KonaTel, Inc. [KTEL] Filings

UNITED STATES

SECURITIES EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2023

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from

Commission File No. 001-10171

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $0.001

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Our website is KonaTel.com.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to previously issued financial statements.  ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

On June 30, 2023, the last business day of the Registrant’s most recently completed second quarter, the aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant was $22,153,037, based upon 26,690,406 shares of the Registrant’s common stock being currently owned by such persons, and based upon the closing price of the common stock of the Registrant on the OTC Markets Group, LLC (the “OTC Markets”) “OTCQB Tier” (“KTEL”) of $0.83 per share on June 30, 2023.

As of March 15, 2024, the Registrant had 43,333,220 shares of its common stock, $0.001 par value, issued and outstanding.

REFERENCES

In this Annual Report, references to “KonaTel, Inc.,” “KonaTel,” the “Company,” “we,” “our,” “us” and words of similar import, refer to KonaTel, Inc., a Delaware corporation, formerly named Dala Petroleum Corp., which is the Registrant, and our wholly owned subsidiaries at December 31, 2023, KonaTel, Inc., a Nevada corporation (“KonaTel Nevada”), Apeiron Systems, Inc., a Nevada corporation (“Apeiron Systems” or “Apeiron”), IM Telecom, LLC, an Oklahoma limited liability company doing business as “Infiniti Mobile” (sometimes called “IM Telecom” or “Infiniti Mobile”).

FORWARD LOOKING STATEMENTS

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Annual Report. We cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Annual Report completely, and it should be read and considered with all other reports filed by us with the United States Securities and Exchange Commission (the “SEC”). Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

CAUTIONARY STATEMENT

Summaries of all agreements or other documents referenced herein or attached hereto by Hyperlink in Part IV, Item 15, and incorporated herein by reference or otherwise, do not purport to be all inclusive of the terms, conditions and other provisions of such agreements or documents, and accordingly, all such summaries are modified in their entirety to the referenced and Hyperlinked respective agreements or documents in Part IV, Item 15 hereof.

DOCUMENTS INCORPORATED HEREIN BY REFERENCE

See Part IV, Item 15, hereof.

TABLE OF CONTENTS

PART I

ITEM 1.  BUSINESS

Corporate History and Business Development

We were 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. At that time, all of our prior operations were conducted through Lee Building Products and T. A. Kilgore & Company, which owned and operated a home center in League City, Texas, about 30 miles southeast of downtown Houston, Texas. During 1990, we ceased these operations, and the secured lenders took possession of our assets.

We changed our name to “Dala Petroleum Corp.” on August 29, 2014, after re-entering the development stage and the completion of a merger with our newly formed and wholly owned subsidiary, Dala Acquisition Corp., a Nevada corporation (respectively, “Dala Acquisition” and the “Dala Merger”), on June 2, 2014. Dala Nevada was wholly owned by Chisholm Partners II, LLC, a Louisiana limited liability company (“Chisholm II”). We operated as an early-stage oil exploration company focused on our leased acreage acquired in the Dala Merger until 2016, when Chisholm II returned a total of 8,567,800 shares of the 10,000,000 shares of our common stock exchanged under the Dala Merger to us for cancellation in exchange for our assignment of approximately 55,000 acres, more or less, of our leased acreage or approximately 68.75% of our total leased acreage, to Chisholm II. All of our remaining oil and gas leasehold interests, comprising leases covering approximately 7,489 and 403 acres, more or less, expired in 2017 and 2018, respectively.

On July 20, 2017, pursuant to a Common Stock Purchase Agreement dated July 19, 2017, M2 Equity Partners, LLC, a privately held Minnesota limited liability company (“M2”), acquired 12,100,000 shares of our common stock in consideration of the sum of $367,500, which resulted in a change in control of our Company.

On November 13, 2017, we filed an Amended and Restated Certificate of Incorporation with the State of Delaware, which removed all of the designations of our preferred stock from our Certificate of Incorporation, while reserving our 50,000,000 authorized and unissued one cent ($0.01) par value shares of preferred stock for future issuance as the Board of Directors may designate and approve.

Effective December 18, 2017, we completed an Agreement and Plan of Merger (the “KonaTel Merger Agreement”) with our newly formed wholly owned subsidiary, Dala Subsidiary Corp., a Nevada corporation (“Dala Nevada”), under which KonaTel, Inc., a Nevada corporation (“KonaTel Nevada”), became our wholly owned subsidiary on the closing of the merger (the “KonaTel Nevada Merger”); and we succeeded to the business operations of KonaTel Nevada comprised of a full service cellular provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets nationwide through its sales network, and we changed our name to “KonaTel, Inc.” on February 5, 2018.  

Effective February 7, 2018, and dated as of February 5, 2018, we entered into an Agreement for the Purchase and Sale of Membership Interest (the “PSMI”), with the transaction documents being deposited in escrow on February 7, 2018, respecting the acquisition of 100% of the membership interest in IM Telecom, doing business as “Infiniti Mobile,” from its sole owner, Trevan Morrow (“Mr. Morrow”).  The principal asset of IM Telecom, at that time, was a “Lifeline Program” license of the Federal Communications Commission (“FCC”), which was an FCC approved wireless Compliance Plan.

On August 9, 2018, we entered into an Asset Purchase Agreement (the “Telecon Wireless Agreement”) with Telecon Wireless Resources, Inc., a New York corporation (“Telecon Wireless”), whereby we sold various assets, including furniture, fixtures, equipment, account receivable and a customer list, among other assets and liabilities, to Telecon Wireless.

Effective December 31, 2018, we completed an Agreement and Plan of Merger with Apeiron Systems (the “Apeiron Systems Merger Agreement”) and under which we exchanged 7,000,000 shares of our common stock for all of the outstanding shares of Apeiron Systems. Apeiron Systems became our wholly owned subsidiary on the closing of the merger (the “Apeiron Systems Merger”). Apeiron Systems was organized in 2013 as a provider of a suite of real-time business communications services that included voice, messaging, network connectivity and platform services.

On December 14, 2020, the shares of our common stock were approved for up listing to the OTC Markets Group LLC (the “OTC Markets”) OTCQB® Venture Market (“OTCQB Tier”). OTCQB is a venture market operated by OTC Markets. To be eligible for quotation on the OTCQB, companies must be current in their reporting obligations under Section 13 or 15(d) of the Exchange Act and

undergo an annual verification and management certification process. Companies must also meet a minimum bid price test and other financial conditions. The OTC Markets is recognized by the SEC as a “Qualified Interdealer Quotation System” (“IDQS”) under SEC Rule 15c2-11(e)(6); and the OTCQB is an established public market that provides current public information to investors.

On August 25, 2021, we filed a registration statement with the SEC on Form S-8 to register 5,901,884 shares of our common stock reserved for grants underlying our 2018 Incentive Stock Option Plan (year designation reflects a change to a calendar year end in 2017).

On June 14, 2022, we and our wholly owned subsidiaries, Apeiron Systems and IM Telecom, entered into a Note Purchase Agreement (the “NPA”) with CCUR Holdings, Inc., a Delaware corporation (“CCUR”), as “Collateral Agent”; and CCUR and Symbolic Logic, Inc., a Delaware corporation (“Symbolic”), as “Purchasers,” along with a related Guarantee and Security Agreement (the “GSA”), whereby the Company and its subsidiary companies pledged their assets (including the Company’s equity ownership of its subsidiaries) to secure $3,150,000 (the “Principal Amount”) in debt financing payable in one (1) year (to be repaid prior to nine (9) months), together with interest at the rate of 15% per annum (the “Interest Rate”), with two (2) successive six (6) month optional extensions (the “CCUR Loan”). On June 1, 2023, we entered into a “First Amendment to the NPA” with CCUR and Symbolic. The purpose of the amendment was to add further growth capital to the Company in the form of “Delayed Draw Notes” in an aggregate principal amount of up to $2,000,000; and in consideration therefor, we provided additional collateral for the NPA. See our 8-K Current Report dated June 14, 2022, filed with the SEC on June 21, 2022, and our 8-KA Current Report dated June 14, 2022, filed with the SEC on June 7, 2023, for additional information on the CCUR Loan. These Current Reports are available by Hyperlink in Part IV, Item 15 hereof, and are incorporated herein by reference.

On July 7, 2022, we filed a registration statement with the SEC on Form S-8 to register an additional 2,000,000 shares of our common stock reserved for grants underlying our 2018 Incentive Stock Option Plan.

On August 22, 2022, we filed an amendment to our registration statement with the SEC on Form S-8 to decrease our shares registered on Form S-8 by 1,500,000 shares; and on March 20, 2023, we filed a similar amendment on Form S-8 to decrease our shares registered on Form S-8 by 253,764 shares, then leaving 6,148,120 remaining registered shares, with 1,648,120 shares having been issued and 4,500,000 shares being reserved for future issuance under outstanding grants or to be granted incentive stock options.

On January 24, 2023, we entered into a non-material Membership Interest Purchase Agreement to acquire 100% of Tempo Telecom, LLC, a Georgia limited liability company, an Eligible Telecommunications Carrier (“ETC”), authorized to provide Lifeline services in twenty-one (21) states (respectively, the “Tempo Purchase Agreement” and “Tempo”), the closing of which is subject to the approval of the FCC and applicable state and other governmental agencies, among other conditions.

On April 6, 2023, pursuant to a Purchase of Contract Rights Agreement between the Company and Insight Mobile, Inc., a Delaware corporation (respectively, the “Insight Mobile Agreement” and “Insight Mobile”), we and Insight Mobile executed and delivered an Assumption of Membership Interest Purchase Agreement (the “Assignment Agreement”), which is being held in escrow by counsel for Insight Mobile (the “Escrow Agent”) pending satisfaction of all conditions to the Closing of the Tempo Purchase Agreement, and whereby Insight Mobile has agreed to pay us the “Purchase Price” of $4,500,000 for our “Contract Rights” under the Tempo Purchase Agreement. For additional information on the Insight Mobile Agreement and the Assignment Agreement, see our 8-K Current Report dated April 6, 2023, filed with the SEC on April 17, 2023, which is Hyperlinked in Part IV, Item 15, below, and is incorporated herein by reference.

On December 8, 2023, we filed an additional registration statement on Form S-8 to increase the number of shares of our common stock available for issuance under our 2018 Incentive Stock Option Plan by 1,700,000 shares. This amendment resulted in 7,848,120 registered shares equaling 1,748,120 shares issued and 6,100,000 reserved shares remaining for future issuance.

