XML 45 R15.htm IDEA: XBRL DOCUMENT v3.21.1
Contingencies and Commitments
12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Contingencies and Commitments

NOTE 8 – 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 December 31, 2020, there are no legal proceedings.

 

Contract Contingencies

 

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.

 

Pursuant to an Independent Contractor Agreement (the “ICA”) effective October 17, 2019, between the Company and Charles L. Schneider, Jr., in the event that Infiniti Mobile is granted its request for Eligible Telecommunications Carrier (“ETC”) status from the California Public Utilities Commission (“CPUC”) to distribute Lifeline cellular phone service within the State of California, Mr. Schneider will be granted a one (1) year Warrant, with a customary “cashless” exercise feature, to purchase 250,000 shares of the Company’s common stock at an exercise price to be determined on the date of any such approval. The ICA was for a term of one (1) year, extendable by the parties yearly. 

 

Regulatory Determination

 

On May 17, 2019, IM Telecom was notified by the United States Administrative Company (“USAC”) of an over-payment of Universal Service Fund reimbursements in the amount of $168,277. On July 25, 2019, the Company entered into a Letter of Acknowledgement with the FCC and requested a twenty-four (24)-month payment plan regarding the repayment of the over-payment amounts. While awaiting approval of this repayment plan, the Company continued to make monthly payments against the outstanding balance. On October 15, 2020, the Company received approval of the payment plan and signed a promissory note with Universal Service Administrative Company to repay the remainder of the unpaid balance in the amount of $67,105. The loan had a commencement date of November 13, 2020, a term of twelve (12) months, with an annual interest rate of 12.75%. The Company agreed to pay Universal Services Administration Company $5,986 per month for twelve (12) months, and a $1,000 Administrative Fee due on October 15, 2020. As of December 31, 2020, the outstanding balance on this promissory note was $56,559.

 

The Company entered into a Settlement Agreement and Release with the former owner of IM Telecom regarding this matter, effective September 4, 2019, which was the date of delivery of the fully executed Settlement Agreement and Release that was dated August 22, 2019, and filed with the SEC on September 4, 2019. Under the Settlement Agreement and Release, and as part of the previous owner’s obligations to indemnify and hold the Company harmless from any liability arising from the breach of any representations and warranties in the initial PSMI dated February 5, 2019, and filed with the SEC on February 6, 2019, which included this liability, the vested $0.20 per share 500,000 share incentive stock option grant that was awarded to the previous owner at the closing of the PSMI was cancelled and deemed null and void, and the previous owner was released from any liability for the $168,277 over-payment. All of the other terms and conditions of the PSMI remain in full force and effect, including the continuing indemnification provisions regarding all other representations and warranties.

 

Letters of Credit

 

The Company had no outstanding letters of credit as December 31, 2020.

 

Going Concern

 

The Company generated net income during the year ended December 31, 2020. In 2019 and 2018, the Company had been dependent upon equity financing to support its operations. In addition to net income of $238,618 and loss of $1,584,904 for the years ended December 31, 2020, and 2019, respectively, the Company experienced cash provided by operations of $571,546 and $107,298, respectively. The accumulated deficit as of December 31, 2020, is $5,968,489.

 

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 acquisition 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. In addition, the Company took advantage of the Paycheck Protection Program under the CARES Act of 2020.

 

Our overall goal was to increase margins through cost controls and selection of higher margin product offerings. From 2019 to 2020, our gross margins increased from 31.3% to 37.8% respectively. Our net operating income (pre-depreciation and amortization expenses) improved 133% from 2019 to 2020. We decreased operating expenses by 13.4% in 2020, as we continue to streamline customer offerings to drive costs down over an extended period of time. We continue to be confident that with aggressive management and business development that we will continue to eliminate any going concern issues.