What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-04-06 compared with 2020-05-12 · 50 added, 378 removed, 34 unchanged (93% of the section changed)

MARKET FOR REGISTRANT’S

COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is quoted on the OTC Pink Tier of the OTC Markets

under the symbol “KTEL.”

No assurance can be given that any market for our common stock will develop or be maintained.

For any market that develops for our common

stock, the sale of shares of our common stock comprised of “restricted securities”

pursuant to Rule 144 of the SEC,

any other available exemption from registration under the Securities Act or by registration under the Securities Act by members

of management or others, including any person to whom any such securities may be issued in the future, may have a substantial adverse

impact on any such public market.

For information regarding the requirements of resales under Rule 144, see the heading

“Rule 144”

of this Item below.

On April 24, 2018, the 12,100,000 shares of

our common stock that were acquired by M2 under the Common Stock Purchase Agreement referenced above were distributed to its members,

pro rata, in accordance with their respective membership interests.

This action was approved by the requisite members of M2 on

April 9, 2018.

The KonaTel Merger Shareholder Voting Agreement and the KonaTel Merger Lock-Up/Leak-Out Agreement that previously

applied to these shares have expired by their respective terms.

The common stock that can be acquired under

vested and unvested Incentive Stock Options that we have granted may also have an impact on any public trading market in our common

See the heading “Outstanding Equity Awards”

of the caption “Executive Compensation”

Item 11, for a description of all of our outstanding Incentive Stock Options.

An aggregate of 7,000,000 shares of our common stock

owned respectively by Messrs.

Ploude and Yanson are subject to resale under a Lock-Up/Leak-Out Agreement.

See the headings “Lock-Up/Leak-Out

Agreement”

and “Apeiron Systems Merger Lock-Up/Leak-Out Agreement”

of the caption “Security Ownership

of Certain Beneficial Owners and Management”

of Part III, Item 12 hereof.

The expiration of this Lock-Up/Leak-Out Agreement

on December 31, 2020, could also have an adverse affect on any public market that evolves in our common stock.

Also, see the heading “Risk Related to

Our Common Stock”

of the caption “Risk Factors”

in Part I, Item 1A herein.

The following table sets forth, for the periods

indicated over the last two (2) years, the high and low closing bid quotations, as reported by the OTC Markets, and represents

prices between dealers, does not include retail markups, markdowns or commissions, and may not represent actual transactions:

Until December 14, 2020,

our common stock was quoted on the OTC Pink Tier of the OTC Markets under the symbol “KTEL.” On December 14, 2020, our common

was approved for listing on the OTC Markets’ OTCQB ®

Market or the OTCQB.

No assurance can be given that any established trading market for our common stock will develop or be maintained.

For any market that develops for our common stock,

the sale of shares of our common stock comprised of “restricted securities” pursuant to Rule 144 of the SEC, any other available

exemption from registration under the Securities Act or by registration under the Securities Act by members of management or others, including

any person to whom any such securities may be issued in the future, may have a substantial adverse impact on any such public market.

information regarding the requirements of resales under Rule 144, see the heading “Rule 144” of this Item below

The common stock that can be acquired under vested

and exercised Incentive Stock Options that we have granted may also have an impact on any public trading market in our common stock.

the heading “Outstanding Equity Awards” of the caption “Executive Compensation” in Part III, Item 11 hereof, for

a description of all of our outstanding Incentive Stock Options.

Also, see the heading “Risks Related to Our

Common Stock” of the caption “Risk Factors” in Part I, Item 1A hereof.

The following table sets forth, for the periods indicated

over the last two (2) years, the high and low closing bid quotations, as reported by the OTC Markets, and represents prices between dealers,

does not include retail markups, markdowns, or commissions, and may not represent actual transactions:

For the Years Ended December 31,

3 unchanged sentences

Fourth Quarter

These prices were obtained from OTC Markets

and do not necessarily reflect actual transactions, retail markups, mark downs or commissions.

The following is a summary of the current requirements of Rule 144:

These prices were obtained from OTC Markets and do

not necessarily reflect actual transactions, retail markups, mark downs or commissions.

The following is a summary of the current requirements of Rule 144, excluding

issues related to companies that are or have ever been a “shell company”:

Affiliate or Person Selling on Behalf of an Affiliate

2 unchanged sentences

During six-month holding period –

resales under Rule 144 Permitted.

under Rule 144 Permitted.