Effective December 18, 2023, we and IM Telecom, as the “Purchasers,” entered into an Installment Sale Agreement (the “Installment Sale Agreement”) with ACP Financing VII Limited Liability Company, a Texas limited liability company (“ACP Financing”), as the “Seller,” pursuant to which the Seller agreed to purchase new and refurbished cellular devices for distribution through the Purchasers’ distribution network to Affordable Connectivity Program Federal Lifeline and California Lifeline eligible consumers, such devices operating on 4G or better technology platforms or any such other consumer technology equipment upon the mutual agreement of the Seller and the Purchasers (the “Devices”), and to sell the Devices to the Purchasers. It is intended that this Installment Sale Agreement will be utilized by KonaTel following the payment of all outstanding amounts owed to ACP Financing. For additional information on the Installment Sale Agreement, see our 8-K Current Report dated December 18, 2023, filed with the SEC on December 22, 2023, which is Hyperlinked in Part IV, Item 15, below, and is incorporated herein by reference.

On November 10, 2023, Apeiron Systems entered into a five (5) year agreement with Viva-US Telecommunications, Inc. (“Viva-US”), as the exclusive supplier of wholesale cellular voice & data, messaging, international call termination, smart SIM (“Subscriber Identity Module”), and other telecommunications services. Apeiron Systems will provide these services through its CPaaS (“Communication Platform as a Service”) cloud platform. Viva-US is a US MVNO (“Mobile Virtual Network Operator”) and part of the Balesia Technologies, Inc. group of companies operating MNOs (“Mobile Network Operator”) and MVNOs throughout North and South America, supporting over three million customers in Bolivia, Mexico and Argentina.

Events Subsequent to December 31, 2023 

Tempo Purchase Agreement Notice of Extension

On January 23, 2024, we exercised our rights under Section 1.07 of the referenced Tempo Purchase Agreement regarding a “Notice of Extension” of Closing Condition-Governmental Approvals, seeking an extension of 180 days for closing or such longer period as may be required to satisfy the required Governmental Approvals to Closing.

Excess Purchase Agreement and Related Agreements

On January 22, 2024 (the “Effective Date”), KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement (the “Excess Purchase Agreement”) with Excess Telecom, Inc., a Nevada corporation (“Excess”), pursuant to which KonaTel conveyed 49% of its Membership Interest in IM Telecom to Excess on the “Initial Closing Date” in consideration of the sum of $10,000,000, and will convey the remaining 51% of the Membership Interest in IM Telecom to Excess for the sum of $100.00 on the Final Closing. The Final Closing is conditioned upon obtaining the necessary federal and state governmental approvals for a change in control of IM Telecom (the “Approvals”), among other customary closing conditions. In the event that Excess is unable to procure the Approvals, Excess may, in its sole discretion, wait for the Approvals without any deadline or outside date; or assign its rights and interests under the Excess Purchase Agreement and related transaction documents to any third party. If on or before December 31, 2024, the ACP Connectivity Program is renewed by the United States Congress for a duration of greater than four (4) months (the “ACP Renewal Condition”), Excess will pay KonaTel an additional sum of $5,000,000 (the “ACP Renewal Earnout). The ACP Connectivity Program is an FCC benefit program that helps ensure that low income households can afford broadband for various uses (respectively, the “ACP Connectivity Program” or “ACP”). The parties also entered into a Management Services Agreement governing the management of the business of IM Telecom to be effective until the earlier of the Final Closing or ninety-nine (99) years and whereby IM Telecom and Excess will be managing IM Telecom until final regulatory approval; and a Master Distribution Agreement whereby KonaTel, doing business as “Infiniti Mobile,” a tradename of IM Telecom that was excluded from the Excess Purchase Agreement, will be a master distributor of IM Telecom’s wireless services, products, Lifeline services, ACP services to potential customers and such other ancillary services relating to Lifeline and ACP services offered to KonaTel’s customers under the Licenses held by IM Telecom (the “Services”), the term of which will commence upon the Final Closing and continue for a period of not less than ten (10) years. The current employees of IM Telecom will novate to employees of KonaTel’s under these agreements.

The CCUR Loan and the total liability of KonaTel under the ACP Financing Installment Sale Agreement, which are referenced above, were paid in full on the Initial Closing Date of the Excess Purchase Agreement. The total payoff amount for the CCUR Loan was $3,681,660, inclusive of unpaid interest and legal fees. The total payoff amount under the ACP Finance Installment Sale Agreement was $1,462,345.

For additional information on the Excess Purchase Agreement and related agreements, see our 8-K Current Report dated January 22, 2024, filed with the SEC on January 30, 2024, which is Hyperlinked in Part IV, Item 15, below, and is incorporated herein by reference.

The referenced Current Report and related agreements that are attached to this Current Report should be fully considered in reviewing the foregoing summary.

BUSINESS

KonaTel Nevada was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D. Sean McEwen, our current Chairman and CEO, to conduct the business of a full-service cellular provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets. Through its sales network, it provided these services nationwide. In furtherance of its proposed business, on November 1, 2014, it acquired most of the assets of Coast to Coast Cellular, Inc. (“Coast to Coast”), including inventories, property, plant and equipment and its customer list, all valued at approximately $950,000 net of liabilities in the approximate amount of $415,000; and on November 1, 2016, it acquired the assets of CS Agency LLC (“CS Agency”), consisting of contract rights

related to the cellular industry, in consideration of assuming liabilities of CS Agency in the approximate amount of $300,000. With the completion of the KonaTel Nevada Merger, we succeeded to the current and intended business operations of KonaTel Nevada.

On December 31, 2018, we acquired Apeiron Systems (www.apeiron.io). Apeiron was organized in 2013 and is an international hosted services Communications Platform as a Service (“CPaaS”) provider that designed, built, owns and operates its national private core network, supporting a suite of business communications services, all accessible via proprietary Applications Programming Interfaces (“APIs”). As an FCC licensed Internet Telephony Service Provider (“ITSP”), Apeiron also holds an FCC numbering authority license. Some of Apeiron’s hosted services include Voice over IP (“VoIP”), cellular and Over-The-Top (“OTT”) telephony, SMS/MMS messaging and broadcast services, numbering features, including Cloud IVRs, Voicemail, Fax, Call Recording and other services through local, toll-free and international phone numbers. Supported by its national redundant network, Apeiron also provides public and private IP network services, including Multiprotocol Label Switching (“MPLS”), Dedicated Internet and LTE Wireless WAN solutions. Apeiron’s cloud services include Information Data Dips, Software-Defined Wide Area Networking (“SD-WAN”) and Internet of Things (“IoT”) data and device management. Apeiron primarily distributes its services nationally through its website, its sales staff, independent sales agents and Independent Sales Organizations (“ISOs”).

Apeiron Systems is headquartered in Johnstown, Pennsylvania, where it has customer service and software engineering resources staffed. Additional development resources are staffed out of Los Angeles, CA, as well as in Europe and Asia.

On February 5, 2018, we entered into a purchase agreement to acquire IM Telecom (www.infinitimobile.com). On October 23, 2018, the FCC approved our acquisition of IM Telecom, and on January 31, 2019, we completed the purchase of IM Telecom. IM Telecom operates as a wholly owned subsidiary of KonaTel. It is an FCC licensed Eligible Telecommunications Carrier (“ETC”) and is one of twenty-two (22) original FCC licensed wireless cellular resellers to hold an FCC approved Lifeline Compliance Plan since 2012, of which approximately twelve (12) license holders remain active today. The FCC has not approved (granted) a new wireless reseller Lifeline Compliance Plan since 2012. As a licensed ETC, IM Telecom is also an FCC licensed Affordable Connectivity Program (“ACP”) provider, authorized to distribute ACP subsidized high-speed Lifeline subsidized mobile voice/data service in eleven (11) states, which are Vermont, South Carolina, Georgia, Maryland, Kentucky, Wisconsin, Oklahoma, California, New York, Pennsylvania and Nevada. In addition to Lifeline, IM Telecom is also an FCC approved ACP provider authorized to distribute ACP subsidized high-speed mobile data service in the fifty (50) states, Washington D.C. and Puerto Rico. Lifeline is an FCC program that provides subsidized, fixed or mobile telecommunications services to low-income Americans. ACP is an FCC program that provides subsidized high-speed wireless data services to low-income Americans. IM Telecom distributes Lifeline and ACP services under its Infiniti Mobile brand name through its website, sales staff, retail locations and ISOs. IM Telecom also offers non-Lifeline and non-ACP services throughout the United States. IM Telecom has a US-based customer support center located in Atmore, Alabama.

IM Telecom is headquartered in Plano, Texas, and has a warehouse operation in Tulsa, Oklahoma, and a customer service center in Atmore, Alabama. We are headquartered in Plano, Texas.

Apeiron Systems has eight (8) full-time employees; IM Telecom has (22) full-time employees and one (1) part-time employee; and we have four (4) full-time employees.

Principal Products or Services and their Markets

Our principal products and services, across two of our wholly owned subsidiaries, Apeiron Systems and IM Telecom, include our CPaaS suite of services (SIP/VoIP, SMS/MMS), wholesale and retail mobile voice and mobile data IoT services, wholesale voice termination services, and our ETC and ACP subsidized services for low-income Americans. Except for our ETC Lifeline services distributed in up to eleven (11) states and our ACP services distributed in the fifty (50) states, as well as Washington D.C. and Puerto Rico, our Apeiron Systems’ products and services are available worldwide and subject to U.S., international and local/national regulations.

We generate revenue from two (2) primary sources, Hosted Services and Mobile Services:

Distribution Methods of the Products or Services

We primarily distribute our Hosted Services through our website, sales staff, master distribution agreements and ISOs. We primarily distribute our Mobile Services through our website, sales staff, retail locations and ISOs. Since 2021, we have continued to increase our Mobile Service online marketing efforts to supplement alternative distribution channel growth.

Sources and Availability of Raw Materials and the Names of Principal Suppliers

Wholesale wireless services are sourced either directly from the wireless carrier or from wholesalers that sit between us (Apeiron Systems and IM Telecom) and the wireless carrier. Carriers can include Verizon, T-Mobile and AT&T. Wholesalers can include Prepaid Wireless Group (“PWG”) and Telispire.

