What changed in this filing

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Item 1A. Risk Factors

2021-04-06 compared with 2020-05-12 · 496 added, 563 removed, 76 unchanged (93% of the section changed)

As we are a “smaller reporting company”

as defined by Section 12b-2 of the Exchange Act, we are not required to provide the information under this Item or in our annual

or quarterly reports filed with the SEC;

however, we believe this information may be of value to our shareholders or potential

investors in our Company for this filing.

These risk factors should be considered in light of the caption “Forward-Looking

Statements”

at the forepart of this Annual Report.

As we are a “smaller reporting company”

as defined by Section 12b-2 of the Exchange Act, we are not required to provide the information under this Item or in our annual or quarterly

reports filed with the SEC;

however, we believe this information may be of value to our shareholders or potential investors in our Company

for this filing.

These risk factors should be considered in light of the caption “Forward-Looking Statements” at the forepart

of this Annual Report.

We reserve the right not to provide risk factors in our future filings.

Our primary risk factors and other considerations include:

Our primary risk factors and other considerations

Risks Related to the Company

We have a limited operating history and

cannot ensure the long-term successful operation of our business or the execution of our business plan.

We have a limited operating history, having

commenced our business operations in November of 2014, and our wireless marketing technology and solutions are an evolving business

As a result, investors have a limited track record by which to evaluate our future performance.

Our prospects must be

considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving

We may be unable to successfully accomplish and fund our current endeavors, which would materially impact our ability

to implement our business plan, including:

We have a limited operating history and cannot

ensure the long-term successful operation of our business or the execution of our business plan.

We have a limited operating history, having commenced

our business operations in November of 2014, and our wireless marketing technology and solutions are an evolving business offering.

a result, investors have a limited track record by which to evaluate our future performance.

Our prospects must be considered in light

of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets.

We may be unable

to successfully accomplish and fund our current endeavors, which would materially impact our ability to implement our business plan, including:

establishing and maintaining broad market acceptance of our technology, solutions, services and platforms, and converting that acceptance into direct and indirect sources of revenue;

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integration of potential evolving offerings of products and acquisitions.

Our business strategy may be unsuccessful,

and we may be unable to address the risks we face in a cost-effective manner, if at all.

If we are unable to successfully accomplish

these tasks, our business will be harmed, and we may fail.

We have experienced minimal net income since

our inception, and have incurred substantial losses, and there is no assurance that we will not continue to experience losses in

our business.

As a result, we may be unable to continue as a “going concern.”

Our business strategy may be unsuccessful, and we

may be unable to address the risks we face in a cost-effective manner, if at all.

If we are unable to successfully accomplish these tasks,

our business will be harmed, and we may fail.

We have experienced minimal net income since our

inception, and have incurred substantial losses, and there is no assurance that we will not continue to experience losses in our business.

As a result, we may be unable to continue as a “going concern.”

We reported gross revenues of approximately $9,358,999,

$9,173,520, cost of revenues of approximately $6,303,053, operating and other expenses of approximately $4,515,662 and a net loss

of approximately $1,645,195 for the year ended December 31, 2019;

and gross revenues of approximately $9,415,139, cost of revenues

of approximately $7,570,350, operating and other expenses of approximately $3,294,524 and a net loss of approximately $1,449,735

for the year ended December 31, 2018.

If we cannot eliminate our losses and achieve profitability, our business may fail.

The Company did not generate net income during

the years ended December 31, 2019, and 2018, and we have been dependent upon equity financing to support our operations.

to losses of $1,645,195 and $1,449,735 in 2019 and 2018, respectively, we have experienced positive cash flow of $176,678 and negative

cash flow from operations of $1,011,453, respectively, during these years.

Our accumulated deficit as of December 31, 2019, was

We believe we have ameliorated any “going

concern”

issues by generating additional cash flow since the completion of the KonaTel Nevada Merger on December 18, 2017;

the acquisition of Apeiron Systems on December 31, 2018;

receiving cash investments through the private placement of shares of

our common stock;

and significantly reduced costs from the termination of our Virtual ETC program, all of which has contributed

to an improvement in our working capital, without the use of additional lines of credit or borrowings.

The United States Government’s dissolution

or reduction of the Lifeline Program or the elimination of “resellers”

of these services would have a substantial adverse

cost of revenues of $5,823,552, operating expenses of $3,895,466 other income and expenses of $598,637, and net income of $238,618 for

the year ended December 31, 2020;

and gross revenues of $9,173,520, cost of revenues of $6,303,053, operating expenses of $4,515,662,

other income and expenses of $(38,209), and a net loss of $1,584,904 for the year ended December 31, 2019.

The Company generated net income of $238,618 during

the year ended December 31, 2020.

In 2019 and 2018, we were dependent upon equity financing to support our operations whereas in 2020

our operations were supported by increased profit margins and the benefit of pandemic related loans.

In addition to net income of $238,618

in 2020, we experienced positive cash flow of $523,721 and positive cash flow from operations of $571,546 during the year.

Our accumulated

deficit as of December 31, 2020, was $5,968,489.

We believe we have ameliorated any “going concern”

issues by continuing to generate additional cash flow since the completion of the KonaTel Nevada Merger on December 18, 2017;

the acquisition

of Apeiron Systems on December 31, 2018;

the acquisition of IM Telecom, effective January 31, 2019, receiving cash investments through

the private placement of shares of our common stock;

and significantly reduced costs from the termination of our Virtual ETC program,

all of which has contributed to an improvement in our working capital, without the use of additional lines of credit or borrowings.

2020, we took advantage of the PPP loan forgiveness to further contribute to positive cash flow.

The United States Government’s dissolution

or reduction of the Lifeline Program or the elimination of “resellers” of these services would have a substantial adverse

effect on our current and planned business operations.

Considering there

are approximately 6,520,000 current Lifeline users and approximately 39,000,000 eligible Lifeline customers (according to CGM,

LLC, a software development firm that designs and delivers compliance centric solutions to the Telecom Industry, focusing on the

Lifeline program), this would be a draconian move;

Considering there are approximately 7,200,000 current Lifeline users and approximately 39,000,000 eligible Lifeline customers (according to the United States Administrative Company (USAC), the administrative arm of the federal Lifeline program), this would be a draconian move;

however, it is a possibility.

Federal or state governmental agencies

could also significantly reduce or delay Lifeline reimbursement payments to Lifeline carriers, forcing Lifeline carriers to continue

to provide minimum Lifeline services and at a reduced reimbursement rate.

Depending on any reimbursement reduction, a reduction

would diminish earnings and could make Lifeline unprofitable.

FCC established the Lifeline program in 1985 to ensure that qualifying low-income consumers could afford phone service and the

opportunities and security it provides.

Congress supported and strengthened Lifeline in the Telecommunications Act of 1996, requiring

that affordable service and advanced communications be available to low-income consumers across the country.”

The FCC is considering a modification to the Lifeline program rules wherein the FCC may limit Lifeline distribution to facilities-based carriers that would eliminate “resellers”

of these services like us.

