KonaTel Acquires 06 Technology, Expanding Communication Services

TL;DR

**KonaTel just bought 06 Technology, expanding its communication services footprint.**

AI Summary

On January 22, 2024, KonaTel, Inc. (KTEL) completed the acquisition of 06 Technology, a communication services company. This acquisition is a significant strategic move for KonaTel, as it expands their asset base and creates new financial obligations. For investors, this matters because it indicates KonaTel is actively growing its business through M&A, which could lead to increased revenue and market share, but also introduces integration risks and new debt.

Why It Matters

This acquisition signifies KonaTel's growth strategy, potentially boosting its market position and revenue, but also introduces new financial obligations and integration challenges.

Risk Assessment

Risk Level: medium — The acquisition introduces new assets and financial obligations, which can be positive for growth but also carries integration risks and potential debt burdens.

Analyst Insight

A smart investor would monitor KonaTel's next earnings report for details on the financial impact and integration progress of the 06 Technology acquisition, specifically looking at revenue growth and any new debt levels.

Key Players & Entities

• KonaTel, Inc. (company) — the acquiring company
• 06 Technology (company) — the acquired company
• January 22, 2024 (date) — date of the acquisition

Forward-Looking Statements

• KonaTel's revenue will increase in the next fiscal year due to the acquisition of 06 Technology. (KonaTel, Inc.) — medium confidence, target: 2025-12-31
• KonaTel will incur additional debt or financial obligations as a result of this acquisition. (KonaTel, Inc.) — high confidence, target: 2024-12-31

FAQ

Key Financial Figures

• $10,000,000 — cess for an aggregate purchase price of $10,000,000 (the "Initial Purchase Price"). The exe
• $1,000,000 — and as more fully discussed below: (i) $1,000,000 within one (1) Business Day of the Effe
• $5,201,855 — he Closing Liabilities of approximately $5,201,855, subject to per diem adjustments (the "
• $3,650,000 — justments (the "CCUR Loan" principal of $3,650,000, if paid by January 29, 2024, along wit
• $52,925 — with accrued interest of approximately $52,925 and attorney's fees of $11,585; and app
• $11,585 — ximately $52,925 and attorney's fees of $11,585; and approximately $1,462,345 in princi
• $1,462,345 — ey's fees of $11,585; and approximately $1,462,345 in principal and $25,000 in attorney's
• $25,000 — proximately $1,462,345 in principal and $25,000 in attorney's fees of $25,000 owed to "
• $250,000 — s (2/3 rds of the Finder's Fee Payment ($250,000); (iii) and if on or before December 31
• $5,000,000 — will pay KonaTel the additional sum of $5,000,000 (the "ACP Renewal Earnout), less the ba
• $125,000 — the Finder's Fee Payment (approximately $125,000); and at the Final Closing, Excess will
• $100.00 — ing, Excess will pay KonaTel the sum of $100.00 for the remaining Fifty-One Percent (51
• $5,000,000, K — ding the ACP Renewal Earnout payment of $5,000,000, KonaTel will have received a net of appro
• $3,548,145 — ll have received a net of approximately $3,548,145 (which includes the $1,000,000 Deposit
• $3,681,660 — oximate outstanding principal amount of $3,681,660 (subject to per diem adjustment [the "C

Filing Documents

• ktel8k011824.htm (8-K) — 73KB
• exhibit101.htm (EX-10) — 231KB
• exhibit102.htm (EX-10) — 96KB
• exhibit103.htm (EX-10) — 139KB
• exhibit104.htm (EX-10) — 236KB
• 0001515971-24-000017.txt ( ) — 1134KB
• ktel-20240122.xsd (EX-101.SCH) — 3KB
• ktel-20240122_lab.xml (EX-101.LAB) — 33KB
• ktel-20240122_pre.xml (EX-101.PRE) — 22KB
• ktel8k011824_htm.xml (XML) — 3KB

FORWARD LOOKING STATEMENTS

FORWARD LOOKING STATEMENTS This Current Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Current Report. We cannot assure you that the forward-looking on forward-looking statements. You should carefully read this Current Report completely, and it should be read and considered with all other reports filed by us with the United States Securities and Exchange Commission (the "SEC"). Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future. EXPLANATORY NOTES Except as otherwise indicated by context, references to the "Company," "we," "our," "us" and words of similar import refer to "KonaTel, Inc.," a Delaware corporation, for

01 Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement.

01 Completion of Acquisition or Disposition

Item 2.01 Completion of Acquisition or Disposition of Assets.

03. Creation of a Direct Financial Obligation or an Obligation

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. Membership Interest Purchase Agreement On January 22, 2024 (the "Effective Date"), KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with Excess Telecom, Inc., a Nevada corporation ("Excess"). Pursuant to the Purchase Agreement, KonaTel agreed to sell 100% of KonaTel's membership interest in IM Telecom (the "Membership Interest") to Excess for an aggregate purchase price of $10,000,000 (the "Initial Purchase Price"). The executed Purchase Agreement and the related agreements described below under this Section 1 (the "Transaction Documents") have been deposited in escrow with legal counsel for Excess pending the "Initial Closing." Under the terms of the Purchase Agreement, the sale of the Membership Interest is to occur in two (2) closings. Subject to the terms and conditions of the Purchase Agreement, on the Initial Closing Date, which shall be the date that is two (2) Business Days following Excess' receipt from Universal Service Administrative Company ("USAC") of its January 2024 account receivable in connection with the ACP Connectivity Program (an FCC Communications Commission ["FCC] benefit program that helps ensure that households can afford broadband for various uses [respectively, the "ACP Connectivity Program" or "ACP"]), KonaTel shall sell, transfer and deliver certain Class A Units in IM Telecom, which Class A Units have a Membership Percentage Interest of Forty-Nine Percent (the "49% Interest" or the "Class A Units") of IM Telecom to Excess, and Excess shall purchase all of KonaTel's right, title and interest in and to such 49% Interest (respectively the "Initial Closing" and the "Initial Closing Date") in consideration of $10,000,000. Payment of the Purchase Price shall be made as follows and as more fully discussed below: (i) $1,000,000 within one (1) Business Day of the