Cover
Cover - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Jun. 30, 2020 | |
Cover [Abstract] | ||
Document Type | 10-K | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2020 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-10171 | |
Entity Registrant Name | KonaTel, Inc. | |
Entity Central Index Key | 0000845819 | |
Entity Incorporation, State or Country Code | DE | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Public Float | $ 3,580,034 | |
Entity Common Stock, Shares Outstanding | 40,692,286 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and Cash Equivalents | $ 715,195 | $ 191,474 |
Accounts Receivable, net | 434,801 | 377,485 |
Inventory, Net | 17,786 | 4,659 |
Prepaid Expenses | 2,365 | 1,743 |
Other Current Assets | 194 | |
Total Current Assets | 1,170,341 | 575,361 |
Fixed Assets | ||
Property and Equipment, Net | 79,571 | 102,689 |
Other Assets | ||
Intangible Assets, Net | 1,517,163 | 2,317,502 |
Other Assets | 172,065 | 207,740 |
Total Other Assets | 1,689,228 | 2,525,242 |
Total Assets | 2,939,140 | 3,203,292 |
Current Liabilities | ||
Accounts Payable and Accrued Expenses | 1,042,567 | 1,223,195 |
Amount Due to Stockholder | 151,357 | |
Revolving Line of Credit | 0 | 12,237 |
Note Payable, current portion | 94,339 | 75,905 |
Right of Use Operating Lease Obligations, current | 66,323 | 69,148 |
Deferred Revenue | 37,677 | 53,074 |
Customer Deposits | 31,087 | |
Total Current Liabilities | 1,240,906 | 1,616,003 |
Long Term Liabilities | ||
Right of Use Operating Lease Obligations, long term | 15,399 | 12,942 |
Note Payable, long term | 150,000 | 50,603 |
Total Long Term Liabilities | 165,399 | 63,545 |
Total Liabilities | 1,406,305 | 1,679,548 |
Stockholders' Equity | ||
Common Stock | 40,692 | 40,692 |
Additional Paid-In Capital | 7,460,632 | 7,380,029 |
Accumulated Deficit | (5,968,489) | (5,896,977) |
Total Stockholders' Equity | 1,532,835 | 1,523,744 |
Total Liabilities and Stockholders' Equity | $ 2,939,140 | $ 3,203,292 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, par value in dollars | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 40,692,286 | 40,692,286 |
Common stock, shares outstanding | 40,692,286 | 40,692,286 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | ||
Revenue | $ 9,358,999 | $ 9,173,520 |
Cost of Revenue | 5,823,552 | 6,303,053 |
Gross Profit | 3,535,447 | 2,870,467 |
Operating expenses | ||
Payroll and Related Expenses | 1,968,415 | 1,853,995 |
Operating and Maintenance | 803,987 | 1,397,995 |
Bad Debt | 2,313 | 36,635 |
Utilities and Facilities | 139,171 | 174,245 |
Depreciation and Amortization | 838,003 | 916,897 |
General and administrative | 62,560 | 99,365 |
Marketing and Advertising | 15,840 | 26,042 |
Taxes and Insurance | 65,177 | 10,488 |
Total Operating Expenses | 3,895,466 | 4,515,662 |
Operating Loss | (360,019) | (1,645,195) |
Other Income and Expense | ||
Interest Income | 1,562 | |
Other Income | 625,591 | 15,499 |
Interest Expense | (26,954) | (55,270) |
Total Other Income and Expenses | 598,637 | (38,209) |
Net Income (Loss) before Provision for Income Tax | 238,618 | (1,683,404) |
Provision for Income Taxes (Benefit) | (98,500) | |
Net Income (Loss) | $ 238,618 | $ (1,584,904) |
Net Income (Loss) per Share | ||
Net Income (Loss) per Share, Basic | $ 0.01 | $ (0.04) |
Net Income (Loss) per Share, Diluted | ||
Weighted Average Number of Shares | ||
Weighted Average Outstanding Shares, Basic | 40,692,286 | 40,692,286 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2018 | $ 40,692 | $ 7,041,696 | $ (4,352,073) | $ 2,730,315 |
Beginning Balance, shares at Dec. 31, 2018 | 40,692,286 | |||
Dividend Settled in 2018 | 40,000 | 40,000 | ||
Stock Based Compensation | 338,333 | 338,333 | ||
Net Income/(Loss) | (1,584,904) | (1,584,904) | ||
Ending Balance at Dec. 31, 2019 | $ 40,692 | 7,380,029 | (5,896,977) | 1,523,744 |
Ending Balance, shares at Dec. 31, 2019 | 40,692,286 | |||
Stock Based Compensation | 80,603 | 80,603 | ||
Dividends Paid to Apeiron Systems shareholders | (310,130) | (310,130) | ||
Net Income/(Loss) | 238,618 | 238,618 | ||
Ending Balance at Dec. 31, 2020 | $ 40,692 | $ 7,460,632 | $ (5,968,489) | $ 1,532,835 |
Ending Balance, shares at Dec. 31, 2020 | 40,692,286 |
Consolidated Statements of St_2
Consolidated Statements of Stockholders' Equity (Deficit) (Parenthetical) | 12 Months Ended |
Dec. 31, 2020 | |
Statement of Stockholders' Equity [Abstract] | |
Year dividend was settled | 2018 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash Flows from Operating Activities | ||
Net Income (Loss) | $ 238,618 | $ (1,584,904) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and Amortization | 838,003 | 916,897 |
Bad Debt | 2,313 | 36,635 |
Stock-based compensation | 80,603 | 338,333 |
Change in Right of Use Asset | (1,994) | (78,583) |
Change in Lease Liability | (367) | 82,090 |
Grant revenue | (319,000) | |
Changes in Operating Assets and Liabilities, net of effects of acquisition: | ||
Accounts Receivable | (59,629) | 745,112 |
Inventory | (13,127) | (3,574) |
Prepaid Expenses | (622) | 8,011 |
Accounts Payable and Accrued Expenses | (182,443) | (145,797) |
Note Payable | (41,769) | |
Deferred Revenue | (15,397) | (16,914) |
Customer Deposits | (31,087) | 2,233 |
Other Assets | 35,675 | (150,472) |
Net cash provided by operating activities | 571,546 | 107,298 |
Cash Flows from Investing Activities | ||
Cash Received in Acquisition of IM Telecom | 14,318 | |
Note Receivable from Sale of Business Component | 66,667 | |
Purchase of Assets | (10,833) | |
Asset Purchase of IM Telecom | (22,382) | |
Net cash provided by (used in) investing activities | (10,833) | 58,603 |
Cash Flows from Financing Activities | ||
Repayment of Revolving Lines of Credit | (12,237) | (91,142) |
Advances made by Stockholder | 200,000 | |
Proceeds from Federal SBA Covid Loans | 468,900 | |
Repayments of amounts due to Related Party and Seller | (151,357) | (139,795) |
Repayments of amounts of Notes Payable | (112,168) | |
Proceeds from Notes Payable | 80,000 | |
Dividends Paid to Apeiron shareholders | (310,130) | |
Net cash used in financing activities | (36,992) | (30,937) |
Net Change in Cash | 523,721 | 134,964 |
Cash, Beginning of Year | 191,474 | |
Cash, End of Period | 715,195 | 191,474 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 21,591 | 40,660 |
Cash paid for taxes | ||
Asset Purchase of IM Telecom | ||
Accounts receivable | 123,959 | |
Prepaid Expense | 2,400 | |
Furniture and Equipment at Fair Market Value | 1,308 | |
Accounts Payable and Accrued Expenses, net of cash | (24,271) | |
Note Payable | (168,277) | |
License | 634,252 | |
Right of use assets obtained in exchange for new operating lease liabilities | $ 28,576 | $ 151,471 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
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. KonaTel Inc., formerly known as Dala Petroleum Corp. (“KonaTel,” 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”). On December 18, 2017, we acquired KonaTel, Inc, a Nevada sub S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly owned subsidiary. On December 31, 2018, we acquired Apeiron Systems, Inc., a Nevada corporation d/b/a “Apeiron” (“Apeiron Systems”), which is also our wholly owned subsidiary. Apeiron Systems was organized in 2013 and is an international hosted services CPaaS (“Communications Platform as a Service”) provider that designed, built, owns, and operates its private core network, supporting a suite of real-time business communications services and Applications Programming Interfaces (“APIs”). As an Internet Telephony Service Provider (“ITSP”), Apeiron Systems holds a Federal Communications Commission (“FCC”) numbering authority license. Some of Apeiron Systems’ hosted services include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”), number services including mobile, toll free and DID landline numbers, SMS to Email services, Database Dip services, SD-WAN, voice termination, and numerous API driven services including voice, messaging, and network management. On January 31, 2019, we acquired IM Telecom, an Oklahoma limited liability company, d/b/a Infiniti Mobile, (“Infiniti Mobile”), which became our wholly owned subsidiary. Infiniti Mobile is an FCC licensed ETC (“Eligible Telecommunications Carrier”) and is one of nineteen (19) FCC licensed carriers to hold an FCC approved Lifeline Compliance Plan in the United States. Under the Lifeline program, Infiniti Mobile is currently authorized to provide government subsidized mobile telecommunications services to eligible low-income Americans currently in eight (8) states. Basis of Presentation 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. Significant estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and customer lists. Actual results could differ from those estimates. Basis of Consolidation The consolidated financial statements for the year ended December 31, 2020, include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems, and Infiniti Mobile (January through December). The consolidated financial statements for the year ended December 31, 2019, include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems, and Infiniti Mobile (February through December). All significant intercompany transactions are eliminated. Cash and Cash Equivalents Cash and Cash Equivalents include cash on hand and all short-term investments with maturities of three months or less. Trade Accounts Receivable The Company accounts for trade receivables based on amounts billed to customers. Past due receivables are determined based on contractual terms. The Company does not accrue interest and does not require collateral on any of its trade receivables. Allowance for Doubtful Receivables The allowance for doubtful receivables is determined by management based on customer credit history, specific customer circumstances and general economic conditions. Periodically, management reviews accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. As of December 31, 2020, and 2019, management has determined that no allowance for doubtful receivables is necessary. Inventory Inventory consists primarily of the cost of cellular phones and cellular accessories. Inventory is reported at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (“FIFO”) method. As