UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM
For the quarterly period ended
For the transition period from ____________to____________
Commission File No.
(Exact name of the issuer as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer I.D. No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number)
The Registrant does not have any securities registered pursuant to Section 12(b) of the Exchange Act.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was
required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o |
| Smaller reporting company | |
| Emerging Growth company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
Our website is www.konatel.com.
Our common stock is quoted on the OTC Markets Group, LLC (the “OTC Markets”) in its “OTCQB Tier” under the symbol “KTEL.”
| 1 |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:
| Common Capital Voting Stock, $0.001 par value per share | shares | |
| Class | Outstanding as of November 13, 2023 |
References
In this Quarterly Report, references to “KonaTel, Inc.,” “KonaTel,” the “Company,” “we,” “our,” “us” and words of similar import, refer to KonaTel, Inc., a Delaware corporation, formerly named “Dala Petroleum Corp.,” which is the Registrant; and our wholly owned subsidiaries, KonaTel, Inc., a Nevada corporation (“KonaTel Nevada”), Apeiron Systems, Inc., a Nevada corporation doing business as “Apeiron” (“Apeiron Systems”), and IM Telecom, LLC, an Oklahoma limited liability company doing business as “Infiniti Mobile” (“IM Telecom” or “Infiniti Mobile”).
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Quarterly Report completely, and it should be read and considered with all other reports filed by us with the United States Securities and Exchange Commission (the “SEC”) that are contained in the SEC Edgar Archives, including the “Risk Factors” enumerated in “Part I, Item IA. Risk Factors” of our 10-K Annual Report for the year ended December 31, 2022, which commence on page ten (10) thereof. A copy of this “Annual Report” is attached hereto by Hyperlink in Part II-Other Information, in Item 6 hereof. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
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KONATEL, INC.
FORM 10-Q
September 30, 2023
INDEX
| Page No. | |
| PART I – FINANCIAL INFORMATION | |
| Item 1. Financial Statements & Footnotes | 4 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4. Controls and Procedures | 20 |
| PART II – OTHER INFORMATION | |
| Item 1. Legal Proceedings | 22 |
| Item 1A. Risk Factors | 22 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3. Defaults Upon Senior Securities | 22 |
| Item 4. Mine Safety Disclosures | 22 |
| Item 5. Other Information | 22 |
| Item 6. Exhibits | 23 |
| SIGNATURES | 24 |
PART I - FINANCIAL STATEMENTS
September 30, 2023
Table of Contents
| 3 |
KonaTel, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Accounts Receivable, Net | ||||||||
| Inventory, Net | ||||||||
| Prepaid Expenses | ||||||||
| Other Current Assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, Net | ||||||||
| Other Assets | ||||||||
| Intangible Assets, Net | ||||||||
| Right of Use Asset | ||||||||
| Other Assets | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable and Accrued Expenses | $ | $ | ||||||
| Loans Payable, Net of Loan Fees | ||||||||
| Right of Use Operating Lease Obligation - Current | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Right of Use Operating Lease Obligation - Long Term | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value, shares authorized, outstanding and issued at September 30, 2023 and outstanding and issued at December 31, 2022 | ||||||||
| Additional Paid In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
KonaTel, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Payroll and Related Expenses | ||||||||||||||||
| Operating and Maintenance | ||||||||||||||||
| Bad Debt | ||||||||||||||||
| Professional and Other Expenses | ||||||||||||||||
| Utilities and Facilities | ||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| Marketing and Advertising | ||||||||||||||||
| Application Development Costs | ||||||||||||||||
| Taxes and Insurance | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Income/(Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Income and Expense | ||||||||||||||||
| Interest Expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income/(Expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Income and Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Earnings (Loss) per Share | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Outstanding Shares | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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KonaTel, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
| Common Shares | Additional | Accumulated | ||||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Total | ||||||||||||||||
| Balances as of January 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Exercised Stock Options | ||||||||||||||||||||
| Stock Based Compensation | — | |||||||||||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Shares | Additional | Accumulated | ||||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Total | ||||||||||||||||
| Balances as of July 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Exercised Stock Options | ||||||||||||||||||||
| Stock Based Compensation | — | ( | ) | ( | ) | |||||||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Shares | Additional | Accumulated | ||||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Total | ||||||||||||||||
| Balances as of January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Exercised Stock Options | ||||||||||||||||||||
| Stock Based Compensation | — | |||||||||||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Shares | Additional | Accumulated | ||||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Total | ||||||||||||||||
| Balances as of July 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Exercised Stock Options | ||||||||||||||||||||
| Stock Based Compensation | — | |||||||||||||||||||
| Net Loss | — | ( | ) | ( | ) | |||||||||||||||
| Balances as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
| 6 |
KonaTel, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Depreciation and Amortization | ||||||||
| Loan Origination Cost Amortization | ||||||||
| Bad Debt | ||||||||
| Stock-based Compensation | ||||||||
| Non-Compensatory Stock Options Exercised | ||||||||
| Change in Right of Use Asset | ( | ) | ||||||
| Change in Lease Liability | ( | ) | ||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts Receivable | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Prepaid Expenses | ( | ) | ||||||
| Accounts Payable and Accrued Expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Net cash (used in) investing activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from Short-Term Note Payable | ||||||||
| Loan Origination Cost | ( | ) | ( | ) | ||||
| Repayments of Amounts of Notes Payable | ( | ) | ||||||
| Cash Received from Stock Options Exercised | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash - Beginning of Year | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
KonaTel, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview of Company
KonaTel Nevada (as defined below) was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D. Sean McEwen, to conduct the business of a full-service MVNO (“Mobile Virtual Network Operator”) provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets. It is currently inactive.
KonaTel Inc., a Delaware corporation, formerly known as Dala Petroleum Corp. (the “Company,” “we,” “our,” or “us”), also formerly known as “Westcott Products Corporation,” was incorporated as “Light Tech, Inc.” under the laws of the State of Nevada on May 24, 1984. A subsidiary in the name “Westcott Products Corporation” was organized by us under the laws of the State of Delaware on June 24, 1986, for the purpose of changing our name and domicile to the State of Delaware. On June 27, 1986, we merged with the Delaware subsidiary, with the survivor being Westcott Products Corporation, a Delaware corporation (“Westcott”). During 1990, we ceased our then current operations. On March 11, 2000, our Board of Directors began the process of re-entering the development stage, and on June 2, 2014, we completed a merger with Dala Petroleum Corp., a Nevada corporation (respectively, “Dala Nevada” and the “Dala Merger”). We operated as an early-stage oil exploration company focused on our leased acreage acquired by Dala Nevada until 2016, at which time we assigned substantially all of our leased acreage to the former owner of Dala Nevada, and our remaining oil and gas leasehold interests, comprising leases covering approximately 7,489 and 403 acres, more or less, expired in 2017 and 2018, respectively.
On December 18, 2017, we acquired KonaTel, Inc, a Nevada subchapter S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly owned subsidiary, and we succeeded to its operations; and we changed our name to “KonaTel, Inc.” on February 5, 2018.
Apeiron Systems is headquartered in Johnstown, Pennsylvania, where it has customer service and software engineering resources staffed. Additional development resources are staffed out of Los Angeles, California, as well as in Europe and Asia.
IM Telecom is headquartered in Plano, Texas, and has a warehouse operation in Tulsa, Oklahoma, and a customer service center in Atmore, Alabama.
We are headquartered in Plano, Texas, and have four (4) full-time employees. Apeiron Systems has eight (8) full-time employees, and IM Telecom has twenty-one (21) full-time employees and two (2) part-time employees.
Principal Products or Services and their Markets
Our principal products and services, across our two (2) active wholly owned subsidiaries, Apeiron Systems and IM Telecom, include our CPaaS suite of services (SIP/VoIP, SMS/MMS), wholesale and retail mobile voice and mobile data IoT services, wholesale voice termination services, and our ETC and ACP subsidized services for low-income Americans. Except for our ETC Lifeline services distributed in up to eleven (11) states and our ACP services distributed in the fifty (50) states, as well as Washington D.C. and Puerto Rico, our Apeiron Systems’ products and services are available worldwide and subject to U.S., international and local/national regulations.