This modification has been open for public comment and even though public comment seems to be trending against the rule change, if it is approved by the FCC, this revision would have a substantial adverse effect on our current and planned business operations.

Federal or state governmental agencies could also significantly reduce or delay Lifeline reimbursement payments to Lifeline carriers, forcing Lifeline carriers to continue to provide minimum Lifeline services and at a reduced reimbursement rate.

Depending on any reimbursement reduction, a reduction would diminish earnings and could make Lifeline unprofitable.

“ The FCC established the Lifeline program in 1985 to ensure that qualifying low-income consumers could afford phone service and the opportunities and security it provides.

Congress supported and strengthened Lifeline in the Telecommunications Act of 1996, requiring that affordable service and advanced communications be available to low-income consumers across the country.”

Lifeline requires several factors to be successful.

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Adequate equipment financing and available cash resources to pay up-front commission payments (sometimes required) is critical to facilitate Lifeline, B2B and retail sales and the lack of these resources would have a negative impact on our business.

A national carrier (Verizon, AT&T, T-Mobile

or Sprint) could dissolve, reduce or restrict any wholesale program, agent program or reseller program.

This includes both

voice and data IoT, which would adversely affect our business.

We, like all voice and data resellers, are

dependent on the FCC licensed national carriers to provide services that can be resold for a profit.

The wireless carriers

own/control their respective network (towers) and provide the wireless service.

Resellers do not own their own network and

are dependent on the national carriers to provide a reseller program.

These carriers could eliminate a reseller program or

reduce the profit margins making any applicable program unprofitable.

They could also implement market restorations reducing

markets we could sell into, which would have a direct adverse effect on our current and future prospects.

Similarly, one of these

national carriers could reduce their own retail pricing, with no corresponding reduction in their wholesale pricing, which could

create a situation where a reseller is unable to make enough profit to sustain operations.

This has happened in the past

with Verizon until Verizon’s wholesale (reseller) division finally reduced wholesale prices.

A wireless reseller could gain a significant

price advantage over other wireless resellers by entering into a special national carrier pricing agreement not available to other

Any special national carrier pricing agreement

that was not available to us would allow that particular reseller to “undercut”

all other resellers.

This scenario

could also apply to a national wireless carrier acquiring a reseller then allowing that reseller to operate with special wholesale

pricing not available to other resellers.

The increase in the number of resellers of services

and products that we provide by any national carrier could saturate the markets and market segments of our targeted customers, which could

affect our business adversely.

Market saturation could occur when a national carrier

allows too many resellers into the market and margins drop so low where the reseller business model is no longer profitable, and our business

may suffer and fail.

A decrease in the amount of wholesale voice and

mobile data available to purchase from wholesale aggregators could cause a substantial reduction in our business and customers.

We purchase the majority of our mobile data service

(“IoT”) directly from national carriers, and purchase some of our wholesale voice and mobile data from wholesale aggregators

or MVNEs like Telispire.

If one of these aggregators vacated the market, such action could strand many resellers of these services,

like us, and could substantially reduce our current and anticipated revenues from our IoT or cellular service.

A wireless reseller could gain a significant price

advantage over other wireless resellers by entering into a special national carrier pricing agreement not available to other resellers.

Any special national carrier pricing agreement that

was not available to us would allow that particular reseller to “undercut” all other resellers.

This scenario could

also apply to a national wireless carrier acquiring a reseller then allowing that reseller to operate with special wholesale pricing not

available to other resellers.

This scenario has happened in the past with Cricket Communications, Inc.

Mobile, resellers that were acquired by a national carrier.

Any such event could have a substantial adverse impact on our business

and revenues.

The increase in the number of resellers

of services and products that we provide by any national carrier could saturate the markets and market segments of our targeted

customers, which could affect our business adversely.

Market saturation could occur when a national

carrier allows too many resellers into the market and margins drop so low the reseller business model is unsustainable, and our

business may suffer and fail.

A decrease in the number of wholesale voice

from aggregators of these services could cause a substantial reduction in our business and customers.

We purchase the majority of our mobile data

service (“IoT”) directly from national carriers, and purchase some of our wholesale voice and mobile data from wholesale

aggregators or MVNEs like Telispire.

If one of these aggregators vacated the market, such action could strand many resellers

of these services, like us, and could substantially reduce our current and anticipated revenues from our IoT or cellular service.

Adequate funds for our current and intended

operations may not be available, requiring us to raise additional financing or curtail our current and planned operations significantly.

We will likely be required to raise additional

funding through public or private debt or equity financings.

Any additional equity financings may be dilutive to our shareholders

and may be completed at a discount to the then-current market price of our common stock, which common stock currently trades in

an illiquid market on the OTC Pink Tier.

Debt financing, if available, would likely involve restrictive covenants on our operations

or pertaining to future debt or equity financing arrangements.

Nevertheless, we may not successfully complete any future equity

or debt financing.

and Ultra Mobile, resellers

that were acquired by a national carrier.

Any such event could have a substantial adverse impact on our business and revenues.

Adequate funds for our current and intended operations

may not be available, requiring us to raise additional financing or curtail our current and planned operations significantly.

We might be required to raise additional funding through

public or private debt or equity financings.

Any additional equity financings may be dilutive to our current shareholders and may be completed

at a discount to the then-current market price of our common stock.

Debt financing, if available, would likely involve restrictive covenants

on our operations or pertaining to future debt or equity financing arrangements.

Nevertheless, we may not successfully complete any future

equity or debt financing.

Adequate funds for our operations, whether from financial markets, collaborative or other arrangements, may

not be available when needed or on terms attractive to us.

If adequate funds are not available, our plans to operate our business

may be adversely affected, and we could be required to curtail our activities significantly and/or cease operations.

We will be unable to implement our business

plan if we cannot raise sufficient capital and may be required to pay higher prices for capital based on the current illiquid market

for our common stock, among other factors.

We anticipate that we will need additional

capital to implement our business plan, and if we cannot attract sufficient capital from customary sources, we may be required

to pay a higher price for capital.

We will need to obtain additional capital to

implement our business plan and meet our financial obligations as they become due.

We may not be able to raise the additional capital

needed or may be required to pay a higher price for any required capital.

If adequate funds are not available, our plans to operate our business may

be adversely affected, and we could be required to curtail our activities significantly and/or cease operations.

We will be unable to implement our business plan if

we cannot raise sufficient capital and may be required to pay higher prices for capital based on the current illiquid market for our common

stock, among other factors.

We may need to raise additional capital to implement

our business plan and meet financial obligations as they come due.

If we do need to raise additional capital, and cannot attract sufficient

capital from customary sources, we may be required to pay a higher price for capital.

Factors affecting the availability and price of capital

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market interest, or lack of interest, in our industry, industry segments and our business plan;

the trading volume of, and volatility

in, the market for our common stock, assuming there is a reasonable trading market for our common stock;

the trading volume of, and volatility in, the market for our common stock, assuming there is a reasonable trading market for our common stock;

our ongoing success, or failure, in executing our business plan;

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the amount of debt, options, warrants and convertible securities that may be outstanding in our Company at any time.