Wireless resellers, like us, traditionally do not own the wireless infrastructure over which services are provided. We purchase services from the following sources:

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts

Our wholly owned subsidiary, IM Telecom, is an FCC licensed ETC and is one of the original twenty-two (22) FCC licensed wireless cellular resellers to hold an FCC approved wireless Lifeline Compliance Plan in the United States (as of 2012), of which approximately twelve (12) license holders remain active today. As a licensed ETC, IM Telecom is currently authorized to distribute Lifeline subsidized mobile voice/data service in eleven (11) states. IM Telecom is also an FCC licensed ACP carrier, authorized to distribute ACP subsidized mobile data services in the fifty (50) states, as well as Washington D.C. and Puerto Rico. Infiniti Mobile also offers non-Lifeline and non-ACP services.

We hold a United States Patent and Trademark Office registered trademark “Lifeline+®” and use this Trademark in our marketing materials.

Competition

The telecommunications industry is highly competitive. Our primary cellular competitors include other resellers and national carriers, such as AT&T, Verizon and T-Mobile. These national cellular carriers are facility-based, are significantly larger than us and enjoy trade name and trademark public recognition, as well as greater resources, scale and competitive advantages, among other substantial factors, as compared to us. In addition, our cellular competitors also include numerous smaller regional carriers, existing MVNOs and ETCs, such as Metro PCS, Cricket Wireless, TracFone Wireless, QLink Wireless, TruConnect and Assurance Wireless, many of which offer or may offer cellular, mobile data, Lifeline and ACP services, along with no-contract postpaid and prepaid service plans. Our CPaaS competitors include, but are not limited to, Twilio, Plivo, Bandwidth, Thinq, VoIP Innovations, Telnyx, Coredial, Vonage/Nexmo, CLX Comm, Genband Kandy, Tropo, Telestax, 2600Hz and Signal Wire. Competitive factors within the telecommunications industry include pricing, market saturation, service and product offerings, customer experience, network investment and quality, development and deployment of technologies and regulatory changes. Some competitors have shown a willingness to use aggressive pricing as a source of differentiation. Other competitors have sought to add ancillary services, like mobile video, to enhance their offerings. Taken together, the competitive factors we face continue to put pressure on margins as companies compete to retain their current customer base and continue to add new developments, many proprietary or patented, and customers.

Need for any Governmental Approval of Principal Products or Services

On October 23, 2018, the FCC approved our acquisition of IM Telecom, an FCC licensed wireless Lifeline carrier. In 1985, during the Reagan administration, the FCC established the Lifeline Assistance program through generic powers afforded the FCC under the Communications Act of 1934. Cellular service was added to the Lifeline program in 2009. Approximately nineteen (19) of the original twenty-two (22) ETCs still hold an FCC approved wireless reseller Lifeline Compliance Plan, but only about twelve (12) are active today. The FCC has not approved any new wireless reseller Lifeline Compliance Plans since 2012.

Existing and Probable Government Regulation to Our Current and Intended Business

The FCC has several complex requirements and proceedings that affect our operations and that could increase our costs or diminish our revenues. For example, the FCC has rules regarding provision of 911 and E-911 services, porting telephone numbers, roaming, disabilities access, privacy and cybersecurity, consumer protection, and the universal service and Lifeline programs, including eligibility, reimbursement and program requirements. Many of these and other issues are being considered in ongoing proceedings, and we cannot predict whether or how such actions will affect our business, financial condition or results of operations. Our ability to provide services and generate revenues could be harmed by adverse regulatory action or changes to existing laws and regulations. In addition, regulation of companies that offer competing services can impact our business indirectly.

Smaller Reporting Company

We are subject to the reporting requirements of Section 13 of the Exchange Act, and we are subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting company.”  That designation relieves us of some of the informational requirements of Regulation S-K and Article 8 of Regulation S-X of the SEC.

Emerging Growth Company

In 2020, our “emerging growth company” designation as defined in the “Jumpstart Our Business Startups Act of 2012,” or the “JOBS Act,” expired as of the fifth anniversary of our initial registered public offering. During our emerging growth company designation, we did not utilize any financial statement waivers available to us as a result of that designation.

Sarbanes/Oxley Act

We are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence.  It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointments, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; auditor attestation to management’s conclusions about internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act could substantially increase our legal and accounting costs.

Exchange Act Reporting Requirements

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to our shareholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our shareholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the SEC at least ten (10) days prior to the date that definitive copies of this information is forwarded to our shareholders.

We are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and are required to timely disclose certain material events (e.g., entry into a definitive material agreement, changes in corporate control, acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business, bankruptcy and receivership filings and the sale of in excess of five percent (5%) of our outstanding securities, among various other material matters) in a Current Report on Form 8-K. See SEC Form 8-K for a more complete description of the type of material events required to be disclosed.

Number of Total Employees and Number of Full-Time Employees

Across our companies, we have a total of thirty-five (35) employees; thirty-four (34) full-time employees and one (1) part-time employee.

Subsidiaries

We have three (3) wholly owned subsidiaries: KonaTel Nevada; IM Telecom; and Apeiron Systems. Our subsidiary KonaTel Nevada, has remained inactive since early 2021.

Additional Information

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports or registration statements that we have previously filed electronically with the SEC at its Internet site at www.sec.gov in the Edgar Archives of the SEC or in our website at konatel.com.

ITEM 1A.  RISK FACTORS

RISK FACTORS

As we are a smaller reporting company as defined by Section 12b-2 of the Exchange Act, we are not required to provide the information under this Item or in our annual or quarterly reports filed with the SEC; however, we believe this information may be of value to our shareholders or potential investors in our Company. These risk factors should be considered in light of the caption “Forward-Looking Statements” at the forepart of this Annual Report. We reserve the right not to provide risk factors in our future filings. Our primary risk factors and other considerations include:

Risks Related to the Company

We have a limited operating history and cannot ensure the long-term successful operation of our business or the execution of our business plan.

We commenced our current business operations in November of 2014, and our wireless marketing technology and solutions are an evolving business offering. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets. We may be unable to successfully accomplish and fund our current endeavors, which would materially impact our ability to implement our business plan, including:

Our business strategy may be unsuccessful, and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully accomplish these tasks, our business will be harmed, and we may fail.

For the year end December 31, 2023, we reported gross revenues of $18,223,745, cost of revenues of $14,850,105, operating expenses of $6,494,243, other income and expenses of ($820,224) and a net loss of ($3,940,827).

For the prior year ended December 31, 2022, we reported gross revenues of $20,023,340, cost of revenues of $15,033,733, operating expenses of $7,544,292, other income and expenses of ($397,675) and net loss of ($2,952,360).

For the year ended December 31, 2023, we had $12,352, in non-cash depreciation expense. As of December 31, 2023, our accumulated deficit was ($12,238,691).

The United States Government’s dissolution or reduction of the Lifeline Program or the elimination of “resellers” of these services would have a substantial adverse effect on our current and planned business operations.

The increase in the number of resellers of services and products that we provide by any national carrier could saturate the markets and market segments of our targeted customers, which could affect our business adversely.

Market saturation could occur when a national carrier allows too many resellers into the market and margins drop so low where the reseller business model is no longer profitable, and our business may suffer and fail.

A decrease in the amount of wholesale voice and mobile data available to purchase from wholesale aggregators could cause a substantial reduction in our business and customers.

We purchase a portion of our mobile data service (“IoT”) directly from national carriers and purchase the remainder of our wholesale voice and mobile data from wholesale aggregators or MVNEs like PWG and Telispire. If one of these aggregators vacated the market, such action could force the transition of services to other providers, and could substantially reduce our current and anticipated revenues from our IoT or cellular service.

A wireless reseller could gain a significant price advantage over other wireless resellers by entering into a special national carrier pricing agreement not available to other resellers.

Any special national carrier pricing agreement that was not available to us would allow that particular reseller to “undercut” all other resellers. This scenario could also apply to a national wireless carrier acquiring a reseller then allowing that reseller to operate with special wholesale pricing not available to other resellers. Any such event could have a substantial adverse impact on our business and revenues.

Adequate funds for our current and intended operations may not be available, requiring us to raise additional financing or curtail our current and planned operations significantly.

We might be required to raise additional funding through public or private debt or equity financings. Any additional equity financings may be dilutive to our current shareholders and may be completed at a discount to the then-current market price of our common stock. Debt financing, if available, would likely involve restrictive covenants on our operations or pertaining to future debt or equity financing arrangements. Nevertheless, we may not successfully complete any future equity or debt financing. Adequate funds for our operations, whether from financial markets, collaborative or other arrangements, may not be available when needed or on terms attractive to us. If adequate funds are not available, our plans to operate our business may be adversely affected, and we could be required to curtail our activities significantly and/or cease operations.

We will be unable to implement our business plan if we cannot raise sufficient capital and may be required to pay higher prices for capital based on the current illiquid market for our common stock, among other factors.

We may need to raise additional capital to implement our business plan and meet financial obligations as they come due. If we do need to raise additional capital, and cannot attract sufficient capital from customary sources, we may be required to pay a higher price for capital.

Factors affecting the availability and price of capital may include the following:

A national carrier (Verizon, AT&T, T-Mobile) could dissolve, reduce or restrict any wholesale program, agent program or reseller program. This includes both voice and data IoT, which would adversely affect our business.

We, like all voice and data resellers, are dependent on the FCC licensed national carriers to provide services that can be resold for profit. The wireless carriers own/control their respective network (towers) and provide the wireless service. Resellers do not own network and are dependent on the national carriers to provide a reseller program.  These carriers could eliminate a reseller program or implement new policies that could reduce profit margins, making any applicable program unprofitable. They could also implement market restorations reducing markets we could sell into, which would have a direct adverse effect on our current and future prospects.

Similarly, one of these national carriers could reduce their own retail pricing, with no corresponding reduction in their wholesale pricing, which could create a situation where a reseller is unable to make enough profit to sustain operations.

We may be unable to meet our current or future obligations or to adequately develop existing or future opportunities if we cannot raise sufficient capital. If we are unable to obtain any required capital for an extended period of time, we may be forced to discontinue or curtail our business operations and we may fail.

We expect that there will be significant consolidation in our industry. Our failure or inability to lead that consolidation would have a severe adverse impact on our access to financing, customers, technologies and human resources.

Our industry is currently composed of a small number of substantial entities, and a relatively large number of small businesses, no single one of which is dominant, or which provides integrated solutions and product offerings incorporating much of the available technology. Accordingly, we believe that substantial consolidation of the smaller companies may occur in our industry in the near future as has occurred with many larger participants. If we do not play a positive role in that consolidation, either as a leader or as a participant whose capabilities and offerings are merged into a larger entity, we may be left out of this process, with product and service offerings of limited value compared with those of our competitors. Moreover, even if we lead the consolidation process, the market may not validate the decisions we make in that process and our business will suffer and may fail.

