10-Q

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 March 31, 2020

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

For the transition period from ____________ to____________

Commission File No. 001-10171

KonaTel, Inc.

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

Delaware	80-0000245
(State or Other Jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. No.)

13601 Preston Road, # E816

Dallas, Texas 75240

(Address of Principal Executive Offices)

214-323-8410

(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.

Yes x 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).  Yes x 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.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company x
	Emerging Growth company x

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. x

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

Our website is www.konatel.com.

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

APPLICABLE ONLY TOCORPORATE 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:

Common Capital Voting Stock, $0.001 par value per share	40,692,286 shares
Class	Outstanding as of June 5, 2020

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” (“Infinite 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,” “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.

Explanatory Note

We are relying on the SEC’s “Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies,” which is dated March 25, 2020, in Release No. 34-88465 (the “COVID-19 Revised Order”), which has exempted certain issuers impacted by COVID-19 from meeting certain filing deadlines for filing their reports under the Exchange Act for the period from March 1, 2020, to July 1, 2020. The current outbreak of COVID-19 has posed a significant impact on the Company to file, on a timely basis, its Quarterly Report that was due May 14, 2020 (the “Original Due Date”). Considering the lack of time for the compilation, dissemination and review of the information required to be presented and the importance of markets and investors to receive materially accurate information in the Quarterly Report, we determined to rely on the COVID-19 Revised Order to delay the filing of this Quarterly Report to no later than 45 days after the Original Due Date.

The COVID-19 pandemic has had a significant impact on our resources to communicate with our employees and those of our auditor’s personnel to timely complete, review and file of our 10-Q Quarterly Report for the quarter ended March 31, 2020.

In light of the current COVID-19 pandemic, the Company included the “Risk Factor” set forth in Part II, Item 1A, below, into its 10-K Annual Report for the year ended December 31, 2019, which was filed with the SEC on May 11, 2020.

2 

KONATEL, INC.

FORM 10-Q

MARCH 31, 2020

INDEX

	Page No.
PART I – FINANCIAL INFORMATION	3
Item 1.      Financial Statements	4
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.      Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.      Controls and Procedures	18
PART II – OTHER INFORMATION	18
Item 1.      Legal Proceedings	18
Item 1A.   Risk Factors	18
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.      Defaults Upon Senior Securities	19
Item 4.      Mine Safety Disclosures	19
Item 5.      Other Information	19
Item 6.      Exhibits	20
SIGNATURES	21

PART I - FINANCIAL STATEMENTS

March 31, 2020

Table of Contents

Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019	4
Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (unaudited)	5
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2020 and 2019 (unaudited)	6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 (unaudited) and 2019	7
Notes to Condensed Consolidated Financial Statements (unaudited)	8

3 

KonaTel, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31, 2020			December 31, 2019
Assets
Current Assets
Cash and Cash Equivalents	$	227,269		$	191,474
Accounts Receivable, net		339,524			377,485
Inventory, Net		4,960			4,659
Prepaid Expenses		1,611			1,743
Total Current Assets		573,364			575,361
Fixed Asset
Property and Equipment, Net		98,641			102,689
Right of Use Assets, Net		142,148			78,584
Total Fixed Assets		240,789			181,273
Other Assets
Intangible Assets, Net		2,038,336			2,238,918
Other Assets		172,065			207,740
Total Other Assets		2,210,401			2,446,658
Total Assets	$	3,024,554		$	3,203,292
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable and Accrued Expenses	$	1,275,300		$	1,223,195
Amount Due to Stockholder		102,313			151,357
Revolving Line of Credit		—			12,237
Note Payable - current portion		81,905			75,905
Lease Liabilities - current portion		108,645			69,148
Deferred Revenue		38,094			53,074
Customer Deposits		544			31,087
Total Current Liabilities		1,606,801			1,616,003
Long Term Liabilities
Lease Liabilities - long term		73,422			12,942
Note Payable - long term		19,626			50,603
Total Long Term Liabilities		93,048			63,545
Total Liabilities		1,699,849			1,679,548
Stockholders’ Equity
Common stock, $.001 par value, 50,000,000 shares authorized, 40,692,286 outstanding and issued at March 31, 2020 and December 31, 2019		40,692			40,692
Additional Paid In Capital		7,390,286			7,380,029
Accumulated Deficit		(6,106,273	)		(5,896,977	)
Total Stockholders’ Equity		1,324,705			1,523,744
Total Liabilities and Stockholders’ Equity	$	3,024,554		$	3,203,292

See accompanying notes to unaudited condensed consolidated financial statements.

4 

KonaTel, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Revenue	$	1,957,355		$	2,640,296
Cost of Revenue		1,192,177			1,503,460
Gross Profit		765,178			1,136,836
Operating Expenses
Payroll and Related Expenses		448,149			471,305
Operating and Maintenance		193,852			557,100
Bad Debt		1,500			—
Utilities and Facilities		8,867			35,819
Depreciation and Amortization		270,300			251,116
General and Administrative		12,743			41,902
Marketing and Advertising		944			21,614
Taxes and Insurance		18,814			45,070
Total Operating Expenses		955,169			1,423,926
Operating Loss		(189,991	)		(287,090	)
Other Income and Expense
Interest Income		1			676
Other Income		301,372			—
Interest Expense		(10,549	)		(11,379	)
Total Other Income and Expenses		290,824			(10,703	)
Net Income (Loss)	$	100,833		$	(297,793	)
Net Income (Loss) per Share	$	0.00		$	(0.01	)
Weighted Average Outstanding Shares		40,692,286			40,692,286
Diluted Net Income (Loss) per Share	$	0.00		$	(0.01	)
Weighted Average Outstanding Shares		44,092,286			43,067,286

See accompanying notes to unaudited condensed consolidated financial statements.

5 

KONATEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Shares				Additional		Accumulated
	Shares		Amount		Paid-in Capital		Deficit			Total
Balances as of January 1, 2020		40,692,286	$	40,692	$	7,380,029	$	(5,896,977	)	$	1,523,744
Stock Based Compensation		—		—		10,257		—			10,257
Dividends Paid to Apeiron Systems shareholders		—		—		—		(310,129	)		(310,129	)
Net Income		—		—		—		100,833			100,833
Balances as of March 31, 2020		40,692,286	$	40,692	$	7,390,286	$	(6,106,273	)	$	1,324,705

	Common Shares				Additional		Accumulated
	Shares		Amount		Paid-in Capital		Deficit			Total
Balances as of January 1, 2019		40,692,286	$	40,692	$	7,041,696	$	(4,352,073	)	$	2,730,315
Value of Options Issued as Part of IM Telecom Acquisition		—		—		98,482		—			98,482
Stock Based Compensation		—		—		141,356		—			141,356
Net Loss		—		—		—		(297,793	)		(297,793	)
Balances as of March 31, 2019		40,692,286	$	40,692	$	7,281,534	$	(4,649,866	)	$	2,672,360

See accompanying notes to unaudited condensed consolidated financial statements.