We may be unable to meet our current or future

obligations or to adequately exploit existing or future opportunities if we cannot raise sufficient capital.

If we are unable to

obtain any required capital for an extended period of time, we may be forced to discontinue or curtail our business operations

and we may fail.

We expect that there will be significant

consolidation in our industry.

Our failure or inability to lead that consolidation would have a severe adverse impact on our access

to financing, customers, technologies and human resources.

Our industry is currently composed of a small

number of substantial entities, and a relatively large number of small businesses, no single one of which is dominant, or which

provides integrated solutions and product offerings incorporating much of the available technology.

Accordingly, we believe that

substantial consolidation of the smaller companies may occur in our industry in the near future as has occurred with many larger

participants.

If we do not play a positive role in that consolidation, either as a leader or as a participant whose capabilities

and offerings are merged into a larger entity, we may be left out of this process, with product and service offerings of limited

value compared with those of our competitors.

Moreover, even if we lead the consolidation process, the market may not validate

the decisions we make in that process and our business will suffer and may fail.

A national carrier (Verizon, AT&T, T-Mobile

or Sprint) could dissolve, reduce or restrict any wholesale program, agent program or reseller program.

This includes both voice

and data IoT, which would adversely affect our business.

We, like all voice and data resellers, are dependent

on the FCC licensed national carriers to provide services that can be resold for a profit.

The wireless carriers own/control their

respective network (towers) and provide the wireless service.

Resellers do not own their own network and are dependent on the national

carriers to provide a reseller program.

These carriers could eliminate a reseller program or implement new policies that could reduce

profit margins making any applicable program unprofitable.

They could also implement market restorations reducing markets we could

sell into, which would have a direct adverse effect on our current and future prospects.

Similarly, one of these national carriers could reduce

their own retail pricing, with no corresponding reduction in their wholesale pricing, which could create a situation where a reseller

is unable to make enough profit to sustain operations.

This has happened in the past with Verizon until Verizon’s wholesale

(reseller) division finally reduced wholesale prices.

We may be unable to meet our current or future obligations

or to adequately exploit existing or future opportunities if we cannot raise sufficient capital.

If we are unable to obtain any required

capital for an extended period of time, we may be forced to discontinue or curtail our business operations and we may fail.

We expect that there will be significant consolidation

in our industry.

Our failure or inability to lead that consolidation would have a severe adverse impact on our access to financing, customers,

technologies, and human resources.

Our industry is currently composed of a small number

of substantial entities, and a relatively large number of small businesses, no single one of which is dominant, or which provides integrated

solutions and product offerings incorporating much of the available technology.

Accordingly, we believe that substantial consolidation

of the smaller companies may occur in our industry in the near future as has occurred with many larger participants.

If we do not play

a positive role in that consolidation, either as a leader or as a participant whose capabilities and offerings are merged into a larger

entity, we may be left out of this process, with product and service offerings of limited value compared with those of our competitors.

Moreover, even if we lead the consolidation process, the market may not validate the decisions we make in that process and our business

will suffer and may fail.

Our success depends on our product and service

technologies achieving and maintaining widespread acceptance in our targeted markets.

Our success will depend to a large extent on

broad market acceptance of our telecommunications solutions among our current and prospective customers.

Our prospective customers

may be unwilling to use our solutions for a number of other reasons, including preference for static advertising, lack of familiarity

with our technologies, preference for competing technologies or perceived lack of reliability.

We believe that the acceptance of

our technologies by prospective customers will depend primarily on the following factors:

Our success will depend to a large extent on broad

market acceptance of our telecommunications solutions among our current and prospective customers.

Our prospective customers may be unwilling

to use our solutions for a number of other reasons, including preference for static advertising, lack of familiarity with our technologies,

preference for competing technologies or perceived lack of reliability.

We believe that the acceptance of our technologies by prospective

customers will depend primarily on the following factors:

our ability to demonstrate the economic and other benefits attendant to our products and services;

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the reliability of these services and technologies.

Because we do not have long-term purchase

commitments from our customers, the failure to obtain anticipated orders or the deferral or cancellation of commitments could have

an adverse effect on our business and future prospects.

Our business is characterized by short-term

purchase orders and contracts that do not require that purchases be made.

Because we do not have long-term purchase commitments

from our customers, the failure to obtain anticipated orders or the deferral or cancellation of commitments could have an adverse effect

on our business and future prospects.

Our business is characterized by short-term purchase

orders and contracts that do not require that purchases be made.

This makes forecasting our sales difficult.

to obtain anticipated orders and deferrals or cancellations of purchase commitments because of changes in customer requirements,

or otherwise, could have a material adverse effect on our business, financial condition and results of operations.

We have experienced

such challenges in the past and may experience such challenges in the future.

Most of our contracts are terminable by

our customers with limited notice and without penalty payments, and early terminations could have a material adverse effect on

our business, operating results and financial condition.

Most of our contracts are terminable by our

customers following limited notice and without early termination payments or liquidated damages due from them.

In addition, each

stage of a project often represents a separate contractual commitment, at the end of which the customer may elect to delay or not

to proceed to the next stage of the project.

We cannot assure you that one or more of our customers will not terminate a material

contract or materially reduce the scope of any large project.

The delay, cancellation or significant reduction in the scope of

a large project or a number of projects could have a material adverse effect on our business, operating results and financial condition.

Our industry is characterized by frequent

technological change.

If we are unable to adapt our products and services and develop new products and services to keep up with

these rapid changes, we will not be able to obtain or maintain market share and our business may fail.

The market for our products and services is

characterized by rapidly changing technology, evolving industry standards, changes in customer needs, heavy competition and frequent

new product and service introductions.

If we fail to develop new products and services or modify or improve our existing products

and services in response to these changes in technology, customer demands or industry standards, our products and services could

become less competitive or obsolete.

We must respond to changing technology and

industry standards in a timely and cost-effective manner.

We may not be successful in using new technologies, developing new products

and services or enhancing existing products and services in a timely and cost-effective manner.

Furthermore, even if we successfully

adapt our products and services, these new technologies or enhancements may not achieve market acceptance.

A portion of our business involves the use

of software technologies that we have developed or licensed.

Industries involving the ownership and licensing of software-based

intellectual property are characterized by frequent intellectual property litigation, and we could face claims of infringement

by others in the industry.

Such claims are costly and add uncertainty to our operational results.

A portion of our business involves our ownership

and/or licensing of software.

The failure to obtain anticipated

orders and deferrals or cancellations of purchase commitments because of changes in customer requirements, or otherwise, could have a

material adverse effect on our business, financial condition and results of operations.

We have experienced such challenges in the past

and may experience such challenges in the future.

Most of our contracts are terminable by our customers

with limited notice and without penalty payments, and early terminations could have a material adverse effect on our business, operating

results, and financial condition.

Most of our contracts are terminable by our customers

following limited notice and without early termination payments or liquidated damages due from them.

In addition, each stage of a project

often represents a separate contractual commitment, at the end of which the customer may elect to delay or not to proceed to the next

stage of the project.

