8-K/A - DTGI - Equibles

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Current Report Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

February 4, 2022

DigeratiTechnologies, Inc.

(Exact Name of Registrant as Specified in its Charter)

Nevada

(State or Other Jurisdiction of Incorporation)

001-15687	74-2849995
(Commission <br><br>File Number)	(IRS Employer <br><br>Identification No.)
825 W. Bitters, Suite 104, San Antonio, TX	78216
---	---
(Address of Principal Executive Offices)	(Zip Code)

(210) 614-7240

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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 pursuant to Section 13(a) of the Exchange Act. ☐

Explanatory Note

On February 10, 2022, Digerati Technologies, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Initial Form 8-K”) reporting under the completion of the acquisition of Next Level Internet, Inc., a California corporation (“Next Level”), by our majority owned subsidiary, T3 Communications, Inc., a Nevada corporation, via an Equity Purchase Agreement (the “Purchase Agreement”). This Amendment No. 1 to the Initial Form 8-K amends and supplements the Initial Form 8-K to include financial statements and pro forma financial information permitted to be filed by amendment.

Item 9.01 Financial Statements andExhibits

(a)Financial statements of businesses acquired

The audited balance sheets of Next Level as of July 31, 2021 and 2020, the related audited statements of operations, changes in stockholders’ deficit, and cash flows for the years ended July 31, 2021 and 2020, the notes related thereto and the Independent Auditor’s Report, are attached hereto as Exhibit 99.1, and incorporated herein by reference.

The unaudited balance sheet of Next Level as of October 31, 2021, the related unaudited statements of operations, changes in stockholders’ deficit, and cash flows for the three months ended October 31, 2021 and 2020, and the notes related thereto, are attached hereto as Exhibit 99.2, and incorporated herein by reference.

(b)Pro forma financial information

The unaudited pro forma consolidated balance sheet of the Company as of October 31, 2021, the unaudited pro forma consolidated statements of operations of the Company for the three months ended October 31, 2021, and for the year ended July 31, 2021, and the notes to the unaudited pro forma consolidated financial statements, all giving effect to the acquisition by the Company of Next Level’s assets, are attached hereto as Exhibit 99.3 and incorporated herein by reference.

(c) Exhibits.

Exhibit No.	Description
99.1	Audited financial statements of Next Level Internet, Inc., for the years ended July 31, 2020 and 2021.
99.2	Unaudited Financial Statements of Next Level Internet, Inc., as of October 31, 2021 and for the three months ended October 31, 2021, and 2020.
99.3	Unaudited Pro Forma Consolidated Balance Sheet of the Company as of October 31, 2021, Unaudited Pro Forma Consolidated Statements of Operations of the Company for the three months ended October 31, 2021, and the year ended July 31, 2021, and Notes to the Unaudited Pro Forma Consolidated Financial Statements, all giving effect to the Acquisition by the Company of Next Level Internet, Inc.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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.

Dated: February 11, 2022	Digerati Technologies, Inc.
	By:	/s/ Antonio Estrada Jr.
		Antonio Estrada Jr.,
		Chief Financial Officer

Exhibit 99.1

Next Level Internet, Inc.

Audited Financial Statements

As of and For the Years Ended July 31,2021 and 2020

Next Level Internet, Inc.

Table of Contents

July 31, 2021 and 2020

	Page
Independent Auditor’s Report	1
Financial Statements
Balance Sheets	2
Statements of Operations	3
Statements of Stockholders’ Deficit	4
Statements of Cash Flows	5
Notes to Financial Statements	6-19

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors

Next Level Internet, Inc.

We have audited the accompanying financial statements of Next Level Internet, Inc. (the “Company”), which comprise the balance sheets as of July 31, 2021 and 2020, and the related statements of operations, stockholders’ deficit, and cash flows for the years ended July 31, 2021 and 2020, and the related notes to the financial statements.

Management’s Responsibilityfor the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Next Level Internet, Inc. as of July 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Melville, New York

December 23, 2021

*Page 1*

Next Level Internet,Inc.

Balance Sheets


			2020
ASSETS
Current assets
Cash	735,041		$	1,215,122
Accounts receivables, net	611,466			509,669
Prepaid expenses and other current assets	493,008			427,129
Total current assets	1,839,515			2,151,920
Capitalized software, net	31,161			-
Property and equipment, net	1,334,418			1,188,733
Other assets	403,831			398,041
Right of use asset, net	1,377,218			1,628,944
	4,986,143		$	5,367,638
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable	284,538		$	359,064
Accrued expenses	834,217			649,802
Accrued taxes and penalties	4,275,334			3,230,650
Deferred revenue	1,233,515			1,003,082
Customer deposits	784,032			660,697
Equipment financing, current	41,559			46,662
Notes payable, related parties	555,600			400,000
Finance leases, current	17,226			20,159
Operating lease liability, current	288,524			265,268
Total current liabilities	8,314,545			6,635,384
Equipment financing	11,474			52,990
Finance leases	-			17,226
Operating lease liability	1,260,532			1,549,056
Paycheck protection program loan	-			685,600
	9,586,551			8,940,256
Stockholders' deficit
Common stock; 1 par value, 1,500 shares authorized and 1,500 shares issued and outstanding at July 31, 2021 and 2020	1,500			1,500
Additional paid-in capital	171,000			41,000
Accumulated deficit	(4,772,908	)		(3,615,118	)
Total stockholders' deficit	(4,600,408	)		(3,572,618	)
	4,986,143		$	5,367,638

All values are in US Dollars.

The accompanying notes are an integral part of these financial statements.

*Page 2*

Next Level Internet, Inc.

Statements of Operations

	Years Ended July 31,
	2021			2020
Revenues	$	11,565,757		$	10,080,090
Costs and expenses
Costs of revenues (exclusive of depreciation and amortization)		4,829,216			3,752,053
Operating expenses		7,459,954			7,251,647
Depreciation and amortization		391,958			268,079
Total costs and expenses		12,681,128			11,271,779
Operating loss		(1,115,371	)		(1,191,689	)
Other income (expense):
Interest expense		(37,795	)		(54,494	)
Other (expense) income		(4,624	)		13,367
Gain from extinguishment of debt		685,600			-
Total other income (expense)		643,181			(41,127	)
Net loss	$	(472,190	)	$	(1,232,816	)

The accompanying notes are an integral part of these financial statements.

*Page 3*

Next Level Internet, Inc.

Statements of Changes inStockholders' Deficit For the Years Ended July 31, 2021 and 2020

****	****		****		Additional		****		****	****		****
****	Common Stock				Paid-In		Accumulated		****	****		****
****	Shares		Value		Capital		Deficit		****	Total		****
Balance at August 1, 2019		1,500	$	1,500	$	41,000	$	(2,174,784	)	$	(2,132,284	)
Distributions		-		-		-		(207,518	)		(207,518	)
Net loss		-		-		-		(1,232,816	)		(1,232,816	)
Balance at July 31, 2020		1,500		1,500		41,000		(3,615,118	)		(3,572,618	)
Contributions		-		-		130,000		-			130,000
Distributions		-		-		-		(685,600	)		(685,600	)
Net loss		-		-		-		(472,190	)		(472,190	)
Balance at July 31, 2021		1,500	$	1,500	$	171,000	$	(4,772,908	)	$	(4,600,408	)

The accompanying notes are an integral part of these financial statements.

*Page 4*

Next Level Internet, Inc.

Statements of Cash Flows

	Years Ended July 31,
	2021			2020
Cash flows from operating activities
Net loss	$	(472,190	)	$	(1,232,816	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		391,958			268,079
Amortization of ROU asset - operating		251,726			242,829
Gain from extinguishment of debt		(685,600	)		-
Bad debt expense		50,058			(53,413	)
Changes in operating assets and liabilities:
Accounts receivable		(151,855	)		(76,377	)
Prepaid expenses and other current assets		(65,879	)		103,087
Related party note receivable		(5,790	)		(126,734	)
Accounts payable		(74,526	)		254,979
Accrued expenses		184,415			239,303
Accrued taxes and penalties		1,044,684			793,865
Deferred revenue		230,433			207,456
Customer deposits		123,335			98,315
Operating lease liability		(265,268	)		(119,774	)
Net cash provided by operating activities		555,501			598,799
Cash flows from investing activities
Capitalization of software development costs		(46,741	)		-
Purchase of property and equipment		(522,063	)		(705,348	)
Net cash used in investing activities		(568,804	)		(705,348	)
Cash flows from financing activities
Repayments of equipment financing		(46,619	)		(34,241	)
Repayments of notes payable, related parties		155,600			(300,000	)
Proceeds from notes payable, related parties		-			600,000
Proceeds from Paycheck Protection Program loan		-			685,600
Repayments on finance leases		(20,159	)		(18,698	)
Capital contributions		130,000			-
Capital distributions		(685,600	)		(207,518	)
Net cash (used in) provided by financing activities		(466,778	)		725,143
Net (decrease) increase in cash		(480,081	)		618,594
Cash, at beginning of year		1,215,122			596,528
Cash, at end of year	$	735,041		$	1,215,122
Supplemental information:
Interest expense paid in cash	$	37,795		$	54,494

The accompanying notes are an integral part of these financial statements.

