10-Q/A: TPT Global Tech Restates Q1 2024 Financials Due to Debt Conversion Error

TPT Global Tech files an amended 10-Q to restate its Q1 2024 financials, correcting an error related to the accounting for a debt-to-preferred stock conversion.

Summary

• TPT Global Tech has filed an amendment to its Q1 2024 report to restate its financial statements.
• The restatement corrects an error related to the accounting for an agreement to convert debt to preferred stock with Michael Murphy.
• The error involved the extinguishment of underlying debt and the creation of a derivative liability.
• The derivative liability was valued at $821,555 at inception and $721,335 as of March 31, 2024.
• The restatement adds the derivative liability to the balance sheet as of March 31, 2024, and adjusts prior periods.
• For the three months ended March 31, 2024, TPT Global Tech reported total revenues of $398,098, a decrease from $1,101,506 in the prior period.
• The company's gross profit was a loss of $132,556, compared to a profit of $270,161 in the prior period.
• Operating expenses were $1,096,497, down from $1,887,479 in the prior period.
• The company recognized a net loss of $3,234,492, compared to $1,472,711 in the prior period.
• As of March 31, 2024, the company's accumulated deficit totaled $120,890,892.
• The company's cash and cash equivalents were $5,068 as of March 31, 2024.
• The company's total assets were $107,546, and total liabilities were $46,074,773.
• The company states that it needs additional debt or equity financing to continue as a going concern.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the restatement, declining revenue, increasing net loss, accumulated deficit, and going concern warning. However, there are some positives such as decreasing operating expenses and gain on debt extinguishment.

Positives

• Operating expenses decreased to $1,096,497 from $1,887,479 year-over-year, mainly due to lower legal expenses and fewer employees.
• The company recognized a gain on debt extinguishment of $367,916 due to the conversion of convertible debt to common stock.

Negatives

• Q1 2024 revenues decreased to $398,098 from $1,101,506 year-over-year, primarily due to a decline in internet customers.
• The company reported a net loss of $3,234,492 for Q1 2024, compared to a net loss of $1,472,711 for the same period last year.
• The company's accumulated deficit as of March 31, 2024, was $120,890,892.
• The company's cash and cash equivalents were $5,068 as of March 31, 2024.
• Gross profit decreased to a loss of 33% from 25% due to the decrease in revenues while still having tower lease commitments in place.

Risks

• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company needs additional debt or equity financing to continue as a going concern, and there is no assurance that it will be able to secure such financing.
• The company faces potential adverse effects from ongoing litigation.
• The company is in default under many of its derivative financial instruments.
• The company has a significant amount of debt, including convertible notes and notes payable to related parties.

Future Outlook

The company states that it needs additional debt or equity financing and to look for companies with cash flow positive operations that it can acquire in order to continue as a going concern for a period of one year from the issuance of these financial statements.

Management Comments

• 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.

Industry Context

The company operates in the technology sector, with divisions in telecommunications, medical technology, media content, and technology solutions; the company's financial performance is impacted by competition, technological advances, and economic conditions.

Comparison to Industry Standards

• It is difficult to compare TPT Global Tech's results to industry standards due to its diverse business segments and its financial difficulties.
• However, the company's declining revenue and significant net losses are concerning compared to industry peers.
• For example, other telecommunications companies such as Verizon and AT&T have significantly higher revenues and profits.
• Similarly, medical technology companies such as Medtronic and Johnson & Johnson have stronger financial performance.
• The company's reliance on short-term financing and its need for additional capital raise concerns about its long-term viability.

Legal Proceedings

• EMA Financial, LLC (EMA) has filed a lawsuit against the company for failing to comply with a Securities Purchase Agreement.
• Pinnacle Towers LLC and Crown Atlantic Company Inc. have filed a lawsuit against the company for outstanding debt incurred by Copperhead Digital.
• American Tower and related entities have filed a lawsuit against the company for outstanding debt or unpaid tower lease payments.
• Mr. Advance, CLOUDFUND and Fox Capital have filed lawsuits against the company for non-payment under debt agreements.
• AHS Staffing, LLC has filed a lawsuit against TPT MedTech, LLC for unpayment of billings for medical staffing services.
• Robert Serrett has filed a lawsuit against TruCom, Inc. for breach of contract.

Related Party Transactions

• There are amounts outstanding due to related parties of the Company of $1,440,695 and $1,308,051, respectively, as of March 31, 2024, and December 31, 2023 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.
• 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.
• On March 25, 2022, the Company entered into a Software Development agreement with Mr. and Mrs. Caudle for which a new note payable was created and employment agreements for Mrs. Caudle and her daughter were modified.
• 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 VuMe within Mexico and Latin America (License Agreement).

Stakeholder Impact

• Shareholders face the risk of dilution due to potential future equity offerings and conversion of convertible debt and preferred stock.
• Employees may be affected by potential cost-cutting measures or restructuring if the company is unable to secure additional financing.
• Customers may be impacted by potential service disruptions or changes in product offerings if the company's financial situation worsens.
• Creditors face the risk of non-payment or restructuring of debt if the company is unable to improve its financial performance.
• Suppliers may be affected by potential delays in payments or changes in purchasing patterns if the company's financial situation worsens.

Next Steps

• The company needs to obtain additional debt or equity financing.
• The company needs to look for companies with cash flow positive operations that it can acquire.
• The company needs to resolve ongoing litigation.
• The company needs to address defaults under derivative financial instruments.

Key Dates

Keywords

restatement, financials, derivative liability, convertible debt, going concern, TPT Global Tech, Q1 2024