UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
   
FORM 10-Q
   
 (Mark One)
 
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
 
[  ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
 
Commission file number: 333-222094
 
TPT Global Tech, Inc.
(Exact name of registrant as specified in its charter)
 
Florida
 
81-3903357
State or other jurisdiction of incorporation or organization
 
(I.R.S. Employer Identification No.)
 
 
 
501 West Broadway, Suite 800
San Diego, CA
 
92101
(Address of principal executive offices)
 
(Zip Code)
 
(619) 301-4200
Registrant’s telephone number, including area code
______________________________________
 
(Former Address and phone of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
---
---
---
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
Yes
[X]
 
No
[  ]
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 for Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
[X]
 
No
[  ]
 
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
[   ]
Accelerated filer
[   ]
Non-accelerated filer
 
[X]
Smaller reporting company
[X]
 
 
 
Emerging growth company
[X]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [ ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
[  ]
 
No
[X]
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
As of August 19, 2019, there were 136,953,904 shares of the registrant’s common stock, $.001 par value, issued and outstanding.  

 
 
 
TABLE OF CONTENTS
 
 
 
Page
 
PART 1 – FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II- OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
 
PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
  T PT Global Tech, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
 
June 30,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
 (Unaudited)
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
Cash and cash equivalents
  $ 101,475  
  $ 31,786  
Accounts receivable, net
    238,751  
    48,922  
Prepaid expenses and other current assets
    232,481  
    36,111  
Total current assets
  572,707
 
  $ 116,819  
NON-CURRENT ASSETS
       
       
        Property and equipment, net
  $ 4,786,235  
  $ 3,046,942  
        Right of use assets
    5,240,311  
   
 
        Intangible assets, net
    6,652,320  
    6,671,582  
        Goodwill
    987,361  
    924,361  
        Deposits and other assets
    81,009  
    62,013  
Total non-current assets
  $ 17,747,236  
  $ 10,704,898  
 
       
       
TOTAL ASSETS
  18,319,943
 
  $ 10,821,717  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
CURRENT LIABILITIES
 
 
 
 
 
 
Accounts payable and accrued expenses
  $ 5,898,483  
  $ 4,993,970  
    Deferred revenue
    209,316  
    6,450  
    Customer deposits
    338,725  
    338,725  
    Business loans, advances and agreements
    1,675,566  
    716,936  
    Current portion of convertible notes payable, net of discount
    341,094  
    10,000  
    Notes payable - related parties, net of discount
    9,462,347  
    9,137,982  
    Current portion of convertible notes payable – related parties, net of discounts
    172,881  
    202,688  
Derivative liabilities
    5,340,322  
   
 
Current portion of operating lease liabilities
    1,800,331  
   
 
Financing lease liabilities
    139,925  
    138,774  
Financing lease liabilities – related party
    612,526  
    598,490  
       Total current liabilities
  25,991,516
 
  $ 16,144,015  
 
       
       
 
       
       
NON-CURRENT LIABILITIES
       
       
     Convertible note payable, net of current portion and discounts
  $
 
  $ 5,000  
     Convertible notes payable – related parties, net of current portion and discounts
    740,500  
    599,200  
     Long term portion of operating lease liabilities
    3,580,849  
   
 
       Total non-current liabilities
    4,321,349  
    604,200  
 Total liabilities
  30,312,865
 
  $ 16,748,215  
 
       
       
Commitments and contingencies – See Note 8  
     
     
 
       
       
STOCKHOLDERS' 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 June 30, 2019 and December 31, 2018
  $ 1,000  
  $ 1,000  
Convertible Preferred Series B, 3,000,000 designated - 2,588,693 shares issued and outstanding as of June 30, 2019 and December 31, 2018
    2,589  
    2,589  
Convertible Preferred Series C – 3,000,000 shares designated, zero shares issued and outstanding as of June 30, 2019 and December 31, 2018
     
     
Common stock, $.001 par value, 1,000,000,000 shares authorized, 136,953,904 shares issued and outstanding as of June 30, 2019 and December 31, 2018
    136,954  
    136,954  
Subscriptions payable
    371,132  
    168,006  
Additional paid-in capital
    12,681,369  
    12,567,881  
Accumulated deficit
    (25,185,966 )
    (18,802,928 )
Total stockholders' deficit
    (11,992,922 )
    (5,926,498 )
 
       
       
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  18,319,943
 
  $ 10,821,717  
 
See accompanying notes to condensed consolidated financial statements.
 
 
3
 
 
TPT Global Tech, Inc.
C ONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
For the three months ended
June 30,
 
 
For the six months ended
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
 
 
 
 
 
 
   Products
  $ 15,086  
  $ 36,780  
  $ 33,769  
  $ 78,430  
   Services
    2,413,369  
    152,231  
    2,556,162  
    360,799  
Total Revenues
  $ 2,428,455  
  $ 189,011  
  $ 2,589,931  
  $ 439,229  
 
       
       
       
       
COST OF SALES:
       
       
       
       
   Products
  $ 15,100  
  $ 39,895  
  $ 35,600  
  $ 82,395  
   Services
    1,472,848  
    216,269  
    1,714,716  
    438,064  
Total Costs of Sales
  $ 1,487,948  
  $ 256,164  
  $ 1,750,316  
  $ 520,459  
Gross profit (loss)
  $ 940,507  
  $ (67,153 )
  $ 839,615  
  $ (81,230 )
EXPENSES:
       
       
       
       
Sales and marketing
  $ 44,317  
  $ 21,012  
  $ 44,317  
  $ 39,898  
Professional
    275,190  
    333,271  
    996,453  
    678,679  
Payroll and related
    367,018  
    178,017  
    564,559  
    370,756  
General and administrative
    602,979  
    127,148  
    616,267  
    319,736  
Depreciation
    128,000  
    43,873  
    199,707  
    87,746  
Amortization
    354,129  
    169,600  
    560,131  
    369,200  
                Total expenses
  $ 1,771,632  
  $ 872,921  
  $ 2,981,433  
  $ 1,866,015  
 