*Page 5*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Next Level Internet, Inc. (the “Company”) is a leading provider of cloud-based Unified Communications as a Service (“UCaaS”) solutions, contact center, and managed connectivity services. The Company has a high-capacity network with nationwide reach and has nearly 1,000 customers across a diverse set of high-value sectors; target multi-location small and medium sized businesses and mid-market customers primarily through regionally focused channel partners.

Basis of Presentation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. As of July 31, 2021 and 2020, there were no cash equivalents.

*Page 6*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The Company applies fair value accounting for all financial assets and liabilities and non- financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Fair value is defined 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 which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

●	Level 1 applies to assets or liabilities for which there are<br>quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
●	Level 2 applies to assets or liabilities for which there are<br>inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, such<br>as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with<br>insufficient volume or infrequent transactions (less active markets).
---	---
●	Level 3 applies to assets or liabilities for which fair value<br>is derived from valuation techniques in which one or more significant inputs are unobservable, including the Company's own assumptions.
---	---

The estimated fair value of financial instruments is determined by the Company using available market information and valuation methodologies considered to be appropriate. At July 31, 2021, the carrying value of the Company’s accounts receivable, accounts payable, and accrued expenses approximated their fair values due to their short-term maturities.

*Page 7*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable

Accounts receivable consists of outstanding amounts due from the sale of products and services. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Accounts receivable are written off when they are determined to be uncollectible. The Company believes that an allowance for doubtful accounts of $27,660 and $127,017 at July 31, 2021 and 2020, respectively, is adequate based on historical experience. Credit losses, when realized, have been within the range of the Company’s expectations.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Replacements and major improvements are capitalized; maintenance and repairs are charged to expense as incurred.

Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets per the table below:

Customer premises equipment	5 years
Furniture and fixtures	7 years
Leasehold improvements	Shorter of useful life of asset or lease term
Software	3 years
Network equipment	5 years

Revenue Recognition

The Company accounts for revenues under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“Topic 606”). The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized utilizing the five-step process as prescribed by Topic 606:

●	identification of the contract, or contracts, with a customer;
●	identification of the performance obligations in the contract;
---	---
●	determination of the transaction price;
---	---
●	allocation of the transaction price to the performance obligations in the contract; and
---	---
●	recognition of revenue when, or as, the Company satisfies a performance obligation.
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*Page 8*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and represents the unit of account in applying the revenue recognition guidance provided by Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are satisfied over time as services are rendered or at a point in time depending on when the customer obtains control of the promised goods or services. Revenue is recognized when obligations under the terms of a contract with the customer are satisfied; generally, this occurs when services are rendered.

Revenues include revenues received from the sale of integrated cloud solutions and business services and is comprised of monthly recurring revenue (“MRRs”), usage charges, and professional services for configuration. MRRs include the fees paid by customers for services and are recognized over the period that the corresponding services are rendered to the customers. Usage and access charges are recognized monthly as services are provided. Professional services are primarily billed on a fixed-fee basis and revenue is recognized over time, generally as services are activated for the customer.

Deferred Revenue

Deferred revenue represents amounts billed to or collected from customers for which the related revenue has not been recognized because one or more of the performance obligations have not been met. The current portion of deferred revenue is expected to be recognized as revenue within 12 months from the balance sheet date.

Costs to Obtain a Customer Contact

Direct incremental costs of obtaining a contract, consisting of sales commissions, are deferred and amortized over the estimated life of the customer, which is currently 36 months. The Company calculates the estimated life of the customer on an annual basis. The Company classifies deferred commissions as prepaid expenses or other noncurrent assets based on the timing of when it expects to recognize the expense.

Customer Deposits

The Company in some instances requires customers to make a last month deposit to be applied to outstanding balances if services are cancelled. If the customer’s account is paid in full, the Company will refund the full deposit in the month following service termination.

*Page 9*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Costs of Revenues

Costs of revenues include bandwidth, colocation, infrastructure and install charges in connection with the Company’s UCaaS or cloud communication services. The bandwidth charges are incurred as part of the connectivity between the Company’s customers to allow them to access various services. The Company also incurs costs from underlying providers for fiber, internet broadband, and telecommunication circuits in connection with the Company’s data and connectivity solutions. Install costs include the installation of necessary equipment and professional services they may be incurred for engineering. All remaining charges are classified as infrastructure costs.

Capitalized Software

The Company complies with the guidance of ASC Topic 350-40, “Intangibles—Goodwill and Other—Internal Use Software”, in accounting for of its internally developed system projects that it utilizes to provide its services to customers. These system projects generally relate to software of the Company that is not intended for sale or otherwise marketed. Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. Once a project has reached the development stage, the Company capitalizes direct internal and external costs until the software is substantially complete and ready for its intended use. Costs for upgrades and enhancements are capitalized, whereas, costs incurred for maintenance are expensed as incurred. These capitalized software costs are amortized on a project-by project basis over the expected economic life of the underlying software on a straight-line basis, which is generally three years. Amortization commences when the software is available for its intended use.

Impairment of Long-Lived Assets

The Company reviews long lived assets, including property and equipment, capitalized software, and right of use assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. Recoverability measurement and estimating of undiscounted cash flows for assets to be held and used is done at the lowest possible levels for which there are identifiable cash flows. If the projected undiscounted cash flows are less than the carrying value, the amount of impairment, if any, recognized would be equal to the amount by which the carrying amount of the assets exceeds the fair value of the assets, which the Company would compute using a discounted cash flow approach. Assets to be disposed of are recorded at the lower of the carrying amount or fair value less costs to sell.

*Page 10*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts that are insured by the FDIC up to

$250,000. As of July 31, 2021, and 2020, the Company had $277,186 and $1,000,220, respectively, of uninsured cash balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Leases

The Company’s leases are accounted for under Financial Accounting Standards Board (“FASB”) ASC Topic 842, Leases (“Topic 842”). At inception of the arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present and whether the lease meets the classification criteria of a finance or operating lease. For operating leases with terms greater than 12 months, the Company records a right-of-use (“ROU”) asset and lease obligation at the present value of lease payments over the term using the implicit interest rate, when readily available, or its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Options to extend or terminate a lease are included in the calculation for the lease term to the extent the option is reasonably certain of exercise. The Company does not recognize ROU assets and lease liabilities for leases with terms at inception of twelve months or less. The Company recognizes the lease expense for operating leases on a straight-line basis in the statement of operations over the lease term.

Finance leases are included in property and equipment and equipment financing on the balance sheets. Finance leases are recorded as an asset and an obligation at an amount equal to the present value of the minimum lease payments during the lease term. Amortization and interest expense associated with finance leases are included in operating expenses and interest expense, respectfully, on the statements of operations.

Income Taxes

The Company has elected under the Internal Revenue Code and related state provisions to be an S-Corporation. In lieu of corporate income taxes, the stockholders of an S-Corporation are taxed at their proportionate share of the Company’s taxable income. Therefore, no provision or liability for Federal income taxes has been included in the financial statements.

*Page 11*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising

The Company expenses advertising costs as they are incurred. Advertising expense was $37,976 and $60,264 for the years ended July 31, 2021 and 2020, respectfully.

Liquidity

The Company has experienced operating and net losses for fiscal 2021 and fiscal 2020 and has relied on periodic loans from related parties and capital contributions to assist in funding its ongoing capital needs. As of July 31, 2021, the Company has an accumulated deficit of $4,772,908 and working capital deficit of $6,475,030. The Company continues to execute on a plan to achieve profitability and generated positive cash flows from operations for fiscal 2021 and fiscal 2020. In addition, the Company’s revenues increased in fiscal 2021 compared to fiscal 2020 while keeping operating expenses flat. As of July 31, 2021, the Company has $735,041 of cash on hand and during the year ended July 31, 2021, the Company paid $685,600 in capital distributions.

