10-Q/A: TPT Global Tech Restates Q3 2023 Financials Due to Debt Conversion Error

Sentiment:

Quarterly Report Amendment (Form 10-Q/A) 7 February 2025 1:42 PM

TPT Global Tech files an amendment to its Q3 2023 report to correct an error related to the accounting for a debt conversion to Series E Preferred Stock.

Capital raiseThe company is seeking equity and debt through its existing Reg A capital raise, debt financing or a proposed public offering.The company has agreed that upon a successful fund-raising event, TPT will provide Geokall with working capital in the amount up to $500,000.A provision allocates up to $80 million of funds raised from TPT's public offering to facilitate the restructuring of Tekmovil's senior debt through loans encompassing a 5-year term with provisions for expedited repayment to TPT.

Worse than expectedThe company restated its financial statements due to an error in accounting for a debt conversion, indicating a weakness in internal controls.The company's auditors have expressed substantial doubt about its ability to continue as a going concern, raising concerns about its financial stability.

Summary

TPT Global Tech has filed an amendment to its Q3 2023 report to restate financial statements due to an error in accounting for the conversion of debt to Series E Preferred Stock related to Michael Murphy.
The error involved the extinguishment of debt and the creation of a derivative liability, which was initially valued at $821,555 and later at $826,347 as of September 30, 2023.
The restatement includes a loss on extinguishment of debt of $821,555 and a derivative expense of $4,792 for the nine months ended September 30, 2023.
The restatement also resulted in an increase to the derivative liability balance on the consolidated balance sheet as of September 30, 2023.
The company incurred net losses of $3,919,955 and $11,352,944 for the nine months ended September 30, 2023 and 2022, respectively.
The company used $442,135 and $263,313 in cash for operations for the nine months ended September 30, 2023 and 2022, respectively.
As of December 13, 2023, there were 2,154,412,687 shares of the registrant's common stock outstanding.
The company's auditors have expressed substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the restatement of financials, the going concern warning, and the company's involvement in legal proceedings. While there are some positive aspects, such as decreased interest expense, the overall outlook is concerning.

Positives

Interest expense decreased for the three months ended September 30, 2023 compared to the prior period by $13,530.
Interest expense decreased for the nine months ended September 30, 2023 compared to the prior period by $3,365,136.
Gross profit percentage for the nine months ended September 30, 2023 is 41% versus 27% for the prior period.

Negatives

The company's auditors have expressed substantial doubt about its ability to continue as a going concern.
The company incurred net losses of $3,919,955 and $11,352,944, respectively, in losses, and we used $442,135 and $263,313, respectively, in cash for operations for the nine months ended September 30, 2023 and 2022.
The company is in default under all of its derivative financial instruments and has accounted for these defaults under each agreements default provisions.
The company's disclosure controls and procedures are not effective as of such date.

Risks

The company's auditors have expressed substantial doubt about its ability to continue as a going concern.
The company needs to obtain additional debt or equity financing and look for companies with cash flow positive operations that it can acquire.
There can be no assurance that the company will be able to secure additional debt or equity financing, that it will be able to acquire cash flow positive operations, or that, if it is successful in any of those actions, those actions will produce adequate cash flow to enable it to meet all its future obligations.
Most of the company's existing financing arrangements are short-term.
If the company is unable to obtain additional debt or equity financing, it may be required to significantly reduce or cease operations.
The company is involved in several legal proceedings, including lawsuits related to unpaid debt and breach of contract.
The company's disclosure controls and procedures are not effective.

Future Outlook

The company needs to obtain additional debt or equity financing and look for companies with cash flow positive operations that it can acquire to continue as a going concern.

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 restatement and going concern warning highlight the challenges faced by smaller companies in this sector, particularly in managing debt and maintaining financial stability.

Comparison to Industry Standards

It is difficult to compare TPT Global Tech's results directly to industry standards due to its diverse business segments and small size.
Larger, more established technology companies typically have stronger financial controls and greater access to capital.
The company's reliance on convertible debt financing is a common strategy for small companies but can create significant risks if not managed carefully.
The restatement of financial statements is a serious issue that can erode investor confidence and lead to regulatory scrutiny, as seen with other companies that have faced similar situations.

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 unpaid rent incurred by Copperhead Digital.
American Tower and related entities have filed a lawsuit against the company for unpaid tower lease payments.
Mr. Advance, CLOUDFUND and Fox Capital have filed lawsuits against TPT SpeedConnect and TPT 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 $1,186,459 and $831,502, respectively, as of September 30, 2023, and December 31, 2022 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 increased risk due to the restatement, going concern warning, and legal proceedings.
Employees may be affected by potential cost-cutting measures or restructuring if the company is unable to secure additional financing.
Customers may experience disruptions in service if the company faces financial difficulties.
Creditors face increased risk of non-payment due to the company's financial challenges.

