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Contingencies and Commitments
6 Months Ended
Jun. 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 June 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.  We have alleged that Mr. Glosser failed to honor an indemnification clause that was material to our 2014 purchase of Glosser’s former company, Coast to Coast Cellular, Inc. doing business as “Coast2Coast Cellular”.   We believe our damages are in the $350,000 to $400,000 range.  Mr. Glosser’s defense to the claim is believed by our counsel to be tenuous; however, no assurance can be given that we will be successful in recovering any amounts from Mr. Glosser.  Our legal fees in this matter are being paid under one of our insurance policies. On, January 11, 2019, Mr. Glosser filed an employment claim against us, alleging that his July 2017 termination was not “for cause” and thus breached his employment agreement with us.  Glosser has claimed damages of approximately $80,000.  Our counsel believes we have strong defenses to Mr. Glosser’s employment claim. Both matters are consolidated at KonaTel, Inc. vs. Saul Glosser, Case No. 01-18-0003-2772, with the American Arbitration Association (International Center for Dispute Resolution). An arbitration hearing occurred on July 11-12, 2019, in Pittsburgh, Pennsylvania. A decision is expected in mid-September 2019.

 

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 June 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 Federal Communications Commission requesting a 24-month payment plan regarding the repayment of the over-payment amount. The FCC decision regarding the payment plan is expected in October 2019. As of June 30, 2019, the Company’s counsel advised that the liability for this over-payment could potentially lie with the previous ownership of Infiniti Mobile, and therefore, no contingency was recorded.