TPT Global Tech, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
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MEZZANINE
EQUITY
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Convertible
Preferred Series A, 1,000,000 designated - 1,000,000 shares issued
and outstanding as of March 31, 2021 and December 31,
2020
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3,117,000
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3,117,000
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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
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1,677,473
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1,677,476
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Convertible
Preferred Series C – 3,000,000 shares designated, zero shares
issued and outstanding as of March 31, 2021 and December 31,
2020
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---
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---
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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
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153,744
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---
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Total mezzanine
equity
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4,948,217
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4,794,473
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STOCKHOLDERS'
DEFICIT
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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
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873,065
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865,565
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Subscriptions
payable
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207,845
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125,052
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Additional paid-in
capital
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11,582,882
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11,462,940
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Accumulated
deficit
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(42,615,996)
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(40,902,944)
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Total TPT Global
Tech, Inc. stockholders' deficit
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(29,952,204)
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(28,449,387)
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Non-controlling
interests
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130,890
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(61,142)
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Total
stockholders’ deficit
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(29,821,314)
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(28,510,529)
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TOTAL LIABILITIES
AND STOCKHOLDERS' DEFICIT
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$13,058,410
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$12,836,688
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See accompanying notes to condensed consolidated financial
statements.
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
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For the three
months ended March 31,
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REVENUES:
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Products
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$2,490
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$11,151
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Services
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2,709,860
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3,064,822
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Total
Revenues
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2,712,350
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3,075,973
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COST OF
SALES:
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Products
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2,500
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12,900
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Services
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2,159,154
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2,293,588
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Total Costs of
Sales
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2,161,654
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2,306,488
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Gross
profit
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550,696
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769,485
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EXPENSES:
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Sales
and marketing
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4,257
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25,900
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Professional
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410,021
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343,967
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Payroll and
related
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660,667
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662,002
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General and
administrative
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670,209
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251,372
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Depreciation
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155,361
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257,403
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Amortization
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184,655
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182,735
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Total
expenses
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2,085,170
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1,723,379
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Loss from
operations
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(1,534,474)
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(953,894)
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OTHER INCOME
(EXPENSE)
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Derivative gain
(expense)
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185,275
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(3,896,672)
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Gain (loss) on debt
conversions
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—
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(568,875)
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Interest
expense
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(390,879)
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(546,757)
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Total
other expenses
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(205,604)
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(5,012,304)
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Net loss before
income taxes
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(1,740,078)
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(5,966,198)
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Income
taxes
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—
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—
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NET LOSS BEFORE
NON-CONTROLLING INTERESTS
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(1,740,078)
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(5,966,198)
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NET
LOSS ATTRIBUTABLE TO NON- CONTROLLING INTERESTS
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(27,026)
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—
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NET LOSS
ATTRIBUTABLE TO TPT GLOBAL TECH, INC. SHAREHOLDERS
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$(1,713,052)
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$(5,966,198)
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Loss per
common share: Basic and diluted
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$(0.00)
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$(0.02)
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Weighted average
number of common shares outstanding:
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Basic and
diluted
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870,424,730
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382,159,789
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See accompanying
notes to condensed consolidated financial
statements.
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three months ended March 31, 2021 and 2020
(Unaudited)
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Additional
Paid-in Capital
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Total
Stockholders’ Deficit
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Balance as of December 31,
2020
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—
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$—
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—
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$—
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865,564,371
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$865,565
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$125,052
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$11,462,940
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$(40,902,944)
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$(61,142)
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$(28,510,529)
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Subscription payable for
services
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—
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—
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—
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—
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—
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—
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82,793
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—
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—
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—
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82,793
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Issuance of shares for exchange for
debt
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---
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---
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---
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---
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7,500,000
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7,500
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---
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339,000
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---
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---
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346,500
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TPT Strategic license
cancellation
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—
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—
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—
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—
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—
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—
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—
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(219,058)
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—
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219,058
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—
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Net loss
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—
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—
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—
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—
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—
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—
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—
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—
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(1,713,052)
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(27,026)
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(1,740,078)
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Balance as of March 31,
2021
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—
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$—
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—
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$—
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873,064,371
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$873,065
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$207,845
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$11,582,882
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$(42,615,996)
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$130,890
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$(29,821,314)
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Balance as of
December 31,
2019
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1,000,000
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$1,000
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2,588,693
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$2,589
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177,629,939
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$177,630
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$574,256
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$13,279,749
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$(32,831,093)
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$(18,795,869)
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Common stock issuable for director
services
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—
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—
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—
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—
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—
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—
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101,562
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—
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—
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101,562
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Common stock issued for convertible
promissory notes
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—
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—
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—
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—
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559,694,835
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559,695
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—
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1,194,233
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—
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1,753,928
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Net Loss
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—
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—
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—
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—
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—
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—
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—
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—
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$(5,966,198)
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$(5,966,198)
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Balance as of
March 31, 2020
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1,000,000
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$1,000
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2,588,693
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$2,589
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737,324,774
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$737,325
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$675,818
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$14,473,982
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$(38,797,291)
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$(22,906,577)
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See
accompanying notes to condensed consolidated financial
statements.
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the three
months ended March 31,
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Cash flows from
operating activities:
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Net
loss
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$(1,740,078)
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$(5,966,198)
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Adjustments to
reconcile net loss to net cash used in operating
activities:
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Depreciation
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155,361
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257,403
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Amortization
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184,655
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182,735
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Amortization of
debt discounts
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212,053
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316,035
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Loss on conversion
of notes payable
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---
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568,875
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Derivative (gain)
expense
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(185,275)
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3,896,672
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Share-based
compensation: Common stock
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82,793
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101,562
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Changes in
operating assets and liabilities:
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Accounts
receivable
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(63,808)
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314,389
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Accounts receivable
related party
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---
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(55,510)
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Prepaid expenses
and other assets
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65,019
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(5,346)
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Deposits and other
assets
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55,039
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---
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Accounts payable
and accrued expenses
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651,188
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425,345
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Net change in
operating lease right of use assets and liabilities
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460,244
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56,854
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Other
liabilities
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116,280
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(3,732)
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Net cash used in
operating activities
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$(6,529)
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$(96,102)
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Cash flows from
investing activities:
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Purchase of
equipment
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$(144,481)
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$(131,351)
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Net cash used in
investing activities
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$(144,481)
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$(131,351)
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Cash flows from
financing activities:
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Proceeds from sale
of Series D Preferred Stock
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$153,744
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$---
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Proceeds from
convertible notes, loans and advances
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1,068,674
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590,000
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Payment on
convertible loans, advances and factoring agreements
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(903,978)
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(328,392)
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Proceeds on
convertible notes and amounts payable – related
parties
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---
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(179,843)
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Payments on
financing lease liabilities
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(12,060)
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—
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Net cash provided
by financing activities
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$306,380
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$81,765
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Net change in
cash
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$155,370
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$46,519
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Cash and cash
equivalents - beginning of period
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$19,309
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$192,172
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Cash and cash
equivalents - end of period
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$174,679
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$238,688
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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:
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Interest
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$29,325
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$88,736
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Taxes
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$—
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$—
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Non-Cash Investing and Financing Activities:
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Debt discount on
factoring agreement
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$—
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$216,720
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Operating lease
liabilities and right of use assets
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—
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1,166,677
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Common stock issued
in exchange for payable and note
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$424,397
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$—
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TPT Strategic, Inc.
merger – Non-controlling interest in intercompany liabilities
rescinded
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$(219,058)
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$—
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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.
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For the three
months ended
March 31,
2021
|
For the three
months ended
March 31,
2020
|
TPT
SpeedConnect
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$2,090,406
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$2,707,654
|
Blue
Collar
|
200,040
|
353,405
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San Diego
Media
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3,431
|
3,763
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TPT
MedTech
|
375,650
|
---
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Aire
Fitness
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40,333
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---
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Total Services
Revenue
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$2,709,860
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$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:
|
|
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
|
___________
(3)
Holder of the
Series A Preferred Stock which is Stephen J. Thomas, is guaranteed
60% of outstanding common stock upon conversion. The Company would
have to authorize additional shares for this to occur as only
1,000,000,000 shares are currently authorized.
(4)
Holders of the
Series D Preferred Stock may decide after 18 months to convert to
common stock @ 80% of the 30 day average market closing price (for
previous 30 business days) divided into $5.00. There is also an
automatic conversion of the Series D Preferred Stock 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.
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 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:
|
|
|
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:
|
|
|
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
|
|
|
Vesting
Period
|
Exercise Price
Outstanding and Exercisable
|
|
December 31,
2019
|
3,000,000
|
3,000,000
|
12 to
18 months
|
$0.10
|
|
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
|
---
|
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|
---
|
---
|
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|
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:
|
|
|
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
|
____________________
(1)
Included is a
Telecom Equipment Lease is with an entity owned and controlled by
shareholders of the Company and was due August 31, 2020, as
amended.
(2)
Also included are
leases under Xroads Equipment Agreements with a third party that
allows the Company to pay between $10,780 and $11,288 per month,
including interest, starting between November 16, 2020 and February
22, 2021 for eleven months with a $1 value acquisition price at the
termination of the leases.
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:
|
|
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
|
___________
(1)
Holder of the
Series A Preferred Stock which is Stephen J. Thomas, is guaranteed
60% of outstanding common stock upon conversion. The Company would
have to authorize additional shares for this to occur as only
1,000,000,000 shares are currently authorized.
(2)
Holders of the
Series D Preferred Stock may decide after 18 months to convert to
common stock @ 80% of the 30 day average market closing price (for
previous 30 business days) divided into $5.00. There is also an
automatic conversion of the Series D Preferred Stock 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.
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)
|
|
|
|
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
|
|
Amortization
expense was $184,655 and $182,735 for the three months ended March
31, 2021 and 2020, respectively.
December 31, 2020
|
|
|
|
|
Customer
Base
|
$938,000
|
(207,771)
|
$730,229
|
3-10
|
Developed
Technology
|
4,595,600
|
(1,616,975)
|
2,978,625
|
9
|
Film
Library
|
957,000
|
(177,100)
|
779,900
|
11
|
Trademarks and
Tradenames
|
132,000
|
(26,731)
|
105,269
|
12
|
Favorable
leases
|
95,000
|
(50,880)
|
44,120
|
3
|
Other
|
76,798
|
---
|
76,798
|
|
Total intangible
assets, net
|
$6,794,398
|
(2,079,457)
|
$4,714,941
|
|
|
|
|
|
|
Goodwill
|
$768,091
|
—
|
$768,091
|
—
|
Remaining
amortization of the intangible assets is as following for the next
five years and beyond:
2021
|
$572,479
|
2022
|
730,059
|
2023
|
719,859
|
2024
|
719,859
|
2025
|
719,859
|
Thereafter
|
1,067,422
|
|
$4,529,537
|
NOTE 11 – SEGMENT REPORTING
ASC 280, “Segment Reporting”, establishes standards for
reporting information about operating segments on a basis
consistent with the Company's internal organizational structure as
well as information about geographical areas, business segments and
major customers in financial statements for details on the
Company's business segments.
The Company's chief operating decision maker (“CODM”)
has been identified as the CEO who reviews the financial
information of separate operating segments when making decisions
about allocating resources and assessing performance of the group.
Based on management's assessment, the Company considers its most
significant segments for 2021 and 2020 are those in which it is
providing Broadband Internet through TPT SpeedConnect and Media
Production services through Blue Collar Medical Testing services
through TPT MedTech and QuikLABs.
The following table presents summary information by segment for the
three months ended March 31, 2021 and 2020
respectively:
2021
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$2,090,406
|
200,040
|
375,650
|
46,254
|
$2,712,350
|
Cost of
sales
|
$(1,618,132)
|
(123,265)
|
(381,975)
|
(38,282)
|
$(2,161,654)
|
Net income
(loss)
|
$(244,462)
|
(103,414)
|
(440,438)
|
(951,764)
|
$(1,740,078)
|
Total
assets
|
$7,583,025
|
398,819
|
462,184
|
4,614,382
|
$13,058,410
|
Depreciation and
amortization
|
$(148,547)
|
(27,834)
|
---
|
(163,635)
|
$(340,016)
|
Derivative
gain
|
$—
|
—
|
---
|
185,275
|
$185,275
|
Interest
expense
|
$(190,469)
|
(8,272)
|
---
|
(192,138)
|
$(390,879)
|
2020
|
|
|
|
|
|
|
|
|
|
|
$ 2,707,654
|
$ 353,405
|
$ 14,914
|
$ 3,075,973
|
Cost of
sales
|
$(1,717,386)
|
$(148,095)
|
$(441,007)
|
$(2,306,488)
|
Net income
(loss)
|
$286,790
|
$(58,095)
|
$(6,194,893)
|
$(5,966,198)
|
Total
assets
|
$6,410,699
|
517,314
|
8,608,575
|
$15,536,588
|
Depreciation and
amortization
|
$(127,194)
|
$(27,834)
|
$(285,110)
|
$(440,138)
|
Derivative
expense
|
$—
|
$—
|
$(3,896,672)
|
$(3,896,672)
|
Interest
expense
|
$(54,004)
|
$(10,218)
|
$(482,535)
|
$(546,757)
|
NOTE 12 – SUBSEQUENT EVENTS
Stock Issuances
Subsequent
to March 31, 2021, the Company issued restricted common shares
under previously contracted consulting agreements of 5,950,000
shares.
Subsequent
to March 31, 2021, Mr. Thomas purchased another 13,500 shares of
the Series D Preferred Shares for $67,500.
Subsequent
events were reviewed through the date the financial statements were
issued.
TPT GLOBAL TECH, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Table of Contents
Audited Consolidated Financial Statements for the years ended
December 31, 2020 and 2019
|
|
F-30
|
|
|
|
|
|
F-33
|
|
|
|
|
|
F-35
|
|
|
|
|
|
F-36
|
|
|
|
|
|
F-37
|
|
|
|
|
|
F-39 – F-66
|
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the
Shareholders and the Board of Directors of TPT Global Tech,
Inc.:
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of TPT Global
Tech, Inc. (“the Company”) as of December 31, 2020 and
2019, the related consolidated statements of operations,
stockholders’ deficit, and cash flows for each of the years
in the two-year period ended December 31, 2020 and the related
notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019,
and the results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Explanatory Paragraph Regarding Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
3 to the financial statements, the Company has suffered recurring
losses from operations and has insufficient cash flows from
operations to support working capital requirements. These factors
raise substantial doubt about the Company’s ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 3. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audit, we are required to obtain an understanding of
internal control over financial reporting, but not for the purpose
of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining on a test basis, evidence
regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The
critical audit matters communicated below are matters arising from
the current-period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The
communication of a critical audit matter does not alter in any way
our opinion on the financial statements, taken as a whole, and we
are not, by communicating the critical audit matters below,
providing a separate audit opinion on the critical audit matters or
on the accounts or disclosures to which it relates.
Long-Lived
Asset Impairment Assessment
Critical Audit Matter Description
As
described in Note 1 to the consolidated financial statements, the
Company performs impairment testing for its long-lived assets when
events or changes in circumstances indicate that its carrying
amount may not be recoverable and exceeds its fair value. Due to
challenging industry and economic conditions, the Company tested
its long-lived assets during the year ended December 31,
2020.
We
identified the evaluation of the impairment analysis for long-lived
assets as a critical audit matter because of the significant
estimates and assumptions management used in the related cash flow
analysis. Performing audit procedures to evaluate the
reasonableness of these estimates and assumptions required a high
degree of auditor judgment and an increased extent of
effort.
How the Critical Audit Matter Was Addressed in the
Audit
Our
audit procedures related to the following:
●
Testing
management’s process for developing the recoverability
test.
●
Evaluating the
appropriateness of the cash flow model used by
management.
●
Testing the
completeness and accuracy of underlying data used in the
recoverability test.
●
Evaluating the
significant assumptions used by management related to revenues,
gross margin, other operating expenses, income taxes and long-term
growth rate to discern whether they are reasonable considering (i)
the current and past performance of the entity; (ii) the
consistency with external market and industry data; and (iii)
whether these assumptions were consistent with evidence obtained in
other areas of the audit.
●
Professionals with
specialized skill and knowledge were utilized by the Firm to assist
in the evaluation of the cash flow model and assumptions used by
management in the related recoverability test.
Goodwill
Impairment Assessment
Critical Audit Matter Description
As
described in Note 1 to the consolidated financial statements, the
Company tests goodwill for impairment annually at the reporting
unit level, or more frequently, if events or circumstances indicate
it is more likely than not that the fair value of a reporting unit
is less than its carrying amount. Reporting units are tested for
impairment by comparing the estimated fair value of each reporting
unit with its carrying amount. If the carrying amount of a
reporting unit exceeds its estimated fair value, an impairment loss
is recorded based on the difference between the fair value and
carrying amount, not to exceed the associated carrying amount of
goodwill. The Company’s annual impairment test occurred on
December 31, 2020.
We
identified the evaluation of the impairment analysis for goodwill
as a critical audit matter because of the significant estimates and
assumptions management used in the discounted cash flow analysis
performed by management to determine fair value of the reporting
unit. Performing audit procedures to evaluate the reasonableness of
these estimates and assumptions required a high degree of auditor
judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the
Audit
Our
audit procedures related to the following:
●
Testing
management’s process for developing the fair value
estimate.
●
Evaluating the
appropriateness of the discounted cash flow model used by
management.
●
Testing the
completeness and accuracy of underlying data used in the fair value
estimate.
●
Evaluating the
significant assumptions used by management related to revenues,
gross margin, other operating expenses, long term growth rate, and
discount rate to discern whether they are reasonable considering
(i) the current and past performance of the entity; (ii) the
consistency with external market and industry data; and (iii)
whether these assumptions were consistent with evidence obtained in
other areas of the audit.
●
Professionals with
specialized skill and knowledge were utilized by the Firm to assist
in the evaluation of the discounted cash flow model and discount
rate assumptions.
Business
Acquisition
Description of the Critical Audit Matter
As
described in Note 2 to the consolidated financial statements, the
Company acquired 75% ownership of Aire Fitness for a total purchase
price of $610,585. The Company accounted for this acquisition as a
business combination. Accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed at fair value as of
the transaction date. The Company utilized a third-party valuation
specialist to assist in determining the fair value of the
consideration granted and identifiable intangible assets acquired
in the acquisition. We identified the estimation of the fair value
of the consideration transferred, assets acquired, and liabilities
assumed in the acquisition as a critical audit matter.
We
identified the valuation of the consideration transferred, assets
acquired, and liabilities assumed as a critical audit matter
because of the significant estimates and assumptions management
made to determine the fair value of certain of these assets. This
required a high degree of auditor judgment and an increased extent
of effort when performing audit procedures to evaluate the
reasonableness of the valuation methodology applied and the
assumptions used such as forecasted sales growth rates, cash flows,
and estimated discount rates. In addition, the audit effort
involved the use of professionals with specialized skill and
knowledge.
How the Critical Audit Matter Was Addressed in the
Audit
Our
audit procedures related to the following:
●
We evaluated
management’s and the valuation specialist’s
identification of assets acquired and liabilities
assumed.
●
We obtained
management’s purchase price allocation detailing fair values
assigned to acquired tangible and intangible assets.
●
We obtained the
valuation report prepared by the valuation specialist engaged by
management to assist in the purchase price allocation, including
determination of fair values assigned to acquired intangible
assets, and examined valuation methods used and qualifications of
the specialist.
●
We examined the
completeness and accuracy of the underlying data supporting the
significant assumptions and estimates used in the valuation report,
including historical and projected financial
information.
●
We evaluated the
accuracy and completeness of the financial statement presentation
and disclosure of the acquisitions.
●
Professionals with
specialized skill and knowledge were utilized by the Firm to assist
in the evaluation of the valuation models deployed by
management.
Determination
and Valuation of Derivative Liabilities
Critical Audit Matter Description
As
described further in Note 6 of the consolidated financial
statements, during the year ended December 31, 2020 and in prior
periods, the Company issued convertible notes and warrants that
required management to assess whether the conversion features of
the convertible notes required bifurcation and separate valuation
as a derivative liability and whether the warrants required
accounting as derivative liabilities. The Company determined that
the conversion features of certain of its convertible notes and
certain warrants issued in financing arrangements required to be
accounted for as derivative liabilities due to: (1) certain
conversion features did not contain an explicit limit on the number
of shares to be delivered in share settlement; and (2) the fact the
Company could not assert it had sufficient authorized but unissued
shares available to settle certain instruments considering all
other stock-based commitments. The derivative liabilities were
recorded at fair value when issued and subsequently re-measured to
fair value upon settlement or at the end of each reporting period.
The Company utilized valuation models to determine the fair value
of the derivative liabilities depending on the features embedded in
the instruments. These models use certain assumptions related to
exercise price, term, expected volatility, and risk-free interest
rate.
We
identified auditing the determination and valuation of the
derivative liabilities as a critical audit matter due to the
significant judgements used by the Company in determining whether
the embedded conversion features and warrants required derivative
accounting treatment and the significant judgements used in
determining the fair value of the derivative liabilities. Auditing
the determination and valuation of the derivative liabilities
involved a high degree of auditor judgement, and specialized skills
and knowledge were needed.
