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Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-04-17 · 112 added, 82 removed, 144 unchanged (57% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When used in this Annual Report, the words “may,”

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may differ materially from those included within the forward-looking statements as a result of various factors.

are discussed at the forepart of this Annual Report on page 2 hereof, and further, below, under “Trends and Uncertainties.”

Such factors are discussed

at the forepart of this Annual Report under the heading “Forward-Looking Statements” on page 2 hereof, and further, below,

under “Trends and Uncertainties.”

Overview of Current and Planned Business Operations

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opportunities for the distribution of our current products and services described in our “Principal Products or Services and their

Markets” summary on page 6 of this Annual Report.

Markets” summary contained on page 7 of this Annual Report.

In addition, we continue to pursue expanded market distribution opportunities,

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In comparing our Statements of Operations between

the years ended December 31, 2022, and 2021, we grew revenue, realized increased costs of revenue and operating expenses, and decreased

the years ended December 31, 2023, and 2022, we had declines in revenue, costs of revenue, operating expenses and lower net income.

For the year ended December 31, 2023, we had $18,223,745

in revenues from operations compared to $12,834,844 in the prior year ended December 31, 2021, for a total revenue increase of $7,188,496,

The increase in 2022 revenue was due to our planned expansion within the Mobile Services segment, which allowed us to distribute

high-speed mobile data service to low-income consumers.

in revenues from operations compared to $20,023,340 in the prior year ended December 31, 2022, for a total revenue decrease of ($1,799,595)

The decrease in 2023 revenue was due to fewer activations within our Mobile Services segment.

Influencing factors of this decline

in revenue were partially the result of the replacement of the EBB program (which had temporarily higher reimbursements) with the ACP

program in March, 2022, which reduced government subsidized revenues, as well our change in strategy in late 2022 to focus on the IM Telecom

sales in the eleven (11) Lifeline states, which suspended growth in early 2023, resulting in future period revenue decreases.

For the year ended December 31, 2023, our cost of

revenue was $15,033,733 compared to $7,105,464 in the prior year ended December 31, 2021, for a cost of revenue increase of $7,928,269,

Our cost of revenue increase was the result of delivering more devices to subscribers, as well as providing for sales compensation

and network costs related to the higher growth occurring within the Mobile Services segment.

revenue was $14,850,105 compared to $15,033,733 in the prior year ended December 31, 2022, for a cost of revenue decrease of ($183,628)

Our cost of revenue decrease was the result of delivering fewer devices to subscribers, which reduced the costs of devices, network

and compensation.

For the year ended December 31, 2023, we had gross

profit of $3,373,640 compared to $4,989,607 in the prior year ended December 31, 2022, for a gross profit decrease of ($1,615,967) in

This decline is directly related to up-front costs incurred by accelerating growth to acquire new customers within our Mobile Services

This decline was partially due to reduced activations within our Mobile Services segment, as well as in early 2022, we received

higher per activation claims on government subsidies through the EBB program, which was replaced with the ACP program in March, 2022.

In late 2022, we changed strategy towards higher ARPU locations, which required temporary suspensions in activity as selling teams relocated.

Additionally, we required an OSS/BSS system change to accommodate growth of new sales activity, which caused a pause in growth during

this implementation.

During lower or reduced activity periods, we had temporary improvements in profit, as compared with high growth activity

periods, where our business is required to recognize up-front costs and show reduced or negative profits.

Because of these factors, swings

in profit occur depending on the level of activations.

For the year ended December 31, 2023, total operating

expenses were $7,544,292 compared to $5,091,033 in the prior year ended December 31, 2021, for an increase of $2,453,259 in 2022.

increase was due primarily from additions in payroll and related expenses resulting from the hiring of our executive staff, as well as

senior operations and customer support staff within our IM Telecom subsidiary.

Additionally, increases in professional service fees for

legal and billing, as related to the expansion of ACP and Lifeline in our Mobile Services segment.

expenses were $6,494,243 compared to $7,544,292 in the prior year ended December 31, 2022, for a decrease of ($1,050,049) in 2023.

decrease was due primarily to lower payroll and related expenses resulting from a reduction in staff.

For the year ended December 31, 2023, other income

(expense) was ($820,224) compared to ($397,675) in the prior year ended December 31, 2022.