After six-month holding period –

resell in accordance with all Rule 144 requirements including:

in accordance with all Rule 144 requirements including:

Current public information,

Volume limitations,

Manner of sale requirements

for equity securities, and

Manner of sale requirements for equity

securities, and

Filing of Form 144.

During six-month holding period –

no resales under

Rule 144 permitted.

no resales under Rule 144

After six-month holding period but before one year –

unlimited public resales under Rule 144 except that the current public information requirement still applies.

public resales under Rule 144 except that the current public information requirement still applies.

After one-year holding period –

unlimited public resales

under Rule 144;

unlimited public resales under

need not comply with any other Rule 144 requirements.

1 unchanged sentence

During one-year holding period –

resales under Rule 144 permitted.

under Rule 144 permitted.

After one-year holding period –

resell in accordance with all Rule 144 requirements including:

in accordance with all Rule 144 requirements including:

Current public information,

Volume limitations,

Manner of sale requirements

for equity securities, and

Manner of sale requirements for equity

securities, and

Filing of Form 144.

1 unchanged sentence

no resales under Rule 144

144 permitted.

After one-year holding period –

unlimited public resales

under Rule 144;

unlimited public resales under

need not comply with any other Rule 144 requirements.

We currently have 577 shareholders of record,

not including an indeterminate number of shareholders who may hold their shares in “street name.”

We have not declared any cash dividends with

respect to our common stock, and do not intend to declare dividends in the foreseeable future.

All future revenues are anticipated

to be utilized for research, development and the furtherance of our business plan and our technologies, products, services and

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

There are no material restrictions limiting,

or that are likely to limit, our ability to pay dividends on our securities.

We currently have 573 shareholders of record as of

December 31, 2020, not including an indeterminate number of shareholders who may hold their shares in “street name.”

We have not declared any cash dividends with respect

to our common stock, and do not intend to declare dividends in the foreseeable future.

All future revenues are anticipated to be utilized

for research, development and the furtherance of our business plan and our technologies, products, services, and platform, and accordingly,

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

There are no material restrictions limiting, or that

are likely to limit, our ability to pay dividends on our securities.

Recent Sales of Unregistered Securities;

Use of Proceeds from

Registered Securities

13,500,000 Shares-D.

Sean McEwen-KonaTel Merger

(December 18, 2017).

3,850,000 Incentive Stock Option Agreement

grants under the KonaTel Merger (December 18, 2017).

300,000 Incentive Stock Option Agreement grants

to newly appointed directors (February 12, 2018).

4,750,000 Shares-Private Placement at $0.20

per share for an aggregate of $950,000 (Effective March 8, 2018).

1,000,000 Shares-Private Placement at $0.20

per share for an aggregate of $200,000, $100,000 in cash and $100,000 in settlement of an advance in that amount from this subscriber

(Effective April 13, 2018).

750,000 Shares-Private Placement at $0.20 per

share for an aggregate of $150,000 (Effective November 19, 2018).

7,000,000 Shares-Apeiron Systems Merger (Messrs.

Ploude [6,300,000 shares] and Yanson [700,000 shares]) (Effective December 31, 2018.

100,000 Incentive Stock Option Agreement grant

to newly appointed director (October 28, 2018).

500,000 Incentive Stock Option Agreement grant

to Trevan Morrow (January 31, 2019), which were cancelled under the Morrow Settlement Agreement filed as an Exhibit in Part IV,

These securities were offered and sold pursuant

to an exemption from registration under the Securities Act provided in Section 4(a)(2) thereof, and/or pursuant to Rule 506(b)

of Regulation D promulgated by the SEC under the Securities Act.

Use of Proceeds from Registered

There have been no sales by us of any unregistered securities during the

past two (2) years ended December 31, 2020, and 2019.

Use of Proceeds of Registered Securities

not applicable.

Purchases of Equity Securities by Us

and Affiliated Purchasers

Purchases of Equity Securities by Us and Affiliated Purchasers

not applicable.

SELECTED FINANCIAL

SELECTED FINANCIAL DATA

Not required for smaller reporting companies.

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

When used in this Annual Report, the words

“may,”

“will,”

“expect,”

“anticipate,”

“continue,”

“estimate,”

“project,”

“intend,”

and similar expressions are intended to identify forward-looking statements within

the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions, and financial

trends that may affect our future plans of operations, business strategy, operating results, and financial position.

reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees of future performance and are

subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements

as a result of various factors.