We cannot assure you that one or more of our customers will not terminate a material contract or materially reduce

the scope of any large project.

The delay, cancellation, or significant reduction in the scope of a large project or a number of projects

could have a material adverse effect on our business, operating results, and financial condition.

Our industry is characterized by frequent technological

If we are unable to adapt our products and services and develop new products and services to keep up with these rapid changes,

we will not be able to obtain or maintain market share and our business may fail.

We must respond to changing technology and industry

standards in a timely and cost-effective manner.

We may not be successful in using new technologies, developing new products and services

or enhancing existing products and services in a timely and cost-effective manner.

Furthermore, even if

we successfully adapt our products and services, these new technologies or enhancements may not achieve market acceptance.

The market for our products and services is characterized by rapidly changing technology, evolving industry

standards, changes in customer needs, heavy competition, and frequent new product and service introductions.

If we fail to develop new

products and services or modify or improve our existing products and services in response to these changes in technology, customer demands

or industry standards, our products and services could become less competitive or obsolete.

A portion of our business involves the use of software

technologies that we have developed or licensed.

Industries involving the ownership and licensing of software-based intellectual property

are characterized by frequent intellectual property litigation, and we could face claims of infringement by others in the industry.

claims are costly and add uncertainty to our operational results.

A portion of our business involves our ownership and/or

licensing of software.

This market space is characterized by frequent intellectual property claims and litigation.

be subject to claims of infringement of third-party intellectual property rights resulting in significant expense and the potential

loss of our own intellectual property rights.

From time to time, third parties may assert copyright, trademark, patent or other

intellectual property rights to technologies that are important to our business.

Any litigation to determine the validity of

these claims, including claims arising through our contractual indemnification of our business partners, regardless of their merit

or resolution, would likely be costly and time consuming and divert the efforts and attention of our management and technical

If any such litigation resulted in an adverse ruling, we could be required to:

We could be subject

to claims of infringement of third-party intellectual property rights resulting in significant expense and the potential loss of our own

intellectual property rights.

From time to time, third parties may assert copyright, trademark, patent, or other intellectual property

rights to technologies that are important to our business.

Any litigation to determine the validity of these

claims, including claims arising through our contractual indemnification of our business partners, regardless of their merit or resolution,

would likely be costly and time consuming and divert the efforts and attention of our management and technical personnel.

litigation resulted in an adverse ruling, we could be required to:

pay substantial damages;

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obtain a license under the intellectual property rights of the third-party claiming infringement, which license may not be available on reasonable terms or at all.

Our business may be adversely affected by

malicious applications that interfere with, or exploit security flaws in, our products and services.

Our business may be adversely affected by malicious

applications that make changes to our customers’

computer systems and interfere with the operation and use of our products

or products that impact our business.

These applications may attempt to interfere with our ability to communicate with our customers’

The interference may occur without disclosure to or consent from our customers, resulting in a negative experience that

our customers may associate with our products and services.

These applications may be difficult or impossible to uninstall or disable,

may reinstall themselves and may circumvent other applications’

efforts to block or remove them.

The ability to provide customers

with a superior interactive marketing technology experience is critical to our success.

If our efforts to combat these malicious

applications fail, or if our products and services have actual or perceived vulnerabilities, there may be claims based on such

failures and our reputation may be harmed, which would damage our business and financial condition and our ability to continue

our business.

We compete with other companies that have

substantially greater resources, and we are at a distinct competitive disadvantage in our chosen industry.

The market for our products and service solution

technologies is generally highly competitive, and we expect competition to increase in the future.

Some of our competitors or potential

competitors have significantly greater financial, technical and marketing resources than we have.

These competitors may be able

to respond more rapidly than we can to new or emerging technologies or changes in customer requirements.

They may also devote greater

resources to the development, promotion and sale of their products than us.

We expect competitors to continue to improve

the performance of their current products and to introduce new products, services and technologies.

Successful new product and

service introductions or enhancements by our competitors could reduce sales and the market acceptance of our products and services,

cause intense price competition or make our products and services obsolete.

To be competitive, we must continue to invest significant

resources in research and development, sales and marketing and customer support.

If we do not have sufficient resources to make

these investments or are unable to make the technological advances necessary to be competitive, our competitive position will suffer,

and we may fail.

Increased competition could result in price reductions, fewer customer orders, reduced margins and loss of market

Our failure to compete successfully against current or future competitors could also adversely affect our business and financial

Our future success depends on key personnel

and our ability to attract and retain additional personnel.

Our success is dependent upon attracting and

maintaining key personnel, including our founder, D.

Sean McEwen, and various key executive employees, including, Joshua Ploude

and Vyacheslav “Slava”

Yanson from whom we acquired Apeiron Systems and serve as CEO and CTO respectively, of Apeiron

Systems, Paul LaPier Vice President of Finance of KonaTel and Nicholas Metherd Vice President of IM Telecom.

Further, if we fail

to retain our key personnel or to attract, retain and motivate other qualified employees, our ability to maintain and develop

our business may be adversely affected.

Our future success depends significantly on the continued service of our key technical,

sales and senior management personnel and their ability to execute our growth strategy.

The loss of the services of our key employees

could harm our business.

We may be unable to retain our employees or to attract, assimilate and retain other highly qualified

employees who could migrate to other employers who offer competitive or superior compensation packages.

Unpredictability in financing markets could

impair our ability to grow our business through acquisitions.

We anticipate that opportunities to acquire

similar businesses will materially depend on the availability of financing alternatives with acceptable terms.

As a result, poor

credit and other market conditions or uncertainty in financial markets could materially limit our ability to grow through acquisitions

since such conditions and uncertainty make obtaining financing more difficult.

Our reliance on information management and

transaction systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced

service provider experiences a security breach.

Effective information security internal controls

are necessary for us to protect our sensitive information from illegal activities and unauthorized disclosure, in addition to denial

of service attacks and corruption of our data.

Further, we rely on the information security internal controls maintained by our

outsourced service provider.

applications that interfere with, or exploit security flaws in, our products and services.

Our business may be adversely affected by malicious

applications that make changes to our customers’ computer systems and interfere with the operation and use of our products or products

that impact our business.

These applications may attempt to interfere with our ability to communicate with our customers’ devices.

The interference may occur without disclosure to or consent from our customers, resulting in a negative experience that our customers

may associate with our products and services.

These applications may be difficult or impossible to uninstall or disable, may reinstall

themselves and may circumvent other applications’ efforts to block or remove them.

The ability to provide customers with a superior

interactive marketing technology experience is critical to our success.

If our efforts to combat these malicious applications fail, or

if our products and services have actual or perceived vulnerabilities, there may be claims based on such failures and our reputation may

be harmed, which would damage our business and financial condition and our ability to continue our business.

We compete with other companies that have substantially

greater resources, and we are at a distinct competitive disadvantage in our chosen industry.

The market for our products and service solution technologies

is generally highly competitive, and we expect competition to increase in the future.

Some of our competitors or potential competitors

have significantly greater financial, technical, and marketing resources than we have.