We generate revenue from two (2) primary sources, Hosted Services and Mobile Services:
| · | Our Hosted Services include a suite of hosted CPaaS services within Apeiron Systems’ cloud platform, including Cloud IVRs, Voicemail, Fax, Call Recording and other services provided with local, toll-free and international phone numbers. Apeiron also delivers public and private IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management, of which IoT provides device connectivity via wireless 4G/5G. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and independent sales organizations. |
| 8 |
| · | Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through our subsidiaries Apeiron Systems and IM Telecom. Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers. Mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. Also included in our Mobile Services segment is the distribution of government subsidized mobile voice service and mobile data service by IM Telecom under its Infiniti Mobile brand and FCC license to low-income American households that qualify for the FCC’s Lifeline mobile voice service program and/or the FCC’s ACP mobile data program. Even though government programs like Lifeline have existed since 1985, these programs, along with newer programs like the ACP program, are subject to change and may have a material impact on our Mobile Services business if changed, reduced or eliminated. |
Basis of Presentation
Interim Financial Statements
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2022.
The accompanying financial statements have been prepared using the accrual basis of accounting.
The preparation of financial statements in conformity 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and stock-based compensation. Actual results could differ from those estimates.
Basis of Consolidation
The condensed consolidated financial statements include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. All significant intercompany transactions are eliminated.
Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the three and nine months ended September 30, 2023, and 2022, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of September 30, 2023, and 2022, there were potentially and dilutive shares.
| 9 |
| Three Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Numerator | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Weighted-average common shares outstanding | ||||||||
| Dilutive impact of stock options | ||||||||
| Weighted-average common shares outstanding, diluted | ||||||||
| Net income per common share | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Numerator | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Weighted-average common shares outstanding | ||||||||
| Dilutive impact of stock options | ||||||||
| Weighted-average common shares outstanding, diluted | ||||||||
| Net income per common share | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash and cash equivalents.
All cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels.
The Company has a concentration of risk with respect
to trade receivables from customers and cellular providers. As of September 30, 2023, the Company had a significant concentration of receivables
(defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amount of
$
| 10 |
Concentration of Major Customer
A significant amount of the revenue is derived from
contracts with major customers. For the three months ended September 30, 2023, the Company had two (2) customers that accounted for $
Effect of Recent Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statements.
Going Concern
For the nine months ended September 30, 2023, the
Company generated a net loss of ($
We received $
Losses incurred are highly correlated to growth in our Mobile Services segment, which requires immediate expense recognition for newly activated customers. Customer acquisition costs are not amortized over the life of the customer. The Company has existing financing options under available delayed draw allocations to provide for any continued growth.
We are one of only a few businesses to hold a national ETC license, which provides us with additive reimbursement rates within the states we operate. In July, 2023, we added an additional license for the state of Pennsylvania, and expanded our wireless service coverage areas within the existing licensed footprint. We will continue to target and expand into new ETC licensed areas, where returns can be maximized. Management believes as we expand state licensing under our ETC designation, this activity will only continue to increase the value of our ETC license within the marketplace and afford us additional financing capabilities for growth. As a result of the Company’s ability to access additional financing and due to the significance of our ETC license, the Company has ameliorated any substantial going concern doubt.
NOTE 2 – INVENTORY
Inventory primarily consists of sim cards, cell phones,
and tablets, which are stored at our warehouse, or have been delivered to distributors in the field. Inventories are stated at cost using
the first-in, first-out (“FIFO”) valuation method. On a monthly basis, inventory is counted at our warehouse facility, and
is reviewed for obsolescence and counted for accuracy with distributors. At September 30, 2023, and December 31, 2022, the Company had
inventory of $
| 11 |
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following major classifications as of September 30, 2023, and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Lease Improvements | $ | $ | ||||||
| Furniture and Fixtures | ||||||||
| Billing Software | ||||||||
| Office Equipment | ||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation related to Property and Equipment amounted
to $
NOTE 4 – RIGHT-OF-USE ASSETS
Right-of-Use Assets consist of assets accounted for
under ASC 842. The assets are recorded at present value using implied interest rates between
The Company has Right-of-Use Assets through leases
of property under non-cancelable leases. As of September 30, 2023,
Future lease liability payments under the terms of these leases are as follows:
| 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total | |||||
| Less Interest | |||||
| Present value of minimum lease payments | |||||
| Less Current Maturities | |||||
| Long Term Maturities | $ |
The weighted average term of the Right-to-Use leases
is
| 12 |
NOTE 5 – INTANGIBLE ASSETS
Intangible Assets with definite useful life consist
of licenses, customer lists and software that were acquired through acquisitions. Intangible Assets with indefinite useful life consist
of the Lifeline license granted by the FCC. The license, because of the nature of the asset and the limitation on the number of granted
Lifeline licenses by the FCC, will not be amortized. The license was acquired through an acquisition. The fair market value of the license
as of September 30, 2023, and December 31, 2022, was $
| September 30, 2023 | December 31, 2022 | |||||||
| Customer List | $ | $ | ||||||
| Software | ||||||||
| ETC License | ||||||||
| Less: Amortization | ( | ) | ( | ) | ||||
| Intangible Assets, net | $ | $ | ||||||
Amortization expense amounted to $
The reclassification in the Balance Sheet for Right of Use Assets has been made in this filing to conform to both the current and future reported presentation.
NOTE 6 – NOTES PAYABLE
On June 14, 2022, we and our wholly-owned subsidiary
companies, Apeiron Systems and IM Telecom, entered into a Note Purchase Agreement (the “NPA”) with CCUR Holdings, Inc., a
Delaware corporation (respectively, “CCUR” and the “CCUR Loan”), as “Collateral Agent”; and CCUR and
Symbolic Logic, Inc., a Delaware corporation (“Symbolic”), as “Purchasers,” along with a related Guarantee and
Security Agreement (the “GSA”) with CCUR as the Collateral Agent, whereby the Company and its subsidiary companies pledged
all of their assets to secure $
On April 28, 2023, the Company provided notice to
CCUR of its election to utilize the “First Extension Option” by an additional six (6) months. As part of the condition to
extend, the Company paid $
On June 1, 2023,
On June 1, 2023, the Company exercised the first draw
under the First Amendment to the NPA of $
NOTE 7 – CONTINGENCIES AND COMMITMENTS
Litigation
From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of September 30, 2023, there are no ongoing legal proceedings.
| 13 |
Contract Contingencies
The Company has the normal obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry and that may be provided in the contractual agreements.
Tax Audits
In June of 2021, the Company received an audit determination
and assessment from the State of Pennsylvania related to sales and use tax for the audit period of January 1, 2016, through September
30, 2019. The assessment is in the amount of $
Letters of Credit
The Company had no outstanding letters of credit as of September 30, 2023.
NOTE 8 – SEGMENT REPORTING
The Company operates within two (
The reportable segments consist of Hosted Services and Mobile Services. Mobile Services reporting will now consist of our post-paid and pre-paid cellular business.
Hosted Services – Our Hosted Services include a suite of hosted CPaaS services within the Apeiron Systems’ cloud platform, including Cloud IVRs, Voicemail, Fax, Call Recording and other services provided with local, toll-free and international phone numbers. Apeiron also delivers public and private IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs.
Mobile Services – Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through our subsidiaries Apeiron Systems and IM Telecom. Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers. Mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. Also included in our Mobile Services segment is the distribution of government subsidized mobile voice service and mobile data service by IM Telecom under its Infiniti Mobile brand and FCC Lifeline license to low-income American households that qualify for the FCC’s Lifeline mobile voice service program and/or the FCC’s ACP mobile data program. Even though government programs like Lifeline have existed since 1985, these programs, along with newer programs like the ACP program, are subject to change and may have a material impact on our Mobile Services business if changed, reduced or eliminated.
| 14 |
The following table reflects the result of operations of the Company’s reportable segments:
| Hosted Services | Mobile Services | Total | ||||||||||
| For the nine months period ended September 30, 2023 | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Additions to property and equipment | $ | $ | $ | |||||||||
| For the three months period ended September 30, 2023 | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Additions to property and equipment | $ | $ | $ |
| For the nine months period ended September 30, 2022 | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Additions to property and equipment | $ | $ | $ |
| For the three months period ended September 30, 2022 | ||||||||||||
| Revenue | $ | $ | $ | |||||||||
| Gross Profit | $ | $ | $ | |||||||||
| Depreciation and amortization | $ | $ | $ | |||||||||
| Additions to property and equipment | $ | $ | $ |
NOTE 9 – STOCKHOLDERS’ EQUITY
Independent Directors’ Incentive Stock Options
On June 1, 2023, the Board of Directors unanimously voted to eliminate incentive stock options available to our two (2) independent directors, effective June 1, 2023.
