Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 18, 2019 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-10171 | |
Entity Registrant Name | KonaTel, Inc. | |
Entity Central Index Key | 0000845819 | |
Entity Incorporation, State or Country Code | DE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 40,692,286 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash and Cash Equivalents | $ 139,637 | $ 56,510 |
Accounts Receivable, net | 720,158 | 1,035,273 |
Note Receivable | 66,667 | |
Inventory, Net | 1,562 | 1,085 |
Prepaid Expenses | 3,677 | 7,354 |
Total Current Assets | 865,034 | 1,166,889 |
Fixed Assets | ||
Property and Equipment, Net | 111,682 | 132,023 |
Right to Use Assets, Net | 58,614 | |
Total Fixed Assets | 170,296 | 132,023 |
Other Assets | ||
Intangible Assets, Net | 2,508,089 | 2,490,922 |
Advances for Acquisition Target | 561,309 | |
Other Assets | 257,740 | 57,266 |
Total Other Assets | 2,765,829 | 3,109,497 |
Total assets | 3,801,159 | 4,408,409 |
Current Liabilities | ||
Accounts Payable and Accrued Expenses | 1,417,543 | 1,265,080 |
Amount Due to Stockholder | 204,344 | 91,152 |
Revolving Line of Credit | 35,683 | 103,379 |
Lease Liabilities | 42,271 | |
Deferred Revenue | 42,867 | 69,988 |
Income tax payable | 87,800 | 108,941 |
Customer Deposits | 29,988 | 28,854 |
Total Current Liabilities | 1,860,496 | 1,667,394 |
Long Term Liabilities | ||
Lease Liabilities | 17,508 | |
Deferred Tax Liability | 10,700 | 10,700 |
Total Long Term Liabilities | 28,208 | 10,700 |
Total Liabilities | 1,888,704 | 1,678,094 |
Commitments and Contingencies | ||
Stockholders' Equity (Deficit) | ||
Common Stock | 40,692 | 40,692 |
Additional Paid-In Capital | 7,301,658 | 7,041,696 |
Accumulated Deficit | (5,429,895) | (4,352,073) |
Total Stockholders' Equity | 1,912,455 | 2,730,315 |
Total Liabilities and Stockholders' Equity | $ 3,801,159 | $ 4,408,409 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common stock, par value in dollars | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 40,692,286 | 40,692,286 |
Common stock, shares outstanding | 40,692,286 | 40,692,286 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenue | $ 2,346,975 | $ 2,453,514 | $ 7,253,641 | $ 7,591,218 |
Cost of Revenue | 1,517,834 | 1,892,988 | 4,836,732 | 6,481,979 |
Gross Profit | 829,141 | 560,526 | 2,416,909 | 1,109,239 |
Operating expenses | ||||
Payroll and Related Expenses | 461,331 | 336,660 | 1,403,872 | 1,120,388 |
Operating and Maintenance | 225,252 | 332,718 | 1,034,287 | 936,212 |
Bad Debt | 3,300 | 3,300 | 15,210 | |
Utilities and Facilities | 21,066 | 41,883 | 80,839 | 147,389 |
Depreciation and Amortization | 251,117 | 61,582 | 753,350 | 206,172 |
General and administrative | 13,306 | 26,560 | 91,639 | 64,485 |
Marketing and Advertising | 2,550 | 4,995 | 24,020 | 42,284 |
Taxes and Insurance | 15,615 | 21,437 | 85,508 | 124,771 |
Total Operating Expenses | 993,537 | 825,835 | 3,476,815 | 2,656,911 |
Operating Loss | (164,396) | (265,309) | (1,059,906) | (1,547,672) |
Other Income and Expense | ||||
Interest Income | 221 | 456 | 1,562 | 4,757 |
Other Income | 318,257 | 14,836 | 318,257 | |
Interest Expense | (11,631) | (7,087) | (34,314) | (30,951) |
Total Other Income and Expenses | (11,410) | 311,626 | (17,916) | 292,063 |
Net Profit (Loss) | $ (175,806) | $ 46,317 | $ (1,077,822) | $ (1,255,609) |
Net loss per share | $ 0 | $ 0 | $ (0.03) | $ (0.04) |
Weighted Average Number of Basic and Diluted Shares | 40,692,286 | 32,942,286 | 40,692,286 | 31,423,055 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2017 | $ 27,192 | $ 2,703,033 | $ (3,190,873) | $ (460,648) |
Beginning Balance, shares at Dec. 31, 2017 | 27,192,286 | |||
Issuance of common stock, value | $ 5,750 | 1,144,250 | 1,150,000 | |
Issuance of common stock, shares | 5,750,000 | |||
Stock Based Compensation | 454,434 | 454,434 | ||
Net loss | (1,255,609) | (1,255,609) | ||
Ending Balance at Sep. 30, 2018 | $ 32,942 | 4,301,717 | (4,446,482) | (111,823) |
Ending Balance, shares at Sep. 30, 2018 | 32,942,286 | |||
Beginning Balance at Jun. 30, 2018 | $ 32,942 | 4,139,734 | (4,492,799) | (320,123) |
Beginning Balance, shares at Jun. 30, 2018 | 32,942,286 | |||
Stock Based Compensation | 161,983 | 161,983 | ||
Net loss | 46,317 | 46,317 | ||
Ending Balance at Sep. 30, 2018 | $ 32,942 | 4,301,717 | (4,446,482) | (111,823) |
Ending Balance, shares at Sep. 30, 2018 | 32,942,286 | |||
Beginning Balance at Dec. 31, 2018 | $ 40,692 | 7,041,696 | (4,352,073) | 2,730,315 |
Beginning Balance, shares at Dec. 31, 2018 | 40,692,286 | |||
Stock Based Compensation | 259,962 | 259,962 | ||
Net loss | (1,077,822) | (1,077,822) | ||
Ending Balance at Sep. 30, 2019 | $ 40,692 | 7,301,658 | (5,429,895) | 1,912,455 |
Ending Balance, shares at Sep. 30, 2019 | 40,692,286 | |||
Beginning Balance at Jun. 30, 2019 | $ 40,692 | 7,414,595 | (5,254,089) | 2,201,198 |
Beginning Balance, shares at Jun. 30, 2019 | 40,692,286 | |||
Cancellation of Stock Options | (98,482) | (98,482) | ||
Stock Based Compensation | (14,455) | (14,455) | ||
Net loss | (175,806) | (175,806) | ||
Ending Balance at Sep. 30, 2019 | $ 40,692 | $ 7,301,658 | $ (5,429,895) | $ 1,912,455 |
Ending Balance, shares at Sep. 30, 2019 | 40,692,286 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash Flows from Operating Activities | ||
Net Loss | $ (1,077,822) | $ (1,255,609) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and Amortization | 753,350 | 206,172 |
Bad Debt | 3,300 | 15,210 |
Stock-based compensation | 259,962 | 454,434 |
Gain on Sale of Business Component | (318,257) | |
Changes in Operating Assets and Liabilities, net of effects of acquisition: | ||
Accounts Receivable | 375,579 | (391,445) |
Inventory | (477) | 39,246 |
Prepaid Expenses | 6,077 | (229,749) |
Accounts Payable and Accrued Expenses | (61,226) | 140,998 |
Deferred Revenue | (27,121) | 36,305 |
Customer Deposits | 1,134 | |
Other Assets | (200,474) | 506 |
Net cash provided by (used in) operating activities | 32,282 | (1,302,189) |
Cash Flows from Investing Activities | ||
Cash Received in Acquisition of IM Telecom | 14,318 | |
Notes receivable from Sale of Business Component | 66,667 | 8,333 |
Proceeds from Sale of Business Component | 226,043 | |
Asset Purchase of IM Telecom | (22,382) | |
Net cash provided by (used in) investing activities | 58,603 | 234,376 |
Cash Flows from Financing Activities | ||
Proceeds from issuance of common stock | 1,150,000 | |
Repayment of of Revolving Lines of Credit | (67,696) | |
Principal Payments on Lease Liabilities | (53,254) | |
Advances made by Stockholder | 200,000 | 100,000 |
Repayments of amounts due to Related Party | (86,808) | (213,328) |
Net cash provided by (used in) financing activities | (7,758) | 1,036,672 |
Net Change in Cash | 83,127 | (31,141) |
Cash, Beginning of period | 56,510 | 94,149 |
Cash, End of period | 139,637 | 63,008 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 29,920 | 20,359 |