Our success depends on our product and service technologies achieving and maintaining widespread acceptance in our targeted markets.

Our success will depend to a large extent on broad market acceptance of our telecommunications solutions among our current and prospective customers. Our prospective customers may be unwilling to use our solutions for a number of other reasons, including preference for static advertising, lack of familiarity with our technologies, preference for competing technologies or perceived lack of reliability. We believe that the acceptance of our technologies by prospective customers will depend primarily on the following factors:

Because we do not have long-term purchase commitments from our customers, the failure to obtain anticipated orders or the deferral or cancellation of commitments could have an adverse effect on our business and future prospects.

Our business is characterized by short-term purchase orders and contracts that do not require that purchases be made. This makes forecasting our sales difficult. The failure to obtain anticipated orders and deferrals or cancellations of purchase commitments because of changes in customer requirements, or otherwise, could have a material adverse effect on our business, financial condition and results of operations. We have experienced such challenges in the past and may experience such challenges in the future.

Most of our contracts are terminable by our customers with limited notice and without penalty payments, and early terminations could have a material adverse effect on our business, operating results and financial condition.

Most of our contracts are terminable by our customers following limited notice and without early termination payments or liquidated damages due from them. In addition, each stage of a project often represents a separate contractual commitment, at the end of which the customer may elect to delay or not to proceed to the next stage of the project. We cannot assure you that one or more of our customers will not terminate a material contract or materially reduce the scope of any large project. The delay, cancellation or significant reduction in the scope of a large project or a number of projects could have a material

adverse effect on our business, operating results and financial condition.

Our industry is characterized by frequent technological change. If we are unable to adapt our products and services and develop new products and services to keep up with these rapid changes, we will not be able to obtain or maintain market share and our business may fail.

We must respond to changing technology and industry standards in a timely and cost-effective manner. We may not be successful in using new technologies, developing new products and services or enhancing existing products and services in a timely and cost-effective manner.

Furthermore, even if we successfully adapt our products and services, these new technologies or enhancements may not achieve market acceptance.  The market for our products and services is characterized by rapidly changing technology, evolving industry standards, changes in customer needs, heavy competition and frequent new product and service introductions. If we fail to develop new products and services or modify or improve our existing products and services in response to these changes in technology, customer demands or industry standards, our products and services could become less competitive or obsolete.

A portion of our business involves the use of software technologies that we have developed or licensed. Industries involving the ownership and licensing of software-based intellectual property are characterized by frequent intellectual property litigation, and we could face claims of infringement by others in the industry. Such claims are costly and add uncertainty to our operational results.

A portion of our business involves our ownership and/or licensing of software. This market space is characterized by frequent intellectual property claims and litigation. We could be subject to claims of infringement of third-party intellectual property rights resulting in significant expense and the potential loss of our own intellectual property rights. From time to time, third parties may assert copyright, trademark, patent or other intellectual property rights to technologies that are important to our business.

Any litigation to determine the validity of these claims, including claims arising through our contractual indemnification of our business partners, regardless of their merit or resolution, would likely be costly and time consuming and divert the efforts and attention of our management and technical personnel. If any such litigation resulted in an adverse ruling, we could be required to:

Our business may be adversely affected by malicious applications that interfere with, or exploit security flaws in, our products and services.

Our business may be adversely affected by malicious applications that make changes to our customers’ computer systems and interfere with the operation and use of our products or products that impact our business. These applications may attempt to interfere with our ability to communicate with our customers’ devices. The interference may occur without disclosure to or consent from our customers, resulting in a negative experience that our customers may associate with our products and services. These applications may be difficult or impossible to uninstall or disable, may reinstall themselves and may circumvent other applications’ efforts to block or remove them. If our efforts to combat these malicious applications fail, or if our products and services have actual or perceived vulnerabilities, there may be claims based on such failures and our reputation may be harmed, which would damage our business and financial condition and our ability to continue our business.

We face risks relating to Cyberattacks.

Our business operations are dependent upon secure information technology systems and telecommunications networks. Breaches of these systems and networks through cyberattack or other unauthorized access may have numerous negative effects on our business, including lost sales and damage to customer relationships; disruptions on our operations; reputational harm and negative publicity; lost trust from our customers, partners and employees; lawsuits resulting from the

compromise of sensitive customer or employee information; costs of mitigation; and remediation and security enhancement expenses. See Part I, Item 1C, below.

We compete with other companies that have substantially greater resources, and we are at a distinct competitive disadvantage in our chosen industry.

The market for our products and service solution technologies is generally highly competitive, and we expect competition to increase in the future. Some of our competitors or potential competitors have significantly greater financial, technical and marketing resources than we have. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than we do.

We expect competitors to continue to improve the performance of their current products and to introduce new products, services and technologies. Successful new product and service introductions or enhancements by our competitors could reduce sales and the market acceptance of our products and services, cause intense price competition or make our products and services obsolete. To be competitive, we must continue to invest significant resources in research and development, sales and marketing and customer support. If we do not have sufficient resources to make these investments or are unable to make the technological advances necessary to be competitive, our competitive position will suffer, and we may fail. Increased competition could result in price reductions, fewer customer orders, reduced margins and loss of market share. Our failure to compete successfully against current or future competitors could also adversely affect our business and financial condition.

Our future success depends on key personnel and our ability to attract and retain additional personnel.

Our success is dependent upon attracting and maintaining key personnel, including our founder, Chairman and CEO, D. Sean McEwen, and various key executive employees, including Joshua Ploude from whom we acquired Apeiron Systems and who serves as CEO of Apeiron Systems, and Charles D. Griffin, our President and COO, among others, who are listed in Part III, Item 10 of this Annual Report.

Further, if we fail to retain our key personnel or to attract, retain and motivate other qualified employees, our ability to maintain and develop our business may be adversely affected. Our future success depends significantly on the continued service of our key technical, sales and senior management personnel and their ability to execute our growth strategy. The loss of the services of our key employees could harm our business. We may be unable to retain our employees or to attract, assimilate and retain other highly qualified employees who could migrate to other employers who may offer competitive or superior compensation packages.

Unpredictability in financing markets could impair our ability to grow our business through acquisitions.

We anticipate that opportunities to acquire similar businesses will materially depend on the availability of financing alternatives with acceptable terms. As a result, poor credit and other market conditions or uncertainty in financial markets could materially limit our ability to grow through acquisitions since such conditions and uncertainty make obtaining financing more difficult.

Our reliance on information management and transaction systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service providers experiences a security breach.

Effective information security internal controls are necessary for us to protect our sensitive information from illegal activities and unauthorized disclosure, in addition to preventing service attacks and corruption of our data. Further, we rely on the information security internal controls maintained by our outsourced service providers. Breaches of our information management system could also adversely affect our business reputation. Finally, significant information system disruptions could adversely affect our ability to effectively manage operations or reliably report results. Cyberattacks against companies have occurred and will continue to occur and have increased in frequency, scope and potential harm in recent years. While, to date, we have not been subject to cyberattacks, that, individually or in the aggregate, have been material to our operations, the preventative actions we take to reduce the risks associated with cyberattacks may be insufficient to stop or mitigate the effects of a cyberattack in the future. See Part I, Item 1C, Cybersecurity.

Because our technology, products, platforms and services are complex and are deployed in and across complex environments, they may have errors or defects that could seriously harm our business.

Our technology, proprietary platforms, products and services are highly complex and are designed to operate in and across data centers, large and complex networks and other elements of the digital media workflow that we do not own or control. On an ongoing basis, we need to perform proactive maintenance services on our platform and related software services to correct errors and defects. In the future, there may be additional errors and defects in our software that may adversely affect our

services. We may not have in place adequate reporting, tracking, monitoring and quality assurance procedures to ensure that we can detect errors in our software in a timely manner. If we are unable to efficiently and cost-effectively correct errors or other problems that may be identified, or if there are unidentified errors that allow persons to improperly access our services, we could experience loss of revenues and market share, damage to our reputation, increased expenses and legal actions by our customers and our business may fail.

We may have insufficient network or server capacity for our current and planned business, which could result in interruptions in our services and the loss of revenues resulting in a negative impact on our business.

Our operations are dependent, in part, upon network capacity provided by our telecommunications network and third-party telecommunications networks; data center services provider owned and leased infrastructure and capacity; server capacity located at the data center services provider partner or partners; and our own infrastructure and equipment. Collectively, this infrastructure, equipment and capacity must be sufficiently robust to handle all of our customers’ wireless requirements, particularly in the event of unexpected surges in high-definition video traffic and network services incidents. We may not be adequately prepared for unexpected increases in bandwidth and related infrastructure demands from our customers. In addition, the bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including payment disputes, outages or such service providers going out of business. Any failure of these service providers or our own infrastructure to provide the capacity we require due to financial or other reasons may result in a reduction in or the interruption of service to our customers, leading to an immediate decline in revenue and possible additional decline in revenue, as a result of subsequent customer losses, which could result in the cessation of all or part of our business operations.

We do not have sufficient capital to engage in substantial research and development, which may harm our long-term growth.

In light of our limited resources in general, we have made no substantial investments in research and development. This conserves capital in the short term. In the long term, as a result of our limited investment in research and development, our technologies and product offerings may not keep pace with the market, and we may lose any existing competitive advantage. Over the long term, this may harm our revenue growth and our ability to be profitable.

Our business operations are susceptible to interruptions caused by events beyond our control.

Our business operations are susceptible to interruptions caused by events beyond our control. We are vulnerable to the following potential problems, among others:

The occurrence of any of the foregoing could result in claims for consequential and other damages, significant repair and recovery expenses and extensive customer losses and otherwise have a material adverse effect on our business, financial condition and results of operations. See Part I, Item 1C, Cybersecurity.

Our business operations could be impacted by public health crises.