Stock Option Grants
On September 8, 2023, Todd Murcer, Executive Vice President of Finance and Secretary of the Company, was granted incentive stock options, and previously issued and partially vested incentive stock options were canceled. On September 22, 2023, Jason Welch, President for IM Telecom, was granted options, and previously issued and partially vested incentive stock options were canceled. These new grants emphasized the importance of the services of Messrs. Murcer and Welch to the Company.
Non-Compensatory Stock Option Grant
On September 13, 2023, D. Sean McEwen, the Chairman and CEO of the Company, exercised his third tranche of equity stock options for shares of common stock at a price of $ per share, which shares were issued on September 13, 2023.
Stock Compensation
The Company offers incentive stock option grants to directors and key employees.
Options vest in tranches and typically expire five (5) years from the date of grant. For the nine months ended September 30, 2023, and
2022, the Company recorded options expense of $
| 15 |
| Number of | Weighted Average | Weighted Average | Aggregate | |||||||||||
| Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||
| Options Outstanding – December 31, 2022 | $ | $ | ||||||||||||
| Granted | ||||||||||||||
| Exercised | ( | ) | — | |||||||||||
| Forfeited | ( | ) | — | |||||||||||
| Options Outstanding – September 30, 2023 | $ | $ | ||||||||||||
| Exercisable and Vested, September 30, 2023 | $ | $ | ||||||||||||
NOTE 10 – SUBSEQUENT EVENTS
Below are events that have occurred since September 30, 2023:
On October 25, 2023, Jeffrey Pearl, an independent Board member, exercised incentive stock options convertible into common stock at a price of $ per share, which shares were issued on October 27, 2023.
On November
6, 2023, the Company agreed to and established a payment plan with the State of Pennsylvania. The Company will pay $
On November 10, 2023, the Company’s wholly owned subsidiary, Apeiron Systems, entered into a five (5) year agreement with Viva-US Telecommunications, Inc. (“Viva-US”), as the exclusive supplier of wholesale cellular voice & data, messaging, international call termination, smart SIM (“Subscriber Identity Module”), and other telecommunications services. Apeiron Systems shall provide these services through its CPaaS (“Communication Platform as a Service”) cloud platform. Viva-US is a US MVNO (“Mobile Virtual Network Operator”) and part of the Balesia Technologies, Inc. group of companies operating MNOs (“Mobile Network Operator”) and MVNOs throughout North and South America, supporting over three million customers in Bolivia, Mexico and Argentina. Viva-US is expected to launch its US MVNO service in the first quarter of 2024.
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
When used in this Quarterly Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions and financial trends that may affect our future plans of operations, business strategy, operating results and financial position. Persons reviewing this Quarterly Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed at the forepart of this Quarterly Report under the caption “Forward-Looking Statements” and include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.
Despite risks and uncertainties specifically related to Covid-19, the Company has not experienced adverse impacts to the business operations as a result of this ongoing health concern. Possible vulnerabilities to Covid-19, such as supply chain disruptions, inventory shortages and travel or resource limitations and delays will continue to be a risk that is presented to the Company, our suppliers, our customers and our investors.
Overview of Current and Planned Business Operations
We continue to pursue market opportunities for the distribution of our current products and services described in our “Principal Products or Services and their Markets” summary commencing on page eight (8) of this Quarterly Report. In addition, we continue to pursue expanded market distribution opportunities, development of new products and services, the addition of new lines of business and accretive acquisition opportunities that may enhance or expand our current product and service offerings.
Results of Operations
As previously discussed in our filings during 2022 (including our 10-K Annual Report for the year ended December 31, 2022 [see Part II-Other Information, Item 6 below, for a Hyperlink to this Annual Report]), we began to accelerate growth opportunities within our Mobile Services market segment through our wholly owned subsidiary, IM Telecom. In Q4 2022, activity slowed as we repositioned distribution channels to higher profit territories. Through September 30, 2023, we have seen increasing activations and ARPU (“Average Revenue Per User”) within these channels.
The Company continues to expand its wireless network coverage, within its state licensed areas. This requires a process of authorization from each state public utility commission. As a result, the Company has broadened its capabilities to sell inside these licensed areas, furthering our sales growth initiatives.
The Company recognized increases in Mobile Services revenue and gross profit during the quarter ended September 30, 2023, as a result of previously scaled activations and related increases in ARPU.
Comparison of the three months ended September 30, 2023, to the three months ended September 30, 2022
For the three months ended September 30, 2023, we had $4,689,001 in revenues from operations compared to $5,880,333 for the three months ended September 30, 2022, for a total revenue decrease of ($1,191,332). The decrease in revenue was primarily due to a change in distribution philosophy. The Company’s focus is targeted to providing services within its eleven (11) ETC licensed states. Unit economics in these states are more favorable, and the Company continues to add resources to these areas (three [3] new distribution partners were trained and onboarded during the period). The added distribution partners provide concentration within our footprint, and should provide strength to existing and underserved markets. The Company completed its OSS/BSS transition to include the state of California, which now provides new activations under the same OSS/BSS platform. Additional inventory is now being sourced to California distribution teams. Revenues in our Mobile Services segment are primarily gained as a result of delivering high-speed mobile voice and data service to low-income consumers.
For the three months ended September 30, 2023, our cost of revenue was $3,424,832 compared to $4,969,251 in the three months ended September 30, 2022, for a cost of revenue decrease of ($1,544,419). Our cost of revenue decrease was due to lower network, sales compensation and device costs, related to the activity declines from our Mobile Services subscribers.
| 17 |
For the three months ended September 30, 2023, we had gross profit of $1,264,169 compared to $911,082 in the three months ended September 30, 2022, for a gross profit increase of $353,087. This increase resulted from adding higher ARPU activations in our Mobile Services segment, in addition to having lower sales acquisition costs to acquire these new customers.
For the three months ended September 30, 2023, total operating expenses were $1,133,106 compared to $2,054,037 in the three months ended September 30, 2022, for a decrease of ($920,931). This decrease was primarily due to lower legal expenses associated with the previous expansion of service coverage in our ETC footprint and the reversal of stock option expense as the result of employee forfeitures of incentive stock options.
For the three months ended September 30, 2023, other income (expense) was $(244,279) compared to $(202,599) in the quarter ended September 30, 2022. This increase is due to interest on our CCUR Loan.
For the three months ended September 30, 2023, we had a net loss of ($113,216) compared to net loss of ($1,345,514) in the three months ended September 30, 2022. The reduction in loss compared to Q3 of 2022 for the three months ended September 30, 2023, was primarily due to the reallocation of distribution to higher ARPU, gross margin locations. The Company continues to fortify in these locations.
Comparison of the nine months ended September 30, 2023, to the nine months ended September 30, 2022
For the nine months ended September 30, 2023, we had $13,322,146 in revenues from operations compared to $15,231,288 for the nine months ended September 30, 2022, for a total revenue decrease of ($1,909,142). This decrease in revenue was partially related to higher per activation reimbursements received in Q1 2022 under the Emergency Broadband Benefit Program (“EBB”), prior to conversion under the ACP supported program, as well as a larger volume of lower ARPU online activations received during Q3 2022. Activations slowed in Q3 2023 following reallocation efforts by the Company to higher ARPU locations within our Mobile Services segment. Additional distribution partners were gained in Q3 2023 and should provide strength to existing and underserved markets. These revenues were primarily derived as a result of delivering high-speed mobile data service to low-income consumers.
For the nine months ended September 30, 2023, our cost of revenue was $10,282,046 compared to $12,230,378 in the nine months ended September 30, 2022, for a cost of revenue decrease of ($1,948,332). Our cost of revenue decrease was due to lower network, sales compensation and device costs, related to fewer activations from our Mobile Services subscribers.
For the nine months ended September 30, 2023, we had gross profit of $3,040,100 compared to $3,000,910 in the nine months ended September 30, 2022, for a gross profit increase of $39,190. This increase resulted from adding higher ARPU activations in our newly concentrated footprint within our Mobile Services segment, in addition to having lower sales acquisition costs to acquire these new customers.
For the nine months ended September 30, 2023, total operating expenses were $4,605,779 compared to $5,470,296 in the nine months ended September 30, 2022, for a decrease of ($864,517). This decrease was primarily due to lower legal expenses associated with the previous expansion of service coverage in our ETC footprint and the reversal of stock option expense as the result of employee forfeitures of incentive stock options.