This increase is due primarily to interest expense

related to our CCUR loan.

This increase is due primarily to interest

expense related to our CCUR Loan.

For the year ended December 31, 2023, we had a net

loss of ($2,952,360) compared to net income of $622,986 in the prior year ended December 31, 2021.

loss of ($3,940,827) compared to a net loss of ($2,952,360) in the prior year ended December 31, 2022.

Liquidity and Capital Resources

As of December 31, 2022, we had $2,055,634 in cash

and cash equivalents on hand.

As of December 31, 2023, we had $777,103 in cash and

cash equivalents on hand.

Our ability to continue as a business is dependent

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Management intends to finance operating costs over the next twelve

(12) months with revenues from our operations and use of financing received during the year.

(12) months with revenues from operations, cash on hand and the use of financing available to the business.

In comparing liquidity between the years ending December

31, 2022, and 2021, cash increased by 120%.

The increase was the result of the CCUR $3,150,000 loan received to finance sales growth in

our mobile services sector.

Total liabilities increased by 294% in 2022when compared to 2021, as a result of the CCUR loan taken out in

Going forward, growth from new service offerings is expected to provide additional liquidity for our business.

Working capital

decreased by $2,257,587 for the year ended December 31, 2022, primarily resulting from the addition of loans payable.

Our current ratio (current assets divided by current

liabilities) was .92 as of December 31, 2022, and 2.91as of December 31, 2021.

31, 2023, and 2022, cash decreased by 62%.

The decrease was primarily the result of growth in our mobile services sector, which requires

up-front expenditures to acquire consumers.

Total liabilities increased by 57% in 2023 when compared to 2022, as a result of the CCUR

Loan delayed draw received in 2023, and the device financing from ACP Finance, which was also established in 2023.

We had a working

capital deficit of ($3,859,200) for the year ended December 31, 2023, primarily resulting from the addition of the CCUR Loan delayed draw

and the financing of devices through ACP Finance.

In January 2024, and as noted under the heading “Events Subsequent to December

31, 2023” in Part I, Item I, Business, the CCUR Loan and the outstanding obligations to ACP Finance, were fully paid off with proceeds

from the sale of IM Telecom, which is discussed under that heading.

Our current ratio (current assets divided by current liabilities) was .48

as of December 31, 2023, and .92 as of December 31, 2022.

Cash Flow from Operations

During the year ended December 31, 2023, and the year

ended December 31, 2021, cash flow provided by operating activities was $(1,821,870) and $211,930, respectively.

Decreased cash

flows provided by operating activities were primarily attributable to a material increase in purchased inventory to support distribution

and growth within the Mobile Services, as well as related sales compensation expenses.

ended December 31, 2022, cash flow used in operating activities was $(1,792,032) and $(1,821,869), respectively.

Cash flows used in operating

activities were mainly impacted by the Company’s net loss and higher inventory due to end of year device purchases.

Cash Flows from Investing Activities

During the year ended December 31, 2023, and the year

ended December 31, 2021, cash flow provided by(used in) investing activities was $10,000 and ($10,000), respectively.

The cash provided

by investing activities during 2022 was the result of the sale of assets.

ended December 31, 2022, cash flow provided by investing activities was $0 and $10,000, respectively.

The cash provided by investing activities

during 2022 was the result of the sale of assets.

Cash Flows from Financing Activities

During the year ended December 31, 2022, and the year

ended December 31, 2021, cash flow provided by financing activities was $2,934,718 and $15,661, respectively.

In 2022, cash flow generated

from financing activities consisted of $3,150,000 cash received from short-term notes payable;

($173,532) cash used for payment of loan

origination costs;

the year ended December 31, 2023, and the year ended December 31, 2022, cash flow provided by financing activities was $513,501 and $2,934,718,

respectively.

In 2023, cash flow generated from financing activities consisted of $554,750 cash received from short-term notes payable

($132,000), cash used for payment of loan origination costs and $90,751 cash received from stock option exercises.

2022, cash flow generated from financing activities consisted of $3,150,000 cash received from short-term notes payable;

($173,532) cash

used for payment of loan origination costs;

($150,000) cash used for repayment of notes payable;

and $108,250 cash received from the exercise of incentive stock

During the year ended December 31, 2021, cash flow used in financing activities was comprised of($94,339) for repayments of notes

payable and $110,000 in cash received from the exercise of incentive stock options.

and $108,250 cash received from the exercise

of incentive stock options.