We are subject to risks related to public health crises, such as the 2020 COVID-19 pandemic, which impacted our operations. Actions taken around the world to help mitigate the spread of the coronavirus included restrictions on travel and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical

areas in which we operate. While it is unknown how long these conditions will last and what the complete financial affect will be on us, to date, and as a result of actions taken by management to mitigate a material impact to our financial statements or our operational results, we are not currently experiencing a material impact to our financial statements or our results of operations; however, a pandemic typically results in social distancing, travel bans and quarantines, which may result in limited access to our facilities, customers, management, support staff and professional advisors.  These, in turn, may not only impact our operations, financial condition and demand for our services, but our overall ability to react timely to mitigate the impact of this event. Given our small staff, if a key member of our team were disabled by COVID-19 or some other similar crisis, it could have a material negative impact on our business. Also, it may substantially hamper our efforts to provide our investors with timely information and to comply with our filing obligations under the Exchange Act with the SEC. If any pandemic were to last a prolonged period of time, we could see a decline in revenue due to the closure of customer businesses, which could then impact our ability to pay our short-term debts. Our concentration of revenue from a small group of Apeiron Systems’ customers makes it reasonably possible that we are vulnerable to the risk of a long-term severe impact. Our dependence on certain suppliers to provide equipment to be distributed or sold to our customers could also be impacted if inventory shortages occur due to import or export restrictions resulting from any pandemic.

General global market and economic conditions may have an adverse impact on our operating performance and results of operations.

Our business has been and could continue to be affected by general economic and market conditions. Weakness in the United States and worldwide economy could have a negative effect on our operating results. Additionally, in a down-cycle economic environment, we may experience the negative effects of increased competitive pricing pressure, customer loss, slowdown in commerce over the Internet and corresponding decrease in traffic delivered over our network and failures by our customers to pay amounts owed to us on a timely basis or at all. Suppliers on which we rely for equipment, field services, servers, bandwidth, co-location and other services could also be negatively impacted by economic conditions that, in turn, could have a negative impact on our business operations or revenues. Flat or worsening economic conditions may harm our operating results and financial condition.

Economic, political and market conditions may adversely affect our business, financial condition and operating results.

Our business, financial condition and operating results are sensitive to changes in general economic conditions, including interest rates, consumer credit conditions, consumer debt levels, consumer confidence, unemployment rates, economic growth, energy costs, rates of inflation (or concerns about deflation), supply chain disruptions, impacts of current geopolitical conflict or instability, such as the Ukraine-Russia and Israel-Hamas wars, and further escalations thereof, and other macroeconomic factors.

These unfavorable economic conditions may lead to decreased demand for our products or services in the future, especially by our lower-income customers, which would have a negative effect on our business and results of operations.  In particular, inflation could affect the price of equipment for the services provided in our Lifeline Program. Ongoing global conflicts and sanctions could lead to higher prices for commodities used in the production of telephones and other technologies used in the global telecommunications industry, which may result in decreased demand for our products and services. To the extent that we are unable to increase the prices of our goods and services in response to increased costs, our operating margins will be compressed.

Supply chain disruptions could adversely affect our business.

Supply chain dislocations resulting from global geopolitical and public health issues such as the Ukraine-Russia and Israel-Hamas wars, any resurgence in the COVID-19 health crises and other causes may have a material adverse impact on our business and results of operations. Such disruptions may increase our costs of doing business, including significant increases in the price of our products and their components and materials and the related costs of shipment, including equipment used in the Lifeline Program. Supply chain disruptions may also adversely affect our access to suppliers, manufacturers, customers and vendors and may impair our ability to perform contracted services. Delays in our ability to meet our obligations as a result of supply chain issues may negatively affect our reputation, our relationships with customers and our ability to deliver products and services.

The markets in which we operate are rapidly emerging, and we may be unable to compete successfully against existing or future competitors to our business.

The markets in which we operate are becoming increasingly competitive. Our current competitors generally include those that offer similar products and services. These competitors, including future new competitors who may emerge, may be able to develop comparable or superior solution capabilities, platforms, services, products and/or a series of services that provide a similar or more robust set of features and functionality than the technologies, products and services we offer. If this occurs, we may be unable to grow as necessary to make our business profitable.

Regardless of whether we have superior products, many of these current and potential future competitors have a longer operating history in their current respective business areas and greater market presence, brand recognition, engineering and marketing capabilities, and financial, technological and personnel resources than we do. Existing and potential competitors with an extended operating history, even if not directly related to our business, have an inherent marketing advantage because of the reluctance of many potential customers to entrust key operations to a company that may be perceived as unproven or in the early stage of its development. In addition, our existing and potential future competitors may be able to use their extensive resources:

If we are unable to compete effectively in our various markets, or if competitive pressures place downward pressure on the prices at which we offer our products and services, our business, financial condition and results of operations may suffer, and our business may fail.

Compliance with the reporting requirements of federal securities laws can be expensive.

We are a public “reporting company” in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, rules and regulations, including compliance obligations under the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited and reviewed financial statements in reports filed with the SEC, along with required communications with our shareholders, are substantial. We have incurred and expect to continue to incur costs associated with continuing as a public company, including, but not limited to, legal, accounting, filing and other related costs and expenses. Failure to comply with the applicable securities laws could result in private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business and financial condition, the value of our common stock and the ability of our shareholders to resell their common stock.

We do not intend to pay dividends on our common stock for the foreseeable future.

All future revenues are anticipated to be utilized for research, development and the furtherance of our business plan and our technologies, products, services and platform, and accordingly, it is highly unlikely that shareholders will receive any dividends from us in the near future, if ever.

We do not intend to provide guidance about future events in the foreseeable future.

Our Board of Directors anticipates adopting a policy that will preclude us from providing guidance about matters that may happen in the foreseeable future, though any such policy will not prohibit our responsibilities to provide forward-looking information to our shareholders and to the public in our Exchange Act filings with the SEC, including our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” required in a number of SEC reports and registration statements.

Risks Related to Our Common Stock

There is a limited active trading market for our shares of common stock.

In general, there has been a limited trading volume in our common stock. The small trading volume will likely make it difficult for shareholders to sell their shares as and when they choose. Furthermore, small trading volumes are generally understood to depress market prices. As a result, you may not always be able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate.

Additionally, if we do not timely file our reports required to be filed with the SEC under the Exchange Act, broker-dealers may not be able or willing to trade our common stock, and the OTC Markets will post adverse warnings on its website about such failures, which, unless such failures are corrected by us, could have an additional adverse impact on the viability of any “established trading market” that may develop for our common stock. Other adverse warnings of the OTC Markets under their current and future policies could similarly have an adverse effect on any market for our common stock, and there is no assurance that we will be able to satisfy comments or concerns of the OTC Markets, if any are expressed.

If an active market for our common stock develops, there is a significant risk that the Company’s common stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control, including, but not limited to:

Our investors’ ownership in the Company may be diluted in the future.

In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present shareholders. We expect to need to issue a substantial number of shares of our common stock or other securities convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations and other business purposes. We currently offer incentive stock options for our officers, directors and certain significant employees and may extend this policy to others. Additional shares of common stock issued by us in the future will dilute an investor’s investment in the Company.

Directors, executive officers, principal shareholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our shareholders do not consider to be in their best interests.

As of the date of this Annual Report, D. Sean McEwen, our Chairman and Chief Executive Officer, beneficially owns approximately 38% of our issued and outstanding shares of common voting stock by reason of his personal holdings. This percentage includes certain vested non-compensatory stock options which he owns and that can be exercised within sixty (60) days of the date of this Annual Report, all of which options are described under the caption “Security Ownership of Certain Beneficial Owners and Management” in Part III, Item 12 hereof. As a result, Mr. McEwen may have the ability to substantially control the election of our board of directors, the outcome of issues requiring approval by our shareholders and other corporate actions. This concentration of ownership may also have the effect of delaying or preventing a change in control of our Company that may be favored by other shareholders; and could prevent transactions in which shareholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management and board decision making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock, whether by making a tender offer or attempting to obtain control of our Company. Also see the caption “Executive Compensation” of Part III, Item 11 hereof.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results in a timely manner or detect fraud. Consequently, investors could lose confidence in our financial reporting, and this may adversely affect any trading price for our common stock that may then exist.

We must maintain effective internal controls to provide reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as would be possible with an

effective control system in place. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist and may in the future discover areas of our internal controls that need improvement.

We are continually in the process of evaluating our internal controls for effectiveness as well as evaluating the need for additional internal controls. Failure to implement changes to our internal controls that we may deem to be ineffective or any others that we may identify as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence could have a substantial negative affect on the trading price of our common stock.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 1C.   CYBERSECURITY

We face significant and persistent cybersecurity risks due primarily to: the substantial level of harm that could occur to us and our customers were we to suffer impacts of a material cybersecurity incident; and our use of third-party products, services and components. We are committed to maintaining strong governance and oversight of these risks and to implementing mechanisms, controls, technologies and processes designed to help us assess, identify and manage these risks. While we have not, as of the date of this Annual Report, experienced a cybersecurity threat or incident that resulted in a material adverse impact to our business or operations, there can be no guarantee that we will not experience such an incident in the future. In addition, these threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures. We seek to detect and investigate unauthorized attempts and attacks against our network, products and services, and to prevent their occurrence and recurrence where practicable through changes or updates to our internal processes and tools and changes or updates to our products and services; however, we remain potentially vulnerable to known or unknown threats.

We aim to incorporate industry best practices throughout our cybersecurity program. Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies and other processes to assess, identify and manage material cybersecurity risks. Our cybersecurity program is designed to be aligned with applicable industry standards and is assessed periodically by independent third parties. We have processes in place to assess, identify, manage and address material cybersecurity threats and incidents. These include, among other things: annual and ongoing security awareness training for employees; mechanisms to detect and monitor unusual network activity; and containment and incident response tools. We monitor issues that are internally discovered or externally reported that may affect our business, and have processes to assess those issues for potential cybersecurity impact or risk. We also have a process in place to manage cybersecurity risks associated with third-party service providers. We impose security requirements upon our suppliers, including maintaining an effective security management program and abiding by information handling and asset management requirements. We have an escalation process in place to inform senior management and the Board of Directors of these material issues.

ITEM 2.  PROPERTIES

We do not own any property.

We have leases on the following properties:

On December 18, 2020, we entered into a lease of an office suite in Plano, TX, which commenced on January 25, 2021. Lease payments were deferred until May 1, 2021. Beginning on May 1, 2021, lease payments are $3,650 per month for the twelve (12) month period ended April 30, 2022; $3,735 per month for the twelve (12) month period ended April 30, 2023; and $3,819 per month for the twelve (12) month period ending April 30, 2024. The lease term is for five (5) years.

Through our wholly owned subsidiary, IM Telecom, we have leases on the following properties:

Our Tulsa, Oklahoma distribution center, consisting of approximately 2,466 square feet, is under a three (3) year lease that commenced on August 1, 2022. Monthly lease payments for this property are $2,356 per month for the twelve (12) month period ended July 31, 2023; and $2,415 per month for the twelve (12) month period ending July 31, 2024.