For the nine months ended September 30, 2023, other income (expense) was ($684,954) compared to ($398,931) in the nine months ended September 30, 2022. This increase is due to interest on our CCUR Loan.
For the nine months ended September 30, 2023, we had a net loss of ($2,250,633) compared to net loss of ($2,868,317) in the nine months ended September 30, 2022. The loss for the nine months ended September 30, 2023, was impacted by lower revenue and increased customer acquisition costs directly related to higher activations within our Mobile Services segment, in addition to increased interest expense related to our CCUR loan. Customer acquisition costs may not be amortized over the life of the customer, and are recorded in full at the time of customer activation.
Liquidity and Capital Resources
As of September 30, 2023, we had $1,322,119 in cash and cash equivalents on hand.
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In comparing liquidity between the nine-month period ending September 30, 2023, and December 31, 2022, cash decreased by 35.7%. This decrease is attributable to the accelerated expansion of our Mobile Services segment and the associated up-front costs required for growth. Liabilities and total overall debt increased by 22.0% in the nine-month period ended September 30, 2023, when compared to December 31, 2022. This change was partially the result of $500,000 debt financing from CCUR, received in June 2023.
Our current ratio (current assets divided by our current liabilities) decreased to .58 as of September 30, 2023, compared to .92 as of December 31, 2022. Working capital decreased by 526.7%.
Cash Flow from Operations
During the nine months ended September 30, 2023, cash flow used in operating activities was ($1,197,515).
Cash Flows from Investing Activities
During the nine months ended September 30, 2023, no cash flow was provided by (used in) investing activities.
Cash Flows from Financing Activities
During the nine months ended September 30, 2023, cash flow provided by financing activities was $464,000, consisting of proceeds from a short-term note payable.
Going Concern
For the nine months ended September 30, 2023, the Company generated a net loss of ($2,250,633), compared to a net loss for the nine months ended September 30, 2022, of ($2,868,317). The Company sourced short-term financing in June, 2022 of $3,150,000. In June, 2023, the Company agreed to additional financing with CCUR, up to an additional $2,000,000 in delayed draw allocations. As of June, 2023, the Company has received an initial delayed draw in the amount of $500,000 to help facilitate its growing Mobile Services segment and support higher customer acquisition costs (sales). The accumulated deficit as of September 30, 2023, is ($10,548,497).
We received $3,150,000 in capital financing during the year ended December 31, 2022, to help grow the Mobile Services base in IM Telecom. In Q4 2022, following a high-growth period, management slowed the acceleration, realized positive cash flow and profit as a result, and shifted distribution channels towards its highest profit areas. In 2023, the Company repositioned distributors to our highest profit states, re-enabled growth channels and as a result, started to realize an increase in our Average Revenue Per User (“ARPU”). Management has procured additional handset and tablet suppliers, and has been able to leverage terms on device purchases and payment terms.
Losses incurred are highly correlated to growth in our Mobile Services segment, which requires immediate expense recognition for newly activated customers. Customer acquisition costs are not amortized over the life of the customer. The Company has existing financing options under available delayed draw allocations to provide for any continued growth.
We are one of only a few businesses to hold a national ETC license, which provides us with additive reimbursement rates within the states we operate. In July, 2023, we added an additional license for the state of Pennsylvania, and expanded our wireless service coverage areas within the existing licensed footprint. We will continue to target and expand into new ETC licensed areas, where returns can be maximized. Management believes as we expand state licensing under our ETC designation, this activity will only continue to increase the value of our ETC license within the marketplace and afford us additional financing capabilities for growth. As a result of the Company’s ability to access additional financing and due to the significance of our ETC license, the Company has ameliorated any substantial going concern doubt.
Off-Balance Sheet Arrangements
We had no Off-Balance Sheet arrangements during the three and nine month period ending September 30, 2023.
| 19 |
Critical Accounting Policies
Earnings Per Share
We follow ASC Topic 260 to account for the earnings per share. Basic earnings per common share calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income available to common stockholders by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash and cash equivalents.
All cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels.
The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of September 30, 2023, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amount of $889,249 or 70.9%, and $202,548 or 16.2%. It should be noted that the largest customer is the federal government, as administered by the Universal Service Administrative Company (“USAC”), under the authority of the Federal Communication Commission (the “FCC”). As of December 31, 2022, the Company had a significant concentration of receivables from two (2) customers in the amounts of $859,334 or 57.0%, and $255,136 or 16.9%.
Concentration of Major Customer
A significant amount of the revenue is derived from contracts with major customers. For the three months ended September 30, 2023, the Company had two (2) customers that accounted for $2,793,313 or 59.6% and $772,614 or 16.5% of revenue, respectively. For the three months ended September 30, 2022, the Company had two (2) customers that accounted for $4,173,492 or 71.0% of revenue and $826,901 or 14.1% of the revenue, respectively. For the nine months ended September 30, 2023, the Company had two (2) customers that accounted for $7,655,678 or 57.5% and $2,235,676 or 16.8% of revenue, respectively. For the nine months ended September 30, 2022, the Company had two (2) customers that accounted for $9,915,189 or 65.1% of revenue and $2,639,730 or 17.3% of the revenue, respectively.
Effect of Recent Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not required.
Item 4. Controls and Procedures.
Management’s Quarterly Report on Internal Control Over Financial Reporting
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of September 30, 2023, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2023.
| 20 |
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 21 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Not required; however, see Part I, Item 1A. Risk Factors, commencing on page ten (10) of our Annual Report for the year ended December 31, 2022, filed with the SEC on April 17, 2023, for a list of Risk Factors, which Annual Report can be accessed by Hyperlink in Part II-Other Information, in Item 6 hereof.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
See NOTE 9-Stockholders’ Equity and NOTE 10-Subsequent Events, of our Condensed Consolidated Financial Statements included in this Quarterly Report respecting the exercise of certain non-compensatory stock options; the grant of certain incentive stock options and the cancelation of certain incentive stock options and the exercise of certain incentive stock options during and subsequent to the quarter ended September 30, 2023. The $41,250 exercise price of the non-compensatory stock options was paid by crediting that sum against accrued compensation of $118,750 owed to the optionee, D. Sean McEwen, our Chairman and CEO.
The shares of common stock issued on the exercise of the non-compensatory stock option and the issuance of the referenced incentive stock options were exempt from registration under the Securities Act pursuant to Section 4(a)(2) thereof and applicable state law registration exemptions. The underlying and/or exercised shares that may be issued under the incentive stock options were registered with the SEC pursuant to an S-8 Registration Statement filed with the SEC on August 25, 2021, and as subsequently amended.
Item 3. Defaults upon Senior Securities
None; not applicable.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
On November 10, 2023, the Company’s wholly owned subsidiary, Apeiron Systems, entered into a five (5) year agreement with Viva-US Telecommunications, Inc. (“Viva-US”), as the exclusive supplier of wholesale cellular voice & data, messaging, international call termination, smart SIM (“Subscriber Identity Module”), and other telecommunications services. Apeiron Systems shall provide these services through its CPaaS (“Communication Platform as a Service”) cloud platform. Viva-US is a US MVNO (“Mobile Virtual Network Operator”) and part of the Balesia Technologies, Inc. group of companies operating MNOs (“Mobile Network Operator”) and MVNOs throughout North and South America, supporting over three million customers in Bolivia, Mexico, and Argentina. Viva-US is expected to launch its US MVNO service in the first quarter of 2024.
| 22 |
Item 6. Exhibits
|
Exhibit Number |
Description of Exhibit | Filing | ||
| 3(i) | Amended and Restated Certificate of Incorporation | Filed with the Form 8-K/A filed on December 20, 2017, and incorporated herein by reference. | ||
| 3(i)(a) | Amendment to Amended and Restated Certificate of Incorporation. | Filed with the Form 8-K filed on February 12, 2018, and incorporated herein by reference. | ||
| 3(ii) | Amended and Restated Bylaws | Filed with the Form 8-K/A filed on December 20, 2017, and incorporated herein by reference. | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||
| 101 | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, were formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL. |
Exhibits incorporated by reference:
| 23 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| KonaTel, Inc. | ||||
| Date: | November 20, 2023 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Date: | November 20, 2023 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO |
| Date: | November 20, 2023 | By: | /s/ Brian R. Riffle | |
| Brian R. Riffle | ||||
| Chief Financial Officer |
24
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, D. Sean McEwen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of KonaTel, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | November 20, 2023 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian R. Riffle, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of KonaTel, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | November 20, 2023 | By: | /s/ Brian R. Riffle | |
| Brian R. Riffle | ||||
| Chief Financial Officer |
Exhibit 32
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of KonaTel, Inc. (the “Registrant”) on Form 10-Q for the quarterly period ending September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), we, D. Sean McEwen, Chief Executive Officer and Brian R. Riffle, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.