Lease Obligations for Right to Use Assets | 59,658 | |
Cash paid for taxes | ||
Asset Purchase of IM Telecom | ||
License | 624,255 | |
Sale of Business Component | ||
Sale of Business Component | ||
Notes Receivable | (100,000) | |
Accounts payable and Accrued Expenses, net of cash | $ 3,819 | |
IM Telecom | ||
Asset Purchase of IM Telecom | ||
Accounts receivable | 63,764 | |
Prepaid Expense | 2,400 | |
Furniture and Equipment at Fair Market Value | 1,308 | |
Accounts Payable and Accrued Expenses, net of cash | (192,548) | |
License | $ 694,447 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | NOTE 1 – ORGANIZATION 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” and words of similar import), and also formerly known as “Westcott Products Corporation,” was incorporated as “Light Tech, Inc.” under the laws of the State of Nevada on May 24, 1984. A subsidiary in the name “Westcott Products Corporation” was organized by us under the laws of the State of Delaware on June 24, 1986, for the purpose of changing our name and domicile to the State of Delaware. On June 27, 1986, we merged with the Delaware subsidiary, with the survivor being Westcott Products Corporation, a Delaware corporation (“Westcott”). On December 18, 2017, we acquired KonaTel, Inc, a Nevada sub S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly-owned subsidiary. On December 31, 2018, we acquired Apeiron Systems, Inc., a Nevada corporation doing business as “Apeiron” (“Apeiron”), which became our wholly-owned subsidiary on December 31, 2018. Apeiron was organized in 2013 and is an international hosted services CPaaS (“Communications Platform as a Service”) provider that designed, built, owns and operates its private core network, supporting a suite of real-time business communications services and Applications Programming Interfaces (“APIs”). As an Internet Telephony Service Provider (“ITSP”), Apeiron holds a Federal Communications Commission (“FCC”) numbering authority license. Some of Apeiron’s hosted services include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”), number services, including mobile, toll free and DID landline numbers, SMS to Email services, Database Dip services, SD-WAN, voice termination and numerous API driven services including voice, messaging and network management. On January 31, 2019, we acquired IM Telecom, an Oklahoma limited liability company doing business as “Infiniti Mobile” (“Infiniti Mobile”), which became our wholly-owned subsidiary on that date. Infiniti Mobile is an FCC licensed ETC (“Eligible Telecommunications Carrier”) and is one of 22 FCC licensed carriers to hold an FCC approved Lifeline Compliance Plan in the United States. Under the Lifeline program, Infiniti Mobile is currently authorized to provide government subsidized mobile telecommunications services to eligible low-income Americans currently in eight states. |
Transactions
Transactions | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Transactions | NOTE 2 – TRANSACTIONS The following are significant transactions that impact the operations of the Company: Apeiron Acquisition On December 31, 2018, the Company purchased Apeiron, which became a wholly-owned subsidiary. The total purchase price was $2,450,000. The purchase included the issuance of 7,000,000 shares of the Company’s common stock in exchange for all the outstanding common shares of Apeiron common stock. The purchase price was derived and based on the fair market value of the 7,000,000 shares at the December 31, 2018, common stock price of $0.35 per share. The acquisition provides the Company with expansion and diversification within the telecommunications industry. Apeiron brings CPaaS and business networking services to the Company that have significant business in the wireless telecommunications industry. The combination allows the Company to share customers and provide bundled service integrations. Infiniti Mobile Acquisition On January 31, 2019, the Company completed the acquisition of Infiniti Mobile. The purchase price was $752,366 and included $100 in cash, advances to Infiniti Mobile for the period from the sales agreement dated February 5, 2018, until January 31, 2019, in the amount of $465,056, USAC over-payment settlement of $168,277 and accounts receivables due to the Company in the amount of $152,764. The transaction was accounted for under the purchase method. The purchase price allocation to assets and liabilities assumed in the transaction was: Cash $ 14,318 Accounts Receivable 63,764 Prepaid Expenses and Deposits 2,400 Furniture and Equipment at Fair Value 1,309 License 694,447 Accounts Payable (192,548 ) Net Assets Acquired $ 583,690 The following table provides unaudited proforma results, prepared in accordance with ASC 805, for the three and nine months ended September 30, 2019, and 2018 respectively, as if Infiniti Mobile and Apeiron had been acquired on January 1, 2018: For the Three Months Ended September 30, 2019 For the Three Months Ended September 30, 2018 For the Nine Months Ended September 30, 2019 For the Nine Months Ended September 30, 2018 Net Sales $ 2,346,975 $ 3,279,615 $ 7,317,859 $ 10,225,430 Net Profit (Loss) $ (175,805 ) $ 89,147 $ (1,043,590 ) $ (928,468 ) Net profit (loss) per share, basic and diluted $ (0.00 ) $ 0.00 $ (0.03 ) $ (0.03 ) |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | NOTE 3 – 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, 2018. Basis of Presentation The accompanying financial statements have been prepared using the accrual basis of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, software, licenses, and customer lists. Actual results could differ from those estimates. Basis of Consolidation The condensed consolidated financial statements include the Company and three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron and Infiniti Mobile. The condensed consolidated financial statements for the nine-month period ended September 30, 2019, include the Company and its three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron and Infiniti Mobile (February through September). The condensed consolidated balance sheet for year ended December 31, 2018, includes the Company and the wholly-owned corporate subsidiaries, KonaTel Nevada and Apeiron. The condensed consolidated statements of operations, cash flows, and stockholders’ equity (deficit) for the nine-month period ended September 30, 2018, include the Company and the wholly owned corporate subsidiary, KonaTel Nevada. All significant intercompany transactions are eliminated. Going Concern As the Company did not generate net income during the nine-month periods ended September 30, 2019, and 2018, the Company has been dependent upon equity financing to support its operations. The Company incurred losses of $1,077,822 and $1,255,609 for the nine-month periods ended September 30, 2019, and 2018, respectively. The Company has had significant improvement in providing cash from the operations. Net cash provided by operating