Based on the operating results of fiscal 2021 and management’s plans to continue to increase revenues and generate positive cash flows from operations, the accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern. The accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Subsequent Events

For the purposes of preparing these financial statements, the Company considered events through December 23, 2021, the date these financial statements were available for issuance. The following subsequent events were identified for disclosure:

On October 11, 2021, the Company and T3 Communications, Inc. (“T3”) entered into a non- binding letter of intent for a potential business combination between the companies (the “Letter of Intent”). Subject to the terms of the LOI, the total consideration for the combination is approximately $20 million, consisting of $14 million dollars of cash, $2.5 million in the form of an unsecured note payable, and $3.5 million of restricted stock. The merger consideration is subject to customary upward or downward adjustments for the Company’s net working capital and closing cash. The Company pursued the business combination and engaged in, among other things, due diligence, the execution of a definitive agreement, approval from its Board of Directors/shareholders, and other customary conditions. Both parties are pursuing the consummation of the contemplated business combination.

*Page 12*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Subsequent Events (Continued)

On October 8, 2021, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is up to $200,000, with proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of 3.75% per annum and installment payments, including principal and interest, are due monthly beginning eighteen months from the date of the EIDL Loan in the amount of $1,002. The balance of principal and interest is payable thirty years from the date of the promissory note. In connection with the EIDL Loan, the Company executed the EIDL Loan documents, which include the SBA Secured Disaster Loan Note, dated October 8, 2021, the Loan Authorization and Agreement, dated October 8, 2021, and the Security Agreement, dated October 8, 2021, each between the SBA and the Company.

PROPERTY AND EQUIPMENT

Property and equipment at July 31, 2021 and 2020 consists of the following:

****	2021		****	2020		****
Customer premises equipment	$	1,122,324		$	716,699
Leasehold improvements		343,642			343,642
Network equipment		327,473			272,704
Furniture and fixtures		191,664			191,664
Software		77,754			37,804
Total cost		2,062,857			1,562,513
Less: accumulated depreciation		(728,439	)		(373,780	)
Property and equipment, net	$	1,334,418		$	1,188,733

Depreciation expense was $376,378 and $268,079 for the years ended July 31, 2021 and 2020, respectively.

*Page 13*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

CAPITALIZED SOFTWARE

Capitalized software as of July 31, 2021 consists of the following:

****	2021		****
Software development costs	$	46,741
Less: accumulated amortization		(15,580	)
Capitalized software, net	$	31,161

There was no capitalized software as of July 31, 2020. Amortization of software development costs totaled $15,580 for the year ended July 31, 2021.

ACCRUED EXPENSES

The following is a summary of accrued expenses as of July 31, 2021 and 2020:

****	2021		2020
Accrued payroll	$	266,842	$	209,214
Accrued vacation		266,806		223,693
Accrued commissions		154,420		115,391
Accrued circuit costs		146,149		101,504
	$	834,217	$	649,802

*Page 14*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

PAYCHECK PROTECTION PROGRAM – LONG TERM

On April 17, 2020, the Company received a loan in the amount of $685,600 (“PPP Loan”) under the U.S. Small Business Administration’s Paycheck Protection Program (“PPP”) established under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) and related rules and regulations. The Company accounted for the PPP Loan as a financial liability in accordance with ASC Topic 470, Debt. The PPP Loan matures on 4/14/2022 and bears interest at a fixed rate of 1.00% per annum. Loan payments, which includes principal and interest, are deferred until 2/14/2023 which is 10 months after the loan forgiveness period.

Accordingly, the PPP Loan was recognized as long-term debt on the Company’s balance sheets. There is no prepayment penalty and under the terms of the PPP Loan, all or a portion of the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. With respect to any portion of the PPP Loan that is not forgiven, the PPP Loan would be subject to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults and breaches of the provisions of the PPP Loan.

On January 20, 2021, the PPP Loan was forgiven in whole, which included principal of

$685,600 and accrued interest of $0. The total amount forgiven of $685,600 is recorded as a gain from extinguishment of debt in the accompanying statements of operations.

EQUIPMENT FINANCING

At July 31, 2021 and 2020, equipment financing consisted of the following:

		****	2020		****
Equipment loan 1, entered into in January 2019, includes total financed amount of 107,750 payable in monthly installments of 2,658 for 48 months. Interest at 8.54% per annum. The equipment loan was provided to purchase certain furniture and fixtures and is secured by the assets purchased.	42,427		$	69,391
Equipment loan 2, entered into in January 2019, includes total financed amount of 56,226 payable in monthly installments of 1,821 for 36 months. Interest at 10.25% per annum. The equipment loan was provided to purchase certain furniture and fixtures and is secured by the assets purchased.	10,606			30,261
	53,033			99,652
Less: Current portion of equipment financing	(41,559	)		(46,662	)
Long-term debt	11,474		$	52,990

All values are in US Dollars.

*Page 15*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

EQUIPMENT FINANCING (Continued)

The Company incurred interest expense related to the equipment loans in the amount of $7,654 and $11,189 for the years ended July 31, 2021 and 2020, respectively.

Equipment financing maturities are as follows:

Year ending July 31,
2022	$	41,559
2023		11,474
	$	53,033

RELATED PARTY TRANSACTIONS

During the years ended July 31, 2021 and 2020, The Company entered into unsecured promissory notes with certain shareholders to provide the Company with liquidity. Interest rates for the related party unsecured promissory notes ranged from 5% to 15%. All outstanding balances at July 31, 2021 included interest rates of 5%. The outstanding principal balances are past due and included as current liabilities in the accompanying balance sheet. No default interest or late payment fees have been assessed during the years ended July 31, 2021 and 2020.

The Company incurred interest expense related to the related party promissory notes in the amount of $29,260 and $42,333 for the years ended July 31, 2021 and 2020, respectively, which have been included in interest expense on the statements of operations.

REVENUES

Revenue by major product offerings for the years ended July 31, 2021 and 2020 are as follows:

Major Product Offerings:	2021		2020
Broadband services	$	6,220,657	$	5,000,355
Cloud hosted voice services		4,796,499		4,561,399
Colocation services		485,574		457,785
Other		63,027		60,551
	$	11,565,757	$	10,080,090

The Company's contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. As of July 31, 2021, and 2020, the deferred revenue balance was $1,233,515 and $1,003,082 respectively. The full amount of the deferred revenue balance as of July 31, 2021 is expected to be performed within 12 months and consist of consideration that is contractually due in advance of providing the product or performing the services.

*Page 16*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

INCOME TAXES

The Company, with stockholders’ consent, has elected to be taxed as an S-Corporation under the provisions of the Internal Revenue Code and comparable state income tax law. As a result, the Company is not subject to Federal income taxes in the years ended July 31, 2021 and 2020. Consequently, the stockholders are liable for individual Federal and State income taxes on their proportionate shares of the Company’s taxable income.

Accounting for Income Taxes, prescribes guidance regarding the minimum recognition threshold an income tax position is required to meet before being recognized in the consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more-likely-than-not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more-likely-than-not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. The Company records income tax related interest and penalties as a component of the provision for income tax expense.

The income tax position taken by the Company for the years 2018 through 2021 remaining open under the various statutes of limitations is that the Company continues to be exempt from income taxes by virtue of its being an S-Corporation pass-through entity. Management believes this tax position meets the more-likely-than-not threshold and, accordingly, the tax benefits of this income tax position (no Federal income tax expense or liability) has been recognized for the years ended on or before July 31, 2021.

The Company believes that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12 months of the reporting date.

LEASES

The Company leases a corporate office building under an operating lease through March 2026. Rent expense on the Company’s operating leases for the years ended July 31, 2021 and 2020 was $336,470. The Company leases equipment and vehicles under finance lease agreements through September 2022. The outstanding balance for finance leases as of July 31, 2021 and 2020 was $17,226 and $37,385, respectively. The Company recorded assets classified as property equipment under finance lease obligations of $69,536 as of July 31, 2021 and 2020. Related accumulated depreciation totaled $52,052 and $32,477 as of July 31, 2021 and 2020, respectively. Because none of the Company’s leases included an implicit rate of return, the Company’s incremental secured borrowing rate was used based on lease term information available as of the lease commencement date in determining the present value of lease payments. The incremental borrowing rate on the leases is 5.0%.

