange Commission.
It was the intent of the Company to pay back all derivative
securities prior to the due dates but that has not occurred in case
of Auctus. As such, the Company is currently in negotiations with
Auctus, EMA and Odyssey relative to extending due dates and
changing terms on the Notes.
ITEM 4. MINE SAFETY DISCLOSURE
Not
Applicable.
ITEM 5. OTHER INFORMATION
None.
30
ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed
as part of this Form 10-Q. Exhibit numbers correspond to the
numbers in the Exhibit Table of Item 601 of Regulation
S-K.
|
Certification of Chief Executive Officer Pursuant to Rule
13a–14(a) or 15d-14(a) of the Securities Exchange Act of
1934
|
|
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
or 15d-14(a) of the Securities Exchange Act of 1934
|
|
|
Certification of Chief Executive Officer under Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
Certification of Chief Financial Officer under Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
101.INS
|
XBRL
Instance Document (1)
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document (1)
|
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase Document (1)
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101.DEF
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XBRL
Taxonomy Extension Definition Linkbase Document (1)
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101.LAB
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XBRL
Taxonomy Extension Label Linkbase Document (1)
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101.PRE
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XBRL
Taxonomy Extension Presentation Linkbase Document (1)
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(1)
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Pursuant
to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, is
deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, and otherwise is not subject to liability
under these sections.
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31
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
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TPT GLOBAL TECH, INC.
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(Registrant)
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Dated:
May 20, 2020
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By:
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/s/
Stephen J. Thomas, III
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Stephen
J. Thomas, III
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(Chief
Executive Officer, Principal Executive Officer)
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Officer)
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Dated:
May 20, 2020
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By:
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/s/
Gary L. Cook
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Gary L.
Cook
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(Chief
Financial Officer, Principal Accounting Officer)
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Officer)
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32