Going Concern

The Company generated a net loss of ($2,952,360) during

the year ended December 31, 2022.

We had net income of $622,986 in 2021.

The Company experienced positive cash flow of $1,112,849 and

We generated a net loss of ($3,940,827) during the

year ended December 31, 2023 and we had a net loss of ($2,952,360) in 2022.

The Company had a net change in cash of ($1,278,531) and $1,112,849

in 2023, and 2022, respectively.

The accumulated deficit as of December 31, 2023, was ($12,238,691).

The business received $3,150,000 in capital financing

during the year ended December 31, 2022, to help grow the mobile services base in IM Telecom.

The business gained additional distribution

channels as a result, and at its peak more than tripled its subscriber base.

High growth phases require immediate expense recognition,

and as a result, management expected net operating losses during this high growth phase.

Following this initial high-growth phase, management

slowed the acceleration, and the business had an immediate (and expected) return to positive cash flow and recorded net operating profit

of $301,135 in Q4 2022.

In Q4 2022, management shifted its distribution channels towards its highest profit areas, and has seen Average

Revenue Per User (“ARPU”) increase as a result.

Management also gained additional equipment suppliers, and has been able to

leverage terms on device purchases, moving from prepayments up to thirty (30) days.

We expect terms to become more favorable and offer

greater use of our cash in 2023.

The Company sourced short-term financing in June,

2022, of $3,150,000.

In June, 2023, the Company agreed to additional financing with CCUR, up to an additional $2,000,000 in delayed draw

As of June, 2023, we had received an initial delayed draw in the amount of $500,000 to help facilitate our growing Mobile

Services segment and support higher customer acquisition costs (sales).

In late 2023, we secured additional device financing through ACP

Finance (up to $5M), to further provide for growth and which also afforded repayment of device costs over an extended timeframe.

All outstanding

liabilities owing under the foregoing arrangements

were paid in full on the Initial Closing Date of

the Excess Purchase Agreement.

See heading “Events Subsequent

to December 31, 2023” in Part I, Item I, Business, hereof.

ACP Finance remains available to us as a growth financing partner, under

prior terms, and provides continuing growth financing for our mobile services segment.

Our business added distribution partners to higher

profit states in 2023, and started to show higher growth in the second half of the year.

High growth phases require immediate expense

recognition and as a result, management expects net operating losses during these growth periods.

We are one of only a few businesses to hold a national

ETC license, which provides us with additive reimbursement rates within the states we operate.

We will continue to target and expand into

new ETC licensed areas, and expect increasing returns as a result.

Management believes as we expand state licensing under our ETC designation,

this activity will only continue to increase the value of our ETC license within the marketplace and afford us additional financing capabilities

At the end of 2023, we held eleven (11)

state licenses.

This coverage area gives us additional reimbursements on claims, and we believe also increases the value of our ETC license

within the marketplace.

As a result of the Company’s ability to access additional financing and due to the significance of our ETC

license, we have ameliorated any substantial going concern doubt.

Critical Accounting Policies and Estimates

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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

Significant estimates in the accompanying financial statements could include the amortization period for intangible assets, valuation

and impairment valuation of intangible assets, depreciable lives of the 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.

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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 maturities.

We measure 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 maturities.

We have adopted accounting guidance for financial

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

We distribute government subsidized mobile services

through Master Agents.

As part of the distribution process, we deliver mobile phones and/or tablets (devices) to our Master Agents, who

then are responsible to subscribe qualifying consumers under a government sponsored program (ACP and/or Lifeline).

In most cases, devices

that have been delivered to our Master Agents are subscribed to and activated by qualifying consumers within sixty (60) days, at which

point we would receive a subsidy from a governing body (USAC or certain states) and recognize revenue.

Once a device is activated, and

the intended service provided under the government program is deemed to have occurred, the program revenue is recognized, the expense

is recognized, and the device is removed from inventory.

Stock-Based Compensation

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

liability for uncertain tax positions as of December 31, 2022, and 2021.

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, 2022, and 2021.

We had no liability

for uncertain tax positions as of December 31, 2023, and 2022.

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, 2023, and 2022.

Earnings Per Share

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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 7. Management’s Discussion and Analysis