Such factors are discussed further below under “Trends and Uncertainties,”

and also include general economic factors and conditions that may directly or indirectly impact our financial condition or results

of operations.

Overview of Current and Planned

Business Operations

We are a cellular reseller of wholesale priced

minutes, text and data, including traditional post-paid cellular services, primarily operating on mobile networks of major communications

companies like Verizon and AT&T;

and we are a Sprint authorized agent of cellular services and products that principally include

business to business and business to customer products and services, mostly B2B Mobile Service and Internet of Things or wireless

During the coming year, we plan to devote additional sales resources to IoT, and we have direct wholesale data agreements

with Verizon and AT&T to provide us with our required wireless services.

We also presently provide Lifeline Program service

through a virtual eligible telecommunications carrier with a Lifeline Program license;

and we own an eligible telecommunications

carrier (ETC), IM Telecom.

We primarily distribute all of our products and services through independent field agents.

Comparison of the Year Ended December

31, 2019, to the Year ended December 31, 2018

Results of Operations

For the year ended December 31, 2019, we had

$9,173,520 in revenues from operations compared to the year ended December 31, 2018, where we had $9,415,139 in revenue from operations.

The cost of revenue for the year ended December 31, 2019, was $6,303,053, compared to $7,570,350 for the year ended December 31,

We had a gross profit of $2,870,467 for the year ended December 31, 2019, and $1,844,789 for the year ended December 31,

For the year ended December 31, 2019, and

the year ended December 31, 2018, total operating expenses were $4,515,662 and $3,294,524, respectively, for an increase of

$1,221,138 in 2019.

For the year ended December 31, 2019, non-operating

expenses were $55,270 compared to $38,945 for the year ended December 31, 2018.

Other income and gain on sale of assets were $17,061

for the year ended December 31, 2019, compared to $327,480 for the year ended December 31, 2018.

For the year ended December 31, 2019, and the

year ended December 31, 2018, we had a net loss from operations of $1,584,904 and $1,161,200, respectively.

In comparing our Statements of Operations

between the years ended December 31, 2019, and 2018, we had declining revenue and increased expenses.

The decrease of revenue

was caused by the selling of our Johnstown NY operations, which has become our customer.

The expense increase was due to the acquisitions

of Apeiron Systems and IM Telecom and the selling of Johnstown NY operations and expense reduction measures involving staffing.

The sale of the Johnstown NY operations resulted in a gain on sale of assets of $318,257 in 2018.

Liquidity and Capital

As of December 31, 2019, we have $ 191,474

in cash and cash equivalents on hand.

We anticipate future losses in the development

of our business.

The ability to continue as a business is dependent upon our generating profitable operations in the future

and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations

when they come due.

Management intends to finance operating costs over the next (6) six months with existing cash on hand and issuance

of equity securities.

There is no assurance funds will continue to be available through these methods of financing operations

until the Company begin generating satisfactory revenue from operations.

In comparing liquidity between the years ending

December 31, 2019, and 2018, cash and short-term assets decreased by 51.8%.

The decrease was caused through continuing focus on

products that are paid in advance, which has resulted in a decrease in accounts receivable of 64.7%.

Liabilities and total overall

debt showed a 0.03% decrease in 2019 when compared to 2018.

Stockholder debt had a net increase with an advance from a shareholder

and payments made on the advances.

The revolving lines of credit were decreased through payments in 2019.

Going forward, equity

investment and growth of new services is expected to provide the liquidity for our business.

Liquidity was also strained by the acquisitions

and increased costs caused through the diversification of services.

The expense increase that helped cause the negative liquidity

is discussed above in the comparison of our Statement of Operations for the years ended December 31, 2019, and 2018.

Overall, the current ratio (current assets

divided by our current liabilities) was .36 and .70 as of December 31, 2019, and 2018, respectively.

Working capital decreased

Cash Flow from Operations

During the year ended December 31, 2019, and

the year ended December 31, 2018, cash flow provided by (used in) operating activities was $176,678 and $(1,011,453), respectively.

Cash flows provided by (used in) operating activities were primarily attributable to the Company’s net loss of $1,584,904

and $1,161,200 for the years ended December 31, 2019, and 2018, respectively.