How the Critical Audit Matter Was Addressed in the
Audit
Our
audit procedures included the following, among others:
●
We inspected and
reviewed debt agreements, warrant agreements, conversion notices,
and settlement agreements to evaluate the Company's determination
of whether derivative accounting was required, including assessing
and evaluating management's application of relevant accounting
standards to such transactions.
●
We evaluated the
reasonableness and appropriateness of the choice of valuation model
used for each specific derivative instrument.
●
We tested the
reasonableness of the assumptions used by the Company in the
valuation models, including exercise price, term, expected
volatility, and risk-free interest rate.
●
We tested the
accuracy and completeness of data used by the Company in developing
the assumptions used in the valuation models.
●
We developed an
independent expectation for comparison to the Company's estimate,
which included developing our own valuation model and
assumptions.
●
We evaluated the
accuracy and completeness of the Company's presentation of these
instruments in the financial statements and related disclosures in
Note 6, including evaluating whether such disclosures were in
accordance with relevant accounting standards.
●
Professionals with
specialized skill and knowledge were utilized by the Firm to assist
in the evaluation of the valuation models deployed by
management.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since
2016.
Draper, UT
April 15, 2021
TPT Global Tech, Inc.
CONSOLIDATED BALANCE
SHEETS
ASSETS
|
|
|
|
|
CURRENT
ASSETS
|
|
|
Cash and cash
equivalents
|
$19,309
|
$192,172
|
Accounts
receivable, net
|
164,818
|
379,805
|
Prepaid expenses
and other current assets
|
180,362
|
48,648
|
Total current
assets
|
364,489
|
620,625
|
NON-CURRENT
ASSETS
|
|
|
Property and
equipment, net
|
2,145,597
|
4,423,148
|
Operating lease
right of use assets
|
4,732,459
|
3,886,045
|
Intangible assets,
net
|
4,714,941
|
5,369,083
|
Goodwill
|
768,091
|
1,050,366
|
Deposits and other
assets
|
111,111
|
104,486
|
Total non-current
assets
|
12,472,199
|
14,833,128
|
TOTAL
ASSETS
|
$12,836,688
|
$15,453,753
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT
LIABILITIES
|
|
|
Accounts payable
and accrued expenses
|
$7,866,140
|
$6,543,635
|
Deferred
revenue
|
341,789
|
305,741
|
Customer
liability
|
338,725
|
338,725
|
Current portion of
loans, advances and factoring agreements
|
2,308,753
|
344,758
|
Current portion of
convertible notes payable, net of discounts
|
1,711,098
|
2,101,649
|
Notes payable
– related parties, net of discounts
|
10,559,796
|
9,297,078
|
Current portion of
convertible notes payable – related party, net
of discounts
|
922,481
|
534,381
|
Derivative
liabilities
|
5,265,139
|
8,836,514
|
Current portion of
operating lease liabilities
|
2,682,722
|
1,921,843
|
Financing lease
liabilities
|
184,939
|
—
|
Financing lease
liability – related party
|
654,633
|
626,561
|
Total
current liabilities
|
32,836,215
|
30,850,885
|
NON-CURRENT
LIABILITIES
|
|
|
Long term
portion:
|
|
|
Loans, advances and
factoring agreements, net of current portion and
discounts
|
843,577
|
1,000,500
|
Convertible notes
payable – related parties, net of current portion and
discounts
|
---
|
388,500
|
Operating lease
liabilities, net of current portion
|
2,872,952
|
2,009,737
|
Total
non-current liabilities
|
3,716,529
|
3,398,737
|
Total
liabilities
|
36,552,744
|
34,249,622
|
|
|
|
Commitments and
contingencies
|
—
|
—
|
See accompanying notes to consolidated financial
statements.
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
|
|
|
|
|
|
|
|
|
|
|
|
MEZZANINE
EQUITY
|
|
|
|
|
|
Convertible
Preferred Series A, 1,000,000 designated - 1,000,000 shares issued
and outstanding as of December 31, 2020 and 2019
|
$3,117,000
|
—
|
Convertible
Preferred Series B, 3,000,000 designated - 2,588,693 shares issued
and outstanding as of December 31, 2020 and 2019
|
1,677,473
|
—
|
Total mezzanine
equity
|
$4,794,473
|
—
|
STOCKHOLDER’S
DEFICIT
|
|
|
PREFERRED STOCK,
$.001 PAR VALUE 100,000,000 SHARES AUTHORIZED:
|
|
|
|
|
|
Convertible
Preferred Series A, 1,000,000 designated - 1,000,000 shares issued
and outstanding as of December 31, 2020 and 2019,
respectively
|
---
|
1,000
|
Convertible
Preferred Series B, 3,000,000 designated - 2,588,693 shares issued
and outstanding as of December 31, 2020 and 2019,
respectively
|
---
|
2,589
|
Convertible
Preferred Series C – 3,000,000 shares designated, zero shares
issued and outstanding as of December 31, 2020 and 2019,
respectively
|
—
|
—
|
Convertible Preferred Series D – 20,000,000 shares
designated, zero shares issued and outstanding as of December 31,
2020 and 2019, respectively
|
—
|
—
|
Common stock, $.001
par value, 1,000,000,000 shares authorized, 865,564,371 and
177,629,939 as of December 31, 2020 and 2019,
respectively
|
865,565
|
177,630
|
Subscriptions
payable
|
125,052
|
574,256
|
Additional paid-in
capital
|
11,462,940
|
13,279,749
|
Accumulated
deficit
|
(40,902,944)
|
(32,831,093)
|
Total TPT Global
Tech, Inc. Stockholders’ deficit
|
(28,449,387)
|
(18,795,869)
|
Non-controlling
interests
|
(61,142)
|
---
|
Total stockholders'
deficit
|
(28,510,529)
|
(18,795,869)
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
$12,836,688
|
$15,453,753
|
See accompanying notes to consolidated financial
statements.
TPT Global Tech, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
For the years
ended December 31,
|
|
|
|
|
|
|
REVENUES:
|
|
|
Products
|
$39,391
|
$53,605
|
Services
|
11,054,779
|
10,158,772
|
Total
Revenues
|
11,094,170
|
10,212,377
|
|
|
|
COST OF
SALES:
|
|
|
Products
|
38,455
|
55,470
|
Services
|
7,155,038
|
5,856,531
|
Total Costs of
Sales
|
7,193,493
|
5,912,001
|
Gross
profit
|
3,900,677
|
4,300,376
|
OPERATING
EXPENSES:
|
|
|
Sales and
marketing
|
178,539
|
55,882
|
Professional
|
2,077,770
|
1,888,047
|
Payroll and
related
|
2,502,461
|
1,513,050
|
General and
administrative
|
1,857,608
|
1,542,886
|
Research and
development
|
1,000,000
|
---
|
Impairment of
goodwill and long-lived assets
|
2,702,996
|
949,872
|
Depreciation
|
1,054,702
|
591,069
|
Amortization
|
730,940
|
868,622
|
Total
operating expenses
|
12,105,016
|
7,409,428
|
|
|
|
Loss from
operations
|
(8,204,339)
|
(3,109,052)
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
Derivative gain
(expense)
|
1,140,323
|
(7,476,908)
|
Gain on debt
extinguishment
|
1,252,131
|
---
|
Gain (loss) on debt
conversions
|
(775,650)
|
138,815
|
Interest
expense
|
(1,531,733)
|
(3,581,020)
|
Total
other income (expense)
|
85,071
|
(10,919,113)
|
|
|
|
Net loss before
income taxes
|
(8,119,268)
|
(14,028,165)
|
Income
taxes
|
—
|
—
|
Net loss before
non-controlling interests
|
(8,119,268)
|
$(14,028,165)
|
Net loss
attributable to non-controlling interests
|
47,417
|
---
|
Net loss
attributable to TPT Global Tech, Inc. Shareholders
|
$(8,071,851)
|
(14,028,165)
|
|
|
|
Loss per common
shares-basic and diluted
|
$(0.01)
|
$(0.10)
|
|
|
|
Weighted-average
common shares outstanding-basic and diluted
|
740,163,898
|
141,594,930
|
See accompanying notes to consolidated financial
statements.
TPT Global Tech, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in Capital
|
|
|
Total
Stockholders’ Deficit
|
Balance as of December 31,
2018
|
1,000,000
|
$1,000
|
2,588,693
|
$2,589
|
136,953,904
|
$136,954
|
$168,006
|
$12,567,881
|
$(18,802,928)
|
$---
|
$(5,926,498)
|
Common stock issuable for director
services
|
|
|
|
|
|
|
406,250
|
|
|
|
406,250
|
Stock options issued for
services
|
|
|
|
|
|
|
|
140,668
|
|
|
140,668
|
Common stock issued for convertible
promissory notes
|
|
|
|
|
40,676,035
|
40,676
|
|
571,200
|
|
|
611,876
|
Net Loss
|
|
|
|
|
|
|
|
|
(14,028,165)
|
|
(14,028,165)
|
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 issued for
services
|
—
|
—
|
—
|
—
|
7,002,000
|
7,002
|
(812,773)
|
859,771
|
—
|
—
|
54,000
|
Common stock issuable for
services
|
---
|
---
|
---
|
---
|
---
|
---
|
363,569
|
---
|
---
|
---
|
363,569
|
Equity interest in QuikLABS issued
for cash
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
368,000
|
—
|
92,000
|
460,000
|
Acquisition of Aire
Fitness
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
113,333
|
113,333
|
Common stock issued for settlement
of liability
|
—
|
—
|
—
|
—
|
1,000,000
|
1,000
|
—
|
57,000
|
—
|
—
|
58,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of preferred stock
as mezzanine
|
(1,000,000)
|
(1,000)
|
(2,588,693)
|
(2,589)
|
----
|
—
|
—
|
(4,790,884)
|
—
|
—
|
(4,794,473)
|
Common stock issued for convertible
promissory notes
|
—
|
—
|
—
|
—
|
679,932,432
|
679,933
|
—
|
1,470,246
|
—
|
---
|
2,150,179
|
InnovaQor
merger
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
219,058
|
---
|
(219,058)
|
---
|
Net Loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(8,071,851)
|
(47,417)
|
(8,119,268)
|
Balance as of December 31,
2020
|
—
|
$—
|
—
|
$—
|
865,564,371
|
$865,565
|
$125,052
|
$11,462,940
|
$(40,902,944)
|
$(61,142)
|
$(28,510,529)
|
See accompanying notes to consolidated financial
statements.
TPT Global Tech, Inc.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
For the years
ended December 31,
|
|
|
|
Cash flows from
operating activities:
|
|
|
Net
loss
|
$(8,119,268)
|
$(14,028,165)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
|
1,054,702
|
591,069
|
Amortization
|
730,940
|
868,622
|
Amortization
of debt discounts
|
738,794
|
2,797,185
|
Promissory
note issued for research and development
|
1,000,000
|
—
|
Note
payable issued for legal fees
|
350,000
|
---
|
Gain
on conversion of notes payable
|
775,650
|
(138,815)
|
Derivative
expense (gain)
|
(1,140,323)
|
7,476,908
|
Gain
on extinguishment of debt
|
(1,252,131)
|
---
|
Impairment
of goodwill and long-lived assets
|
2,702,996
|
949,877
|
Share-based
compensation: Common stock (issued and payable)
|
417,649
|
406,250
|
Stock
options
|
---
|
140,668
|
Changes
in operating assets and liabilities:
|
|
|
Accounts
receivable
|
254,022
|
(330,883)
|
Prepaid
expenses and other assets
|
(138,339)
|
57,340
|
Accounts payable and accrued expenses
|
1,314,086
|
766,867
|
Other
liabilities
|
43,969
|
69,291
|
Net
change in operating lease assets and liabilities
|
777,680
|
45,535
|
Net
cash used in operating activities
|
(489,573)
|
(328,251)
|
|
|
|
Cash flows from
investing activities:
|
|
|
Acquisition
of property and equipment
|
(424,560)
|
(103,515)
|
Purchase
of intangibles
|
(76,798)
|
---
|
Payment
for business acquisitions, net of cash acquired
|
460
|
(798,386)
|
Net
cash used in investing activities
|
(500,898)
|
(901,901)
|
|
|
|
Cash flows from
financing activities:
|
|
|
Proceeds
from sale of non-controlling interests in QuikLABS
|
460,000
|
—
|
Proceeds
from convertible notes and notes payable – related
parties
|
2,400
|
293,707
|
Proceeds
from convertible notes, loans and advances
|
1,753,204
|
2,613,047
|
Payments
on convertible loans, advances and factoring
agreements
|
(1,169,330)
|
(1,440,139)
|
Payments
on convertible notes and amounts payable – related
parties
|
(212,256)
|
(50,720)
|
Payments
on financing lease liabilities
|
(16,410)
|
(25,357)
|
Net
cash provided by financing activities
|
817,608
|
1,390,538
|
|
|
|
Net change in
cash
|
(172,863)
|
160,386
|
Cash and cash
equivalents – beginning of period
|
192,172
|
31,786
|
|
|
|
Cash and cash
equivalents – end of period
|
$19,309
|
$192,172
|
|
|
|
See accompanying notes to consolidated financial
statements.
TPT Global Tech, Inc.
CONSOLIDATED STATEMENTS
OF CASH FLOWS - CONTINUED
Supplemental Cash Flow Information:
Cash
used for:
|
|
|
Interest
expense
|
$—
|
$—
|
Taxes
|
$—
|
$—
|
Non-Cash Investing and Financing Activity:
|
|
|
Debt discount on
factoring agreement
|
$634,341
|
$2,011,600
|
Acquisition of
assets of SpeedConnect – Liabilities assumed
|
$---
|
$1,894,964
|
Operating lase
liabilities and right of use assets
|
$---
|
$5,003,178
|
Common stock issued
for conversion of convertible notes
|
$2,258,637
|
—
|
Convertible
Preferred Series A and B reclassified to mezzanine
equity
|
$4,790,884
|
$—
|
Acquisition of Aire
Fitness – Liabilities assumed
|
$610,919
|
$—
|
Purchase of
property and equipment under finance leases
|
$201,349
|
$---
|
InnovaQor Merger-
non controlling interest
|
$219,058
|
$---
|
See accompanying notes to consolidated financial
statements.
TPT Global Tech, Inc.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 2020
NOTE
1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature
of Operations
The
Company was originally incorporated in 1988 in the state of
Florida. TPT Global, Inc., a Nevada corporation formed in June
2014, merged with Ally Pharma US, Inc., a Florida corporation,
(“Ally Pharma”, formerly known as Gold Royalty
Corporation) in a “reverse merger” wherein Ally Pharma
issued 110,000,000 shares of Common Stock, or 80% ownership, to the
owners of TPT Global, Inc. in exchange for all outstanding common
stock of TPT Global Inc. and Ally Pharma agreed to change its name
to TPT Global Tech, Inc. (jointly referred to as “the
Company” or “TPTG”).
The
following acquisitions have resulted in entities which have been
consolidated into TPTG. In 2014 the Company acquired all the assets
of K Telecom and Wireless LLC (“K Telecom”) and Global
Telecom International LLC (“Global Telecom”). Effective
January 31, 2015, TPTG completed its acquisition of 100% of the
outstanding stock of Copperhead Digital Holdings, Inc.
(“Copperhead Digital”) and Subsidiaries, TruCom, LLC
(“TruCom”), Nevada Utilities, Inc. (“Nevada
Utilities”) and CityNet Arizona, LLC (“CityNet”).
Effective September 30, 2016, the company acquired 100% ownership
in San Diego Media Inc. (“SDM”). In October 2017, we
entered into agreements to acquire Blue Collar, Inc. (“Blue
Collar”) which closed as of September 1, 2018. On May 7, 2019
we completed the acquisition of a majority of the assets of
SpeedConnect, LLC, which assets were conveyed into our wholly owned
subsidiary TPT SpeedConnect, LLC (“TPT SC” or
“TPT SpeedConnect”) which was formed on April 16, 2019.
On January 8, 2020 we formed TPT Federal, LLC (“TPT
Federal”), on March 7, 2020 we acquired 75% interest in
Bridget Internet, LLC (“Bridge Internet” or
“BIC”). 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 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
Principles of Consolidation
Our
consolidated financial statements include the wholly-owned accounts
of K Telecom and Global, Copperhead Digital, SDM, Blue Collar, TPT
SpeedConnect, TPT Federal, BIC, 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.
Reclassifications
Certain
amounts presented in previously issued financial statements have
been reclassified in these financial statements. During 2019,
impairment expense of $949,872 was recorded in Other Income
(Expense) in the statement of operations and has been reclassified
to Operating Expenses to be consistent with the current period
presentation.
Revenue Recognition
On
January 1, 2018, we adopted the new accounting standard ASC
606, Revenue from Contracts
with Customers, and all of the related amendments
(“new revenue standard”). We recorded the change, which
was immaterial, related to adopting the new revenue standard using
the modified retrospective method. Under this method, we recognized
the cumulative effect of initially applying the new revenue
standard as an adjustment to the opening balance of retained
earnings. This results in no restatement of prior periods, which
continue to be reported under the accounting standards in effect
for those periods. We expect the impact of the adoption of the new
revenue standard to continue to be immaterial on an ongoing basis.
We have applied the new revenue standard to all contracts as of the
date of initial application and as such, have used the following
criteria described below in more detail for each business
unit:
Identify the contract with the
customer.
Identify the performance
obligations in the contract.
Determine the transaction
price.
Allocate the transaction price
to performance obligations in the contract.
Recognize revenue when or as we satisfy a performance
obligation.
Reserves are recorded as a reduction in net sales and are not
considered material to our consolidated statements of income for
the years ended December 31, 2020 and 2019. In addition, we
invoice our customers for taxes assessed by governmental
authorities such as sales tax and value added taxes, where
applicable. We present these taxes on a net
basis.
The
Company’s revenue generation for the years ended December 31,
2020 and 2019 came from the following sources disaggregated by
services and products, which sources are explained in detail
below.
|
For the year
ended
December 31,
2020
|
For the year
ended
December 31,
2019
|
TPT
SpeedConnect
|
$9,958,770
|
$8,002,875
|
Blue
Collar
|
1,051,120
|
1,941,955
|
San Diego
Media
|
14,405
|
23,683
|
TPT
MedTech
|
30,484
|
---
|
Copperhead
Digital
|
---
|
189,511
|
Other
|
---
|
749
|
Total Services
Revenues
|
$11,054,779
|
$10,158,772
|
K Telecom –
Product Revenue
|
39,391
|
53,605
|
Total
Revenue
|
$11,094,170
|
$10,212,377
|
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 for TPT SpeedConnect at
December 31, 2020 and 2019 are $292,847 and $305,741, respectively.
Certain of our products require specialized installation and
equipment. For telecom products that include installation, if the
installation meets the criteria to be considered a separate
element, product revenue is recognized upon delivery, and
installation revenue is recognized when the installation is
complete. The Installation Technician collects the signed quote
containing terms and conditions when installing the site equipment
at customer premises.
Revenue
for installation services and equipment is billed separately from
recurring ISP and telecom services and is recognized when equipment
is delivered and installation is completed. Revenue from ISP and
telecom services is recognized monthly over the contractual period,
or as services are rendered and accepted by the
customer.
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 December 31,
2020 and 2019. Software support services (including software
upgrades) are billed in real time, on the first of the month. Web
design service revenues are recognized upon completion of specific
projects. Revenue is booked in the month the services are rendered
and payments are due on the final day of the month. There are
usually no contract revenues that are deferred until services are
performed.
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 facility, 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.
Share-based
Compensation
The
Company is required to measure and recognize compensation expense
for all share-based payment awards (including stock options) made
to employees and directors based on estimated fair value.
Compensation expense for equity-classified awards is measured at
the grant date based on the fair value of the award and is
recognized as an expense in earnings over the requisite service
period.
The
Company records compensation expense related to non-employees that
are awarded stock in conjunction with selling goods or services and
recognizes compensation expenses over the vesting period of such
awards.
Income Taxes
Deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
our income tax provision in the period of enactment.
We
recognize deferred tax assets to the extent that we believe that
these assets are more likely than not to be realized. In making
such a determination, we consider all available positive and
negative evidence, including future reversal of existing taxable
temporary differences, projected future taxable income,
tax-planning strategies, and results of recent operations,
including taxable income in carryback periods. If we determine that
we would be able to realize our deferred tax assets in the future
in excess of their net recorded amount, we would make an adjustment
to the deferred tax asset valuation allowance, which would reduce
our income tax provision.
We
account for uncertain tax positions using a
“more-likely-than-not” recognition threshold. We
evaluate uncertain tax positions on a quarterly basis and consider
various factors, including, but not limited to, changes in tax law,
the measurement of tax positions taken or expected to be taken in
tax returns, the effective settlement of matters subject to audit,
new audit activity and changes in facts or circumstances related to
a tax position.
It is
our policy to record costs associated with interest and penalties
related to tax in the selling, general and administrative line of
the consolidated statements of operations.
