TPT GLOBAL TECH, INC. - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

 (Mark One)

 

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

For the quarterly period ended March 31, 2021

 

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from __________ to ___________

 

Commission file number: 333-222094

 

TPT Global Tech, Inc.

(Exact name of registrant as specified in its charter)

 

Florida		81-3903357
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)
501 West Broadway, Suite 800 San Diego, CA		92101
(Address of principal executive offices)		(Zip Code)

 

(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:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
---	---	---

 

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.

Yes

☒

No

☐

 

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).

Yes

☒

No

☐

 

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.

 

Large accelerated filer		☐	Accelerated filer	☐
Non-accelerated filer		☒	Smaller reporting company	☒
			Emerging growth company	☒

 

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).

 

Yes

☐

No

☒

 

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 10, 2021, there were 879,029,038 shares of the registrant’s common stock, $0.001 par value, issued and outstanding.

 

 

TABLE OF CONTENTS

 

		Page
	PART 1 – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets – March 31, 2021 (Unaudited) and December 31, 2020	3
	Condensed Consolidated Statements of Operations – Three months ended March 31, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Deficit – Three months ended March 31, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2021 and 2020 (Unaudited)	7
	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk – Not Applicable	36
Item 4.	Controls and Procedures	36
	PART II- OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors – Not Applicable	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosure – Not Applicable	37
Item 5.	Other Information – Not Applicable	37
Item 6.	Exhibits	37
	Signatures	38

  

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

TPT Global Tech, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

ASSETS

 

	March 31,	December 31,
	2021	2020
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$174,679	$19,309
Accounts receivable, net	228,626	164,818
Prepaid expenses and other current assets	82,880	180,362
Total current assets	486,185	364,489
NON-CURRENT ASSETS
Property and equipment, net	2,134,718	2,145,597
Operating lease right of use assets	5,083,807	4,732,459
Intangible assets, net	4,529,537	4,714,941
Goodwill	768,091	768,091
Deposits and other assets	56,072	111,111
Total non-current assets	12,572,225	12,472,199
TOTAL ASSETS	$13,058,410	$12,836,688

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses	$8,435,164	$7,866,140
Deferred revenue	458,069	341,789
Customer liability	338,725	338,725
Current portion of loans, advances and factoring agreements	1,703,678	2,308,753
Convertible notes payable, net of discounts	1,711,098	1,711,098
Notes payable - related parties, net of discounts	10,555,159	10,559,796
Convertible notes payable – related parties, net of discounts	922,181	922,481
Derivative liabilities	5,157,761	5,265,139
Current portion of operating lease liabilities	3,084,981	2,682,722
Financing lease liabilities	172,880	184,939
Financing lease liabilities – related party	661,651	654,633
Total current liabilities	33,201,347	32,836,215
NON-CURRENT LIABILITIES
Loans, advances and factoring agreements, net of current portion and discounts	1,447,875	843,577
Operating lease liabilities, net of current portion	3,282,285	2,872,952
Total non-current liabilities	4,730,160	3,716,529
Total liabilities	37,931,507	36,552,744
Commitments and contingencies	—	—

 

See accompanying notes to condensed consolidated financial statements.

 

 

TPT Global Tech, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED

  

	March 31,	December 31,
	2021	2020
	(Unaudited)
MEZZANINE EQUITY
Convertible Preferred Series A, 1,000,000 designated - 1,000,000 shares issued and outstanding as of March 31, 2021 and December 31, 2020	3,117,000	3,117,000
Convertible Preferred Series B – 3,000,000 shares designated, 2,588,693 shares issued and outstanding as of March 31, 2021 and December 31, 2020	1,677,473	1,677,476
Convertible Preferred Series C – 3,000,000 shares designated, zero shares issued and outstanding as of March 31, 2021 and December 31, 2020	---	---
Convertible Preferred Series D, 10,000,000 designated – 30,749 and zero shares issued and outstanding as of March 31, 2021 and December 31, 2020	153,744	---
Total mezzanine equity	4,948,217	4,794,473
STOCKHOLDERS' DEFICIT
Common stock, $.001 par value, 1,000,000,000 shares authorized, 873,064,371 and 865,564,371 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	873,065	865,565
Subscriptions payable	207,845	125,052
Additional paid-in capital	11,582,882	11,462,940
Accumulated deficit	(42,615,996)	(40,902,944)
Total TPT Global Tech, Inc. stockholders' deficit	(29,952,204)	(28,449,387)
Non-controlling interests	130,890	(61,142)
Total stockholders’ deficit	(29,821,314)	(28,510,529)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$13,058,410	$12,836,688

 

See accompanying notes to condensed consolidated financial statements.

 

TPT Global Tech, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

	For the three months ended March 31,
	2021	2020
REVENUES:
Products	$2,490	$11,151
Services	2,709,860	3,064,822
Total Revenues	2,712,350	3,075,973
COST OF SALES:
Products	2,500	12,900
Services	2,159,154	2,293,588
Total Costs of Sales	2,161,654	2,306,488
Gross profit	550,696	769,485
EXPENSES:
Sales and marketing	4,257	25,900
Professional	410,021	343,967
Payroll and related	660,667	662,002
General and administrative	670,209	251,372
Depreciation	155,361	257,403
Amortization	184,655	182,735
Total expenses	2,085,170	1,723,379
Loss from operations	(1,534,474)	(953,894)
OTHER INCOME (EXPENSE)
Derivative gain (expense)	185,275	(3,896,672)
Gain (loss) on debt conversions	—	(568,875)
Interest expense	(390,879)	(546,757)
Total other expenses	(205,604)	(5,012,304)
Net loss before income taxes	(1,740,078)	(5,966,198)
Income taxes	—	—
NET LOSS BEFORE NON-CONTROLLING INTERESTS	(1,740,078)	(5,966,198)
NET LOSS ATTRIBUTABLE TO NON- CONTROLLING INTERESTS	(27,026)	—
NET LOSS ATTRIBUTABLE TO TPT GLOBAL TECH, INC. SHAREHOLDERS	$(1,713,052)	$(5,966,198)
Loss per common share: Basic and diluted	$(0.00)	$(0.02)
Weighted average number of common shares outstanding:
Basic and diluted	870,424,730	382,159,789

 

 See accompanying notes to condensed consolidated financial statements.

 

 

TPT Global Tech, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

For the three months ended March 31, 2021 and 2020

(Unaudited)

 

	Series A Preferred Stock		Series B Preferred Stock		Common Stock
	Shares	Amount	Shares	Amount	Shares	Amount	Subscriptions Payable	Additional Paid-in Capital	Accumulated Deficit	Non-Controlling Interest	Total Stockholders’ Deficit
Balance as of December 31, 2020	—	$—	—	$—	865,564,371	$865,565	$125,052	$11,462,940	$(40,902,944)	$(61,142)	$(28,510,529)
Subscription payable for services	—	—	—	—	—	—	82,793	—	—	—	82,793
Issuance of shares for exchange for debt	---	---	---	---	7,500,000	7,500	---	339,000	---	---	346,500
TPT Strategic license cancellation	—	—	—	—	—	—	—	(219,058)	—	219,058	—
Net loss	—	—	—	—	—	—	—	—	(1,713,052)	(27,026)	(1,740,078)
Balance as of March 31, 2021	—	$—	—	$—	873,064,371	$873,065	$207,845	$11,582,882	$(42,615,996)	$130,890	$(29,821,314)

 

	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)

   See accompanying notes to condensed consolidated financial statements.

 

 

TPT Global Tech, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

	For the three months ended March 31,
	2021	2020
Cash flows from operating activities:
Net loss	$(1,740,078)	$(5,966,198)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	155,361	257,403
Amortization	184,655	182,735
Amortization of debt discounts	212,053	316,035
Loss on conversion of notes payable	---	568,875
Derivative (gain) expense	(185,275)	3,896,672
Share-based compensation: Common stock	82,793	101,562
Changes in operating assets and liabilities:
Accounts receivable	(63,808)	314,389
Accounts receivable related party	---	(55,510)
Prepaid expenses and other assets	65,019	(5,346)
Deposits and other assets	55,039	---
Accounts payable and accrued expenses	651,188	425,345
Net change in operating lease right of use assets and liabilities	460,244	56,854
Other liabilities	116,280	(3,732)
Net cash used in operating activities	$(6,529)	$(96,102)
Cash flows from investing activities:
Purchase of equipment	$(144,481)	$(131,351)
Net cash used in investing activities	$(144,481)	$(131,351)
Cash flows from financing activities:
Proceeds from sale of Series D Preferred Stock	$153,744	$---
Proceeds from convertible notes, loans and advances	1,068,674	590,000
Payment on convertible loans, advances and factoring agreements	(903,978)	(328,392)
Proceeds on convertible notes and amounts payable – related parties	---	(179,843)
Payments on financing lease liabilities	(12,060)	—
Net cash provided by financing activities	$306,380	$81,765
Net change in cash	$155,370	$46,519
Cash and cash equivalents - beginning of period	$19,309	$192,172
Cash and cash equivalents - end of period	$174,679	$238,688

  

See accompanying notes to condensed consolidated financial statements.

 

 

TPT Global Tech, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 

(Unaudited)

 

Supplemental Cash Flow Information:

 

Cash paid for:

 

	2021	2020
Interest	$29,325	$88,736
Taxes	$—	$—

 

Non-Cash Investing and Financing Activities:

 

	2021	2020
Debt discount on factoring agreement	$—	$216,720
Operating lease liabilities and right of use assets	—	1,166,677
Common stock issued in exchange for payable and note	$424,397	$—
TPT Strategic, Inc. merger – Non-controlling interest in intercompany liabilities rescinded	$(219,058)	$—

 

See accompanying notes to condensed consolidated financial statements. 

 

 

TPT Global Tech, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

 

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 January 8, 2020 we formed TPT Federal, LLC (“TPT Federal”). On March 30, 2020 we formed TPT MedTech, LLC (“TPT MedTech”) and on June 6, 2020 we formed InnovaQor, Inc (“InnovaQor”). In July and August 2020, the Company formed Quiklab 1 LLC, QuikLAB 2, LLC, QuikLAB 3, LLC and QuikLAB 4, LLC where TPT MedTech owns 80% (as agreed per the operating agreement) of all outside equity investments. Effective August 1, 2020 we closed on the acquisition of 75% of The Fitness Container, LLC (“Air Fitness”). In July 2020, we invested in a Hong Kong company called TPT Global Tech Asia Limited of which we own 78%, and during 2020, InnovaQor did a reverse merger with Southern Plains of which there ended up being a non controlling interest of 6% as of March 31, 2021 and December 31, 2020. The name of InnovaQor remained for the merged entities but was changed to TPT Strategic, Inc. on March 21, 2021.

 

We are based in San Diego, California, and operate as a technology-based company with divisions providing telecommunications, medical technology and product distribution, media content for domestic and international syndication as well as technology solutions. We operate on our own proprietary Global Digital Media TV and Telecommunications infrastructure platform and also provide technology solutions to businesses domestically and worldwide. We offer 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.

 

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, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

 

These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2020. The condensed consolidated balance sheet as of March 31, 2021, 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 and Global, Copperhead Digital, SDM, Blue Collar, TPT SpeedConnect, TPT Federal, TPT MedTech, InnovaQor, Quiklab 1, QuikLAB 2, QuikLAB 3, QuikLAB 4, Aire Fitness and TPT Global Tech Asia Limited. The consolidated financial statements also give effects to non-controlling interests of the QuikLABs of 20%, Aire Fitness of 25%, TPT Global Tech Asia Limited of 22% and InnovaQor of 6%, where appropriate. All intercompany accounts and transactions have been eliminated in consolidation.

 

Revenue Recognition

 

We have applied ASC 606, revenue from Contracts with Customers, 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, 2021 and 2020. 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, 2021 and 2020 came from the following sources disaggregated by services and products, which sources are explained in detail below.

 

	For the three months ended March 31, 2021	For the three months ended March 31, 2020
TPT SpeedConnect	$2,090,406	$2,707,654
Blue Collar	200,040	353,405
San Diego Media	3,431	3,763
TPT MedTech	375,650	---
Aire Fitness	40,333	---
Total Services Revenue	$2,709,860	$3,064,822
K Telecom-Product Revenue	2,490	11,151
Total Revenue	$2,712,350	$3,075,973

 

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, 2021 and December 31, 2020 are $345,935 and $292,847, 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.

 

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.

 

 

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.

 

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, 2021 and December 31, 2020. 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.

 

TPT MedTech: Medical Testing Revenue

TPT MedTech operates in the Point of Care Testing (“POCT”) market by primarily offering mobile medical testing facilities and software equipped for mobile devices to monitor and manage personalized healthcare. Services used from our mobile medical testing facilities are billing through credit cards at the time of service. Revenue is generated from our software platform as users sign up for our mobile healthcare monitor and management application and tests are performed. If medical testing is in one our own owned facilities, the usage of the software application is included in the testing fees. If the testing is in a non-owned outside contracted facility, fees are generated from the usage of the software application on a per test basis and billed monthly.

TPT MedTech also offers two products. One is to build and sell its mobile testing facilities called QuikLABs designed for mobile testing. This is used by TPT MedTech for its own testing services. The other is a sanitizing unit called SANIQuik which is used as a safe and flexible way to sanitize providing an additional routine to hand washing and facial coverings. The SANIQuik has not yet been approved for sale in the United States but has in some parts of the European community. Revenues from these products are recognized when a product is delivered, the sales transaction considered closed and accepted by a customer. There are no financing terms or variable transaction prices for either of these products.

Copperhead Digital: ISP and Telecom Revenue

 

Copperhead Digital operated as a regional internet and telecom services provider operating in Arizona under the trade name Trucom. Although there are currently no customers and it will take capital to reopen this revenue stream, Copperhead Digital operated as a wireless telecommunications Internet Service Provider (“ISP”) facilitating both residential and commercial accounts. Copperhead Digital’s primary business model was subscription based, pre-paid monthly reoccurring revenues, from wireless delivered, high-speed internet connections. In addition, the company resold third-party satellite and DSL internet and IP telephony services. Revenue generated from sales of telecommunications services was recognized as the transaction with the customer is considered closed and the customer received and accepted the services that were the result of the transaction. There are no financing terms or variable transaction prices. Due date was detailed on monthly invoices distributed to customer. Services billed monthly in advance were deferred to the proper period as needed. Deferred revenue was contract liabilities for cash received before performance obligations for monthly services are satisfied. Certain of its products required specialized installation and equipment. For telecom products that included installation, if the installation met the criteria to be considered a separate element, product revenue was recognized upon delivery, and installation revenue was recognized when the installation was complete. The Installation Technician collected the signed quote containing terms and conditions when installing the site equipment at customer premises.

 

 

Revenue for installation services and equipment was billed separately from recurring ISP and telecom services and was recognized when equipment was delivered, and installation was completed. Revenue from ISP and telecom services was recognized monthly over the contractual period, or as services were rendered and accepted by the customer.

 

The overwhelming majority of revenue was recognized when transactions occurred. Since installation fees were generally small relative to the size of the overall contract and because most contracts were for a year or less, the impact of not recognizing installation fees over the contract was 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.

 

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 the 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, 2021, the Company had shares that were potentially common stock equivalents as follows:

 

	2020
Convertible Promissory Notes	129,822,592
Series A Preferred Stock (1)	1,258,081,214
Series B Preferred Stock	2,588,693
Series D Preferred Stock (2)	4,067,328
Stock Options and Warrants	3,333,333
	1,397,893,160

___________

 

Financial Instruments and Fair Value of Financial Instruments

 

Our primary financial instruments at March 31, 2021 and December 31, 2020 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, 2021 are the following: 

 

Derivative Instrument	Fair Value
Fair value of Auctus Convertible Promissory Note	$4,083,329
Fair value of EMA Financial Convertible Promissory Note	911,387
Fair value of Warrants issued with the derivative instruments	11,195
Fair value of Littman promissory note agreement	151,850
	$5,157,761

  

Recently Adopted Accounting Pronouncements

  

In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815 - 40)" ("ASU 2020-06"). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU's amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permissible for fiscal years beginning after December 15, 2020. The Company early adopted ASU 2060-06 on January 1, 2021, which had no material impact on its financial statements.

 

Management has reviewed 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

 

The Fitness Container, LLC (DBA Aire Fitness)

 

On June 1, 2020, the Company signed an agreement for the acquisition of a majority interest in San Diego based manufacturing company, The Fitness Container, LLC dba “Aire Fitness” (www.airefitness.com), for 500,000 shares of common stock in TPT, vesting and issuable after the common stock reaches at least a $1.00 per share closing price in trading, a $500,000 promissory note payable primarily out of future capital raising and a 10% gross profit royalty from sales of drive through lab operations for the first year. Aire Fitness, in which TPT owns 75% is a California LLC founded in 2014 focused on custom designing, manufacturing, and selling high-end turnkey outdoor fitness studios and mobile medical testing labs. Aire Fitness has contracted with YMCAs, Parks and Recreation departments, Universities and Country Clubs which are currently using its mobile gyms.  Aire Fitness’ existing and future clients will be able to take advantage of TPT’s upcoming Broadband, TV and Social Media platform to offer virtual classes utilizing the company’s mobile gyms. The agreement included an employment agreement for Mario Garcia, former principal owner, which annual employment is to be at $120,000 plus customary employee benefits. This agreement was closed August 1, 2020.

 

The Company evaluated this acquisition in accordance with ASC 805-10-55-4 to discern whether the assets and operations of the assets purchased met the definition of a business. The company concluded that there are processes and sufficient inputs into outputs. Accordingly, the Company accounted for this transaction as a business combination and allocated the purchase price as follows: 

 

Consideration given at fair value:
Note payable, net of discount	$340,000
Accounts payable	157,252
Non-controlling interest	113,333
	$610,585
Assets acquired at fair value:
Cash	$460
Accounts receivable	39,034
	$39,494
Goodwill	$571,091

 

Included in the consolidated statement of operations for the three months ended March 31, 2021 is $40,333 in revenues and $22,574 of net losses.

 

 

TPT Strategic Merger with Southern Plains

 

On August 1, 2020, InnovaQor (name changed to TPT Strategic, Inc.), a wholly-owned subsidiary of the Company, entered into a Merger Agreement with the publicly traded company Southern Plains Oil Corp. (OTC PINK: SPLN prior to Merger Agreement). The SPLN Merger moved the Company’s subsidiary TPT Strategic one step closer to completing an executed Asset Purchase Agreement with Rennova Health, Inc. and positioned TPT Strategic to trade on the OTC Market. The Company was to receive 6,000,000 common shares as part of the Merger Agreement out of a total of 6,400,667 common shares outstanding.

 

During 2020, TPT Strategic authorized a Series A Super Majority Preferred Stock valued at $350,000 by management and issued to a third party in exchange for legal services. Effective September 30, 2020, the Series A Super Majority Preferred Stock was exchanged with TPT for a note payable of $350,000 payable in cash or common stock (see Note 5(2)). As such, as of September 30, 2020, the Company, for accounting purposes, took control of the merged TPT Strategic and reflected in it’s consolidated balance sheet the non-controlling interest of $219,058 in the liabilities under a license agreement valued at $3,500,000. This $3,500,000 was recorded as a Note Payable and expensed on InnovaQor’s books. During the three months ended March 31, 2021, the license agreement was cancelled and the non controlling interest reversed.

 

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, 2021 and 2020. Financing activities described below have helped with working capital and other capital requirements.

 

We incurred $1,740,078 and $5,966,198, respectively, in losses, and we used $6,529 and $96,102, respectively, in cash from operations for the three months ended March 31, 2021 and 2020. We calculate the net cash used by operating activities by decreasing, or increasing in case of gain, our let loss by those items that do not require the use of cash such as depreciation, amortization, promissory note issued for research and development, note payable issued for legal fees, derivative expense or gain, gain on extinguishment of debt, loss on conversion of notes payable, impairment of goodwill and long-loved assts and share-based compensation which totaled to a net $450,336 for 2021 and $5,323,282 for 2020.

 

In addition, we report increases and reductions in liabilities as uses of cash and deceases assets and increases in liabilities as sources of cash, together referred to as changes in operating assets and liabilities. For the three months ended March 31, 2021, we had a net increase in our assets and liabilities of $1,283,213 primarily from an increase in accounts payable from lag of payments for accounts payable for cash flow considerations and an increase in the balances from our operating lease liabilities. For the three months ended March 31, 2021, we had a net increase to our assets and liabilities of $739,018 for similar reasons.

 

Cash flows from financing activities were $306,380 and $81,765 for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021, these cash flows were generated primarily from proceeds from sale of Series D Preferred Stock of $153,744, proceeds from convertible notes, loans and advances of $1,068,674 offset by payment on convertible loans, advances and factoring agreements of $903,978. For the three months ended March 31, 2020, cash flows from financing activities primarily came from proceeds from convertible notes, loans and advances of $590,000 offset by payments on convertible loans, advances and factoring agreements of $328,392 and payments on convertible notes and amounts payable – related parties of $179,843.

 

Cash flows used in investing activities were $144,481 and $131,351, respectively, for the three months ended March 31, 2021 and 2020. These cash flows were used for the purchase of equipment.

 

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 a period of time, the Company closed its Blue Collar office in Los Angeles and its TPT SpeedConnect offices in Michigan, Idaho and Arizona.  Most employees were 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 $680,500 in February 2021 and believes it has used these funds as is prescribed by the stimulus offerings to have the entire amounts forgiven. The Company has applied for forgiveness of the original stimulus of $722,200. The forgiveness process for stimulus funded in February 2021 has not begun. The Company will try and take advantage of additional stimulus as it is available and 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 continue to decline because of the COVID-19 closures. 

 

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.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment and related accumulated depreciation as of March 31, 2021 and December 31, 2020 are as follows: 

 

	2021	2020
Property and equipment:
Telecommunications fiber and equipment	$2,578,526	$2,530,167
Film production equipment	369,903	369,903
Medical equipment	229,452	133,329
Office furniture and equipment	86,899	86,899
Leasehold improvements	18,679	18,679
Total property and equipment	3,283,459	3,138,977
Accumulated depreciation	(1,148,741)	(993,380)
Property and equipment, net	$2,134,718	$2,145,597

 

Depreciation expense was $155,361 and $257,403 for the three months ended March 31, 2021 and 2020, respectively.

 

NOTE 5 – DEBT FINANCING ARRANGEMENTS

 

Financing arrangements as of March 31, 2021 and December 31, 2020 are as follows:

	2021	2020
Loans and advances (1)	$2,686,842	$2,517,200
Convertible notes payable (2)	1,711,098	1,711,098
Factoring agreements (3)	464,711	635,130
Debt – third party	$4,862,651	$4,863,428
Line of credit, related party secured by assets (4)	$3,043,390	$3,043,390
Debt– other related party, net of discounts (5)	7,450,000	7,423,334
Convertible debt – related party (6)	922,181	922,481
Shareholder debt (7)	61,769	93,072
Debt – related party	$11,477,340	$11,482,277
Total financing arrangements	$16,339,991	$16,345,705
Less current portion:
Loans, advances and factoring agreements – third party	$(1,703,678)	$(2,308,753)
Convertible notes payable third party	(1,711,098)	(1,711,098
Debt – related party, net of discount	(10,555,159)	(10,559,796)
Convertible notes payable– related party	(922,181)	(922,481)
	(14,892,116)	(15,502,128)
Total long term debt	$1,447,875	$843,577

__________  

(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%, 2.14% as of March 31, 2021, and is secured by assets of the Company, was 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).

 

 

$400,500 is a line of credit that Blue Collar has with a bank, bears interest at Prime plus 1.125%, 4.38% as of March 31, 2021, and was due March 25, 2021.

 

$302,800 is a bank loan dated May 28, 2019 which bears interest at Prime plus 6%, 9.25% as of March 31, 2021, is interest only for the first year, there after beginning in June of 2020 payable monthly of principal and interest of $22,900 until the due date of May 1, 2022. The bank loan is collateralized by assets of the Company.