Next Steps

The company needs to secure additional debt or equity financing.
The company needs to improve its internal controls and procedures.
The company needs to resolve its legal proceedings.
The company needs to complete the acquisitions of Broadband, Tekmovil, and Geokall.

Key Dates

Date	Description
1988	The Company was originally incorporated in the state of Florida.
2014-06	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.
2015-02	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.
2018-05	The Company designated 3,000,000 shares of Preferred Stock as Series C Convertible Preferred Stock.
2019-06-04	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).
2019-06-11	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).
2020-05-06	The company entered into a promissory note for the acquisition of Media Live One Platform from Steve and Yuanbing Caudle for the further development of software.
2020-07-06	The Company amended its Series D Designation from January 14, 2020.
2021-10-06	TPT Global Tech, Inc. and FirstFire Global Opportunities Fund, LLC. entered into a convertible promissory note totaling $1,087,000 and a securities purchase agreement (FirstFire Note).
2021-10-13	TPT Global Tech, Inc. and Cavalry Investment Fund LP entered into a convertible promissory note totaling $271,250 and a securities purchase agreement (Cavalry Investment Note).
2021-10-13	TPT Global Tech, Inc. and Cavalry Fund I, LP entered into a convertible promissory note totaling $815,250 and a securities purchase agreement (Cavalry Fund I Note).
2022-01-31	TPT Global Tech, Inc. and Blue Lake Partners, LLC entered into a convertible promissory note totaling $271,750 and a securities purchase agreement (Blue Lake Note).
2022-03-24	An Agreement and Plan of Merger ('Agreement') was made and entered into as of March 24, 2023 by and among TPT SpeedConnect LLC, a Colorado Limited Liability Company (wholly-owned subsidiary of TPT Global Tech, Inc.) ('SPC'), and Asberry 22 Holdings, Inc., a Delaware Corporation ('ASHI'), and SPC Acquisition, Inc., a wholly-owned subsidiary of ASHI, domiciled in Colorado ('Acquisition Sub').
2022-04-01	The Company entered into a Future Receivable Sale and Purchase Agreement (Mr. Advance Agreement) with Mr. Advance LLC (Mr. Advance).
2022-04-01	The Company entered into a Future Receipts Sale and Purchase Agreement (CLOUDFUND Agreement) with CLOUDFUND LLC (CLOUDFUND).
2022-04-27	The Company entered into a Future Receivables Sale and Purchase Agreement (Fox Capital Agreement) with Fox Capital Group, Inc. (Fox Capital).
2022-06-29	TPT Strategic entered into a definitive agreement for the acquisition of the assets and Information Security and Training LLC (IST LLC or IST).
2023-02-08	TPT Global Tech, Inc. and 1800 Diagonal Lending LLC entered into a $81,675 promissory note agreement (1800 Diagonal Note #2).
2023-02-09	TPT Global Tech, Inc. and FirstFire Global Opportunities Fund, LLC (First Fire) entered into a $330,000 promissory note agreement (Firstfire Note #2).
2023-07-28	The Company entered into a Securities Purchase Agreement with Broadband Infrastructure, Inc. (Broadband) and Braddock Cunningham, owner, for the purchase of 100% of the ownership of Broadband.
2023-07-31	The Company and Michael Murphy, shareholder and debt holder, entered into a Conversion Shares Purchase Agreement.
2023-09-11	Everett Lanier and the Company agreed to a Settlement Agreement and Mutual Release (Settlement Agreement).
2023-09-18	The Company entered into a Securities Purchase Agreement (Tekmovil SPA) to acquire control of Tekmovil Holdings LLC (Tekmovil).
2023-10-01	Effective October 1, 2023, but consummated on October 26, 2023, the Company entered into an Advisory Services Agreement to provide information technology advisory services.
2023-10-31	The Company entered into an Acquisition and Purchase Agreement with Geokall UK Ltd. (Geokall), a UK Limited Company, and its owners (Sellers) (altogether, the Parties) for all of the assets, liabilities, intellectual property, and technology of Geokall.
2024-04-22	The Amended Form 10-Q was originally filed with the Securities and Exchange Commission on April 22, 2024.
2025-02-07	Report signed.

Keywords

restatement, financial statements, derivative liability, debt conversion, Series E Preferred Stock, going concern, TPT Global Tech, financial results, Q3 2023

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