| Date: | November 20, 2023 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO |
| Date: | November 20, 2023 | By: | /s/ Brian R. Riffle | |
| Brian R. Riffle | ||||
| Chief Financial Officer |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 50,000,000 | 50,000,000 |
| Common stock, shares issued | 42,858,220 | 42,240,406 |
| Common stock, shares outstanding | 42,858,220 | 42,240,406 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Revenue | $ 4,689,001 | $ 5,880,333 | $ 13,322,146 | $ 15,231,288 |
| Cost of Revenue | 3,424,832 | 4,969,251 | 10,282,046 | 12,230,378 |
| Gross Profit | 1,264,169 | 911,082 | 3,040,100 | 3,000,910 |
| Operating Expenses | ||||
| Payroll and Related Expenses | 686,560 | 1,348,152 | 2,933,409 | 3,719,446 |
| Operating and Maintenance | 1,242 | 5,321 | 4,563 | 6,681 |
| Bad Debt | 200 | 214 | 29,133 | |
| Professional and Other Expenses | 113,546 | 381,340 | 576,964 | 675,987 |
| Utilities and Facilities | 53,814 | 60,083 | 162,889 | 135,118 |
| Depreciation and Amortization | 3,088 | 3,088 | 9,264 | 9,264 |
| General and Administrative | 35,459 | 71,545 | 120,103 | 251,778 |
| Marketing and Advertising | 36,633 | 15,542 | 120,640 | 100,570 |
| Application Development Costs | 185,350 | 142,237 | 628,508 | 391,930 |
| Taxes and Insurance | 17,214 | 26,729 | 49,225 | 150,389 |
| Total Operating Expenses | 1,133,106 | 2,054,037 | 4,605,779 | 5,470,296 |
| Operating Income/(Loss) | 131,063 | (1,142,955) | (1,565,679) | (2,469,386) |
| Other Income and Expense | ||||
| Interest Expense | (209,991) | (161,977) | (551,123) | (233,153) |
| Other Income/(Expense), net | (34,288) | (40,582) | (133,831) | (165,778) |
| Total Other Income and Expenses | (244,279) | (202,559) | (684,954) | (398,931) |
| Net Loss | $ (113,216) | $ (1,345,514) | $ (2,250,633) | $ (2,868,317) |
| Earnings (Loss) per Share | ||||
| Basic | $ (0.00) | $ (0.03) | $ (0.05) | $ (0.07) |
| Diluted | $ (0.00) | $ (0.03) | $ (0.05) | $ (0.07) |
| Weighted Average Outstanding Shares | ||||
| Basic | 42,707,808 | 41,912,145 | 42,658,697 | 41,715,406 |
| Diluted | 42,707,808 | 41,912,145 | 42,658,697 | 41,715,406 |
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($) |
Common Shares |
Additional Paid-in Capital |
Accumulated Deficit |
Total |
|---|---|---|---|---|
| Beginning balance, value at Dec. 31, 2021 | $ 41,615 | $ 7,911,224 | $ (5,345,504) | $ 2,607,335 |
| Shares outstanding at Dec. 31, 2021 | 41,615,406 | |||
| Exercised Stock Options | $ 600 | 89,400 | 90,000 | |
| Exercised Stock Options, shares | 600,000 | |||
| Stock Based Compensation | $ 0 | 539,933 | 0 | 539,933 |
| Net Loss | 0 | 0 | (2,868,317) | (2,868,317) |
| Ending balance, value at Sep. 30, 2022 | $ 42,215 | 8,540,557 | (8,213,821) | 368,951 |
| Shares outstanding at Sep. 30, 2022 | 42,215,406 | |||
| Beginning balance, value at Jun. 30, 2022 | $ 41,615 | 8,265,520 | (6,868,307) | 1,438,828 |
| Shares outstanding at Jun. 30, 2022 | 41,615,406 | |||
| Exercised Stock Options | $ 600 | 89,400 | 90,000 | |
| Exercised Stock Options, shares | 600,000 | |||
| Stock Based Compensation | $ 0 | 185,637 | 0 | 185,637 |
| Net Loss | 0 | 0 | (1,345,514) | (1,345,514) |
| Ending balance, value at Sep. 30, 2022 | $ 42,215 | 8,540,557 | (8,213,821) | 368,951 |
| Shares outstanding at Sep. 30, 2022 | 42,215,406 | |||
| Beginning balance, value at Dec. 31, 2022 | $ 42,240 | 8,710,987 | (8,297,864) | 455,363 |
| Shares outstanding at Dec. 31, 2022 | 42,240,406 | |||
| Exercised Stock Options | $ 618 | 123,133 | $ 123,751 | |
| Exercised Stock Options, shares | 617,814 | 662,500 | ||
| Stock Based Compensation | $ 0 | 85,133 | 0 | $ 85,133 |
| Net Loss | 0 | 0 | (2,250,633) | (2,250,633) |
| Ending balance, value at Sep. 30, 2023 | $ 42,858 | 8,919,253 | (10,548,497) | (1,586,386) |
| Shares outstanding at Sep. 30, 2023 | 42,858,220 | |||
| Beginning balance, value at Jun. 30, 2023 | $ 42,671 | 9,075,626 | (10,435,281) | (1,316,984) |
| Shares outstanding at Jun. 30, 2023 | 42,670,720 | |||
| Exercised Stock Options | $ 187 | 41,063 | 41,250 | |
| Exercised Stock Options, shares | 187,500 | |||
| Stock Based Compensation | $ 0 | (197,436) | 0 | (197,436) |
| Net Loss | 0 | 0 | (113,216) | (113,216) |
| Ending balance, value at Sep. 30, 2023 | $ 42,858 | $ 8,919,253 | $ (10,548,497) | $ (1,586,386) |
| Shares outstanding at Sep. 30, 2023 | 42,858,220 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview of Company
KonaTel Nevada (as defined below) was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D. Sean McEwen, to conduct the business of a full-service MVNO (“Mobile Virtual Network Operator”) provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets. It is currently inactive.
KonaTel Inc., a Delaware corporation, formerly known as Dala Petroleum Corp. (the “Company,” “we,” “our,” or “us”), also formerly known as “Westcott Products Corporation,” was incorporated as “Light Tech, Inc.” under the laws of the State of Nevada on May 24, 1984. A subsidiary in the name “Westcott Products Corporation” was organized by us under the laws of the State of Delaware on June 24, 1986, for the purpose of changing our name and domicile to the State of Delaware. On June 27, 1986, we merged with the Delaware subsidiary, with the survivor being Westcott Products Corporation, a Delaware corporation (“Westcott”). During 1990, we ceased our then current operations. On March 11, 2000, our Board of Directors began the process of re-entering the development stage, and on June 2, 2014, we completed a merger with Dala Petroleum Corp., a Nevada corporation (respectively, “Dala Nevada” and the “Dala Merger”). We operated as an early-stage oil exploration company focused on our leased acreage acquired by Dala Nevada until 2016, at which time we assigned substantially all of our leased acreage to the former owner of Dala Nevada, and our remaining oil and gas leasehold interests, comprising leases covering approximately 7,489 and 403 acres, more or less, expired in 2017 and 2018, respectively.
On December 18, 2017, we acquired KonaTel, Inc, a Nevada subchapter S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly owned subsidiary, and we succeeded to its operations; and we changed our name to “KonaTel, Inc.” on February 5, 2018.
Apeiron Systems is headquartered in Johnstown, Pennsylvania, where it has customer service and software engineering resources staffed. Additional development resources are staffed out of Los Angeles, California, as well as in Europe and Asia.
IM Telecom is headquartered in Plano, Texas, and has a warehouse operation in Tulsa, Oklahoma, and a customer service center in Atmore, Alabama.
We are headquartered in Plano, Texas, and have four (4) full-time employees. Apeiron Systems has eight (8) full-time employees, and IM Telecom has twenty-one (21) full-time employees and two (2) part-time employees.