Cash and Cash Equivalents
The
Company considers all investments with a maturity date of three
months or less when purchased to be cash equivalents. There are no
cash equivalents as of December 31, 2020 and 2019.
Accounts Receivable
We
establish an allowance for potential uncollectible accounts
receivable. All accounts receivable 60 days past due are considered
uncollectible unless there are circumstances that support
collectability. Those circumstances are documented. As of December
31, 2020 and 2019, the allowance for uncollectible accounts
receivable was $762,815 and $881,676, respectively. Receivables are
charged off when collection efforts cease.
Property and Equipment
Property
and equipment are stated at cost or fair value if acquired as part
of a business combination. Depreciation is computed by the
straight-line method and is charged to operations over the
estimated useful lives of the assets. Maintenance and repairs are
charged to expense as incurred. The carrying amount of accumulated
depreciation of assets sold or retired are removed from the
accounts in the year of disposal and any resulting gain or loss in
s included in results of operations. The estimated useful lives of
property and equipment are telecommunications network - 5 years,
telecommunications equipment - 7 to 10 years, and computers and
office equipment - 3 years.
Goodwill
Goodwill
relates to amounts that arose in connection with our various
business combinations and represents the difference between the
purchase price and the fair value of the identifiable tangible and
intangible net assets when accounted for using the acquisition
method of accounting. Goodwill is not amortized, but it is subject
to periodic review for impairment.
We test goodwill balances for impairment on an annual basis as of
December 31st or whenever impairment indicators arise. We
utilize several reporting units in evaluating goodwill for
impairment using a quantitative assessment, which uses a
combination of a guideline public company market-based approach and
a discounted cash flow income-based approach. The quantitative
assessment considers whether the carrying amount of a reporting
unit exceeds its fair value, in which case an impairment charge is
recorded to the extent the reporting unit’s carrying value
exceeds its fair value. Based on our impairment testing, we
recorded impairment charges of $853,366 and $70,995 of goodwill
during the years ended December 31, 2020 and 2019,
respectively.
Intangible Assets
Our
intangible assets consist primarily of customer relationships,
developed technology, favorable leases, trademarks and the film
library. The majority of our intangible assets were recorded in
connection with our various business combinations. Our intangible
assets are recorded at fair value at the time of their acquisition.
Intangible assets are amortized over
their estimated useful life on a straight-line basis. Estimated
useful lives are determined considering the period the assets are
expected to contribute to future cash flows. We evaluate the
recoverability of our intangible assets periodically and take into
account events or circumstances that warrant revised estimates of
useful lives or that indicate impairment
exists.
Business Acquisitions
Our
business acquisitions have historically been made at prices above
the fair value of the assets acquired and liabilities assumed,
resulting in goodwill or some identifiable intangible asset.
Significant judgment is required in estimating the fair value of
intangible assets and in assigning their respective useful lives.
The fair value estimates are based on available historical
information and on future expectations and assumptions deemed
reasonable by management but are inherently uncertain.
We
generally employ the income method to estimate the fair value of
intangible assets, which is based on forecasts of the expected
future cash flows attributable to the respective assets.
Significant estimates and assumptions inherent in the valuations
reflect a consideration of other marketplace participants and
include the amount and timing of future cash flows (including
expected growth rates and profitability), the underlying product
life cycles, economic barriers to entry, a brand’s relative
market position and the discount rate applied to the cash flows.
Unanticipated market or macroeconomic events and circumstances may
occur, which could affect the accuracy or validity of the estimates
and assumptions.
Net
assets acquired are recorded at their fair value and are subject to
adjustment upon finalization of the fair value analysis.
Long-Lived Assets
We periodically review the carrying amount of our depreciable
long-lived assets for impairment which include property and
equipment and intangible assets. An asset is considered
impaired when estimated future cash flows are less than the
carrying amount of the asset. In the event the carrying amount
of such asset is not considered recoverable, the asset is adjusted
to its fair value. Fair value is generally determined based on
discounted future cash flow. As of December 31, 2020, we adjusted
the net book value to zero for the net book value of the equipment
of Copperhead Digital as it became doubtful with no customers that
the estimated future cash flows would recover the net book value.
We recorded impairment expenses of $1,849,630 and $878,877,
respectively, for the years ended December 31, 2020 and
2019.
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 and convertible
preferred stock using the if-converted method. 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 December
31, 2020 and 2019, the Company had shares that were potentially
common stock equivalents as follows:
|
|
|
Convertible
Promissory Notes
|
175,316,748
|
1,506,387,647
|
Series A Preferred
Stock (1)
|
1,243,987,624
|
199,728,891
|
Series B Preferred
Stock
|
2,588,693
|
2,588,693
|
Stock Options and
warrants
|
4,333,333
|
6,333,333
|
|
1,426,226,398
|
1,715,038,564
|
_____________________
(1)
Holder of the
Series A Preferred Stock which is Stephen J. Thomas, is guaranteed
60% of the then outstanding common stock upon conversion. The
Company would have to authorize additional shares for this to occur
as only 1,000,000,000 shares are currently authorized.
Concentration of Credit Risk, Off-Balance Sheet Risks and Other
Risks and Uncertainties
Financial
instruments that potentially subject us to concentration of credit
risk primarily consist of cash and cash equivalents and accounts
receivable. We invest our excess cash primarily in high quality
securities and limit the amount of our credit exposure to any one
financial institution. We do not require collateral or other
securities to support customer receivables; however, we perform
on-going credit evaluations of our customers and maintain
allowances for potential credit losses.
As of
December 31, 2020 and 2019, two customer accounts receivable
balances were 78% and 91%, respectively, of our aggregate accounts
receivable from revenues.
Financial Instruments and Fair Value of Financial
Instruments
Our
primary financial instruments at December 31, 2020 and 2019
consisted of cash equivalents, accounts receivable, accounts
payable and debt. 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 December
31, 2020 are the following:
Derivative
Instrument
|
|
Fair value of
Auctus Convertible Promissory Note
|
$4,227,656
|
Fair value of EMA
Financial Convertible Promissory Note
|
1,001,780
|
Fair value of
Warrants issued with the derivative instruments
|
35,703
|
|
$5,265,139
|
Research and Development
Our
research and development programs focus on telecommunications
products and services. Research and development costs are expensed
as incurred. Any payments received from external parties to fund
our research and development activities reduce the recorded
research and development expenses.
Advertising Costs
Advertising
costs are expensed as incurred. The Company incurred advertising
costs of zero for the years ended December 31, 2020 and 2019,
respectively.
Use of Estimates
The
preparation of financial statements in conformity with United
States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ materially from those
estimates. The Company’s consolidated financial statements
reflect all adjustments that management believes are necessary for
the fair presentation of their financial condition and results of
operations for the periods presented.
Derivative Financial Instruments
Derivative
financial instruments, as defined in ASC 815, “Accounting for
Derivative Financial Instruments and Hedging Activities”,
consist of financial instruments or other contracts that contain a
notional amount and one or more underlying (e.g. interest rate,
security price or other variable), require no initial net
investment and permit net settlement. Derivative financial
instruments may be free-standing or embedded in other financial
instruments. Further, derivative financial instruments are
initially, and subsequently, measured at fair value and recorded as
liabilities or, in rare instances, assets.
The
Company does not use derivative financial instruments to hedge
exposures to cash-flow, market or foreign-currency risks. However,
the Company had issued financial instruments including convertible
promissory notes payable with features during 2019 that were either
(i) not afforded equity classification, (ii) embody risks not
clearly and closely related to host contracts, or (iii) may be
net-cash settled by the counterparty. As required by ASC 815, in
certain instances, these instruments are required to be carried as
derivative liabilities, at fair value, in our financial
statements.
The
Company estimates the fair values of derivative financial
instruments using the Monte Carlo model. Estimating fair values of
derivative financial instruments requires the development of
significant and subjective estimates (such as volatility, estimated
life and interest rates) that may, and are likely to, change over
the duration of the instrument with related changes in internal and
external market factors. In addition, option-based techniques are
highly volatile and sensitive to changes in the trading market
price of our common stock, which has a high-historical volatility.
Since derivative financial instruments are initially and
subsequently carried at fair values, the Company’s operating
results will reflect the volatility in these estimate and
assumption changes.
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 December 31, 2020, the Company marked to market the fair
value of the debt derivatives and determined a fair value of
$5,265,139 ($5,229,436 from the convertible notes and $35,703 from
the warrants) in Note 6. The Company recorded a gain from change in
fair value of debt derivatives of $1,140,323 for the year ended
December 31, 2020. The fair value of the embedded derivatives was
determined using Monte Carlo simulation method based on the
following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 190.9% to 350.8%, (3) weighted average risk-free
interest rate of 0.09% to 0.12% (4) expected life of 0.25 to 1.4
years, and (5) the quoted market price of $0.03 for the
Company’s common stock.
Recently Adopted Accounting Pronouncements
In June
2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee
Share-Based Payment Accounting, which amends ASC 718, Compensation
– Stock Compensation. This ASU requires that most of the
guidance related to stock compensation granted to employees be
followed for non-employees, including the measurement date,
valuation approach, and performance conditions. The expense is
recognized in the same period as though cash were paid for the good
or service. The effective date is the first quarter of fiscal year
2020, with early adoption permitted, including in interim periods.
The ASU has been adopted using a modified-retrospective transition
approach. The adoption is not considered to have a material effect
on the consolidated financial statements.
Management
has reviewed other recently issued accounting pronouncements and
have determined there are not any that would have a material impact
on the condensed consolidated financial statements.
NOTE 2 – ACQUISITIONS
SpeedConnect Asset Acquisition
Effective April 2, 2019, the Company entered into an Asset Purchase
Agreement with SpeedConnect, LLC (“SpeedConnect”) to
acquire substantially all of the assets of SpeedConnect. On May 7,
2019, the Company closed the transaction underlying the Asset
Purchase Agreement with SpeedConnect to acquire substantially all
of the assets of SpeedConnect for $2 million and the assumption of
certain liabilities. The Asset Purchase Agreement required a
deposit of $500,000 made in April and an additional $500,000
payment to close. The additional $500,000 was paid and all other
conditions were met to effectuate the sale of substantially all of
the assets of SpeedConnect to the Company. As part of the closing,
the Company entered into a Promissory Note to pay SpeedConnect
$1,000,000 in two equal installments of $500,000 plus applicable
interest at 10% per annum with the first installment payable within
30 days of closing and the second installment payable within 60
days of closing (but no later than July 6, 2019). The Company paid
off the Promissory Note by June 11, 2019 and by amendment dated May
7, 2019, SpeedConnect forgave $250,000 of the Promissory
Note.
The
Company treated the asset acquisition as a business combination and
has allocated the fair market value to assets received in excess of
goodwill.
Purchase
Price Allocation:
Effective
date
|
|
|
|
Purchaser
|
|
|
|
Consideration
Given:
|
|
Cash
paid
|
$1,000,000
|
Liabilities:
|
|
|
|
Promissory
Note
|
$750,000
|
Deferred
revenue
|
230,000
|
Operating
lease liabilities
|
5,162,077
|
Unfavorable
leases
|
323,000
|
Accounts
and other payables
|
591,964
|
Total
liabilities
|
$7,057,041
|
Total Consideration
Value
|
$8,057,041
|
|
|
Assets
Acquired:
|
|
Customer
base
|
$350,000
|
Current
assets:
|
|
Cash
|
201,614
|
Prepaid
and other receivables
|
99,160
|
Deposits
|
13,190
|
Operating
lease right of use asset
|
5,162,077
|
Favorable
leases
|
95,000
|
Property
and equipment
|
1,939,000
|
Total Assets
Acquired
|
$7,860,041
|
Goodwill
|
$197,000
|
Included
in the consolidated statement of operations for the year ended
December 31, 2019 are the results of operations for TPT
SpeedConnect for the period May 8, 2019 to December 31, 2019 as
follows:
|
|
Revenue
|
$8,002,875
|
Cost of
Sales
|
4,826,475
|
Gross
Profit
|
3,176,400
|
Expenses
|
(1,999,221)
|
Interest
Expense
|
—
|
Income
taxes
|
—
|
Net
Income
|
$1,177,179
|
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 year ended
December 31, 2020 is $56,300 of expenses which primarily related to
payroll expenses. The were no outside revenues generated by Aire
Fitness recorded From August 1, 2020 through December 31,
2020.
Had the
acquisitions of TPT SpeedConnect and Aire Fitness occurred on
January 1, 2019, condensed proforma results of operations for the
years ended December 31, 2020 and 2019 would be as
follows:
|
|
|
Revenue
|
11,191,709
|
$11,630,775
|
Cost of
Sales
|
7,270,166
|
6,513,624
|
Gross
Profit
|
3,921,543
|
$5,117,151
|
Expenses
|
(12,305,652)
|
(7,844,692)
|
Other income
(expense)
|
85,071
|
(10,875,850)
|
Net
Loss
|
(8,299,039)
|
$(13,603,991)
|
Loss per
share
|
(0.01)
|
$(0.10)
|
EPIC Reference Labs, Inc. Acquisition
On August 6, 2020, TPT MedTech signed a binding letter of intent
with Rennova to acquire EPIC Reference Labs, Inc.
(“EPIC”), wholly owned subsidiary of Rennova, for
$750,000, comprised of a deposit of $25,000 within five days of
signing and the remainder due either from 20% of net proceeds
received from fund raising that the Company had initiated and as
evidenced by SEC Filings or a minimum payment of $25,000 per month
until paid in full. The first $25,000 payment was made and was
accounted for as a deposit in the consolidated balance sheet. All
defined laboratory equipment and a $100,000 lease deposit were to
be excluded from the sales price. All liabilities incurred up to
signing were to be discharged. Receivables existing at signing were
to be 100% ownership of Rennova. There were no other significant
assets. This acquisition would allow TPT MedTech to own a license
to operate medical testing facilities.
TPT MedTech and Rennova subsequently agreed that the acquisition
would be of an asset acquisition of substantially all of the assets
of EPIC instead of acquiring the stock of EPIC, but that all other
terms were to be consistent with the binding letter of
intent. Until the change of
ownership of the assets was complete, Rennova started operating the
laboratory under a management agreement dated August 6, 2020
between TPT MedTech, LLC and Rennova. There are approximately
$19,000 of expenses in our consolidated statement of operations
under the management agreement.
Subsequently, TPT MedTech decided that it would not acquire the
assets of EPIC and terminated its relationship with EPIC. The
$25,000 deposit was then expensed to the statement of operations
for the year ended December 31, 2020.
Rennova Acquisition Agreement
Effective
December 31, 2020, the Company completed its
acquisition agreement (“Rennova Acquisition Agreement”)
with Rennova Health, Inc. (“Rennova”), an owner
and operator of rural hospitals in Tennessee, and InnovaQor, to
merge Rennova’s software and genetic testing interpretation
divisions, Health Technology Solutions, Inc. (HTS) and Advanced
Molecular Services Group, Inc., (AMSG) and their subsidiaries into
InnovaQor. After closing, these entities were to operate as wholly
owned subsidiaries of InnovaQor which then would have been
controlled by Rennova. Closing was subject to a number of customary
conditions for a transaction of this nature and was intended to
happen on or before January 31, 2020.
InnovaQor
had previously completed a license agreement giving it certain
rights to assets and technology from the Company’s
proprietary live streaming communication technology. As part of the
license agreement InnovaQor and TPT had agreed on a development
project to create a next generation telehealth type platform. It
was intended to combine the TPT and Rennova assets and technology
into a smart phone and computer accessible healthcare platform to
facilitate a patient’s immediate access to healthcare and
their local hospital or doctors office, for initial consultation,
scheduling of appointments and follow on care and other added value
services that may be one off or recurring.
Rennova
had agreed to complete the necessary steps and SEC filings with the
intent to facilitate TPT shareholders receiving approximately
2,500,000 shares in InnovaQor, and Rennova’s shareholders
receiving approximately $5M of Preference shares which were be
converted to common shares. As described in the Rennova Acquisition
Agreement, TPT, or its assigns, was to retain direct ownership of a
further 3,500,000 shares and Rennova and retain ownership of an
additional $17.5M of preference shares with certain conversion
rights and restrictions, making it the contolling entity of
InnovaQor.
Rennova
terminated the Rennova Acquisition Agreement effective March 5,
2021 and the Company agreed to this termination with both parties
not able to come to agreement of final terms.
InnovaQor Merger with Southern Plains
On
August 1, 2020, InnovaQor,
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 InnovaQor one step closer to
completing a recently executed Asset Purchase Agreement with
Rennova Health, Inc. The Merger also positioned InnovaQor to trade
on the OTC Market, which InnovaQor is now traded under INOQ. 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 August, InnovaQor 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(1)). As such, as of September 30, 2020, the
Company, for accounting purposes, took control of the merged
InnovaQor and reflected in it’s consolidated balance the
consolidated balance sheet of InnovaQor which assets and
liabilities were di minimus. The merger was a reverse merger with
Southern Plains of which there ended up being a non controlling
interest of 6% as of December 31, 2020. The name of InnovaQor
remained for the merged entities but was changed to TPT Strategic,
Inc. on March 21, 2021.
A License Agreement that was originally signed between the Company
and InnovaQor for software development but rescinded March 30, 2021
and the issuance of 6,000,000 shares of common stock were
cancelled.
Bridge Internet Acquisition
On
March 6, 2020, the Company executed an Acquisition and Purchase
Agreement (“Agreement”) dated March 6, 2020 with Bridge
Internet, LLC (“Bridge Internet”), a Delaware Limited
Liability Company. On December 23, 2020, the Company and prior
owner agreed to terminate the agreement.
The
Agreement stated that the Company had acquired 75% of Bridge
Internet for 8,000,000 shares of common stock of TPT Global Tech,
Inc., 4,000,000 common shares issued to Sydney “Trip”
Camper immediately and 4,000,000 common shares would vest equally
over two years. As sufficient funding was raised by the Company,
defined as approximately $3,000,000, marketing funds of up to
$200,000 per quarter for the next year were to be provided. Sydney
“Trip” Camper, would retain the remaining 25% of Bridge
Internet and stay on as the CEO. This Agreement was terminated as
if there were no agreement. Any monies paid as contractor payments
by the Company are to be maintained and the Company is to have no
liabilities related to Bridge Internet of any sort.
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 years ended
December 31, 2020 and 2019. Financing activities described below
have helped with working capital and other capital
requirements.
We
incurred $8,119,268 and $14,028,165, respectively, in losses, and
we used $489,573 and $328,251, respectively, in cash for operations
for the years ended December 31, 2020 and 2019. 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 $5,378,277 for 2020 and $13,091,764 for 2019.
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 year ended December 31, 2020, we had a net
increase in our assets and liabilities of $2,251,418 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 year ended
December 31, 2019 we had a net increase to our assets and
liabilities of $608,150 for similar reasons.
Cash
flows from financing activities were $817,608 and $1,390,538 for
the years ended December 31, 2020 and 2019, respectively. For the
year ended December 30, 2020, these cash flows were generated
primarily from proceeds from proceeds from sale of non-controlling
interests in QuikLABS of $460,000, proceeds from convertible notes,
loans and advances of $1,753,204 offset by payment on convertible
loans, advances and factoring agreements of $1,169,330 and payments
on convertible notes and amounts payable – related parties of
$212,256. For the year ended December 31, 2019, cash flows from
financing activities primarily came from proceeds from convertible
notes, loans and advances of $2,613,047 offset by payments on
convertible loans, advances and factoring agreements of
$1,440,139.
Cash
flows used in investing activities were $500,898 and $901,901,
respectively, for the years ended December 31, 2020 and 2019. For
the year ended December 31, 2020 these cash flows were used
primarily for the acquisition of property and equipment of $424,560
and the purchase of intangibles of $76,798. For the year ended
December 31, 2019 cash flows for investing activities were used to
acquire property and equipment and the payment for business
acquisitions.
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 December
31, 2020 and 2019 are as follows:
|
|
|
Property and
equipment:
|
|
|
Telecommunications
fiber and equipment
|
$2,530,167
|
5,203,000
|
Film production
equipment
|
369,903
|
369,903
|
Medical
equipment
|
133,329
|
---
|
Office furniture
and equipment
|
86,899
|
85,485
|
Leasehold
improvements
|
18,679
|
18,679
|
Total
Property ad equipment
|
3,138,977
|
5,677,067
|
Accumulated
depreciation
|
(993,380)
|
(1,253,919)
|
Property and
equipment, net
|
$2,145,597
|
4,423,148
|
Depreciation
expense was $1,054,702 and $591,069 for the years ended December
31, 2020 and 2019, respectively.
During
the year ended December 31, 2019, the Company had a change in
useful life for its telecommunications fiber and equipment related
to Copperhead Digital resulting from managements evaluation of its
remaining useful life in light of the decrease in revenues for
which it was being used. The useful life was decreased from its
original 20 years when it was acquired in 2015 to five years.
Subsequently, as of December 31, 2020, management adjusted the net book
value of this equipment to zero as it became doubtful with no
customers that the estimated future cash flows would recover the
net book value. This resulted in an expense for impairment of
$1,849,630 to the statement of operations for the year ended
December 31, 2020.