       
       
       
       
OTHER INCOME (EXPENSE)
       
       
       
       
Derivative expense
    (2,068,906 )
   
 
    (3,609,322 )
   
 
Interest expense
    (501,661 )
    (48,131 )
    (631,898 )
    (78,541 )
                 Total other income (expenses)
  $ (2,570,567 )
  $ (48,131 )
  $ (4,241,220 )
  $ (78,541 )
 
       
       
       
       
Net loss before income taxes
    (3,401,692 )
    (988,205 )
    (6,383,038 )
    (2,025,786 )
Income taxes
   
 
   
 
   
 
   
 
 
       
       
       
       
NET LOSS
  $ (3,401,692 )
  $ (988,205 )
  $ (6,383,038 )
  $ (2,025,786 )
 
       
       
       
       
Loss per common share: Basic and diluted
  $ (0.02 )
  $ (0.01 )
  $ (0.05 )
  $ (0.01 )
 
       
       
       
       
Weighted average number of common shares outstanding:
       
       
       
       
Basic and diluted
    136,953,904  
    136,953,904  
    136,953,904  
    136,953,904  
 
See accompanying notes to condensed consolidated financial statements
 
 
4
 
TPT Global Tech, Inc.
C ONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three and six months ended June 30, 2019 and 2018
 
 
 
Series A Preferred Stock
 
 
Series B Preferred Stock
 
 
Common Stock
 
 
Subscriptions Payable
 
 
Additional
Paid-in
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
(Receivable)
 
 
Capital
 
 
Deficit
 
 
Total
 
Balance as of April 1, 2018
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 401,541  
  $ 10,355,666  
  $ (14,463,020 )
  $ (3,565,270 )
 
       
       
       
       
       
       
       
       
       
       
Issuance of stock and stock options for services
   
 
   
 
   
 
   
 
   
 
   
 
    92,790  
    69,330  
     
    162,121  
 
       
       
       
       
       
       
       
       
       
       
Cash received for common stock to be contributed by officer
     
     
     
     
     
     
    245,500  
   
 
     
    245,500  
 
       
       
       
       
       
       
       
       
       
       
Conversion of debt
       
       
       
       
       
       
    2,000  
       
       
    2,000  
Net loss
     
     
     
     
     
     
     
     
  $ (988,205 )
  $ (988,205 )
Balance as of June 30, 2018
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 741,832  
  $ 10,424,996  
  $ (15,451,225 )
  $ (4,143,854 )
 
 
 
Series A Preferred Stock
 
 
Series B Preferred Stock
 
 
Common Stock
 
 
Subscriptions Payable
 
 
Additional
Paid-in
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
  (Receivable)
 
 
Capital
 
 
Deficit
 
 
Total
 
Balance as of December 31, 2017
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ (4,765 )
  $ 10,371,442  
  $ (13,425,439 )
  $ (2,918,219 )
 
       
       
       
       
       
       
       
       
       
       
Issuance of stock and stock options for services
   
 
   
 
   
 
   
 
   
 
   
 
    347,097  
    83,554  
     
    430,651  
 
       
       
       
       
       
       
       
       
       
       
Cash received for common stock to be contributed by officer
     
     
     
     
     
     
    367,500  
   
 
     
    367,500  
 
       
       
       
       
       
       
       
       
       
       
Conversion of debt
       
       
       
       
       
       
    2,000  
       
       
    2,000  
Net loss
     
     
     
     
     
     
     
     
  $ (2,025,786 )
  $ (2,025,786 )
Balance as of June 30, 2018
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 741,832  
  $ 10,424,996  
  $ (15,451,225 )
  $ (4,143,854 )
   
See accompanying notes to condensed consolidated financial statements
 
 
5
 
 
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT- CONTINUED
For the three and six months ended June 30, 2019 and 2018
 
 
 
Series A Preferred Stock
 
 
Series B Preferred Stock
 
 
Common Stock
 
 
Subscriptions Payable
 
 
Additional
Paid-in
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
(Receivable)
 
 
Capital
 
 
Deficit
 
 
Total
 
Balance as of
April 1, 2019
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 269,569  
  $ 12,640,597  
  $ (21,784,274 )
  $ (8,733,565 )
 
       
       
       
       
       
       
       
       
       
       
Issuance of stock and stock options for services
     
     
     
     
     
     
    101,563  
    40,772  
     
    142,335  
 
       
       
       
       
       
       
       
       
       
       
 
       
       
       
       
       
       
       
       
       
       
Net Loss
     
     
     
     
     
     
     
     
  $ (3,401,692 )
  $ (3,401,692 )
 
       
       
       
       
       
       
       
       
       
       
Balance as of
June 30, 2019
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 371,132  
  $ 12,681,369  
  $ (25,185,966 )
  $ (11,992,922 )

 
 
Series A Preferred Stock
 
 
Series B Preferred Stock
 
 
Common Stock
 
 
Subscriptions Payable
 
 
Additional
Paid-in
 
 
Accumulated
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
(Receivable)
 
 
Capital
 
 
Deficit
 
 
Total
 
Balance as of December 31, 2018
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 168,006  
  $ 12,567,881  
  $ (18,802,928 )
  $ (5,926,498 )
 
       
       
       
       
       
       
       
       
       
       
Issuance of stock and stock options for services
     
     
     
     
     
     
    203,126  
    113,488  
     
    316,614  
 
       
       
       
       
       
       
       
       
       
       
 
       
       
       
       
       
       
       
       
       
       
Net Loss
     
     
     
     
     
     
     
     
  $ (6,383,038 )
  $ (6,383,038 )
 
       
       
       
       
       
       
       
       
       
       
Balance as of
June 30, 2019
    1,000,000  
  $ 1,000  
    2,588,693  
  $ 2,589  
    136,953,904  
  $ 136,954  
  $ 371,132  
  $ 12,681,369  
  $ (25,185,966 )
  $ (11,992,922 )
     
See accompanying notes to condensed consolidated financial statements.
 