Principal Products or Services and their Markets
Our principal products and services, across our two (2) active wholly owned subsidiaries, Apeiron Systems and IM Telecom, include our CPaaS suite of services (SIP/VoIP, SMS/MMS), wholesale and retail mobile voice and mobile data IoT services, wholesale voice termination services, and our ETC and ACP subsidized services for low-income Americans. Except for our ETC Lifeline services distributed in up to eleven (11) states and our ACP services distributed in the fifty (50) states, as well as Washington D.C. and Puerto Rico, our Apeiron Systems’ products and services are available worldwide and subject to U.S., international and local/national regulations.
We generate revenue from two (2) primary sources, Hosted Services and Mobile Services:
Basis of Presentation
Interim Financial Statements
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2022.
The accompanying financial statements have been prepared using the accrual basis of accounting.
The preparation of financial statements in conformity 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and stock-based compensation. Actual results could differ from those estimates.
Basis of Consolidation
The condensed consolidated financial statements include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. All significant intercompany transactions are eliminated.
Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the three and nine months ended September 30, 2023, and 2022, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of September 30, 2023, and 2022, there were potentially and dilutive shares.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash and cash equivalents.
All cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels.
The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of September 30, 2023, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amount of $889,249 or 70.9%, and $202,548 or 16.2%. It should be noted that the largest customer is the federal government, as administered by the Universal Service Administrative Company (“USAC”), under the authority of the Federal Communication Commission (the “FCC”). As of December 31, 2022, the Company had a significant concentration of receivables from two (2) customers in the amounts of $859,334 or 57.0%, and $255,136 or 16.9%.
Concentration of Major Customer
A significant amount of the revenue is derived from contracts with major customers. For the three months ended September 30, 2023, the Company had two (2) customers that accounted for $2,793,313 or 59.6% and $772,614 or 16.5% of revenue, respectively. For the three months ended September 30, 2022, the Company had two (2) customers that accounted for $4,173,492 or 71.0% of revenue and $826,901 or 14.1% of the revenue, respectively. For the nine months ended September 30, 2023, the Company had two (2) customers that accounted for $7,655,678 or 57.5% and $2,235,676 or 16.8% of revenue, respectively. For the nine months ended September 30, 2022, the Company had two (2) customers that accounted for $9,915,189 or 65.1% of revenue and $2,639,730 or 17.3% of the revenue, respectively.
Effect of Recent Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statements.
Going Concern
For the nine months ended September 30, 2023, the Company generated a net loss of ($2,250,633), compared to a net loss for the nine months ended September 30, 2022, of ($2,868,317). The Company sourced short-term financing in June, 2022, of $3,150,000. In June, 2023, the Company agreed to additional financing with CCUR, up to an additional $2,000,000 in delayed draw allocations. As of June, 2023, the Company had received an initial delayed draw in the amount of $500,000 to help facilitate its growing Mobile Services segment and support higher customer acquisition costs (sales). The accumulated deficit as of September 30, 2023, is ($10,548,497).
We received $3,150,000 in capital financing during the year ended December 31, 2022, to help grow the Mobile Services base in IM Telecom. In Q4 2022, following a high-growth period, management slowed the acceleration, realized positive cash flow and profit as a result, and shifted distribution channels towards its highest profit areas. In 2023, the Company repositioned distributors to our highest profit states, re-enabled growth channels and as a result, started to realize an increase in our Average Revenue Per User (“ARPU”). Management has procured additional handset and tablet suppliers, and has been able to leverage terms on device purchases and payment terms.
Losses incurred are highly correlated to growth in our Mobile Services segment, which requires immediate expense recognition for newly activated customers. Customer acquisition costs are not amortized over the life of the customer. The Company has existing financing options under available delayed draw allocations to provide for any continued growth.
We are one of only a few businesses to hold a national ETC license, which provides us with additive reimbursement rates within the states we operate. In July, 2023, we added an additional license for the state of Pennsylvania, and expanded our wireless service coverage areas within the existing licensed footprint. We will continue to target and expand into new ETC licensed areas, where returns can be maximized. Management believes as we expand state licensing under our ETC designation, this activity will only continue to increase the value of our ETC license within the marketplace and afford us additional financing capabilities for growth. As a result of the Company’s ability to access additional financing and due to the significance of our ETC license, the Company has ameliorated any substantial going concern doubt.
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INVENTORY |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Inventory Disclosure [Abstract] | |
| INVENTORY | NOTE 2 – INVENTORY
Inventory primarily consists of sim cards, cell phones, and tablets, which are stored at our warehouse, or have been delivered to distributors in the field. Inventories are stated at cost using the first-in, first-out (“FIFO”) valuation method. On a monthly basis, inventory is counted at our warehouse facility, and is reviewed for obsolescence and counted for accuracy with distributors. At September 30, 2023, and December 31, 2022, the Company had inventory of $679,185 and $526,337, respectively.
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PROPERTY AND EQUIPMENT |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following major classifications as of September 30, 2023, and December 31, 2022:
Depreciation related to Property and Equipment amounted to $3,088 and $3,088 for the three months ended September 30, 2023, and 2022, respectively. Depreciation related to Property and Equipment amounted to $9,264 and $9,264 for the nine months ended September 30, 2023, and 2022, respectively. Depreciation and amortization expenses are included as a component of operating expenses in the accompanying statements of operations.
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RIGHT-OF-USE ASSETS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Right-of-use Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RIGHT-OF-USE ASSETS | NOTE 4 – RIGHT-OF-USE ASSETS
Right-of-Use Assets consist of assets accounted for under ASC 842. The assets are recorded at present value using implied interest rates between 4.75% and 7.50%. Right-of-Use Assets are recorded on the balance sheet as intangible assets.
The Company has Right-of-Use Assets through leases of property under non-cancelable leases. As of September 30, 2023, the Company had four (4) properties with lease terms in excess of one (1) year. Of these four (4) leases, two (2) leases expire in 2025, one (1) lease expires in 2026, and one (1) lease expires in 2030. Lease payables as of September 30, 2023, is $488,679.
Future lease liability payments under the terms of these leases are as follows:
The weighted average term of the Right-to-Use leases is 62.2 months recorded with a weighted average discount of 6.84%. Total lease expense for the three months ended September 30, 2023, and 2022, was $42,503 and $33,663, respectively. Total lease expense for the nine months ended September 30, 2023, and 2022, was $128,582 and $93,260, respectively.
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INTANGIBLE ASSETS |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INTANGIBLE ASSETS | NOTE 5 – INTANGIBLE ASSETS
Intangible Assets with definite useful life consist of licenses, customer lists and software that were acquired through acquisitions. Intangible Assets with indefinite useful life consist of the Lifeline license granted by the FCC. The license, because of the nature of the asset and the limitation on the number of granted Lifeline licenses by the FCC, will not be amortized. The license was acquired through an acquisition. The fair market value of the license as of September 30, 2023, and December 31, 2022, was $634,251.
Amortization expense amounted to $0, and $0 for the three months ended September 30, 2023, and 2022, respectively. Amortization expense amounted to $0, and $0 for the nine months ended September 30, 2023, and 2022, respectively. Amortization expense is included as a component of operating expenses in the accompanying statements of operations. With the exception of the Lifeline license granted by the FCC, all intangible assets are fully amortized as of September 30, 2023.
The reclassification in the Balance Sheet for Right of Use Assets has been made in this filing to conform to both the current and future reported presentation.
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NOTES PAYABLE |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Debt Disclosure [Abstract] | |
| NOTES PAYABLE | NOTE 6 – NOTES PAYABLE
On June 14, 2022, we and our wholly-owned subsidiary companies, Apeiron Systems and IM Telecom, entered into a Note Purchase Agreement (the “NPA”) with CCUR Holdings, Inc., a Delaware corporation (respectively, “CCUR” and the “CCUR Loan”), as “Collateral Agent”; and CCUR and Symbolic Logic, Inc., a Delaware corporation (“Symbolic”), as “Purchasers,” along with a related Guarantee and Security Agreement (the “GSA”) with CCUR as the Collateral Agent, whereby the Company and its subsidiary companies pledged all of their assets to secure $3,150,000 (the “Principal Amount”) in debt financing payable in one (1) year (could not be repaid prior to nine (9) months), together with interest at the rate of 15% per annum (the “Interest Rate”), with two (2) successive six (6) month optional extensions.