6 

KonaTel, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2020			2019
Cash Flows from Operating Activities:
Net Income (Loss)	$	100,833		$	(297,793	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and Amortization		270,300			251,116
Bad Debt		1,500			—
Stock-based Compensation		10,257			141,356
Changes in Operating Assets and Liabilities, net of effects of acquisition:
Accounts Receivable		36,461			203,712
Inventory		(301	)		135
Prepaid Expenses		132			3,461
Accounts Payable and Accrued Expenses		(2,012	)		(44,541	)
Deferred Revenue		(14,980	)		(10,154	)
Customer Deposits		(30,543	)		—
Other Assets		35,675			(199,573	)
Net cash provided by operating activities		407,322			47,719
Cash Flows from Investing Activities
Cash Received in Acquisition of IM Telecom		—			14,318
Purchase of Assets		(3,168	)		—
Asset Purchase of IM Telecom		—			(56,611	)
Net cash (used in) investing activities		(3,168	)		(42,293	)
Cash Flows from Financing Activities
Payments received on Notes Receivables		—			25,001
Payments on Operating Lease Liabilities		(26,089	)		(17,517	)
Repayment of Revolving Lines of Credit		(12,237	)		(22,147	)
Repayment of Notes Payable		(24,977	)		—
Advances made by Stockholder		—			200,000
Repayments of amounts due to Related Party and Seller		(49,044	)		(27,564	)
Dividends Paid to Apeiron shareholders		(256,012	)		—
Net cash provided by (used in) financing activities		(368,359	)		157,773
Net Change in Cash		35,795			163,199
Cash - Beginning of Year		191,474			56,510
Cash - End of Period	$	227,269		$	219,709
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	7,201		$	14,297
Cash paid for taxes	$	—		$	—
Non-cash investing and financing activities:
Asset Purchase of IM Telecom
Accounts Receivable	$	—		$	63,764
Prepaid Expense	$	—		$	950
Furniture and Equipment at Fair Market Value	$	—		$	1,309
Other Assets	$	—		$	1,450
Accounts Payable and Accrued Expenses, net of cash	$	—		$	(23,870	)
License	$	—		$	658,452
Value of Options	$	—		$	98,482
Right of use assets obtained in exchange for new operating lease liabilities	$	129,108		$	113,035

See accompanying notes to unaudited condensed consolidated financial statements.

7 

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 sub S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly-owned subsidiary.

On December 31, 2018, we acquired Apeiron Systems, Inc., a Nevada corporation d/b/a “Apeiron” (“Apeiron Systems”), which is also our wholly-owned subsidiary. Apeiron Systems was organized in 2013 and is an international hosted services CPaaS (“Communications Platform as a Service”) provider that designed, built, owns and operates its private core network, supporting a suite of real-time business communications services and Applications Programming Interfaces (“APIs”). As an Internet Telephony Service Provider (“ITSP”), Apeiron Systems holds a Federal Communications Commission (the “FCC”) numbering authority license. Some of Apeiron Systems’ hosted services include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”), number services including mobile, toll free and DID landline numbers, SMS to Email services, Database Dip services, SD-WAN, voice termination, and numerous API driven services including voice, messaging, and network management.

On January 31, 2019, we acquired IM Telecom, LLC, an Oklahoma limited liability company, d/b/a “Infiniti Mobile” (“IM Telecom”), which became our wholly-owned subsidiary. 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 (8) 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.

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

8 

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

Basis of Consolidation

The condensed consolidated financial statements include the Company and three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. The condensed consolidated balance sheet for year ended December 31, 2019, includes the Company and the wholly-owned corporate subsidiaries, KonaTel Nevada Apeiron Systems and IM Telecom. The condensed consolidated statements of operations, cash flows, and stockholders’ equity (deficit) for the three-month period ended March 31, 2019, include the Company and the three (3) wholly owned subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom (February and March). All significant intercompany transactions are eliminated.

Net Income/(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 March 31, 2020, and March 31, 2019, there are 3,400,000 potentially dilutive common shares. The dilutive common shares are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive.

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

	Three Months Ended March 31,
	2020		2019
Net income (loss)	$	100,833	$	(297,793	)
Weighted average shares outstanding during period on which basic earnings per share is calculated		40,692,286		40,692,286
Effect of dilutive shares
Incremental shares under stock-based compensation		3,400,000		2,375,000
Weighted average shares outstanding during period on which diluted earnings per share is calculated		44,092,286		43,067,286
Earnings per share attributable to common stockholders
Basic earnings (loss) per share	$	0.00	$	(0.01	)
Diluted earnings (loss) per share	$	0.00	$	(0.01	)

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.

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.

9 

The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of March 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 one (1) customer in the amount of $53,649, or 15.8%, of accounts receivables. 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 (3) customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%, respectively.

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers and cellular partners. For the three months ended March 31, 2020, the Company had one (1) wholesale customer that accounted for $555,826, or 28.4%, of revenue. For the three months ended March 31, 2019, the Company had one (1) cellular partner that accounted for $728,649, in contractually obligated commission payments or 27.6% of revenue.

Effect of Recent Accounting Pronouncements

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

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 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 $168,677.

The purchase price of $617,920 consisted of payments of debt and accounts payable made by the company on behalf of IM Telecom from the PMSI effective date of February 7, 2018, until January 31, 2019, the closing date. The purchase price allocation included the FCC license valued at $634,252, cash of $14,318, accounts receivable of $123,959, prepaid other assets of $2,400, furniture and equipment of $1,309. As part of the transaction, the Company also agreed to assume accounts payable of $24,271.

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

Cash	$	14,318
Accounts Receivable		123,959
Prepaid Expenses and Deposits		2,400
Furniture and Equipment at Fair Value		1,309
License		634,252
Accounts Payable		(24,271	)
Note Payable		(168,277	)
Net Assets Acquired	$	583,690

10 

The following table provides unaudited proforma results, prepared in accordance with ASC 805, for the three months ended March 31, 2020, and 2019 respectively, as if IM Telecom and Apeiron Systems had been acquired on January 1, 2018:

	For the Three Months Ended March 31, 2020		For the Three Months Ended March 31, 2019
Net Sales	$	1,957,355	$	2,706,577
Net Profit (Loss)	$	100,833	$	(262,939	)
Net profit (loss) per share, basic and diluted	$	0.00	$	(0.01	)

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following major classifications as of March 31, 2020, and December 31, 2019:

	March 31, 2020			December 31, 2019
Leasehold Improvements	$	46,950		$	46,950
Furniture and Fixtures		102,946			102,946
Billing Software		217,163			217,163
Office Equipment		90,055			86,887
		457,114			453,946
Less:  Accumulated Depreciation and Amortization		(358,473	)		(351,257	)
Property and equipment, net	$	98,641		$	102,689

Depreciation and amortization amounted to $7,215 and $7,216 for the three months ended March 31, 2020, and 2019, respectively. Depreciation and amortization expense are included as a component of operating expenses in the accompanying statements of operations.

NOTE 4 – RIGHT-OF-USE ASSETS

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

	March 31, 2020			December 31, 2019
Right-of-Use Assets	$	261,476		$	151,472
Less:  Accumulated Depreciation		(119,328	)		(72,888	)
Right-of-Use, net	$	142,148		$	78,584

Depreciation amounted to $62,502 and $18,140 for the three months ended March 31, 2020, and 2019, respectively. Depreciation expense is included as a component of operating expenses in the accompanying statements of operations.

The Company has right-of-use assets through leases of property under three non-cancelable leases with terms in excess of one (1) year. The current lease liabilities expire January 1, 2021, December 1, 2021, and May 15, 2022. Future lease liability payments under the terms of these leases are as follows:

2020	$	90,987
2021	$	70,613
2022	$	20,467
Total	$	182,067
Less Current Maturities	$	108,645
Long Term Maturities	$	73,422

The Company also leases two (2) office spaces on a month-to-month basis. Total lease expense for the three months ended March 31, 2020, and 2019 amounted to $3,468 and $21,028, respectively.

11 

NOTE 5 – INTANGIBLE ASSETS

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

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 March 31, 2020 was $634,252.

	March 31, 2020			December 31, 2019
Customer Lists	$	1,135,961		$	1,135,961
Software		2,407,001			2,407,001
License		634,252			634,252
Less: Accumulated Amortization		(2,138,878	)		(1,938,296	)
Intangible Assets, net	$	2,038,336		$	2,238,918

Amortization expense amounted to $200,583 and $225,760 for the three months ended March 31, 2020, and 2019, respectively. Amortization expense is included as a component of operating expenses in the accompanying statements of operations. Amortization expense is expected to be as follows:

2020	$	601,751
2021	$	802,332

NOTE 6 – AMOUNT DUE TO STOCKHOLDER

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 March 31, 2020, was $102,313.

NOTE 7 – 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 March 31, 2020, there are no legal proceedings, except the following:

In August, 2019, the Company won an arbitration award (ratified by the court) from Mr. Glosser in the amount of $357,914, together with arbitrator’s compensation of $4,957, for a total award of $362,871; and Mr. Glosser’s counterclaim was found to be without merit. The Company and Mr. Glosser entered into a Settlement Agreement and Mutual Release on February 24, 2020, pursuant to which this matter was fully settled, resolving all claims, and Mr. Glosser paid the Company $300,000. The settlement amount was recorded and reported as other income.