Our customer service center is in Atmore, Alabama, and consists of approximately 1,766 square feet. This lease commenced on June 1, 2022, and terminates on June 1, 2025. Monthly lease payments for this property are $2,121 per month.

Through our wholly owned subsidiary, Apeiron Systems, we have a lease at the following property:

Our Johnstown, Pennsylvania office, consisting of approximately 6,900 square feet, is under a lease that commenced on September 1, 2022, and expires on August 31, 2030. Monthly lease payments for this property are $4,500 per month.

ITEM 3:  LEGAL PROCEEDINGS

We are not party to any material legal proceedings.

ITEM 4:  MINE SAFETY DISCLOSURES

None; not applicable.

 PART II

ITEM 5:  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Until December 14, 2020, our common stock was quoted on the “OTC Pink Tier” of the OTC Markets under the symbol “KTEL.” On December 14, 2020, our common was approved for up-listing on the OTC Markets’ OTCQB® Venture Market or the OTCQB Tier. No assurance can be given that any established trading market for our common stock will develop or be maintained.

For any market that develops for our common stock, the sale of shares of our common stock comprised of restricted securities pursuant to Rule 144 of the SEC, any other available exemption from registration under the Securities Act or by registration under the Securities Act by members of management or others, including any person to whom any such securities may be issued in the future, may have a substantial adverse impact on any such public market.  For information regarding the requirements of resales under Rule 144, see the heading “Rule 144” of this Item below.

Our common stock that can be acquired under vested and exercised incentive stock options that we have granted may also have an impact on any public trading market in our common stock. The shares underlying our 2018 Incentive Stock Option Plan have been registered with the SEC on Form S-8. See the heading “Outstanding Equity Awards” of the caption “Executive Compensation” in Part III, Item 11 hereof, for a description of all of our outstanding incentive stock options.

Also, see the heading “Risks Related to Our Common Stock” of the caption “Risk Factors” in Part I, Item 1A hereof.

The following table sets forth, for the periods indicated over the last two (2) years, the high and low closing prices during each period, as reported by the OTC Markets and OTCQB Markets, and represents prices between dealers that do not include retail markups, markdowns or commissions and may not represent actual transactions:

These prices were obtained from OTC Markets and do not necessarily reflect actual transactions, retail markups, mark downs or commissions.

Rule 144

The following is a summary of the current requirements of Rule 144, including issues related to companies that are or have ever been a “shell company,” which includes the Company:

Holders

We currently have 555 active shareholders of record as of December 31, 2023, not including an indeterminate number of shareholders who may hold their shares in “street name.”

Dividends

We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. All future earnings are anticipated to be utilized for research, development and the furtherance of our business plan and our technologies, products, services, and platform, and accordingly, it is highly unlikely that you will receive any dividends from us in the near future, if ever.

There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

With the exception of the purchase of 750,000 shares of our common stock in the year ended December 31, 2023, pursuant to the exercise of certain non-compensatory stock options acquired by our Chairman and CEO, D. Sean McEwen, in 2017, at an exercise price of $0.22 per share, there have been no sales by us of any unregistered securities during the past two (2) years ended December 31, 2023, and 2022. The exercise price of these stock options was paid from accrued salary owed to Mr. McEwen.

Use of Proceeds of Registered Securities

None; not applicable.

Purchases of Equity Securities by Us and Affiliated Purchasers

None; not applicable.

ITEM 6:  [RESERVED]

ITEM 7:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When used in this Annual Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions and financial trends that may affect our future plans of operations, business strategy, operating results and financial position.  Persons reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed at the forepart of this Annual Report under the heading “Forward-Looking Statements” on page 2 hereof, and further, below, under “Trends and Uncertainties.”

Overview of Current and Planned Business Operations

We continue to pursue market opportunities for the distribution of our current products and services described in our “Principal Products or Services and their Markets” summary contained on page 7 of this Annual Report. In addition, we continue to pursue expanded market distribution opportunities, development of new products and services, the addition of new lines of business and accretive acquisition opportunities that may enhance or expand our current product and service offerings.

Comparison of the Year Ended December 31, 2023, to the Year ended December 31, 2022

Results of Operations

In comparing our Statements of Operations between the years ended December 31, 2023, and 2022, we had declines in revenue, costs of revenue, operating expenses and lower net income.

For the year ended December 31, 2023, we had $18,223,745 in revenues from operations compared to $20,023,340 in the prior year ended December 31, 2022, for a total revenue decrease of ($1,799,595) in 2023. The decrease in 2023 revenue was due to fewer activations within our Mobile Services segment. Influencing factors of this decline in revenue were partially the result of the replacement of the EBB program (which had temporarily higher reimbursements) with the ACP program in March, 2022, which reduced government subsidized revenues, as well our change in strategy in late 2022 to focus on the IM Telecom sales in the eleven (11) Lifeline states, which suspended growth in early 2023, resulting in future period revenue decreases.

For the year ended December 31, 2023, our cost of revenue was $14,850,105 compared to $15,033,733 in the prior year ended December 31, 2022, for a cost of revenue decrease of ($183,628) in 2023. Our cost of revenue decrease was the result of delivering fewer devices to subscribers, which reduced the costs of devices, network and compensation.

For the year ended December 31, 2023, we had gross profit of $3,373,640 compared to $4,989,607 in the prior year ended December 31, 2022, for a gross profit decrease of ($1,615,967) in 2023. This decline was partially due to reduced activations within our Mobile Services segment, as well as in early 2022, we received higher per activation claims on government subsidies through the EBB program, which was replaced with the ACP program in March, 2022. In late 2022, we changed strategy towards higher ARPU locations, which required temporary suspensions in activity as selling teams relocated. Additionally, we required an OSS/BSS system change to accommodate growth of new sales activity, which caused a pause in growth during this implementation. During lower or reduced activity periods, we had temporary improvements in profit, as compared with high growth activity periods, where our business is required to recognize up-front costs and show reduced or negative profits. Because of these factors, swings in profit occur depending on the level of activations.

For the year ended December 31, 2023, total operating expenses were $6,494,243 compared to $7,544,292 in the prior year ended December 31, 2022, for a decrease of ($1,050,049) in 2023. This decrease was due primarily to lower payroll and related expenses resulting from a reduction in staff.

For the year ended December 31, 2023, other income (expense) was ($820,224) compared to ($397,675) in the prior year ended December 31, 2022. This increase is due primarily to interest expense related to our CCUR Loan.

For the year ended December 31, 2023, we had a net loss of ($3,940,827) compared to a net loss of ($2,952,360) in the prior year ended December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2023, we had $777,103 in cash and cash equivalents on hand.

Our ability to continue as a business is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve (12) months with revenues from operations, cash on hand and the use of financing available to the business.

In comparing liquidity between the years ending December 31, 2023, and 2022, cash decreased by 62%. The decrease was primarily the result of growth in our mobile services sector, which requires up-front expenditures to acquire consumers. Total liabilities increased by 57% in 2023 when compared to 2022, as a result of the CCUR Loan delayed draw received in 2023, and the device financing from ACP Finance, which was also established in 2023. We had a working capital deficit of ($3,859,200) for the year ended December 31, 2023, primarily resulting from the addition of the CCUR Loan delayed draw and the financing of devices through ACP Finance. In January 2024, and as noted under the heading “Events Subsequent to December 31, 2023” in Part I, Item I, Business, the CCUR Loan and the outstanding obligations to ACP Finance, were fully paid off with proceeds from the sale of IM Telecom, which is discussed under that heading.

Our current ratio (current assets divided by current liabilities) was .48 as of December 31, 2023, and .92 as of December 31, 2022.

Cash Flow from Operations

During the year ended December 31, 2023, and the year ended December 31, 2022, cash flow used in operating activities was $(1,792,032) and $(1,821,869), respectively. Cash flows used in operating activities were mainly impacted by the Company’s net loss and higher inventory due to end of year device purchases.

Cash Flows from Investing Activities

During the year ended December 31, 2023, and the year ended December 31, 2022, cash flow provided by investing activities was $0 and $10,000, respectively. The cash provided by investing activities during 2022 was the result of the sale of assets.

Cash Flows from Financing Activities

During the year ended December 31, 2023, and the year ended December 31, 2022, cash flow provided by financing activities was $513,501 and $2,934,718, respectively. In 2023, cash flow generated from financing activities consisted of $554,750 cash received from short-term notes payable ($132,000), cash used for payment of loan origination costs and $90,751 cash received from stock option exercises. In 2022, cash flow generated from financing activities consisted of $3,150,000 cash received from short-term notes payable; ($173,532) cash used for payment of loan origination costs; ($150,000) cash used for repayment of notes payable; and $108,250 cash received from the exercise of incentive stock options.

Going Concern

We generated a net loss of ($3,940,827) during the year ended December 31, 2023 and we had a net loss of ($2,952,360) in 2022. The Company had a net change in cash of ($1,278,531) and $1,112,849 in 2023, and 2022, respectively. The accumulated deficit as of December 31, 2023, was ($12,238,691).

The Company sourced short-term financing in June, 2022, of $3,150,000. In June, 2023, the Company agreed to additional financing with CCUR, up to an additional $2,000,000 in delayed draw allocations. As of June, 2023, we had received an initial delayed draw in the amount of $500,000 to help facilitate our growing Mobile Services segment and support higher customer acquisition costs (sales). In late 2023, we secured additional device financing through ACP Finance (up to $5M), to further provide for growth and which also afforded repayment of device costs over an extended timeframe. All outstanding liabilities owing under the foregoing arrangements

were paid in full on the Initial Closing Date of the Excess Purchase Agreement. See heading “Events Subsequent to December 31, 2023” in Part I, Item I, Business, hereof. ACP Finance remains available to us as a growth financing partner, under prior terms, and provides continuing growth financing for our mobile services segment.

Our business added distribution partners to higher profit states in 2023, and started to show higher growth in the second half of the year. High growth phases require immediate expense recognition and as a result, management expects net operating losses during these growth periods.

We are one of only a few businesses to hold a national ETC license, which provides us with additive reimbursement rates within the states we operate. At the end of 2023, we held eleven (11) state licenses. This coverage area gives us additional reimbursements on claims, and we believe also increases the value of our ETC license within the marketplace. As a result of the Company’s ability to access additional financing and due to the significance of our ETC license, we have ameliorated any substantial going concern doubt.