On April 28, 2023, the Company provided notice to CCUR of its election to utilize the “First Extension Option” by an additional six (6) months. As part of the condition to extend, the Company paid $47,250 to CCUR, which is equal to one and a half percent (1.5%) of the outstanding principal amount of the CCUR Loan. A summary of these agreements, along with copies of the NPA and GSA are contained in the 8-K Current Report of the Company dated June 14, 2022, and filed with the SEC on June 21, 2022, which can be accessed by Hyperlink in Part II, Item 6 hereof.
On June 1, 2023, we entered into a “First Amendment to the NPA” with CCUR and Symbolic. The purpose for the amendment was to add further growth capital to the Company in the form of “Delayed Draw Notes” in an aggregate principal amount of up to $2,000,000; and in consideration therefor, we provided additional collateral for the NPA by the assignment of our Purchase of Contract Rights Agreement between us and Insight Mobile (the “Tempo Assignment Agreement”) under a Collateral Assignment of Acquisition Documents (the “Collateral Assignment of Acquisition Documents”), the terms of which are summarized below, with all summaries being subject to the referenced Exhibits that are attached hereto in Part II, Item 6 hereof. A copy of the initial Assignment Agreement is contained in the 8-K Current Report of the Company dated April 6, 2023, and filed with the SEC on April 17, 2023, which can be accessed by Hyperlink in Part II, Item 6 hereof.
On June 1, 2023, the Company exercised the first draw under the First Amendment to the NPA of $500,000. As part of the First Amendment to NPA, the Company paid $15,000 to CCUR, which is equal to one and a half percent (1.5%) of the initial delayed draw, and the initial interest rate established in the NPA was increased by three percent (3%).
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CONTINGENCIES AND COMMITMENTS |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| CONTINGENCIES AND COMMITMENTS | NOTE 7 – CONTINGENCIES AND COMMITMENTS
Litigation
From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of September 30, 2023, there are no ongoing legal proceedings.
Contract Contingencies
The Company has the normal obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry and that may be provided in the contractual agreements.
Tax Audits
In June of 2021, the Company received an audit determination and assessment from the State of Pennsylvania related to sales and use tax for the audit period of January 1, 2016, through September 30, 2019. The assessment is in the amount of $115,000, including interest and penalties calculated on sales made inside and outside Pennsylvania. The Company has recorded the full amount of this assessment. The Company appealed the assessment in August, 2021, and at the request of the state, provided additional information to support its appeal. The Company’s position is that Pennsylvania has no sales tax authority to levy and collect sales tax on sales made outside of Pennsylvania. The Company initially recorded an expected liability of $7,000, based on known sales inside Pennsylvania. The State of Pennsylvania rejected an appeal by the Company. The Company has agreed to a twenty-four (24) month payment plan with the State of Pennsylvania, which will commence in December, 2023. Following the final payoff of the liability, the Company can re-open an appeal with the state for a refund of the liability.
Letters of Credit
The Company had no outstanding letters of credit as of September 30, 2023.
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SEGMENT REPORTING |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT REPORTING | NOTE 8 – SEGMENT REPORTING
The Company operates within two (2) reportable segments. The Company’s management evaluates performance and allocates resources based on the profit or loss from operations. Because the Company is a recurring revenue service business with very few physical assets, management does not use total assets by segment to make decisions regarding operations, and therefore, the total assets disclosure by segment has not been included.
The reportable segments consist of Hosted Services and Mobile Services. Mobile Services reporting will now consist of our post-paid and pre-paid cellular business.
Hosted Services – Our Hosted Services include a suite of hosted CPaaS services within the Apeiron Systems’ cloud platform, including Cloud IVRs, Voicemail, Fax, Call Recording and other services provided with local, toll-free and international phone numbers. Apeiron also delivers public and private IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs.
Mobile Services – Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through our subsidiaries Apeiron Systems and IM Telecom. Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers. Mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. Also included in our Mobile Services segment is the distribution of government subsidized mobile voice service and mobile data service by IM Telecom under its Infiniti Mobile brand and FCC Lifeline license to low-income American households that qualify for the FCC’s Lifeline mobile voice service program and/or the FCC’s ACP mobile data program. Even though government programs like Lifeline have existed since 1985, these programs, along with newer programs like the ACP program, are subject to change and may have a material impact on our Mobile Services business if changed, reduced or eliminated.
The following table reflects the result of operations of the Company’s reportable segments:
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STOCKHOLDERS’ EQUITY |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ EQUITY | NOTE 9 – STOCKHOLDERS’ EQUITY
Independent Directors’ Incentive Stock Options
On June 1, 2023, the Board of Directors unanimously voted to eliminate incentive stock options available to our two (2) independent directors, effective June 1, 2023.
Stock Option Grants
On September 8, 2023, Todd Murcer, Executive Vice President of Finance and Secretary of the Company, was granted incentive stock options, and previously issued and partially vested incentive stock options were canceled. On September 22, 2023, Jason Welch, President for IM Telecom, was granted options, and previously issued and partially vested incentive stock options were canceled. These new grants emphasized the importance of the services of Messrs. Murcer and Welch to the Company.
Non-Compensatory Stock Option Grant
On September 13, 2023, D. Sean McEwen, the Chairman and CEO of the Company, exercised his third tranche of equity stock options for shares of common stock at a price of $ per share, which shares were issued on September 13, 2023.
Stock Compensation
The Company offers incentive stock option grants to directors and key employees. Options vest in tranches and typically expire five (5) years from the date of grant. For the nine months ended September 30, 2023, and 2022, the Company recorded options expense of $85,133 and $539,933, respectively. For the three months ended September 30, 2023, and 2022, the Company recorded options expense of ($197,436) and $185,637, respectively. The option expense not taken as of September 30, 2023, is $, with a weighted average term of years.
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SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 10 – SUBSEQUENT EVENTS
Below are events that have occurred since September 30, 2023:
On October 25, 2023, Jeffrey Pearl, an independent Board member, exercised incentive stock options convertible into common stock at a price of $ per share, which shares were issued on October 27, 2023.
On November 6, 2023, the Company agreed to and established a payment plan with the State of Pennsylvania. The Company will pay $5,500 per month, over a twenty-four (24) month commencing in December, 2023.
On November 10, 2023, the Company’s wholly owned subsidiary, Apeiron Systems, entered into a five (5) year agreement with Viva-US Telecommunications, Inc. (“Viva-US”), as the exclusive supplier of wholesale cellular voice & data, messaging, international call termination, smart SIM (“Subscriber Identity Module”), and other telecommunications services. Apeiron Systems shall provide these services through its CPaaS (“Communication Platform as a Service”) cloud platform. Viva-US is a US MVNO (“Mobile Virtual Network Operator”) and part of the Balesia Technologies, Inc. group of companies operating MNOs (“Mobile Network Operator”) and MVNOs throughout North and South America, supporting over three million customers in Bolivia, Mexico and Argentina. Viva-US is expected to launch its US MVNO service in the first quarter of 2024. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
Interim Financial Statements
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2022.
The accompanying financial statements have been prepared using the accrual basis of accounting.
The preparation of financial statements in conformity 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and stock-based compensation. Actual results could differ from those estimates.
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| Basis of Consolidation | Basis of Consolidation
The condensed consolidated financial statements include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. All significant intercompany transactions are eliminated.
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| Net Income (Loss) Per Share |
Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the three and nine months ended September 30, 2023, and 2022, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of September 30, 2023, and 2022, there were potentially and dilutive shares.
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| Concentrations of Credit Risk | Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash and cash equivalents.
All cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels.
The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of September 30, 2023, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amount of $889,249 or 70.9%, and $202,548 or 16.2%. It should be noted that the largest customer is the federal government, as administered by the Universal Service Administrative Company (“USAC”), under the authority of the Federal Communication Commission (the “FCC”). As of December 31, 2022, the Company had a significant concentration of receivables from two (2) customers in the amounts of $859,334 or 57.0%, and $255,136 or 16.9%.
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| Concentration of Major Customer | Concentration of Major Customer
A significant amount of the revenue is derived from contracts with major customers. For the three months ended September 30, 2023, the Company had two (2) customers that accounted for $2,793,313 or 59.6% and $772,614 or 16.5% of revenue, respectively. For the three months ended September 30, 2022, the Company had two (2) customers that accounted for $4,173,492 or 71.0% of revenue and $826,901 or 14.1% of the revenue, respectively. For the nine months ended September 30, 2023, the Company had two (2) customers that accounted for $7,655,678 or 57.5% and $2,235,676 or 16.8% of revenue, respectively. For the nine months ended September 30, 2022, the Company had two (2) customers that accounted for $9,915,189 or 65.1% of revenue and $2,639,730 or 17.3% of the revenue, respectively.