 
6
 
 
TPT Global Tech, Inc.
CONDENSED C ONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
For the six months ended June 30,
 
 
 
2019
 
 
2018
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
  $ (6,383,038 )
  $ (2,025,786 )
Adjustments to reconcile net loss to net cash used in operating activities:
       
       
Depreciation
    199,707  
    87,746  
           Amortization
    560,131  
    369,200  
           Amortization of debt discount
    539,796  
   
 
           Derivative expense
    3,609,322  
   
 
           Share-based compensation: Common stock
    203,126  
    347,097  
                                                        Stock options
    113,488  
    83,554  
     Changes in operating assets and liabilities:
       
       
           Accounts receivable
    (189,829 )
    (1,278 )
           Prepaid expenses and other assets
    44,646  
    (30,658 )
           Accounts payable and accrued expenses
    275,765  
    542,873  
           Other liabilities
    (55,322 )
    (7,924 )
              Net cash used in operating activities
  $ (1,082,208 )
  $ (635,176 )
 
       
       
Cash flows from investing activities:
       
       
            Cash paid for acquisition of assets of SpeedConnect
  (1,000,000 )
   
              Net cash provided (used in) by investing activities
  (1,000,000 )
   
 
       
       
 
       
       
Cash flows from financing activities:
       
       
           Proceeds from stock subscriptions
   
 
    367,500  
           Proceeds from convertible notes and notes payable – related parties
    456,390  
    300,000  
           Proceeds from convertible notes and business advance
    2,659,181  
    10,000  
           Payment on business loans
    (913,978 )
   
 
           Payments on convertible notes – related parties
    (39,807 )
    (44,894 )
           Payments on financing lease liabilities
    (9,889 )
       
              Net cash provided by financing activities
  $ 2,151,897
  $ 632,916  
 
       
       
 
       
       
Net change in cash
  $ 69,689  
  $ (2,260 )
Cash and cash equivalents - beginning of period
  $ 31,786  
  $ 36,380  
 
       
       
Cash and cash equivalents - end of period
  $ 101,475  
  $ 34,120  
 
       
       
 
See accompanying notes to condensed consolidated financial statements
 
 
7
 
 
TPT Global Tech, Inc.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS - CONTINUED 
 
Supplemental Cash Flow Information:
 
Cash paid for:
 
 
 
2019
 
 
2018
 
Interest
  $ 9,857  
  $
 
Taxes
  $
 
  $
 
 
Non-Cash Investing and Financing Activities:

 
 
2019  
 
 
2018  
 
Discount on derivative financial instruments
  $ 2,011,600  
  $
 
Stock subscription payable issued for conversion of debt
  $  
  $ 2,000  
Acquisition of the assets of SpeedConnect
  $ 2,662,013  
  $
 
Right of use assets
  5,381,180
 
   
Operating lease liabilities
  5,381,180
 
   
 
See accompanying notes to condensed consolidated financial statements  
 
 
8
 
 
TPT Global Tech, Inc.
NOTES TO
CONDENSED C ONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
 
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 .
 
We are based in San Diego, California, and operate as a Media Content Hub for Domestic and International syndication Technology/Telecommunications company operating on our own proprietary Global Digital Media TV and Telecommunications infrastructure platform and also provide technology solutions to businesses domestically and worldwide. We are a rural Broadband Wireless Access (BWA) provider, Software as a Service (SaaS), Technology Platform as a Service (PAAS), Cloud-based Unified Communication as a Service (UCaaS) and carrier-grade performance and support for businesses over our private IP MPLS fiber and wireless network in the United States. Our cloud-based UCaaS services allow businesses of any size to enjoy all the latest voice, data, media and collaboration features in today's global technology markets. We also operate as a Master Distributor for Nationwide Mobile Virtual network Operators (MVNO) and Independent Sales Organization (ISO) as a Master Distributor for Pre-Paid Cellphone services, Mobile phones, Cellphone Accessories and Global Roaming Cellphones. In addition, we create media marketing materials and content.
 
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 six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
 
These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2018. The condensed consolidated balance sheet at June 30, 2019, 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 Telecom, Copperhead Digital, SDM, Port 2 Port, Blue Collar and TPT SpeedConnect. All intercompany accounts and transactions have been eliminated in consolidation.
 
 
 
9
 
 
CRITICAL ACCOUNTING POLICIES
 
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.
 
The Company’s revenue generation for the last two years came from the following sources, which sources are explained in detail below.
 
 
 
For the six months ended June 30, 2019  
 
 
For the six months ended June 30, 2018
 
TPT SpeedConnect
  $ 1,946,820  
 
 
 
Copperhead Digital
    128,130  
  $ 224,454  
K Telecom
    33,769  
    78,430  
San Diego Media
    17,165  
    114,257  
Blue Collar
    464,047  
     
P2P
   
 
    22,088  
Total Revenue
  $ 2,589,931  
  $ 439,229  
 
TPT SpeedConnect: ISP and Telecom Revenue
 
TPT SpeedConnect is a rural BWA 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. Due date is detailed on monthly invoices distributed to customer. Services billed monthly in advance are deferred to the proper period as needed. 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.
 
Copperhead Digital: ISP and Telecom Revenue
 
Copperhead Digital is a regional internet and telecom services provider operating in Arizona under the trade name Trucom. Copperhead Digital operates as a wireless telecommunications Internet Service Provider (“ISP”) facilitating both residential and commercial accounts. Copperhead Digital’s primary business model is subscription based, pre-paid monthly reoccurring revenues, from wireless delivered, high-speed internet connections. In addition, the company resells third-party satellite and DSL internet and IP telephony services. Revenue generated from sales of telecommunications services is recognized as the transaction with the customer is considered closed and the customer receives and accepts the services that were the result of the transaction. Due date is detailed on monthly invoices distributed to customer. Services billed monthly in advance are deferred to the proper period as needed. Certain of our products require specialized installation and equipment. For telecom products that include installation, if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and installation revenue is recognized when the installation is complete. The Installation Technician collects the signed quote containing terms and conditions when installing the site equipment at customer premises.
 