*Page 17*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

LEASES (Continued)

The maturity of operating and finance lease liabilities as of July 31, 2021 are as follows:

Year ending July 31,	Operating Leases		****	Finance Leases		****
2022	$	359,478		$	17,672
2023		369,229			-
2024		379,272			-
2025		389,617			-
2026		244,433			-
Total minimum lease payments		1,742,029			17,672
Less: imputed interest		(192,973	)		(446	)
Present value of lease liabilities		1,549,056			17,226
Less: current lease liabilities		(288,524	)		(17,226	)
Long-term lease liabilities	$	1,260,532		$	-
Lease term and discount rate	July 31, 2021		****
---	---	---	---
Weighted-average remaining lease term (years)
Operating leases		4.7
Finance leases		1.0
Weighted-average discount rate
Operating leases		5.0	%
Finance leases		5.0	%

11. COMMITMENTS AND CONTINGENCIES

Contingencies

The Company acts as a collection agent for various government authorities, including but not limited to the Federal Communications Commissions (“FCC”), state authorities such as the California Public Utilities Commission (“PUC”), and other state and local taxes including the California Utility User Tax (“UUT”). The Company performed a review of the regulatory classification of its services and its federal and state regulatory and transactional tax obligations and determined the Company understated its remittances. At July 31, 2021 and 2020, the Company’s outstanding aggregate tax remittance liability, including penalties and interest, was $4,275,334 and $3,230,650, respectively, and is included as accrued taxes and penalties on the accompanying balance sheets.

*Page 18*

Next Level Internet, Inc.

Notes to Financial Statements July31, 2021 and 2020

COMMITMENTS AND CONTINGENCIES (Continued) Other Commitments

In the normal course of business, the Company enters into contracts and agreements that may contain representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made in the future but have not yet been made. The Company has not paid any material settlement amounts related to indemnification obligations to date. In accordance with its bylaws and certain agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date under these indemnification obligations. In addition, the Company is involved in litigation incidental to the conduct of its business. The Company is not a party to any other lawsuit or proceeding that, in the opinion of management, is probable to have a material adverse effect on its financial position, results of operations or cash flows.

EMPLOYEE BENEFIT PLANS

The Company sponsors a 401(k) plan for eligible employees. The Company matches 100% of the first 4% of eligible compensation that is deferred by employees. Employees are fully vested in matching contributions. Contributions to the plan totaled $109,840 and $120,151 for the years ended July 31, 2021 and 2020, respectively.

EFFECTS OF COVID-19 PANDEMIC

In December 2019, a novel strain of coronavirus was reported in Wuhan, China. The World Health Organization has declared the outbreak to constitute a “Public Health Emergency of International Concern.” The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on customers, employees and vendors all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19, including emerging variants, may impact the Company’s financial condition or results of operations is uncertain.

In response to COVID-19, the Company put into place certain restrictions, requirements and guidelines to protect the health of its employees and customers. Also, to protect the health and safety of its employees, the Company’s daily execution has evolved into a largely virtual model. The Company plans to continue to monitor the current environment and may take further actions that may be required by federal, state or local authorities or that it determines to be in the interest of its employees, customers, and partners.

Page 19

Exhibit99.2

Next Level Internet, Inc.

FinancialStatements

Asof October 31, 2021 and July 31, 2021

andfor the three months ended October 31, 2021 and 2020

Next Level Internet, Inc.

Tableof Contents

	Page
Independent Accountant’s Review Report	1
Financial Statements
Balance Sheets	2
Statements of Operations	3
Statements of Stockholders’ Deficit	4
Statements of Cash Flows	5
Notes to Financial Statements	6-19

INDEPENDENTACCOUNTANT’S REVIEW REPORT

To the Board of Directors

Next Level Internet, Inc.

We have reviewed the accompanying financial statements of Next Level Internet, Inc. (the “Company”), which comprise the balance sheet as of October 31, 2021, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the three months ended October 31, 2021 and 2020, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management’sResponsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Accountant’sResponsibility

Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountant’sConclusion

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

OtherMatter – Report on 2021 Financial Statements

The July 31, 2021 balance sheet was audited by us, and we expressed an unmodified opinion on it in our report dated December 23, 2021. We have not performed any auditing procedures since that date.

Melville, NY

January 11, 2022

Next Level Internet, Inc.

Balance Sheets

			July<br> 31,
			2021
ASSETS
Current<br> assets
Cash	758,162		$	735,041
Accounts<br> receivables, net	559,014			611,466
Prepaid<br> expenses and other current assets	524,935			493,008
Total<br> current assets	1,842,111			1,839,515
Capitalized<br> software, net	27,266			31,161
Property<br> and equipment, net	1,299,163			1,334,418
Other<br> assets	386,365			403,831
Right<br> of use asset, net	1,312,176			1,377,218
	4,867,081		$	4,986,143
LIABILITIES<br> AND STOCKHOLDERS’ DEFICIT
Current<br> liabilities
Accounts<br> payable	300,347		$	284,538
Accrued<br> expenses	819,600			834,217
Accrued<br> taxes and penalties	4,552,303			4,275,334
Deferred<br> revenue	1,269,907			1,233,515
Customer<br> deposits	827,800			784,032
Equipment<br> financing, current	35,407			41,559
Notes<br> payable, related parties	300,000			555,600
Finance<br> leases, current	11,972			17,226
Operating<br> lease liability, current	294,546			288,524
Total<br> current liabilities	8,411,882			8,314,545
Equipment<br> financing	5,273			11,474
Operating<br> lease liability	1,185,309			1,260,532
Economic<br> injury disaster loan	200,000			-
	9,802,464			9,586,551
Stockholders’<br> deficit
Common<br> stock; 1 par value, 1,500 shares authorized and 1,500 shares issued and outstanding at October 31, 2021 and July 31, 2021, respectively	1,500			1,500
Additional paid-in capital	171,000			171,000
Accumulated<br> deficit	(5,107,883	)		(4,772,908	)
Total<br> stockholders’ deficit	(4,935,383	)		(4,600,408	)
	4,867,081		$	4,986,143

All values are in US Dollars.

The accompanying notes are an integral part of these financial statements.

*Page 2*

Next Level Internet, Inc.

Statements of Operations

(Unaudited)

	Three<br> Months Ended <br><br> October 31,
	2021			2020
Revenues	$	3,253,088		$	2,637,632
Costs and expenses
Costs<br> of revenues (exclusive of depreciation and amortization)		1,377,143			999,499
Operating<br> expenses		2,086,289			1,652,364
Depreciation<br> and amortization		113,716			86,718
Total<br> costs and expenses		3,577,148			2,738,581
Operating loss		(324,060	)		(100,949	)
Other expense:
Interest expense		9,887			5,935
Other<br> expense		1,028			1,117
Total<br> other expense		10,915			7,052
Net loss	$	(334,975	)	$	(108,001	)

The accompanying notes are an integral part of these financial statements.

*Page 3*

Next Level Internet, Inc.

Statements of Changes in Stockholders’ Deficit

(Unaudited)

For the Three Months Ended October 31, 2021 and 2020

****	Common Stock			Additional<br> Paid-In	Accumulated	****		****
****	Shares		Value	Capital	Deficit	****	Total	****
Balance at August 1, 2020	1,500		1,500	41,000	(3,615,118)		(3,572,618)
Net<br> loss		-				)		)
Balance at October 31,<br> 2020 (unaudited)		1,500				)		)
Balance at August 1, 2021		1,500				)		)
Net<br> loss		-				)		)
Balance at October 31,<br> 2021 (unaudited)		1,500				)		)

All values are in US Dollars.

The accompanying notes are an integral part of these financial statements.

*Page 4*

Next Level Internet, Inc.

Statements of Cash Flows

(Unaudited)

	Three<br> Months Ended <br><br> October 31,
	2021			2020
Cash flows<br> from operating activities
Net loss	$	(334,975	)	$	(108,001	)
Adjustments<br> to reconcile net loss to net cash provided by operating activities:
Depreciation<br> and amortization		113,716			86,718
Amortization<br> of ROU asset - operating		65,042			61,703
Bad debt<br> expense		9,712			(18,566	)
Changes in operating assets<br> and liabilities:
Accounts<br> receivable		42,740			(16,082	)
Prepaid<br> expenses and other current assets		(31,927	)		(45,974	)
Other<br> assets		17,466			20,204
Accounts<br> payable		15,809			63,819
Accrued<br> expenses		(14,617	)		19,540
Accrued<br> taxes and penalties		276,969			243,837
Deferred<br> revenue		36,392			21,104
Customer<br> deposits		43,768			8,526
Operating<br> lease liability		(69,201	)		(63,542	)
Net<br> cash provided by operating activities		170,894			273,286
Cash flows<br> from investing activities
Capitalization<br> of software development costs		-			(46,741	)
Purchase<br> of property and equipment		(74,566	)		(102,986	)
Net<br> cash used in investing activities		(74,566	)		(149,727	)
Cash flows<br> from financing activities
Repayments<br> of equipment financing		(12,353	)		(11,281	)
Repayments<br> of notes payable, related parties		(255,600	)		(200,000	)
Proceeds<br> from economic injury disaster loan		200,000			-
Repayments<br> on finance leases		(5,254	)		(4,870	)
Net<br> cash used in financing activities		(73,207	)		(216,151	)
Net increase (decrease) in<br> cash		23,121			(92,592	)
Cash,<br> at beginning of period		735,041			1,215,122
Cash,<br> at end of period	$	758,162		$	1,122,530
Supplemental<br> information:
Interest<br> expense paid in cash	$	7,572		$	5,935

The accompanying notes are an integral part of these financial statements.