of December 31, 2020, total inventory owned by the company was $17,786. Due to the rapidly changing technology within the industry, inventory is evaluated on a regular basis to determine if any obsolescence exists. As of December 31, 2020, and 2019, the allowance for inventory obsolescence was $0. Property and Equipment Property and equipment are recorded at cost and are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are amortized over the lesser of the lease term or estimated useful life, furniture and fixtures, equipment, and vehicles are depreciated over periods ranging from five to seven (5-7) years, and billing software is depreciated over three (3) years which represents the estimated useful life of the assets. Maintenance and repairs are charged to expense as incurred while major replacements and improvements are capitalized. When property and equipment are retired or sold, the cost and applicable accumulated depreciation are removed from the respective accounts and the related gain or loss is recognized. The Company recognizes impairment losses for long-lived assets whenever changes in circumstances result in the carrying amount of the assets exceeding the sum of the expected future cash flows associated with such assets. Management has concluded that no impairment reserves are required as of December 31, 2020, and 2019. Intangible Assets – Long-Lived Assets The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Intangible assets consist of customer lists, licenses, and software arising from acquisitions which are amortized on a straight-line basis over three (3) years, their estimated useful lives. Other Intangibles The Company accounts for other intangibles in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During 2019, KonaTel, through the acquisition of IM Telecom, recorded, at fair market value, an FCC License in the amount of $634,251. Other Intangible Assets are not amortized. As of December 31, 2020, there is no impairment of the value of the license. Other Assets Other Assets represent items classified as long-term assets in accordance with the Statement of Financial Accounting Standards ASC 210-10-45. Other Assets include vendor deposits and security deposits that the Company is required to maintain. Customer Deposits Before entering into a contract with a sub-reseller customer, the Company requires the customer to either secure a formal letter of credit with a bank or require a certain level of cash collateral deposits from the customer. These collateral requirements are determined by management and may be adjusted upward or downward depending on the volume of business with the sub-reseller customer, or if management’s assessment of credit risk for a sub-reseller customer would change. The Company held $0 and $31,088 in collateral deposits from various sub-reseller customers at December 31, 2020, and 2019, respectively. Such amounts represent collateral received from the sub-resellers in order to contract with the Company. The related contracts have an option to terminate within a period of less than one (1) year, and accordingly, these collateral deposits are classified as current liabilities in the accompanying balance sheet. Fair Market Value of Assets The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses, deposits received from customers for receivables and short-term loans the carrying amounts approximate fair value due to their short maturities. Long-term assets purchased through acquisitions are valued at the Fair Market Value of the asset at the time of acquisition. The Fair Market Value is based on observable inputs on assets in active market- places for fixed assets, and estimations and assumptions developed by us for Other Intangibles. The Company follows accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices, which are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. Leases In February 2016, the FASB updated the accounting guidance related to leases. The most significant change in the updated accounting guidance requires lessees to recognize lease assets and liabilities on the balance sheet for all operating leases with the exception of short-term leases. The standard also expands the disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. For a lessee, the recognition, measurement and presentation of expenses and cash flows arising from a lease did not significantly change from previous guidance. We adopted the updated guidance on January 1, 2019 on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the updated guidance. In addition, as permitted under the transition guidance within the new standard, prior scoping, and classification conclusions were carried forward for leases existing as of the adoption date. See NOTE 4. Upon adoption, we recorded $151,471 for operating lease assets and liabilities, which includes the impact of fair value adjustments, prepaid and deferred rent. As of December 31, 2020, and December 31, 2019, our operating lease assets and liabilities were $80,578 and $81,723, respectively. Revenue Recognition Services revenues are generated from cellular and telecommunication services. The revenue is derived from wholesale and retail services. Telecommunications and mobile telecommunication services include network platforms, voice, data, and text services. The Company recognizes revenue as telecommunications and mobile services are provided in service revenue. Telecommunications and mobile services are billed and paid on a monthly basis. Services are billed and paid on a monthly basis. These bills include an amount for the monthly recurring charge and a usage charge. We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services. We account for these revenues under Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers” (Topic 606), which we adopted on January 1, 2018, using the modified retrospective approach. This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard U.S. GAAP. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The adoption of this guidance did not have a material impact on the consolidated financial statements. Deferred Revenue Services for cellular and telecommunication services have a monthly recurring charge that is billed in advance. This charge covers a thirty (30) or thirty-one (31)-day period. This charge is deferred for the period in which it was received and recorded as revenue at the conclusion of this period. Costs, mainly from outside providers, associated with the deferred revenue are recognized in the same period as revenue is recognized. Cost of Revenue Cost of Revenue includes the cost of communication services, equipment and accessories, shipping costs, and commissions of sub-agents. Advertising Costs for advertising products and services, as well as other promotional and sponsorship costs, are charged to Selling, general and administrative expense in the periods in which they are incurred. Advertising expense was $15,840 and $23,275 for 2020 and 2019 respectively. Stock-based Compensation The Company records stock-based compensation in accordance with the guidance in ASC 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This requires that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from nonemployees in accordance with ASC 718-10 and the conclusions reached by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services. In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In 2020, KonaTel issued stock-based options to key employees of the company. Implementation of the aforementioned standard had no effect on the issuance of the 2020 options. Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the consolidated financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rate are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The benefits of uncertain tax positions are recorded in the Company’s Consolidated Financial Statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. The Company records interest and penalties related to unrecognized tax benefits in interest expense in the Company’s Consolidated Statements of Operations. Net Income / Loss Per Share Basic net income / loss per common share calculations are determined by dividing net income / loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income / loss per common share calculations are determined by dividing net income / loss by the weighted average number of common shares and dilutive common share equivalents outstanding. As of December 31, 2020, there are 3,600,000 potentially dilutive common shares. As of December 31, 2019, there were 3,675,000 potentially dilutive common shares. The dilutive common shares for the year ended December 31, 2020, and December 31, 2019, are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive. The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income/loss per common share: Years Ended December 31, 2020 2019 Numerator Net Income/Loss $ 238,618 $ (1,584,904 ) Denominator Weighted-average common shares outstanding 40,692,286 40,692,286 Dilutive impact of stock options — — Weighted-average common shares outstanding, diluted 40,692,286 40,692,286 Net income per common share Basic $ 0.01 $ (0.04 ) 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 and restricted 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 December 31, 2020, 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 amounts of $194,509 or 52.4% and $52,843 or 14.2%. As of December 31, 2019, the Company had a significant concentration of receivables from three (3) customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%. These receivables represented 14% and 59% of the total receivables for the years ended December 31, 2020, and 2019, respectively. Concentration of Major Customer A significant amount of the revenue is derived from contracts with major customers and cellular providers. For the year ended December 31, 2020, the Company had one (1) cellular provider that accounted for $3,337,262, or 35.7% of revenue and one (1) customer that accounted for $1,472,962, or 15.7%, of the revenue. For the year ended December 31, 2019, the Company had one (1) cellular provider that accounted for $3,728,456, or 39.6% of revenue and one (1) customer that accounted for $2,200,761, or 23.4%, of the revenue. The loss of a major customer would create a very negative impact on the company, which would require the company to make significant changes to reduce expenses. Effect of Recent Accounting Pronouncements The Company has evaluated all other recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statement. |