activities was $32,282 and used in operating activities was ($1,302,189) for the nine-months ended September 30, 2019, and 2018, respectively. The accumulated deficit as of September 30, 2019, is $5,429,895. The Company has ameliorated any substantial doubt issues by generating additional cash flow since the completion of our merger with KonaTel Nevada on December 18, 2017, including: the acquisition of Apeiron and Infiniti Mobile; receiving cash investments through the private placement of shares of our common stock; and revenues from the growth of our Virtual ETC program, all of which has contributed to an improvement in our working capital, without the use of additional lines of credit or borrowings. Additionally, the Company also has two options to finance our mobile phone equipment purchases whereby multiple equipment suppliers provide us short term credit terms of up to 60 days on mobile phone purchases and a bank line of credit for purchases of select mobile phones. Net Loss Per Share Basic 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. As of September 30, 2019, and December 31, 2018, there are 4,575,000 and 4,325,000 potentially dilutive common shares, respectively. The dilutive common shares are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of receivables, cash and cash equivalents. All cash and cash equivalents and restricted cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels. The Company also has a concentration of risk with respect to trade receivables from customers and cellular providers. As of September 30, 2019, the Company had no significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables). As of December 31, 2018, the Company had a significant concentration of receivables due from two customers in the amounts of $441,934, or 42.7%. Concentration of Major Customer A significant amount of the revenue is derived from contracts with major customers and cellular providers. 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 28.0%, of the total 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 On February 25, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. Early application is permitted. The Company has determined that adoption of the standard will begin January 1, 2019. The Company currently has four equipment operating leases and one Property lease; and the Property lease expires in April 2020. The Company has determined that this pronouncement will not have a material impact on the financial statements (see NOTE 5). The Company has evaluated all other recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statement. 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 Securities Exchange Act of 1934, as amended (the”Exchange Act”). |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consist of the following major classifications as of September 30, 2019, and December 31, 2018: September 30, 2019 December 31, 2018 Leasehold Improvements $ 46,950 $ 46,950 Furniture and Fixtures 102,946 101,638 Billing Software 217,163 217,163 Office Equipment 86,887 86,887 453,946 452,638 Less: Accumulated Depreciation and Amortization (342,264 ) (320,615 ) Property and equipment, net $ 111,682 $ 132,023 Depreciation and amortization expense amounted to $21,649 and $21,649 for the nine-month periods ended September 30, 2019 and 2018 and $7,217 and $7,216 for the three-month periods ended September 30, 2019, and 2018, respectively. Depreciation and amortization expense are included as a component of operating expenses in the accompanying statements of operations. |
Right-To-Use Assets
Right-To-Use Assets | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Right-To-Use Assets | NOTE 5 – RIGHT-TO-USE ASSETS Right-to-Use Assets consist of assets accounted for under ASC 842. The assets are recorded at present value using implied interest rates between 5.29% and 5.34%. September 30, 2019 December 31, 2018 Right-to-Use Assets $ 113,035 $ — Less: Accumulated Depreciation (54,421 ) — Right-to-Use, net $ 58,614 $ — Depreciation amounted to $54,421 for the nine-month period and $18,140 for the three-month period ended September 30, 2019. Depreciation expense is included as a component of operating expenses in the accompanying statements of operations. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 6 – INTANGIBLE ASSETS Intangible Assets with definite useful life consist of licenses, customer lists and software that were acquired through acquisitions: September 30, 2019 December 31, 2018 Customer Lists $ 1,135,961 $ 1,135,961 Software 2,407,001 2,407,001 License 694,447 — Less: Accumulated Amortization (1,729,320 ) (1,052,040 ) Intangible Assets, net $ 2,508,089 $ 2,490,922 Amortization expense amounted to $677,280 and $151,059 for the nine-month periods ended September 30, 2019, and 2018 and $225,761 and $20,903 for the three-month periods ended September 30, 2019, and 2018, 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: 2019 $ 208,976 2020 $ 802,334 2021 $ 802,333 Intangible Assets with indefinite useful life consist of a license granted by the FCC: The License, because of the nature of the asset and the limitation on the number of granted licenses by the FCC, will not be amortized. The License was acquired through an acquisition. The fair market value of the License as of September 30, 2019, was $624,255. |
Lines of Credit
Lines of Credit | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Lines of Credit | NOTE 7 – LINES OF CREDIT The Company has two lines of credit with a bank which provide aggregate maximum borrowing availability of $1,050,000 as of September 30, 2019, and December 31, 2018. The lines of credit are payable on demand and bear interest at a variable rate with rate ranges from 7.5% to 8.0%. Outstanding advances under these line of credit arrangements amounted to $35,683 and $103,379 as of September 30, 2019, and December 31, 2018, respectively. The lines of credit mature on January 5, 2020, and February 14, 2020. The lines are secured by the general assets of the Company and aggregate amounts drawn under the lines of credit may be limited to a borrowing base, as defined. The revolving lines of credit are guaranteed by an officer of the Company. |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leases | NOTE 8 – LEASES The Company has right-to-use assets through leases of property under three non-cancelable leases with terms in excess of one year. The current lease liabilities expire April 30, 2020, September 1, 2020, and December 1, 2021. Future lease liability payments under the terms of these leases are as follows: 2019 $ 18,110 2020 $ 31,373 2021 $ 10,175 Total $ 59,658 Less Current Maturities $ 42,150 Long Term Maturities $ 17,508 The Company also leases two office spaces on a month-to-month basis. Total lease expense for the nine-month periods ended September 30, 2019, and 2018 amounted to $52,592 and $110,023 and $15,392 and $33,677 for the three-month periods ended September 30, 2019, and 2018, respectively. |