*Page 5*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020 (Unaudited)

1.	NATUREOF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

On October 11, 2021, the Company and T3 Communications, Inc. (“T3”) entered into a non- binding letter of intent for a potential business combination between the companies (the “Letter of Intent”). Subject to the terms of the LOI, T3 will acquire 100% of the Company for a total of $20 million, consisting of $14 million of cash, $2.5 million in the form of an unsecured note payable, and $3.5 million of restricted stock. The merger consideration is subject to customary upward or downward adjustments for the Company’s net working capital and closing cash. On January 3, 2022, the Company and T3 executed an amendment to the non-binding letter of intent to extend the exclusivity period to January 21, 2022 and amend the purchase price to $17.3 million, consisting of $13.3 million in cash, $2 million in the form of an unsecured convertible promissory notes, and $2 million in the form of unsecured adjustable promissory notes.

Basis of Presentation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting). Accordingly, these statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended July 31, 2021.

In the opinion of the management, the accompanying unaudited financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The Company’s unaudited financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s financial statements as of and for the year ended July 31, 2021. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year.

The financial information as of July 31, 2021 presented in the unaudited financial statements is derived from the audited financial statements as of and for the year ended July 31, 2021.

*Page 6*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020 (Unaudited)

1.	NATUREOF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. As of October 31, 2021 and 2020, there were no cash equivalents.

Fair Value of Financial Instruments

●	Level<br> 1 applies to assets or liabilities for which there are quoted prices in active markets for<br> identical assets or liabilities that the Company has the ability to access at the measurement<br> date.
●	Level<br> 2 applies to assets or liabilities for which there are inputs other than quoted prices included<br> in Level 1 that are observable for the asset or liability, either directly or indirectly,<br> such as quoted prices for similar assets or liabilities in active markets; quoted prices<br> for identical assets or liabilities in markets with insufficient volume or infrequent transactions<br> (less active markets).
---	---
●	Level<br> 3 applies to assets or liabilities for which fair value is derived from valuation techniques<br> in which one or more significant inputs are unobservable, including the Company’s own assumptions.
---	---

*Page 7*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

1.	NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

FairValue of Financial Instruments (Continued)

The estimated fair value of financial instruments is determined by the Company using available market information and valuation methodologies considered to be appropriate. At October 31, 2021, the carrying value of the Company’s accounts receivable, accounts payable, and accrued expenses approximated their fair values due to their short-term maturities.

Accounts Receivable

Accounts receivable consists of outstanding amounts due from the sale of products and services. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Accounts receivable are written off when they are determined to be uncollectible. The Company believes that an allowance for doubtful accounts of $48,718 and $27,660 at October 31, 2021 and July 31, 2021, respectively, is adequate based on historical experience. Credit losses, when realized, have been within the range of the Company’s expectations.

Property and Equipment

Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets per the table below:

Customer premises equipment	5 years
Furniture and fixtures	7 years
Leasehold improvements	Shorter of useful life of asset or lease term
Software	3 years
Network equipment	5 years

Revenue Recognition

The Company accounts for revenues under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers(“Topic 606”). The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized utilizing the five-step process as prescribed by Topic 606:

*Page 8*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

1.	NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition (Continued)

●	identification<br> of the contract, or contracts, with a customer;
●	identification<br> of the performance obligations in the contract;
---	---
●	determination<br> of the transaction price;
---	---
●	allocation<br> of the transaction price to the performance obligations in the contract; and
---	---
●	recognition<br> of revenue when, or as, the Company satisfies a performance obligation.
---	---

Deferred Revenue

Costs to Obtain a Customer Contact

*Page 9*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

1.	NATUREOF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

CustomerDeposits

Costs of Revenues

Capitalized Software

Impairment of Long-Lived Assets

*Page 10*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

1.	NATUREOF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment of Long-Lived Assets (Continued)

If the projected undiscounted cash flows are less than the carrying value, the amount of impairment, if any, recognized would be equal to the amount by which the carrying amount of the assets exceeds the fair value of the assets, which the Company would compute using a discounted cash flow approach. Assets to be disposed of are recorded at the lower of the carrying amount or fair value less costs to sell.

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts that are insured by the FDIC up to $250,000. As of October 31, 2021 and July 31, 2021, the Company had $340,135 and $277,186, respectively, of uninsured cash balances. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Leases

*Page 11*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

1.	NATUREOF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

Advertising

The Company expenses advertising costs as they are incurred. Advertising expense was $33,645 and $8,592 for the three months ended October 31, 2021 and 2020, respectfully.

Liquidity

The Company has experienced operating and net losses for the three month periods ended October 31, 2021 and 2020 and has relied on periodic loans from related parties and capital contributions to assist in funding its ongoing capital needs. As of October 31, 2021, the Company has an accumulated deficit of $5,120,038 and working capital deficit of $6,581,926 The Company continues to execute on a plan to achieve profitability and generated positive cash flows from operations for the three month periods ended October 31, 2021 and 2020. In addition, the Company’s revenues increased in the three months ended October 31, 2021 compared to the three months ended October 31, 2020 and the Company secured an Economic Injury Disaster Loan in the amount of $200,000 in October 2021 (see Note 5). As of October 31, 2021, the Company has $758,162 of cash on hand.

Based on the operating results of the three months ended October 31, 2021 and management’s plans to continue to increase revenues and generate positive cash flows from operations, the accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern. The accompanying financial statements have been prepared on a basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Subsequent Events

For the purposes of preparing these financial statements, the Company considered events through January 11, 2021, the date these financial statements were available for issuance.

*Page 12*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

2.	PROPERTY<br>AND EQUIPMENT

Property and equipment consist of the following at:

****	October 31, 2021		****	July 31, 2021		****
Customer premises<br> equipment	$	1,196,890		$	1,122,324
Leasehold improvements		343,642			343,642
Network equipment		327,473			327,473
Furniture and fixtures		191,664			191,664
Software		77,754			77,754
Total<br> cost		2,137,423			2,062,857
Less:<br> accumulated depreciation		(838,260	)		(728,439	)
Property<br> and equipment, net	$	1,299,163		$	1,334,418

Depreciation expense was $109,821 and $85,420 for the three months ended October 31, 2021 and 2020, respectively.

3.	CAPITALIZEDSOFTWARE

Capitalized software consist of the following at:

****	October 31, 2021		****	July 31, 2021		****
Software development<br> costs	$	46,741		$	46,741
Less:<br> accumulated amortization		(19,475	)		(15,580	)
Capitalized<br> software, net	$	27,266		$	31,161

Amortization of software development costs totaled $3,895 and $1,298 for the three months ended October 31, 2021 and 2020, respectively.

4.	ACCRUEDEXPENSES

Accrued expenses consisted of the following at:

****	October 31, 2021		July 31, 2021
Accrued payroll	$	255,152	$	266,842
Accrued vacation		264,412		266,806
Accrued commissions		144,659		154,420
Accrued circuit costs		155,377		146,149
	$	819,600	$	834,217

*Page 13*

NextLevel Internet, Inc.

Notes to Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020 (Unaudited)

5.	ECONCOMIC<br>INJURY DISASTER LOAN

On October 8, 2021, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan is up to $200,000, with proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of 3.75% per annum and installment payments, including principal and interest, are due monthly beginning eighteen months from the date of the EIDL Loan in the amount of $1,002. All payments will first be applied to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied to the principal. The balance of principal and interest is payable thirty years from the date of the promissory note. As the Company will not make payments against principal until 2023, the entire balance was classified as a long-term liability in the accompanying balance sheet.