Cash Flows from Investing

During the year ended December 31, 2019, and

the year ended December 31, 2018, cash flow provided by (used in) investing activities was $58,603 and ($144,251), respectively.

The cash used in investing activities during 2019 were created through cash received through acquisitions and cash provided through

the sale of assets.

Cash Flows from Financing

During the year ended December 31, 2019, and

the year ended December 31, 2018, cash flow provided by (used in) financing activities was ($100,317) and $1,118,064, respectively.

The funds provided by financing were comprised of payment on operating lease liabilities, $69,380 for 2019 and $0 for 2018;

of a revolving line of credit, $91,142 for 2019 and $49,761 for 2018;

advances made by a shareholder of $200,000 in 2019 and $100,000

repayments to related parties of $139,795 for 2019 and $132,175 for 2018;

and proceeds from issuance of common stock and

contributions of $0 for 2019 and $1,200,000 for 2018.

Going Concern

As the Company did not generate net income

during the years ended December 31, 2019, and 2018, the Company has been dependent upon equity financing to support its operations.

In addition to losses of $1,584,904 and $1,161,200 for the years ended December 31, 2019, and 2018, respectively, the Company

has experienced cash provided by (used in) $176,678 and $(1,011,453), respectively.

The accumulated deficit as of December 31,

2019, is $5,896,977.

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;

acquisition of Apeiron Systems;

receiving cash investments through the private placement of shares of our common stock;

from the growth of our Virtual ETC program, all of which has contributed to an improvement in our working capital, without the

use of additional lines of credit or borrowings.

As a result of the sale of assets to Telecon

Wireless, the Company’s irrevocable standby letter of credit arrangements with certain cellular carriers in the aggregate

amount was reduced to $213,000 from $263,000.

The letters of credit serve as collateral and security for various resale contracts

the Company has with their suppliers.

Off-Balance Sheet Arrangements

The Company entered into an off-balance sheet

arrangement as a result of the purchase of Apeiron Systems.

The former Apeiron Systems stockholders have a $1.00 “Guaranteed

if the Company’s common stock trading price does not reach or exceed $1.00 per share over a ten (10) consecutive

day period between December 31, 2020, and ending on December 31, 2021.

If the share price is not reached, the Company shall issue

to the Apeiron Systems stockholders for each such share of the Company’s common stock that is equal to the number of “Qualifying

Shares”

multiplied by the difference between the Guaranteed Value and the highest “Calculated Value”

during the “Valuation Period.”

See Section 5.10 of the Apeiron Systems Merger Agreement that was filed as an Exhibit

to the Company’s 8-K Current Report dated December 31, 2018, and filed with the SEC on December 31, 2018, and which is accessible

by Hyperlink in Part IV, Item 15.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in

conformity with accounting principles generally accepted in the United States of America requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results

could differ from those estimates.

Significant estimates in the accompanying financial statements include the amortization period

for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the website and property and

equipment, valuation of warrant and beneficial conversion feature debt discounts, valuation of share-based payments and the valuation

allowance on deferred tax assets.

Impairment of Long-Lived

We account for long-lived assets in accordance

with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal

of Long-Lived Assets”.

This statement requires that long-lived assets and certain identifiable intangibles be reviewed for

impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability

of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows

expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured

by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Assets to be disposed of are reported

at the lower of the carrying amount or fair value less costs to sell.

Fair Value of Financial

Instruments and Fair Value Measurements

We measure their financial assets and liabilities

in accordance with generally accepted accounting principles.

For certain of our financial instruments, including cash, accounts

payable, accrued expenses escrow liability and short-term loans the carrying amounts approximate fair value due to their short

We have adopted accounting guidance for financial

and non-financial assets and liabilities.

The adoption did not have a material impact on our results of operations, financial position

or liquidity.

This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures.

standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require

or permit fair value measurements.

This guidance does not apply to measurements related to share-based payments.

This guidance

discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future

income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).

utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad

The following is a brief description of those three levels:

Observable inputs such as quoted

prices (unadjusted) in active markets for identical assets or liabilities.

Inputs other than quoted prices

which are observable, either directly or indirectly.

These include quoted prices for similar assets or liabilities in active markets

and quoted prices for identical or similar assets or liabilities in markets that are not active.

Unobservable inputs in which

little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that

a market participant would use.

In February 2016, the FASB updated the accounting

guidance related to leases.