Significant Transactions
Significant Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Significant Transactions | NOTE 2 – SIGNIFICANT TRANSACTIONS January 2019 Transaction – IM Telecom Acquisition Effective February 7, 2018, we entered into an Agreement for the Purchase and Sale of Membership Interest (the “PMSI”) dated as of February 5, 2018, with the transaction documents being deposited in escrow on February 7, 2018, respecting the acquisition of 100% of the membership interest in IM Telecom from its sole owner, Trevan Morrow. The principal asset of IM Telecom was a “Lifeline Program” license (an FCC approved Compliance Plan), the transfer of ownership of required prior approval of the FCC. Following the FCC approval of the transfer of the Lifeline Program license to us on October 23, 2018, the PSMI was completed on January 31, 2019. At the closing, we also engaged Mr. Morrow as an independent consultant for ninety (90) days in consideration of $100 and granted him an incentive stock option to purchase 500,000 shares of our common stock at an exercise price of $0.20 per share. The incentive stock option to purchase 500,000 shares to Mr. Morrow was cancelled as discussed in NOTE 8. The purchase price of $583,690 consisted of payments of debt and accounts payable made by the Company on behalf of IM Telecom from the PMSI effective date of February 7, 2018, until January 31, 2019, the closing date. The purchase price allocation included the FCC license valued at $634,252, cash of $14,318, accounts receivable of $123,959, prepaid other assets of $2,400, furniture and equipment of $1,309. As part of the transaction, the Company also agreed to assume accounts payable of $24,271. The transaction was accounted for under the purchase method. The purchase price allocation to assets and liabilities assumed in the transaction was: Cash $ 14,318 Accounts Receivable 123,959 Prepaid Expenses and Deposits 2,400 Furniture and Equipment at Fair Value 1,309 License 634,252 Accounts Payable (24,271 ) Note Payable (168,277 ) Net Assets Acquired $ 583,690 Glosser Arbitration Settlement In August, 2019, the Company won an arbitration award (ratified by the court) from Mr. Glosser in the amount of $357,914, together with arbitrator’s compensation of $4,957, for a total award of $362,871; and Mr. Glosser’s counterclaim was found to be without merit. The Company and Mr. Glosser entered into a Settlement Agreement and Mutual Release on February 24, 2020, pursuant to which this matter was fully settled, resolving all claims, and Mr. Glosser paid the Company $300,000. Apeiron Systems Working Capital Settlement On December 31, 2018, the Company and the shareholders of Apeiron Systems entered into an Agreement and Plan of Merger. Section 2.2 Estimated Net Working Capital and Section 2.3 Final Settlement of that agreement provided for a method to calculate and reconcile any surplus or deficit in net working capital amounts as of December 31, 2018. On November 22, 2019, the Company, Apeiron Systems and the Apeiron Systems’ shareholders reached an agreement on the final surplus net working capital amount of $310,130 owed by Apeiron Systems to the Apeiron Systems shareholders under the Apeiron Systems Merger Agreement. The net working capital amount was deemed to be payable by Apeiron Systems to the Apeiron Systems shareholders pro rata: 90% or $279,117 to Joshua Ploude and 10% or $31,013 to Vyacheslav Yanson. On February 14, 2020, the Company, on behalf of Apeiron Systems, made a partial payment of $5,000 towards the surplus net working capital balance of $31,013 Apeiron Systems owed to Mr. Yanson. On March 5, 2020, the Company, on behalf of Apeiron Systems, paid Yanson $26,013, representing the final payment of the surplus net working capital balance owed to Yanson. On March 8, 2020, the Company, on behalf of Apeiron Systems, paid Mr. Ploude $225,000. The remaining surplus net working capital balance of $54,117 was paid to Mr. Ploude during 2020. Euler Hermes/Sky Phone Settlement Between March and July 2019, IM Telecom purchased wireless handsets from Sky Phone, LLC in the amount of $192,293. Subsequently, a dispute arose between the parties regarding the amount of the debt, a lack of sufficient transaction documentation and problems with some of the handsets. On or about December 2019, the debt was transferred to Euler Hermes North America Insurance Company. On April 22, 2020, the parties entered into an agreement to settle the matter whereby IM Telecom agreed to pay $80,000 in monthly payments of $4,000 over twenty (20) months. The first payment was made on May 20, 2020. SBA Paycheck Protection Program On April 14, 2020 the operating companies of the Company made loan applications to participate in the Small Business Administration’s Paycheck Protection Program created as a result of the COVID-19 pandemic. On April 15, 2020, the loan applications of Apeiron Systems, IM Telecom and KonaTel Nevada were approved and loan proceeds in the amounts of $101,800, $20,900 and $186,300, respectively, were received. The Company has followed all prescribed loan forgiveness guidelines provided by our local bank and the SBA by using these loan proceeds to fund employee payrolls. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 3 – PROPERTY AND EQUIPMENT Property and equipment consist of the following major classifications as of December 31, 2020, and 2019: December 31, 2020 2019 Leasehold Improvements $ 46,950 $ 46,950 Furniture and Fixtures 217,163 102,946 Billing Software 102,945 217,163 Office Equipment 94,552 86,887 461,610 453,946 Less: Accumulated Depreciation and Amortization (382,040 ) (351,257 ) Property and equipment, net $ 79,570 $ 102,689 Depreciation and amortization amounted to $30,783 and $30,642 for the years ended December 31, 2020, and 2019, respectively. Depreciation and amortization expense are included as a component of operating expenses in the accompanying statements of operations. |
Right-Of-Use Assets
Right-Of-Use Assets | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
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 5.34% and 3.29%. The net Right-of-Use Assets were $80,578 and $78,584 in 2020 and 2019 respectively. The Company has right-of-use assets through leases of properties under non-cancelable leases. As of December 31, 2020, the Company had two (2) properties with lease terms in excess of one (1) year. These lease liabilities expire April 30, 2022, and December 31, 2021. Lease payables as of December 31, 2020, are $81,722. Future lease liability payments under the terms of these leases are as follows: 2021 $ 66,323 2022 $ 15,399 Thereafter $ — Total $ 81,722 Less Current Maturities $ 66,323 Long Term Maturities $ 15,399 The weighted average term of the right-to-use leases is 15.4 months recorded with a weighted average discount of 3.53%. The Company also leases two (2) office spaces on a month-to-month basis. Total rent expense for the year ended December 31, 2020, and 2019, amounted to $109,960 and $140,778, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2020 | |
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: December 31, 2020 2019 Customer Lists $ 1,135,961 $ 1,135,961 Software 2,407,001 2,407,001 License 634,251 634,252 Less: Accumulated Amortization (2,740,629 ) (1,938,296 ) Intangible Assets, net $ 1,436,584 $ 2,238,918 Amortization expense amounted to $802,334 and $886,255 for the years ended December 31, 2020, and 2019, respectively. Amortization expense is included as a component of operating expenses in the accompanying statements of operations. Amortization expense is expected to be as follows: 2021 $ 802,332 2022 $ 634,252 Intangible Assets with indefinite useful life consist of a license granted by the FCC: The License, because of the nature of the asset and the limitation on the number of granted licenses by the FCC, will not be amortized. The License was acquired through an acquisition. The fair market value of the License as of December 31, 2020, and December 31, 2019, was $634,252. |
Lines of Credit
Lines of Credit | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Lines of Credit | NOTE 6 – LINES OF CREDIT The Company previously had two (2) lines of credit with a bank which provided aggregate maximum borrowing availability of $1,050,000 as of 2020, and 2019, respectively. The lines of credit were payable on demand and bore interest at a variable rate with rate ranges from 7.5% to 8.0%. Outstanding advances under these lines of credit arrangements amounted to $0 as of December 31, 2020, and $12,237 as of December 31, 2019. The lines of credit matured in 2020 and were paid in full on January 5, 2020, and February 14, 2020. |
Amount Due to Stockholder
Amount Due to Stockholder | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Amount Due to Stockholder | NOTE 7 – AMOUNT DUE TO STOCKHOLDER As of January 1, 2018, D. Sean McEwen was owed $191,500. This advance matured and final payment was received in October, 2019. During 2019, Joshua Ploude, CEO of Apeiron Systems, advanced the Company $200,000. The amount was used to provide a vendor security deposit. The note carried a 10% per annum interest rate until May 1, 2019, at which time, increased to 12% per annum. The note had an original maturity date of July 10, 2019. The loan was extended without a defined maturity end date. The amount due as of December 31, 2019, was $151,357. The advance was fully repaid with interest on November 25, 2020. The total amount of repayment for the years ended December 31, 2020, and 2019, to stockholders was $151,357 and $147,251, respectively. |
Contingencies and Commitments