Amount Due to Stockholder
Amount Due to Stockholder | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Amount Due to Stockholder | NOTE 9 – AMOUNT DUE TO STOCKHOLDER As of September 30, 2019, and December 31, 2018, the Company’s principal shareholder, D. Sean McEwen was owed $4,344 and $91,152, respectively, for advances used for working capital under a note. The note bears a 10% per annum interest rate. The note matures on November 30, 2019. During 2019, Joshua Ploude, CEO of Apeiron, 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, 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. |
Contingencies and Commitments
Contingencies and Commitments | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies and Commitments | NOTE 10 – CONTINGENCIES AND COMMITMENTS Litigation From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of September 30, 2019, there are no legal proceedings, except the following: On August 28, 2018, we filed a claim in AAA Arbitration against a former employee, Saul Glosser. In August 2019 the Company won an arbitration award (ratified by the court) from Mr. Glosser in the amount of $362,871 ($357,914 plus arbitrator compensation of $4,957). The award has been deemed final as Mr. Glosser has not preserved any outstanding issues for review. At this time collectability is yet to be determined, and therefore the award is not currently reflected in the balance sheet. 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. Letters of Credit The Company maintains irrevocable standby letter of credit arrangements with certain cellular carriers in the aggregate amount of $63,000. The 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 September 30, 2019, and December 31, 2018. The letters of credit are not considered in the financial statements. Regulatory Determinations On May 17, 2019, Infiniti Mobile was notified by the United States Administrative Company (“USAC”) of an over-payment of Universal Service Fund reimbursements in the amount of $168,677. On July 25, 2019, the Company entered into a Letter of Acknowledgement with the FCC and requested a 24-month payment plan regarding the repayment of the over-payment amounts. The FCC decision regarding the payment plan request is pending and is expected before December 31, 2019. As required by the Letter of Acknowledgement requirements, Infiniti Mobile has made a good faith down payment in the amount of 10% of the total over-payment and continues to make regular monthly payments of 1/24th of the outstanding balance pending payment plan approval. The over-payment amount was recorded as a current acquisition expense. The Company entered into a Settlement Agreement with the former owner of Infiniti Mobile regarding this matter, effective September 4, 2019, which was the date of delivery of the fully executed Settlement Agreement that was dated August 22, 2019, and filed with the SEC on September 4, 2019. Under the Settlement Agreement, and as part of the previous owner’s obligations to indemnify and hold the Company harmless from any liability arising from the breach of any representations and warranties in the initial Purchase and Sale Agreement dated February 5, 2019 (the “PSMI”), and filed with the SEC on February 6, 2019, which included this liability, the vested $0.20 per share 500,000 share incentive stock option grant that was awarded to the previous owner at the closing of the PSMI was cancelled and deemed null and void, and the previous owner was released from any liability for the $168,677 over-payment. All of the other terms and conditions of the PSMI remain in full force and effect, including the continuing indemnification provisions regarding all other representations and warranties. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Reporting | NOTE 11 – SEGMENT REPORTING The Company operates within four reportable segments. The Company’s management evaluates performance and allocates resources based on the profit or loss from operations. Because the Company is a service business with very few physical assets, management does not use total assets by segment to make decisions regarding operations, and therefore, the total assets disclosure by segment has not been included. The reportable segments consist of Hosted Services, Mobile Services, Lifeline ETC (“Eligible Communications Carrier”), and Lifeline VETC (“Virtual Eligible Communications Carrier”). Hosted Services Mobile Services services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller does not own the wireless network infrastructure over which services are provided to its customers. Apeiron’s mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided which can include, but is not limited to, phones, tablets, modems, routers and accessories. Apeiron primarily markets its mobile services through independent sales agents and ISOs via the “Apeiron” brand. These agents and ISOs generally market to small and medium sized businesses throughout the United States. This type of marketing is also considered B2B (“Business to Business”) sales. Lifeline ETC Lifeline VETC The following table reflects the result of operations of the Company’s reportable segments: Hosted Services Mobile Services Lifeline ETC Lifeline VETC Total For the nine-month period ended September 30, 2019 Revenue $ 2,450,483 $ 1,943,318 $ 506,931 $ 2,352,909 $ 7,253,641 Net Loss $ (215,291 ) $ 144,955 $ (462,519 ) $ (544,967 ) $ (1,077,822 ) Depreciation and amortization $ 428,060 $ 269,712 $ 34,705 $ 20,872 $ 753,350 Additions to property and equipment $ — $ — $ — $ — $ — For the three-month period ended September 30, 2019 Revenue $ 875,256 $ 600,553 $ 276,073 $ 595,093 $ 2,346,975 Net Loss $ 46,816 $ (93,308 ) $ 21,819 $ (151,133 ) $ (175,806 ) Depreciation and amortization $ 199,586 $ 19,711 $ 1,507 $ 30,313 $ 251,117 Additions to property and equipment $ — $ — $ — $ — $ — For the nine-month period ended September 30, 2018 Revenue $ — $ 3,929,840 $ — $ 3,661,378 $ 7,591,218 Net Loss $ — $ (676,925 ) $ — $ (578,684 ) $ (1,255,609 ) Depreciation and amortization $ — $ 115,140 $ — $ 91,032 $ 206,172 Additions to property and equipment $ — $ — $ — $ — $ — For the three-month period ended September 30, 2018 Revenue $ — $ 945,764 $ — $ 1,507,750 $ 2,453,514 Net Profit (Loss) $ — $ (254,292 ) $ — $ 300,609 $ 46,317 Depreciation and amortization $ — $ 52,542 $ — $ 9,040 $ 61,582 Additions to property and equipment $ — $ — $ — $ — $ — |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 12 – STOCKHOLDERS’ EQUITY Common Stock On March 8, 2018, the Company issued 4,750,000 shares of our common stock in a private placement to “accredited investors” at $0.20 per share for an aggregate amount of $950,000. On April 13, 2018, the Company issued 1,000,000 shares in a private placement to “accredited investors” at $0.20 per share for an aggregate amount of $200,000, $100,000 of which was in cash and $100,000 of which was in settlement of an advance in that amount from this