These competitors may be able to respond more rapidly

than we can to new or emerging technologies or changes in customer requirements.

They may also devote greater resources to the development,

promotion, and sale of their products than we do.

We expect competitors to continue to improve the performance

of their current products and to introduce new products, services, and technologies.

Successful new product and service introductions

or enhancements by our competitors could reduce sales and the market acceptance of our products and services, cause intense price competition

or make our products and services obsolete.

To be competitive, we must continue to invest significant resources in research and development,

sales and marketing and customer support.

If we do not have sufficient resources to make these investments or are unable to make the technological

advances necessary to be competitive, our competitive position will suffer, and we may fail.

Increased competition could result in price

reductions, fewer customer orders, reduced margins, and loss of market share.

Our failure to compete successfully against current or future

competitors could also adversely affect our business and financial condition.

Our future success depends on key personnel and

our ability to attract and retain additional personnel.

Our success is dependent upon attracting and maintaining

key personnel, including our founder, D.

Sean McEwen, and various key executive employees, including, Joshua Ploude and Vyacheslav “Slava”

Yanson from whom we acquired Apeiron Systems and serve as CEO and CTO respectively, of Apeiron Systems, Paul LaPier Vice President of

Finance of KonaTel, and Nicholas Metherd COO at

Infiniti Mobile.

Further, if we fail to retain our key personnel or

to attract, retain, and motivate other qualified employees, our ability to maintain and develop our business may be adversely affected.

Our future success depends significantly on the continued service of our key technical, sales, and senior management personnel and their

ability to execute our growth strategy.

The loss of the services of our key employees could harm our business.

We may be unable to retain

our employees or to attract, assimilate, and retain other highly qualified employees who could migrate to other employers who offer competitive

or superior compensation packages.

Unpredictability in financing markets could impair

our ability to grow our business through acquisitions.

We anticipate that opportunities to acquire similar

businesses will materially depend on the availability of financing alternatives with acceptable terms.

As a result, poor credit and other

market conditions or uncertainty in financial markets could materially limit our ability to grow through acquisitions since such conditions

and uncertainty make obtaining financing more difficult.

Our reliance on information management and transaction

systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service provider

experiences a security breach.

Effective information security internal controls are

necessary for us to protect our sensitive information from illegal activities and unauthorized disclosure, in addition to preventing service

attacks and corruption of our data.

Further, we rely on the information security internal controls maintained by our outsourced service

Breaches of our information management system could also adversely affect our business reputation.

Finally, significant information system disruptions could adversely affect our ability to effectively manage operations or reliably

report results.

Because our technology, products, platforms

and services are complex and are deployed in and across complex environments, they may have errors or defects that could seriously

harm our business.

Our technology, proprietary platforms, products

and services are highly complex and are designed to operate in and across data centers, large and complex networks and other elements

of the digital media workflow that we do not own or control.

On an ongoing basis, we need to perform proactive maintenance services

on our platform and related software services to correct errors and defects.

In the future, there may be additional errors and

defects in our software that may adversely affect our services.

We may not have in place adequate reporting, tracking and monitoring

and quality assurance procedures to ensure that we can detect errors in our software in a timely manner.

If we are unable to efficiently

and cost-effectively correct errors or other problems that may be identified, or if there are unidentified errors that allow persons

to improperly access our services, we could experience loss of revenues and market share, damage to our reputation, increased expenses

and legal actions by our customers and our business may fail.

We may have insufficient network or server

capacity for our current and planned business, which could result in interruptions in our services and the loss of revenues resulting

in a negative impact on our business.

Our operations are dependent, in part, upon

network capacity provided by our telecommunications network and third-party telecommunications networks;

data center services provider

owned and leased infrastructure and capacity;

Finally, significant information

system disruptions could adversely affect our ability to effectively manage operations or reliably report results.

Because our technology, products, platforms, and

services are complex and are deployed in and across complex environments, they may have errors or defects that could seriously harm our

Our technology, proprietary platforms, products, and

services are highly complex and are designed to operate in and across data centers, large and complex networks and other elements of the

digital media workflow that we do not own or control.

On an ongoing basis, we need to perform proactive maintenance services on our platform

and related software services to correct errors and defects.

In the future, there may be additional errors and defects in our software

that may adversely affect our services.

We may not have in place adequate reporting, tracking, monitoring, and quality assurance procedures

to ensure that we can detect errors in our software in a timely manner.

If we are unable to efficiently and cost-effectively correct errors

or other problems that may be identified, or if there are unidentified errors that allow persons to improperly access our services, we

could experience loss of revenues and market share, damage to our reputation, increased expenses and legal actions by our customers and

our business may fail.

We may have insufficient network or server capacity

for our current and planned business, which could result in interruptions in our services and the loss of revenues resulting in a negative

impact on our business.

Our operations are dependent, in part, upon network

capacity provided by our telecommunications network and third-party telecommunications networks;

data center services provider owned and

leased infrastructure and capacity;

server capacity located at the data center services provider partner or partners;

and our own infrastructure and equipment.

Collectively, this infrastructure, equipment and capacity must be sufficiently robust

to handle all of our customers’

wireless requirements, particularly in the event of unexpected surges in high-definition

video traffic and network services incidents.

We may not be adequately prepared for unexpected increases in bandwidth and related

infrastructure demands from our customers.

In addition, the bandwidth we have contracted to purchase may become unavailable for

a variety of reasons, including payment disputes, outages or such service providers going out of business.

Any failure of these

service providers or our own infrastructure to provide the capacity we require due to financial or other reasons may result in

a reduction in or the interruption of service to our customers, leading to an immediate decline in revenue and possible additional

decline in revenue as a result of subsequent customer losses, which could result in the cessation of all or part of our business

We do not have sufficient capital to engage

in material research and development, which may harm our long-term growth.

In light of our limited resources in general,

we have made no material investments in research and development.

and our own infrastructure

and equipment.

Collectively, this infrastructure, equipment and capacity must be sufficiently robust to handle all of our customers’

wireless requirements, particularly in the event of unexpected surges in high-definition video traffic and network services incidents.

We may not be adequately prepared for unexpected increases in bandwidth and related infrastructure demands from our customers.

the bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including payment disputes, outages, or

such service providers going out of business.

Any failure of these service providers or our own infrastructure to provide the capacity

we require due to financial or other reasons may result in a reduction in or the interruption of service to our customers, leading to

an immediate decline in revenue and possible additional decline in revenue, as a result of subsequent customer losses, which could result

in the cessation of all or part of our business operations.

We do not have sufficient capital to engage in

material research and development, which may harm our long-term growth.

In light of our limited resources in general, we have

made no material investments in research and development.

This conserves capital in the short term.

In the long term, as

a result of our failure to invest in research and development, our technologies and product offerings may not keep pace with the

market, and we may lose any existing competitive advantage.

Over the long term, this may harm our revenue growth and our ability

to become profitable.

Our business operations are susceptible

to interruptions caused by events beyond our control.

Our business operations are susceptible to

interruptions caused by events beyond our control.