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 $60,000. 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 March 31, 2020, and December 31, 2019. The letters of credit are not considered in the financial statements.

12 

NOTE 8 – SEGMENT REPORTING

The Company operates within four (4) 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 and Lifeline VETC.

Hosted Services – This segment includes a suite of hosted CPaaS services including SIP/VoIP services, SMS/MMS, BOT integration, mobile numbers, toll free numbers, DID landline numbers, SMS to Email, Database Dip, SD-WAN, voice termination and numerous API driven services.  Apeiron Systems developed, owns and supports its services 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 its website, independent sales agents, ISOs and SCOs.

Mobile Services – This segment includes retail and wholesale cellular voice/text/data services and mobile data (IoT or “Internet of Things”) services. The Company consolidated its wholesale 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’ mobile voice/text/data and mobile data services are supported by a blend of reseller agreements with selected 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 Systems’ mobile 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 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 – This segment operates under its own FCC approved Compliance Plan and FCC wireless ETC designation in eight (8) states which currently include Georgia, Kentucky, Maryland, Nevada, Oklahoma, South Carolina, Vermont and Wisconsin.  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.

Lifeline VETC – This segment operates through a single VETC agent agreement with another ETC.  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:

	Hosted Services		Mobile Services			Lifeline ETC			Lifeline VETC			Total
For the three-month period ended March 31, 2020
Revenue	$	978,675	$	500,251		$	326,341		$	152,088		$	1,957,355
Net Income	$	63,092	$	(42,254	)	$	30,065		$	49,930		$	100,833
Depreciation and amortization	$	10,584	$	17,217		$	10,739		$	31,760		$	270,300
Additions to property and equipment	$	—	$	—		$	—		$	—		$	—
For the three-month period ended March 31, 2019
Revenue	$	715,664	$	726,188		$	169,471		$	1,028,973		$	2,640,296
Net Loss	$	24,178	$	(31,010	)	$	(135,192	)	$	(107,414	)	$	(297,794	)
Depreciation and amortization	$	68,066	$	69,067		$	16,118		$	97,865		$	251,116
Additions to property and equipment	$	—	$	—		$	—		$	—		$	—

13 

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock

The Company has not issued any common stock through March 31, 2020, nor for the year ended December 31, 2019.

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 three months ended March 31, 2020, and 2019, the Company recorded vested options expense of $10,257 and $141,356, respectively. The option expense not taken as of March 31, 2020, is $954,900, with a weighted average term of 2.9 years.

The following table represents stock option activity as of and for the three months ended March 31, 2020:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life		Aggregate Intrinsic Value
Options Outstanding – December 31, 2019		3,800,000	$	0.21		3.0	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Options Outstanding – March 31, 2020		3,800,000	$	0.21		3.0	$	—
Exercisable and Vested, March 31, 2020		3,400,000	$	0.21		2.9	$	—

NOTE 10 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of this filing, and with the exception of the following, no material subsequent events have occurred:

Euler Hermes/Sky Phone Settlement

Between March and July 2019, IM Telecom purchased wireless handsets from Sky Phone, LLC in the amount of $192,293.34. Subsequently, a dispute arose between the parties regarding the amount of the debt, a lack of sufficient transaction documentation and problems with some of the handsets. On or about December, 2019, the debt was transferred to Euler Hermes North America Insurance Company. On April 22, 2020, the parties entered into an agreement to settle the matter whereby IM Telecom agreed to pay $80,000 in monthly payments of $4,000 over twenty (20) months. The first payment was made on April 28, 2020.

SBA Paycheck Protection Program

On April 14, 2020, the operating companies of KonaTel made loan applications to participate in the Small Business Administration’s (the “SBA”) Paycheck Protection Program created as a result of the COVID-19 pandemic. On April 15, 2020, the loan applications of Apeiron Systems, IM Telecom and KonaTel Nevada were approved and loan proceeds in the amounts of $101,800, $20,900 and $186,300, respectively, were received. The Company intends to follow all prescribed loan forgiveness guidelines provided by our local bank and the SBA by using these loan proceeds to fund employee payrolls through the 56-day period ending on June 10, 2020.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Overview of Current and Planned Business Operations

Our Hosted Services (“CPaaS or Communications Platform as a Service”) include SIP/VoIP services, SMS/MMS, BOT integration, mobile numbers, toll free numbers, DID landline numbers, SMS to Email, Database Dip, SD-WAN, voice termination and numerous API driven services. Apeiron Systems developed, owns and supports its services through its dedicated national telecommunications network. Apeiron Systems provides telecommunications services to application developers, call centers and small and medium size businesses. It markets these services through the Apeiron Systems website, independent sales agents, ISOs (Independent Sales Organizations) and Social Media Optimization (“SCO”).

Our Mobile Services include our retail and wholesale cellular voice/text/data services and mobile data (IoT – “Internet of Things”) services. We consolidated our wholesale and retail mobile services with Apeiron Systems’ hosted CPaaS services, providing Apeiron Systems with a bundled portfolio of mobile and hosted CPaaS services. Its mobile voice/text/data and mobile data 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 Systems’ 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. It 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.

Our Lifeline ETC services operate under its own FCC approved Compliance Plan and FCC wireless ETC designation in eight (8) states which currently include Georgia, Kentucky, Maryland, Nevada, Oklahoma, South Carolina, Vermont, and Wisconsin.  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.

Our Lifeline VETC services operate through a single VETC agent agreement with another ETC.  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.

Results of Operations

Comparison of the quarter ended March 31, 2020, to the quarter ended March 31, 2019

For the quarter ended March 31, 2020, we had $1,957,355 in revenues from operations compared to the quarter ended March 31, 2019, where we had $2,640,296 in revenue from operations. The cost of revenue for the quarter ended March 31, 2020, was $1,192,177, compared to $1,503,460 for the quarter ended March 31, 2019. We had a gross profit of $765,178 for the quarter ended March 31, 2020, and $1,136,836 for the quarter ended March 31, 2019.

15 

For the quarter ended March 31, 2020, and the quarter ended March 31, 2019, total operating expenses were $955,169 and $1,423,926, respectively, for a decrease of $468,757.

For the quarter ended March 31, 2020, non-operating expenses were interest income of $1, other income of $301,372 (from an arbitration settlement) and interest expense of $10,549, compared to $676 interest income and interest expense of $11,379 for the quarter ended March 31, 2019.

For the quarter ended March 31, 2020, we had net income of $100,833. For the quarter ended March 31, 2019, we had a net loss of $297,793.

In comparing our Statements of Operations between the three-month periods ended March 31, 2020, and 2019, the Company continued the process of diversifying the service mix. Gross Revenue from Hosted Services and Lifeline ETC were new services added through acquisitions and accounted for 66.7% of the total gross revenue for the three months ended March 31, 2020. Mobile services showed a decline of 26.5%, and Lifeline VETC showed a decrease of 84.5% in gross revenue for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. Gross profit margin overall was 39.0% for the three months ended March 31, 2020, compared to 43.1% for the three months ended March 31, 2019. Hosted services and Lifeline ETC gross profit margin was 51.6% and 52.17%, respectively, for the three months ended March 31, 2020. Mobile services gross profit margin was 9.2% compared to 6.2% for the three months ended March 31, 2020, and 2019, respectively. Lifeline VETC gross profit margin was 37.4% compared to 70.5% for the three months ended March 31, 2020, and 2019, respectively.

 Liquidity and Capital Resources

As of March 31, 2020, we have $227,269 in cash and cash equivalents on hand.

In comparing liquidity between the three-month periods ending March 31, 2020, and March 31, 2019, cash and short-term assets decreased by 0.3%. Liabilities and total overall debt showed a 1.2% increase in the three-month period ending March 31, 2020, when compared to March 31, 2019. Going forward, equity investment and growth of new services is expected to provide the liquidity for our business.

Overall, the current ratio (current assets divided by our current liabilities) remained at .36 as of March 31, 2020, compared to December 31, 2019. Working capital increased by 0.7%.