Contingencies and Commitments | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies and Commitments | NOTE 8 – 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 December 31, 2020, there are no 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. Pursuant to an Independent Contractor Agreement (the “ICA”) effective October 17, 2019, between the Company and Charles L. Schneider, Jr., in the event that Infiniti Mobile is granted its request for Eligible Telecommunications Carrier (“ETC”) status from the California Public Utilities Commission (“CPUC”) to distribute Lifeline cellular phone service within the State of California, Mr. Schneider will be granted a one (1) year Warrant, with a customary “cashless” exercise feature, to purchase 250,000 shares of the Company’s common stock at an exercise price to be determined on the date of any such approval. The ICA was for a term of one (1) year, extendable by the parties yearly. Regulatory Determination On May 17, 2019, IM Telecom was notified by the United States Administrative Company (“USAC”) of an over-payment of Universal Service Fund reimbursements in the amount of $168,277. On July 25, 2019, the Company entered into a Letter of Acknowledgement with the FCC and requested a twenty-four (24)-month payment plan regarding the repayment of the over-payment amounts. While awaiting approval of this repayment plan, the Company continued to make monthly payments against the outstanding balance. On October 15, 2020, the Company received approval of the payment plan and signed a promissory note with Universal Service Administrative Company to repay the remainder of the unpaid balance in the amount of $67,105. The loan had a commencement date of November 13, 2020, a term of twelve (12) months, with an annual interest rate of 12.75%. The Company agreed to pay Universal Services Administration Company $5,986 per month for twelve (12) months, and a $1,000 Administrative Fee due on October 15, 2020. As of December 31, 2020, the outstanding balance on this promissory note was $56,559. The Company entered into a Settlement Agreement and Release with the former owner of IM Telecom regarding this matter, effective September 4, 2019, which was the date of delivery of the fully executed Settlement Agreement and Release that was dated August 22, 2019, and filed with the SEC on September 4, 2019. Under the Settlement Agreement and Release, and as part of the previous owner’s obligations to indemnify and hold the Company harmless from any liability arising from the breach of any representations and warranties in the initial PSMI dated February 5, 2019, and filed with the SEC on February 6, 2019, which included this liability, the vested $0.20 per share 500,000 share incentive stock option grant that was awarded to the previous owner at the closing of the PSMI was cancelled and deemed null and void, and the previous owner was released from any liability for the $168,277 over-payment. All of the other terms and conditions of the PSMI remain in full force and effect, including the continuing indemnification provisions regarding all other representations and warranties. Letters of Credit The Company had no outstanding letters of credit as December 31, 2020. Going Concern The Company generated net income during the year ended December 31, 2020. In 2019 and 2018, the Company had been dependent upon equity financing to support its operations. In addition to net income of $238,618 and loss of $1,584,904 for the years ended December 31, 2020, and 2019, respectively, the Company experienced cash provided by operations of $571,546 and $107,298, respectively. The accumulated deficit as of December 31, 2020, is $5,968,489. The Company has ameliorated any substantial doubt issues by generating additional cash flow since the completion of our merger with KonaTel Nevada on December 18, 2017; the acquisition of Apeiron Systems and IM Telecom; receiving cash investments through the private placement of shares of our common stock; and revenues from the growth of IM Telecom, all of which has contributed to an improvement in our working capital, without the use of additional lines of credit or borrowings. In addition, the Company took advantage of the Paycheck Protection Program under the CARES Act of 2020. Our overall goal was to increase margins through cost controls and selection of higher margin product offerings. From 2019 to 2020, our gross margins increased from 31.3% to 37.8% respectively. Our net operating income (pre-depreciation and amortization expenses) improved 133% from 2019 to 2020. We decreased operating expenses by 13.4% in 2020, as we continue to streamline customer offerings to drive costs down over an extended period of time. We continue to be confident that with aggressive management and business development that we will continue to eliminate any going concern issues. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | N OTE 9 – 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. Previously, the Company had reported four (4) segments of Hosted Services, Mobile Services, Lifeline ETC and Lifeline VETC. The Company has made the decision to consolidate and align its segment reporting by the type of service offering and believes that this reporting will provide for a more accurate view of its lines of operation. The reportable segments consist of Hosted Services & Mobile Services. Mobile Services reporting will now consist of our post-paid and pre-paid cellular business. Hosted Services Mobile Services The following table reflects the result of operations of the Company’s reportable segments: Hosted Services Mobile Services Total For the year ended December 31, 2020 Revenue $ 4,810,573 $ 4,548,426 $ 9,358,999 Gross Margin $ 1,786,531 $ 1,748,915 $ 3,535,447 Depreciation and amortization $ 761,511 $ 76,492 $ 838,003 Additions to property and equipment $ — $ — $ — Gross Margin % 37.1 % 38.5 % 37.8 % For the year ended December 31, 2019 Revenue $ 2,616,830 $ 6,556,690 $ 9,173,520 Gross Margin $ (369,658 ) $ 3,240,125 $ 2,870,467 Depreciation and amortization $ 430,256 $ 486,641 $ 916,897 Additions to property and equipment $ — $ — $ — Gross Margin % -14.1 % 49.4 % 31.3 % |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 10 – STOCKHOLDERS’ EQUITY Stock Compensation The Company offers stock option equity awards to directors and key employees. Options vested in tranches and expire in five (5) years. During the year ended December 31, 2020, and 2019, the Company recorded vested options expense of $80,603 and $338,333 respectively. The option expense not taken as of December 31, 2020, is $1,058,593, with a weighted average term of 2.2 years. The stock option valuation as of December 31, 2020 was computed using the Black-Scholes-Merton pricing model using an average stock price of $0.141, a strike price of $0.155, an expected term of five (5) years, volatility of 280.02% and a risk-free discount rate of 0.9%. The stock option valuation as of December 31, 2019 was computed using the Black-Scholes-Merton pricing model using a stock price of $.152, a strike price of $.15, an expected term of five (5) years, volatility of 258.10% and a risk-free discount rate of 1.52%. The estimated grant-fair value of stock option grants was calculated using the Black-Scholes-Merton option-pricing model using the following assumptions: Weighted average 280.02 % 278.0 % Weighted average expected term (years) 2.2 3.0 Risk free interest rate 0.9 % 1.59 % Expected dividend yield — — The following table represents stock option activity as of and for the year ended December 31, 2020: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2019 3,800,000 $ .20 3.0 $ — Granted 400,000 $ .15 4.5 Exercised Forfeited (400,000 ) Options Outstanding – December 31, 2020 3,800,000 $ .21 3.6 $ 812,350 Exercisable and Vested, December 31, 2020 3,600,000 $ .22 2.4 $ 698,475 In 2020, 400,000 share options were granted to two (2) members of the Board of Directors. Each member was granted 25,000 shares per quarter of service for 2019 and 2020 for a total of 200,000 shares each. During the year, 350,000 share options were forfeited. The forfeited options were 300,000 from a key employee and 50,000 from a board member who had resigned and had not exercised his options prior to their expiration. The Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $0.421 on December 31, 2020. The following table represents stock option activity as of and for the year ended December 31, 2019: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2018 4,250,000 $ 0.24 3.9 $ — Granted 1,100,000 $ 0.17 4.8 Exercised — Forfeited (1,550,000 ) Options Outstanding – December 31, 2019 3,800,000 $ 0.20 3.0 $ — Exercisable and Vested, December 31, 2019 3,400,000 $ 0.24 3.1 $ — In 2019, 1,100,000 share options were granted. 500,000 share options were granted as part of the acquisition of IM Telecom. 600,000 share options were granted to key employees. During the year, 1,550,000 share options were forfeited. The forfeited options were 1,000,000 from a key employee, 500,000 from the IM Telecom acquisition amendment, and 50,000 from a board member who had resigned and not exercised the options prior to their expiration. |
Income Tax