The most significant change in the updated accounting guidance requires lessees to recognize lease

assets and liabilities on the balance sheet for all operating leases with the exception of short-term leases.

The standard also

expands the disclosures regarding the amount, timing and uncertainty of cash flows arising from leases.

For a lessee, the recognition,

measurement and presentation of expenses and cash flows arising from a lease did not significantly change from previous guidance.

We adopted the updated guidance on January 1, 2019 on a prospective basis and as a result, prior period amounts were not adjusted

to reflect the impacts of the updated guidance.

In addition, as permitted under the transition guidance within the new standard,

prior scoping and classification conclusions were carried forward for leases existing as of the adoption date.

Upon adoption, we recorded $151,471 for operating

lease assets and liabilities, which includes the impact of fair value adjustments, prepaid and deferred rent.

Revenue Recognition

We earn revenue from contracts with customers, primarily through

the provision of telecommunications and other services.

We account for these revenues under Accounting Standards Update (ASU) 2014-09,

“Revenue from Contracts with Customers”

(Topic 606), which we adopted on January 1, 2018, using the modified retrospective

This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue

and develops a common revenue standard U.S.

The standard update also amends current guidance for the recognition of costs

to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts

with customers will be deferred and amortized consistent with the transfer of the related good or service..

Revenue from these

services is generally recognized monthly as the services are provided.

Such revenue is recognized based on usage, which can vary

from month to month or at a contractually committed amount, net of credits or other billing adjustments.

Advance billings for future

service in the form of monthly recurring charges are not recognized as revenue until the service is provided.

Stock-Based Compensation

We record stock-based compensation in accordance

with the guidance in ASC 718 which requires the Company to recognize expenses related to the fair value of its employee stock option

This requires that such transactions be accounted for using a fair-value-based method.

The Company recognizes the cost

of all share-based awards on a graded vesting basis over the vesting period of the award.

We account for equity instruments issued in

exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached

by the ASC 505-50.

Costs are measured at the estimated fair market value of the consideration received or the estimated fair value

of the equity instruments issued, whichever is more reliably measurable.

The value of equity instruments issued for consideration

other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider

of goods or services.

We account for income taxes in accordance with

FASB ASC 740, “Income Taxes”.

Deferred tax assets and liabilities are recognized for the future tax consequences

attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and

loss carryforwards and their respective tax bases.

Deferred tax assets and liabilities are measured

using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected

to be recovered or settled.

The effect of a change in tax rules on deferred

tax assets and liabilities is recognized in operations in the year of change.

A valuation allowance is recorded when it is “more

likely-than-not”

that a deferred tax asset will not be realized.

Tax benefits of uncertain tax positions are

recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return.

We had no liability for uncertain tax positions as of December 31, 2019, and 2018.

Interest and penalties, if any, related

to unrecognized tax benefits would be recognized as interest expense.

We do not have any accrued interest or penalties associated

with unrecognized tax benefits, nor was any significant interest expense recognized during the years ended December 31, 2019, and

On December 22, 2018, the United States Government

passed new tax legislation that, among other provisions, will lower the corporate tax rate from 35% to 21%.

In addition to

applying the new lower corporate tax rate in 2019 and thereafter to any taxable income we may have, the legislation affects the

way we can use and carry forward net operating losses previously accumulated and results in a revaluation of deferred tax assets

recorded on our balance sheet.

Given that the deferred tax assets are offset by a full valuation allowance, these changes

will have no net impact on the Company’s financial position and net loss.

However, if and when we become profitable, we will

receive a reduced benefit from such deferred tax assets.

Had this legislation passed prior to our December 31, 2019, fiscal year-end,

the effect of the legislation would have been a reduction in deferred tax assets and the corresponding valuation allowance.

Loss Per Share

We follow ASC Topic 260 to account for the

loss per share.

Basic loss per common share calculations are determined by dividing net loss by the weighted average number of

shares of common stock outstanding during the period.

Diluted loss per common share calculations are determined by dividing net

loss by the weighted average number of common shares and dilutive common share equivalents outstanding.

During periods when common

stock equivalents, if any, are anti-dilutive they are not considered in the computation.

As the Company has incurred losses

for the years ended December 31, 2019, and 2018, dilutive loss per share is the same as loss per share.

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 5. Market for Registrant’s Common Equity