Revenue for installation services and equipment is billed separately from recurring ISP and telecom services, and is recognized when equipment is delivered and installation is completed. Revenue from ISP and telecom services is recognized monthly over the contractual period, or as services are rendered and accepted by the customer.
 
The overwhelming majority of our revenue continues to be recognized when transactions occur. Since installation fees are generally small relative to the size of the overall contract and because most contracts are for a year or less, the impact of not recognizing installation fees over the contract is immaterial.
 
 
10
 
 
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. 
 
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. 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.
 
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.
 
P2P Asset Activity: Telecom Revenue
 
Port 2 Port Communications (P2P) is a U.S. domestic minutes provider that sells wholesale long distance domestic telecom minutes to other domestic U.S. carriers. A service is defined as wholesale telecom minute based on a per-minute and per-destination rate basis. A series of services for P2P would be substantially the same and would include a pattern of transfers of services to a customer on a per-minute flat rate basis for all destinations in a specified geographic. Revenue generated from sales of minute services are recognized when weekly invoices are generated and distributed.
   
Basic and Diluted Net Loss Per Share
 
The Company computes net income (loss) per share in accordance with ASC 260, “Earning per Share””. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of thee income statement. Basic EPS is computed by dividing net income (loss) available to common shareholder (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method 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 June 30, 2019, the Company had shares that were potentially common stock equivalents as follows:
 
 
 
2019
 
Series A Preferred Stock
    128,056,506  
Series B Preferred Stock
    2,588,693  
Stock Options and Warrants
    6,426,453  
Convertible Debt
    63,048,113  
 
    200,119,764  
 
Financial Instruments and Fair Value of Financial Instruments
 
Our primary financial instruments at June 30, 2019 and December 31, 2018 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.
 
 
11
 
 
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 June 30, 2019 are the following:
 
Derivative Instrument
 
Fair Value
 
Fair value of Geneva Roth Convertible Promissory Notes
  $ 302,523  
Fair value of Auctus Convertible Promissory Note
  $ 3,205,913  
Fair value of Odyssey Capital Convertible Promissory Note
  $ 764,458  
Fair value of EMA Financial Convertible Promissory Note
  $ 651,837  
Fair value of JSJ Investment Convertible Promissory Note
  $ 215,611  
Fair value of Warrants issued with the derivative instruments
  $ 109,980  
 
Use of Estimates
 
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The Company’s consolidated financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented. 
 
Recently Adopted Accounting Pronouncements
   
In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC 718, Compensation – Stock Compensation. This ASU requires that most of the guidance related to stock compensation granted to employees be followed for non-employees, including the measurement date, valuation approach, and performance conditions. The expense is recognized in the same period as though cash were paid for the good or service. The effective date is the first quarter of fiscal year 2019, with early adoption permitted, including in interim periods. The ASU has been adopted using a modified-retrospective transition approach. The adoption is not considered to have a material effect on the consolidated financial statements.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). Topic 842 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. We adopted Topic 842 using the effective date, January 2019, as the date of our initial application of the standard. Consequently, financial information for the comparative periods has not been updated. Our finance and operating lease commitments are subject to the new standard and we recognize as finance and operating lease liabilities and right-of-use assets. The effect on our condensed consolidated financial statements has not been material until we acquired the assets of SpeedConnect, which effect has been recorded during the period ended June 30, 2019 and is reflected in the condensed consolidated financial statements as of June 30, 2019.
 
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.
 
 
 
12
 
 
NOTE 2 – ACQUISITIONS
 
TPT SpeedConnect, LLC Asset Acquisition
 
SpeedConnect Asset Acquisition
 
Effective April 2, 2019, the Company entered into an Asset Purchase Agreement with SpeedConnect, LLC (“SpeedConnect”) to acquire substantially all of the assets of SpeedConnect. On May 7, 2019, the Company closed the transaction underlying the Asset Purchase Agreement with SpeedConnect to acquire substantially all of the assets of SpeedConnect for $2 million and the assumption of certain liabilities. The Asset Purchase Agreement required a deposit of $500,000 made in April and an additional $500,000 payment to close. The additional $500,000 was paid and all other conditions were met to effectuate the sale of substantially all of the assets of SpeedConnect to the Company. As part of the closing, the Company entered into a Promissory Note to pay SpeedConnect $1,000,000 in two equal installments of $500,000 plus applicable interest at 10% per annum with the first installment payable within 30 days of closing and the second installment payable within 60 days of closing (but no later than July 6, 2019). The Company paid off the Promissory Note by June 11, 2019 and by amendment dated May 7, 2019, SpeedConnect forgave $250,000 of the Promissory Note. The Company is required to have SpeedConnect’s financial information audited for the last two years.
 
The Company applied the acquisition method of accounting to the business combination and has valued each of the assets acquired and liabilities on a provisional basis primarily because the valuation of the assets acquired has not yet been finalized, although we do not believe there will be a material adjustment. Accordingly, the assets and liabilities were deemed to be recorded at fair value on a provisional basis as of the acquisition date of May 7, 2019.
 