At October 31, 2021, the EIDL matures as follows:

Year ending<br> July 31,
2026	$	4,212
Thereafter		195,788
	$	200,000
6.	RELATED<br>PARTY TRANSACTIONS
---	---

The Company entered into various unsecured promissory notes with certain shareholders to provide the Company with liquidity. Interest rates for the related party unsecured promissory notes ranged from 5% to 15%. All outstanding balances at October 31, 2021 included interest rates of 5%. The outstanding principal balances are past due and included as current liabilities in the accompanying balance sheet. No default interest or late payment fees have been assessed during the three months ended October 31, 2021 and 2020.

The Company incurred interest expense related to the related party promissory notes in the amount of $8,612 and $3,333 for the three months ended October 31, 2021 and 2020, respectively, which have been included in interest expense on the statements of operations.

*Page 14*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

7.	EQUIPMENT<br>FINANCING

Equipment financing consisted of the following:

		****	July 31, 2021		****
Equipment<br> loan 1, entered into in January 2019, includes total financed amount of 107,750 payable in monthly installments of 2,658 for 48<br> months. Interest at 8.54% per annum. The equipment loan was provided to purchase certain furniture and fixtures and is secured by<br> the assets purchased.	36,956		$	42,427
Equipment<br> loan 2, entered into in January 2019, includes total financed amount of 56,226 payable in monthly installments of 1,821 for 36<br> months. Interest at 10.25% per annum. The equipment loan was provided to purchase certain furniture and fixtures and is secured by<br> the assets purchased.	3,724			10,606
	40,680			53,033
Less:<br> Current portion of equipment financing	(35,407	)		(41,559	)
Long-term<br> debt	5,273		$	11,474

All values are in US Dollars.

The Company incurred interest expense related to the equipment loans in the amount of $1,082 and $2,154 for the three months ended October 31, 2021 and 2020, respectively.

Equipment financing maturities are as follows:

Year<br> ending July 31,
2022 (9 months)	$	27,671
2023		13,009
	$	40,680

*Page 15*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

8.	REVENUES

Revenue by major product offerings for the three months ended October 31, 2021 and 2020 are as follows:

Major Product Offerings:	2021		2020
Broadband services	$	1,803,539	$	1,366,731
Cloud hosted voice services		1,315,162		1,141,231
Colocation services		127,800		115,873
Other		6,587		13,797
	$	3,253,088	$	2,637,632

The Company’s contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. As of October 31, 2021 and July 31, 2021, the deferred revenue balance was $1,269,907 and $1,233,515 respectively. The full amount of the deferred revenue balance as of October 31, 2021 is expected to be performed within 12 months and consist of consideration that is contractually due in advance of providing the product or performing the services.

9.	INCOME<br>TAXES

The Company, with stockholders’ consent, has elected to be taxed as an S-Corporation under the provisions of the Internal Revenue Code and comparable state income tax law. As a result, the Company is not subject to Federal income taxes in the three months ended October 31, 2021 and 2020. Consequently, the stockholders are liable for individual Federal and State income taxes on their proportionate shares of the Company’s taxable income.

*Page 16*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

9.	INCOME<br>TAXES (Continued)

The Company believes that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12 months of the reporting date.

10.	LEASES

The Company leases a corporate office building under an operating lease through March 2026. Rent expense on the Company’s operating leases for the three months ended October 31, 2021 and 2020 was $84,117. The Company leases equipment and vehicles under finance lease agreements through September 2022. The outstanding balance for finance leases as of October 31, 2021 and July 31, 2021 was $11,972 and $17,226, respectively. The Company recorded assets classified as property equipment under finance lease obligations of $69,536 as of October 31, 2021 and July 31, 2021. Related accumulated depreciation totaled $56,911 and $52,052 as of October 31, 2021 and July 31, 2021, respectively. Because none of the Company’s leases included an implicit rate of return, the Company’s incremental secured borrowing rate was used based on lease term information available as of the lease commencement date in determining the present value of lease payments. The incremental borrowing rate on the leases is 5.0%.

The maturity of operating and finance lease liabilities as of October 31, 2021 are as follows:

Year ending July 31,	Operating Leases		****	Finance Leases		****
2022 (9 months)	$	271,202		$	12,224
2023		369,229			-
2024		379,272			-
2025		389,617			-
2026		244,433			-
Total minimum lease payments		1,653,753			12,224
Less:<br> imputed interest		(173,898	)		(252	)
Present value of lease liabilities		1,479,855			11,972
Less:<br> current lease liabilities		(294,546	)		(11,972	)
Long-term<br> lease liabilities	$	1,185,309		$	-
Lease term and discount rate	October 31, 2021		****
---	---	---	---
Weighted-average remaining<br> lease term (years)
Operating<br> leases		4.4
Finance<br> leases		0.8
Weighted-average discount<br> rate
Operating<br> leases		5.0	%
Finance<br> leases		5.0	%

*Page 17*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020

(Unaudited)

11.	COMMITMENTS<br>AND CONTINGENCIES

Contingencies

The Company acts as a collection agent for various government authorities, including but not limited to the Federal Communications Commissions (“FCC”), state authorities such as the California Public Utilities Commission (“PUC”), and other state and local taxes including the California Utility User Tax (“UUT”). The Company performed a review of the regulatory classification of its services and its federal and state regulatory and transactional tax obligations and determined the Company understated its remittances. At October 31, 2021 and July 31, 2021, the Company’s outstanding aggregate tax remittance liability, including penalties and interest, was $4,552,303 and $4,275,334, respectively, and is included as accrued taxes and penalties on the accompanying balance sheets.

Other Commitments

12.	EMPLOYEE<br>BENEFIT PLANS

The Company sponsors a 401(k) plan for eligible employees. The Company matches 100% of the first 4% of eligible compensation that is deferred by employees. Employees are fully vested in matching contributions. Contributions to the plan totaled $28,196 and $26,452 for the three months ended October 31, 2021 and 2020, respectively.

*Page 18*

NextLevel Internet, Inc.

Notesto Financial Statements

Forthe Three Months Ended October 31, 2021 and 2020 (Unaudited)

13.	EFFECTS<br>OF COVID-19 PANDEMIC

Page19

Exhibit 99.3

DIGERATI TECHNOLOGIES,INC. AND NEXT LEVEL INTERNET, INC.

Unaudited Pro Forma ConsolidatedBalance Sheet

and

Unaudited Pro FormaConsolidated Statements of Operations

On February 4, 2022, our indirect, wholly owned subsidiary, T3 Communications, Inc., a Nevada corporation (“T3 Nevada”, “T3”), executed and closed on a Equity Purchase Agreement (the “Equity Purchase Agreement”) with Next Level Internet, Inc., a California Corporation (“NLI”, “Next Level”, “Next Level Internet”, “Seller”).

Pursuant to the Stock Purchase Agreement, T3 acquired the customer base, equipment, certain intellectual property, inventory, contract rights, software and other licenses and miscellaneous assets used in connection with the operation of Seller’s communications business, including but not limited to subscriber-based Interconnected Voice Over Internet Protocol communication services (“I-VoIP”), Unified Cloud Communications Services (“UCCS”), and Internet Protocol Private Branch Exchange (“IP-PBX”) based systems of telephony.

The total purchase price is up to $12.90 million consisting of: (i) $8.9 million in cash which includes payoff of certain indebtedness held at closing by Next Level and certain transaction expenses; (ii) unsecured promissory notes in the aggregate principal amount of $2 million issued by T3 to the Sellers (the “Unsecured Notes”) with such notes payable in eight equal quarterly installments in the aggregate amount of $250,000.00 each starting on June 4, 2022 through and including March 7, 2024. The amount owed is subject to change based on certain revenue milestones needing to be met by Next Level; and (iii) unsecured convertible promissory notes (the “Convertible Notes”) in the aggregate principal amount of $2 million issued by T3 to the Sellers with such notes payable in eight equal quarterly installments in the aggregate amount of $250,000.00 each starting on April 30, 2022 through and including January 31, 2024. The Sellers have a onetime right to convert all or a portion of the Convertible Notes commencing on the six-month anniversary of the notes being issued and ending 30 days after such six-month anniversary. The conversion price is the volume weighted average price per share for the ten (10) consecutive trading days immediately preceding the date on which a conversion notice is received by T3.

T3 paid $8.9 million in cash to the Sellers on the closing date of February 4, 2022.

In addition, 120 days after the closing of the transaction, T3 will pay the Sellers the amount by which net working capital deficit is better than $2.16 million or the Sellers will pay T3 the amount by which net working capital deficit is worse than $2.36 million.