subscriber. Stock Compensation The Company offers stock option equity awards to directors and key employees. Options vested in tranches and expire in five (5) years. During the nine-months ended September 30, 2019, and 2018, the Company recorded vested options expense of $141,804 and $454,434, respectively. The option expense not taken as of September 30, 2019, is $743,967, with a weighted average term of 3.1 years. The following table represents stock option activity as of and for the three-month period ended September 30, 2019: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2018 4,325,000 $ 0.20 3.1 $ — Granted 500,000 $ 0.20 2.3 Exercised Forfeited 1,550,000 Options Outstanding – September 30, 2019 3,275,000 $ 0.19 3.2 $ — Exercisable and Vested, September 30, 2019 2,925,250 $ 0.19 3.1 $ — |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of this filing and no material subsequent events have occurred. Effective October 15, 2019 (though executed October 17, 2019), the Company and Charles L. Schneider, Jr., the CEO of our wholly-owned subsidiary, KonaTel Nevada, and the President and CEO of our wholly-owned subsidiary, Infiniti Mobile, executed and delivered a Severance Agreement and Release (the “Severance Agreement”). In connection with the execution and delivery of the Severance Agreement, the parties also executed and delivered the following additional agreements: (i) various assignments to Mr. Schneider regarding the Company’s reseller agreement with Standup Wireless; (ii) an Amended Incentive Stock Option Agreement; and (iii) an Independent Contractor Agreement. Pursuant to the Severance Agreement, Mr. Schneider’s Employment Agreement with the Company dated July 1, 2016, was terminated. The Company agreed to pay his salary (16,667 per month) and benefits through December 31, 2019; allowed him to retain his laptop, monitors, keyboard/mouse and printer; and assigned him certain Company contract rights as a reseller of Lifeline services for StandUp Wireless, another Lifeline provider, which he agreed to assume. The Company had determined that it was no longer interested in acting as a distributor of Lifeline services for StandUp Wireless and intended to focus its efforts on distributing Lifeline service under its own FCC Lifeline license. Additionally, the parties agreed that 500,000 of the 1,500,000 incentive stock options held by Mr. Schneider had vested; that the remaining 1,000,000 incentive stock options that he had been granted were void; and the Amended Incentive Stock Option Agreement was revised to include a customary “cashless” exercise feature for the 500,000 vested options. A Lock-Up/Leak-Out Agreement (the “LULO Agreement”) was also executed and delivered by the Company and Mr. Schneider, which provides for a Lock-Up Period of six (6) months from the exercise of the option to purchase any shares underlying the vested options; and an eighteen (18) month Leak-Out Period thereafter by which he is limited to the resale of shares of common stock acquired in any such exercise (including shares currently owned or hereafter acquired) to the greater of (i) (5%) of the total shares of the Company publicly traded on any nationally recognized medium of a stature no less than the Pink OTC Markets, Inc. (the “OTC Pink Tier”) of the OTC Markets Group, Inc. (the “OTC Markets”) over the previous ten (10) trading days, or (ii) one percent (1%) of the total outstanding shares of the Company as reported in the Company’s most recently filed SEC report or registration statement in the Edgar Archives of the SEC, divided by thirteen (13) weeks. Pursuant to the Independent Contractor Agreement (the “ICA”) entered into with the Company, Mr. Schneider has agreed to assist the Company in having its wholly-owned subsidiary, Infiniti Mobile, being granted its request for Eligible Telecommunications Carrier (“ETC”) status from the California Public Utilities Commission (“CPUC”) to distribute Lifeline cellular phone service within the State of California. In the event that the Company is successful in this process, Mr. Schneider will be granted a one (1) year Warrant with a customary “cashless” exercise feature to purchase 250,000 shares of the Company’s common stock at an exercise price to be determined on the date of any such approval. The ICA has a term of one (1) year and may be extended by the parties yearly. The LULO Agreement is applicable to any shares that may be acquired under any such Warrant, with the eighteen (18) month term commencing on the exercise of any such Warrant that may be issued. Mr. Schneider has more than thirty (30) year experience in the telecommunications industry should be invaluable to the Company in this process. These agreements also contained customary representations and warranties, confidentiality provisions and non-disparagement provisions, as may have been applicable, among other customary terms and conditions The Company also granted the Vice President of Operations of Infiniti Mobile and the Vice President of Finance stock options under its Form of Incentive Stock Option Agreement and incentive stock option plan, 300,000 options to each at an exercise price of $0.15 per share, which is the current public market price for the common stock of the Company on the OTC Pink Tier, with 100,000 shares each vesting on December 31, 2019, and with the remainder vesting at the rate of 100,000 shares each on December 31, 2020, and 2021. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying financial statements have been prepared using the accrual basis of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, software, licenses, and customer lists. Actual results could differ from those estimates. |
Basis of Consolidation | Basis of Consolidation The condensed consolidated financial statements include the Company and three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron and Infiniti Mobile. The condensed consolidated financial statements for the nine-month period ended September 30, 2019, include the Company and its three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron and Infiniti Mobile (February through September). The condensed consolidated balance sheet for year ended December 31, 2018, includes the Company and the wholly-owned corporate subsidiaries, KonaTel Nevada and Apeiron. The condensed consolidated statements of operations, cash flows, and stockholders’ equity (deficit) for the nine-month period ended September 30, 2018, include the Company and the wholly owned corporate subsidiary, KonaTel Nevada. All significant intercompany transactions are eliminated. |
Net Loss Per Share | Net Loss Per Share Basic 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. As of September 30, 2019, and December 31, 2018, there are 4,575,000 and 4,325,000 potentially dilutive common shares, respectively. The dilutive common shares are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive. |