Purchase Price Allocation:
 
 
 
TPT Global Tech
 
Effective
    5-7-19  
 
       
Purchaser
 
TPT Global Tech
 
 
       
Provisional Consideration Given:
       
Liabilities:
       
   Cash paid
    1,000,000  
   Promissory Note
    750,000  
   Deferred revenue
    258,188  
   Accounts and other payables
    653,824  
Total Consideration Value
  $ 2,662,013  
 
       
Provisional Assets Acquired:
       
 
       
Assets
       
   Customer base
  400,000  
   Current assets:
       
        Prepaid and other receivables
    246,823  
        Deposits
    13,190  
   Property and equipment
    1,939,000  
Total Assets Acquired
  $ 2,599,013  
Goodwill – provisional  
  $ 63,000  
 
 
13
 
 
Had the acquisition occurred on January 1, 2018, condensed proforma statement of operations for the six months ended June 30, 2019 and 2018 would be as follows:
 
 
 
2019
 
 
2018
 
Revenue
  $ 7,352.758  
  $ 9,101,507  
Cost of Sales
    4,754,166  
    5,171,840  
Gross Profit
  $ 2,598,592  
  $ 3,929,667  
Expenses
    4.514,097
 
    (4,423,743 )
Interest Expense and Impairment
  4,241,220
    (78,541 )
Income Taxes
     
     
Net Loss
  $ 6,156,725
  $ (572,617 )
 
Included in the consolidated statement of operations for the six months ended June 30, 2019 are the results of operations for TPT SpeedConnect for the period from May 8, 2019 to June 30, 2019 which are the following:
 
 
 
2019
 
Revenue
  $ 1,946,820  
Cost of Sales
    1,227,988  
Gross Profit
  $ 718,832  
Expenses
    (532,107 )
Interest Expense
   
 
Income taxes
   
 
Net Income
  $ 186,725  
 
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 six months ended June 30, 2019 and 2018. Financing activities described below have helped with working capital and other capital requirements. We incurred $6,383,038 and $2,025,786, respectively, in losses, and we used $1,082,208 and $635,176, respectively, in cash for operations for the six months ended June 30, 2019 and 2018. Cash flows from financing activities were $2,151,897 and $632,916 for the same periods. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
We acquired the assets of SpeedConnect on May 7, 2019 for $1,000,000 and a note payable for $750,000. These assets were conveyed into a wholly owned subsidiary, TPT SpeedConnect. Although TPT SpeedConnect is currently generating cash flows, there is expected to be significant capital required in the near term to upgrade the current network to 5G standards.
 
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.
   
 
14
 
 
NOTE 4 – PROPERTY AND EQUIPMENT
 
Property and equipment and related accumulated depreciation as of June 30, 2019 and December 31, 2018 are as follows:
 
 
 
2019
 
 
2018
 
Property and equipment:
 
 
 
 
 
 
     Telecommunications fiber and equipment
  $ 5,213,045  
    3,274,045  
Film production equipment
    369,903  
    369,903  
Office furniture and equipment
    82,014  
    82,104  
Leasehold improvements
    18,679  
    18,679  
 
    5,683,641  
    3,744,641  
Accumulated depreciation
    (897,406 )
    (697,699 )
Property and equipment, net
  $ 4,786,235  
    3,046,942  
 
Depreciation expense was $199,707 and $87,746 for the six months ended June 30, 2019 and 2018, respectively.
 
NOTE 5 – DEBT FINANCING ARRANGEMENTS
 
Financing arrangements as of June 30, 2019 and December 31, 2018 are as follows:
 
 
 
 2019
 
 
 2018
 
Business loans and advances, net of discounts (1)
  $ 1,574,322  
    615,692  
Convertible notes payable, net of discounts (2)
    341,094  
    15,000  
Factoring agreement (3)
    101,244  
    101,244  
Debt – third party
  $ 2,016,660  
    731,936  
 
       
       
Line of credit, related party secured by assets (4)
  $ 3,043,390  
    3,043,390  
Debt– other related party, net of discounts (5)
    5,950,000  
    5,912,898  
Convertible debt – related party (2)
    913,381  
    801,888  
Shareholder debt (6)
    468,957  
    181,694  
Debt – related party
  $ 10,375,728  
    9,939,870  
 
       
       
Total financing arrangements
  $ 12,392,388  
    10,671,806  
 
       
       
Less current liabilities:
       
       
   Business loans, advances and agreements
  $ (1,675,566 )
    (716,936 )
Convertible notes payable, net of discount
    (341,094 )
    (10,000 )
  Notes payable – related parties, net of discount
    (9,462,347 )
    (9,137,982 )
  Convertible notes payable – related party
    (172,881 )
    (202,688 )
 
    (11,651,888 )
    (10,067,606 )
Total non-current liabilities
  $ 740,500  
    604,200  
 
 
 
(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%, 4.4% as of June 30, 2019, and is secured by assets of the Company, is due August 31, 2019, as amended, and included 8,000 stock options as part of the terms (see Note 7).
 
$500,500 is a line of credit that Blue Collar has with a bank, bears interest at Prime plus 1.125%, 6.755% as of June 30, 2019, and is due March 25, 2021.
 
$500,000 is a bank loan dated May 28, 2019 which bears interest at Prime plus 6%, 11.5% as of June 30, 2019, is interest only for the first year, thereafter payable monthly of principal and interest until the due date of May 1, 2022. The bank loan is collateralized by assets of the Company.
 
$10,000 is an amount the bears interest at 6%, subsequently increased to 11%, as it was due and not repaid on October 10, 2018. 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.
 
 
 
15
 
 
 
 
(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 are 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.
 
During 2016, the Company acquired SDM which consideration included a convertible promissory note for $250,000 due August 31, 2018, 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 $172,881 as of June 30, 2019.
 
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. During 2019, the Company issued these same securities with the same terms in the amount of $141,300 to related parties. 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.
 
During 2019, the Company consummated Securities Purchase Agreements dated March 15, 2019, April 12, 2019, May 15, 2019 and June 6, 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 and $53,000 (“Geneva Roth Convertible Promissory Notes”). The Geneva Roth Convertible Promissory Notes are due one year from issuance, pays interest at the rate of 12% 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.
 
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% 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. 2,000,000 warrants were issued in conjunction with the issuance of this debt. See Note 7.
 