The unaudited pro forma condensed consolidated financial information presented below has been prepared on the basis set forth in the notes below and have been presented to illustrate the estimated effects of the Next Level Internet acquisition. The Next Level Internet acquisition is being accounted for as a business combination using the acquisition method with the Company as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

The historical financial information of the Company has been derived from the unaudited consolidated financial statements of the Company as of October 31, 2021, as found in Form 10Q which was filed with the Securities and Exchange Commissions on December 14, 2021.

The historical financial information of Next Level Internet has been derived from the unaudited financial statements of the Seller as of and for the three months ended October 31, 2021, included in Exhibit 99.2 to the Company’s Form 8-K/A filed with the SEC on February 11, 2022.

The historical financial information of the Company has been derived from the audited consolidated financial statements of the Company as of July 31, 2021, as found in Form 10K which was filed with the Securities and Exchange Commissions on October 26, 2021.

The historical financial information of Next Level Internet has been derived from the audited financial statements of the Seller for the year ended July 31, 2021, included in Exhibit 99.1 to the Company’s Form 8-K/A filed with the SEC on February 11, 2022.

The following unaudited pro forma consolidated balance sheet as of October 31, 2021, and the unaudited pro forma consolidated statement of operations for the three months ended October 31, 2021, and twelve months ended July 31, 2021 (collectively, the “Pro Forma Statements”) have been prepared in compliance with the requirements of SEC Regulation S-X Article 11 using accounting policies in accordance with U.S. GAAP.

The pro forma adjustments presented below are based on preliminary estimates and currently available information and assumptions that management believes are reasonable and appropriate under the circumstances and are factually supported based on information currently available. The notes to the unaudited pro forma condensed consolidated financial information provide a discussion of how such adjustments were derived and presented in the Pro Forma Statements. Changes in facts and circumstances or discovery of new information may result in revised estimates. As a result, there may be material adjustments to the Pro Forma Statements. Certain historical financial statement caption amounts for Next Level Internet have been reclassified or combined to conform to presentation and the disclosure requirements of the combined company.

DIGERATI TECHNOLOGIES, INC. AND NEXT LEVEL INTERNET, INC.

Unaudited Pro Forma Consolidated Balance Sheet

(In thousands)

Asof October 31, 2021


			Next Level			Pro Forma					Pro Forma
			Internet			Adjustments			Note 3		Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	1,646		$	758		$	(502	)		(a)	$	1,902
Accounts receivable, net	471			559			-					1,030
Prepaid and other current assets	218			525			-					743
Total current assets	2,335			1,842			(502	)				3,675
LONG-TERM ASSETS:
Intangible assets, net	8,093			-			14,270			(b)		22,363
Goodwill, net	3,931			-			3,567			(c)		7,498
Property and equipment, net	499			1,299			-					1,798
Other assets	79			414			-					493
Investment in Itellum	185			-			-					185
Right-of-use asset	822			1,312			-					2,134
Total assets	15,944		$	4,867		$	17,335				$	38,146
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable	1,937		$	300			-				$	2,237
Accrued liabilities	2,703			5,372			-					8,075
Equipment financing	28			47			-					75
Convertible note payable, current, net 212	1,477			-			1,000			(a)		2,477
Note payable, current, net 286	3,438			-			1,000			(a)		4,438
Note payable, current, related party, net 0	1,000			300			(300	)		(d)		1,000
Deferred income	3			2,098			-					2,101
Derivative liability	12,340			-			-					12,340
Operating lease liability, current	478			295			-					773
Total current liabilities	23,404			8,412			1,700					33,516
LONG-TERM LIABILITIES:
Convertible note payable	-			-			1,000			(a)		1,000
Notes payable	-			-			1,000			(a)		1,000
Note payable, net 4,293	6,727			-			8,900			(e)		15,627
Note payable				200			(200	)		(d)
Equipment financing	-			5			-					5
Operating lease liability	344			1,185			-					1,529
Total long-term liabilities	7,071			1,390			10,700					19,161
Total liabilities	30,475			9,802			12,400					52,677
Commitments and contingencies
STOCKHOLDERS’ DEFICIT:
Preferred stock, 0.001, 50,000,000 shares authorized
Convertible Series A Preferred stock, 0.001, 1,500,000 shares designated, 225,000 issued and outstanding	-			-			-					-
Convertible Series B Preferred stock, 0.001, 1,000,000 shares designated, 425,442 issued and outstanding	-			-			-					-
Convertible Series C Preferred stock, 0.001, 1,000,000 shares designated, 55,400 issued and outstanding	-			-			-					-
Series F Super Voting Preferred stock, 0.001, 100 shares designated, 100 issued and outstanding	-			-			-					-
Common stock, 0.001, 150,000,000 shares authorized, 139,138,039 issued and outstanding (25,000,000 reserved in Treasury)	139			-			-					139
Additional paid in capital	89,157			173			(173	)		(f)		89,157
(Accumulated deficit) Retained earnings	(102,956	)		(5,108	)		5,108			(f)		(102,956	)
Other comprehensive income	1			-			-					1
Total Digerati’s stockholders’ deficit	(13,659	)		(4,935	)		4,935					(13,659	)
Noncontrolling interest	(872	)		-			-					(872	)
Total stockholders’ deficit	(14,531	)		(4,935	)		4,935					(14,531	)
Total liabilities and stockholders’ deficit	15,944		$	4,867		$	17,335				$	38,146

All values are in US Dollars.

See accompanying notes to unaudited pro forma consolidated financialstatements

DIGERATI TECHNOLOGIES, INC. AND NEXT LEVEL INTERNET, INC.

Unaudited Pro Forma Consolidated Statement of Operations

(In thousands, except per share amounts)

For the Three Months Ended October 31, 2021

	Historical (unaudited)
				Next Level			Pro Forma					Pro Forma
	Digerati			Internet			Adjustments			Note 3		Consolidated
OPERATING REVENUES:
Cloud software and service revenue	$	3,777		$	3,253		$	-				$	7,030
Total operating revenues		3,777			3,253			-					7,030
OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization)		1,490			1,377			-					2,867
Selling, general and administrative expense		1,788			2,086			-					3,874
Legal and professional fees		574			-			-					574
Bad debt		13			-			-					13
Depreciation and amortization expense		492			114			636			(g)		1,242
Total operating expenses		4,357			3,577			636					8,570
OPERATING INCOME (LOSS)		(580	)		(324	)		(636	)				(1,540	)
OTHER INCOME (EXPENSE):
Gain (loss) on derivative instruments		4,433			-			-					4,433
Income tax benefit (expense)		(77	)		-			-					(77	)
Other income (expense)		(4	)		(1	)		-					(5	)
Interest expense		(1,506	)		(10	)		(300	)		(h)		(1,816	)
Total other expense		2,846			(11	)		(300	)				2,535
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST		2,266			(335	)		(936	)				995
Less: Net loss attributable to the noncontrolling interests		158			-			254			(i)		412
NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI’S SHAREHOLDERS		2,424			(335	)		(682	)				1,407
Deemed dividend on Series A Convertible preferred stock		(5	)		-			-					(5	)
NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI’S COMMON SHAREHOLDERS	$	2,419		$	(335	)	$	(682	)			$	1,402
LOSS PER COMMON SHARE - BASIC	$	0.02										$	0.01
LOSS PER COMMON SHARE - DILUTED	$	0.01										$	0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC		138,719,017											138,719,017
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED		250,723,611											250,723,611

See accompanying notes to unaudited pro forma consolidated financial statements

DIGERATI TECHNOLOGIES, INC. AND NEXT LEVEL INTERNET, INC.