In the long term, as a result of our

failure to invest in research and development, our technologies and product offerings may not keep pace with the market, and we may lose

any existing competitive advantage.

Over the long term, this may harm our revenue growth and our ability to be profitable.

Our business operations are susceptible to interruptions

caused by events beyond our control.

Our business operations are susceptible to interruptions

caused by events beyond our control.

We are vulnerable to the following potential problems, among others:

our platform, technologies, products, and services and underlying infrastructure, or that of our key suppliers, may be damaged or destroyed by events beyond our control, such as fires, earthquakes, floods, power outages or telecommunications failures;

we and our customers and/or partners may experience interruptions in service as a result of the accidental or malicious actions of Internet users, hackers or current or former employees;

our platform, technologies, products, services, and underlying infrastructure, or that of our key suppliers, may be damaged or destroyed by events beyond our control, such as fires, earthquakes, floods, power outages, or telecommunications failures;

we and our customers and/or partners may experience interruptions in service as a result of the accidental or malicious actions of Internet users, hackers, or current /former employees;

we may face liability for transmitting viruses to third parties that damage or impair their access to computer networks, programs, data, or information.

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the failure of our systems or those of our suppliers may disrupt service to our customers (and from our customers to their customers), which could materially impact our operations (and the operations of our customers), adversely affecting our relationships with our customers and lead to lawsuits and contingent liabilities.

The occurrence of any of the foregoing could result in claims for

consequential and other damages, significant repair and recovery expenses and extensive customer losses and otherwise have a material

adverse effect on our business, financial condition and results of operations.

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

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

The occurrence of any of the foregoing could result

in claims for consequential and other damages, significant repair and recovery expenses and extensive customer losses and otherwise have

a material adverse effect on our business, financial condition, and results of operations.

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.

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

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 .

General global market and economic conditions

may have an adverse impact on our operating performance and results of operations.

Our business has been and could continue to

be affected by general economic and market conditions.

Weakness in the United States and worldwide economy could have a negative

effect on our operating results.

Additionally, in a down-cycle economic environment, we may experience the negative effects of

increased competitive pricing pressure, customer loss, slowdown in commerce over the Internet and corresponding decrease in traffic

delivered over our network and failures by our customers to pay amounts owed to us on a timely basis or at all.

Suppliers on which

we rely for equipment, field services, servers, bandwidth, co-location and other services could also be negatively impacted by

economic conditions that, in turn, could have a negative impact on our business operations or revenues.

Flat or worsening economic

conditions may harm our operating results and financial condition.

The markets in which we operate are rapidly

emerging, and we may be unable to compete successfully against existing or future competitors to our business.

The markets in which we operate are becoming

increasingly competitive.

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

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 to 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 .

General global market and economic conditions may have an adverse impact

on our operating performance and results of operations.

Our business has been and could continue to be affected

by general economic and market conditions.

Weakness in the United States and worldwide economy could have a negative effect on our operating

Additionally, in a down-cycle economic environment, we may experience the negative effects of increased competitive pricing pressure,

customer loss, slowdown in commerce over the Internet and corresponding decrease in traffic delivered over our network and failures by

our customers to pay amounts owed to us on a timely basis or at all.

Suppliers on which we rely for equipment, field services, servers,

bandwidth, co-location, and other services could also be negatively impacted by economic conditions that, in turn, could have a negative

impact on our business operations or revenues.

Flat or worsening economic conditions may harm our operating results and financial condition.

The markets in which we operate are rapidly emerging,

and we may be unable to compete successfully against existing or future competitors to our business.

The markets in which we operate are becoming increasingly

Our current competitors generally include those that offer similar products and services.

These competitors,

including future new competitors who may emerge, may be able to develop comparable or superior solution capabilities, platforms,

services, products and/or a series of services that provide a similar or more robust set of features and functionality than the

technologies, products and services we offer.

These competitors, including future

new competitors who may emerge, may be able to develop comparable or superior solution capabilities, platforms, services, products and/or

a series of services that provide a similar or more robust set of features and functionality than the technologies, products, and services

If this occurs, we may be unable to grow as necessary to make our business profitable.

Regardless of whether we have superior products,

many of these current and potential future competitors have a longer operating history in their current respective business areas

and greater market presence, brand recognition, engineering and marketing capabilities, and financial, technological and personnel

resources than we do.

Existing and potential competitors with an extended operating history, even if not directly related to our

business, have an inherent marketing advantage because of the reluctance of many potential customers to entrust key operations

to a company that may be perceived as unproven or in the early stage of its development.

In addition, our existing and potential

future competitors may be able to use their extensive resources:

Regardless of whether we have superior products, many

of these current and potential future competitors have a longer operating history in their current respective business areas and greater

market presence, brand recognition, engineering, and marketing capabilities, and financial, technological and personnel resources than

Existing and potential competitors with an extended operating history, even if not directly related to our business, have an inherent

marketing advantage because of the reluctance of many potential customers to entrust key operations to a company that may be perceived

as unproven or in the early stage of its development.

In addition, our existing and potential future competitors may be able to use their

extensive resources:

to develop and deploy new products and services more quickly and effectively than we can;

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to devote greater resources to the marketing and sales of their products, technology, platform, and services.

If we are unable to compete effectively in

our various markets, or if competitive pressures place downward pressure on the prices at which we offer our products and services,

our business, financial condition and results of operations may suffer and our business may fail.

Compliance with the reporting requirements

of federal securities laws can be expensive.

We are a public “reporting company”

in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal

securities laws, rules and regulations, including compliance obligations under the Sarbanes-Oxley Act of 2002.

The costs of preparing

and filing annual and quarterly reports and other information with the SEC and furnishing audited and reviewed financial statements

in reports filed with the SEC, along with required communications with our shareholders, are substantial.

We have incurred and

expect to continue to incur costs associated with becoming and continuing as a public company, including, but not limited to, legal,

accounting, filing and other related costs and expenses.

Failure to comply with the applicable securities laws could result in

private or governmental legal action against us or our officers and directors, which could have a detrimental impact on our business

and financial condition, the value of our common stock and the ability of our shareholders to resell their common stock.

We do not intend to pay dividends on our

common stock for the foreseeable future.

If we are unable to compete effectively in our various

markets, or if competitive pressures place downward pressure on the prices at which we offer our products and services, our business,

financial condition and results of operations may suffer and our business may fail.

Compliance with the reporting requirements of federal

securities laws can be expensive.

We are a public “reporting company” in

the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities

laws, rules, and regulations, including compliance obligations under the Sarbanes-Oxley Act of 2002.

The costs of preparing and filing

annual and quarterly reports and other information with the SEC and furnishing audited and reviewed financial statements in reports filed

with the SEC, along with required communications with our shareholders, are substantial.

We have incurred and expect to continue to incur

costs associated with becoming and continuing as a public company, including, but not limited to, legal, accounting, filing, and other

related costs and expenses.

Failure to comply with the applicable securities laws could result in private or governmental legal action

against us or our officers and directors, which could have a detrimental impact on our business and financial condition, the value of

our common stock and the ability of our shareholders to resell their common stock.