On June 4, 2019, the Company consummated a Securities Purchase Agreement with Odyssey Capital Funding, LLC. (“Odyssey”) for the purchase of a $525,000 Convertible Promissory Note (“Odyssey Convertible Promissory Note”). The Odyssey Convertible Promissory Note is due June 3, 2020, pays interest at the rate of 12% per annum and gives the holder the right from time to time, and at any time during the period beginning six months from the issuance date to convert all of the outstanding balance into common stock of the Company limited to 4.99% of the outstanding common stock of the Company. The conversion price is 55% multiplied by the average of the two lowest trading prices for the common stock during the previous 20 trading days prior to the applicable conversion date. The Odyssey Convertible Promissory Note may be prepaid in full at 125% to 145% up to 180 days from origination.
 
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. 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% 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. 1,000,000 warrants were issued in conjunction with the issuance of this debt. See Note 7.
  The Company may be in default under several of its new derivative financial instruments for not having filed a Form S-1 with the Securities and Exchange Commission by now. It is the intent of the Company to complete its quarter Form 10-Q for the three months ended June 31, 2019 and then incorporate that filing into a Form S-1 to be filed as soon as practical.  
 
 
16
 
 
 
(3)
One Factoring Agreement with full recourse, due August 31, 2019, 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 in principal remained unpaid as of June 30, 2019 and December 31, 2018.
 
Another factoring agreement was entered into dated May 8, 2019 with Advantage Capital Funding. $500,000 was actually funded to the Company with a promise to pay $18,840 per week for 40 weeks until a total of $753,610 is paid. $656,712 remains outstanding under this factoring agreement as of June 30, 2019.
 
 
(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%, 4.4% as of June 30, 2019, 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 (see Note 7) and is due, as amended, August 31, 2019.
 
During the year ended December 31, 2018, these same shareholders and one other loaned the Company money in the form of convertible loans of $537,200 described in (2) above.
 
 
(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 intended to be in 2019.
 
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 (fair value of $1,533,217, net of a discount to fair value of $66,783 which is being amortized through expense through the due date of May 1, 2019) and interest at 3% from the date of closure. $37,102 was amortized as interest expense in the six months ended June 30, 2019. The promissory note is secured by the assets of Blue Collar.
 
 
(6)
 
 
 
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 six months ended June 30, 2019, the Company borrowed $50,000 from a related party for working capital with no written terms. This was paid back prior to June 30, 2019 with $7,000 representing interest on the funds.
 
 
 
 
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.
 
 
 
17
 
 
The derivative liability as of June 30, 2019, in the amount of $5,340,322 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 June 30, 2019. There were no derivative financial instruments as of December 31, 2018.
 
 
 
Debt Derivative Liabilities
 
Balance, December 31, 2018
  $
 
Debt discount from initial derivative
    1,731,000  
Initial fair value of derivative liabilities
    2,592,736  
Change in fair value of derivative liabilities at end of period
    1,016,986  
Balance, June 30, 2019
  $ 5,340,322  
Derivative expense for the six months ended June 30, 2019
  $ 3,609,322  
 
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 June 30, 2019, the Company marked to market the fair value of the debt derivatives and determined a fair value of $5,340,322 ($5,230,342 from the convertible notes and $109,980 from the warrants in Note 5 (2) above. The Company recorded a loss from change in fair value of debt derivatives of $1,016,986 for the six months ended June 30, 2019. 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 188.2% to 212.8%, (3) weighted average risk-free interest rate of 2.23% to 2.52% (4) expected life of 0.72 to 5.0 years, and (5) the quoted market price of $0.0531 to $0.0726 for the Company’s common stock.
 
See Financing lease arrangements in Note 8.
  
NOTE 7 - STOCKHOLDERS' DEFICIT
 
Preferred Stock
 
As of June 30, 2019, 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 and Series C Preferred Stock.
 
Series A Convertible Preferred Stock
 
In February 2015, the Company designated 1,000,000 shares of Preferred Stock as Series A Preferred Stock.
 
The Series A Preferred Stock was designated in February 2016, has a par value of $.001, is redeemable at the Company’s option at $100 per share, is senior to any other class or series of outstanding Preferred Stock or Common Stock and does not bear dividends. The Series A Preferred Stock has a liquidation preference immediately after any Senior Securities, as defined, and of an amount equal to $100 per share. Holders of the Series A Preferred Stock shall, collectively have the right to convert all of their Series A Preferred Stock when conversion is elected into that number of shares of Common Stock of the Company, determined by the following formula: 60% of the issued and outstanding Common Shares as computed immediately after the transaction for conversion. For further clarification, the 60% of the issued and outstanding common shares includes what the holders of the Series A Preferred Stock may already hold in common shares at the time of conversion. The Series A Preferred Stock, collectively, shall have the right to vote as if converted prior to the vote to an amount of shares equal to 60% of the outstanding Common Stock of the Company.
 
In February 2015, the Board of Directors authorized the issuance of 1,000,000 shares of Series A Preferred Stock to Stephen Thomas, Chairman, CEO and President of the Company, valued at $3,117,000 for compensation expense.
 
 
 
18
 
 
Series B Convertible Preferred Stock
 
In February 2015, the Company designated 3,000,000 shares of Preferred Stock as Series B Convertible Preferred Stock. There are 2,588,693 shares of Series B Convertible Preferred Stock outstanding as of June 30, 2019.
 
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 amount of common shares at the conversion price of $2.00 per share. The Series B Preferred Stockholders have a right to vote on any matter with holders of Common Stock and shall have a number of votes equal to that number of Common Shares on a one to one basis.
 
Series C Convertible Preferred Stock
 
In May 2018, the Company designated 3,000,000 shares of Preferred Stock as Series C Convertible Preferred Stock. There are no shares of Series C Convertible Preferred Stock outstanding as of June 30, 2019.
 
The Series C Preferred Stock was designated in May 2018, has a par value of $.001, is not redeemable, is senior to any other class or series of outstanding Preferred Stock, except the Series A and Series B Preferred Stock, or Common Stock and does not bear dividends. The Series C Preferred Stock has a liquidation preference immediately after any Senior Securities, as defined and currently the Series A and B Preferred Stock, and of an amount equal to $2.00 per share. Holders of the Series C Preferred Stock have a right to convert all or any part of the Series C Preferred Shares and will receive an equal amount 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.
 