NOTE 5 – DEBT FINANCING ARRANGEMENTS
Financing
arrangements as of December 31, 2020 and 2019 are as
follows:
|
|
|
Loans and advances
(1)
|
$2,517,200
|
$1,121,640
|
Convertible notes
payable (2)
|
1,711,098
|
2,101,649
|
Factoring
agreements (3)
|
635,130
|
223,618
|
Debt – third
party
|
$4,863,428
|
$3,446,907
|
|
|
|
Line of credit,
related party secured by assets (4)
|
$3,043,390
|
3,043,390
|
Debt– other
related party, net of discounts (5)
|
7,423,334
|
5,950,000
|
Convertible debt
– related party (6)
|
922,481
|
922,881
|
Shareholder debt
(7)
|
93,072
|
303,688
|
Debt –
related party
|
$11,482,277
|
$10,219,959
|
|
|
|
Total financing
arrangements
|
$16,345,705
|
$13,666,866
|
|
|
|
Less current
portion:
|
|
|
Loans, advances and
factoring agreements – third party
|
$(2,308,753)
|
$(344,758)
|
Convertible notes
payable third party
|
(1,711,098)
|
(2,101,649
|
Debt –
related party, net of discount
|
(10,559,796)
|
(9,297,078)
|
Convertible notes
payable– related party
|
(922,481)
|
(534,381)
|
|
(15,502,128)
|
(12,277,866)
|
Total long term
debt
|
$843,577
|
$1,389,000
|
_____________________________
(1) The
terms of $40,000 of this balance are similar to that of the Line of
Credit which bears interest at adjustable rates, 1 month LIBOR plus
2%, 2.2% as of December 31, 2020, 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).
$500,500
is a line of credit that Blue Collar has with a bank, bears
interest at Prime plus 1.125%, 4.38% as of December 31, 2020, and
is due March 25, 2021. The Company is working with the bank on an
extension of the due date.
$363,558
is a bank loan dated May 28, 2019 which bears interest at Prime
plus 6%, 9.25% as of December 31, 2020, was interest only for the
first year, thereafter 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
represents loans under the COVID-19 Pandemic Paycheck Protection
Program (“PPP”) originated in April of 2020. The
Company believes that it has used the funds such that 100% will be
forgiven. The applications for forgiveness have been submitted to
the Small Business Administration. 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 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. The $350,000 is
included as a Note Payable as of December 31, 2020 and bears no
interest.
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, and are delinquent. The Company is working to renegotiate
these promissory notes.
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
September 30, 2020 from its various Securities Purchase Agreements
into 125,446,546 shares of common stock of the Company leaving no
outstanding principal balances as of September 30, 2020. On
February 13, 2020, the August 22, 2019 Securities Purchase
Agreement was repaid for $63,284, including a premium and accrued
interest.
On March 25, 2019, the Company consummated a Securities Purchase
Agreement dated March 18, 2019 with Auctus Fund, LLC.
(“Auctus”) for the purchase of a $600,000 Convertible
Promissory Note (“Auctus Convertible Promissory Note”).
The Auctus Convertible Promissory Note is due December 18, 2019,
pays interest at the rate of 12% (24% default) per annum and gives
the holder the right from time to time, and at any time during the
period beginning 180 days from the origination date or at the
effective date of the registration of the underlying shares of
common stock, which the holder has registration rights for, to
convert all of the outstanding balance into common stock of the
Company limited to 4.99% of the outstanding common stock of the
Company. The conversion price is the lessor of the lowest trading
price during the previous 25 trading days prior the date of the
Auctus Convertible Promissory Note or 50% multiplied by the average
of the two lowest trading prices for the common stock during the
previous 25 trading days prior to the applicable conversion date.
The Auctus Convertible Promissory Note may be prepaid in full at
135% to 150% up to 180 days from origination. Auctus converted
$33,180 of principal and $142,004 of accrued interest into
376,000,000 shares of common stock of the Company prior to December
31, 2020. 2,000,000 warrants were issued in conjunction with the
issuance of this debt. See Note 8.
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 December
31, 2020. In addition, on February 25, 2020 the Company repaid for
$97,000, including a premium and accrued interest, for all
remaining principal and accrued interest balances as of that day.
333,333 warrants were issued in conjunction with the issuance of
this debt. See Note 8.
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 December 31, 2020, EMA converted
$35,366 of principal into 147,700,000 shares of common stock of the
Company. 1,000,000 warrants were issued in conjunction with the
issuance of this debt. See Note 8.
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 9 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)
$101,244 of the Factoring Agreements is 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. This 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 this Factoring
Agreement for which $101,244 and $101,244 in principal remained
unpaid as of December 31, 2020 and December 31, 2019,
respectively.
On May
8, 2019, the Company entered into a factoring agreement with
Advantage Capital Funding (“2019 Factoring agreement”).
$500,000, net of expenses, was funded to the Company with a promise
to pay $18,840 per week for 40 weeks until a total of $753,610 was
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, of which $144,119 in payments have been deferred to
be paid at the end of the 50-week term. 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 December 31, 2020, is payable monthly, and is
secured by the assets of the Company. 1,000,000 shares of Common
Stock of the Company have been reserved to accomplish raising the
funds to pay off the Line of Credit. Since assignment of the Line
of Credit to certain shareholders, which balance on the date of
assignment was $2,597,790, those shareholders have loaned the
Company $445,600 under the similar terms and conditions as the line
of credit but most of which were also given stock options totaling
$85,120 which expired as of December 31, 2019 (see Note 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 the Company 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 a 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 the year ended
December 31, 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.
$473,334,
net of a discount of $26,666 represents a Note Payable related to
the acquisition of 75% of Aire Fitness, payable six months from the
date of the note or as agreed by the Company out of future capital
raising efforts 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 $181,981 as of December 31,
2020. As of March 1, 2020, this convertible promissory note is
delinquent.
During
2018, the Company issued convertible promissory notes in the amount
of $537,200 to related parties and $10,000 to a non-related party
which bear interest at 6% (11% default interest rate), are due 30
months from issuance and are convertible into Series C Preferred
Stock at $1.00 per share. Because the Series C Preferred Stock has
a conversion price of $0.15 per share, the issuance of Series C
Preferred Stock promissory notes will cause a beneficial conversion
feature of approximately $38,479 upon exercise of the convertible
promissory notes.
(7) The
shareholder debt represents funds given to TPTG or subsidiaries by
officers and managers of the Company as working capital. There are
no written terms of repayment or interest that is being accrued to
these amounts and they will only be paid back, according to
management, if cash flows support it. They are classified as
current in the balance sheets.
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 arrangement in Note 9.
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 December 31, 2020, in the amount of
$5,265,139 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 December
31, 2020.
|
Debt Derivative
Liabilities
|
Balance, December
31, 2018
|
$—
|
Debt discount from
initial derivative
|
1,774,000
|
Initial fair value
of derivative liabilities
|
2,601,631
|
Change in
derivative liability from conversion of notes payable
|
(407,654)
|
Change in fair
value of derivative liabilities at end of period
|
4,868,537
|
Balance, December
31, 2019
|
$8,836,514
|
Change in
derivative liabilities from conversion of notes
payable
|
(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 at end of period – derivative
expense
|
(1,140,323)
|
Balance, December
31, 2020
|
$5,265,139
|
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 December 31, 2020, the Company marked to market the fair
value of the debt derivatives and determined a fair value of
$5,265,139 comprised of $5,229,436 from the convertible notes (Note
5) and $35,703 from the warrants (Note 8). The Company recorded a
gain from change in fair value of debt derivatives of $1,140,323
for the year ended December 31, 2020. The fair value of the
embedded derivatives was determined using Monte Carlo simulation
method based on the following assumptions: (1) dividend yield of
0%, (2) expected volatility of 190.9% to 350.8%, (3) weighted
average risk-free interest rate of 0.09% to 0.12% (4) expected life
of 0.25 to 1.4 years, and (5) the quoted market price of $0.03 for
the Company’s common stock.
See
Financing lease arrangements in Note 9.
NOTE 7 - INCOME TAXES
The
following table sets forth the components of the Company’s
income tax expense (benefit) for the years ended December 31, 2020
and 2019:
Current:
|
|
|
Federal State and
local
|
$—
|
—
|
Total
Current
|
$—
|
—
|
Deferred:
|
|
|
Federal State and
local benefit
|
$(1,705,046)
|
(2,945,915)
|
Net operating loss,
net of state tax effect
|
(60,546)
|
(107,011)
|
Meals and
entertainment
|
4,459
|
4,506
|
Stock based
expenses
|
87,706
|
124,124
|
Impairment
|
567,629
|
199,473
|
Amortization
|
153,497
|
182,411
|
Derivative
expense
|
239,468
|
--
|
Other
|
---
|
61,472
|
Change in
allowance
|
712,833
|
2,480,939
|
Total
Benefit
|
$—
|
—
|
The
following table sets forth a reconciliation of the Company’s
income tax expense (benefit) as the federal statutory rate to
recorded income tax expense (benefit) for the years ended December
31, 2020 and 2019:
|
|
|
Income tax at
Federal statutory rate
|
21%
|
21%
|
Change in valuation
allowance
|
(21%)
|
(21%)
|
Stock based
compensation
|
(0%)
|
(0%)
|
Net operating loss,
net of state tax effect
|
(1%)
|
(1%)
|
Other
|
(1%)
|
(1%)
|
Total
|
—
|
—
|
The
following table sets forth the components of the Company’s
deferred income taxes as of December 31, 2020 and
2019:
Current deferred
tax assets (liabilities):
|
|
|
Valuation
allowance
|
$—
|
—
|
Total current
deferred tax asset (liability)
|
$—
|
—
|
|
|
|
Noncurrent deferred
tax assets (liabilities):
|
|
|
Derivative (gain)
expense
|
$1,330,683
|
1,570,151
|
Intangible assets
amortization
|
956,355
|
802,857
|
Net operating loss
carry forwards
|
2,752,287
|
2,140,224
|
Stock base
compensation
|
1,743,527
|
1,655,821
|
Other
|
99,034
|
—
|
Less; Valuation
allowance
|
$(6,881,886)
|
(6,169,052)
|
Total noncurrent
deferred tax asset (liability)
|
—
|
—
|
|
|
|
Total deferred tax
asset (liability)
|
$—
|
—
|
The
Company has approximately $13,100,000 and $10,000,000 of net
operating loss carry forwards as of December 31, 2020 and 2019,
respectively, which expire in varying amounts, if unused. Because
of the change in ownership of more than 50% of the Company in
accordance with Section 382 of the IRS Code, these net operating
loss carry forwards may be significantly limited to use in future
periods.
NOTE
8 - STOCKHOLDERS' DEFICIT
Preferred
Stock
As of
December 31, 2020, we had authorized 100,000,000 shares of
Preferred Stock, of which certain shares had been designated as
Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock.
Series A Convertible Preferred Stock
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. These
shares are outstanding as of December 31, 2020.
The
Series A Preferred Stock 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 December 31, 2020. 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 December 31, 2020. 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%.
As of
December 31, 2020, there are no Series D Preferred shares
outstanding as amended.
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
December 31, 2020, we had authorized 1,000,000,000 shares of Common
Stock, of which 865,564,371 common shares are issued and
outstanding.
Common Stock Issued for Conversion of Debt
During
the year ended December 31, 2020, the Company issued 679,932,432 of
common shares for $232,430 of principal and $104,300 of interest,
resulting in a loss on conversion of $775,650. In addition, the
Company issued 1,000,000 common shares in exchange for $58,000 of
legal liabilities.
Common Stock Issued for Expenses and Liabilities
The
Company also entered into a twelve-month general consulting
agreement with a third party to provide general business advisory
services to be rendered through March 30, 2019 for 1,000,000
restricted shares of common stock and 1,000,000 options to purchase
restricted common shares at $0.10 per share for 36 months from the
time of grant. The fair value of the common shares granted was
based on the Company’s stock price of $0.155 per share, or
$155,000 of which $0 and $34,444 was expensed during the period for
the portion of service term complete as of December 31, 2020 and
2019.
In
addition, in the year ended December 31, 2020 1,000,000 shares were
issued to a consultant as a bonus for IR consulting services
performed which the Company recorded $58,000 of compensation
expense. These shares were valued at their fair value on the day
they were granted for which the Company recorded $54,000 in the
statement of operations as share-based compensation.
Subscription Payable
As of
December 31, 2020, the Company has recorded $125,052 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 for
conversion of debt
|
14,667
|
Unissued shares for
TPT MedTech consulting agreements
|
300,000
|
Unissued shares for
TPT consulting agreements
|
4,150,000
|
Shares receivable
under terminated acquisition agreement
|
(3,096,181)
|
Net
commitment
|
(1,368,486)
|
During
the years ended December 31, 2018, 16,667 of common shares were
subscribed to for a note payable on the balance sheet of $2,000.
2,000 of these shares were issued during the year ended December
31, 2020.
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.
$110,390 has been amortized into the statement of operations as of
December 31, 2020.
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 December 31, 2020, $215,500 and $75,000 has been
accrued as accounts payable in the balance sheet for Mr. Shkolnik
and Mr. Thomas, respectively. For the year ended December 31, 2020
and 2019, $236,978 and $409,688, respectively, have been expensed
under these agreements. Both the 5,000,000 and 1,000,000 shares
granted were issued during the year ended December 31, 2020 and are
no longer reflected in subscriptions payable as of December 31,
2020.
Effective
November 1, 2017, the Company entered into an agreement to acquire
Holly wood Rivera, LLC and HRS Mobile LLC (“HRS”). In
March 2018, the HRS acquisition was rescinded and 3,096,181 shares
of common stock which were issued as consideration are being
returned by the recipients. As such, as of December 31, 2020 the
shares for the HRS transaction are reflected as subscriptions
receivable based on their par value.
Common Stock Issued Subsequent to December 31, 2020
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 subsequent to December 31, 2020 and included in a Form
S-1 filed in January 2021. To date, we
understand the shares have not been sold and thus there is no
calculated shortfall as outlined above.
Stock Options
|
|
|
|
Exercise Price
Outstanding and Exercisable
|
|
December 31,
2018
|
3,093,120
|
1,954,230
|
100% at issue and
12 to 18 months
|
$0.05 to $0.22
|
|
Expired
|
(93,120)
|
|
|
$0.05 to $0.22
|
12-31-19
|
December 31,
2019
|
3,000,000
|
3,000,000
|
12 to 18
months
|
$0.10
|
|
Expired
|
(2,000,000)
|
|
|
|
|
December 31,
2020
|
1,000,000
|
1,000,000
|
12
months
|
$0.10
|
3-21-21
|
During
the year ended December 31, 2018, the Company entered into
consulting arrangements primarily for legal work and general
business support that included the issuance of stock options to
purchase 3,000,000 options to purchase common shares at $0.10 per
share. 2,000,000 of these expired. The remaining 1,000,000 are
fully vested as of December 31, 2020 but expired after year end.
The Black-Scholes options pricing model was used to value the stock
options. The inputs included the following:
(1)
|
Dividend
yield of 0%
|
(2)
|
expected
annual volatility of 307% - 311%
|
(3)
|
discount
rate of 2.2% to 2.3%
|
(4)
|
expected
life of 2 years, and
|
(5)
|
estimated
fair value of the Company’s common $0.125 to $0.155 per
share.
|
Additionally,
93,120 options expired in 2019. Expense recorded in the years ended
December 31, 2020 and 2019 was $0 and $0 related to stock options.
No further expense will be incurred to the consolidated statement
of operations for the existing stock options.
Warrants
As of
December 31, 2020, there were 3,333,333 warrants outstanding that
expire in five years or in the year ended December 31, 2024. As
part of the Convertible Promissory Notes payable – third
party issuance in Note 5, the Company issued 3,333,333 warrants to
purchase 3,333,333 common shares of the Company at 70% of the
current market price. Current market price means the average of the
three lowest trading prices for our common stock during the
ten-trading day period ending on the latest complete trading day
prior to the date of the respective exercise notice. However, if a
required registration statement, registering the underlying shares
of the Convertible Promissory Notes, is declared effective on or
before June 11, 2019 to September 11, 2019, then, while such
Registration Statement is effective, the current market price shall
mean the lowest volume weighted average price for our common stock
during the ten-trading day period ending on the last complete
trading day prior to the conversion date.
The
warrants issued were considered derivative liabilities valued at
$35,703 of the total $5,265,436 derivative liabilities as of
December 31, 2020. 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.
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
year ended December 31, 2020 is $30,536.
Other Non-Controlling Interests
InnovaQor,
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 year ended December 31, 2020 is
$16,881.
InnovaQor
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.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Accounts Payable and Accrued Expenses
Accounts
payable:
|
|
|
Related
parties (1)
|
$1,339,352
|
$1,141,213
|
General
operating
|
3,965,135
|
3,342,952
|
Accrued interest on
debt (2)
|
1,328,939
|
793,470
|
Credit card
balances
|
173,972
|
183,279
|
Accrued payroll and
other expenses
|
296,590
|
207,108
|
Taxes and fees
payable
|
641,012
|
633,357
|
Unfavorable lease
liability
|
121,140
|
242,256
|
Total
|
$7,866,140
|
$6,543,635
|
_____________
|
(1)
|
Relates
to amounts due to management and members of the Board of Directors
according to verbal and written agreements that have not been paid
as of period end.
|
|
(2)
|
Portion relating to related parties is $679,380 and $481,942 for
December 31, 2020 and 2019, 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 4.2 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
December 31, 2020, operating lease right-of-use assets and
liabilities arising from operating leases were $4,732,459 and
$5,555,674, respectively. During the year ended December 31, 2020,
cash paid for amounts included for the measurement of lease
liabilities was $2,506,924 and the Company recorded lease expense
in the amount of $2,846,068 in cost of sales.
The
Company entered into an operating lease agreement for location
rights for certain QuikLABS. The operating lease agreement start
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 starts
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 December 31, 2020.
2021
|
$2,790,694
|
2022
|
1,545,075
|
2023
|
1,002,903
|
2024
|
668,474
|
2025
|
354,398
|
Thereafter
|
93,242
|
Total operating
lease liabilities
|
6,454,785
|
Amount representing
interest
|
(899,111)
|
Total net present
value
|
$5,555,674
|
Office lease used by CEO
During
the years ended December 31, 2020 and 2019, 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 $30,000 and $30,857 in rent and
utility payments for this space for the year ended December 31,
2020 and 2019, 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
|
____________________
(1)
Included is a
Telecom Equipment Lease is with an entity owned and controlled by
shareholders of the Company and was due August 31, 2020, as
amended.
(2)
Also included are
leases under Xroads Equipment Agreements with a third party that
allows the Company to pay between $11,288 and $11,780 per month,
including interest, starting between November 16, 2020 and February
22, 2021 for eleven months with a $1 value acquisition price at the
termination of the leases.
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 a motion in response for which EMA has filed a motion to
dismiss. The Company does not believe at this time that any
negative outcome would result in more than the $593,120 it has
recorded on its balance sheet as of December 31, 2020.
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 December
31, 2020 and 2019.
Stock Contingencies
The
Company issued 7,500,000 shares of stock to Mr. Littman in
accordance with its December 28 and 29, 2020 agreements as
described in Note 8. These shares were included in a Form S-1 filed
by the Company on January 15, 2021. To date, we understand the
shares have not been sold and thus there is no calculated shortfall
as outlined in Note 8, but this may happen, which shortfall, if it
occurs, is unknown at this time.
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 December 31, 2020, the
following shares would be issued:
Convertible
Promissory Notes
|
175,316,748
|
Series A Preferred
Stock (1)
|
1,243,987,624
|
Series B Preferred
Stock
|
2,588,693
|
Stock Options and
warrants
|
4,333,333
|
|
1,426,226,398
|
_______________
(1)
Holder of the Series A Preferred Stock which is Stephen J. Thomas,
is guaranteed 60% of the then outstanding common stock upon
conversion. The Company would have to authorize additional shares
for this to occur as only 1,000,000,000 shares are currently
authorized.
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 10 – RELATED PARTY ACTIVITY
Accounts Payable and Accrued Expenses
There
are amounts outstanding due to related parties of the Company of
$1,339,352 and $1,141,213, respectively, as of December 31, 2020
and 2019 related to amounts due to employees, management and
members of the Board of Directors according to verbal and written
agreements that have not been paid as of period end which are
included in accounts payable and accrued expenses on the balance
sheet. See Note 9.
As is
mentioned in Note 8, 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 9 for office lease used by CEO.
Debt Financing and Amounts Payable
As of
December 31, 2020, there are amounts due to management/shareholders
of $93,072 included in financing arrangements, of which $88,922 is
payable from the Company to Stephen J. Thomas III, CEO of the
Company. See note 5.
Revenue Transactions and Accounts Receivable
During
the years ended December 31, 2020 and 2019, 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 $385,988 and $707,263, respectively, and had accounts receivable
outstanding as of December 31, 2020 and 2019 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 11 – GOODWILL AND INTANGIBLE ASSETS
Goodwill
and intangible assets are comprised of the following:
December 31, 2020
|
|
|
|
|
Customer
Base
|
$938,000
|
(207,771)
|
$730,229
|
3-10
|
Developed
Technology
|
4,595,600
|
(1,616,975)
|
2,978,625
|
9
|
Film
Library
|
957,000
|
(177,100)
|
779,900
|
11
|
Trademarks and
Tradenames
|
132,000
|
(26,731)
|
105,269
|
12
|
Favorable
leases
|
95,000
|
(50,880)
|
44,120
|
3
|
Other
|
76,798
|
—
|
76,798
|
|
Total intangible
assets, net
|
$6,794,398
|
(2,079,457)
|
$4,714,941
|
|
|
|
|
|
|
Goodwill
|
$768,091
|
—
|
$768,091
|
—
|
Amortization
expense was $730,940 and $548,205 for the year ended December 31,
2020 and 2019, respectively.
December 31, 2019
|
|
|
|
|
Customer
Base
|
$1,197,200
|
(364,383)
|
$832,817
|
3-10
|
Developed
Technology
|
4,595,600
|
(1,106,351)
|
3,489,249
|
9
|
Film
Library
|
957,000
|
(104,900)
|
852,100
|
11
|
Trademarks and
Tradenames
|
132,000
|
(15,123)
|
116,877
|
12
|
Favorable
leases
|
95,000
|
(16,960)
|
78,040
|
3
|
Total intangible
assets, net
|
$6,976,800
|
(2,707,717)
|
$5,369,083
|
|
|
|
|
|
|
Goodwill
|
$1,050,366
|
—
|
$1,050,366
|
—
|
Amortization
expense was $730,940 and $868,622 for year ended December 31, 2020
and 2019, respectively. Increases from the prior year are from the
acquisition of the SpeedConnect assets. See more details on this
acquisition in Note 2 to these consolidated financial statements.
During the year ended December 31, 2019, the Company’s
evaluation of goodwill and intangible assets resulted in
impairments for Copperhead Digital to goodwill of $70,995 and for
developed technology of $600,000 resulting in impairment expense of
$70,995 and $272,213, respectively. During this same period an
impairment of the developed technology intangible of $910,000 for
the Lion Phone resulted in impairment expense of $606,664. There
was no impairment considered necessary as of December 31, 2020 for
intangibles. There was, however, impairment expense of $853,366 for
Blue Collar to Goodwill during the year ended December 31,
2020.
Remaining
amortization of the intangible assets is as following for the next
five years and beyond:
2021
|
$753,779
|
2022
|
730,059
|
2023
|
719,859
|
2024
|
719,859
|
2025
|
719,859
|
Thereafter
|
1,071,526
|
|
$4,714,941
|
NOTE 12 – SEGMENT REPORTING
ASC
280, “Segment Reporting”, establishes standards for
reporting information about operating segments on a basis
consistent with the Company's internal organizational structure as
well as information about geographical areas, business segments and
major customers in financial statements for details on the
Company's business segments.
The
Company's chief operating decision maker (“CODM”) has
been identified as the CEO who reviews the financial information of
separate operating segments when making decisions about allocating
resources and assessing performance of the group. Based on
management's assessment, the Company considers its most significant
segments for 2020 and 2019 are those in which it is providing
Broadband Internet through TPT SpeedConnect and Media Production
services through Blue Collar Medical Testing services through TPT
MedTech and QuikLABs.
The
following table presents summary information by segment for the
twelve months ended December 31, 2020 and 2019,
respectively:
2020
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$9,958,770
|
$1,051,120
|
$30,484
|
$53,796
|
$11,094,170
|
Cost of
revenue
|
$(6,367,474)
|
$(437,936)
|
$(68,884)
|
$(319,199)
|
$(7,193,493)
|
Net income
(loss)
|
$983,673
|
$(166,110)
|
$(747,485)
|
$(8,189,346)
|
$(8,119,268)
|
Total
assets
|
$7,010,444
|
$370,554
|
$11,850
|
$5,443,840
|
$12,836,688
|
Depreciation and
amortization
|
$(531,254)
|
$(111,336)
|
$(3,583)
|
$(1,139,470)
|
$(1,785,643)
|
Impairment of long
lived assets and goodwill
|
$—
|
$(853,366)
|
$—
|
$(1,849,630)
|
$(2,702,996)
|
Derivative gain
(expense)
|
$—
|
$—
|
$—
|
$1,140,323
|
$1,140,323
|
Interest
expense
|
$(242,693)
|
$(36,507)
|
$(800)
|
$(1,251,733)
|
$(1,531,733)
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$8,002,875
|
$1,941,955
|
$—
|
$267,547
|
$10,212,377
|
Cost of
revenue
|
$(4,879,444)
|
$(751,349)
|
$—
|
$(281,208)
|
$(5,912,001)
|
Net income
(loss)
|
$1,124,210
|
$428,758
|
$—
|
$(15,581,133)
|
$(14,028,165)
|
Total
assets
|
$8,003,380
|
$476,268
|
$—
|
$6,974,105
|
$15,453,753
|
Depreciation and
amortization
|
$(282,449)
|
$(20,563)
|
$—
|
$(1,156,679)
|
$(1,459,691)
|
Impairment of long
lived assets and goodwill
|
$—
|
$—
|
$—
|
$(949,872)
|
$(949,872)
|
Derivative
expense
|
$—
|
$—
|
$—
|
$(7,476,908)
|
$(7,476,908)
|
Interest
expense
|
$—
|
$(119,359)
|
$—
|
$(3,461,661)
|
$(3,581,020)
|
NOTE 13 – SUBSEQUENT EVENTS
Stock Issuance
The
Company issued 7,500,000 shares of stock to Mr. Littman in
accordance with its December 28 and 29, 2020 agreements as
described in Note 8. These shares were included in a Form S-1 filed
by the Company on January 15, 2021. To date, we understand the
shares have not been sold and thus there is no calculated shortfall
as outlined in Note 8.
On
April 5, the Company granted 1,500,000 restricted commons shares to
a consultant as a bonus for services rendered. The Company will
record $44,100 as expense in the statement of operations during the
year ended December 31, 2021 represented the calculation fair value
on the date of grant.
COVID-19
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.
Rennova Acquisition Agreement
Rennova
terminated the Rennova Acquisition Agreement described in Note 2
effective March 5, 2021 and the Company agreed to this termination
with both parties not able to come to agreement of final
terms.
InnovaQor
InnovaQor
changed its name to TPT Strategic, Inc. on March 21, 2021. On March
30, 2021, a License Agreement, originally signed between the
Company and InnovaQor for software development, was rescinded and
the issuance of 6,000,000 shares of common stock to the Company
were cancelled.
On
April 5, 2021, the Board of Directors granted 1,500,000 restricted
common shares of the Company to a consultant as a bonus for past
services. This grant was valued by the Company at $44,100 and will
be expensed in the year ending December 31, 2021.
Subsequent
events were reviewed through the date the financial statements were
issued.
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our
audited financial statements and notes thereto included herein. In
connection with, and because we desire to take advantage of, the
"safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, we caution readers regarding certain
forward-looking statements in the following discussion and
elsewhere in this report and in any other statement made by, or on
our behalf, whether or not in future filings with the Securities
and Exchange Commission. Forward-looking statements are statements
not based on historical information and which relate to future
operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and
assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of
which are beyond our control and many of which, with respect to
future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could
cause actual results to differ materially from those expressed in
any forward-looking statements made by, or on our behalf. We
disclaim any obligation to update forward-looking
statements.
We
generate revenues primarily through telecommunications and Internet
services and as a provider of ecommerce and cloud solutions in the
western United States.
Our
plan of operations for the next 12 months is as
follows:
Estimate of Liquidity and Capital Resource Needs
Equipment purchase
and manufacturing
|
$14,000,000
|
Product
advancement
|
2,250,000
|
Acquisitions
|
500,000
|
Debt
Restructuring
|
7,300,000
|
Working capital,
including marketing
|
10,710,000
|
Brokerage
commissions
|
3,040,000
|
Offering
expenses
|
200,000
|
|
$38,000,000
|
Although
the items set forth above indicate management’s present
estimate of our liquidity and capital resource needs, we may have difference needs or utilize
corporate liquidity and capital resources for other corporate
purposes. Our actual use of liquidity and capital resources
may vary from these estimates because of a number of factors,
including whether we are successful in completing future
acquisitions, whether we obtain additional funding, what other
obligations have been incurred by us, the operating results of our
initial acquisition activities, and whether we are able to operate
profitably. If our need for liquidity and capital resources
increases, we may seek additional funds through any financing
opportunity available to us. There are no current commitments for
any such financing opportunity, and there can be no assurance that
these funds may be obtained in the future if the need
arises.
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2021 Compared to the Three
Months Ended March 31,2020
During
the three months ended March 31, 2021, we recognized total revenues
of $2,712,350 compared to the prior period of $3,075,973. The
decrease is largely attributable to the decrease in internet
customers from attrition.
Gross
profit for the three months ended March 31, 2021 was $550,696
compared to $769,485 for the prior period. The decrease of $218,789
is largely attributable to the decrease in internet customer from
attrition, which attrition was the primary factor in the reduction
in the profit margin for the period as compared to the prior
period.
During
the three months ended March 31, 2021, we recognized $2,085,170 in
operating expenses compared to $1,723,379 for the prior period. The
increase of $361,791 was in large part attributable to increased
payroll and professional fees from our TPT MedTech
activities.
Derivative
gain of $185,275 and derivative expense of $3,896,672 results from
the accounting for derivative financial instruments during the
three months ended March 31, 2021 and 2020,
respectively.
Interest
expense decreased for the three months ended March 31, 2021
compared to the prior period by $155,878. The decrease is largely
from the derivative debt being in default of the increased penalty
amounts that were accounted for in the prior period versus this
period.
During
the three months ended March 31, 2021, we recognized a net loss of
$1,740,078 compared to $5,966,198 for the prior period. The
difference of $4,226,120 was primarily due to the reasons described
above.
For the Year Ended December 31, 2020 Compared to the Year Ended
December 31, 2019
During
the year ended December 31, 2020, we recognized total revenues of
$11,094,170 compared to the prior period of $10,212,377. The
increase was a result of the acquisition of a majority of the
assets of SpeedConnect in May of 2019.
Gross
profit (loss) for the year ended December 31, 2020 was $3,900,677
compared to $4,300,376 for the prior period. The decrease was due
primarily to a decrease in the gross profit from Blue Collar. Blue
Collar’s operations were severally restricted from the
effects of COVID-19 during 2020.
During
the year ended December 31, 2020, we recognized $12,105,016 in
expenses compared to $7,409,428 for the prior period. The increase
was a result of the acquisition of a majority of the assets of
SpeedConnect in May of 2019, 1,000,000 of research and development
expense, and $2,702,996 of impairment expense in 2020.
Derivative
gain of $1,140,323 compared to derivative expense of $7,476,908 for
2019 resulted from the accounting for derivative financial
instruments.
Interest
expense decreased for the year ended December 31, 2020 compared to
the prior period by $2,049,287. The decrease is largely from the
derivative debt being in default of the increased penalty amounts
that were accounted for in the prior period versus this
period.
During
the year ended December 31, 2020, we recognized a net loss of
$8,119,268 compared to $14,028,165 for the prior period. The
increase in the loss of $6,762,263 was in large part a result of
derivative expense of $7,476,908 in 2019 versus a derivative gain
of $1,140,323 in 2020, higher interest expense of $3,581,020 versus
$1,531,733 in 2020 from the convertible promissory notes and
impairment expense of $2,702,996, in 2020 versus $949,872 for the
prior year.
LIQUIDITY
AND CAPITAL RESOURCES
Cash
flows generated from operating activities were not enough to
support all working capital requirements for the three months ended
March 31, 2021 and 2020. Financing activities described below have
helped with working capital and other capital
requirements.
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, 2020, 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.
On May
28, 2021, the Company entered into a Common Stock Purchase
Agreement (“Purchase Agreement”) and Registration
Rights Agreement (“Registration Rights Agreement”) with
White Lion Capital, LLC, a Nevada limited liability company
(“White Lion”). Under the terms of the Purchase
Agreement, White Lion agreed to provide the Company with up to
$5,000,000 upon effectiveness of a registration statement on Form
S-1 (the “Registration Statement”) filed with the U.S.
Securities and Exchange Commission (the “Commission”).
A Form S-1 was filed on June 30, 2021 regarding this transaction.
Subsequent Amendments to Forms S-1 related to this transaction were
filed on July 6, 2021 and July 14, 2021.
Following
effectiveness of that Registration Statement, the Company has the
discretion to deliver purchase notice to White Lion and White Lion
will be obligated to purchase shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”)
based on the investment amount specified in each purchase notice.
The maximum amount of the Purchase Notice shall be the lesser of: (i) 200% of the Average Daily
Trading Volume or (ii) the Investment Limit divided by the highest
closing price of the Common Stock over the most recent five (5)
Business Days including the respective Purchase Date.
Notwithstanding the forgoing, the Investor may waive the Purchase
Notice Limit at any time to allow the Investor to purchase
additional shares under a Purchase Notice. Pursuant to the
Purchase Agreement, White Lion and its affiliates will not be
permitted to purchase and the Company may not put shares of the
Company’s Common Stock to White Lion that would result in
White Lion’s beneficial ownership equaling more than 9.99% of
the Company’s outstanding Common Stock. The price of each
purchase share shall be equal to eighty-five percent (85%) of the
Market Price (as defined in the Purchase Agreement). Purchase
Notices may be delivered by the Company to White Lion until the
earlier of seven (7) months (until December 31, 2021) or the date
on which White Lion has purchased an aggregate of $5,000,000 worth
of Common Stock under the terms of the Purchase
Agreement.
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.
LIQUIDITY
AND CAPITAL RESOURCES for the years ended December 31, 2020 and
2019
Cash
flows generated from operating activities were not enough to
support all working capital requirements for the years ended
December 31, 2020 and 2019. Financing activities described below
have helped with working capital and other capital
requirements.
We
incurred $8,119,268 and $14,028,165, respectively, in losses, and
we used $489,573 and $328,251, respectively, in cash for operations
for the years ended December 31, 2020 and 2019. 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 $5,378,277 for 2020 and $13,091,764 for 2019.
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 year ended December 31, 2020, we had a net
increase in our assets and liabilities of $2,251,418 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 year ended
December 31, 2019 we had a net increase to our assets and
liabilities of $608,150 for similar reasons.
Cash
flows from financing activities were $817,608 and $1,390,538 for
the years ended December 31, 2020 and 2019, respectively. For the
year ended December 30, 2020, these cash flows were generated
primarily from proceeds from proceeds from sale of non-controlling
interests in QuikLABS of $460,000, proceeds from convertible notes,
loans and advances of $1,753,204 offset by payment on convertible
loans, advances and factoring agreements of $1,169,330 and payments
on convertible notes and amounts payable – related parties of
$212,256. For the year ended December 31, 2019, cash flows from
financing activities primarily came from proceeds from convertible
notes, loans and advances of $2,613,047 offset by payments on
convertible loans, advances and factoring agreements of
$1,440,139.
Cash
flows used in investing activities were $500,898 and $901,901,
respectively, for the years ended December 31, 2020 and 2019. For
the year ended December 31, 2020 these cash flows were used
primarily for the acquisition of property and equipment of $424,560
and the purchase of intangibles of $76,798. For the year ended
December 31, 2019 cash flows for investing activities were used to
acquire property and equipment and the payment for business
acquisitions.
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.
Ongoing Assessment of the Impact of COVID-19
Companies have undertaken and are generally in the process of
making a diverse range of operational adjustments in response to
the effects of COVID-19. These adjustments are numerous and include
a transition to telework; supply chain and distribution
adjustments; and suspending or modifying certain operations to
comply with health and safety guidelines to protect employees,
contractors, and customers, including in connection with a
transition back to the workplace. These types of adjustments may
have an effect on a company that would be material to an investment
or voting decision and affected companies should carefully consider
their obligations to disclose this information to investors.
Companies also are undertaking a diverse and sometimes complex
range of financing activities in response to the effects of
COVID-19 on their businesses and markets. These activities may
involve obtaining and utilizing credit facilities, accessing public
and private markets, implementing supplier finance programs, and
negotiating new or modified customer payment terms. The SEC has
required a discussion of COVID-19 related considerations, specific
facts and circumstances and make disclosures to address the
following questions;
●
What
are the material operational challenges that management and the
Board of Directors are monitoring and evaluating?
●
We
have been challenged by the gathering restrictions under state and
local rules and lack of events due to cancellation specifically
related to our Blue Collar operations.
●
How
and to what extent have you altered your operations, such as
implementing health and safety policies for employees, contractors,
and customers, to deal with these challenges, including challenges
related to employees returning to the workplace?
●
We
have allowed our employees to work from home and are using contract
service providers where appropriate. Blue Collar was completely
shut down for a period of time but has implemented health and
safety policies for employees, contractors and customers to be able
to resume some of their operations.
●
How
are the changes impacting or reasonably likely to impact your
financial condition and short- and long-term
liquidity?
●
The
changes have impaired our Blue Collar operations significantly in
the prior year but which operations are rebounding in
2021.
●
How
is your overall liquidity position and outlook
evolving?
●
We
have raised limited funds to help our liquidity position but hope
our outlook is bright primarily through a pending private placement
and current discussions with other funding
opportunities.
●
To
the extent COVID-19 is adversely impacting your revenues, consider
whether such impacts are material to your sources and uses of
funds, as well as the materiality of any assumptions you make about
the magnitude and duration of COVID-19’s impact on your
revenues. Are any decreases in cash flow from operations having a
material impact on your liquidity position and
outlook?
●
COVID-19
reduced our historical revenues in 2020. The bans on events and
gatherings were very material to our Blue Collar operations. Blue
Collar in 2021 is rebounding from those declines.
●
Have
you accessed revolving lines of credit or raised capital in the
public or private markets to address your liquidity
needs?
●
We
have raised some limited funds through private sources but have
mainly relied on PPP funding and cash flows from those parts of our
business with positive cash flows.
●
Have
COVID-19 related impacts affected your ability to access your
traditional funding sources on the same or reasonably similar terms
as were available to you in recent periods?
●
Have
you provided additional collateral, guarantees, or equity to obtain
funding?
●
Have
there been material changes in your cost of capital?
●
How
has a change, or a potential change, to your credit rating impacted
your ability to access funding?
●
Do your
financing arrangements contain terms that limit your ability to
obtain additional funding? If so, is the uncertainty of additional
funding reasonably likely to result in your liquidity decreasing in
a way that would result in you being unable to maintain current
operations?
●
Are
you at material risk of not meeting covenants in your credit and
other agreements?
●
If
you include metrics, such as cash burn rate or daily cash use, in
your disclosures, are you providing a clear definition of the
metric and explaining how management uses the metric in managing or
monitoring liquidity?
●
Are
there estimates or assumptions underlying such metrics the
disclosure of which is necessary for the metric not to be
misleading?
●
Have
you reduced your capital expenditures and if so, how?
●
Have
you reduced or suspended share repurchase programs or dividend
payments?
●
Have
you ceased any material business operations or disposed of a
material asset or line of business?
●
Have
you materially reduced or increased your human capital resource
expenditures?
●
Yes,
we have reduced staff for Blue Collar and are using more
contractors for current work.
●
Are
any of these measures temporary in nature, and if so, how long do
you expect to maintain them?
●
These
measures were temporary and are starting to be
changed.
●
What
factors will you consider in deciding to extend or curtail these
measures?
●
Gathering
are starting to open up and allow operations as
before.
●
What
is the short- and long-term impact of these reductions on your
ability to generate revenues and meet existing and future financial
obligations?
●
There
is no impact of these reductions upon our ability to generate
revenues or meet financial obligations.
●
Are
you able to timely service your debt and other
obligations?
●
Yes,
for most debt instruments.
●
Have
you taken advantage of available payment deferrals, forbearance
periods, or other concessions? What are those concessions and how
long will they last?
●
Do you foresee any liquidity challenges once those
accommodations end?
●
Possibly,
if creditors demand all deferrals at once rather than payment over
time as indicated.
●
Have
you altered terms with your customers, such as extended payment
terms or refund periods, and if so, how have those actions
materially affected your financial condition or
liquidity?
●
We
have not altered terms with customers.
●
Did
you provide concessions or modify terms of arrangements as a
landlord or lender that will have a material impact?
●
Have
you modified other contractual arrangements in response to COVID-19
in such a way that the revised terms may materially impact your
financial condition, liquidity, and capital resources?
●
Possibly,
if creditors demand all deferrals at once rather than payment over
time as indicated.
●
Are
you relying on supplier finance programs, otherwise referred to as
supply chain financing, structured trade payables, reverse
factoring, or vendor financing, to manage your cash
flow?
●
Have
these arrangements had a material impact on your balance sheet,
statement of cash flows, or short- and long-term liquidity and if
so, how?
●
What
are the material terms of the arrangements?
●
Most
vendors situations now provide up to 30 days terms; but a good
portion has now returned to normal payment terms.
●
Did
you or any of your subsidiaries provide guarantees related to these
programs?
●
Do
you face a material risk if a party to the arrangement terminates
it?
●
What
amounts payable at the end of the period relate to these
arrangements, and what portion of these amounts has an intermediary
already settled for you?
●
There
have been no settlements. Most related to up to 30 days with
telecommunications vendors and payments are being included in
planned cash flows.
●
Have
you assessed the impact material events that occurred after the end
of the reporting period, but before the financial statements were
issued, have had or are reasonably likely to have on your liquidity
and capital resources and considered whether disclosure of
subsequent events in the financial statements and known trends or
uncertainties in MD&A is required?
●
There are no material events occurring after the
end of the reporting period but before financial statements were
issued which would have any affect on liquidity or capital
resources and there are no new
trends or uncertainties needed to be
disclosed.
Government Assistance – The Coronavirus Aid, Relief, and
Economic Security Act (CARES Act)
The CARES Act includes financial assistance for companies in the
form of loans and tax relief in the form of deferred or
reduced payments and potential refunds. Companies receiving
federal assistance must consider the short- and long-term impact of
that assistance on their financial condition, results of
operations, liquidity, and capital resources, as well as the
related disclosures and critical accounting estimates and
assumptions. We have not received any financial assistance from the
banks or any government agency.
●
How
does a loan impact your financial condition, liquidity and capital
resources?
●
We
have no government loans, except PPP loans that we anticipate will
be forgiven.
●
What
are the material terms and conditions of any assistance you
received, and do you anticipate being able to comply with
them?
●
PPP
loans only and we anticipate forgiveness.
●
Do
those terms and conditions limit your ability to seek other sources
of financing or affect your cost of capital?
●
Do
you reasonably expect restrictions, such as maintaining certain
employment levels, to have a material impact on your revenues or
income from continuing operations or to cause a material change in
the relationship between costs and revenues?
●
Once
any such restrictions lapse, do you expect to change your
operations in a material way?
●
Are
you taking advantage of any recent tax relief, and if so, how does
that relief impact your short- and long-term
liquidity?
●
We
are using payroll tax deferrals allowed by the tax relief
programs.
●
Do
you expect a material tax refund for prior periods?
●
Does
the assistance involve new material accounting estimates or
judgments that should be disclosed or materially change a prior
critical accounting estimate?
●
What
accounting estimates were made, such as the probability a loan will
be forgiven, and what uncertainties are involved in applying the
related accounting guidance?
●
We
anticipate forgiveness of our PPP loans but have disclosed them as
loans through March 31, 2021.
A Company’s Ability to Continue as a Going
Concern
The SEC has advised that Management should consider whether
conditions and events, taken as a whole, raise substantial doubt
about the company’s ability to meet its obligations as they
become due within one year after the issuance of the financial
statements. There is substantial doubt about a company’s
ability to continue as a going concern due to continuation of the
COVID-19 pandemic and we make the following
disclosure:
●
Are
there conditions and events that give rise to the substantial doubt
about the company’s ability to continue as a going
concern?
●
Yes.
There was concern about our ability to continue as a going concern
prior to COVID 19, however the continuation of COVID-19
restrictions may hamper Blue Collar from operating and generating
revenues at full capacity.
●
For
example, have you defaulted on outstanding
obligations?
●
Yes,
but not because of COVID-19.
●
Have
you faced labor challenges or a work stoppage?
●
What
are your plans to address these challenges?
●
At
the point of allowing full operations for Blue Collar and film
production companies to fully operate will be the complete
turnaround for these revenues.
●
Have
you implemented any portion of those plans?
●
No,
it’s a matter of allowing Blue Collar to fully operate and
trying to raise money and fund operational plans.
(REMAINDER
OF PAGE LEFT BLANK INTENTIONALLY)
Financing
arrangements as of March 31, 2021 and December 31, 2020 are as
follows:
|
|
|
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.
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.
CRITICAL ACCOUNTING POLICIES
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 have not been
considered material to our consolidated statements of
income. 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.
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. 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. 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.
Share-based
Compensation
The
Company is required to measure and recognize compensation expense
for all share-based payment awards (including stock options) made
to employees and directors based on estimated fair value.
Compensation expense for equity-classified awards is measured at
the grant date based on the fair value of the award and is
recognized as an expense in earnings over the requisite service
period.
The
Company records compensation expense related to non-employees that
are awarded stock in conjunction with selling goods or services and
recognizes compensation expenses over the vesting period of such
awards.
Income Taxes
Deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
our income tax provision in the period of enactment.
We
recognize deferred tax assets to the extent that we believe that
these assets are more likely than not to be realized. In making
such a determination, we consider all available positive and
negative evidence, including future reversal of existing taxable
temporary differences, projected future taxable income,
tax-planning strategies, and results of recent operations,
including taxable income in carryback periods. If we determine that
we would be able to realize our deferred tax assets in the future
in excess of their net recorded amount, we would make an adjustment
to the deferred tax asset valuation allowance, which would reduce
our income tax provision.
We
account for uncertain tax positions using a
“more-likely-than-not” recognition threshold. We
evaluate uncertain tax positions on a quarterly basis and consider
various factors, including, but not limited to, changes in tax law,
the measurement of tax positions taken or expected to be taken in
tax returns, the effective settlement of matters subject to audit,
new audit activity and changes in facts or circumstances related to
a tax position.
It is
our policy to record costs associated with interest and penalties
related to tax in the selling, general and administrative line of
the consolidated statements of operations.
Cash and Cash Equivalents
The
Company considers all investments with a maturity date of three
months or less when purchased to be cash equivalents.
Accounts Receivable
We
establish an allowance for potential uncollectible accounts
receivable. All accounts receivable 60 days past due are considered
uncollectible unless there are circumstances that support
collectability. Those circumstances are documented.
Property and Equipment
Property
and equipment are stated at cost or fair value if acquired as part
of a business combination. Depreciation is computed by the
straight-line method and is charged to operations over the
estimated useful lives of the assets. Maintenance and repairs are
charged to expense as incurred. The carrying amount of accumulated
depreciation of assets sold or retired are removed from the
accounts in the year of disposal and any resulting gain or loss in
s included in results of operations. The estimated useful lives of
property and equipment are telecommunications network - 5 years,
telecommunications equipment - 7 to 10 years, and computers and
office equipment - 3 years.
Goodwill
Goodwill
relates to amounts that arose in connection with our various
business combinations and represents the difference between the
purchase price and the fair value of the identifiable tangible and
intangible net assets when accounted for using the acquisition
method of accounting. Goodwill is not amortized, but it is subject
to periodic review for impairment.
We test goodwill balances for impairment on an annual basis as
of December 31st
or whenever impairment indicators
arise. We utilize several reporting units in evaluating
goodwill for impairment using a quantitative assessment, which uses
a combination of a guideline public company market-based approach
and a discounted cash flow income-based approach. The quantitative
assessment considers whether the carrying amount of a reporting
unit exceeds its fair value, in which case an impairment charge is
recorded to the extent the reporting unit’s carrying value
exceeds its fair value.
Intangible Assets
Our
intangible assets consist primarily of customer relationships,
developed technology, favorable leases, trademarks and the film
library. The majority of our intangible assets were recorded in
connection with our various business combinations. Our intangible
assets are recorded at fair value at the time of their acquisition.
Intangible assets are amortized over
their estimated useful life on a straight-line basis. Estimated
useful lives are determined considering the period the assets are
expected to contribute to future cash flows. We evaluate the
recoverability of our intangible assets periodically and take into
account events or circumstances that warrant revised estimates of
useful lives or that indicate impairment
exists.
Business Acquisitions
Our
business acquisitions have historically been made at prices above
the fair value of the assets acquired and liabilities assumed,
resulting in goodwill or some identifiable intangible asset.
Significant judgment is required in estimating the fair value of
intangible assets and in assigning their respective useful lives.
The fair value estimates are based on available historical
information and on future expectations and assumptions deemed
reasonable by management but are inherently uncertain.
We
generally employ the income method to estimate the fair value of
intangible assets, which is based on forecasts of the expected
future cash flows attributable to the respective assets.
Significant estimates and assumptions inherent in the valuations
reflect a consideration of other marketplace participants and
include the amount and timing of future cash flows (including
expected growth rates and profitability), the underlying product
life cycles, economic barriers to entry, a brand’s relative
market position and the discount rate applied to the cash flows.
Unanticipated market or macroeconomic events and circumstances may
occur, which could affect the accuracy or validity of the estimates
and assumptions.
Net
assets acquired are recorded at their fair value and are subject to
adjustment upon finalization of the fair value analysis.
Long-Lived Assets
We periodically review the carrying amount of our depreciable
long-lived assets for impairment which include property and
equipment and intangible assets. An asset is considered
impaired when estimated future cash flows are less than the
carrying amount of the asset. In the event the carrying amount
of such asset is not considered recoverable, the asset is adjusted
to its fair value. Fair value is generally determined based on
discounted future cash flow.
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 and convertible preferred stock using the
if-converted method. 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.
Concentration of Credit Risk, Off-Balance Sheet Risks and Other
Risks and Uncertainties
Financial
instruments that potentially subject us to concentration of credit
risk primarily consist of cash and cash equivalents and accounts
receivable. We invest our excess cash primarily in high quality
securities and limit the amount of our credit exposure to any one
financial institution. We do not require collateral or other
securities to support customer receivables; however, we perform
on-going credit evaluations of our customers and maintain
allowances for potential credit losses.
Financial Instruments and Fair Value of Financial
Instruments
Our
primary financial instruments consist of cash equivalents, accounts
receivable, accounts payable and debt. 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.
Research and Development
Our
research and development programs focus on telecommunications
products and services. Research and development costs are expensed
as incurred. Any payments received from external parties to fund
our research and development activities reduce the recorded
research and development expenses.
Advertising Costs
Advertising
costs are expensed as incurred.
Use of Estimates
The
preparation of financial statements in conformity with United
States generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ materially from those
estimates. The Company’s consolidated financial statements
reflect all adjustments that management believes are necessary for
the fair presentation of their financial condition and results of
operations for the periods presented.
Derivative Financial Instruments
Derivative
financial instruments, as defined in ASC 815, “Accounting for
Derivative Financial Instruments and Hedging Activities”,
consist of financial instruments or other contracts that contain a
notional amount and one or more underlying (e.g. interest rate,
security price or other variable), require no initial net
investment and permit net settlement. Derivative financial
instruments may be free-standing or embedded in other financial
instruments. Further, derivative financial instruments are
initially, and subsequently, measured at fair value and recorded as
liabilities or, in rare instances, assets.
The
Company does not use derivative financial instruments to hedge
exposures to cash-flow, market or foreign-currency risks. However,
the Company had issued financial instruments including convertible
promissory notes payable with features during 2019 that were either
(i) not afforded equity classification, (ii) embody risks not
clearly and closely related to host contracts, or (iii) may be
net-cash settled by the counterparty. As required by ASC 815, in
certain instances, these instruments are required to be carried as
derivative liabilities, at fair value, in our financial
statements.
The
Company estimates the fair values of derivative financial
instruments using the Monte Carlo model. Estimating fair values of
derivative financial instruments requires the development of
significant and subjective estimates (such as volatility, estimated
life and interest rates) that may, and are likely to, change over
the duration of the instrument with related changes in internal and
external market factors. In addition, option-based techniques are
highly volatile and sensitive to changes in the trading market
price of our common stock, which has a high-historical volatility.
Since derivative financial instruments are initially and
subsequently carried at fair values, the Company’s operating
results will reflect the volatility in these estimate and
assumption changes.
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.
COVID-19
In December 2019, COVID-19 emerged and has subsequently spread
worldwide. The World Health Organization has declared COVID-19 a
pandemic resulting in federal, state and local governments and
private entities mandating various restrictions, including travel
restrictions, restrictions on public gatherings, stay at home
orders and advisories and quarantining of people who may have been
exposed to the virus. After close monitoring and responses and
guidance from federal, state and local governments, in an effort to
mitigate the spread of COVID-19, around March 18, 2020 for an
indefinite period of time, the Company closed its Blue Collar
office in Las Angeles and its TPT SpeedConnect offices in Michigan,
Idaho and Arizona. Most employees are working remotely,
however this is not possible with certain employees and all
subcontractors that work for Blue Collar. The Company continues to
monitor developments, including government requirements and
recommendations at the national, state, and local level to evaluate
possible extensions to all or part of such closures.
The Company has taken advantage of the stimulus offerings and
received $722,200 in April 2020 and $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 $722,200 of this amount. The forgiveness
process to 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 decrease significantly because of
the COVID-19 closures.
As the COVID-19 pandemic is complex and rapidly evolving, the
Company's plans as described above may change. At this point, we
cannot reasonably estimate the duration and severity of this
pandemic, which could have a material adverse impact on our
business, results of operations, financial position and cash
flows.
i. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not
applicable.
j. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Not
applicable.
k. DIRECTORS and EXECUTIVE
OFFICERS
Name
|
|
Position
|
Term
|
Stephen J. Thomas,
III
|
57
|
President, Chief
Executive Officer and Chairman of the Board
|
Annual
|
Richard
Eberhardt
|
63
|
Chief Operating
Officer and Director
|
Annual
|
Arkady
Shkolnik
|
57
|
Director
|
Annual
|
Reginald
Thomas
|
56
|
Director
|
Annual
|
Gary
Cook
|
63
|
Chief Financial
Officer
|
Annual
|
Stephen J. Thomas, III – President, Chief Executive Officer
and Chairman of the Board
Mr.
Thomas was appointed President, CEO and Chairman of the Board of
TPT Global Tech, Inc. on August 11, 2014. Previously, Mr. Thomas
was Manager of TPT Group, LLC (2015-2017) and Director of TPT
Group, Inc. (2011-2014). Mr. Thomas was founder, CEO and Director
of Trans Pacific Telecom, Inc. from 2000-2011 and prior to that was
president and CEO of New Orbit Communications (1999-2001). In 2002,
as CEO of Trans Pacific Telecom Group, Mr. Thomas was featured on
CBS MarketWatch for winning “Product of the Year Award for
2002” VIVOware at the Internet Telephony Conference and Expo
an event focused on voice, video, fax and data convergence. During
his employment with New Orbit, Mr. Thomas worked extensively
throughout Latin America, gaining extensive expertise and resources
in the international telecom marketplace. Mr. Thomas has also
served as Director of Network Optimization/Validation for
WorldxChange Communications, one of the largest privately held
facilities-based telecommunications company with headquarters in
San Diego, California and international operations all over the
globe. His responsibilities included Cost Assurance for expenses.
As a matter of disclosure, in 2005 Mr. Thomas was an ISP equipment
provider to Access Point Africa (“APA”). APA allowed
its license to expire in Sierra Leone, and as a result APA and
several individuals were alleged to have violated the Sierra Leone
Telecommunications Act by operating an unlicensed internet access
point. Mr. Thomas was charged as well as for the offense which
bears a fine of up to $3,000 but the charge is unresolved at this
time, but he intends to resolve it in the next several
months.
Mr.
Thomas attended Northeastern University majoring in Finance and
Management (1984 to 1987).
Richard Eberhardt- Chief Operating Officer and
Director
Mr.
Eberhardt was appointed Executive Vice-President and Director of
TPT Global Tech, Inc. on October 10, 2014. Mr. Eberhardt resigned
as Executive Vice-President on December 15, 2020 and was
simultaneously appointed as Chief Operating Officer. Mr. Eberhardt
also serves as Chief Executive Officer of Copperhead Digital
Holdings, LLC, a wholly-owned subsidiary of TPT Global, Inc.
Previously, Mr. Eberhardt served CEO/COO of Pacific Bio Medical, a
Durable Medical Equipment provider, located in Phoenix, Arizona
(2008-2012). From 2012-2015, Mr. Eberhardt served as Consultant and
Sales Director for two telecommunications companies, Fathom Voice
and Ipitomy located in Indiana and Florida, respectively. Founding
member of a telecommunications firm, WorldxChange, located in San
Diego, CA. (1989-2001) With WorldxChange, he researched, designed,
and implemented start-up business sales and marketing models
resulting in wholesale, commercial, and consumer revenue channels.
He opened and operated offices in approximately 23 countries. He
created and managed channels with 25K+ agents and $15M in monthly
revenue.
We
believe his management experience is valuable to our company
because he is an experienced sales and business development
executive with strong business acumen and more than thirty years of
experience leading sales and marketing operations. He has managed
growth and revenue expansion through effective management of
accounts and consultative sales approach that aligns the interests
of all parties.
He has
sought, and negotiated, partnerships and asset management
agreements across multiple channels, including wholesale telecom
providers (AT&T, Verizon, Global Crossing, and Worldcom). He
has managed structured methodologies that combined strengths of
marketing, sales, and operations to reduce redundancies, improve
order-processing times, and streamline business flow. He has
experience in reviving product lines with rebranding and
repackaging, as well as created communications bundles, and
incentive programs to maximize existing client penetration and
drive vertical growth.
Arkady Shkolnik – Director
Mr.
Shkolnik was appointed a Director of TPT Global Tech, Inc. on
August 15, 2018. Mr. Shkolnik has over 25 years of senior-level
management experience in the Semiconductor, Wireless and
Telecommunications industry. He is currently VP EMEA of Sales with
Qualcomm (2010 – present). In addition to being a leader at
Qualcom, Mr. Shkolnik served on the Board of Advisors at Zeevo
Technology, Inc, (2009 to 2012) leading up to their acquisition by
Broadcom and brings extensive experience in global business
development, sales, marketing, product management and strategic
account management to TPT Global’s already diverse board.
From 2006 until 2010, Mr. Shkolnik was Vice President, EMEA Sales
& Business Development of PacketVideo Corporation. Previous
experience includes Executive Vice President, Sales & Business
Development of Quorum Systems (2005-2006), Vice President, Sales
& Business Development of Broadcom (acquired by Widcomm) from
2000-2005, and Director of Sales, North America Wireless ASIC
Business Unit at Philips Semiconductors/VLSI Technology from
1991-2000.
Mr.
Shkolnik has developed and managed strategic OEM and semiconductor
relationships globally. Aligning sales and marketing functions with
corporate objectives, he has negotiated and secured over ~100
License, Technology and CSA agreements with customers such as
Samsung, LG, Sony, Panasonic, HTC, BlackBerry, Microsoft, IBM, HP,
Dell, Compaq, Logitech, TDK, Acer, TI, Philips, STM, Broadcom, CSR,
Toyota, Panasonic, ZTE, and others.
Mr.
Shkolnik attended Temple University where he received a Bachelor of
Applied Science (B.A.Sc.), Electrical and Electronics Engineering
Skills & Endorsements (1984).
Reginald Thomas – Director
Mr.
Thomas was appointed a Director of TPT Global Tech, Inc. on August
15, 2018. He has over 20 years of experience working for technology
companies where he is an accomplished business leader driving world
class customer and partner experiences though the delivery of
innovative software products and solutions for leading global
companies. Specific results include:
Cisco:
(July 2018 - present) As Partner Delivery Executive he supports 3
of Cisco’s largest Multi National Partners- IBM US IBM
Canada, and Presidio. He aligned these Partners go to market
strategy with Cisco’s shifting business strategy to influence
more than $15M in services sales in the last 14
months.
Cisco:
(2007 - 2017) As the Sr. Product Manager he owned Cisco’s
Services Portal strategy, the UX Strategy, the build, and adoption
of Cisco’s Services Portal. Under his direction it grew from
2 to 24 integrated service offers delivering a seamless customer
and partner experience.
Openwave: (2001 -
2007) IT Director of Program Management- through his leadership he
designed the foundation for the Program Management Office that
managed the upgrades to mission critical databases requiring the
management of highly technical resources; multiple applications
deliveries from concept to development, companywide roll outs for
ERP systems, and Merger & Acquisition
consolidation.
Lucent
/Avaya: (1997 - 2001) E- Commerce Product and Strategy Lead where
he had global responsibility for Lucent’s online Partner
Portal. He e- enabled Lucent to transition $10M of Distributor
order revenue to a seamless online experience realizing significant
savings in the cost per order.
Mr.
Thomas graduated from the University of Connecticut in 1988 with a
BS in Business.
Gary Cook – Chief Financial Officer
Mr. Cook was appointed Chief Financial Officer of TPT Global Tech,
Inc. on November 1, 2017. Mr. Cook has served as Chief Financial
Officer, Secretary or Treasurer for several small to medium size
public and private companies in various industries for over 25
years including providing Chief Financial Officer services for
several companies on a contract basis (2008-2017), in addition to
full time employment with eVision USA.com, Inc. (1996-2002),
Cognigen Networks, Inc. (2003-2008), and SolaRover, Inc.
(2009-2015). Prior to this, Mr. Cook worked in the auditing
department for KPMG in both the New Orleans, LA and Denver, CO
offices for 12 years.
His experience includes companies from start-ups to
multimillion-dollar international operating companies in the
internet marketing, software development, medical device,
alternative energy, telecommunications, securities broker/dealer,
private equity and manufacturing industries. While working with
KPMG, Mr. Cook worked in other industries such as oil & gas,
oil & gas services, cable, theatre exhibition, mining, banking,
construction and not-for-profit.
Mr.