Income Tax | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax | NOTE 11 – INCOME TAX For the years ending December 31, 2020, and December 31, 2019, there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances. The tax effect of significant components of the Company’s deferred tax assets and liabilities at December 31, 2020, and 2019, respectively, are as follows: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforward $ 333,393 $ 460,374 Total gross deferred tax assets 333,393 460,374 Less: Deferred tax asset valuation allowance (333,393 ) (460,374 ) Total net deferred tax assets — — Deferred tax liabilities: Federal $ — $ — State - California — — Total net deferred taxes $ — $ — In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Because of the historical earnings history of the Company, the net deferred tax assets for 2020 and 2019 were fully offset by a 100% valuation allowance. The total NOL as of December 31, 2020, is $1,587,111. On December 22, 2017, the United States Government passed new tax legislation that, among other provisions, will lower the corporate tax rate from 35% to 21%. In addition to applying the new lower corporate tax rate in 2018 and thereafter to any taxable income the Company may have, the legislation affects the way the Company can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets recorded on our balance sheet. Given that the deferred tax assets are offset by a full valuation allowance, these changes did not have an impact on the Company’s financial position and net loss. As long as the Company continues to be profitable, the Company will receive a reduced benefit from such deferred tax assets. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 12 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of this filing, and with the exception of the following, no material subsequent events have occurred: Loss of Significant Employee Effective February 19, 2021 one (1) of our significant employees, Vyacheslav “Slava” Yanson resigned his position as Chief Technology Officer of Apeiron Systems. The Company is in the process of evaluating several channels for replacing Mr. Yanson’s industry knowledge and expertise. Forgiveness of CARES Act Paycheck Protection Program (PPP) Loans During March 2021, the Company received confirmation from the Small Business Administration that the PPP loans for Apeiron Systems ($101,800) and IM Telecom ($20,900) respectively have been forgiven. Application for forgiveness for the remaining loan to KonaTel Nevada in the amount of $186,300 is in process. New Leased Headquarters Office Space On December 18, 2020 the Company entered into a lease agreement for an office suite in Plano, TX to commence on January 25, 2021. Lease payments are deferred until May 1, 2021. Commencing on May 1, 2021 lease payments will be $3,650 per month for the 12-month period ended April 30, 2022. The lease term is five (5) years. 100,000 Incentive Stock Options granted to Terry Addington, a director who resigned effective January 1, 2020, expired on January 1, 2021. The Company granted two (2) quarterly director 25,000 share Incentive Stock Options, one to Jeffrey Pearl on January 28, 2021, at an exercise price of $.4895, fully vested; and one to Robert Beaty on February 12, 2020, at an exercise price of $.44, fully vested. The exercise prices were based upon 110% of the fair market value of our common stock on these respective dates. On April 1, 2021, the Company also granted 150,000 Incentive Stock Options to an employee at an exercise price of $ 0.32 |
Accounting Policies (Policies)
Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation 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. Significant estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and customer lists. Actual results could differ from those estimates. |
Basis of Consolidation | Basis of Consolidation The consolidated financial statements for the year ended December 31, 2020, include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems, and Infiniti Mobile (January through December). The consolidated financial statements for the year ended December 31, 2019, include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems, and Infiniti Mobile (February through December). All significant intercompany transactions are eliminated. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and Cash Equivalents include cash on hand and all short-term investments with maturities of three months or less. |
Trade Account Receivables | Trade Accounts Receivable The Company accounts for trade receivables based on amounts billed to customers. Past due receivables are determined based on contractual terms. The Company does not accrue interest and does not require collateral on any of its trade receivables. |
Allowance for Doubtful Receivables | Allowance for Doubtful Receivables The allowance for doubtful receivables is determined by management based on customer credit history, specific customer circumstances and general economic conditions. Periodically, management reviews accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. As of December 31, 2020, and 2019, management has determined that no allowance for doubtful receivables is necessary. |
Inventory | Inventory Inventory consists primarily of the cost of cellular phones and cellular accessories. Inventory is reported at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (“FIFO”) method. As of December 31, 2020, total inventory owned by the company was $17,786. Due to the rapidly changing technology within the industry, inventory is evaluated on a regular basis to determine if any obsolescence exists. As of December 31, 2020, and 2019, the allowance for inventory obsolescence was $0. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost and are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are amortized over the lesser of the lease term or estimated useful life, furniture and fixtures, equipment, and vehicles are depreciated over periods ranging from five to seven (5-7) years, and billing software is depreciated over three (3) years which represents the estimated useful life of the assets. Maintenance and repairs are charged to expense as incurred while major replacements and improvements are capitalized. When property and equipment are retired or sold, the cost and applicable accumulated depreciation are removed from the respective accounts and the related gain or loss is recognized. The Company recognizes impairment losses for long-lived assets whenever changes in circumstances result in the carrying amount of the assets exceeding the sum of the expected future cash flows associated with such assets. Management has concluded that no impairment reserves are required as of December 31, 2020, and 2019. |
Intangible Assets - Long-Lived Assets | Intangible Assets – Long-Lived Assets The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Intangible assets consist of customer lists, licenses, and software arising from acquisitions which are amortized on a straight-line basis over three (3) years, their estimated useful lives. Other Intangibles The Company accounts for other intangibles in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During 2019, KonaTel, through the acquisition of IM Telecom, recorded, at fair market value, an FCC License in the amount of $634,251. Other Intangible Assets are not amortized. As of December 31, 2020, there is no impairment of the value of the license. Other Assets Other Assets represent items classified as long-term assets in accordance with the Statement of Financial Accounting Standards ASC 210-10-45. Other Assets include vendor deposits and security deposits that the Company is required to maintain. |
Customer Deposits | Customer Deposits Before entering into a contract with a sub-reseller customer, the Company requires the customer to either secure a formal letter of credit with a bank or require a certain level of cash collateral deposits from the customer. These collateral requirements are determined by management and may be adjusted upward or downward depending on the volume of business with the sub-reseller customer, or if management’s assessment of credit risk for a sub-reseller customer would change. The Company held $0 and $31,088 in collateral deposits from various sub-reseller customers at December 31, 2020, and 2019, respectively. Such amounts represent collateral received from the sub-resellers in order to contract with the Company. The related contracts have an option to terminate within a period of less than one (1) year, and accordingly, these collateral deposits are classified as current liabilities in the accompanying balance sheet. |
Fair Market Value of Assets | Fair Market Value of Assets The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses, deposits received from customers for receivables and short-term loans the carrying amounts approximate fair value due to their short maturities. Long-term assets purchased through acquisitions are valued at the Fair Market Value of the asset at the time of acquisition. The Fair Market Value is based on observable inputs on assets in active market- places for fixed assets, and estimations and assumptions developed by us for Other Intangibles. The Company follows accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices, which are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. |
Leases | Leases In February 2016, the FASB updated the accounting guidance related to leases. The most significant change in the updated accounting guidance requires lessees to recognize lease assets and liabilities on the balance sheet for all operating leases with the exception of short-term leases. The standard also expands the disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. For a lessee, the recognition, measurement and presentation of expenses and cash flows arising from a lease did not significantly change from previous guidance. We adopted the updated guidance on January 1, 2019 on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the updated guidance. In addition, as permitted under the transition guidance within the new standard, prior scoping, and classification conclusions were carried forward for leases existing as of the adoption date. See NOTE 4. Upon adoption, we recorded $151,471 for operating lease assets and liabilities, which includes the impact of fair value adjustments, prepaid and deferred rent. As of December 31, 2020, and December 31, 2019, our operating lease assets and liabilities were $80,578 and $81,723, respectively. |
Revenue Recognition | Revenue Recognition Services revenues are generated from cellular and telecommunication services. The revenue is derived from wholesale and retail services. Telecommunications and mobile telecommunication services include network platforms, voice, data, and text services. The Company recognizes revenue as telecommunications and mobile services are provided in service revenue. Telecommunications and mobile services are billed and paid on a monthly basis. Services are billed and paid on a monthly basis. These bills include an amount for the monthly recurring charge and a usage charge. We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services. We account for these revenues under Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers” (Topic 606), which we adopted on January 1, 2018, using the modified retrospective approach. This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard U.S. GAAP. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The adoption of this guidance did not have a material impact on the consolidated financial statements. Deferred Revenue Services for cellular and telecommunication services have a monthly recurring charge that is billed in advance. This charge covers a thirty (30) or thirty-one (31)-day period. This charge is deferred for the period in which it was received and recorded as revenue at the conclusion of this period. Costs, mainly from outside providers, associated with the deferred revenue are recognized in the same period as revenue is recognized. Cost of Revenue Cost of Revenue includes the cost of communication services, equipment and accessories, shipping costs, and commissions of sub-agents. |
Advertising | Advertising Costs for advertising products and services, as well as other promotional and sponsorship costs, are charged to Selling, general and administrative expense in the periods in which they are incurred. Advertising expense was $15,840 and $23,275 for 2020 and 2019 respectively. |
Stock-Based Compensation | Stock-based Compensation The Company records stock-based compensation in accordance with the guidance in ASC 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This requires that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award. The Company accounts for equity instruments issued in exchange for the receipt of goods or services from nonemployees in accordance with ASC 718-10 and the conclusions reached by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services. In June 2018, the FASB issued ASU 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. The amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In 2020, KonaTel issued stock-based options to key employees of the company. Implementation of the aforementioned standard had no effect on the issuance of the 2020 options. |
Income Taxes | Income Taxes Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the consolidated financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rate are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The benefits of uncertain tax positions are recorded in the Company’s Consolidated Financial Statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. The Company records interest and penalties related to unrecognized tax benefits in interest expense in the Company’s Consolidated Statements of Operations. |
Net Income / Loss Per Share | Net Income / Loss Per Share Basic net income / loss per common share calculations are determined by dividing net income / loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income / loss per common share calculations are determined by dividing net income / loss by the weighted average number of common shares and dilutive common share equivalents outstanding. As of December 31, 2020, there are 3,475,000 potentially dilutive common shares. As of December 31, 2019, there were 3,675,000 potentially dilutive common shares. The dilutive common shares for the year ended December 31, 2020, and December 31, 2019, are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive. |
Concentration 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 and restricted 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 December 31, 2020, 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 amounts of $194,509 or 52.4% and $52,843 or 14.2%. As of December 31, 2019, the Company had a significant concentration of receivables from three (3) customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%. These receivables represented 14% and 59% of the total receivables for the years ended December 31, 2020, and 2019, respectively. |
Concentration of Major Customer | Concentration of Major Customer A significant amount of the revenue is derived from contracts with major customers and cellular providers. For the year ended December 31, 2020, the Company had one (1) cellular provider that accounted for $3,337,262, or 35.7% of revenue and one (1) customer that accounted for $1,472,962, or 15.7%, of the revenue. For the year ended December 31, 2019, the Company had one (1) cellular provider that accounted for $3,728,456, or 39.6% of revenue and one (1) customer that accounted for $2,200,761, or 23.4%, of the revenue. The loss of a major customer would create a very negative impact on the company, which would require the company to make significant changes to reduce expenses. |
Effect of Recent Accounting Pronouncements | Effect of Recent Accounting Pronouncements The Company has evaluated all other recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statement. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income/loss per common share: Years Ended December 31, 2020 2019 Numerator Net Income/Loss $ 238,618 $ (1,584,904 ) Denominator Weighted-average common shares outstanding 40,692,286 40,692,286 Dilutive impact of stock options — — Weighted-average common shares outstanding, diluted 40,692,286 40,692,286 Net income per common share Basic $ 0.01 $ (0.04 ) Diluted $ — $ — |
Significant Transactions (Table
Significant Transactions (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Transactions of Recognized Assets Acquired and Liabilities Assumed | Cash $ 14,318 Accounts Receivable 123,959 Prepaid Expenses and Deposits 2,400 Furniture and Equipment at Fair Value 1,309 License 634,252 Accounts Payable (24,271 ) Note Payable (168,277 ) Net Assets Acquired $ 583,690 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consist of the following major classifications as of December 31, 2020, and 2019: December 31, 2020 2019 Leasehold Improvements $ 46,950 $ 46,950 Furniture and Fixtures 217,163 102,946 Billing Software 102,945 217,163 Office Equipment 94,552 86,887 461,610 453,946 Less: Accumulated Depreciation and Amortization (382,040 ) (351,257 ) Property and equipment, net $ 79,570 $ 102,689 |
Right-Of-Use Assets (Tables)
Right-Of-Use Assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Schedule of Future Minimum Lease Payments for Operating Leases | Future lease liability payments under the terms of these leases are as follows: 2021 $ 66,323 2022 $ 15,399 Thereafter $ — Total $ 81,722 Less Current Maturities $ 66,323 Long Term Maturities $ 15,399 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Acquired Finite-Lived Intangible Assets | Intangible Assets with definite useful life consist of licenses, customer lists and software that were acquired through acquisitions: December 31, 2020 2019 Customer Lists $ 1,135,961 $ 1,135,961 Software 2,407,001 2,407,001 License 634,251 634,252 Less: Accumulated Amortization (2,740,629 ) (1,938,296 ) Intangible Assets, net $ 1,436,584 $ 2,238,918 |
Schedule of Intangible Assets Future Amortization Expense | Amortization expense is expected to be as follows: 2021 $ 802,332 2022 $ 634,252 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | The following table reflects the result of operations of the Company’s reportable segments: Hosted Services Mobile Services Total For the year ended December 31, 2020 Revenue $ 4,810,573 $ 4,548,426 $ 9,358,999 Gross Margin $ 1,786,531 $ 1,748,915 $ 3,535,447 Depreciation and amortization $ 761,511 $ 76,492 $ 838,003 Additions to property and equipment $ — $ — $ — Gross Margin % 37.1 % 38.5 % 37.8 % For the year ended December 31, 2019 Revenue $ 2,616,830 $ 6,556,690 $ 9,173,520 Gross Margin $ (369,658 ) $ 3,240,125 $ 2,870,467 Depreciation and amortization $ 430,256 $ 486,641 $ 916,897 Additions to property and equipment $ — $ — $ — Gross Margin % -14.1 % 49.4 % 31.3 % |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Schedule of Fair Value of Stock Options Valuation Assumptions | The estimated grant-fair value of stock option grants was calculated using the Black-Scholes-Merton option-pricing model using the following assumptions: Weighted average 280.02 % 278.0 % Weighted average expected term (years) 2.2 3.0 Risk free interest rate 0.9 % 1.59 % Expected dividend yield — — |
Schedule of Share-Based Compensation , Stock Options, Activity | The following table represents stock option activity as of and for the year ended December 31, 2020: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2019 3,800,000 $ .20 3.0 $ — Granted 400,000 $ .15 4.5 Exercised Forfeited (400,000 ) Options Outstanding – December 31, 2020 3,800,000 $ .21 3.6 $ 812,350 Exercisable and Vested, December 31, 2020 3,600,000 $ .22 2.4 $ 698,475 The following table represents stock option activity as of and for the year ended December 31, 2019: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2018 4,250,000 $ 0.24 3.9 $ — Granted 1,100,000 $ 0.17 4.8 Exercised — Forfeited (1,550,000 ) Options Outstanding – December 31, 2019 3,800,000 $ 0.20 3.0 $ — Exercisable and Vested, December 31, 2019 3,400,000 $ 0.24 3.1 $ — |
Income Tax (Tables)
Income Tax (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | The tax effect of significant components of the Company’s deferred tax assets and liabilities at December 31, 2020, and 2019, respectively, are as follows: December 31, 2020 2019 Deferred tax assets: Net operating loss carryforward $ 333,393 $ 460,374 Total gross deferred tax assets 333,393 460,374 Less: Deferred tax asset valuation allowance (333,393 ) (460,374 ) Total net deferred tax assets — — Deferred tax liabilities: Federal $ — $ — State - California — — Total net deferred taxes $ — $ — |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Numerator | ||
Net Income (Loss) | $ 238,618 | $ (1,584,904) |
Denominator | ||
Weighted-average common shares outstanding | 40,692,286 | 40,692,286 |
Weighted-average common shares outstanding, diluted | 40,629,286 | 40,692,286 |
Net income per common share | ||
Basic | $ 0.01 | $ (0.04) |
Diluted |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Jan. 02, 2019 | |
Inventory | |||
Inventory | $ 17,786 | $ 4,659 | |
Allowance for inventory obsolescence | 0 | 0 | |
Other Intangibles | |||
Fair market value of FCC License | 634,252 | 634,252 | |
Customer Deposits | |||
Collateral deposits | 0 | 31,088 | |
Leases | |||
Operating lease assets and liabilities | 80,578 | 81,723 | $ 151,471 |
Advertising | |||
Advertising expense | $ 15,840 | $ 23,275 | |
Earnings Per Share | |||
Potentially dilutive common shares | 3,600,000 | 3,675,000 | |
Concentration Risk | |||
Revenue | $ 9,358,999 | $ 9,173,520 | |
Trade Accounts Receivable | |||
Concentration Risk | |||