Common Stock and Capital Contributions
 
As of June 30, 2019, we had authorized 1,000,000,000 shares of Common Stock, of which 136,953,904 common shares are issued and outstanding.
 
Common Stock Contributions Related to Acquisitions
 
Effective November 1 and 3, 2017, an officer of the Company contributed 9,765,000 shares of restricted Common Stock to the Company for the acquisition of Blue Collar and HRS. These shares were subsequently issued as consideration for these acquisitions in November 2017. In March 2018, the HRS acquisition was rescinded and 3,625,000 shares of common stock are being returned by the recipients. The other transaction involved 6,500,000 shares for the acquisition of Blue Collar which closed in 2018. As such, as of June 30, 2019 the 3,265,000 shares for the HRS transaction are reflected as subscriptions receivable based on their par value.
 
Common Stock Issued for Expenses and Liabilities
 
During the year ended December 31, 2018, the Company entered into a two-year agreement for legal services. The agreement provided for 4,000,000 shares of restricted common stock to be issued. 2,000,000 to be issued for previous legal services upon execution of the agreement in March 2018 and the remaining 2,000,000 in the form of stock options to purchase common stock at $0.10 per share, of which the stock options would vest equally over 18 months. The value of the Company’s common stock upon execution of the agreement was $0.125 per share, or $250,000 which was recorded as professional expenses during 2018. See stock options and warrants discussion below for the value of the 2,000,000 stock options.
 
During the year ended December 31, 2018, 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 June 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 $34,444 was expensed during the six months ended June 30, 2019 for the portion of service term completed during this period.
 
For these two agreements, the underlying stock for the stock options are intended to come from the contribution of stock by an officer of the Company. During the six months ended June 30, 2019, the Company recorded $203,126 as stock-based compensation related to these agreements.
 
Common Stock Payable Issued for Expenses and Liabilities
 
As of June 30, 2019, 16,667 of common shares were subscribed to in 2018 for a note payable of $2,000.
 
19
 
 
In 2018, a majority of the outstanding voting shares of the Company voted through a consent resolution to support a consent resolution of the Board of Directors of the Company to add two new directors to the Board. As such, Arkady Shkolnik and Reginald Thomas (family member of CEO) were added as members of the Board of Directors. The total members of the Board of Directors after this addition is four. In accordance with agreements with the Company for his services as a director, Mr. Shkolnik is to receive $25,000 per quarter and 5,000,000 shares of restricted common stock valued at approximately $692,500 vesting quarterly over twenty-four months. The quarterly cash payments of $25,000 will be paid in unrestricted common shares if the Company has not been funded adequately to make such payments. Mr. Thomas is to receive $10,000 per quarter and 1,000,000 shares of restricted common stock valued at approximately $120,000 vesting quarterly over twenty-four months. The quarterly payment of $10,000 may be suspended by the Company if the Company has not been adequately funded. As of June 30, 2019, $72,500 and $20,000 has been accrued in the balance sheet for Mr. Shkolnik and Mr. Thomas, respectively.  
 
Stock Options
 
 
 
Options Outstanding
 
 
Vested
 
 
Vesting Period
 
 
Exercise Price Outstanding and Exercisable
 
 
Expiration Date
 
December 31, 2017
    93,120  
    93,120  
100% at issue
  $ 0.05 to $0.22  
    12-31-19  
Granted
    3,000,000  
   
 
12 to 18 months
  $ 0.10  
 
2-28-20 to 3-20-21
 
December 31, 2018
    3,093,120  
    1,954,230  
 
  $ 0.05 to $0.22  
 
12-31-19 to 3-20-21
 
Granted
   
 
       
 
       
       
June 30, 2018
    3,093,120  
    2,176,453  
 
  $ 0.05 to $0.22  
 
12-31-19 to 3-20-21
 
 
 
Stock options to purchase approximately 3,093,120 shares of common stock of the Company are outstanding as of June 30, 2019 related to debt issuances (see Note 5) at prices ranging from $0.05 to $0.22 per share.
 
In addition, the company granted through 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, 1,000,000 of which is fully vested and 2,000,000 which will vest over 18 months from date of grant. All these stock options have an exercise period of 24 to 36 months. 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.
 
 
During the six months ended June 30, 2019, the Company recorded $113,488 as stock-based compensation related to the stock options and the related service period for which services have been rendered. For future periods, the remaining value of the stock options totaling approximately $27,181 will be amortized into the statement of operations consistent with the period for which the services will be rendered, which is two years for the legal agreement and one year for the general consulting agreement.
 
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.
 
Warrants
 
As part of the Convertible Promissory Notes 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 $109,980 of the total $5,450,963 derivative liabilities as of June 30, 2019. See Note 5.
 
 
20
 
 
NOTE 8 - COMMITMENTS AND CONTINGENCIES
 
Accounts Payable and Accrued Expenses as of June 30, 2019 and December 31, 2018:
 
 
 
2019
 
 
2018
 
Accounts payable:
 
 
 
 
 
 
   Related parties (1)
  $ 954,284  
  $ 741,577  
   General operating
    3,096,771  
    3,036,601  
   Credit card balances
    257,109  
    246,949  
   Accrued interest on debt
    462,698  
    306,319  
   Accrued expenses
    495,765  
    33,062  
   Taxes and fees payable
    631,857  
    629,462  
Total
  $ 5,898,482  
  $ 4,993,970  
 
 
(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.
 
Lease Arrangements
 
We have various non-cancelable lease agreements for certain of our tower locations with original lease periods expiring between 2019 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 our two other equipment leases that are in default and leases with an initial term of twelve months have not been recorded on the condensed consolidated balance sheets. We recognize rent expense on a straight-line basis over the lease term.

Lease Cost – Actual lease cost for the six months ended June 30, 2019 was $450,626.
 