Cook has a broad experience
in accounting, finance, human resources, legal, insurance,
contracts, banking relations, shareholder relations, internal
controls, SEC matters, financial reporting and other corporate
administrative and governance matters for both private and public
companies. Mr. Cook has held Series 7, 24, 27 and 63 licenses from
FINRA successor to the NASD.
Mr.
Cook attended and graduated from Brigham Young University between
1979 and 1982. He is a certified public accountant and licensed
with the State of Colorado.
KEY EMPLOYEES OF SUBSIDIARIES
Steve Caudle - CEO Cloud Services
Steve
Caudle has been in the technology field for 31 years and brings
significant operations and technology development experiences to
TPT Global Tech, Inc. Mr. Caudle began his career at the IBM
“Think Tank” and Fairchild/National Semiconductor
located in Silicon Valley California. Steve then moved on to work
for the Department of Defense for eighteen years and specialized in
code writing and software applications. Steve moved to the private
sector and was the Chief Information Officer (CIO) at North Face
Corporation and then moved to become the Executive VP of ZDTV
(renamed TechTV) and then became C-NET now owned by
CBS.
Robert
Haas, CEO of Levi Strauss, contracted Mr. Caudle as an executive
consultant where he was placed in charge of relocating their data
center from San Francisco, California to Dallas, Texas
(1988).
Subsequently,
Mr. Caudle joined ESST, where he was the CIO. ESST was a public
company. Steve Caudle then joined Mr. Fred Chan, CEO of ESST in
starting a new company called Vialta, Inc. Mr. Caudle was again the
CIO and the number two person in charge of Vialta. Vialta designed
DVD laser decoder chips that were used in many DVD players in the
world. Vialta grew the company from 3 employees to over 4,000 in
just five months and over $1.2 billion in revenue while he was
there.
Upon
leaving Vialta, Mr. Caudle started his own software development
company called Matrixsites. Matrixsites has developed software and
applications for a variety of companies such as Federal Express,
Wells Fargo Bank, Bank of America, Apple, Pixar, ITV Guide and
China Mobile.
Mr.
Caudle received his Bachelor of Science Degree in Electrical
Engineering from San Jose State University in 1977 and holds one
U.S. Patent.
Mark Rowen- CEO Media Division
Mark
Rowen is a seasoned executive with over 25 years in the film and
television business. In 2000, Mr. Rowen founded Blue Collar
Productions, Inc., an entity with which we entered into an
acquisition agreement in November 2017 and amended in February
2018, where he remains President today. Blue Collar is a leader in
the creation of original live action and animated content and has
produced hundreds of hours of material for the television,
theatrical, home entertainment and new media markets. Mr. Rowen
works closely with all of the major television networks, cable
channels and film studios to produce home entertainment
products.
Mr.
Rowen also works with a wide array of notable filmmakers including
Steven Spielberg, Ron Howard, Brett Ratner and James Cameron to
name a few. Mr. Rowen also has very close working relationships
with actors including Tom Hanks, Brad Pitt, Julia Roberts, Robert
Downey, Jr., Denzel Washington, Ryan Gosling, Sofia Vergara,
Mariska Hargitay and many others.
Prior
to starting Blue Collar Productions, Mr. Rowen functioned as the
head of home entertainment production for DreamWorks SKG from 1997
to 2000. He also serves as the President of Long Leash
Entertainment, an aggregator of entertainment based intellectual
property and creator of high-end entertainment
content.
Mr.
Rowen is a graduate of the University of California, Los Angeles.
He is also actively involved in charitable organizations including
Stand Up 2 Cancer,
The Joyful Heart
Foundation, Save The
Children, and other philanthropic endeavors in the
arts.
Conflicts of Interest – General.
Our
directors and officers are, or may become, in their individual
capacities, officers, directors, controlling shareholders and/or
partners of other entities engaged in a variety of non-profit and
for-profit organizations. Thus, there exist potential conflicts of
interest including, among other things, time, efforts and
corporation opportunity, involved in participation with such other
business entities.
Conflicts of Interest – Corporate Opportunities
Presently
no requirement contained in our Articles of Incorporation, Bylaws,
or minutes which requires our officers and directors to disclose
business opportunities which come to their attention. Our officers
and directors do, however, have a fiduciary duty of loyalty to us
to disclose to us any business opportunities which come to their
attention, in their capacity as an officer and/or director or
otherwise. Excluded from this duty would be opportunities which the
person learns about through his involvement as an officer and
director of another company. We have no intention of merging with
or acquiring an affiliate, associate person or business opportunity
from any affiliate or any client of any such person.
Involvement in Certain Legal Proceedings
None of our directors and executive officers has been involved in
any of the following events during the past ten years:
|
(a)
|
any
petition under the federal bankruptcy laws or any state insolvency
laws filed by or against, or an appointment of a receiver, fiscal
agent or similar officer by a court for the business or property of
such person, or any partnership in which such person was a general
partner at or within two years before the time of such filing, or
any corporation or business association of which such person was an
executive officer at or within two years before the time of such
filing;
|
|
|
|
|
(b)
|
any
conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences);
|
|
(c)
|
being
subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person
from, or otherwise limiting, the following activities: (i) acting
as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity; engaging in
any type of business practice; or (iii) engaging in any activity in
connection with the purchase or sale of any security or commodity
or in connection with any violation of federal or state securities
laws or federal commodities laws;
|
|
|
|
|
(d)
|
being
the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in
paragraph (c)(i) above, or to be associated with persons engaged in
any such activity;
|
|
|
|
|
(e)
|
being
found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission to have violated a federal or
state securities or commodities law, and the judgment in such civil
action or finding by the Securities and Exchange Commission has not
been reversed, suspended, or vacated;
|
|
|
|
|
(f)
|
Being
found by a court of competent jurisdiction in a civil action or by
the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;
|
|
|
|
|
(g)
|
being
the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of: (i) any federal or state securities or commodities
law or regulation; or (ii) any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease- and-desist order, or removal or prohibition order;
or (iii) any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or
|
|
|
|
|
(h)
|
being
the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Securities
Exchange Act of 1934), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a
member.
|
(REMAINDER
OF PAGE LEFT BLANK INTENTIONALLY)
l. EXECUTIVE AND DIRECTORS
COMPENSATION
COMPENSATION
The
following table sets forth the compensation paid to our officers
from the six months ended June 30, 2021, and for the years ended
December 31, 2020, 2019, and 2018.
SUMMARY EXECUTIVE COMPENSATION TABLE
In
Dollars
Name &
Position
|
|
Year
|
|
|
|
|
Non-equity
incentive plan compensation ($)
|
Non-qualified
deferred compensation earnings ($)
|
All other
compensation ($)
|
|
Stephen J. Thomas, III CEO and
President
|
|
2021
|
114,582
|
—
|
—
|
—
|
—
|
—
|
—
|
114,582
|
|
|
2020
|
262,083
|
—
|
—
|
—
|
—
|
—
|
—(1)
|
262,083(2)
|
|
|
2019
|
175,000
|
—
|
—
|
—
|
—
|
—
|
—(1)
|
175,000(2)
|
|
|
2018
|
98,790
|
—
|
—
|
—
|
—
|
—
|
—(1)
|
98,790(2)
|
Richard Eberhardt,
COO
|
|
2021
|
68,750
|
—
|
—
|
—
|
—
|
—
|
5,352(3)
|
74,102
|
|
|
2020
|
169,250
|
—
|
—
|
—
|
—
|
—
|
—
|
169,250(2)
|
|
|
2019
|
110,242
|
—
|
—
|
—
|
—
|
—
|
—
|
110,242(2)
|
|
|
2018
|
21,115
|
—
|
—
|
—
|
—
|
—
|
—
|
21,115(2)
|
Gary Cook, CFO
|
|
2021
|
91,667
|
—
|
—
|
—
|
—
|
—
|
—
|
91,667
|
|
|
2020
|
219,167
|
—
|
—
|
—
|
—
|
—
|
—
|
219,167(2)
|
|
|
2019
|
112,150
|
—
|
—
|
—
|
—
|
—
|
—
|
112,150(2)
|
|
|
2018
|
45,100
|
—
|
—
|
—
|
—
|
—
|
—
|
45,100(2)
|
Stacie Stricker, Secretary and
Controller (4)
|
|
2020
|
135,000
|
—
|
—
|
—
|
—
|
—
|
—
|
135,000(2)
|
|
|
2019
|
80,750
|
—
|
—
|
—
|
—
|
—
|
—
|
80,750(2)
|
|
|
2018
|
52,850
|
—
|
—
|
—
|
—
|
—
|
—
|
52,850(2)
|
___________________________
(1)
The
Company entered into a lease 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 approximately $15,000, $30,000 and $30,857 in rent
and utility payments for the six months ended June 30, 2021, and
the years ended December 31, 2020 and 2019, respectively. No
portion of the payments on this lease have been included in amounts
shown in compensation to Mr. Stephen Thomas and has approximated
$30,000 to $40,000 a year in 2015-2018.
(2)
These amounts do
not include compensation that has been accrued on the books of the
Company in accordance with employment agreements and other previous
contract work performed but has not been paid because of the lack
of cash flows. Accrued but unpaid compensation as of March 31, 2021
is as follows: Stephen J. Thomas, III - $0; Richard Eberhardt -
$171,440; and Gary Cook - $164,696.
(3)
Represents a
monthly car allowance paid by the Company.
(4)
Ms. Stricker
resigned as an employee of the Company in March 2021.
OPTION/WARRANT GRANTS IN THE LAST FISCAL YEAR
On
October 14, 2017, the Board of Directors and majority stockholders
of TPT approved the 2017 TPT Global Tech, Inc. Stock Option and
Award Incentive Plan (“the 2017 Plan.”) There are
20,000,000 shares of our common stock reserved under the 2017
Plan.
As of
March 31, 2021, there were no options outstanding to purchase
shares of common stock of the Company.
During
the year ended December 31, 2020, 3,333,333 warrants were issued to
purchase 3,333,333 shares of common stock in conjunction with
financing arrangements entered into. See Note 8 of the consolidated
financial statements.
Option/Warrant Grants In The Last Interim and Fiscal
Year
On
October 14, 2017, the Board of Directors and majority stockholders
of TPT approved the 2017 TPT Global Tech, Inc. Stock Option and
Award Incentive Plan (“the 2017 Plan.”) There are
20,000,000 shares of our common stock reserved under the 2017
Plan.
As of June 30, 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.
Outstanding Equity Awards At Interim and Fiscal Year
End
The
following table sets forth certain information concerning
outstanding equity awards held by our appointed executive officers
for the six months ended June 30, 2021, and for the years ended
December 31, 2020 and 2019 (the "Named Executive
Officers"):
|
|
|
Name
|
Number
of securities underlying unexercised options (#)
exercisable
|
Number
of securities underlying unexercised options (#)
unexercisable
|
Equity
incentive plan awards: Number of securities underlying unexercised
unearned options
(#)
|
Option
exercise price
($)
|
|
Number
of shares or units of stock that have not vested
(#)
|
Market
value of shares of units of stock that have not vested
($)
|
Equity
incentive plan awards: Number of unearned shares, units or other
rights that have not vested (#)
|
Equity
incentive plan awards: Market or payout value of unearned shares,
units or other rights that have not vested
($)
|
Stephen J. Thomas,
III, CEO and Chairman (1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Richard Eberhardt,
Executive VP
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Gary Cook,
CFO
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
______________________
(1)
Does not
contemplate the Series A Preferred Stock held 100% by Stephen J.
Thomas, III which guarantees the holder to 60% of the outstanding
common stock in shares when converted and 60% of any vote prior to
or after conversion. As of December 31, 2020, approximately
1,243,987,624 additional common shares would be issued if Mr.
Thomas were to convert his Series A Preferred Stock holdings to
common stock. The Company would have to authorize more shares as
there are only 1,000,000,000 shares authorized
currently.
BOARD OF DIRECTORS COMPENSATION
All of
our officers and/or directors will continue to be active in other
companies. All officers and directors have retained the right to
conduct their own independent business interests.
The
term of office for each Director is one (1) year, or until his/her
successor is elected at our annual meeting and qualified. The term
of office for each of our Officers is at the pleasure of the Board
of Directors.
The
Board of Directors has no nominating, auditing committee or a
compensation committee. Therefore, the selection of person or
election to the Board of Directors was neither independently made
nor negotiated at arm's length.
At this
time, our Directors do not receive cash compensation for serving as
members of our Board of Directors.
Only
our outside Directors receive cash compensation for serving as
members of our Board of Directors.
The
following table sets forth certain information concerning
compensation paid to our directors for services as directors, but
not including compensation for services as officers reported in the
"Summary Executives’ Compensation Table" during the six
months ended June 30, 2021, and the years ended December 31, 2020,
2019, and 2018:
Name
|
Year
|
Fees
earned or paid in cash ($)
|
|
|
Non-equity incentive
plan compensation ($)
|
Non-qualified
deferred compensation earnings ($)
|
All
other compensation ($)
|
|
Stephen J.
Thomas, III (1)
|
2021
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2020
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2019
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2018
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Richard Eberhardt
(2)
|
2021
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2020
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2019
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2018
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
Arkady Shkolnik
(3)
|
2021
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2020
|
100,000
|
201,979
|
—
|
—
|
—
|
—
|
301,979
|
2019
|
100,000
|
346,250
|
—
|
—
|
—
|
—
|
446,250
|
2018
|
37,500
|
144,271
|
—
|
—
|
—
|
—
|
181,771
|
Reginald Thomas
(3)
|
2021
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2020
|
40,000
|
35,000
|
—
|
—
|
—
|
—
|
75,000
|
2019
|
40,000
|
60,000
|
—
|
—
|
—
|
—
|
100,000
|
2018
|
15,000
|
25,000
|
—
|
—
|
—
|
—
|
40,000
|
________
|
(1)
|
Mr.
Thomas is also an officer and as such he receives the compensation
as disclosed in the Executive Compensation Table.
|
|
(2)
|
Mr.
Eberhardt is also an officer and as such he receives the
compensation as disclosed in the Executive Compensation
Table.
|
|
(3)
|
In
August 2018, a majority of the outstanding voting shares of the
Company voted through a consent resolution to support a consent
resolution of the Board of Directors of the Company to add two new
directors to the Board. As such, Arkady Shkolnik and Reginald
Thomas were added as members of the Board of Directors. The total
members of the Board of Directors after this addition is four. In
accordance with agreements with the Company for his services as a
director, Mr. Shkolnik is to receive $25,000 per quarter and
5,000,000 shares of restricted common stock valued at approximately
$687,500 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
$119,000 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. Both the 5,000,000 and 1,000,000
shares granted were issued during the year ended December 31, 2020
and are no longer reflected in subscriptions payable as of December
31, 2020.
|
Employment
Agreements with Officers and Directors of TPT Global Tech,
Inc.
The
initial term for our three executive employee employment agreements
have expired and they are now working under an extended period
which primarily calls for a 30-day notice for any changes or
termination. The Board is working to revise the executive
employment agreements. Below is a summary of current terms for our
three executives which is, for the most part, an extension of their
prior employment agreements, as well as those consulting agreements
for the outside directors. The prior employment agreements were
approved by our board based upon recommendations conducted by the
board.
Name
|
Position
|
|
Stephen J. Thomas,
III (1)
|
Chief Executive
Officer
|
$250,000
|
|
|
Richard Eberhardt
(2)
|
Chief Operating
Officer
|
$150,000
|
|
|
Gary Cook
(3)
|
Chief Financial
Officer
|
$200,000
|
|
|
Arkady Shkolnik
(4)
|
Director
|
$100,000
|
|
|
Reginald Thomas
(5)
|
Director
|
$40,000
|
_____________________________
(1)
Pursuant to an employment agreement dated November 1, 2017, and now
is in an extended period, Mr. Thomas receives a base salary of
$250,000 per year. In addition to the base salary, Mr. Thomas is
eligible to receive performance bonuses as to be determined by our
Board of Directors. The agreement had a three-year term that ended
on October 31, 2020 and now is in an extended period.
Upon an
affirmative vote of not less than two-thirds of the Board of
Directors, the employment may be terminated without further
liability on the part of our Company. Cause is considered to be an
act or acts of serious dishonesty fraud, or material and deliberate
injury related to our business, including personal enrichment at
the expense of our Company. If there is a termination for cause the
benefits of any bonus for the period preceding termination would be
forfeit.
In
addition, the agreement provides for Mr. Thomas to be able to
terminate the agreement for Good Reason. Good Reason is considered
to be (1) an adverse change in his status or position as CEO, (2) a
reduction in base salary, or (3) action by us that adversely
affected his participation in the benefits.
(2)
Pursuant to an employment agreement dated November 1, 2017, and now
is in an extended period, Mr. Eberhardt receives a base salary of
$150,000 per year. In addition to the base salary, Mr. Eberhardt is
eligible to receive performance bonuses as to be determined by our
Board of Directors. The agreement had a three-year term that ended
on October 31, 2020 and now is in an extended period.
Upon an
affirmative vote of not less than two-thirds of the Board of
Directors, the employment may be terminated without further
liability on the part of our Company. Cause is considered to be an
act or acts of serious dishonesty fraud, or material and deliberate
injury related to our business, including personal enrichment at
the expense of our Company. If there is a termination for cause the
benefits of any bonus for the period preceding termination would be
forfeit.
In
addition, the agreement provides for Mr. Eberhardt to be able to
terminate the agreement for Good Reason. Good Reason is considered
to be (1) an adverse change in his status or position as CEO, (2) a
reduction in base salary, or (3) action by us that adversely
affected his participation in the benefits.
(3)
Pursuant to an employment agreement dated November 1, 2017, and now
is in an extended period, Mr. Cook receives a base salary of
$200,000 per year for which currently he devotes no less than 60%
of his full-time. In addition to the base salary, Mr. Cook is
eligible to receive performance bonuses as to be determined by our
Board of Directors. The agreement had a three-year term that ended
on October 31, 2020 and now is in an extended period.
Upon an
affirmative vote of not less than two-thirds of the Board of
Directors, the employment may be terminated without further
liability on the part of our Company. Cause is considered to be an
act or acts of serious dishonesty fraud, or material and deliberate
injury related to our business, including personal enrichment at
the expense of our Company. If there is a termination for cause the
benefits of any bonus for the period preceding termination would be
forfeit.
In
addition, the agreement provides for Mr. Cook to be able to
terminate the agreement for Good Reason. Good Reason is considered
to be (1) an adverse change in his status or position as CEO, (2) a
reduction in base salary, or (3) action by us that adversely
affected his participation in the benefits.
(4) In
accordance with an Independent Director Agreement 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 $687,500 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.
(5) In
accordance with an Independent Director Agreement with the Company
for his services as director, Mr. Thomas is to receive $10,000 per
quarter and 1,000,000 shares of restricted common stock valued at
approximately $119,000 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.
Compensation Committee Interlocks and Insider
Participation
Our
board of directors in our entirety acts as the compensation
committee for TPT Global Tech, Inc.
m. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AS OF JULY 8, 2021
The
following table sets forth information regarding beneficial
ownership of our common stock as of July 8, 2021 and as adjusted to
reflect the sale of shares of our common stock offered by this
Offering Circular, by:
●
each of our
directors and the named executive officers;
●
all of our
directors and executive officers as a group; and
●
each person or
group of affiliated persons known by us to be the beneficial owner
of more than 5% of our outstanding shares of common
stock.
Beneficial
ownership and percentage ownership are determined in accordance
with the rules of the Securities and Exchange Commission and
includes voting or investment power with respect to shares of
stock. This information does not necessarily indicate beneficial
ownership for any other purpose.
Unless
otherwise indicated, such as the case with voting percentages, and
subject to applicable community property laws, to our knowledge,
each stockholder named in the following table possesses sole voting
and investment power over their shares of common stock, except for
those jointly owned with that person’s spouse. Percentage of
beneficial ownership before the offering is based on 879,029,038
shares of common stock outstanding as of July 8, 2021.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
OFFICERS AND DIRECTORS
Title of Class
|
Name and Address
of Beneficial Owner (1)
|
Amount and
Nature of Beneficial Owner
|
Percent of Class
Outstanding Common Shares (2)
|
Number of Common
Shares & Warrants if fully exercised
|
Percent of Class
including Warrants(5)
|
Percent of Class
including all classes of voting stock (6)
|
Common
Stock
|
Stephen J. Thomas,
III, Chairman, President, Chief Executive Officer and
Director
|
15,743,573(3 )
|
1.79%
|
15,743,573
|
1.79%
|
60%
|
|
|
|
|
|
|
Common
Stock
|
Richard Eberhardt,
Chief Operating Officer and Director
|
17,000,000
|
1.93%
|
17,000,000
|
1.93%
|
.79%
|
|
|
|
|
|
|
Common
Stock
|
Arkady Shkolnik,
Director
|
5,000,000(4 )
|
.57%
|
5,000,000
|
.57%
|
.23%
|
|
|
|
|
|
|
Common
Stock
|
Reginald Thomas,
Director
|
1,165,000(4 )
|
.13%
|
1,165,000
|
.13%
|
.05%
|
|
|
|
|
|
|
Common
Stock
|
Gary Cook, Chief
Financial Officer
|
5,806,281
|
.66%
|
5,806,281
|
.66%
|
.27%
|
|
|
|
|
|
|
Common
shares
|
All Directors and
Executive Officers as a Group (5 persons)
|
44,714,854
|
5.08%
|
44,714,854
|
5.08%
|
61.34%
|
_______________
|
(1)
|
|
The
Address for the above individuals and entities is c/o 501 West
Broadway, Suite 800, San Diego, CA 92101.
|
|
(2)
|
|
Based
upon 879,029,038 shares issued and outstanding as of July 8,
2021.
|
|
(3)
|
|
Based
upon 879,029,038 shares issued and outstanding as of July 8, 2021.