Concentration of Credit Risk | Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of receivables, cash and cash equivalents. All cash and cash equivalents and restricted cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels. The Company also has a concentration of risk with respect to trade receivables from customers and cellular providers. As of September 30, 2019, the Company had no significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables). As of December 31, 2018, the Company had a significant concentration of receivables due from two customers in the amounts of $441,934, or 42.7%. |
Concentration of Major Customer | Concentration of Major Customer A significant amount of the revenue is derived from contracts with major customers and cellular providers. For the 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 28.0%, of the total 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 | Effect of Recent Accounting Pronouncements On February 25, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. Early application is permitted. The Company has determined that adoption of the standard will begin January 1, 2019. The Company currently has four equipment operating leases and one Property lease; and the Property lease expires in April 2020. The Company has determined that this pronouncement will not have a material impact on the financial statements (see NOTE 5). The Company has evaluated all other recent accounting pronouncements and believes that none will have a significant effect on the Company’s financial statement. 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). |
Transactions (Tables)
Transactions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Schedule of Noncash or Part Noncash Acquisitions | Cash $ 14,318 Accounts Receivable 63,764 Prepaid Expenses and Deposits 2,400 Furniture and Equipment at Fair Value 1,309 License 694,447 Accounts Payable (192,548 ) Net Assets Acquired $ 583,690 |
Schedule of Pro-Forma Financial Information | For the Three Months Ended September 30, 2019 For the Three Months Ended September 30, 2018 For the Nine Months Ended September 30, 2019 For the Nine Months Ended September 30, 2018 Net Sales $ 2,346,975 $ 3,279,615 $ 7,317,859 $ 10,225,430 Net Profit (Loss) $ (175,805 ) $ 89,147 $ (1,043,590 ) $ (928,468 ) Net profit (loss) per share, basic and diluted $ (0.00 ) $ 0.00 $ (0.03 ) $ (0.03 ) |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | September 30, 2019 December 31, 2018 Leasehold Improvements $ 46,950 $ 46,950 Furniture and Fixtures 102,946 101,638 Billing Software 217,163 217,163 Office Equipment 86,887 86,887 453,946 452,638 Less: Accumulated Depreciation and Amortization (342,264 ) (320,615 ) Property and equipment, net $ 111,682 $ 132,023 |
Right-To-Use Assets (Tables)
Right-To-Use Assets (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Right-To-Use Assets | September 30, 2019 December 31, 2018 Right-to-Use Assets $ 113,035 $ — Less: Accumulated Depreciation (54,421 ) — Right-to-Use, net $ 58,614 $ — |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets and Goodwill | September 30, 2019 December 31, 2018 Customer Lists $ 1,135,961 $ 1,135,961 Software 2,407,001 2,407,001 License 694,447 — Less: Accumulated Amortization (1,729,320 ) (1,052,040 ) Intangible Assets, net $ 2,508,089 $ 2,490,922 |
Schedule of Intangible Assets Future Amortization Expense | 2019 $ 208,976 2020 $ 802,334 2021 $ 802,333 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Schedule of Future Minimum Lease Payments for Operating Leases | 2019 $ 18,110 2020 $ 31,373 2021 $ 10,175 Total $ 59,658 Less Current Maturities $ 42,150 Long Term Maturities $ 17,508 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | Hosted Services Mobile Services Lifeline ETC Lifeline VETC Total For the nine-month period ended September 30, 2019 Revenue $ 2,450,483 $ 1,943,318 $ 506,931 $ 2,352,909 $ 7,253,641 Net Loss $ (215,291 ) $ 144,955 $ (462,519 ) $ (544,967 ) $ (1,077,822 ) Depreciation and amortization $ 428,060 $ 269,712 $ 34,705 $ 20,872 $ 753,350 Additions to property and equipment $ — $ — $ — $ — $ — For the three-month period ended September 30, 2019 Revenue $ 875,256 $ 600,553 $ 276,073 $ 595,093 $ 2,346,975 Net Loss $ 46,816 $ (93,308 ) $ 21,819 $ (151,133 ) $ (175,806 ) Depreciation and amortization $ 199,586 $ 19,711 $ 1,507 $ 30,313 $ 251,117 Additions to property and equipment $ — $ — $ — $ — $ — For the nine-month period ended September 30, 2018 Revenue $ — $ 3,929,840 $ — $ 3,661,378 $ 7,591,218 Net Loss $ — $ (676,925 ) $ — $ (578,684 ) $ (1,255,609 ) Depreciation and amortization $ — $ 115,140 $ — $ 91,032 $ 206,172 Additions to property and equipment $ — $ — $ — $ — $ — For the three-month period ended September 30, 2018 Revenue $ — $ 945,764 $ — $ 1,507,750 $ 2,453,514 Net Profit (Loss) $ — $ (254,292 ) $ — $ 300,609 $ 46,317 Depreciation and amortization $ — $ 52,542 $ — $ 9,040 $ 61,582 Additions to property and equipment $ — $ — $ — $ — $ — |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Schedule of Share-Based Compensation , Stock Options, Activity | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2018 4,325,000 $ 0.20 3.1 $ — Granted 500,000 $ 0.20 2.3 Exercised Forfeited 1,550,000 Options Outstanding – September 30, 2019 3,275,000 $ 0.19 3.2 $ — Exercisable and Vested, September 30, 2019 2,925,250 $ 0.19 3.1 $ — |
Transactions - Schedule of Nonc
Transactions - Schedule of Noncash or Part Noncash Acquisitions (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Jan. 31, 2019 | |
Cash | $ 14,318 | |
License | $ 624,255 | |
Infiniti Mobile Acquisition | ||
Cash | $ 14,318 | |
Accounts Receivable | 63,764 | |
Prepaid Expense | 2,400 | |
Furniture and Equipment at Fair Value | 1,308 | |
License | 694,447 | |
Accounts Payable | (192,548) | |
Net Assets Acquired | $ 583,690 |
Transactions - Schedule of Pro-
Transactions - Schedule of Pro-Forma Financial Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Net profit (loss) per share, basic and diluted | $ 0 | $ 0 | $ (0.03) | $ (0.04) |
Apeiron Systems, Inc. and Infiniti Mobile | ||||
Net Sales | $ 2,346,975 | $ 3,279,615 | $ 7,317,859 | $ 10,225,430 |
Net Profit (Loss) | $ (175,805) | $ 89,147 | $ (1,043,590) | $ (928,468) |
Net profit (loss) per share, basic and diluted | $ 0 | $ 0 | $ (0.03) | $ (0.03) |
Transactions (Details Narrative
Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Jan. 31, 2019 | Dec. 31, 2018 | |
Apeiron Systems | ||
Acquisition purchase price | $ 2,450,000 | |
Equity interest issued, acquisition | 7,000,000 | |
Price per share | $ 0.35 | |
Infiniti Mobile Acquisition | ||
Acquisition purchase price | $ 752,366 | |
Cash payments for acquisition | 100 | |
Advances for acqusition | 465,056 | |
USAC over-payment settlement | 168,677 | |
Accounts receivable | $ 152,764 |
Basis of Presentation (Details
Basis of Presentation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Net Loss | $ (175,806) | $ 46,317 | $ (1,077,822) | $ (1,255,609) | |