Summary of future payments
  $ 6,436,103  
Discount
    (1,054,923 )
Net Present Value
  $ 5,381,180  
 
Lease Term and Discount Rate - The weighted-average remaining lease term (in years) and discount rate related to the operating leases were as follows:
 
Weighted average lease term
  
6 years
 
Discount Rate
    12 %
 
Maturity of Lease Liabilities - The present value of our tower operating lease liabilities as of June 30, 2019 were as follows:
 
 
 
2019
 
 
2020
 
 
2021
 
 
2022
 
 
2023
 
 
Thereafter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tower Leases
  $ 1,913,493  
  $ 1,466,659  
  $ 975,744  
  $ 630,800  
  $ 252,960  
  $ 141,525  
 
       
       
       
       
       
       
 
 
21
 
 
 
Lease obligations not included in the above calculations are as follows as of June 30, 2019:
 
Obligation
 
2019
 
 
In Default
 
 
Accrued
Interest
 
 
 Total
 
Telecom Equipment Finance (1)
  $ 449,103  
     
    156,405  
  $ 605,508  
Telecommunications Equipment (2)
     
    101,347  
    33,624  
    134,971  
Production Equipment Lease (3)
    2,919  
     
   
 
    2,919  
Total
  $ 452,022  
    101,347  
    190,029  
  $ 743,398  
 
(1) The Telecom Equipment Lease is with an entity owned and controlled by shareholders of the Company and is due August 31, 2019, as amended.
 
(2) The Telecommunications Equipment Lease requires payments of $3,702 per month and is in default. See discussion below in Other Commitments and Contingencies. In December 2017, the Company learned that the telecommunications equipment lease identified herein for $101,348 was included in a default judgement in a non-jurisdictional state of Pennsylvania for $169,474 from a lawsuit by the lessor. Management is working with the lessor to settle this matter including a proposal for the equipment to be returned to the lessor and then a negotiated amount for any deficiency between the value given for the retired equipment and the $101,348. When concluded, management does not believe the results will be significantly different than the liability of $101,348 and accrued fees and interest of $38,110 recorded.
 
(3) The Production Equipment Lease, maturing on April 15, 2019, required payments of $2,535 per month and includes imputed interest at 8.5%. The lease was entered into in 2015 for the purchase of equipment in the amount of approximately $120,000.
 
Other Commitments and Contingencies
 
The Company has employment agreements with certain employees of SDM and K Telecom. The agreements are such that SDM and K Telecom, on a standalone basis in each case, must provide sufficient cash flow to financially support the financial obligations within the employment agreements.
 
In December 2016, a subsidiary’s landlord agreed to terminate a facilities lease for 150,000 restricted shares of Common Stock valued at $43,350 from a capital contribution of an officer of the Company. Subsequent to the agreement, the landlord requested more shares against the Company’s agreement. As such, $63,053 remains in liabilities payable to the landlord and the $43,350 was expensed as rent previously. The matter is still unresolved. Management does not believe any negative resolution will have a material impact on the Company’s consolidated financial statements. 
 
 
 
22
 
The Company has been named in a lawsuit by a former employee who was terminated by management in 2016. The employee was working under an employment agreement but was terminated for breach of the agreement. The former employee is suing for breach of contract and is seeking around $75,000 in back pay and benefits. Management believes it has good and meritorious defenses and does not believe the outcome of the lawsuit will have any material effect on the financial position of the Company.
 
As of June 30, 2019, the Company has collected $338,725 from one customer in excess of amounts due from that customer in accordance with the customer’s understanding of the appropriate billings activity. The customer has filed a written demand for repayment by the Company of amounts owed. Management believes that the customer agreement allows them to keep the amounts under dispute. Given the dispute, the Company has reflected the amounts in dispute as a customer liability on the consolidated balance sheet as of June 30, 2019 and does not believe the outcome of the dispute will have a material effect on the financial position of the Company.
 
NOTE 9 – RELATED PARTY ACTIVITY
 
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 $15,500 and $13,642 in rent and utility payments for this space for the six months ended June 30, 2019 and 2018, respectively.
 
There are shares issuances and capital contributions from an officer of the Company. See Note 7. Also, there are debt and lease balances outstanding due to shareholders and other related parties of the Company of $954,693 and $741,577, respectively, as of June 30, 2019 and December 31, 2018 related 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 which are included in accounts payable and accrued expenses on the balance sheet. See Notes 7 and 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.
 
 
 
23
 
 
NOTE 10 – GOODWILL AND INTANGIBLE ASSETS
 
Goodwill and intangible assets are comprised of the following:
 
June 30, 2019
 
 
 
Gross Carrying Amount
 
 
Accumulated Amortization
 
 
Net Book Value
 
 
Useful Life
 
Customer Base
  $ 2,347,200  
    (1,413,089 )
    934,111  
    3-10  
Developed Technology
  $ 6,105,600  
    (1,398,272 )
    4,707,328  
    9  
Film Library
  $ 957,000  
    (68,800 )
    888,200  
    11  
Trademarks and Tradenames
  $ 132,000  
    (9,319 )
    122,681  
    12  
 
  $ 9,541,800  
    (2,889,480 )
    6,652,320  
       
 
       
       
       
       
Goodwill
  $ 987,361  
     
    987,361  
     
 
Amortization expense was $419,262 and $369,200 for the six months ended June 30, 2019 and 2018, respectively.
 
December 31, 2018
 
 
 
Gross Carrying Amount
 
 
Accumulated Amortization
 
 
Net Book Value
 
 
Useful Life
 
Customer Base
  $ 1,947,200  
    (1,374,933 )
    572,267  
    3-10  
Developed Technology
  $ 6,105,600  
    (1,059,070 )
    5,046,530  
    9  
Film Library
  $ 957,000  
    (32,700 )
    924,300  
    11  
Trademarks and Tradenames
  $ 132,000  
    (3,515 )
    128,485  
    12  
 
  $ 9,141,800  
    (2,470,218 )
    6,671,582  
       
 
       
       
       
       
Goodwill
  $ 924,361