Concentration risk, percentage | 14.00% | 59.00% | |
Trade Accounts Receivable | Customer #3 | |||
Concentration Risk | |||
Concentration risk, percentage | 13.30% | ||
Receivable concentration | $ 48,475 | ||
Trade Accounts Receivable | Customer #2 | |||
Concentration Risk | |||
Concentration risk, percentage | 14.20% | 21.30% | |
Receivable concentration | $ 52,843 | $ 77,662 | |
Trade Accounts Receivable | Customer #1 | |||
Concentration Risk | |||
Concentration risk, percentage | 52.40% | 24.40% | |
Receivable concentration | $ 194,509 | $ 89,078 | |
Revenue | Cellular Provider | |||
Concentration Risk | |||
Concentration risk, percentage | 35.70% | 39.60% | |
Revenue | $ 3,337,262 | $ 3,728,456 | |
Revenue | Customer #1 | |||
Concentration Risk | |||
Concentration risk, percentage | 15.70% | 23.40% | |
Revenue | $ 1,472,962 | $ 2,200,761 | |
Leasehold Improvements | |||
Property and Equipment | |||
Depreciation method and terms | Depreciated on the straight-line method over their estimated useful life. Amortized over the lesser of the lease term or estimated useful life | ||
Furniture and Fixtures | |||
Property and Equipment | |||
Depreciation method and terms | Depreciated on the straight-line method over periods ranging from 5-7 years | ||
Equipment | |||
Property and Equipment | |||
Depreciation method and terms | Depreciated on the straight-line method over periods ranging from 5-7 years | ||
Vehicles | |||
Property and Equipment | |||
Depreciation method and terms | Depreciated on the straight-line method over periods ranging from 5-7 years | ||
Billing Software | |||
Property and Equipment | |||
Depreciation method and terms | Depreciated on the straight-line method over 3 years |
Significant Transactions - Sche
Significant Transactions - Schedule of Transactions of Recognized Assets Acquired and Liabilities Assumed (Details) - IM Telecom, LLC | Dec. 31, 2019USD ($) |
Cash | $ 14,318 |
Accounts Receivable | 123,959 |
Prepaid Expense | 2,400 |
Furniture and Equipment at Fair Value | 1,309 |
License | 634,252 |
Accounts Payable | (24,271) |
Note Payable | (168,277) |
Net Assets Acquired | $ 583,690 |
Significant Transactions (Detai
Significant Transactions (Details Narrative) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2020 | Dec. 31, 2019 | ||||
Incentive stock options granted | 400,000 | [1] | 1,100,000 | [2] | |
Options, exercise price | $ 0.15 | $ .17 | |||
Options cancelled | 400,000 | [3] | 1,550,000 | [4] | |
Proceeds received from SBA Loans | $ 468,900 | ||||
SBA Payroll Protection Loans | |||||
Proceeds received from SBA Loans | [5] | 309,000 | |||
Positive Outcome of Litigation | |||||
Litigation settlement, amount awarded from other party | [6] | $ 362,871 | |||
Name of plaintiff | Saul Glosser | ||||
Proceeds from litigation settlement | 300,000 | ||||
IM Telecom, LLC | |||||
Net assets acquired | $ 583,690 | ||||
Ownership interest acquired | 100.00% | ||||
Consulting fees | $ 100 | ||||
Incentive stock options granted | 500,000 | ||||
Options, exercise price | $ 0.20 | ||||
Options cancelled | 500,000 | ||||
Accounts Receivable | $ 123,959 | ||||
Accounts payable and accrued expenses assumed | (24,271) | ||||
License | 634,252 | ||||
Cash | 14,318 | ||||
Prepaid Expense | 2,400 | ||||
Furniture and Equipment at Fair Value | 1,309 | ||||
Payment for wireless handsets | 192,293 | ||||
Settlement agreement | [7] | 80,000 | |||
Apeiron Systems | |||||
Payment for shareholders agreement for surplus net working capital | [8] | $ 310,130 | |||
Apeiron Systems | Vyacheslav Yanson / Net Working Capital | |||||
Payment for shareholders agreement for surplus net working capital | [9] | 31,013 | |||
Apeiron Systems | Joshua Ploude / Net Working Capital | |||||
Payment for shareholders agreement for surplus net working capital | [10] | $ 279,117 | |||
[1] | Granted to two (2) members of the Board of Directors. Each member was granted 25,000 shares per quarter of service for 2019 and 2020 for a total of 200,000 shares each. | ||||
[2] | 500,000 share options were granted as part of the acquisition of IM Telecom; 600,000 share options were granted to key employees. | ||||
[3] | The forfeited options were 300,000 from a key employee and 50,000 from a board member. | ||||
[4] | 1,000,000 from a key employee; 500,000 from the IM Telecom acquisition amendment, and 50,000 from a board member. | ||||
[5] | Three separate SBA Payroll Protection Loans in the amounts of $186,300, $101,800, and $20,900 | ||||
[6] | $357,914 plus arbitrator compensation of $4,957. | ||||
[7] | IM Telecom agreed to pay $80,000 in monthly payments of $4,000 over twenty (20) months. | ||||
[8] | The Apeiron Systems shareholders reached an agreement on the final surplus net working capital amount of $310,130 owed by Apeiron Systems to the Apeiron Systems shareholders under the Apeiron Systems Merger Agreement. The net working capital amount was deemed to be payable by Apeiron Systems to the Apeiron Systems shareholders, $279,117 to Joshua Ploude and $31,013 to Vyacheslav Yanson. | ||||
[9] | February 14, 2020, a partial payment of $5,000 was made towards the balance of $31,013 and on March 5, 2020, final payment was made for $26,013. | ||||
[10] | On March 8, 2020, the Company paid $225,000 and the balance of $54,117 was paid during 2020. |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | $ 461,610 | $ 453,946 |
Less: Accumulated Depreciation and Amortization | (382,040) | (351,257) |
Property, plant and equipment, net | 79,571 | 102,689 |
Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 46,950 | 46,950 |
Furniture and Fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 217,163 | 102,946 |
Billing Software | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 102,945 | 217,163 |
Office Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | $ 94,552 | $ 86,887 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Depreciation and amortization expense | $ 838,003 | $ 916,897 |
Property and Equipment | ||
Depreciation and amortization expense | $ 30,783 | $ 30,642 |
Right-Of-Use Assets - Schedule
Right-Of-Use Assets - Schedule of Future Minimum Lease Payments for Operating Leases (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Future minimum lease payments, 2021 | $ 66,323 | |
Future minimum lease payments, 2022 | 15,399 | |
Total | 81,722 | |
Less Current Maturities | 66,323 | $ 69,148 |
Long Term Maturities | $ 15,399 | $ 12,942 |
Right-Of-Use Assets (Details Na
Right-Of-Use Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Right of use assets | $ 80,578 | $ 78,584 |
Lease payables | $ 81,722 | |
Weighted average term of lease | 15 months 12 days | |
Weighted average discount rate | 3.53% | |
Lease terms and expirations, description | The Company has two (2) properties with lease terms in excess of one (1) year. These lease liabilities expire April 30, 2022, and December 31, 2021. The Company also leases two (2) office spaces on a month-to-month basis. | |
Rent expense | $ 109,960 | $ 140,778 |
Minimum | ||
Implied interest rate used to record assets at present value | 5.34% | |
Maximum | ||
Implied interest rate used to record assets at present value | 3.29% |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets and Goodwill (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Customer Lists | $ 1,135,961 | $ 1,135,961 |
Software | 2,407,001 | 2,407,001 |
License | 634,251 | 634,252 |
Less: Accumulated Amortization | (2,740,629) | (1,938,296) |
Intangible assets, net | $ 1,436,584 | $ 2,238,918 |
Intangible Assets - Schedule _2
Intangible Assets - Schedule of Intangible Assets Future Amortization Expense (Details) | Dec. 31, 2020USD ($) |
Intangible Assets Future Amortization Expense | |
2021 | $ 802,332 |
2022 | $ 634,252 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 802,334 | $ 886,255 |
Fair market value of acquired license | $ 634,252 | $ 634,252 |
Lines of Credit (Details Narrat
Lines of Credit (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Line of credit, maximum borrowing | $ 1,050,000 | $ 1,050,000 |
Line of credit, interest rate description | Bears interest at a variable rate with rate ranges from 7.5% to 8.0%. | Bears interest at a variable rate with rate ranges from 7.5% to 8.0%. |
Line of credit, outstanding balance | $ 0 | $ 12,237 |
Amount Due to Stockholder (Deta
Amount Due to Stockholder (Details Narrative) - USD ($) | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Proceeds from related parties | $ 200,000 | |||
Amount due to related party | 151,357 | |||
D. Sean McEwen | ||||
Repayment of related party payable | 191,500 | |||
Amount due to related party | $ 191,500 | |||
Joshua Ploude, Ceo of Apeiron | ||||
Proceeds from related parties | $ 200,000 | |||
Interest rate | [1] | 10.00% | ||
Amount due to related party | $ 151,357 | |||
Stockholders | ||||
Repayment of related party payable | $ 151,357 | $ 147,251 | ||
[1] | The interest rate will increase to 12% per annum after May 1, 2019. |
Contingencies and Commitments (
Contingencies and Commitments (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Oct. 17, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | |||
Stock options cancelled | 400,000 | [1] | 1,550,000 | [2] | |
Net Loss | $ 238,618 | $ (1,584,904) | |||
Net cash provided by (used in) operating activities | 571,546 | 107,298 | |||
Accumulated Deficit | (5,968,489) | $ (5,896,977) | |||
Independent Contractor Agreement (the "ICA") | |||||
Commitment, description | Pursuant to an Independent Contractor Agreement (the “ICA”) effective October 17, 2019, between the Company and Charles L. Schneider, Jr., in the event that Infiniti Mobile is granted its request for Eligible Telecommunications Carrier (“ETC”) status from the California Public Utilities Commission (“CPUC”) to distribute Lifeline cellular phone service within the State of California, Mr. Schneider will be granted a one (1) year Warrant, with a customary “cashless” exercise feature, to purchase 250,000 shares of the Company’s common stock at an exercise price to be determined on the date of any such approval. The ICA was for a term of one (1) year, extendable by the parties yearly. | ||||
Former Owner of IM Telecom | |||||
