What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-04-14 compared with 2021-04-06 · 123 added, 100 removed, 472 unchanged (32% of the section changed)

18 unchanged sentences

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;

establishing and maintaining adoption of our technology, solutions, services and platforms in and on a variety of environments, experiences and types of devices;

timely and successfully developing new technologies, solutions, services and platform features, and increasing the functionality and features of our existing technologies, solutions, services and platform offerings;

developing technologies, solutions, services and platforms that result in a high degree of customer satisfaction and a high level of end-customer usage;

successfully responding to competition, including competition from emerging technologies and solutions;

developing and maintaining strategic relationships to enhance the distribution, features, content and utility of our technologies, solutions, services and platforms;

identifying, attracting and retaining talented engineering, network operations, program management, technical services, creative services and other personnel at reasonable market compensation rates in the markets in which we employ such personnel;

· establishing and maintaining broad market acceptance of our technology,

solutions, services and platforms, and converting that acceptance into direct and indirect sources of revenue;

· establishing and maintaining adoption of our technology, solutions, services

and platforms in and on a variety of environments, experiences and types of devices;

· timely and successfully developing new technologies, solutions, services

and platform features, and increasing the functionality and features of our existing technologies, solutions, services and platform offerings;

· developing technologies, solutions, services and platforms that result in

a high degree of customer satisfaction and a high level of end-customer usage;

· successfully responding to competition, including competition from emerging

technologies and solutions;

· developing and maintaining strategic relationships to enhance the distribution,

features, content and utility of our technologies, solutions, services and platforms;

· identifying, attracting and retaining talented engineering, network operations,

program management, technical services, creative services and other personnel at reasonable market compensation rates in the markets in

which we employ such personnel;

· integration of potential evolving offerings of products and acquisitions.

3 unchanged sentences

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,

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.

For the year end December 31, 2021, we reported gross revenues of $12,834,844,

cost of revenues of $7,105,464, operating expenses of $5,091,033, other expenses of ($15,361) and net income of $622,986.

We anticipate

additional revenue and net income growth in 2022, further reducing our accumulated deficit balance.

For the prior year ended December 31, 2020, we reported

gross revenues of $9,358,999, cost of revenues of $5,823,552, operating expenses of $3,895,466, other income of $598,637 and net income

For the year ended December 31, 2021, we had $833,016

in non-cash depreciation/amortization expense, which was mostly exhausted at the end 2021.

As of December 31, 2021, our accumulated deficit

was $5,345,504.

The United States Government’s dissolution

1 unchanged sentence

effect on our current and planned business operations.

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;

· Considering there are approximately 6,600,000 current Lifeline users and

approximately 34,300,000 eligible Lifeline customers (according to USAC), 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.

“ 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.

The impact of negative governmental changes and negative national carrier pricing have been outlined above.

In addition to those two risks, an interruption to the supply of low-cost phones and/or a reduction of Lifeline agents (no access to or not enough access to agents) would have a negative impact on Lifeline.

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.

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 and EBB require several factors to be successful.

The impact of

negative governmental changes and negative national carrier pricing have been outlined above.

In addition to those two risks, an interruption

to the supply of low-cost phones and/or a reduction of Lifeline agents (no access to or not enough access to agents) would have a negative

impact on Lifeline and/or EBB.

· Adequate equipment financing and available cash resources to pay up-front

commission payments (sometimes required) is critical to facilitate Lifeline, EBB, B2B and retail sales, and the lack of these resources

would have a negative impact on our business.

The increase in the number of resellers of services

6 unchanged sentences

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.

We purchase a portion of our mobile data service (“IOT”)

directly from national carriers and purchase the remainder of our wholesale voice and mobile data from wholesale aggregators or MVNEs

like PWG and Telispire.

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

37 unchanged sentences

· the experience and reputation of our management team;

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;

· 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;

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

· the amount of our capital needs;

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

· the amount of debt, options, warrants and convertible securities that may

be outstanding in our Company at any time.

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

44 unchanged sentences

customers will depend primarily on the following factors:

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

· our ability to demonstrate the economic and other benefits attendant to

our products and services;

· our customers becoming comfortable with using our telecommunications technologies;

30 unchanged sentences

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.

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

18 unchanged sentences

· discontinue the use of certain technologies;

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.

· 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

37 unchanged sentences

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.

key personnel, including our founder, Chairman and CEO, D.

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

whom we acquired Apeiron Systems and who serves as CEO of Apeiron Systems, and Charles D.

Griffin, our President and COO, among others,

some of whom are listed in Part III, Item 10 of this Annual Report.

Further, if we fail to retain our key personnel or

23 unchanged sentences

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

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

31 unchanged sentences

We do not have sufficient capital to engage in

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

substantial 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.

made no substantial 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.

In the long term, as a result of

our limited investment 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.

4 unchanged sentences

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

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.

Eliminating computer viruses and alleviating other security problems may require interruptions, delays, or cessation of service to our customers;

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.

· 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, pandemics, war, 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, hostile nation states 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.

Eliminating computer viruses and alleviating other security

problems may require interruptions, delays or cessation of service to our customers;

· 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

1 unchanged sentence

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.

Our business operations could be impacted by the current world health

On January 30, 2020, the World Health Organization

53 unchanged sentences

extensive resources:

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

to develop, improve and expand their platforms and related infrastructures more quickly than we can;

to reduce costs, particularly hardware costs, because of discounts associated with large volume purchases and longer-term relationships and commitments;

to offer less expensive products, technologies, platforms, and services, as a result of a lower cost structure, greater capital reserves or otherwise;

to adapt more swiftly and completely to new or emerging technologies and changes in customer requirements;

· to develop and deploy new products and services more quickly and effectively

· to develop, improve and expand their platforms and related infrastructures

more quickly than we can;

· to reduce costs, particularly hardware costs, because of discounts associated

with large volume purchases and longer-term relationships and commitments;

· to offer less expensive products, technologies, platforms and services as

a result of a lower cost structure, greater capital reserves or otherwise;

· to adapt more swiftly and completely to new or emerging technologies and

changes in customer requirements;

· to take advantage of acquisition and other opportunities more readily;

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

· 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

29 unchanged sentences

shares of common stock.

In general, there has been a minimal trading volume

In general, there has been a limited trading volume

in our common stock.

17 unchanged sentences

· sales of large blocks of our common stock by insiders and others;

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

· 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

19 unchanged sentences

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.

and quasi-governmental agencies regarding the trading of securities that are deemed to be penny stocks, 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

1 unchanged sentence

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.

and often, two (2) legal opinions are required, one (1) from the shareholder’s legal counsel and one

(1) 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 (2) to three (3) 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

23 unchanged sentences

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”

sixty (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.

33 unchanged sentences

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