 

 $722,220 and $680,500 represent loans under the COVID-19 Pandemic Paycheck Protection Program (“PPP”) originated in April 2020 and February 2021, respectively. The Company believes that it has used the funds as prescribed by the stimulus offerings to have the entire amounts forgiven. The Company has applied for forgiveness of the original stimulus of $722,200. The forgiveness process for stimulus funded in February 2021 has not begun. If any of the PPP loans are not forgiven then, per the PPP, the unforgiven loan amounts will be payable monthly over a five-year period of which payments are to begin no later than 10 months after the covered period as defined at a 1% annual interest rate.

 

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 was due June 3, 2020, paid interest at the rate of 12% ( 24% default) per annum and gave 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 was 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 could be prepaid in full at 125% to 145% up to 180 days from origination. Through June 3, 2020, Odyssey converted $49,150 of principal and $4,116 of accrued interest into 52,961,921 shares of common stock of the Company. On June 8, 2020, Odyssey agreed to convert the remaining principal and accrued interest balance on the Odyssey Convertible Promissory Note of $475,850 and $135,000, respectively, to a term loan payable in six months in the form of a balloon payment, earlier if the Company has a funding event, bearing simple interest on the unpaid balance of 0% for the first three months and then 10% per annum thereafter. This loan is in default. The Company is negotiating with Odyssey for repayment.

 

Effective September 30, 2020, we entered into a Purchase Agreement by which we agreed to purchase the 500,000 outstanding Series A Preferred shares of TPT Strategic, our majority owned subsidiary, in an agreed amount of $350,000 in cash or common stock, if not paid in cash, at the five day average price preceding the date of the request for effectiveness after the filing of a registration statement on Form S-1. This was modified December 28 and 29, 2020, to provide for registration of 7,500,000 common shares for resale at the market price. Any balance due on notes will be calculated after an accounting for the net sales proceeds from sale of the stock by February 28, 2021 and may be paid in cash or stock thereafter. The Series A Preferred shares were purchased from the Michael A. Littman, Atty. Defined Benefit Plan. The $350,000 was originally recorded as a Note Payable as of December 31, 2020 but then reclassified to equity and derivative liability when the 7,500,000 shares were issued during January 2021.

 

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.

 

(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.

 

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, 2021 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, 2021. 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 $33,180 of principal and $142,004 of accrued interest into 376,000,000 shares of common stock of the Company prior to March 31, 2021. 2,000,000 warrants were issued in conjunction with the issuance of this debt. See Note 7.

 

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, 2021. 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.

 

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, 2021, 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 and EMA 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 or EMA. As such, the Company is currently in negotiations with Auctus and EMA and relative to extending due dates and changing terms on the Notes. The Company has been named in a lawsuit by EMA for failing to comply with a Securities Purchase Agreement entered into in June 2019. See Note 8 Other Commitments and Contingencies.

 

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 in June 2020, including $9,000 of interest in June and $1,000 in July 2020.

 

(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, 2021 and December 31, 2020, 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 21, 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 was to pay $14,221 per week for 50 weeks at an effective interest rate of approximately 43% annually. However, due to COVID-19 the payments under the 2020 Factoring Agreement were reduced temporarily, to between $9,000 and $11,000 weekly. All deferred payments, $39,249 as of March 31, 2021, were subsequently paid. The 2020 Factoring Agreement includes a guaranty by the CEO of the Company, Stephen J. Thomas III.

 

On November 13, 2020, the Company entered into an Agreement for the Purchase and Sale of Future Receipts (“2020 NewCo Factoring Agreement”). The balance to be purchased and sold is $326,400 for which the Company received $232,800, net of fees. Under the 2020 NewCo Factoring Agreement, the Company is to pay $11,658 per week for 28 weeks at an effective interest rate of approximately 36% annually. The 2020 NewCO Factoring Agreement includes a guaranty by the CEO of the Company, Stephen J. Thomas III.

 

On December 11, 2020, the Company entered into an Agreement for the Purchase and Sale of Future Receipts with Samson MCA LLC (“Samson Factoring Agreement”). The balance to be purchased and sold is $162,500 for which the Company received $118,625, net of fees. Under the Samson Factoring Agreement, the Company is to pay $8,125 per week for 20 weeks at an effective interest rate of approximately 36%. The Samson Factoring Agreement includes a guaranty by the CEO of the Company, Stephen J. Thomas III.

 

On December 11, 2020, the Company entered into a consolidation agreement for the Purchase and Sale of Future Receipts with QFS Capital (“QFS Factoring Agreement”). The balance to be purchased and sold is $976,918 for which the Company receives weekly payments of $29,860 for 20 weeks and then $21,978 for 4 weeks and then $11,669 in the last week of receipts all totaling $696,781 net of fees. During the same time, the Company is required to pay weekly $23,087 for 42 weeks at an effective interest rate of approximately 36% annually. The QFS 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%, 2.14% as of March 31, 2021, 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 8) and was due, as amended, August 31, 2020. The Company is in negotiations to refinance this Line of Credit.

 

During the years 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.

 

$1,000,000 represents a promissory note which was entered into on May 6, 2020 for the acquisition of Media Live One Platform from Steve and Yuanbing Caudle for the further development of software. This was expensed as research and development in 2020. This $1,000,000 promissory note is non-interest bearing, due after funding has been received by the Company from its various investors and other sources. Mr. Caudle is a principal with the Company’s ViewMe technology.

 

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.

 

$500,000 represents a Note Payable related to the acquisition of 75% of Aire Fitness, payable by February 1, 2021 or as mutually agreed out of future capital raising efforts or net profits. The Note Payable has not been paid and does not accrue interest.

 

(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, 2021. As of March 31, 2021, 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.

 

(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.

 

During the year ended December 31, 2020, the holders of approximately $4,700,000 of existing financing arrangements agreed to exchange their debt and accrued interest for Series D Preferred Stock through a separate $12 Million Private Placement of Series D Preferred Stock (“$12 Million Private Placement”), conditioned on the Company raising at least $12,000,000. To date, this condition has not been met.