Critical Accounting Policies and Estimates

Use of Estimates

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. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements could include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the property and equipment, valuation of warrant and beneficial conversion feature debt discounts, valuation of share-based payments and the valuation allowance on deferred tax assets.

Impairment of Long-Lived Assets

 We account 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.

Fair Value of Financial Instruments and Fair Value Measurements

We measure financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses, escrow liability and short-term loans the carrying amounts approximate fair value due to their short maturities.

We have adopted accounting guidance for financial and non-financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. 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.

Revenue Recognition

We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services. We account for these revenues under Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers.” 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. Revenue from these services is generally recognized monthly as the services are provided. Such revenue is recognized based on usage, which can vary from month to month or at a contractually committed amount, net of credits or other billing adjustments. Advance billings for future service in the form of monthly recurring charges are not recognized as revenue until the service is provided.

We distribute government subsidized mobile services through Master Agents. As part of the distribution process, we deliver mobile phones and/or tablets (devices) to our Master Agents, who then are responsible to subscribe qualifying consumers under a government sponsored program (ACP and/or Lifeline). In most cases, devices that have been delivered to our Master Agents are subscribed to and activated by qualifying consumers within sixty (60) days, at which point we would receive a subsidy from a governing body (USAC or certain states) and recognize revenue. Once a device is activated, and the intended service provided under the government program is deemed to have occurred, the program revenue is recognized, the expense is recognized, and the device is removed from inventory.

Stock-Based Compensation

We record 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.

We account for equity instruments issued in exchange for the receipt of goods or services from other than employees 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.

 Income Taxes

We account for income taxes in accordance with FASB ASC 740, “Income Taxes.”  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. We had no liability for uncertain tax positions as of December 31, 2023, and 2022. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as interest expense. We do not have any accrued interest or penalties

associated with unrecognized tax benefits, nor was any significant interest expense recognized during the years ended December 31, 2023, and 2022.

Earnings Per Share

We follow ASC Topic 260 to account for the earnings per share. Basic earnings per common share calculations are determined by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income available to common stockholders by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 305 of SEC Regulation S-K provides that certain registrants are required to categorize market risk sensitive instruments into instruments entered into for trading purposes and instruments entered into for purposes other than trading purposes. Within both the trading and other than trading portfolios, separate quantitative information shall be presented, to the extent material, for each market risk exposure category (i.e., interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market risks, such as equity price risk). These requirements are not applicable to smaller reporting companies under subsection thereof.

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ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

KONATEL, INC.

FINANCIAL STATEMENTS

December 31, 2023, and 2022

TABLE OF CONTENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of KonaTel, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of KonaTel, Inc. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its consolidated operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Stock Based Compensation

Description of the Matter:

As discussed in Note 10 to the consolidated financial statements, the Company offers stock option awards that involve complex accounting estimates. Management evaluates the stock option awards in accordance with ASC Topic 718, “Compensation-Stock Compensation” and uses the Black Scholes Model to value the stock option awards. This model requires management to make assumptions, use judgment, and can be complex.

How We Addressed the Matter in Our Audit

We gained an understanding of management’s processes and methodology to develop the estimates. We reviewed the underlying option agreements. We evaluated management’s selection of a valuation method, tested the inputs used in the valuation method (Black-Scholes) calculation by agreeing terms of the underlying agreements and market information to third-party sites, and recalculated the value of the options. We also evaluated the adequacy of the disclosures related to these fair value measurements.

/s/ Haynie & Company

Haynie & Company

Salt Lake City, Utah

April 1, 2024

PCAOB #457

We have served as the Company’s auditor since 2019. 

KONATEL, INC.

CONSOLIDATED BALANCE SHEETS

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

KONATEL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

KONATEL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

Common Shares

Additional Paid-in Capital

Accumulated Deficit

KONATEL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

KONATEL, INC.

Notes to Consolidated Financial Statements

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

During our two (2) most recent fiscal years, no independent accountant who was previously engaged as the principal accountant to audit our financial statements, or an independent accountant who was previously engaged to audit a significant subsidiary and on whom the principal accountant expressed reliance in its report, has resigned (or indicated it has declined to stand for re-election after the completion of the current audit) or was dismissed.

ITEM 9A:  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of December 31, 2023, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal controls over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records, which in reasonable detail, accurately and fairly reflect the transactions and disposition of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In evaluating the effectiveness of our internal control over financial reporting as of December 31, 2023, management used the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the criteria established by COSO, management (with the participation of the CEO and the CFO) determined that the internal controls over financial reporting are effective as of December 31, 2023, and that there are no material weaknesses in the Company’s internal controls over financial reporting as of such date.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to satisfy these requirements by providing the management’s report only.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the last fiscal quarter of our fiscal year ended December 31, 2023.

Limitations on the Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B:  OTHER INFORMATION

None.

ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None, not applicable.

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PART III

ITEM 10:  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors and Executive Officers

Our executive officers and directors and their respective ages, positions and biographical information are set forth below.

Background and Business Experience

D. Sean McEwen

Mr. McEwen is 62 years of age and founded KonaTel Nevada in 2014, a wireless data and voice service reseller, and currently focuses his efforts exclusively on our current and planned business operations. From 2011 to 2013, Mr. McEwen consulted with multiple international Mobile virtual network operators (“MVNOs”) in the U.S., Peru, Croatia and China. From 2010 to 2011, he served as a founding board member of One Fund, a NYSE listed (NYSE: ONEF) exchange traded fund. One Fund pioneered the “ETF of ETFs” concept, and in 2011, came to the attention of Russell Investments, known for their stock indices (i.e., the Russell 2000). Russell Investments purchased One Fund in 2011. In 2008, Mr. McEwen became a member of the venture/angel investment group, Sierra Angels (www.sierraangels.com) serving on several high-tech due diligence committees and participating in early-stage funding transactions. In early 1983, he co-founded Online Data Corp. Through a series of acquisitions/mergers, this company was eventually renamed “TriTech Software Systems” (www.tritech.com) “TriTech”. From 1983 to 1990, it developed custom strategic software applications for numerous businesses, including E. F. Hutton Life Insurance, Travel Lodge Hotels, Foodmaker (Jack in the Box restaurants), AT&T, UCSD’s Scripps Institute of Oceanography and Visa’s Plus Systems national ATM network.

In 1991, TriTech transformed from a custom software development firm to an enterprise software development and systems integration company specializing in mission critical public safety (e.g., police, fire, and EMS) software solutions. TriTech’s flagship product, VisiCAD, was the world’s first 9-1-1 emergency dispatching system based on Microsoft technology with integrated GPS based tracking and predictive routing technology. In 1995, TriTech won the Microsoft Most Innovative Windows Application award competing against all Windows applications worldwide. In 1998, while Mr. McEwen was CEO, TriTech was named to the Inc. 500 as the 344^th fastest growing privately held company in the United States. The following year, Bill Gates cited TriTech and VisiCAD in his book Business at the Speed of Thought as an example of a mission critical Windows based telecom system utilizing GPS.

Mr. McEwen served as Vice President of TriTech from 1983 to 1988, President from 1988 to 1996, Chairman/CEO from 1996 to 2000, and finally as a member of the Board of Directors, until controlling interest was sold to Westview Capital Partners in 2006.

Charles D. Griffin

Mr. Griffin is 59 years of age. Prior to joining us, Mr. Griffin served as Chairman and Chief Executive Officer of Lingo Communications, a provider of IP-based Cloud voice and data solutions, following its merger with Impact Telecom, Inc. (“Impact Telecom”) in 2018. In this role, he led the successful integration of Impact Telecom into Lingo Communications (“Lingo”) under a private equity purchase and facilitated the financing of the transaction in collaboration with a private equity investor.

Impact Telecom and Lingo continue to operate as global providers of voice and data communications services spanning Residential, SMB, Enterprise and Wholesale markets. Prior to the merger of Lingo and Impact Telecom, Mr. Griffin served as Chief Executive Officer of Impact Telecom, where he completed eleven (11) accretive M&A transactions and led the successful restructuring of multiple technology portfolio companies, including PacWest, TNCI and Unipoint Holdings, which resulted in record high net income. As one of

the original founders of Impact Telecom, Mr. Griffin led it from a start-up to a company with annual revenues of over $290 million and more than 300 employees servicing 250,000 customers worldwide.

Mr. Griffin ultimately guided Impact Telecom to a successful exit in 2020. Previously, Mr. Griffin served as Chief Executive Officer of Ipath Communications, where he was responsible for building a Class V Broadsoft VoIP network for SMB direct sales distribution with over 5,000 subscribers nationwide. In this role, he also led the successful merger with Impact Telecom. Prior to his time with Ipath, Mr. Griffin served in a number of business development, operations and sales roles where he was involved in product development, sales strategy and distribution and installations, all within the telecommunications industry.

Mr. Griffin graduated with honors in business communications from Metropolitan State University of Colorado.

Brian R. Riffle

Mr. Riffle is 64 years of age and the founder of CFO Strategies LLC of Johnstown, Pennsylvania (“CFO Strategies”), an accounting firm and consulting firm, which he founded in May 2008. CFO Strategies has thirteen (13) employees; approximately 180 small business clients and approximately 650 tax clients. It provides consulting, CFO, accounting, bookkeeping, payroll and tax services, including: CFO for businesses; entire accounting department for businesses; temporary staffing for businesses; complete payroll processing; CFO consulting and small business start-up services; and prepares taxes for corporations, small businesses, non-profits and individuals. Mr. Riffle is the Managing Partner and has extensive experience in various industries, including: Chief Financial Officer, healthcare industry; telecommunications, security, manufacturing and non-profit industries experience; Chief Executive Officer in the financial services industry and healthcare; Assistant Controller in the retail industry; Consultant in non-profit, healthcare and event management arenas; governmental treasurer and board member for over thirty (30) years; and as a masters level college instructor at Mount Aloysius College since 1994. He is also a Certified Public Accountant (May 1987).

B. Todd Murcer

Mr. Murcer is 54 years of age. Prior to joining us, Mr. Murcer served as Executive Vice President, FP&A and Treasury of Lingo Communications, a provider of IP-based Cloud voice and data solutions, following its merger with Impact Telecom, Inc. (“Impact”) in 2018. In this key leadership position, he directed procedures and policies for the financial operations of the business and had responsibility for planning and implementing financial projections and reporting activities for the U.S. and its Canadian subsidiary, Vancouver Telephone Company, Limited. As owner of treasury operations, Mr. Murcer managed the use and sourcing of the company’s cash and banking activities with additional oversight to credit and collections risk management. Mr. Murcer has been in the telecommunication industry for more than 20 years, and got his start with Matrix Telecom, Inc. (“Matrix”), a Platinum Equity portfolio company that ultimately divested to Impact. At Matrix, he helped the company grow annual revenues from $10 million to $400 million, serving in a number of business development and financial roles and leading teams through numerous M&A transactions. Mr. Murcer holds a B.S. in Economics from the University of Oklahoma and an M.S.M. from Boston University’s Brussels Graduate Center.

Robert Beaty

Mr. Beaty is 54 years of age and currently the President of AGS Construction Inc., a premier reconstruction company in the Denver metropolitan area. Previously, he was the founder and CEO of Impact Telecom, a leader in the telecommunications market, which focused on delivering flexible and effective solutions to carriers, businesses and homes. Impact Telecom is comprised of a family of brands all dedicated to innovation, affordability and execution.

Mr. Beaty brings twenty-five (25) years of experience in telecommunications and managing wholesale and commercial customer bases. Prior to starting Impact Telecom in 2005, he served as the Senior Vice President of Sales for ICG Communications. He helped guide ICG through bankruptcy and was a valued member of the senior executive team tasked with growing and managing the customer base.

He earned a B.A. in Psychology from the University of Kansas and his M.B.A. in Business Administration from Webster University.

Mr. Beaty has been appointed the interim President of Sales and Marketing Apeiron Systems for the oversight and growth of VIVA-US Telecommunications, Inc. (“VIVA”). Viva is expected to have substantial growth, potentially in excess of 100,000 cellular customers to Apeiron under its “Mobile Reseller Agreement” with Apeiron dated November 10, 2023, on or before November 29, 2024. Mr. Beaty will provide his services for purpose of expediting the growth curve for the VIVA agreement and other significant growth initiatives.  Also see the “Outstanding Equity Award” Table in Part III, Item 11, below, and specifically, Note (1) thereof.

Jeffrey Pearl

Mr. Pearl is 60 years of age and brings more than thirty-two (32) years of Telecommunications/Cloud Service Provider experience to our Board of Directors. Jeffrey has experience in both the startup environment as well as working inside of some of the larger incumbent players, both privately held as well as publicly traded companies. This experience will assist us in building out our go to market strategy, focusing both on direct sales as well as the alternative channels of distribution. His extensive sales and marketing experience, knowledge of the marketplace and personal connections in the industry are valuable to us at this stage and throughout our evolution.

Mr. Pearl currently is involved in running two (2) companies.

Mr. Pearl is currently CEO and Co-founder of OTG Consulting, which was founded in May 2016. OTG Consulting is a sales agency formed by a group of industry leaders in order to fill a gap in the marketplace. The group assists executives of SMB and Enterprise businesses as they make the move to cloud-based services. OTG Consulting works with most carriers and service providers delivering solutions for voice and data communications, internet, hosting, managed services and other cloud offerings.

Mr. Pearl also consults under PearlCom, a consulting practice focusing on telecom companies and service providers which was founded in January 2016. PearlCom offers strategic advice, providing direction on sales management, technology implementation, product pricing and positioning, bringing his thirty (30) plus years of experience to the table, accelerating timelines and creating efficiencies.

Prior to starting and running these two (2) companies, Jeffrey worked at Broadsoft (recently acquired by Cisco) July 2013 to May 2016, where he successfully ran North America Carrier Sales. In this role he cultivated strong relationships with C-Level executives within the major telcos and service providers utilizing BroadSoft in the US. Under his guidance, his organization also pursued new relationships with startups and providers not utilizing BroadSoft. After successfully fulfilling those duties, Jeffrey was next tasked with starting an entirely new division: Channel Acceleration, focusing on some of the largest customers in and outside the US. In this role, Jeffrey and his teams engaged with executives and sales organizations to productively assist in accelerating their efforts around “Go to Market” strategies, sales training and sales assistance in the area of Hosted VoIP and SIP Trunking services. Prior to Broadsoft Jeffrey successfully started, operated and sold two VoIP companies.

Joshua Ploude

Mr. Ploude is 47 years old. He is the President and CEO and Co-Founder of Apeiron Systems, and since 2013, he has been responsible for defining the product vision and operational strategy for Apeiron Systems. He has worked directly with software, hardware and carrier network vendors to oversee the development of Apeiron Systems’ product set; and has also had the responsibility to work with internal software development teams to ensure Apeiron Systems’ software provides the requisite function to support product and operational initiatives.

He has also been responsible for planning and building Competitive Local Exchange Carrier (“CLEC”) and Internet Service Provider (“ISP”) facilities-based networks since 2001 and has managed 5+ “Greenfield network” (the installation of a network where there was not previously one in use) builds across all types of wireline and wireless network infrastructures.

Mr. Ploude holds a Bachelor of Science in Political Science from UCLA and a Master of Science in Telecommunications Management from Golden Gate University. He has had the following business experience since 1999: 1999-2005 - CTO of PCS1/Datavo - A facilities-based CLEC serving a California-wide footprint; 2006-2010 - President/CEO of Ethos Communications - A consultancy helping CLECs and ISPs with operational and technology development; 2010-2013 - CTO of TNCI - A facilities-based CLEC & ISP, serving a forty-eight (48)-state footprint; and 2013-Present - Co-Founder, CEO and President of Apeiron Systems.

Jason N. Welch

Mr. Welch is 53 years of age, President of IM Telecom. Prior to joining us, Mr. Welch served as Chief Operations Officer of 46 Labs LLC, a provider of SaaS, voice and data solutions servicing large enterprise and communications providers internationally. In this key leadership position, he directed procedures and policies for the operations of the business and had responsibility for service delivery,

customer care and vendor management. Prior to joining 46 Labs, Mr. Welch served as Executive Vice President of Impact Telecom, a Lingo Company. In this function, he provided oversight to carrier wholesale sales acquisition, product strategy, account management, agent channel management, vendor management, pricing, routing and business analytics. He successfully managed the growth of the carrier wholesale business unit to $40m+ in annual revenues, processing 18b+ voice minutes annually through hundreds of domestic and international carrier partnerships. Mr. Welch has been in the telecommunication industry for more than 25 years and has successfully served in management roles across companies such as Frontier Communications, Global Crossing, Telco Group Inc., KDDI Global, XO Communication and Impact Telecom.

Family Relationships

There are no family relationships between any of our officers and directors.

Involvement in Other Public Companies

Except as may be indicated above, none of our officers or directors is an “affiliate” of any other publicly held companies.

Involvement in Certain Legal Proceedings

During the past ten (10) years, none of our directors, executive officers or persons nominated to become directors or executive officers (or those in similar positions with us) has been the subject of any of the following:

(1) A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two (2) years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two (2) years before the time of such filing

(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than sixty (60) days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

(5) Such person was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

(7) Such person was the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

(i) Any federal or state securities or commodities law or regulation; or

(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Compliance with Section 16(a) of the Exchange Act

The common stock of the Company is registered under the Exchange Act, and therefore, the officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon review of the copies of such forms furnished to us during the fiscal year ended December 31, 2023, and based upon a review of the filings contained in the Edgar Archives, all such required reports were believed to be timely filed.

Code of Ethics

We have adopted a Code of Ethics for our principal executive and financial officers. See Exhibit 14 in Part IV, Item 15. We anticipate that our Code of Ethics will be updated by our Board of Directors as the Board deems necessary.

Corporate Governance

Nominating Committee

We have not established a Nominating Committee because until our closing of the KonaTel Nevada Merger, we had only two (2) directors and two (2) executive officers, and we believed that we were able to effectively manage the issues normally considered by a Nominating Committee and currently believe we can do without a Nominating Committee.

If we do establish a Nominating Committee, we will disclose our procedures in recommending nominees by our Board of Directors.

Audit Committee

We have not established an Audit Committee for the same reasons why we have not established a Nominating Committee, and a further review of this issue will no doubt be necessitated and undertaken by our management in the future.

Insider Trading Policy

During the year ended December 31, 2021, our Board of Directors adopted an Insider Trading Policy, which is Exhibit 99.1 hereto. See Item IV, Part 15.

The Insider Trading Policy was adopted by the Company to satisfy its obligations to prevent insider trading and to help its personnel avoid the consequences associated with violations of applicable federal and state securities laws, rules and regulations regarding insider trading of our securities when they have material non-public information related to the Company. It is also intended to prevent even the appearance of improper conduct on the part of anyone employed by or associated with us, not just so-called “insiders.”  It contains four (4) “Black-Out Periods”, which are as follows: twenty (20) days prior to the release of financial results for the periods ending March 31, June 30, September 30 and December 31 of each year and end after three (3) full trading days of our securities on the OTCQB (or any other recognized nation medium on which our securities publicly trade [“Other Medium”]) after financial results are announced for

the preceding fiscal period.  If the last day of the month falls on a weekend, the Black-Out Period will start at the close of business on the last trading day prior to the weekend. Additional Black-Out Periods may occur when other material events occur, such as a press release sent out to the public, wherein only a select few persons have knowledge of the event. The Black-Out Periods do not apply to the exercise of outstanding and vested ISOs issued by the Company or other stock issuances approved by the Board of Directors; however, they do apply to all of our securities that are the subject of a registration statement filed with the SEC. This summary is modified in its entirely by reference to Exhibit 99.1.

ITEM 11:  EXECUTIVE COMPENSATION

All Compensation

The following Employment Agreements of our officers and directors are discussed below under the caption “Executive Compensation” in Part III, Item 11 hereof, and can be accessed by Hyperlink in Part IV, Item 15 hereof:

D. Sean McEwen-Chairman and CEO-8-K Current Report dated January 1, 2022, filed with the SEC January 14, 2022, along with the third amendment to Mr. McEwen’s Employment Agreement that is Exhibit 10.1 filed herewith.

Charles D. Griffin, President-8-K Current Report dated January 1, 2022, filed with the SEC January 14, 2022.

B. Todd Murcer, 8-K Current Report dated February 4, 2022, filed with the SEC on February 11, 2022.

Joshua Ploude, President of Apeiron Systems-8-K Current Report dated December 31, 2018, filed with the SEC on December 31, 2018.

Jason N. Welch, President of IM Telecom-8-KA-1 Current Report dated February 4, 2022, filed with the SEC on April 8, 2022.

Summary Compensation Table