We do not intend to pay dividends on our common

stock for the foreseeable future.

All future revenues are anticipated to be utilized

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it is highly unlikely that you will receive any dividends from us in the near future, if ever.

We do not intend to provide guidance about future events in the

foreseeable future.

Our Board of Directors anticipates adopting

a policy that will preclude us from providing guidance about matters that may happen in the foreseeable future, though any such

policy will not prohibit our responsibilities to provide forward-looking information to our shareholders and to the public in our

Exchange Act filings with the SEC, including our “Management’s Discussion and Analysis of Financial Condition and Results

of Operations”

We do not intend to provide guidance about future events in the foreseeable

Our Board of Directors anticipates adopting a policy

that will preclude us from providing guidance about matters that may happen in the foreseeable future, though any such policy will not

prohibit our responsibilities to provide forward-looking information to our shareholders and to the public in our Exchange Act filings

with the SEC, including our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

required in a number of SEC reports and registration statements.

Risks Related to Our Common Stock

Our common stock trades only in an illiquid

trading market.

Quotations for our common stock are contained

in the OTC Markets OTC Pink Tier under the trading symbol “KTEL.”

This lower categorized market tier may have an adverse

effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price,

but also through delays in the timing of transactions and reduction in security analysts’

and the media’s coverage

of us and our common stock.

It may also result in lower prices for our common stock than might otherwise be obtained and could

also result in a larger spread between the bid and asked prices for our common stock, regardless of whether we are successful in

our current and planned business operations.

There is not now and there may not ever

be an active market for our shares of common stock.

In general, there has been a minimal trading

volume in our common stock.

The small trading volume will likely make it difficult for shareholders to sell their shares as and

when they choose.

There is a limited active trading market for our

shares of common stock.

In general, there has been a minimal trading volume

in our common stock.

The small trading volume will likely make it difficult for shareholders to sell their shares as and when they choose.

Furthermore, small trading volumes are generally understood to depress market prices.

As a result, you may not

always be able to resell shares of our common stock publicly at the time and prices that you feel are fair or appropriate.

Additionally, if we do not timely file our

reports required to be filed with the SEC under the Exchange Act, broker-dealers may not be able or willing to trade our common

stock, and the OTC Markets will post adverse warnings on its website about such failures, which, unless such failures are corrected

by us, could have an additional adverse impact on the viability of any market that may develop for our common stock.

Other adverse

warnings of the OTC Markets under their current and future policies could similarly have an adverse effect on any market for our

common stock, and there is no assurance that we will be able to satisfy comments or concerns of the OTC Markets, if any are expressed.

If an active market for our common stock

develops, there is a significant risk that the Company’s common stock price may fluctuate dramatically in the future in

response to any of the following factors, some of which are beyond our control, including, but not limited to:

As a result, you may not always be able to resell

shares of our common stock publicly at the time and prices that you feel are fair or appropriate.

Additionally, if we do not timely file our reports

required to be filed with the SEC under the Exchange Act, broker-dealers may not be able or willing to trade our common stock, and the

OTC Markets will post adverse warnings on its website about such failures, which, unless such failures are corrected by us, could have

an additional adverse impact on the viability of any market that may develop for our common stock.

Other adverse warnings of the OTC Markets

under their current and future policies could similarly have an adverse effect on any market for our common stock, and there is no assurance

that we will be able to satisfy comments or concerns of the OTC Markets, if any are expressed.

If an active market for our common stock develops,

there is a significant risk that the Company’s common stock price may fluctuate dramatically in the future in response to any of

the following factors, some of which are beyond our control, including, but not limited to:

variations in our quarterly operating results;

announcements that our revenue or income are below analysts’

expectations;

announcements that our revenue or income are below analysts’ expectations;

general economic slowdowns;

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announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital raises.

Our common stock is subject to the “penny

rules of the SEC, which may make it more difficult for shareholders to sell our common stock.

Our common stock is subject to the “penny

stock” rules of the SEC, which may make it more difficult for shareholders to sell our common stock.

The SEC has adopted Rule 15g-9, which established

the definition of a “penny stock,”

for the purposes relevant to us, as any equity security that has a market price

of less than $5.00 per share, subject to certain exceptions.

For any transaction involving a penny stock, unless exempt, the rules

require that a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receive

from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account

for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of

the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and that the

person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny

The broker or dealer must also deliver, prior

to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in

highlight form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer

received a signed, written agreement from the investor prior to the transaction.

the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less

than $5.00 per share, subject to certain exceptions.

For any transaction involving a penny stock, unless exempt, the rules require that

a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receive from the investor

a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions

in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person and make a

reasonable determination that the transactions in penny stocks are suitable for that person and that the person has sufficient knowledge

and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny

stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on

which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from

the investor prior to the transaction.

Generally, brokers may be less willing to execute

transactions in securities subject to the “penny stock”

This may make it more difficult for investors to dispose

of the Company’s common stock if and when such shares are eligible for sale and may cause a decline in the market value of

Because of increased regulatory efforts

of governmental and quasi-governmental agencies regarding the trading of securities in the over-the-counter market where the Company’s

shares of common stock are presently quoted, the cost and expense of depositing and inducing a broker-dealer to effect sales of

these shares is very costly, which can be in excess of value of the shares sought to be sold, and often includes requirements of

legal opinions of both the selling shareholder’s counsel and the broker-dealer’s counsel, both at the expense of the

selling shareholder.

Currently, broker-dealers require legal opinions

of shareholders of almost all over-the-counter stocks to deposit and sell these shares, and all of these legal opinions are required

to be paid for by the shareholder;

and often, two legal opinions are required, one from the shareholder’s legal counsel and

one from the broker-dealer’s legal counsel.

This policy has been required of mostly all low priced over-the-counter shares,

regardless of whether the shares have been registered with the SEC, or whether there is no legend on the stock certificate representing

the shares and always if the shares are designated as “restricted securities.”

Larger, national broker-dealers will

generally not even trade these securities.

The high cost of these types of legal opinions is often more than the value of the shares

sought to be sold, and the process can take two to three weeks or more.

Accordingly, shareholders with limited shares of low priced

stocks will be unable to economically sell their shares, regardless of whether an “established trading market”

the shares exists, and if they could sell their shares, the required selling process will inhibit their ability to sell the shares

when they desire to sell their shares.

transactions in securities subject to the “penny stock” rules.

This may make it more difficult for investors to dispose of

the Company’s common stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock.

Because of increased regulatory efforts of governmental

and quasi-governmental agencies regarding the trading of securities in the over-the-counter market where the Company’s shares of

common stock are presently quoted, the cost and expense of depositing and inducing a broker-dealer to effect sales of these shares is

very costly, which can be in excess of value of the shares sought to be sold, and often includes requirements of legal opinions of both

the selling shareholder’s counsel and the broker-dealer’s counsel, both at the expense of the selling shareholder.