Settlement agreement, description | The Company entered into a Settlement Agreement and Release with the former owner of IM Telecom regarding this matter, effective September 4, 2019, which was the date of delivery of the fully executed Settlement Agreement and Release that was dated August 22, 2019, and filed with the SEC on September 4, 2019. Under the Settlement Agreement, and as part of the previous owner’s obligations to indemnify and hold the Company harmless from any liability arising from the breach of any representations and warranties in the initial PSMI dated February 5, 2019, and filed with the SEC on February 6, 2019, which included this liability, the vested $0.20 per share 500,000 share incentive stock option grant that was awarded to the previous owner at the closing of the PSMI was cancelled and deemed null and void, and the previous owner was released from any liability for the $168,677 over-payment. All of the other terms and conditions of the PSMI remain in full force and effect, including the continuing indemnification provisions regarding all other representations and warranties. | ||||
Stock options cancelled | 500,000 | ||||
Stock options cancelled, exercise price | $ 0.20 | ||||
United States Administrative Company ("USAC") | |||||
Over-payment of fund reimbursements, description | IM Telecom was notified by the United States Administrative Company (“USAC”) of an over-payment of Universal Service Fund reimbursements in the amount of $168,277. On July 25, 2019, the Company entered into a Letter of Acknowledgement with the FCC and requested a twenty-four (24)-month payment plan regarding the repayment of the over-payment amounts. While awaiting approval of this repayment plan, the Company continued to make monthly payments against the outstanding balance. On October 15, 2020, the Company received approval of the payment plan and signed a promissory note with Universal Service Administrative Company to repay the remainder of the unpaid balance. | ||||
Repayment of over-payment of fund reimbursement | $ 67,105 | ||||
Interest rate | 12.75% | ||||
Commitment, term | 12 months | ||||
Commitment, description | The Company agreed to pay Universal Services Administration Company $5,986 per month for twelve (12) months, and a $1,000 Administrative Fee due on October 15, 2020. | ||||
Promissory note, balance | $ 56,559 | ||||
[1] | The forfeited options were 300,000 from a key employee and 50,000 from a board member. | ||||
[2] | 1,000,000 from a key employee; 500,000 from the IM Telecom acquisition amendment, and 50,000 from a board member. |
Segment Reporting - Schedule of
Segment Reporting - Schedule of Segment Reporting Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Segment Reporting Information [Line Items] | ||
Revenue | $ 9,358,999 | $ 9,173,520 |
Gross Margin | 3,535,447 | 2,870,467 |
Depreciation and amortization | 838,003 | 916,897 |
Additions to property and equipment | ||
Gross Margin % | 37.80% | 31.30% |
Hosted Services | ||
Segment Reporting Information [Line Items] | ||
Revenue | $ 4,810,573 | $ 2,616,830 |
Gross Margin | 1,786,531 | (369,658) |
Depreciation and amortization | 761,511 | 430,256 |
Additions to property and equipment | ||
Gross Margin % | 37.10% | (14.10%) |
Mobile Services | ||
Segment Reporting Information [Line Items] | ||
Revenue | $ 4,548,426 | $ 6,556,690 |
Gross Margin | 1,748,915 | 3,240,125 |
Depreciation and amortization | 76,492 | 486,641 |
Additions to property and equipment | ||
Gross Margin % | 38.50% | 49.40% |
Segment Reporting (Details Narr
Segment Reporting (Details Narrative) | 12 Months Ended |
Dec. 31, 2020Integer | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Fair Value of Stock Options Valuation Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | ||
Weighted average | 280.02% | 278.00% |
Weighted average expected term (years) | 2 years 2 months | 3 years |
Risk free interest rate | 0.90% | 1.59% |
Expected dividend yield |
Stockholders' Equity - Schedu_2
Stockholders' Equity - Schedule of Share-Based Compensation , Stock Options, Activity (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | |||
Share-Based Compensation Arrangement By Share-Based Payment Award Options Outstanding | ||||
Options outstanding, beginning of period | 3,800,000 | 4,250,000 | ||
Granted | 400,000 | [1] | 1,100,000 | [2] |
Forfeited | (400,000) | [3] | (1,550,000) | [4] |
Options outstanding, end of period | 3,800,000 | 3,800,000 | ||
Options exercisable and vested, end of period | 3,600,000 | 3,400,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | ||||
Weighted average exercise price outstanding, beginning of period | $ 0.20 | $ .24 | ||
Weighted average exercise price, granted | 0.15 | .17 | ||
Weighted average exercise price outstanding, end of period | 0.21 | 0.20 | ||
Weighted average exercise price, exercisable and vested, end of period | $ 0.22 | $ .24 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures | ||||
Weighted average remaining contractual life outstanding, beginning of period | 3 years | 3 years 10 months | ||
Weighted average remaining contractual life, granted | 4 years 6 months | 4 years 9 months | ||
Weighted average remaining contractual life outstanding, end of period | 3 years 7 months | 3 years | ||
Weighted average remaining contractual life, exercisable and vested, end of period | 2 years 3 months | 3 years 1 month | ||
Average intrinsic value outstanding, beginning of period | ||||
Average intrinsic value outstanding, end of period | $ 812,350 | |||
Average intrinsic value, exercisable and vested, end of period | $ 698,475 | |||
[1] | Granted to two (2) members of the Board of Directors. Each member was granted 25,000 shares per quarter of service for 2019 and 2020 for a total of 200,000 shares each. | |||
[2] | 500,000 share options were granted as part of the acquisition of IM Telecom; 600,000 share options were granted to key employees. | |||
[3] | The forfeited options were 300,000 from a key employee and 50,000 from a board member. | |||
[4] | 1,000,000 from a key employee; 500,000 from the IM Telecom acquisition amendment, and 50,000 from a board member. |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | |||
Equity [Abstract] | ||||
Stock-based compensation expense, vested options | $ 80,603 | $ 338,333 | ||
Deferred compensation expense | $ 1,058,593 | |||
Weighted average term, compensation expense | 2 years 2 months | |||
Options vesting period | 5 years | 5 years | ||
Stock price | $ 0.141 | $ 0.152 | ||
Strike price | $ 0.155 | $ 0.15 | ||
Weighted average volatility rate | 280.02% | 278.00% | ||
Weighted average expected term (years) | 2 years 2 months | 3 years | ||
Risk-free discount rate | 0.90% | 1.59% | ||
Share options granted | 400,000 | [1] | 1,100,000 | [2] |
Share options forfeited | (400,000) | [3] | (1,550,000) | [4] |
Aggregate intrinsic value, per share | $ 0.421 | |||
[1] | Granted to two (2) members of the Board of Directors. Each member was granted 25,000 shares per quarter of service for 2019 and 2020 for a total of 200,000 shares each. | |||
[2] | 500,000 share options were granted as part of the acquisition of IM Telecom; 600,000 share options were granted to key employees. | |||
[3] | The forfeited options were 300,000 from a key employee and 50,000 from a board member. | |||
[4] | 1,000,000 from a key employee; 500,000 from the IM Telecom acquisition amendment, and 50,000 from a board member. |
Income Tax - Schedule of Deferr
Income Tax - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred Tax Assets | ||
Net operating loss carryforward | $ 333,393 | $ 460,374 |
Total gross deferred tax assets | 333,393 | 460,374 |
Less: Deferred tax asset valuation allowance | (333,393) | (460,374) |
Total net deferred tax assets | ||
Deferred Tax Liabilities | ||
Federal | ||
State - California | ||
Total net deferred taxes |
Income Tax (Details Narrative)
Income Tax (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Reduction of tax rate | 21.00% | 21.00% |
Net operating loss | $ 1,587,111 | |
Valuation allowance, rate | 100.00% | 100.00% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Apr. 02, 2021 | Mar. 31, 2021 | Feb. 28, 2021 | Jan. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | ||
Subsequent Event [Line Items] | ||||||||
Incentive stock options granted | 400,000 | [1] | 1,100,000 | [2] | ||||
Incentive stock options granted, exercise price | $ 0.15 | $ .17 | ||||||
Subsequent Event | Incentive Stock Options | ||||||||
Subsequent Event [Line Items] | ||||||||
Incentive stock options granted | 150,000 | |||||||
Incentive stock options granted, exercise price | $ 0.32 | |||||||
Incentive stock options granted, vesting terms | 50,000 shares vesting annually on April 1, 2022, 2023 and 2024. | |||||||
Subsequent Event | Incentive Stock Options | Former Director / Terry Addington | ||||||||
Subsequent Event [Line Items] | ||||||||
Options, expired | 100,000 | |||||||
Subsequent Event | Incentive Stock Options | Director / Jeffrey Pearl | ||||||||
Subsequent Event [Line Items] | ||||||||
Incentive stock options granted | 25,000 | |||||||
Subsequent Event | Incentive Stock Options | Director / Robert Beaty | ||||||||
Subsequent Event [Line Items] | ||||||||
Incentive stock options granted | 25,000 | |||||||
Subsequent Event | Office Suite, Plano, TX | ||||||||
Subsequent Event [Line Items] | ||||||||
Lease payments, monthly | $ 3,650 | |||||||
Lease, term of contract | 5 years | |||||||
Subsequent Event | SBA's Paycheck Protection Program/Apeiron Systems | ||||||||
Subsequent Event [Line Items] | ||||||||
Forgiveness of debt | $ (101,800) | |||||||
Subsequent Event | SBA's Paycheck Protection Program/IM Telecom | ||||||||
Subsequent Event [Line Items] | ||||||||
Forgiveness of debt | $ (20,900) | |||||||
Subsequent Event | SBA's Paycheck Protection Program/KonaTel Nevada | ||||||||
Subsequent Event [Line Items] | ||||||||
Forgiveness of debt, description | Application for forgiveness for the remaining loan to KonaTel Nevada in the amount of $186,300 is in process. | |||||||
[1] | Granted to two (2) members of the Board of Directors. Each member was granted 25,000 shares per quarter of service for 2019 and 2020 for a total of 200,000 shares each. | |||||||
[2] | 500,000 share options were granted as part of the acquisition of IM Telecom; 600,000 share options were granted to key employees. |