Unaudited Pro Forma Consolidated Statement of Operations

(In thousands, except share amounts)

Forthe Year Ended July 31, 2021

	Historical (unaudited)
				Next Level			Pro forma					Pro Forma
	Digerati			Internet			Adjustments			Note 3		Consolidated
OPERATING REVENUES:
Cloud software and service revenue	$	12,416		$	11,566		$	-				$	23,982
Total operating revenues		12,416			11,566			-					23,982
OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization)		5,135			4,829			-					9,964
Selling, general and administrative expense		7,019			7,460			-					14,479
Legal and professional fees		894			-			-					894
Bad debt		17			-			-					17
Depreciation and amortization expense		1,749			392			2,543			(g)		4,684
Total operating expenses		14,814			12,681			2,543					30,038
OPERATING INCOME (LOSS)		(2,398	)		(1,115	)		(2,543	)				(6,056	)
OTHER INCOME (EXPENSE):
Gain on derivative instruments		(9,935	)		-			-					(9,935	)
Gain on settlement of debt		560			686			-					1,246
Income tax benefit		(183	)		-			-					(183	)
Other (expense) income		(294	)		(5	)		-					(299	)
Interest expense		(4,765	)		(38	)		(1,202	)		(h)		(6,005	)
Total other expense		(14,617	)		643			(1,202	)				(15,176	)
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST		(17,015	)		(472	)		(3,745	)				(21,232	)
Less: Net loss attributable to the noncontrolling interests		332			-			843			(i)		1,175
NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI’S SHAREHOLDERS		(16,683	)		(472	)		(2,902	)				(20,057	)
Deemed dividend on Series A Convertible preferred stock		(20	)		-			-					(20	)
NET INCOME (LOSS) ATTRIBUTABLE TO DIGERATI’S COMMON SHAREHOLDERS	$	(16,703	)	$	(472	)	$	(2,902	)			$	(20,077	)
LOSS PER COMMON SHARE - BASIC	$	(0.13	)									$	(0.15	)
LOSS PER COMMON SHARE - DILUTED	$	(0.13	)									$	(0.15	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC		129,411,947											129,411,947
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED		129,411,947											129,411,947

See accompanying notes to unaudited pro forma consolidated financialstatements

Notes to the Unaudited Pro Forma ConsolidatedFinancial Statements

Note 1 — Basis of Presentation and Descriptionof Transactions

The unaudited pro forma consolidated financial statements were prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of SEC Regulation S-X and presents the pro forma financial position and results of operations of the combined companies based upon the historical data of the Company and Next Level Internet.

Basis of Presentation

The historical consolidated financial statements have been adjusted in the unaudited pro forma consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the Next Level Internet Acquisition, (2) factually supportable and (3) with respect to the unaudited pro forma consolidated statement of operations, expected to have a continuing impact on the combined results of the Company following the Next Level Internet Acquisition.

The Next Level Internet Acquisition is being accounted for as a business combination using the acquisition method with the Company as the accounting acquirer in accordance with ASC Topic 805, Business Combinations. As the accounting acquirer, the Company has estimated the fair value of Next Level Internet assets acquired and liabilities assumed and conformed the accounting policies of Next Level Internet to its own accounting policies.

The unaudited pro forma consolidated financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Note 2— Preliminary purchaseprice allocation

Description ofTransaction

On February 4, 2022, our indirect, wholly owned subsidiary, T3 Communications, Inc., a Nevada corporation (“T3 Nevada”, “T3”), executed and closed on an Equity Purchase Agreement (the “Equity Purchase Agreement”) with Next Level Internet, Inc., a California Corporation (“NLI”, “Next Level”, “Next Level Internet”, “Seller”).

T3 paid $8.9 million in cash to the Sellers on the closing date of February 4, 2022.

The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed for the Next Level Internet Acquisition:

	Next Level
	Internet
	(in thousands)
Cash	$	258
Accounts receivable, net		559
Prepaid and other current assets		525
Intangible assets and Goodwill		17,837
Property and Equipment, net		1,299
Deposits and other assets		414
Operating lease right-of-use asset		1,312
Total identifiable assets	$	22,204
Less: Liabilities assumed		7,822
Less: Operating lease liability		1,480
Total Purchase price	$	12,902

The following table summarizes the cost of intangible assets related to the acquisition:

	Next Level
	Internet		Useful Life
	(in thousands)		(in Years)
Customer Relationships	$	7,313		7
Trade Names and Trademarks		4,994		7
Non-Compete Agreement		1,962		2-3
Goodwill		3,567		-
Total intangible assets	$	17,837

Note 3— Pro forma adjustments

The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma consolidated financial statements:

a)	Adjustment to reflect the consideration transferred<br> by the Company, which includes:
●	Cash<br> paid at the closing of the Next Level Internet Acquisition of $8.9 million.
---	---
●	Elimination<br> of $500,000 for the net cash used to pay-off two promissory notes by Next Level Internet<br> at closing;
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●	$2,000,000 in earn-out associated with a Monthly Recurring Revenue<br>targets (“MRC Target”) , of which $1,000,000 is due in quarterly payments during the first year from the Next Level Internet<br>Acquisition and included in the Current Note payable in the unaudited pro forma consolidated balance sheet, and $1,000,000 is due in quarterly<br>payments during the second year from the Next Level Internet Acquisition and included in the long term Note Payable, net of current portion<br>in the unaudited pro forma consolidated balance sheet. $2,000,000 is an unsecured convertible promissory note, of which $1,000,000 is<br>due in quarterly payments during the first year from the Next Level Internet Acquisition and included in the Current Convertible Note<br>payable in the unaudited pro forma consolidated balance sheet, and $1,000,000 is due in quarterly payments during the second year from<br>the Next Level Internet Acquisition and included in the long term Convertible Note Payable, net of current portion in the unaudited pro<br>forma consolidated balance sheet. All or a portion of the unpaid principal amount outstanding on this Note may be converted into shares<br>of Stock at the option of Seller, in Seller’s sole and absolute discretion, at any time during the periods (A) commencing on the<br>six-month anniversary of this Note and ending 30 days after such six-month anniversary and (B) if the Company elects to prepay this Note<br>prior to the six- month anniversary of this Note, commencing on the date of seller’s receipt of notice of Company’s intention<br>to prepay the Note and ending 30 days thereafter. The conversion price on the note shall be an amount equal to the volume<br>weighted average price per share of Stock on the Nasdaq Stock Market for the 10 consecutive trading days immediately preceding the date<br>on which a Conversion Notice is received by Maker; provided, however, that (i) if the Stock is not then listed for trading on the Nasdaq<br>Stock Market, the Conversion Price shall be the volume weighted average transaction price per share reported by the OTC Reporting Facility<br>for the 10 consecutive trading days immediately preceding the date on which such Conversion Notice is received by Maker and (ii) if, at<br>any time within the 10 consecutive trading days prior to receipt of a Conversion Notice by Maker, the Stock was offered and sold by the<br>Issuer to the public pursuant to an effective registration statement on Form S-1 under the Securities Act of 1933, the Conversion Price<br>shall be the price to the public set forth in the most recent prospectus included in such registration statement. For the avoidance of<br>doubt, in the event of a stock subdivision or combination during the 10 consecutive trading days immediately preceding the date on which<br>a Conversion Notice is received by Maker, the volume weighted average price per share of Stock for those days prior to the stock subdivision<br>or combination shall be adjusted to reflect such subdivision or combination.
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b)	Represents the preliminary purchase price<br> allocated to the intangible assets based on the estimated fair values as follows:
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Customer relationships: The fair value of the customer relationships was determined using an income approach based upon management’s assessment of prospective financial information and a discount rate based upon the Company’s weighted average cost of capital.

Non-competeprovisions: The fair value of the non-compete provisions, was determined using an income approach based upon management’s assessment of prospective financial information, including an estimated impact of competition, and a discount rate based upon the Company’s weighted average cost of capital.

Trade Namesand Trademarks: The fair value of the Trade names and trademarks were determined using an income approach based upon management’s assessment of prospective revenues, a royalty rate selected from a range of comparable licensing transactions and a discount rate based upon the Company’s weighted average cost of capital.

Represents the preliminary purchase price allocated to goodwill in the Next Level Internet Acquisition. Goodwill represents the excess of the consideration transferred over the preliminary fair value of the net tangible and intangible assets acquired. Goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of the impairment during the period in which the determination is made.

d)	Adjustment to eliminate the pay-off of two<br> promissory notes by Next Level Internet at closing.
e)	Represents cash secured by the Company in the amount of $8.9 million<br>for the initial net cash payment made at closing for the Next Level Internet Acquisition and included in the Long Term Note payable in<br>the unaudited pro forma consolidated balance sheet. The financing was secured as part of the Amended Credit Agreement and Note with Post<br>Road Group and previously disclosed. (Per Item 1.01, Form 8-K filed with the SEC on February 10, 2022.)
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f)	Adjustment to eliminate Next Level Internet’s<br> historical additional paid-in capital and retained earnings.
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g)	Represents the future quarterly and annual<br> amortization of the intangible assets based upon their estimated useful lives. The estimated<br> useful lives were determined based on a review of the time period over which the economic<br> benefit of each intangible asset is estimated to be generated.
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h)	Represents interest expense incurred on the<br> borrowings from the credit facility used to fund the acquisition at an interest rate of approximately<br> 14.0%.
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i)	Adjustment to allocate T3 Communications,<br> Inc., Digerati’s operating subsidiary, net (loss) to redeemable noncontrolling interest holders,<br> this is reflected in Digerati’s consolidated financial statements. The net (loss) allocated<br> to noncontrolling interest is computed by applying the 19.99% ownership interest in T3 Communications,<br> Inc.
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