 

See Lease financing arrangements in Note 8.

 

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, 2021, in the amount of $5,157,761 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, 2021.

 

	Debt Derivative Liabilities
Balance, December 31, 2019	$8,836,514
Change in derivative liabilities from conversion of notes payable	(1,144,290)
Change in derivative liabilities from the Odyssey conversion to a term loan	(1,286,762)
Change in fair value of derivative liabilities for the period – derivative expense	(1,140,323
Balance, December 31, 2020	$5,265,139
Initial fair value of derivative liabilities during the period	77,897
Change in fair value of derivative liabilities for period – derivative expense	(185,275)
Balance, March 31, 2021	$5,157,761

 

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, 2021, the Company marked to market the fair value of the debt derivatives and determined a fair value of $5,157,761 ($4,994,716 from the convertible notes, $151,850 from other debt and $11,195 from warrants) in Note 5 (2) above. The Company recorded a gain from change in fair value of debt derivatives of $185,275 for the three months ended March 31, 2021. 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 151.1% to 302.7%, (3) weighted average risk-free interest rate of 0.3% to 0.35% (4) expected life of 0.25 to 3.183 years, and (5) the quoted market price of $0.039 to $0.039 for the Company’s common stock.

 

 

NOTE 7 - STOCKHOLDERS' DEFICIT

 

Preferred Stock

 

As of March 31, 2021, 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.

 

During the prior year ended December 31, 2020, the Series A Preferred Stock and the Series B Preferred Stock were reclassified as mezzanine equity as a result of the Company not having enough authorized common shares to be able to issue common shares upon their conversion. The Series C and D Preferred Stock are also classified as mezzanine equity for the same reason.

 

Series A Convertible Preferred Stock

 

In February 2015, the Company designated 1,000,000 shares of Preferred Stock as Series A Preferred Stock. 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.

 

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 a number of shares equal to 60% of the outstanding Common Stock of the Company.

 

During the year ended December 31, 2020, the Series A Preferred Stock was reclassified as mezzanine equity as a result of the Company not having enough authorized common shares to be able to issue common shares upon their conversion.

 

Series B Convertible Preferred Stock

 

In February 2015, the Company designated 3,000,000 shares of Preferred Stock as Series B Convertible Preferred Stock.

 

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.

 

There are 2,588,693 shares of Series B Convertible Preferred Stock outstanding as of March 31, 2021. During the year ended December 31, 2020, the Series B Preferred Stock was reclassified as mezzanine equity as a result of the Company not having enough authorized common shares to be able to issue common shares upon their conversion.

 

Series C Convertible Preferred Stock

 

In May 2018, the Company designated 3,000,000 shares of Preferred Stock as Series C Convertible Preferred Stock.

 

The Series C Preferred Stock 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.

 

 

There are no shares of Series C Convertible Preferred Stock outstanding as of March 31, 2021. There are approximately $688,500 in convertible notes payable convertible into Series C Convertible Preferred Stock which compromise some of the common stock equivalents calculated in Note 1.

 

Series D Convertible Preferred Stock

 

On June 15, 2020, the Company amended its Series D Designation from January 14, 2020. This Amendment changed the number of shares to 10,000,000 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.") 

 

Series D Preferred shares have the following features: (i) 6% 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) Any time after 18 months from issuance an option to convert 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 $5.00. ; (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 - $5.00 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%.

 

During the three months ended March 31, 2021, 30,749 shares of Series D Preferred Share were purchased for $153,744 of which Stephen Thomas, CEO of the Company, acquired 20,749 for $103,744. The remainder of the shares purchased as of March 31, 2021 were purchased by a third party. Subsequent to March 31, 2021, Mr. Thomas purchased another 13,500 shares of the Series D Preferred Shares for $67,500.

 

During the year ended December 31, 2020, the related party holders of approximately $4,700,000 of existing financing arrangements agreed to exchange their debt and accrued interest for 940,800 Series D Preferred Stock through a separate $12 Million Private Placement of Series D Preferred Stock (“$12 Million Private Placement”), conditioned on the Company raising at least $12,000,000. To date, this condition has not been met.

 

Common Stock

 

As of March 31, 2021, we had authorized 1,000,000,000 shares of Common Stock, of which 873,064,371 common shares are issued and outstanding.

 

Subscription Payable

 

As of March 31, 2021, the Company has recorded $207,845 in stock subscription payable, which equates to the fair value on the date of commitment, of the Company’s commitment to issue the following common shares:

 

Unissued shares under consulting and director agreements	4,450,000
Unissued shares for conversion of debt	14,667
Shares receivable under prior terminated acquisition agreement	(3,096,181)
Net commitment	1,386,486

 

During 2018, a note payable of $2,000 was forgiven for 16,667 common shares. 2,000 of these shares were issued during the year ended December 31, 2020. The remainder were issued subsequent to March 31, 2021.

 

During the year ended December 31, 2020, the Company signed consulting agreements related to their activities with TPT Global Tech and TPT MedTech with three third parties for which we agreed to issue 4,450,000 shares of restricted common stock. 300,000 of these shares were valued at fair value and expensed in the statement of operations for $16,200. The other 4,150,000 shares were value at their value of $275,975 which is being amortized over 10 months of service starting on the date of the agreement of September 1, 2020. $82,793 has been amortized into the statement of operations for the three months ended March 31, 2021.

 

 

In 2018, Arkady Shkolnik and Reginald Thomas (family member of CEO) were added as members of the Board of Directors. 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, 2021, $215,500 and $75,000 has been accrued as accounts payable in the balance sheet for Mr. Shkolnik and Mr. Thomas, respectively. For the three months ended March 31, 2021 and 2020, $0 and $236,978, respectively, have been expensed under these agreements.

 

Effective November 1, 2017, the Company entered into an agreement to acquire Hollywood Rivera, LLC (“HRS”). In March 2018, the HRS acquisition was rescinded and 3,625,000 shares of common stock, which were issued as part of the transaction, are being returned by the recipients. As such, as of March 31, 2021 the 3,265,000 shares for the HRS transaction are reflected as subscriptions receivable based on their par value.