Currently, broker-dealers require legal opinions of

shareholders of almost all over-the-counter stocks to deposit and sell these shares, and all of these legal opinions are required to be

paid for by the shareholder;

and often, two legal opinions are required, one from the shareholder’s legal counsel and one from the

broker-dealer’s legal counsel.

This policy has been required of mostly all low-priced over-the-counter shares, regardless of whether

the shares have been registered with the SEC, or whether there is no legend on the stock certificate representing the shares and always

if the shares are designated as “restricted securities.” Larger, national broker-dealers will generally not even trade these

The high cost of these types of legal opinions is often more than the value of the shares sought to be sold, and the process

can take two to three weeks or more.

Accordingly, shareholders with limited shares of low-priced stocks will be unable to economically

sell their shares, regardless of whether an “established trading market” for the shares exists, and if they could sell their

shares, the required selling process will inhibit their ability to sell the shares when they desire to sell their shares.

Because we became public by means of a reverse

acquisition, we may not be able to attract the attention of brokerage firms.

Because we became public through a “reverse

acquisition,”

securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage

Because we became public through a “reverse

acquisition,” securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage

firms to recommend the purchase of our common stock.

Moreover, no assurance can be given that brokerage firms will want to conduct

capital raises on our behalf, presently or in the future.

Our investors’

ownership in the Company

may be diluted in the future.

In the future, we may issue additional

authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present

shareholders.

We expect to need to issue a substantial number of shares of our common stock or other securities convertible

into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, raising

additional capital in the future to fund our operations and other business purposes.

We currently offer incentive stock

options for our officers, directors and certain significant employees and may extend this policy to others.

Additional shares

of common stock issued by us in the future will dilute an investor’s investment in the Company.

Directors, executive officers, principal

shareholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our shareholders

do not consider to be in their best interests.

Moreover, no assurance can be given that brokerage firms will want to conduct capital

raises on our behalf, presently or in the future.

Our investors’ ownership in the Company may

be diluted in the future.

In the future, we may issue additional authorized

but previously unissued equity securities, resulting in the dilution of ownership interests of our present shareholders.

need to issue a substantial number of shares of our common stock or other securities convertible into or exercisable for our common stock

in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations

and other business purposes.

We currently offer incentive stock options for our officers, directors and certain significant employees

and may extend this policy to others.

Additional shares of common stock issued by us in the future will dilute an investor’s investment

in the Company.

Directors, executive officers, principal shareholders,

and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our shareholders do not consider

to be in their best interests.

As of the date of this Annual Report, D.

McEwen, our Chairman and Chief Executive Officer, beneficially owns approximately 49.9% of our issued and outstanding shares of

common voting stock by reason of his personal holdings and the irrevocable proxies granted to him under the Apeiron Systems Merger

Agreement Shareholder Voting Agreement.

This percentage also includes certain vested Incentive Stock Options that can be exercised

within 60 days of the date of this Annual Report, all of which options are described under the heading “Outstanding Equity

Awards”

of the caption “Executive Compensation”

in Part IV, Item 11, below, and a portion of which are reflected

McEwen’s beneficial ownership of shares of our common stock under the caption “Security Ownership of Certain

Beneficial Owners and Management”

our Chairman and Chief Executive Officer, beneficially owns approximately 38% of our issued and outstanding shares of common voting stock

by reason of his personal holdings.

This percentage does not include certain vested Incentive Stock Options that can be exercised within

60 days of the date of this Annual Report, all of which options are described under the heading “Outstanding Equity Awards”

of the caption “Executive Compensation” in Part III, Item 11, below, and a portion of which are reflected in Mr.

beneficial ownership of shares of our common stock under the caption “Security Ownership of Certain Beneficial Owners and Management”

in Part III, Item 12 hereof.

As a result, personal ownership and various other provisions

of this Shareholder Voting Agreement, Mr.

McEwen may have the ability to control the election of our board of directors, the outcome

of issues requiring approval by our shareholders and other corporate actions until December 31, 2020, when this Shareholder Voting

Agreement expires, and beyond.

This concentration of ownership may also have the effect of delaying or preventing a change in

control of our Company that may be favored by other shareholders;

and could prevent transactions in which shareholders might otherwise

recover a premium for their shares over current market prices.

This concentration of ownership and influence in management and

board decision making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer

from seeking to acquire shares of our capital stock, whether by making a tender offer or attempting to obtain control of our Company.

For a more detailed discussion of the provisions of the Shareholder Voting Agreement, see the heading “Apeiron Systems Merger

Shareholder Voting Agreement”

of the caption “Security Ownership of Certain Beneficial Owners and Management”

of Part III, Item 12 hereof.

If we fail to maintain an effective system

of internal controls, we may not be able to accurately report our financial results in a timely manner or detect fraud.

Consequently,

investors could lose confidence in our financial reporting, and this may adversely affect any trading price of our common stock

that may then exist.

We must maintain effective internal controls

to provide reliable financial reports and to detect and prevent fraud.

If we cannot provide reliable financial reports or prevent

fraud, we may not be able to manage our business as effectively as would be possible with an effective control system in place.

We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist and may

in the future discover areas of our internal controls that need improvement.

We have been assessing our internal controls

to identify areas that need improvement and we are continually in the process of evaluating our internal controls.

Failure to implement

changes to our internal controls that we may deem to be ineffective or any others that we may identify as necessary to maintain

an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported

financial information.

Any such loss of confidence could have a substantial negative affect on the trading price of our common

UNRESOLVED STAFF

As a result, Mr.

McEwen may have the ability to substantially control the election of our board of directors,

the outcome of issues requiring approval by our shareholders and other corporate actions.

This concentration of ownership may also have

the effect of delaying or preventing a change in control of our Company that may be favored by other shareholders;

and could prevent transactions

in which shareholders might otherwise recover a premium for their shares over current market prices.

This concentration of ownership and

influence in management and board decision making could also harm the price of our capital stock by, among other things, discouraging

a potential acquirer from seeking to acquire shares of our capital stock, whether by making a tender offer or attempting to obtain control

of our Company.

See the captions “Executive Compensation” and “Security Ownership of Certain Beneficial Owners

and Management” of Part III, Items 11 and 12, respectively, hereof.

If we fail to maintain an effective system of internal

controls, we may not be able to accurately report our financial results in a timely manner or detect fraud.

Consequently, investors could

lose confidence in our financial reporting, and this may adversely affect any trading price of our common stock that may then exist.

We must maintain effective internal controls to provide

reliable financial reports and to detect and prevent fraud.

If we cannot provide reliable financial reports or prevent fraud, we may not

be able to manage our business as effectively as would be possible with an effective control system in place.

We have not performed an

in-depth analysis to determine if historical undiscovered failures of internal controls exist and may in the future discover areas of

our internal controls that need improvement.

We are continually in the process of evaluating our

internal controls for effectiveness as well as evaluating the need for additional internal controls.

Failure to implement changes to our

internal controls that we may deem to be ineffective or any others that we may identify as necessary to maintain an effective system of

internal controls could harm our operating results and cause investors to lose confidence in our reported financial information.

loss of confidence could have a substantial negative affect on the trading price of our common stock.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors