UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20202021

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to________________________to____________

Commission File No. 001-10171

KonaTel, Inc.

(Exact name of the issuer as specified in its charter)

13601 Preston Road, # E816500 N. Central Expressway, Ste. 202

Dallas, Plano, Texas 7524075074

(Address of Principal Executive Offices)

214-323-8410214-323-8410

(Registrant Telephone Number)

The Registrant does not have any securities registered pursuant to Section 12(b) of the Exchange Act.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx No o

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). Yesx No o

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

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. xo

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNox

Our website is www.konatel.com.

Our common stock is quoted on the OTC Markets Group, Inc. (“OTC Markets”) “OTC Pinkin its “OTCQB Tier” under the symbol “KTEL.”

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:

References

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

Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” ��could,“could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Quarterly Report completely, and it should be read and considered with all other reports filed by us with the United States Securities and Exchange Commission (the “SEC”) that are contained in the SEC Edgar Archives. 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.

KONATEL, INC.

FORM 10-Q

SEPTEMBERJune 30, 20202021

INDEX

PART I - FINANCIAL STATEMENTS

SeptemberJune 30, 20202021

Table of Contents

KonaTel, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

KonaTel, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

KonaTel, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Common Stock

Additional Paid-in Capital

Accumulated Deficit

See accompanying notes to unaudited condensed consolidated financial statements.

KonaTel, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

KONATEL, INC.KonaTel, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of Company

KonaTel Nevada (as defined below) was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D. Sean McEwen, to conduct the business of a full-service MVNO (“Mobile Virtual Network Operator”) provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets.

KonaTel Inc., formerly known as Dala Petroleum Corp. (the “Company,” “we,” “our,” or “us”), also formerly known as “Westcott Products Corporation,” was incorporated as “Light Tech, Inc.” under the laws of the State of Nevada on May 24, 1984. A subsidiary in the name “Westcott Products Corporation” was organized by us under the laws of the State of Delaware on June 24, 1986, for the purpose of changing our name and domicile to the State of Delaware. On June 27, 1986, we merged with the Delaware subsidiary, with the survivor being Westcott Products Corporation, a Delaware corporation (“Westcott”). On December 18, 2017, we acquired KonaTel, Inc, a Nevada subsubchapter S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly-owned subsidiary.

On December 31, 2018, we acquired Apeiron Systems, Inc., a Nevada corporation d/b/a “Apeiron” (“ApeironApeiron” or “Apeiron Systems”), which is also our wholly-owned subsidiary. Apeiron Systems was organized in 2013 and is an international Hosted Services CPaaS (“Communications Platform as a Service”) provider that designed, built, owns and operates its national private core network, supporting a suite of real-time business communications services andall accessible via proprietary Applications Programming Interfaces (“APIs”). As an Internet Telephony Service Provider (“ITSP”), Apeiron Systems holds a Federal Communications Commission (the “FCC”(“FCC”) numbering authority license. Some of Apeiron Systems’Apeiron’s Hosted Services include SIP/VoIPVoice over IP (“VoIP”), cellular and Over-The-Top (“OTT”) telephony, SMS/MMS messaging and broadcast services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”), numbernumbering 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 mobile, toll freeMPLS, Dedicated Internet and DID landline numbers, SMS to Email services, Database Dip services, SD-WAN, voice termination,LTE Wireless WAN solutions. Apeiron’s Cloud Services include Information Data Dips, Software-Defined Wide Area Networking (“SD-WAN”), and numerous API driven services including voice, messaging,Internet of Things (“IOT”) data and networkdevice management.

On January 31, 2019, we acquired IM Telecom, LLC, an Oklahoma limited liability company, d/b/a “Infiniti Mobile” (“IM Telecom” or “Infiniti Mobile”), which became our wholly-owned subsidiary. Infiniti Mobile is an FCC licensed ETC (“Eligible Telecommunications Carrier”Carrier (“ETC”) and is one of 22 FCC licensed carrierswireless cellular resellers to hold an FCC approved Lifeline Compliance Plan in the United States. Under the FCC’s Lifeline program, Infiniti Mobile is currently authorized to provide government subsidized mobile telecommunications services to eligible low-income AmericansAmerican households, currently in eightnine states.

Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019.2020.

The accompanying financial statements have been prepared using the accrual basis of accounting.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, stock-based compensation, and customer lists. Actual results could differ from those estimates.

Basis of Consolidation

The condensed consolidated financial statements include the Company and three wholly-ownedwholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. All significant intercompany transactions are eliminated.

Net Income/(Loss)Income Per Share

Basic income/(loss)income per common share calculations are determined by dividing net income/(loss)income by the weighted average number of shares of common stock outstanding during the period. Diluted income/(loss)income per common share calculations are determined by dividing net income/(loss)income by the weighted average number of common shares and dilutive common share equivalents outstanding. Dilutive common share equivalents are computed by using the “Treasury Stock Method,” which computes the number of new shares that may potentially be created by unexercised options. Diluted common share equivalents are stock based compensation options.

The dilutive common shares for the three and nine months periods ended September 30, 2019, are not included infollowing table illustrates the computation of diluted earnings perthe dilutive common share because to do so would be anti-dilutive.equivalents under the Treasury Stock Method: Summary of Significant Accounting Policies - Schedule of Computation of Dilutive Common Share Equivalents Under Treasury Stock Method

The following table reconciles the shares outstanding and net income/(loss)income used in the computations of both basic and diluted earnings per share of common stockholders:

Summary of Significant Accounting Policies -Schedule of Earnings Per Share, Basic income/(loss) per common share calculations are determined by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

Diluted loss per common share calculations are determined by dividing net loss by the weighted average number of common shares and dilutive common share equivalents outstanding.Diluted

Dilutive common share equivalents are computed using the Treasury Stock Method, which computes the number of new shares that may potentially be created by unexercised options. The effects of incremental shares under stock-based compensation would be anti-dilutive because no options are in the money during the reporting periods. The number of shares that would have been reported had the options been in the money would have been 3,400,000 and 2,650,000 respectively for both the three month and nine-month periods ended September 30, 2020, and 2019.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash, and cash equivalents.

All cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels.

Trade Accounts Receivable

Sales Revenue 

The Company has a concentration of risk with respect to trade receivables from customers and other cellular providers. As of SeptemberJune 30, 2021, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amounts of $106,783 and $447,738, or 14.36% and 60.21% of total accounts receivable, respectively. As of December 31, 2020, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amounts of 112,248,$194,509, or 40.3%52.4%, and $42,563,$52,843, or 15.3%, of total accounts receivable respectively. As of December 31, 2019, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from three customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%14.2%, respectively.

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers and cellular partners. For the ninesix months ended SeptemberJune 30, 2021, the Company had two (2) customers that accounted for $1,774,644 or 33.4% and $1,664,735 or 31.37% of revenue, respectively. For the six-month period ended June 30, 2020, the Company had one (1) customer that accounted for $2,332,716$1,309,330, or 34.6%31.1%, of revenue. For the nine-month period ended September 30, 2019, the Company had one customer that accounted for $1,810,875, or 25.0%, and one cellular provider that accounted for $2,028,814, or 27.0%, of the total revenue. For the three-month period ended September 30, 2020, the Company had one customer that accounted for $1,023,386 or 40.5%, of revenue. For the three-month period ended September 30, 2019, the Company had one customer that accounted for $634,668, or 27.0% and one cellular provider that accounted for $612,092, or 26.1% of the total revenue.

Effect of Recent Accounting Pronouncements

The Company has evaluated all recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statement.statements.

Emerging Growth Company

The Company is an emerging growth company and 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.

NOTE 2 – TRANSACTIONS

January 2019 Transaction – IM Telecom Acquisition

Effective February 7, 2018, we entered into an Agreement for the Purchase and Sale of Membership Interest (the “PMSI”) dated as of February 5, 2018, with the transaction documents being deposited in escrow on February 7, 2018, respecting the acquisition of 100% of the membership interest in IM Telecom d/b/a “Infiniti Mobile” from its sole owner, Trevan Morrow.  The principal asset of IM Telecom was a “Lifeline Program” license (an FCC approved Compliance Plan), the transfer of ownership of which required prior approval of the FCC. Following the FCC approval of the transfer of the Lifeline Program license to us on October 23, 2018, the PSMI was completed on January 31, 2019.  At the closing, we also engaged Mr. Morrow as an independent consultant for ninety (90) days in consideration of $100 and granted him an incentive stock option to purchase 500,000 shares of our common stock at an exercise price of $0.20 per share. The incentive stock option to purchase 500,000 shares was cancelled under a Settlement Agreement and Release between the Company and Mr. Morrow dated September 4, 2019, under the indemnifying obligations of Mr. Morrow under the PSMI, as amended, by reason of an overpayment made to IM Telecom of $168,277.

The purchase price of $583,690 consisted of payments of debt and accounts payable made by the Company on behalf of IM Telecom from the PMSI effective date of February 7, 2018, until January 31, 2019, the closing date. The purchase price allocation included the FCC license valued at $634,252, cash of $14,318, accounts receivable of $123,959, prepaid other assets of $2,400, furniture and equipment of $1,309. As part of the transaction, the Company also agreed to assume accounts payable of $24,271.

The transaction was accounted for under the purchase method. The purchase price allocation to assets and liabilities assumed in the transaction was:

The following table provides unaudited proforma results, prepared in accordance with ASC 805, for the nine months ended September 30, 2020, and 2019, respectively:

NOTE 32 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following major classifications as of SeptemberJune 30, 2020,2021, and December 31, 2019:2020: Property and Equipment - Schedule of Property and Equipment

Depreciation and amortization related to Property and Equipment amounted to $21,649$12,969 and $21,649 for the nine-month periods ended September 30, 2020, and 2019, respectively; and $7,216 and $7,217$7,216 for the three-month periods ended SeptemberJune 30, 2021, and 2020, respectively. For the six-month periods ended June 30, 2021, and 2019,2020, was $25,938 and $14,433, respectively. Depreciation and amortization expenseexpenses are included as a component of operating expenses in the accompanying statements of operations.

NOTE 43 – RIGHT-OF-USE ASSETS

Minimum

Maximum 

Right-of-Use Assets consist of assets accounted for under ASC 842. The assets are recorded at present value using implied interest rates between 5.29%3.29% and 5.34%5.34%.

Amortization amounted to $139,958 and $54,421 for Right-of-Use Assets are recorded on the nine months ended September 30, 2020, and 2019, respectively; and $38,290 and $18,140 for the three months ended September 30, 2020, and 2019, respectively. Amortization expense is includedbalance sheet as a component of operating expenses in the accompanying Condensed Consolidated Statements of Operations.intangible assets.

The Company has Right-of-Use Assets through leases of property under three (3) non-cancelable leasesleases. As of June 30, 2021, the Company had one (1) property with termsa lease term in excess of one (1) year. This lease liability expires March 31, 2026. The Company has two (2) current lease liabilities. These lease liabilities expire January 1, 2021, December 1, 2021, and May 15, 2022. 2022, respectively. In January 2021, the Company entered into a new, five (5) year lease for its corporate headquarters located in Plano, TX.

Future lease liability payments under the terms of these leases are as follows:Right-of-Use Assets - Schedule of Future Minimum Lease Payments for Operating Leases

The Company also leases two office(2) office/retail spaces on a month-to-month basis. Total lease expense for the ninethree months ended SeptemberJune 30, 2021, and 2020, was $3,967and 2019,$3,217, respectively. Total lease expense for the six months ended June 30, 2021, and 2020, amounted to $10,653$8,185 and $52,592,$6,435, respectively, for these leases.

NOTE 54 – INTANGIBLE ASSETS

Intangible Assets with definite useful life consist of licenses, customer lists and software that were acquired through acquisitions.

Intangible Assets with indefinite useful life consist of a Lifeline License granted by the FCC.

The Lifeline License, because of the nature of the asset and the limitation on the number of granted licenses by the FCC, will not be amortized. The Lifeline License was acquired through an acquisition. The fair market value of the License as of SeptemberJune 30, 2020,2021, was $634,251.$634,251. 

Amortization expense amounted to $601,750 and $677,280 for the nine months ended September 30, 2020, and 2019, respectively; and $200,583 and $225,760expenses for the three months ended SeptemberJune 30, 2021, and 2020, was $200,583. Amortization expense amounted to $401,167 for the six months ended June 30, 2021, and 2019,2020, respectively. Amortization expense is included as a component of operating expenses in the accompanying statements of operations.

Amortization expense is expected to be as follows:

Intangible Assets - Schedule of Intangible Assets Future Amortization Expense 

NOTE 6 – AMOUNT DUE TO STOCKHOLDERCurrent intangible assets will be fully amortized as of December 31, 2021.

During 2019, Joshua Ploude, CEO of Apeiron Systems, advanced the Company $200,000. The amount was used to provide a vendor security deposit. The note bears a 10% per annum interest rate until May 1, 2019, at which time, the interest rate will increase to 12% per annum. The note had an original maturity date of July 10, 2019. The loan has been extended without a defined maturity end date. The amount due as of September 30, 2020, was $41,692.

NOTE 75 – NOTES PAYABLE

In June 2020, the Company received a Small Business Administration (“SBA”) Emergency Injury Disaster Loan (“EIDL”) in the amount of $150,000. $150,000. The maturity date of the 30-year note is June 2050. Interest will accrue at a rate of 3.75%3.75% per annum. Payments will begin inon this loan have been deferred by the SBA until June 2021.2022 due to the COVID pandemic.

The Company also received three (3) separate SBA Payroll Protection Loans in the amounts of $186,300, $101,800,$186,300, $101,800, and $20,900$20,900, for a total of $309,000.$309,000. Each loan includes an interest rate of 1%1% and a maturity date of April 14, 2022; however,2022. On March 8, 2021, the Company believeswas informed that 100%the payroll protection loans in the amounts of these loans will be$101,800 and $20,900 had been forgiven based upon currentby the SBA. On May 27, 2021, the Company was informed that the payroll protection loan SBA forgiveness guidelines. Asin the amount of September 30, 2020, all$186,300 had been forgiven. All loan proceeds have been recorded as forgiven and have beenwere recorded as Other Income.Income in 2020.

In conjunction with the Notes Payable, the Company received $10,000$10,000 in an SBA Emergency Injury Disaster Grant. This amount was recorded as Other Income.

On September 30, 2020, IM Telecom entered into a promissory note agreement to repay a Federal Universal Service Fund overpayment in the amount of $67,105. The term of the note is twelve (12) months and interest will accrue at a rate of 12.75% per annum. As of June 30, 2021, the balance of this note was $17,308. The Company anticipates that this note will be paid in full by July 31, 2021.

NOTE 86 – CONTINGENCIES AND COMMITMENTS

Litigation

From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of SeptemberJune 30, 2020,2021, there are no ongoing legal proceedings.

Contract Contingency

The Company has the normal obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry and that may be provided in the contractual agreements.

Tax Audits

In June of 2021, the Company received an audit determination and assessment from the State of Pennsylvania in respect of an audit of sales and use tax liability for the audit period of January 1, 2016, through September 30, 2019. The assessment is in the amount of $111,650, including interest and penalties. The Company plans to appeal this assessment and strongly maintains, based on previous outcomes with the State of Pennsylvania, that it will be successful on appeal on a minimum of 93% of the assessment amount. A potential liability in the amount of $7,000 has been recorded

Letters of Credit

The Company maintains irrevocable standby letter of credit arrangements with a certain cellular carrier in the aggregate amount of $60,000. Thehad no outstanding letters of credit serve as collateral and security for various resale contracts the Company has with their suppliers. The letters of credit are unused as of SeptemberJune 30, 2020, and December 31, 2019, respectively. The letters of credit are not considered in the financial statements.2021.

NOTE 97 – SEGMENT REPORTING

The Company operates within fourtwo (2) reportable segments. The Company’s management evaluates performance and allocates resources based on the profit or loss from operations.operational needs and results. Because the Company is a recurring revenue service business with very few physical assets, management does not use total assets by segment to make decisions regarding operations, and therefore, the total assets disclosure by segment has not been included.

The reportable Previously, the Company reported four (4) segments, consist ofincluding Hosted Services, Mobile Services, Lifeline ETC and Lifeline VETC. The Company has made the decision to consolidate and align its segment reporting by the type of service offering and believes this reporting will provide for a more accurate view of its lines of operation. Reportable segments now include Hosted Services and Mobile Services.

Hosted Services – This segment includes a suite of hosted CPaaS services within the Apeiron Systems’ cloud platform, including SIP/VoIPCloud IVRs, Voicemail, Fax, Call Recording and other services SMS/MMS, BOT integration, mobile numbers, toll free numbers, DID landline numbers, SMS to Email, Database Dip, SD-WAN, voice terminationprovided with local, toll-free, and numerous API driven services.international phone numbers. Apeiron Systems developed, owns,also delivers public and supportsprivate IP network services from its servicesnational redundant network backbone including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, Software-Defined Wide Area Networking (SD-WAN), and IOT data and device management. These Hosted Services are marketed nationally through its dedicated national telecommunications network. Apeiron Systems provides telecommunications services to application developers, call centers and small and medium size businesses and markets these services through itsApeiron’s website, independent sales agents, ISOs and SCOs.

Mobile Services – This segment includes retail and wholesale cellular voice/text/data services and IOT mobile data (IoT or “Internet of Things”) services. The Company consolidated its wholesaleservices from Apeiron and retail services with Apeiron Systems’ hosted CPaaS services, providing Apeiron Systems with an expanded portfolio of mobile services to bundle with its existing services. Apeiron Systems’ mobileIM Telecom. Mobile voice/text/data and IOT mobile data services are supported by a blend of reseller agreements with selectedselect national wireless carriers and national wireless wholesalers.  A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers.  Apeiron Systems’ mobileMobile voice/text/data and mobile data solutions are generally sold as traditional post-paid or pre-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. Apeiron Systems primarily markets its mobile services through independent sales agents and ISOs viaAlso included in our Mobile Services segment is the “Apeiron” brand.  These agents and ISOs generally marketdistribution of cellular voice service to small and medium sized businesses throughoutlow-income American households that qualify for the United States.  This type of marketing is also considered B2B (“Business to Business”) sales.

FCC’s Lifeline ETC – This segment operates under its own FCC approved Compliance Plan and FCC wireless ETC designation in eight states, which currently include Georgia, Kentucky, Maryland, Nevada, Oklahoma, South Carolina, Vermont, and Wisconsin.program, distributed by IM Telecom operating under its Infiniti Mobile brand, currently markets its Lifeline service through its Internet presence, its storefront in Tulsa, Oklahoma, and through ISOs that specialize in the distribution of Lifeline services.  These ISOs typically support teams of field agents who market directly to Lifeline eligible individuals requesting Lifeline service.  We provide phones and wireless voice/text/data service to Lifeline eligible individuals requesting Lifeline service. In some states, and depending on government requirements, we may only provide voice/text service with no mobile data.brand.

Lifeline VETC – This segment operates through a single VETC agent agreement with another ETC.  Following our acquisition of IM Telecom, thereby securing our own FCC approved Lifeline ETC license, we are phasing out this segment and we no longer distribute Lifeline service under this single VETC agent agreement; however, we continue to collect monthly commissions for those Lifeline lines that we distributed and which remain active under this single VETC agent agreement.

The following table reflects the result of operations of the Company’s reportable segments:

Segment Reporting - Schedule of Segment Reporting Information 

NOTE 108 – STOCKHOLDERS’ EQUITY

Common Stock

The Company has not issued any common stock through SeptemberJune 30, 2020,2021, nor for the year ended December 31, 2019.2020; however, one holder of incentive stock options delivered a Notice of Exercise regarding certain granted and vested incentive stock options to the Company on June 29, 2021. See Note 9-Subsequent Events.

Stock Compensation

The Company offers stock option equity awardsgrants to directors and key employees. Options vest in tranches and typically expire in five (5) years. DuringFor the ninesix months ended SeptemberJune 30, 2020,2021, and 2019,2020, the Company recorded vested options expense of $30,771$79,058 and $259,962, respectively. For the three months ended September 30, 2020, and 2019, the Company recorded vested options expense of $10,257 and ($14,455)$20,514, respectively. The option expense not taken as of SeptemberJune 30, 2020,2021, is $51,285,$43,639, with a weighted average term of 2.63.92 years.

The stock option valuation as of June 30, 2021, was computed using the Black-Scholes-Merton pricing model using an average stock price of $0.559, a strike price of $0.531, an expected term of five (5) years, volatility of 258.10% and a risk-free discount rate of 1.52%.

The following table represents stock option activity as of and for the ninesix months ended SeptemberJune 30, 2020:2021:

Stockholders’ Equity - Schedule of Share-Based Compensation, Stock Option Activity