 

Common Stock Issued During Three Months ended March 31, 2021

 

Effective September 30, 2020, we entered into a Purchase Agreement by which we agreed to purchase the 500,000 outstanding Series A Preferred shares of InnovaQor, Inc., our majority owned subsidiary, in an agreed amount of $350,000 in cash or common stock, if not paid in cash, at the five day average price preceding the date of the request for effectiveness after the filing of a registration statement on Form S-1. This was modified December 28 and 29, 2020, to provide for registration of 7,500,000 common shares for resale at the market price. Any balance due on notes will be calculated after an accounting for the net sales proceeds from sale of the stock by February 28, 2021 and may be paid in cash or stock thereafter. The Series A Preferred shares are being purchased from the Michael A. Littman, Atty. Defined Benefit Plan.

 

Effective September 30, 2020, we entered into a Settlement Agreement to settle outstanding legal fees due to date in the amount of $74,397 (as assigned to the Michael A. Littman Atty. Defined Benefit Plan.) The number of shares to be issued in consideration is to be computed at the five day average price as specified under Rule 474 under the Securities Act of 1933 for the 5 days preceding the date of the request for acceleration of the effective date of this registration of our common shares to be issued. (This may also be fully settled by payment of the sum of $74,397 in cash at any time prior to the issuance of the shares of stock of the Company.) This was modified December 28 and 29, 2020, to provide for registration of 7,500,000 common shares for resale at the market price. Any balance due on notes will be calculated after an accounting for the net sales proceeds from sale of the stock by February 28, 2021 and may be paid in cash or stock thereafter.

 

The 7,500,000 shares identified in these agreements with Mr. Littman were issued during the three months ended March 31, 2021 and included in a Form S-1 filed and declared effective in January 2021. To date, we understand the shares have not been sold and thus there is no calculated shortfall as outlined above. There is however, a calculated shortfall accounted for as a derivative liability of $151,850 as of March 31, 2021 included in the overall derivative liability on the balance sheet of $5,157,761.

 

Stock Options

 

	Options Outstanding	Vested	Vesting Period	Exercise Price Outstanding and Exercisable	Expiration Date
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)
December 31, 2020	1,000,000	1,000,000	12 months	$0.10	3-21-21
Expired	(1,000,000)
March 31, 2021	---	---	---	---	---

 

Warrants

 

As of March 31, 2021, 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.

 

 

The warrants issued were considered derivative liabilities valued at $11,195 of the total $5,157,761, derivative liabilities as of March 31, 2021. See Note 6.

 

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 approximately 90,000,000 common shares.

 

Non-Controlling Interests

 

QuikLAB Mobile Laboratories

 

In July and August 2020, the Company formed Quiklab 1 LLC, QuikLAB 2, LLC, QuikLAB 3, LLC and QuikLAB 4, LLC. It is the intent to use these entities as vehicles into which third parties would invest and participate in owning QuikLAB Mobile Laboratories. As of December 31, 2020, Quiklab 1 LLC, QuikLAB 2, LLC and QuikLAB 3, LLC have received an investment of $460,000, of which Stephen Thomas and Rick Eberhardt, CEO and COO of the Company, have invested $100,000 in QuikLAB 2, LLC. The third party investors and Mr. Thomas and Mr. Eberhart, will benefit from owning 20% of QuikLAB Mobile Laboratories specific to their investments. The Company owns the other 80% ownership in the QuickLAB Mobile Laboratories. The net loss attributed to the non-controlling interests from the QuikLAB Mobile Laboratories included in the statement of operations for the three months ended March 31, 2021 is $21,382.

 

Other Non-Controlling Interests

 

TPT Strategic, Aire Fitness and TPT Asia are other non-controlling interests in which the Company owns 94%, 75% and 78%, respectively. There is very little activity in any of these entities. The net loss attributed to these non-controlling interests included in the statement of operations for the three months ended March 31, 2021 is $5,644.

 

TPT Strategic did a reverse merger with Southern Plains of which there ended up being a non-controlling interest ownership of 6% as of December 31, 2020. As a result, $219,058 in the non-controlling interest in liabilities of a license agreement valued at $3,500,000 was reflected in the consolidated balance sheet as of December 31, 2020. This was reversed during the three months ended March 31, 2021 when the liabilities under the license agreement were terminated by mutual agreement.

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

Accounts Payable and Accrued Expenses 

 

Accounts payable:	2021	2020
Related parties (1)	$1,393,668	$1,339,352
General operating	4,348,499	3,965,135
Accrued interest on debt (2)	1,479,146	1,328,939
Credit card balances	173,104	173,972
Accrued payroll and other expenses	308,331	296,590
Taxes and fees payable	641,555	641,012
Unfavorable lease liability	90,861	121,140
Total	$8,435,163	$7,866,140

 _______________

	(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 $737,565 and $679,380 for March 31, 2021 and December 31, 2020, respectively

 

 

Operating lease obligations

 

The Company adopted Topic 842 on January 1, 2019. The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s consolidated balance sheet now contains the following line items: Operating lease right-of-use assets, Current portion of operating lease liabilities and Operating lease liabilities, net of current portion.

 

As all the existing leases subject to the new lease standard were previously classified as operating leases by the Company, they were similarly classified as operating leases under the new standard. 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 10.0% and the weighted average lease term of 4.37 years.

We have various non-cancelable lease agreements for certain of our tower locations with original lease periods expiring between 2021 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. 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, 2021 and December 31, 2020, operating lease right-of-use assets and liabilities arising from operating leases were $6,367,266 and $5,555,674, respectively. During the three months ended March 31, 2021, cash paid for amounts included for the measurement of lease liabilities was $239,486 and the Company recorded lease expense in the amount of $690,756 in cost of sales.

The Company entered into an operating lease agreement for location rights for certain QuikLABS. The operating lease agreement started October 1, 2020 and goes for three years at $9,798 per month. In addition, the Company entered an operating agreement to lease colocation space for 5 years. This operating agreement started October 1, 2020 for 7,140 per month.

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, 2021. 