Does not contemplate the Series A Preferred Stock held 100% by
Stephen J. Thomas, III which guarantees the holder to 60% of the
outstanding common stock in shares when converted and 60% of any
vote prior to or after conversion. As of March 31, 2021,
approximately 1,258,081,214 additional common shares would be
issued if Mr. Thomas were to convert his Series A Preferred Stock
holdings to common stock. The Company would have to
authorize more shares as there are only 1,000,000,000 shares
authorized currently.
|
|
(4)
|
|
In
August 2018, the Company added two new directors to the Board.
Arkady Shkolnik and Reginald Thomas were added as members of the
Board of Directors. The total members of the Board of Directors
after this addition is four. In accordance with agreements with the
Company for his services as a director, Mr. Shkolnik received
5,000,000 shares of restricted common stock and Mr. Thomas received
1,000,000 shares of restricted common stock.
|
|
(5)
|
|
Assuming
full exercise of any stock options or warrants.
|
|
(6)
|
|
Calculated
using voting shares from all classes of common and preferred voting
shares.
|
GREATER THAN 5% STOCKHOLDERS
Title of
Class
|
Name of
Beneficial Owner
|
Amount and
Nature of Beneficial Owner
|
Percent of Class
Outstanding and Pre-Offering (2)
|
Number of Common
Shares & Warrants if fully exercised
|
Percent of Class
including Warrants(4)
|
Percent of Class
including all classes of voting stock (5)
|
Common
Stock
|
Stephen J. Thomas,
III, Chairman, President, Chief Executive Officer and Director
(1)
|
15,743,573(3 )
|
1.79%
|
15,743,573
|
1.79%
|
60%
|
__________
|
(1)
|
The
Address for the above individuals and entities is c/o 501 West
Broadway, Suite 800, San Diego, CA 92101.
|
|
(2)
|
Based
upon 879,029,038 shares issued and outstanding as of July 8,
2021.
|
|
(3)
|
Does
not contemplate the Series A Preferred Stock held 100% by Stephen
J. Thomas, III which guarantees the holder to 60% of the
outstanding common stock in shares when converted and 60% of any
vote prior to or after conversion. As of March 31, 2021,
approximately 1,258,081,214 additional common shares would be
issued if Mr. Thomas were to convert his Series A Preferred Stock
holdings to common stock as there are only 1,000,000,000 shares
authorized currently.
|
|
(4)
|
Assuming
full exercise of any stock options or warrants.
|
|
(5)
|
Calculated
using voting shares from all classes of common and preferred voting
shares.
|
Rule
13d-3 under the Securities Exchange Act of 1934 governs the
determination of beneficial ownership of securities. That rule
provides that a beneficial owner of a security includes any person
who directly or indirectly has or shares voting power and/or
investment power with respect to such security. Rule 13d-3 also
provides that a beneficial owner of a security includes any person
who has the right to acquire beneficial ownership of such security
within sixty days, including through the exercise of any option,
warrant or conversion of a security. Any securities not outstanding
which are subject to such options, warrants or conversion
privileges are deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class
owned by such person. Those securities are not deemed to be
outstanding for the purpose of computing the percentage of the
class owned by any other person.
BENEFICIAL
OWNERSHIP OF EACH CLASS OF VOTING SECURITIES
The
following table reflects the beneficial ownership of each class of
voting securities as of March 31, 2021.
|
|
Equivalent
Voting Percentage
|
Voting
Rights
|
Series A Preferred
Stock
|
1,258,081,214
|
60.00%
|
Shall have the
right to vote as if converted prior to any vote at
60%.
|
Series B Preferred
Stock
|
2,588,693
|
0.1%
|
Shall have the
right to vote equal to the number of common shares on a one-to-one
basis.
|
Series C Preferred
Stock
|
—
|
—
|
Shall have the
right to vote equal to the number of common shares on a one-to-one
basis.
|
Series D Preferred
Stock
|
4,067,328
|
0.2%
|
Shall have the
right to vote on an as-converted basis
|
Common
Stock
|
879,029,038
|
39.7%
|
|
|
2,143,766,273
|
100.00%
|
|
n. CERTAIN RELATIONSHIPS, RELATED
TRANSACTIONS, PROMOTERS AND CONTROL PERSONS
Other
than the stock transactions discussed herein, we have not entered
into any transaction nor are there any proposed transactions in
which any of our founders, directors, executive officers,
stockholders or any members of the immediate family of any of the
foregoing had or are to have a direct or indirect material interest
except as follows:
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 of the Consolidated Financial Statements 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 of the Consolidated Financial Statements.
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.
ITEM 11A. MATERIAL
CHANGES
None
not already disclosed in our Consolidated Financial
Statements.
ITEM 12. INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
WHERE YOU CAN FIND MORE INFORMATION
We are not required to deliver an annual report to our stockholders
unless our directors are elected at a meeting of our stockholders
or by written consents of our stockholders. If our directors are
not elected in such manner, we are not required to deliver an
annual report to our stockholders and will not voluntarily send an
annual report.
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. Such
filings are available to the public over the Internet at the
Securities and Exchange Commission’s website
at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act of 1933
with respect to the securities offered under this prospectus. This
prospectus, which forms a part of that registration statement, does
not contain all information included in the registration statement.
Certain information is omitted and you should refer to the
registration statement and its exhibits.
You may review a copy of the registration statement at the
Securities and Exchange Commission’s public reference room at
100 F Street, N.E. Washington, D.C. 20549 on official business days
during the hours of 10 a.m. to 3 p.m. You may obtain information on
the operation of the public reference room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. You may also
read and copy any materials we file with the Securities and
Exchange Commission at the Securities and Exchange
Commission’s public reference room. Our filings and the
registration statement can also be reviewed by accessing the
Securities and Exchange Commission’s website at
http://www.sec.gov.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” into this
prospectus information we have filed with it. The information
incorporated by reference is an important part of this prospectus
and is considered to be part of this prospectus. We incorporate by
reference the documents listed as exhibits to the document in Item
16.
ITEM 12A. DISCLOSURE OF
COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The
Florida Statutes requires us to indemnify officers and directors
for any expenses incurred by any officer or director in connection
with any actions or proceedings, whether civil, criminal,
administrative, or investigative, brought against such officer or
director because of his or her status as an officer or director, to
the extent that the director or officer has been successful on the
merits or otherwise in defense of the action or proceeding. The
Florida Statutes permits a corporation to indemnify an officer or
director, even in the absence of an agreement to do so, for
expenses incurred in connection with any action or proceeding if
such officer or director acted in good faith and in a manner in
which he or she reasonably believed to be in or not opposed to the
best interests of us and such indemnification is authorized by the
stockholders, by a quorum of disinterested directors, by
independent legal counsel in a written opinion authorized by a
majority vote of a quorum of directors consisting of disinterested
directors, or by independent legal counsel in a written opinion if
a quorum of disinterested directors cannot be
obtained.
The
Florida Statutes prohibits indemnification of a director or officer
if a final adjudication establishes that the officer's or
director's acts or omissions involved intentional misconduct,
fraud, or a knowing violation of the law and were material to the
cause of action. Despite the foregoing limitations on
indemnification, the Florida Statutes may permit an officer or
director to apply to the court for approval of indemnification even
if the officer or director is adjudged to have committed
intentional misconduct, fraud, or a knowing violation of the
law.
The
Florida Statutes also provides that indemnification of directors is
not permitted for the unlawful payment of distributions, except for
those directors registering their dissent to the payment of the
distribution.
According
to our bylaws, we are authorized to indemnify our directors to the
fullest extent authorized under Florida Law subject to certain
specified limitations.
Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 (the “Act”) may be permitted to directors,
officers and persons controlling us pursuant to the foregoing
provisions or otherwise, we are advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
[OUTSIDE BACK COVER PAGE OF PROSPECTUS]
Dealer Prospectus Delivery Requirements
PART II. INFORMATION NOT REQUIRED
IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF
ISSUANCE AND DISTRIBUTION
We have
expended, or will expend fees in relation to this registration
statement as detailed below:
Expenditure
Item
|
|
Attorney
Fees
|
$25,000
|
Audit
Fees
|
$125,000
|
Transfer Agent
Fees
|
$2,000
|
SEC Registration
and Blue Sky Registration fees (estimated)
|
$5,000
|
Printing Costs and
Miscellaneous Expenses (estimated)
|
$18,000
|
Total
|
$175,000
|
ITEM 14. INDEMNIFICATION OF
DIRECTORS AND OFFICERS
Our
officers and directors are indemnified as provided by the Florida
Revised Statutes and the bylaws.
Under
the Florida Revised Statutes, director immunity from liability to a
company or its shareholders for monetary liabilities applies
automatically unless it is specifically limited by a company's
Articles of Incorporation. Our Articles of Incorporation do not
specifically limit the directors’ immunity. Excepted from
that immunity are: (a) a willful failure to deal fairly with us or
our shareholders in connection with a matter in which the director
has a material conflict of interest; (b) a violation of criminal
law, unless the director had reasonable cause to believe that his
or her conduct was lawful or no reasonable cause to believe that
his or her conduct was unlawful; (c) a transaction from which the
director derived an improper personal profit; and (d) willful
misconduct.
Our
bylaws provide that it will indemnify the directors to the fullest
extent not prohibited by Florida law; provided, however, that we
may modify the extent of such indemnification by individual
contracts with the directors and officers; and, provided, further,
that we shall not be required to indemnify any director or officer
in connection with any proceeding, or part thereof, initiated by
such person unless such indemnification: (a) is expressly required
to be made by law, (b) the proceeding was authorized by the board
of directors, (c) is provided by us, in sole discretion, pursuant
to the powers vested under Florida law or (d) is required to be
made pursuant to the bylaws.
Our
bylaws provide that it will advance to any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact
that he is or was a director or officer of us, or is or was serving
at the request of us as a director or executive officer of another
company, partnership, joint venture, trust or other enterprise,
prior to the final disposition of the proceeding, promptly
following request therefore, all expenses incurred by any director
or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if
it should be determined ultimately that such person is not entitled
to be indemnified under the bylaws or otherwise.
Our
bylaws provide that no advance shall be made by us to an officer
except by reason of the fact that such officer is or was our
director in which event this paragraph shall not apply, in any
action, suit or proceeding, whether civil, criminal, administrative
or investigative, if a determination is reasonably and promptly
made: (a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or
(b) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made
demonstrate clearly and convincingly that such person acted in bad
faith or in a manner that such person did not believe to be in or
not opposed to the best interests of us.
ITEM 15. RECENT SALES OF
UNREGISTERED SECURITIES
None.
ITEM 16. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES
EXHIBIT INDEX
|
|
Incorporated by Reference
|
Exhibit Number
|
Exhibit Description
|
Form
|
Exhibit
|
Filing
Date/Period
End Date
|
3.1
|
|
S-1
|
3.1
|
12/15/17
|
3.2
|
|
S-1
|
3.2
|
12/15/17
|
3.3
|
|
S-1
|
3.3
|
12/15/17
|
3.4
|
|
S-1
|
3.4
|
12/15/17
|
3.5
|
|
S-1
|
3.5
|
12/15/17
|
3.6
|
|
S-1
|
3.6
|
12/15/17
|
3.7
|
|
S-1
|
3.7
|
12/15/17
|
3.8
|
|
S-1
|
3.8
|
12/15/17
|
3.9
|
|
S-1
|
3.9
|
12/15/17
|
3.10
|
|
S-1
|
3.10
|
12/15/17
|
3.11
|
|
S-1
|
3.11
|
12/15/17
|
3.12
|
|
S-1
|
3.12
|
12/15/17
|
3.13
|
|
S-1
|
3.13
|
12/15/17
|
3.14
|
|
S-1
|
3.14
|
12/15/17
|
3.15
|
|
S-1
|
3.15
|
12/15/17
|
3.16
|
|
S-1
|
3.16
|
12/15/17
|
3.17
|
|
S-1
|
3.17
|
12/15/17
|
3.18
|
|
S-1
|
3.18
|
12/15/17
|
3.19
|
|
S-1
|
3.19
|
12/15/17
|
3.20
|
|
S-1
|
3.20
|
12/15/17
|
3.21
|
|
S-1
|
3.21
|
12/15/17
|
3.22
|
|
1-A
|
3.22
|
7/2/20
|
3.23
|
|
1-A
|
3.23
|
7/2/20
|
3.24
|
|
1-A
|
3.24
|
7/2/20
|
3.25
|
|
1-A/A
|
3.25
|
8/28/20
|
3.26
|
|
1-A/A
|
3.26
|
8/28/20
|
3.27
|
|
1-A/A
|
3.27
|
8/28/20
|
EXHIBIT INDEX
|
|
Incorporated by Reference
|
Exhibit Number
|
Exhibit Description
|
Form
|
Exhibit
|
Filing
Date/Period
End Date
|
3.28
|
|
1-A/A
|
3.28
|
8/28/20
|
3.29
|
|
1-A/A
|
3.29
|
8/28/20
|
3.30
|
|
1-A/A
|
3.30
|
8/28/20
|
3.31
|
|
1-A/A
|
3.31
|
8/28/20
|
4.1
|
|
S-1
|
4.1
|
12/15/17
|
4.2
|
|
S-1
|
4.2
|
12/15/17
|
4.3
|
|
S-1
|
4.3
|
12/15/17
|
4.4
|
|
S-1
|
4.4
|
12/15/17
|
4.5
|
|
S-1
|
4.5
|
12/15/17
|
4.6
|
|
S-1
|
4.6
|
12/15/17
|
4.7
|
|
S-1/A
|
4.7
|
2/23/18
|
4.8
|
|
S-1/A
|
4.8
|
2/23/18
|
4.9
|
|
S-1/A
|
4.9
|
10/2/18
|
4.10
|
|
S-1/A
|
4.10
|
10/2/18
|
4.11
|
|
S-1/A
|
4.11
|
10/2/18
|
4.12
|
|
8-K
|
|
3/10/20
|
4.13
|
|
1-A
|
4.13
|
7/2/20
|
5.1
|
Opinion
re: Legality
|
|
*
|
|
10.1
|
|
S-1
|
10.1
|
12/15/17
|
10.2
|
|
S-1
|
10.2
|
12/15/17
|
10.3
|
|
S-1
|
10.3
|
12/15/17
|
10.4
|
|
S-1
|
10.4
|
12/15/17
|
10.5
|
|
S-1
|
10.5
|
12/15/17
|
10.6
|
|
S-1
|
10.6
|
12/15/17
|
10.7
|
|
S-1
|
10.7
|
12/15/17
|
10.8
|
|
S-1
|
10.8
|
12/15/17
|
EXHIBIT INDEX
|
|
Incorporated by Reference
|
Exhibit Number
|
Exhibit Description
|
Form
|
Exhibit
|
Filing
Date/Period
End Date
|
10.9
|
|
S-1
|
10.9
|
12/15/17
|
10.10
|
|
S-1
|
10.10
|
12/15/17
|
10.11
|
|
S-1
|
10.11
|
12/15/17
|
10.12
|
|
S-1
|
10.12
|
12/15/17
|
10.13
|
|
S-1
|
10.13
|
12/15/17
|
10.14
|
|
S-1
|
10.14
|
12/15/17
|
10.15
|
|
S-1/A
|
10.15
|
2/23/18
|
10.16
|
|
S-1/A
|
10.16
|
2/23/18
|
10.17
|
|
S-1/A
|
10.17
|
10/2/18
|
10.18
|
|
S-1/A
|
10.18
|
10/2/18
|
10.19
|
|
S-1/A
|
10.19
|
10/2/18
|
10.20
|
|
S-1/A
|
10.20
|
10/2/18
|
10.21
|
|
S-1/A
|
10.21
|
10/2/18
|
10.22
|
|
S-1/A
|
10.22
|
10/2/18
|
10.23
|
|
S-1/A
|
10.23
|
11/5/18
|
10.24
|
|
S-1/A
|
10.24
|
11/5/18
|
10.25
|
|
8-K
|
10.1
|
3/22/19
|
10.26
|
|
8-K
|
10.1
|
3/27/19
|
10.27
|
|
8-K
|
10.2
|
3/27/19
|
10.28
|
|
8-K
|
10.3
|
3/27/19
|
10.29
|
|
8-K
|
10.1
|
4/8/19
|
10.30
|
|
8-K
|
10.1
|
3/3/20
|
10.31
|
|
8-K
|
10.1
|
3/19/20
|
10.32
|
|
8-K
|
10.1
|
6/10/20
|
10.33
|
|
1-A/A
|
6.33
|
8/28/20
|
10.34
|
|
1-A/A
|
6.34
|
8/28/20
|
EXHIBIT INDEX
|
|
Incorporated by Reference
|
Exhibit Number
|
Exhibit Description
|
Form
|
Exhibit
|
Filing
Date/Period
End Date
|
10.35
|
|
1-A/A
|
6.35
|
8/28/20
|
10.36
|
|
8-K
|
10.1
|
8/17/20
|
10.37
|
|
8-K
|
10.1
|
9/9/20
|
10.38
|
|
8-K
|
10.2
|
9/9/20
|
10.39
|
|
8-K
|
|
9/10/20
|
10.40
|
|
S-1
|
10.40
|
10/28/20
|
10.41
|
|
S-1
|
10.41
|
10/28/20
|
10.42
|
|
S-1
|
10.42
|
10/28/20
|
10.43
|
|
S-1
|
10.43
|
10/28/20
|
10.44
|
Amendment and Extension Agreement No. 1 with Michael A. Littman,
Atty, Defined Benefit Plan
|
S-1/A
|
10.44
|
1/15/21
|
10.45
|
Addendum to Amendment and Extension Agreement No. 1 with Michael A.
Littman, Atty, Defined Benefit Plan
|
S-1/A
|
10.45
|
1/15/21
|
10.46
|
Release and Termination Agreement
|
S-1/A
|
10.46
|
1/15/21
|
10.47
|
Common Stock Purchase Agreement with White Lion Capital,
LLC
|
S-1
|
10.47
|
6/30/21
|
10.48
|
Registration Rights Agreement with White Lion Capital,
LLC
|
S-1
|
10.48
|
6/30/21
|
|
|
|
|
|
21.1
|
|
|
*
|
|
23.1
|
|
|
*
|
|
23.2
|
|
|
*
|
|
99.1
|
|
S-1
|
99.1
|
12/15/17
|
99.2
|
|
S-1
|
99.2
|
12/15/17
|
* Filed
Herewith
We
hereby undertake the following:
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
a.
|
To
include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
|
|
b.
|
To
reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
|
|
c.
|
To
include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in the
registration statement.
|
That,
for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
To
remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at
the termination of the Offering.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to the directors, officers and controlling persons
pursuant to the provisions above, or otherwise, we have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore,
unenforceable.
In the
event that a claim for indemnification against such liabilities,
other than the payment by us of expenses incurred or paid by one of
the directors, officers, or controlling persons in the successful
defense of any action, suit or proceeding, is asserted by one of
the directors, officers, or controlling persons in connection with
the securities being registered, we will unless in the opinion of
our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the
Securities Act, and we will be governed by the final adjudication
of such issue.
For
determining liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant under
Rule 424(b) (1) or (4) or 497(h) under the Securities Act as part
of this Registration Statement as of the time the Commission
declared it effective.
In
accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-1 and
authorized this Registration Statement to be signed on our behalf
by the undersigned, thereunto duly authorized, in the City of San
Diego, State of California, on July 16, 2021
TPT GLOBAL TECH, INC.
/s/
Stephen J. Thomas, III
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July
16, 2021
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Stephen
J. Thomas, III
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President,
Chief Executive Officer and Principal Executive Officer and
Chairman of the Board
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/s/
Gary Cook
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July
16, 2021
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Gary
Cook
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Chief
Financial Officer and Principal Accounting Officer
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In
accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates stated.
/s/
Stephen J. Thomas, III
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July
16, 2021
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Stephen
J. Thomas, III, President, Chief Executive Officer and Chairman of
the Board
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/s/
Gary Cook
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Gary
Cook, Chief Financial Officer
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July
16, 2021
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/s/
Richard Eberhardt
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July
16, 2021
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Richard
Eberhardt, Chief Operating Officer and Director
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/s/
Arkady Shkolnik
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July
16, 2021
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Arkady
Shkolnik, Director
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/s/
Reginald Thomas
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July
16, 2021
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Reginald
Thomas, Director
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