Net cash provided by (used in) operating activities | 32,282 | (1,302,189) | |||
Accumulated Deficit | (5,429,895) | $ (5,429,895) | $ (4,352,073) | ||
Potentially dilutive common shares | 4,575,000 | 4,325,000 | |||
Concentration risk, percentage | 42.70% | ||||
Receivable concentration | $ 441,934 | ||||
Revenues | $ 2,346,975 | $ 2,453,514 | $ 7,253,641 | $ 7,591,218 | |
Operating leases, description | The Company currently has four equipment operating leases and one Property lease; and the Property lease expires in April 2020. | ||||
Revenue | Cellular Provider | |||||
Concentration risk, percentage | 26.10% | 28.00% | |||
Revenues | $ 612,092 | $ 2,028,814 | |||
Revenue | Customer | |||||
Concentration risk, percentage | 27.00% | 25.00% | |||
Revenues | $ 634,668 | $ 1,810,875 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | $ 453,946 | $ 452,638 |
Less: Accumulated Depreciation and Amortization | (342,264) | (320,615) |
Property, plant and equipment, net | 111,682 | 132,023 |
Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 46,950 | 46,950 |
Furniture and Fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 102,946 | 101,638 |
Billing Software | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 217,163 | 217,163 |
Office Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | $ 86,887 | $ 86,887 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation and amortization expense | $ 7,217 | $ 7,216 | $ 21,649 | $ 21,649 |
Right-To-Use Assets - Schedule
Right-To-Use Assets - Schedule of Right-To-Use Assets (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Right-to-Use Assets | $ 113,035 | |
Less: Accumulated Depreciation | (54,421) | |
Right to Use Assets, Net | $ 58,614 |
Right-To-Use Assets (Details Na
Right-To-Use Assets (Details Narrative) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Depreciation | $ 18,140 | $ 54,421 |
Minimum | ||
Implied interest rate | 5.29% | 5.29% |
Maximum | ||
Implied interest rate | 5.34% | 5.34% |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets and Goodwill (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Customer Lists | $ 1,135,961 | $ 1,135,961 |
Software | 2,407,001 | 2,407,001 |
License | 694,447 | |
Less: Accumulated Amortization | (1,729,320) | (1,052,040) |
Intangible assets, net | $ 2,508,089 | $ 2,490,922 |
Intangible Assets - Schedule _2
Intangible Assets - Schedule of Intangible Assets Future Amortization Expense (Details) | Sep. 30, 2019USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2019 | $ 208,976 |
2020 | 802,334 |
2021 | $ 802,333 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangible assets | $ 225,761 | $ 20,903 | $ 677,280 | $ 151,059 |
License | $ 624,255 |
Lines of Credit (Details Narrat
Lines of Credit (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||
Line of credit, maximum borrowing | $ 1,050,000 | $ 1,050,000 |
Line of credit, interest rate description | Bears interest at a variable rate with rate ranges from 7.5% to 8.0%. | Bears interest at a variable rate with rate ranges from 7.5% to 8.0%. |
Line of credit, outstanding balance | $ 35,683 | $ 103,379 |
Line of credit, maturity date | Jan. 5, 2020 | Feb. 14, 2020 |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments (Details) | Sep. 30, 2019USD ($) |
Leases [Abstract] | |
Future minimum lease payments, 2019 | $ 18,110 |
Future minimum lease payments, 2020 | 31,373 |
Future minimum lease payments, 2021 | 10,175 |
Total | 59,658 |
Less Current Maturities | 42,271 |
Long Term Maturities | $ 17,508 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Leases [Abstract] | ||||
Lease expense | $ 15,392 | $ 33,677 | $ 52,592 | $ 110,023 |
Amount Due to Stockholder (Deta
Amount Due to Stockholder (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Proceeds from related parties | $ 200,000 | $ 100,000 | |
Amount Due to related party | $ 204,344 | $ 91,152 | |
D. Sean McEwen | |||
Interest rate | 10.00% | 10.00% | |
Maturity date | Nov. 30, 2019 | Nov. 30, 2019 | |
Amount Due to related party | $ 4,344 | $ 91,152 | |
Joshua Ploude, Ceo of Apeiron | |||
Proceeds from related parties | $ 200,000 | ||
Interest rate | 12.00% | ||
Maturity date | Jul. 10, 2019 |
Contingencies and Commitments (
Contingencies and Commitments (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Stock options cancelled | 1,550,000 | |
Former Owner of Infiniti Mobile | ||
Settlement agreement, description | The Company entered into a Settlement Agreement with the former owner of Infiniti Mobile regarding the over-payment of Universal Service Fund reimbursements, effective September 4, 2019, which was the date of delivery of the fully executed Settlement Agreement that was dated August 22, 2019, and filed with the SEC on September 4, 2019. Under the Settlement Agreement, and as part of the previous owner's obligations to indemnify and hold the Company harmless from any liability arising from the breach of any representations and warranties in the initial Purchase and Sale Agreement dated February 5, 2019 (the "PSMI"), and filed with the SEC on February 6, 2019, which included this liability, the vested $0.20 per share 500,000 share incentive stock option grant that was awarded to the previous owner at the closing of the PSMI was cancelled and deemed null and void, and the previous owner was released from any liability for the $168,677 over-payment. All of the other terms and conditions of the PSMI remain in full force and effect, including the continuing indemnification provisions regarding all other representations and warranties. | |
Stock options cancelled | 500,000 | |
Stock options cancelled, exercise price | $ 0.20 | |
Positive Outcome of Litigation | ||
Contingencies, description | On August 28, 2018, we filed a claim in AAA Arbitration against a former employee, Saul Glosser. In August 2019 the company won an arbitration award (ratified by the court) from Mr. Glosser in the amount of $362,871 ($357,914 plus arbitrator compensation of $4,957). The award has been deemed final as Mr. Glosser has not preserved any outstanding issues for review. At this time collectability is yet to be determined therefore the award is not currently reflected in the Balance Sheet. | |
Litigation settlement, amount awarded from other party | $ 362,871 | |
Name of plaintiff | Saul Glosser | |
Dispute resolution type, description | Arbitration | |
United States Administrative Company | ||
Over-payment of fund reimbursements, description | Infiniti Mobile was notified by the United States Administrative Company ("USAC") of an over-payment of Universal Service Fund reimbursements in the amount of $168,677. On July 25, 2019, the Company entered into a Letter of Acknowledgement with the FCC and requested a 24-month payment plan regarding the repayment of the over-payment amounts. The FCC decision regarding the payment plan request is pending and is expected before December 31, 2019. As required by the Letter of Acknowledgement requirements, Infiniti Mobile has made a good faith down payment in the amount of 10% of the total over-payment and continues to make regular monthly payments of 1/24th of the outstanding balance pending payment plan approval. The over-payment amount was recorded as a current acquisition expense. | |