2021	$2,694,827
2022	1,799,060
2023	1,252,941
2024	935,504
2025	588,217
Thereafter	150,783
Total operating lease liabilities	7,421,332
Amount representing interest	(1,054,066)
Total net present value	$6,367,266

 

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 $7,500 and $7,000 in rent and utility payments for this space for the three months ended March 31, 2021 and 2020, respectively.

 

 

Financing lease obligations

 

Future minimum lease payments are as follows:

 

2021	$864,025
2022	10,780
2023	---
2024	---
2025	---
Thereafter	---
Total financing lease liabilities	874,805
Amount representing interest	(35,233)
Total future payments (1)(2)	$839,572

____________________

 

Other Commitments and Contingencies 

 

Employment Agreements

 

The Company has employment agreements with certain employees of SDM, K Telecom and Aire Fitness. The agreements are such that SDM, K Telecom and Aire Fitness, on a standalone basis in each case, must provide sufficient cash flow to financially support the financial obligations within the employment agreements.

 

On May 6, 2020, the Company entered into an agreement to employ Ms. Bing 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. The payment is guaranteed for five years whether or not Ms. Caudle is dismissed with cause.

 

Litigation

We have been named in a lawsuit by EMA Financial, LLC (“EMA”) for failing to comply with a Securities Purchase Agreement entered into in June 2019. More specifically, EMA claims the Company failed to honor notices of conversion, failed to establish and maintain share reserves, failed to register EMA shares and by failed to assure that EMA shares were Rule 144 eligible within 6 months. EMA has claimed in excess of $7,614,967 in relief. The Company has filed an answer and counterclaim. The Company does not believe at this time that any negative outcome would result in more than the $619,955 it has recorded on its balance sheet as of March 31, 2021.

 

A lawsuit was filed in Michigan by the one of the former owners of SpeedConnect, LLC, John Ogren.   Mr. Ogren claims he is owed back wages related to the acquisition agreement wherein the Company acquired the assets of SpeedConnect, LLC and kept him on through a consulting agreement.  He ultimately resigned in writing and now claims that even though he resigned he should still have been paid.  Mr. Ogren is claiming wages of $354,178 plus interest, fees and costs.  The consulting agreement called for arbitration.  We understand that Mr. Ogren is in the process of dismissing the lawsuit and that he wants to pursue his claim through arbitration.   Management does not believe the Company has any liability in this claim and will pursue its defenses vigorously.

 

The Company has been named in a lawsuit, Robert Serrett vs. TruCom, Inc., 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. We recently learned that Mr. Serrett received a default judgement in Texas on May 15, 2018 for $70,650 plus $3,500 in attorney fees and 5% interest and court costs.  However, he has made no attempt that we are aware of to obtain a sister state judgment in Arizona, where Trucom resides, or to try and enforce the judgement and collect.  Management believes it has good and meritorious defenses and does not belief the outcome of the lawsuit will have any material effect on the financial position of the Company.  

 

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. We anticipate that we (including current and any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure that their ultimate disposition will not have a materially adverse effect on our business, financial condition, cash flows or results of operations.

 

Customer Contingencies

 

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 these amounts. 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, 2021 and December 31, 2020.

 

Stock Contingencies

 

The Company issued 7,500,000 shares of stock in January 2021 to Mr. Littman in accordance with its December 28 and 29, 2020 agreements as described in Note 7. This is in addition to the 1,000,000 shares issued previously to Mr. Littman in exchange for accounts payable. To date, we understand these shares have not been sold and thus there is no calculated shortfall as outlined in Note 7, but this may happen, which shortfall, if it occurs, is unknown at this time. There is however, a calculated shortfall accounted for as a derivative liability of $151,850 as of March 31, 2021 included in the overall derivative liability on the balance sheet of $5,157,761.

 

The Company has convertible debt, preferred stock, options and warrants outstanding for which common shares would be required to be issued upon exercise by the holders. As of March 31, 2021, the following shares would be issued:

	2021
Convertible Promissory Notes	129,822,592
Series A Preferred Stock (1)	1,258,081,214
Series B Preferred Stock	2,588,693
Series D Preferred Stock (2)	4,067,328
Stock Options and Warrants	3,333,333
	1,397,893,160

___________

 

During the fourth quarter of 2020, the related party holders of approximately $4,700,000 of existing financing arrangements agreed to exchange their debt and accrued interest for Series D Preferred Stock through a separate $12 Million Private Placement, conditioned on the Company raising at least $12,000,000 in a separate Form 1-A Offering.

 

Part of the consideration in the acquisition of Aire Fitness was the issuance of 500,000 restricted common shares of the Company vesting and issuable after the common stock reaches at least a $1.00 per share closing price in trading. To date, this has not occurred but may happen in the future upon which the Company will issue 500,000 common shares to the non-controlling interest owners of Aire Fitness.

 

NOTE 9 – RELATED PARTY ACTIVITY

 

Accounts Payable and Accrued Expenses

 

There are amounts outstanding due to related parties of the Company of $1,393,668 and $1,339,352, respectively, as of March 31, 2021 and December 31, 2020 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.

 

Debt Financing and Amounts Payable

 

As of March 31, 2021, there are amounts due to management/shareholders included in financing arrangements, of which $88,822 is payable from the Company to Stephen J. Thomas III, CEO of the Company. See note 5.

 

Revenue Transactions and Accounts Receivable

 

During the three months ended March 31, 2021, 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 $0 and $235,149, respectively, and had accounts receivable outstanding as of March 31, 2021 and December 31, 2020 of $0 and $169,439, respectively, which is included in accounts receivable on the consolidated balance sheet. 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.

 

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, 2021  

 

	Gross carrying amount (1)	Accumulated Amortization	Net Book Value	Useful Life
Customer Base	$938,000	$(233,418)	$704,582	3-10
Developed Technology	4,595,600	(1,744,631)	2,850,969	9
Film Library	957,000	(195,150)	761,850	11
Trademarks and Tradenames	132,000	(29,633)	102,367	12
Favorable leases	95,000	(59,360)	35,640	3
Other	76,798	(1,920)	74,129	10
	6,794,398	(2,264,112)	4,529,537
Goodwill	$768,091	$—	$768,091