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| Effect of Recent Accounting Pronouncements | Effect of Recent Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statements. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies -Schedule of Earnings Per Share, Basic and Diluted |
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PROPERTY AND EQUIPMENT (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment - Schedule of Property and Equipment | Property and equipment consist of the following major classifications as of September 30, 2023, and December 31, 2022:
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RIGHT-OF-USE ASSETS (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Right-of-Use Assets - Schedule of Future Minimum Lease Payments for Operating Leases | Future lease liability payments under the terms of these leases are as follows:
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INTANGIBLE ASSETS (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets - Schedule of Acquired Finite Lived Intangible Assets |
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SEGMENT REPORTING (Tables) |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting - Schedule of Segment Reporting Information | The following table reflects the result of operations of the Company’s reportable segments:
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STOCKHOLDERS’ EQUITY (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ Equity - Schedule of Share-Based Compensation, Stock Option Activity |
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Summary of Significant Accounting Policies -Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Numerator | ||||
| Net Loss | $ (113,216) | $ (1,345,514) | $ (2,250,633) | $ (2,868,317) |
| Denominator | ||||
| Weighted-average common shares outstanding | 42,707,808 | 41,912,145 | 42,658,697 | 41,715,406 |
| Weighted-average common shares outstanding, diluted | 42,707,808 | 41,912,145 | 42,658,697 | 41,715,406 |
| Net income per common share | ||||
| Basic | $ (0.00) | $ (0.03) | $ (0.05) | $ (0.07) |
| Diluted | $ (0.00) | $ (0.03) | $ (0.05) | $ (0.07) |
INVENTORY (Details Narrative) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Inventory, net | $ 679,185 | $ 526,337 |
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 461,611 | $ 461,611 |
| Less: Accumulated Depreciation | (434,339) | (425,075) |
| Property and equipment, net | 27,272 | 36,536 |
| Lease Improvements | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 46,950 | 46,950 |
| Furniture and Fixtures | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 102,946 | 102,946 |
| Billing Software | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 217,163 | 217,163 |
| Officer Equipment | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 94,552 | $ 94,552 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Property, Plant and Equipment [Line Items] | ||||
| Depreciation expense | $ 3,088 | $ 3,088 | $ 9,264 | $ 9,264 |
| Property and Equipment | ||||
| Property, Plant and Equipment [Line Items] | ||||
| Depreciation expense | $ 3,088 | $ 3,088 | $ 9,264 | $ 9,264 |
Right-of-Use Assets - Schedule of Future Minimum Lease Payments for Operating Leases (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Right-of-use Assets | ||
| 2023 | $ 38,565 | |
| 2024 | 155,325 | |
| 2025 | 129,543 | |
| 2026 | 65,967 | |
| 2027 | 54,000 | |
| Thereafter | 144,000 | |
| Total | 587,400 | |
| Less Interest | 98,721 | |
| Present value of minimum lease payments | 488,679 | |
| Less Current Maturities | 125,324 | $ 118,382 |
| Long Term Maturities | $ 363,355 | $ 458,227 |
RIGHT-OF-USE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Lease terms and expirations, description | the Company had four (4) properties with lease terms in excess of one (1) year. Of these four (4) leases, two (2) leases expire in 2025, one (1) lease expires in 2026, and one (1) lease expires in 2030 | |||
| Present value of minimum lease payments | $ 488,679 | $ 488,679 | ||
| Weighted average term | 62 months 6 days | 62 months 6 days | ||
| Weighted average discount | 6.84% | 6.84% | ||
| Lease expense | $ 42,503 | $ 33,663 | $ 128,582 | $ 93,260 |
| Minimum | ||||
| Implied interest rate used | 4.75% | 4.75% | ||
| Maximum | ||||
| Implied interest rate used | 7.50% | 7.50% | ||
Intangible Assets - Schedule of Acquired Finite Lived Intangible Assets (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Customer List | $ 1,135,962 | $ 1,135,962 |
| Software | 2,407,001 | 2,407,001 |
| ETC License | 634,251 | 634,251 |
| Less: Amortization | (3,542,963) | (3,542,963) |
| Intangible Assets, net | $ 634,251 | $ 634,251 |
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||
| Lifeline License, fair market value | $ 634,251 | $ 634,251 | $ 634,251 | ||
| Amortization expense | $ 0 | $ 0 | $ 0 | $ 0 | |
NOTES PAYABLE (Details Narrative) - USD ($) |
1 Months Ended | 6 Months Ended | |
|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2023 |
Jun. 14, 2022 |
|
| Note Purchase Agreement | |||
| Short-Term Debt [Line Items] | |||
| Note payable | $ 3,150,000 | ||
| Repayment of debt | $ 47,250 | ||
| Note Purchase Agreement "First Amendment" | |||
| Short-Term Debt [Line Items] | |||
| Repayment of debt | $ 15,000 | ||
| Amendment to the Note Purchase Agreement, description | we entered into a “First Amendment to the NPA” with CCUR and Symbolic. The purpose for the amendment was to add further growth capital to the Company in the form of “Delayed Draw Notes” in an aggregate principal amount of up to $2,000,000 | ||
| Proceeds from note payable | $ 500,000 |
CONTINGENCIES AND COMMITMENTS (Details Narrative) - State of Pennsylvania |
1 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Operating Loss Carryforwards [Line Items] | |
| Tax assessment | $ 115,000 |
| Potential tax liability | $ 7,000 |
Segment Reporting - Schedule of Segment Reporting Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Segment Reporting Information [Line Items] | ||||
| Revenue | $ 4,689,001 | $ 5,880,333 | $ 13,322,146 | $ 15,231,288 |
| Gross Profit | 1,264,169 | 911,082 | 3,040,100 | 3,000,910 |
| Depreciation and amortization | 3,088 | 3,088 | 9,264 | 9,264 |
| Additions to property and equipment | 0 | 0 | 0 | 0 |
| Hosted Services | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenue | 1,252,405 | 1,328,333 | 3,736,323 | 4,199,365 |
| Gross Profit | 351,766 | 453,087 | 1,059,921 | 1,372,019 |
| Depreciation and amortization | 825 | 2,986 | 2,598 | 8,958 |
| Additions to property and equipment | 0 | 0 | 0 | 0 |
| Mobile Services | ||||
| Segment Reporting Information [Line Items] | ||||
| Revenue | 3,436,596 | 4,552,000 | 9,585,823 | 11,031,923 |
| Gross Profit | 912,403 | 457,995 | 1,980,179 | 1,628,891 |
| Depreciation and amortization | 2,263 | 102 | 6,666 | 306 |
| Additions to property and equipment | $ 0 | $ 0 | $ 0 | $ 0 |
SEGMENT REPORTING (Details Narrative) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
Number
| |
| Segment Reporting [Abstract] | |
| Number of reportable segments | 2 |
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Incentive stock options, granted | 1,600,000 | |||
| Incentive stock options, canceled | 700,000 | |||
| Stock options, exercised | 662,500 | |||
| Stock-based compensation expense, vested options | $ 197,436 | $ 185,637 | $ 85,133 | $ 539,933 |
| Deferred compensation expense | $ 1,654,950 | |||
| Weighted average expected term (years) | 3 years 2 months 8 days | |||
| Executive Vice President of Finance | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Incentive stock options, granted | 750,000 | |||
| Incentive stock options, canceled | 350,000 | |||
| President for IM Telecom | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Incentive stock options, granted | 750,000 | |||
| Incentive stock options, canceled | 350,000 | |||
| Chief Executive Officer | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Stock options, exercised | 187,500 | |||
| Shares issued as a result of options exercised | 187,500 | |||
| Stock price | $ 0.22 | $ 0.22 | ||
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | |
|---|---|---|---|
Oct. 25, 2023 |
Sep. 30, 2023 |
Nov. 06, 2023 |
|
| Subsequent Event [Line Items] | |||
| Incentive stock options, exercised | 662,500 | ||
| Subsequent Event | State of Pennsylvania | |||
| Subsequent Event [Line Items] | |||
| Commitment, payment plan | $ 5,500 | ||
| Subsequent Event | Independent Director #1 | |||
| Subsequent Event [Line Items] | |||
| Incentive stock options, exercised | 100,000 | ||
| Stock price | $ 0.495 |