Standby Letters of Credit | ||
Letter of credit | $ 63,000 | $ 63,000 |
Segment Reporting - Schedule of
Segment Reporting - Schedule of Segment Reporting Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Revenue | $ 2,346,975 | $ 2,453,514 | $ 7,253,641 | $ 7,591,218 |
Net Loss | (175,806) | 46,317 | (1,077,822) | (1,255,609) |
Depreciation and amortization | 251,117 | 61,582 | 753,350 | 206,172 |
Additions to property and equipment | ||||
Hosted Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 875,256 | 2,450,483 | ||
Net Loss | 46,816 | (215,291) | ||
Depreciation and amortization | 199,586 | 428,060 | ||
Additions to property and equipment | ||||
Mobile Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 600,553 | 945,764 | 1,943,318 | 3,929,840 |
Net Loss | (93,308) | (254,292) | 144,955 | (676,925) |
Depreciation and amortization | 19,711 | 52,542 | 269,712 | 115,140 |
Additions to property and equipment | ||||
Lifeline ETC | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 276,073 | 506,931 | ||
Net Loss | 21,819 | (462,519) | ||
Depreciation and amortization | 1,507 | 34,705 | ||
Additions to property and equipment | ||||
Lifeline VETC | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 595,093 | 1,507,750 | 2,352,909 | 3,661,378 |
Net Loss | (151,133) | 300,609 | (544,967) | (578,684) |
Depreciation and amortization | 30,313 | 9,040 | 20,872 | 91,032 |
Additions to property and equipment |
Segment Reporting (Details Narr
Segment Reporting (Details Narrative) | 9 Months Ended |
Sep. 30, 2019Number | |
Segment Reporting [Abstract] | |
Number of reportable segments | 4 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Share-Based Compensation , Stock Options, Activity (Details) | 9 Months Ended |
Sep. 30, 2019USD ($)$ / sharesshares | |
Share-Based Compensation Arrangement By Share-Based Payment Award Options Outstanding | |
Options outstanding, beginning of period | 4,325,000 |
Granted | 500,000 |
Forfeited | 1,550,000 |
Options outstanding, end of period | 3,275,000 |
Options exercisable and vested, end of period | 2,925,250 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | |
Weighted average exercise price outstanding, beginning of period | $ / shares | $ 0.20 |
Weighted average exercise price, granted | $ / shares | 0.20 |
Weighted average exercise price outstanding, end of period | $ / shares | 0.19 |
Weighted average exercise price, exercisable and vested, end of period | $ / shares | $ 0.19 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures | |
Weighted average remaining contractual life outstanding, beginning of period | 3 years 1 month |
Weighted average remaining contractual life, granted | 2 years 5 months |
Weighted average remaining contractual life outstanding, end of period | 3 years 2 months |
Weighted average remaining contractual life, exercisable and vested, end of period | 3 years 1 month |
Average intrinsic value outstanding, beginning of period | $ | |
Average intrinsic value outstanding, end of period | $ | |
Average intrinsic value, exercisable and vested, end of period | $ |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | ||
Stock-based compensation expense, vested options | $ 141,804 | $ 454,434 | |||
Deferred compensation expense | $ 743,967 | ||||
Weighted average term, compensation expense | 3 years 1 month | ||||
Options vesting period | 5 years | ||||
Private Placement | |||||
Common stock issued | 1,000,000 | 4,750,000 | |||
Common stock issued, aggregate value | $ 200,000 | [1] | $ 950,000 | ||
Stock price | $ 0.20 | $ 0.20 | |||
[1] | $100,000 of which was in cash and $100,000 of which was in settlement of an advance in that amount from the subscriber. |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - $ / shares | 1 Months Ended | 9 Months Ended | ||
Oct. 31, 2019 | Oct. 17, 2019 | Sep. 30, 2019 | ||
Subsequent Event [Line Items] | ||||
Stock options cancelled | 1,550,000 | |||
Options granted | 500,000 | |||
Options granted, exercise price | $ 0.20 | |||
Subsequent Event | Former CEO | ||||
Subsequent Event [Line Items] | ||||
Severance agreement, description | Pursuant to the Severance Agreement, Mr. Schneider's Employment Agreement with the Company dated July 1, 2016, was terminated. The Company agreed to pay his salary (16,667 per month) and benefits through December 31, 2019; allowed him to retain his laptop, monitors, keyboard/mouse and printer; and assigned him certain Company contract rights as a reseller of Lifeline services for StandUp Wireless, another Lifeline provider, which he agreed to assume. The Company had determined that it was no longer interested in acting as a distributor of Lifeline services for StandUp Wireless and intended to focus its efforts on distributing Lifeline service under its own FCC Lifeline license. | |||
Stock options vested | [1] | 500,000 | ||
Stock options cancelled | 1,000,000 | |||
Independent Contractor Agreement, description | Pursuant to the Independent Contractor Agreement (the "ICA") entered into with the Company, Mr. Schneider has agreed to assist the Company in having its wholly-owned subsidiary, Infiniti Mobile, being granted its request for Eligible Telecommunications Carrier ("ETC") status from the California Public Utilities Commission ("CPUC") to distribute Lifeline cellular phone service within the State of California. In the event that the Company is successful in this process, Mr. Schneider will be granted a one (1) year Warrant with a customary "cashless" exercise feature to purchase 250,000 shares of the Company's common stock at an exercise price to be determined on the date of any such approval. The ICA has a term of one (1) year and may be extended by the parties yearly. The LULO Agreement is applicable to any shares that may be acquired under any such Warrant, with the eighteen (18) month term commencing on the exercise of any such Warrant that may be issued. | |||
Subsequent Event | Vice President of Operations of Infiniti Mobile | ||||
Subsequent Event [Line Items] | ||||
Options granted | 300,000 | |||
Options granted, exercise price | $ 0.15 | |||
Options granted, vesting terms | 100,000 shares vesting on December 31, 2019, and the remainder vesting at the rate of 100,000 shares each on December 31, 2020, and 2021. | |||
Subsequent Event | Vice President of Finance | ||||
Subsequent Event [Line Items] | ||||
Options granted | 300,000 | |||
Options granted, exercise price | $ 0.15 | |||
Options granted, vesting terms | 100,000 shares vesting on December 31, 2019, and the remainder vesting at the rate of 100,000 shares each on December 31, 2020, and 2021. | |||
[1] | Amended Incentive Stock Option Agreement was revised to include a customary "cashless" exercise feature for the 500,000 vested options. |