Cash Flow from Operations

During the three months ended March 31, 2020, cash flow provided by operating activities was $407,322 and for the three months ended March 31, 2019, cash flow provided by operating activities was $47,719. Cash flows provided by operating activities were primarily attributable to the Company’s other income and dividends paid for the three months ended March 31, 2020.

Cash Flows from Investing Activities

During the three months ended March 31, 2020, and the three months ended March 31, 2019, cash flow used in investing activities was $3,168 and $42,293, respectively. The cash flow from investing activities for the three months ended March 31, 2020, were from an asset purchase. The cash flow from investing activities for the three months ended March 31, 2019, was derived from the purchase of IM Telecom.

Cash Flows from Financing Activities

During the three months ended March 31, 2020, and the three months ended March 31, 2019, cash flow provided by (used in) financing activities was ($368,359) and $157,773, respectively. The funds used in financing comprised repayment of $12,237 on revolving lines of credit, $26,089 principal payments on lease liabilities and $49,044 in repayments due to a stockholder for the three months ended March 31, 2020.

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Going Concern

The Company for the three months ended March 31, 2020 generated net income of $100,833 derived from other income of $301,372. For the three months ended March 31, 2019, the net loss was $297,793. The Company has sustained itself through the operations of the business as is indicated by net cash provided by operations of $126,333 and $72,720 for the three months ended March 31, 2020, and 2019, respectively. The accumulated deficit as of March 31, 2020 is $6,106,273.

The Company has ameliorated any substantial doubt issues by generating additional cash flow since the completion of our merger with KonaTel Nevada on December 18, 2017; the acquisitions of Apeiron Systems and IM Telecom; receiving cash investments through the private placement of shares of our common stock; and revenues from the growth of IM Telecom, all of which has contributed to an improvement in our working capital, without the use of additional lines of credit or borrowings.

Our overall goal was to increase profit margins through cost controls and selection of high margin product offerings. Our profit margins were 39% and 43% for the three months ended March 31, 2020, and 2019, respectively. Our overall expenses were decreased from $1,423,926 for the three months ended March 31, 2019, to $955,169 for three months ended March 31, 2020. We continue to be confident that with aggressive management and business development that we will continue to eliminate any going concern issues.

Off-Balance Sheet Arrangements

We had no Off-Balance Sheet arrangements during the period ended March 31, 2020.

Critical Accounting Policies

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 March 31, 2020, and December 31, 2019, there are 3,400,000 potentially dilutive common shares. 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.

The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of March 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 one (1) customer in the amount of $53,649, or 15.8%, of accounts receivables. 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 (3) customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%, respectively.

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers and cellular providers. For the three months ended March 31, 2020, the Company had one (1) customer that accounted for $555,826, or 28.4%, of revenue. For the three months ended March 31, 2019, the Company had one (1) cellular partner that accounted for $728,649 in contractually obligated commission payments or 27.6% of revenue.

Effect of Recent Accounting Pronouncements

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

17 

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.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

Not required.

Item 4.  Controls and Procedures.

Management’s Quarterly Report on Internal Control Over Financial Reporting

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

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of March 31, 2020, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were adequate as of March 31, 2020. Prior to this period, we achieved effective controls for ensuring the accuracy of reporting over significant account balances, including the review, approval, documentation of related transactions and other complex accounting procedures. These control improvements were achieved through the implementation of a Vice President of Finance function and additional segregation of duties and responsibilities as well as multi-level review procedures to validate accounts and financial results. The Company also currently has two independent directors.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Not required; however, see Item 1A. Risk Factors, Part I, commencing on page 11, of the Company’s 10-K Annual Report for the fiscal year ended December 31, 2019, filed with the SEC on May 11, 2020, for a list of “Risk Factors,” which Annual Report can be accessed by Hyperlink in Part II, Item 6 hereof.

The following risk factor regarding the COVID-19 pandemic was one of the risk factors included in the Company’s 10-K Annual Report for the year ended December 31, 2019:

18 

“Our business operations could be impacted by the current world health crisis.

On January 30, 2020, the World Health Organization declared the coronavirus (the ‘COVID-19’) outbreak a “Public Health Emergency of International Concern,” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in which we operate. While it is unknown how long these conditions will last and what the complete financial affect will be on us, to date and as a result of actions taken by management to mitigate a material impact to our financial statements or our operational results, we are not currently experiencing a material impact to our financial statements or our results of operations; however, a pandemic typically results in social distancing, travel bans and quarantines, which may result in limited access to our facilities, customers, management, support staff and professional advisors.  These, in turn, may not only impact our operations, financial condition and demand for our services, but our overall ability to react timely to mitigate the impact of this event.  Given our small staff, if a key member of our team were disabled by COVID-19, it could have a material negative impact on our business.  Also, it may substantially hamper our efforts to provide our investors with timely information and to comply with our filing obligations under the Exchange Act with the SEC. If this pandemic were to last a prolonged period of time, we could see a decline in revenue due to the closure of customer businesses, which could then impact our ability pay our short-term debts. Our concentration of revenue from a small group of Apeiron Systems’ customers makes it reasonably possible that we are vulnerable to the risk of a long-term severe impact. Our dependence on certain suppliers to provide equipment to be distributed or sold to our customers could also be impacted if inventory shortages occur due to import or export restrictions resulting from the pandemic.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None; not applicable.

Item 3. Defaults upon Senior Securities

None; not applicable.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

19 

Item 6. Exhibits

Exhibit Number	Description of Exhibit	Filing
3(i)	Amended and Restated Certificate of Incorporation	Filed with the Form 8-K/A filed on December 20, 2017 and incorporated herein by reference.
3(ii)	Amended and Restated Bylaws	Filed with the Form 8-K/A filed on December 20, 2017 and incorporated herein by reference.
14	Code of Ethics	Filed with the Form 8-K/A filed on December 20, 2017 and incorporated herein by reference.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

Exhibits incorporated by reference:

8-K Current Report dated May 6, 2020, and filed with the SEC on May 13, 2020, regarding the extension of the filing of this Quarterly Report, among other unrelated matters.

Annual Report on Form 10-K for the year ended December 31, 2019, and filed with the SEC on May 11, 2020.

20 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

KonaTel, Inc.

Date:	June 5, 2020	By:	/s/ D. Sean McEwen
			D. Sean McEwen
			Chairman, President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date:	June 5, 2020	By:	/s/ D. Sean McEwen
			D. Sean McEwen
			Chairman, President, CEO and a Director

Date:	June 5, 2020	By:	/s/ Brian R. Riffle
			Brian R. Riffle
			Chief Financial Officer

21 

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, D. Sean McEwen, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of KonaTel, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.   The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)       designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)       designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)       evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)       disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);

a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:	June 5, 2020	By:	/s/ D. Sean McEwen
			D. Sean McEwen
			Chairman, President and CEO

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian R. Riffle, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of KonaTel, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.   The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)       designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)       designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)       evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)       disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);

a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date:	June 5, 2020	By:	/s/ Brian R. Riffle
			Brian R. Riffle
			Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of KonaTel, Inc. (the “Registrant”) on Form 10-Q for the quarterly period ending March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), we, D. Sean McEwen, President and Chief Executive Officer and Brian R. Riffle, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.

Date:	June 5, 2020	By:	/s/ D. Sean McEwen
			D. Sean McEwen
			Chairman, President and CEO

Date:	June 5, 2020	By:	/s/ Brian R. Riffle
			Brian R. Riffle
			Chief Financial Officer

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Right-To-Use Assets (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Depreciation	$ 62,502	$ 18,140
Lease expense	$ 3,468	$ 21,028
Minimum
Implied interest rate used to record assets at present value	5.29%
Maximum
Implied interest rate used to record assets at present value	5.34%

XML

Amount Due to Stockholder (Details Narrative) - USD ($)		3 Months Ended	12 Months Ended
		Mar. 31, 2019	Dec. 31, 2019	Mar. 31, 2020
Proceeds from related parties		$ 200,000
Amount due to related party			$ 151,357	$ 102,313
Joshua Ploude, Ceo of Apeiron
Proceeds from related parties			$ 200,000
Interest rate	[1]		10.00%
Amount due to related party				$ 102,313

[1] The interest rate will increase to 12% per annum after May 1, 2019.

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended March 31,
	2020		2019
Net income (loss)	$	100,833	$	(297,793	)
Weighted average shares outstanding during period on which basic earnings per share is calculated		40,692,286		40,692,286
Effect of dilutive shares
Incremental shares under stock-based compensation		3,400,000		2,375,000
Weighted average shares outstanding during period on which diluted earnings per share is calculated		44,092,286		43,067,286
Earnings per share attributable to common stockholders
Basic earnings (loss) per share	$	0.00	$	(0.01	)
Diluted earnings (loss) per share	$	0.00	$	(0.01	)

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Segment Reporting

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment Reporting

NOTE 8 – SEGMENT REPORTING

The Company operates within four (4) 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 and Lifeline VETC.

Hosted Services – This segment includes a suite of hosted CPaaS services including SIP/VoIP services, SMS/MMS, BOT integration, mobile numbers, toll free numbers, DID landline numbers, SMS to Email, Database Dip, SD-WAN, voice termination and numerous API driven services.  Apeiron Systems developed, owns and supports its services 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 its website, independent sales agents, ISOs and SCOs.

Mobile Services – This segment includes retail and wholesale cellular voice/text/data services and mobile data (IoT or “Internet of Things”) services. The Company consolidated its wholesale 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’ mobile voice/text/data and mobile data services are supported by a blend of reseller agreements with selected 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 Systems’ mobile 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 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 – This segment operates under its own FCC approved Compliance Plan and FCC wireless ETC designation in eight (8) states which currently include Georgia, Kentucky, Maryland, Nevada, Oklahoma, South Carolina, Vermont and Wisconsin.  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.

Lifeline VETC – This segment operates through a single VETC agent agreement with another ETC.  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:

	Hosted Services		Mobile Services			Lifeline ETC			Lifeline VETC			Total
For the three-month period ended March 31, 2020
Revenue	$	978,675	$	500,251		$	326,341		$	152,088		$	1,957,355
Net Income	$	63,092	$	(42,254	)	$	30,065		$	49,930		$	100,833
Depreciation and amortization	$	10,584	$	17,217		$	10,739		$	31,760		$	270,300
Additions to property and equipment	$	—	$	—		$	—		$	—		$	—
For the three-month period ended March 31, 2019
Revenue	$	715,664	$	726,188		$	169,471		$	1,028,973		$	2,640,296
Net Loss	$	24,178	$	(31,010	)	$	(135,192	)	$	(107,414	)	$	(297,794	)
Depreciation and amortization	$	68,066	$	69,067		$	16,118		$	97,865		$	251,116
Additions to property and equipment	$	—	$	—		$	—		$	—		$	—

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Right-To-Use Assets

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Right-To-Use Assets

NOTE 4 – RIGHT-OF-USE ASSETS

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

	March 31, 2020			December 31, 2019
Right-of-Use Assets	$	261,476		$	151,472
Less:  Accumulated Depreciation		(119,328	)		(72,888	)
Right-of-Use, net	$	142,148		$	78,584

Depreciation amounted to $62,502 and $18,140 for the three months ended March 31, 2020, and 2019, respectively. Depreciation expense is included as a component of operating expenses in the accompanying statements of operations.

The Company has right-of-use assets through leases of property under three non-cancelable leases with terms in excess of one (1) year. The current lease liabilities expire January 1, 2021, December 1, 2021, and May 15, 2022. Future lease liability payments under the terms of these leases are as follows:

2020	$	90,987
2021	$	70,613
2022	$	20,467
Total	$	182,067
Less Current Maturities	$	108,645
Long Term Maturities	$	73,422

The Company also leases two (2) office spaces on a month-to-month basis. Total lease expense for the three months ended March 31, 2020, and 2019 amounted to $3,468 and $21,028, respectively.

XML

Cover - shares	3 Months Ended
	Mar. 31, 2020	Jun. 05, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2020
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020
Current Fiscal Year End Date	--12-31
Entity File Number	001-10171
Entity Registrant Name	KonaTel, Inc.
Entity Central Index Key	0000845819
Entity Incorporation, State or Country Code	DE
Entity 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

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance at Dec. 31, 2018	$ 40,692	$ 7,041,696	$ (4,352,073)	$ 2,730,315
Beginning Balance, shares at Dec. 31, 2018	40,692,286
Value of Options Issued as Part of IM Telecom Acquisition		98,482		98,482
Stock Based Compensation		141,356		141,356
Net loss			(297,793)	(297,793)
Ending Balance at Mar. 31, 2019	$ 40,692	7,281,534	(4,649,866)	2,672,360
Ending Balance, shares at Mar. 31, 2019	40,692,286
Beginning Balance at Dec. 31, 2019	$ 40,692	7,380,029	(5,896,977)	1,523,744
Beginning Balance, shares at Dec. 31, 2019	40,692,286
Stock Based Compensation		10,257		10,257
Dividends Paid to Apeiron Systems shareholders			(310,129)	(310,129)
Net loss			100,833	100,833
Ending Balance at Mar. 31, 2020	$ 40,692	$ 7,390,286	$ (6,106,273)	$ 1,324,705
Ending Balance, shares at Mar. 31, 2020	40,692,286

XML

Subsequent Events (Details Narrative) - Subsequent Event - USD ($)			1 Months Ended
		Apr. 22, 2020	Apr. 15, 2020
SBA's Paycheck Protection Program/Apeiron Systems
Subsequent Event [Line Items]
Proceeds received from SBA's Paycheck Protection Program			$ 101,800
SBA's Paycheck Protection Program/IM Telecom
Subsequent Event [Line Items]
Proceeds received from SBA's Paycheck Protection Program			20,900
SBA's Paycheck Protection Program/KonaTel Nevada
Subsequent Event [Line Items]
Proceeds received from SBA's Paycheck Protection Program			$ 186,300
Euler Hermes/Sky Phone Settlement
Subsequent Event [Line Items]
Settlement agreement, description		Between March and July 2019 IM Telecom, LLC purchased wireless handsets from Sky Phone, LLC in the amount of $192,293.34. Subsequently, a dispute arose between the parties regarding the amount of the debt, a lack of sufficient transaction documentation and problems with some of the handsets. On or about December 2019 the debt was transferred to Euler Hermes North America Insurance Company.
Obligation for purchases, agreed settlement	[1]	$ 80,000

[1] IM Telecom agreed to pay in monthly payments of $4,000 over twenty months.

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Property and Equipment

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Property and Equipment

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following major classifications as of March 31, 2020, and December 31, 2019:

	March 31, 2020			December 31, 2019
Leasehold Improvements	$	46,950		$	46,950
Furniture and Fixtures		102,946			102,946
Billing Software		217,163			217,163
Office Equipment		90,055			86,887
		457,114			453,946
Less:  Accumulated Depreciation and Amortization		(358,473	)		(351,257	)
Property and equipment, net	$	98,641		$	102,689

Depreciation and amortization amounted to $7,215 and $7,216 for the three months ended March 31, 2020, and 2019, respectively. Depreciation and amortization expense are included as a component of operating expenses in the accompanying statements of operations.

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Earnings Per Share
Potentially dilutive common shares	3,400,000	3,400,000
Concentration Risk
Revenue	$ 1,957,355	$ 2,640,296
Trade Accounts Receivable | Customer #3
Concentration Risk
Concentration risk, percentage			13.30%
Receivable concentration			$ 48,475
Trade Accounts Receivable | Customer #2
Concentration Risk
Concentration risk, percentage			21.30%
Receivable concentration			$ 77,662
Trade Accounts Receivable | Customer #1
Concentration Risk
Concentration risk, percentage	15.80%		24.40%
Receivable concentration	$ 53,649		$ 89,078
Revenue | Cellular Partner
Concentration Risk
Concentration risk, percentage		27.60%
Revenue		$ 728,649
Revenue | Customer #1
Concentration Risk
Concentration risk, percentage	28.40%
Revenue	$ 555,826

XML

Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

	March 31, 2020			December 31, 2019
Customer Lists	$	1,135,961		$	1,135,961
Software		2,407,001			2,407,001
License		634,252			634,252
Less: Accumulated Amortization		(2,138,878	)		(1,938,296	)
Intangible Assets, net	$	2,038,336		$	2,238,918

Schedule of Intangible Assets Future Amortization Expense

2020	$	601,751
2021	$	802,332

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Stockholders' Equity (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Equity [Abstract]
Stock-based compensation expense, vested options	$ 10,257	$ 141,356
Deferred compensation expense	$ 954,900
Weighted average term, compensation expense	3 years
Options vesting period	5 years	5 years

XML

Transactions

3 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Transactions

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 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 $168,677.

The purchase price of $617,920 consisted of payments of debt and accounts payable made by the company on behalf of IM Telecom from the PMSI effective date of February 7, 2018, until January 31, 2019, the closing date. The purchase price allocation included the FCC license valued at $634,252, cash of $14,318, accounts receivable of $123,959, prepaid other assets of $2,400, furniture and equipment of $1,309. As part of the transaction, the Company also agreed to assume accounts payable of $24,271.

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

Cash	$	14,318
Accounts Receivable		123,959
Prepaid Expenses and Deposits		2,400
Furniture and Equipment at Fair Value		1,309
License		634,252
Accounts Payable		(24,271	)
Note Payable		(168,277	)
Net Assets Acquired	$	583,690

The following table provides unaudited proforma results, prepared in accordance with ASC 805, for the three months ended March 31, 2020, and 2019 respectively, as if IM Telecom and Apeiron Systems had been acquired on January 1, 2018:

	For the Three Months Ended March 31, 2020		For the Three Months Ended March 31, 2019
Net Sales	$	1,957,355	$	2,706,577
Net Profit (Loss)	$	100,833	$	(262,939	)
Net profit (loss) per share, basic and diluted	$	0.00	$	(0.01	)

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenue	$ 1,957,355	$ 2,640,296
Cost of Revenue	1,192,177	1,503,460
Gross Profit	765,178	1,136,836
Operating expenses
Payroll and Related Expenses	448,149	471,305
Operating and Maintenance	193,852	557,100
Bad Debt	1,500
Utilities and Facilities	8,867	35,819
Depreciation and Amortization	270,300	251,116
General and administrative	12,743	41,902
Marketing and Advertising	944	21,614
Taxes and Insurance	18,814	45,070
Total Operating Expenses	955,169	1,423,926
Operating Loss	(189,991)	(287,090)
Other Income and Expense
Interest Income	1	676
Other Income	301,372
Interest Expense	(10,549)	(11,379)
Total Other Income and Expenses	290,824	(10,703)
Net Income (Loss)	$ 100,833	$ (297,793)
Net Income (Loss) per Share, Basic	$ 0.00	$ (0.01)
Weighted Average Outstanding Shares, Basic	40,692,286	40,692,286
Diluted Net Income (Loss) per Share	$ 0.00	$ (0.01)
Weighted Average Outstanding Shares, Diluted	44,092,286	43,067,286

XML

Transactions - Schedule of Transactions of Recognized Assets Acquired and Liabilities Assumed (Details) - IM Telecom, LLC	Dec. 31, 2019 USD ($)
Cash	$ 14,318
Accounts Receivable	123,959
Prepaid Expense	2,400
Furniture and Equipment at Fair Value	1,309
License	634,252
Accounts Payable	(24,271)
Note Payable	(168,277)
Net Assets Acquired	$ 583,690

XML

Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

	Hosted Services		Mobile Services			Lifeline ETC			Lifeline VETC			Total
For the three-month period ended March 31, 2020
Revenue	$	978,675	$	500,251		$	326,341		$	152,088		$	1,957,355
Net Income	$	63,092	$	(42,254	)	$	30,065		$	49,930		$	100,833
Depreciation and amortization	$	10,584	$	17,217		$	10,739		$	31,760		$	270,300
Additions to property and equipment	$	—	$	—		$	—		$	—		$	—
For the three-month period ended March 31, 2019
Revenue	$	715,664	$	726,188		$	169,471		$	1,028,973		$	2,640,296
Net Loss	$	24,178	$	(31,010	)	$	(135,192	)	$	(107,414	)	$	(297,794	)
Depreciation and amortization	$	68,066	$	69,067		$	16,118		$	97,865		$	251,116
Additions to property and equipment	$	—	$	—		$	—		$	—		$	—

XML

Right-To-Use Assets - Supplemental Balance Sheet Information Related to Operating Leases (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Right-to-Use Assets	$ 261,476	$ 151,472
Less: Accumulated Depreciation	(119,328)	(72,888)
Right to Use Assets, Net	$ 142,148	$ 78,584

XML

Intangible Assets (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 200,583	$ 225,760
Fair market value of acquired license	$ 634,252

XML

Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Stockholders' Equity

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock

The Company has not issued any common stock through March 31, 2020, nor for the year ended December 31, 2019.

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 three months ended March 31, 2020, and 2019, the Company recorded vested options expense of $10,257 and $141,356, respectively. The option expense not taken as of March 31, 2020, is $954,900, with a weighted average term of 2.9 years.

The following table represents stock option activity as of and for the three months ended March 31, 2020:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life		Aggregate Intrinsic Value
Options Outstanding – December 31, 2019		3,800,000	$	0.21		3.0	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Options Outstanding – March 31, 2020		3,800,000	$	0.21		3.0	$	—
Exercisable and Vested, March 31, 2020		3,400,000	$	0.21		2.9	$	—

XML

Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

NOTE 5 – INTANGIBLE ASSETS

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

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 March 31, 2020 was $634,252.

	March 31, 2020			December 31, 2019
Customer Lists	$	1,135,961		$	1,135,961
Software		2,407,001			2,407,001
License		634,252			634,252
Less: Accumulated Amortization		(2,138,878	)		(1,938,296	)
Intangible Assets, net	$	2,038,336		$	2,238,918

Amortization expense amounted to $200,583 and $225,760 for the three months ended March 31, 2020, and 2019, respectively. Amortization expense is included as a component of operating expenses in the accompanying statements of operations. Amortization expense is expected to be as follows:

2020	$	601,751
2021	$	802,332

XML

Transactions (Tables)

3 Months Ended

Mar. 31, 2020

Business Combinations [Abstract]

Schedule of Transactions of Recognized Assets Acquired and Liabilities Assumed

Cash	$	14,318
Accounts Receivable		123,959
Prepaid Expenses and Deposits		2,400
Furniture and Equipment at Fair Value		1,309
License		634,252
Accounts Payable		(24,271	)
Note Payable		(168,277	)
Net Assets Acquired	$	583,690

Schedule of Pro-Forma Financial Information

	For the Three Months Ended March 31, 2020		For the Three Months Ended March 31, 2019
Net Sales	$	1,957,355	$	2,706,577
Net Profit (Loss)	$	100,833	$	(262,939	)
Net profit (loss) per share, basic and diluted	$	0.00	$	(0.01	)

XML

Segment Reporting (Details Narrative)	3 Months Ended
	Mar. 31, 2020 Integer
Segment Reporting [Abstract]
Number of reportable segments	4

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Current Assets
Cash and Cash Equivalents	$ 227,269	$ 191,474
Accounts Receivable, net	339,524	377,485
Inventory, Net	4,960	4,659
Prepaid Expenses	1,611	1,743
Total Current Assets	573,364	575,361
Fixed Assets
Property and Equipment, Net	98,641	102,689
Right of Use Assets, Net	142,148	78,584
Total Fixed Assets	240,789	181,273
Other Assets
Intangible Assets, Net	2,038,336	2,238,918
Other Assets	172,065	207,740
Total Other Assets	2,210,401	2,446,658
Total Assets	3,024,554	3,203,292
Current Liabilities
Accounts Payable and Accrued Expenses	1,275,300	1,223,195
Amount Due to Stockholder	102,313	151,357
Revolving Line of Credit		12,237
Note Payable, current portion	81,905	75,905
Lease Liabilities, current portion	108,645	69,148
Deferred Revenue	38,094	53,074
Customer Deposits	544	31,087
Total Current Liabilities	1,606,801	1,616,003
Long Term Liabilities
Lease Liabilities, long term	73,422	12,942
Note Payable, long term	19,626	50,603
Total Long Term Liabilities	93,048	63,545
Total Liabilities	1,699,849	1,679,548
Stockholders' Equity
Common Stock	40,692	40,692
Additional Paid-In Capital	7,390,286	7,380,029
Accumulated Deficit	(6,106,273)	(5,896,977)
Total Stockholders' Equity	1,324,705	1,523,744
Total Liabilities and Stockholders' Equity	$ 3,024,554	$ 3,203,292

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Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash Flows from Operating Activities
Net Income (Loss)	$ 100,833	$ (297,793)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and Amortization	270,300	251,116
Bad Debt	1,500
Stock-based compensation	10,257	141,356
Changes in Operating Assets and Liabilities, net of effects of acquisition:
Accounts Receivable	36,461	203,712
Inventory	(301)	135
Prepaid Expenses	132	3,461
Accounts Payable and Accrued Expenses	(2,012)	(44,541)
Deferred Revenue	(14,980)	(10,154)
Customer Deposits	(30,543)
Other Assets	35,675	(199,573)
Net cash provided by operating activities	407,322	47,719
Cash Flows from Investing Activities
Cash Received in Acquisition of IM Telecom		14,318
Purchase of Assets	(3,168)
Asset Purchase of IM Telecom		(56,611)
Net cash provided by (used in) investing activities	(3,168)	(42,293)
Cash Flows from Financing Activities
Payments received on Notes Receivable		25,001
Payments on Operating Lease Liabilities	(26,089)	(17,517)
Repayment of Revolving Lines of Credit	(12,237)	(22,147)
Repayment of Notes Payable	(24,977)
Advances made by Stockholder		200,000
Repayments of amounts due to Related Party and Seller	(49,044)	(27,564)
Dividends Paid to Apeiron shareholders	(256,012)
Net cash provided by (used in) financing activities	(368,359)	157,773
Net Change in Cash	35,795	163,199
Cash, Beginning of period	191,474	56,510
Cash, End of period	227,269	219,709
Supplemental disclosure of cash flow information:
Cash paid for interest	7,201	14,297
Cash paid for taxes
Asset Purchase
Value of Options		98,482
Right of use assets obtained in exchange for new operating lease liabilities	$ 129,108	113,035
IM Telecom, LLC
Asset Purchase
Accounts receivable		63,764
Vendor Deposits		1,450
Prepaid Expense		950
Furniture and Equipment at Fair Market Value		1,309
Other Assets		1,450
Accounts Payable and Accrued Expenses, net of cash		(23,870)
License		658,452
Value of Options		$ 98,482

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Transactions (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Incentive stock options granted
Options, exercise price
Options cancelled
IM Telecom, LLC
Acquisition purchase price		$ 617,920
Ownership interest acquired		100.00%
Consulting fees		$ 100
Incentive stock options granted		500,000
Options, exercise price		$ 0.20
Options cancelled		500,000
Settlement agreement and release, description		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, by reason of the indemnifying obligations of Mr. Morrow under the PSMI, as amended, by reason of an overpayment made to IM Telecom of $168,677.
Accounts Receivable		$ 123,959
Accounts payable and accrued expenses assumed		(24,271)
License		634,252
Cash		14,318
Prepaid Expense		2,400
Furniture and Equipment at Fair Value		$ 1,309

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Summary of Significant Accounting Policies - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Accounting Policies [Abstract]
Net Income (Loss)	$ 100,833	$ (297,793)
Weighted average shares outstanding during period on which basic earnings per share is calculated	40,692,286	40,692,286
Effect of dilutive shares
Incremental shares under stock-based compensation	3,400,000	2,375,000
Weighted average shares outstanding during period on which diluted earnings per share is calculated	44,092,286	43,067,286
Earnings per share attributable to common stockholders
Basic earnings (loss) per share	$ 0.00	$ (0.01)
Diluted earnings (loss) per share	$ 0.00	$ (0.01)

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Right-To-Use Assets (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Supplemental Balance Sheet Information Related to Operating Leases

	March 31, 2020			December 31, 2019
Right-of-Use Assets	$	261,476		$	151,472
Less:  Accumulated Depreciation		(119,328	)		(72,888	)
Right-of-Use, net	$	142,148		$	78,584

Schedule of Future Minimum Lease Payments for Operating Leases

2020	$	90,987
2021	$	70,613
2022	$	20,467
Total	$	182,067
Less Current Maturities	$	108,645
Long Term Maturities	$	73,422

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation

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.

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

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

Basis of Consolidation

Basis of Consolidation

The condensed consolidated financial statements include the Company and three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. The condensed consolidated balance sheet for year ended December 31, 2019, includes the Company and the wholly-owned corporate subsidiaries, KonaTel Nevada Apeiron Systems and IM Telecom. The condensed consolidated statements of operations, cash flows, and stockholders’ equity (deficit) for the three-month period ended March 31, 2019, include the Company and the three (3) wholly owned subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom (February and March). All significant intercompany transactions are eliminated.

Net Income/(Loss) Per Share

Net Income/(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 March 31, 2020, and March 31, 2019, there are 3,400,000 potentially dilutive common shares. The dilutive common shares are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive.

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.

Concentration of Credit Risk

Concentrations of Credit Risk

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

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

The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of March 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 one (1) customer in the amount of $53,649, or 15.8%, of accounts receivables. 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 (3) customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%, respectively.

Concentration of Major Customer

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers and cellular providers. For the three months ended March 31, 2020, the Company had one (1) wholesale customer that accounted for $555,826, or 28.4%, of revenue. For the three months ended March 31, 2019, the Company had one (1) cellular partner that accounted for $728,649 in contractually obligated commission payments or 27.6% of revenue.

Effect of Recent Accounting Pronouncements

Effect of Recent Accounting Pronouncements

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

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Contingencies and Commitments

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Contingencies and Commitments

NOTE 7 – 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 March 31, 2020, there are no legal proceedings, except the following:

In August, 2019, the Company won an arbitration award (ratified by the court) from Mr. Glosser in the amount of $357,914, together with arbitrator’s compensation of $4,957, for a total award of $362,871; and Mr. Glosser’s counterclaim was found to be without merit. The Company and Mr. Glosser entered into a Settlement Agreement and Mutual Release on February 24, 2020, pursuant to which this matter was fully settled, resolving all claims, and Mr. Glosser paid the Company $300,000. The settlement amount was recorded and reported as other income.

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 $60,000. 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 March 31, 2020, and December 31, 2019. The letters of credit are not considered in the financial statements.

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Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 457,114	$ 453,946
Less: Accumulated Depreciation and Amortization	(358,473)	(351,257)
Property, plant and equipment, net	98,641	102,689
Leasehold Improvements
Property, Plant and Equipment [Line Items]
Property, plant and equipment	46,950	46,950
Furniture and Fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment	102,946	102,946
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	$ 90,055	$ 86,887

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Intangible Assets - Schedule of Intangible Assets and Goodwill (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Customer Lists	$ 1,135,961	$ 1,135,961
Software	2,407,001	2,407,001
License	634,252	634,252
Less: Accumulated Amortization	(2,138,878)	(1,938,296)
Intangible assets, net	$ 2,038,336	$ 2,238,918

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Contingencies and Commitments (Details Narrative) - USD ($)		3 Months Ended	12 Months Ended
		Mar. 31, 2020	Dec. 31, 2019
Positive Outcome of Litigation
Litigation settlement, arbitration award	[1]		$ 362,871
Name of plaintiff			Saul Glosser
Dispute resolution type, description			Arbitration
Proceeds received from litigation settlement		$ 300,000
Standby Letters of Credit
Letter of credit		$ 60,000	$ 60,000

[1] $357,914 plus arbitrator compensation of $4,957.

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Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

NOTE 10 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of this filing, and with the exception of the following, no material subsequent events have occurred:

Euler Hermes/Sky Phone Settlement

Between March and July 2019, IM Telecom purchased wireless handsets from Sky Phone, LLC in the amount of $192,293.34. Subsequently, a dispute arose between the parties regarding the amount of the debt, a lack of sufficient transaction documentation and problems with some of the handsets. On or about December, 2019, the debt was transferred to Euler Hermes North America Insurance Company. On April 22, 2020, the parties entered into an agreement to settle the matter whereby IM Telecom agreed to pay $80,000 in monthly payments of $4,000 over twenty (20) months. The first payment was made on April 28, 2020.

SBA Paycheck Protection Program

On April 14, 2020, the operating companies of KonaTel made loan applications to participate in the Small Business Administration’s (the “SBA”) Paycheck Protection Program created as a result of the COVID-19 pandemic. On April 15, 2020, the loan applications of Apeiron Systems, IM Telecom and KonaTel Nevada were approved and loan proceeds in the amounts of $101,800, $20,900 and $186,300, respectively, were received. The Company intends to follow all prescribed loan forgiveness guidelines provided by our local bank and the SBA by using these loan proceeds to fund employee payrolls through the 56-day period ending on June 10, 2020.

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Amount Due to Stockholder

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Amount Due to Stockholder

NOTE 6 – AMOUNT DUE TO STOCKHOLDER

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 March 31, 2020, was $102,313.

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Segment Reporting - Schedule of Segment Reporting Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Revenue	$ 1,957,355	$ 2,640,296
Net Loss	100,833	(297,793)
Depreciation and amortization	270,300	251,116
Additions to property and equipment
Hosted Services
Segment Reporting Information [Line Items]
Revenue	978,675	715,664
Net Loss	63,092	(24,178)
Depreciation and amortization	210,584	68,066
Additions to property and equipment
Mobile Services
Segment Reporting Information [Line Items]
Revenue	500,251	726,188
Net Loss	(42,254)	(31,010)
Depreciation and amortization	17,217	69,067
Additions to property and equipment
Lifeline ETC
Segment Reporting Information [Line Items]
Revenue	326,341	169,471
Net Loss	30,065	(135,192)
Depreciation and amortization	10,739	16,118
Additions to property and equipment
Lifeline VETC
Segment Reporting Information [Line Items]
Revenue	152,088	1,028,973
Net Loss	49,930	(107,414)
Depreciation and amortization	31,760	97,865
Additions to property and equipment

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Property and Equipment (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 7,215	$ 7,216

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Intangible Assets - Schedule of Intangible Assets Future Amortization Expense (Details)	Mar. 31, 2020 USD ($)
Intangible Assets Future Amortization Expense
2020	$ 601,751
2021	$ 802,332

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value in dollars	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	40,692,286	40,692,286
Common stock, shares outstanding	40,692,286	40,692,286

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of Company

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

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

On December 31, 2018, we acquired Apeiron Systems, Inc., a Nevada corporation d/b/a “Apeiron” (“Apeiron Systems”), which is also our wholly-owned subsidiary. Apeiron Systems was organized in 2013 and is an international hosted services CPaaS (“Communications Platform as a Service”) provider that designed, built, owns and operates its private core network, supporting a suite of real-time business communications services and Applications Programming Interfaces (“APIs”). As an Internet Telephony Service Provider (“ITSP”), Apeiron Systems holds a Federal Communications Commission (the “FCC”) numbering authority license. Some of Apeiron Systems’ hosted services include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”), number services including mobile, toll free and DID landline numbers, SMS to Email services, Database Dip services, SD-WAN, voice termination, and numerous API driven services including voice, messaging, and network management.

On January 31, 2019, we acquired IM Telecom, LLC, an Oklahoma limited liability company, d/b/a “Infiniti Mobile” (“IM Telecom”), which became our wholly-owned subsidiary. 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 (8) 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.

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

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

Basis of Consolidation

The condensed consolidated financial statements include the Company and three (3) wholly-owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom. The condensed consolidated balance sheet for year ended December 31, 2019, includes the Company and the wholly-owned corporate subsidiaries, KonaTel Nevada Apeiron Systems and IM Telecom. The condensed consolidated statements of operations, cash flows, and stockholders’ equity (deficit) for the three-month period ended March 31, 2019, include the Company and the three (3) wholly owned subsidiaries, KonaTel Nevada, Apeiron Systems and IM Telecom (February and March). All significant intercompany transactions are eliminated.

Net Income/(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 March 31, 2020, and March 31, 2019, there are 3,400,000 potentially dilutive common shares. The dilutive common shares are not included in the computation of diluted earnings per share, because to do so would be anti-dilutive.

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

	Three Months Ended March 31,
	2020		2019
Net income (loss)	$	100,833	$	(297,793	)
Weighted average shares outstanding during period on which basic earnings per share is calculated		40,692,286		40,692,286
Effect of dilutive shares
Incremental shares under stock-based compensation		3,400,000		2,375,000
Weighted average shares outstanding during period on which diluted earnings per share is calculated		44,092,286		43,067,286
Earnings per share attributable to common stockholders
Basic earnings (loss) per share	$	0.00	$	(0.01	)
Diluted earnings (loss) per share	$	0.00	$	(0.01	)

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.

Concentrations of Credit Risk

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

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

The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of March 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 one (1) customer in the amount of $53,649, or 15.8%, of accounts receivables. 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 (3) customers in the amounts of $89,078, or 24.4%, $77,662, or 21.3% and $48,475, or 13.3%, respectively.

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers and cellular partners. For the three months ended March 31, 2020, the Company had one (1) wholesale customer that accounted for $555,826, or 28.4%, of revenue. For the three months ended March 31, 2019, the Company had one (1) cellular partner that accounted for $728,649, in contractually obligated commission payments or 27.6% of revenue.

Effect of Recent Accounting Pronouncements

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

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.

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Stockholders' Equity - Schedule of Share-Based Compensation , Stock Options, Activity (Details)	3 Months Ended
	Mar. 31, 2020 USD ($) $ / shares shares
Share-Based Compensation Arrangement By Share-Based Payment Award Options Outstanding
Options outstanding, beginning of period | shares	3,800,000
Granted | shares
Exercised | shares
Forfeited | shares
Options outstanding, end of period | shares	3,800,000
Options exercisable and vested, end of period | shares	3,400,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price
Weighted average exercise price outstanding, beginning of period | $ / shares	$ 0.21
Weighted average exercise price, granted | $ / shares
Weighted average exercise price, exercised | $ / shares
Weighted average exercise priced, forfeited | $ / shares
Weighted average exercise price outstanding, end of period | $ / shares	0.21
Weighted average exercise price, exercisable and vested, end of period | $ / shares	$ 0.21
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures
Weighted average remaining contractual life outstanding, beginning of period	3 years
Weighted average remaining contractual life outstanding, end of period	3 years
Weighted average remaining contractual life, exercisable and vested, end of period	2 years 10 months
Average intrinsic value outstanding, beginning of period | $
Average intrinsic value outstanding, end of period | $
Average intrinsic value, exercisable and vested, end of period | $

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2020

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, 2019		3,800,000	$	0.21		3.0	$	—
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Options Outstanding – March 31, 2020		3,800,000	$	0.21		3.0	$	—
Exercisable and Vested, March 31, 2020		3,400,000	$	0.21		2.9	$	—

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

	March 31, 2020			December 31, 2019
Leasehold Improvements	$	46,950		$	46,950
Furniture and Fixtures		102,946			102,946
Billing Software		217,163			217,163
Office Equipment		90,055			86,887
		457,114			453,946
Less:  Accumulated Depreciation and Amortization		(358,473	)		(351,257	)
Property and equipment, net	$	98,641		$	102,689

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Transactions - Schedule of Pro-Forma Financial Transactions (Details) - IM Telecom, LLC and Apeiron Systems, Inc. - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net Sales	$ 1,957,355	$ 2,706,577
Net Profit (Loss)	$ 100,833	$ (262,939)
Net profit (loss) per share, basic and diluted	$ 0.00	$ (0.01)