UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
 
 (Mark One)
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
 
Commission file number: 333-222094
 
TPT Global Tech, Inc.
(Exact name of registrant as specified in its charter)
 
Florida
 
81-3903357
State or other jurisdiction of incorporation or organization
 
(I.R.S. Employer Identification No.)
 
 
 
501 West Broadway, Suite 800
San Diego, CA
 
92101
(Address of principal executive offices)
 
(Zip Code)
 
(619) 301-4200
Registrant’s telephone number, including area code
 
(Former Address and phone of principal executive offices)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
---
---
---
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
Yes
 
No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 for Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
 
No
 
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
 
No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
As of May 19, 2020, there were 853,221,966 shares of the registrant’s common stock, $0.001 par value, issued and outstanding.
 

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