KonaTel, Inc. Files 2023 Annual Report on Form 10-K

TL;DR

<b>KonaTel, Inc. filed its 2023 10-K, highlighting financial performance and customer concentration risks.</b>

AI Summary

KonaTel, Inc. (KTEL) filed a Annual Report (10-K) with the SEC on April 1, 2024. KonaTel, Inc. filed its 2023 Form 10-K on April 1, 2024, reporting on the fiscal year ending December 31, 2023. The company was formerly known as DALA PETROLEUM CORP. and WESTCOTT PRODUCTS CORP. KonaTel operates in the COMMUNICATION SERVICES, NEC industry (SIC code 4899). The filing details financial data for the fiscal years 2023, 2022, and 2021, including common stock, additional paid-in capital, and retained earnings. Customer concentration risk is noted, with specific mention of 'CustomerOne' and 'CustomerTwo' impacting trade accounts receivable and sales revenue in 2023 and 2022.

Why It Matters

For investors and stakeholders tracking KonaTel, Inc., this filing contains several important signals. The 10-K filing provides a comprehensive overview of KonaTel's financial position and operational results for the fiscal year 2023, which is crucial for investors to assess the company's performance and future prospects. Disclosure of customer concentration risk is important for understanding potential revenue volatility and the company's reliance on a few key clients.

Risk Assessment

Risk Level: — KonaTel, Inc. shows moderate risk based on this filing. The company faces medium risk due to customer concentration, as 'CustomerOne' and 'CustomerTwo' significantly impact trade accounts receivable and sales revenue, creating potential revenue volatility.

Analyst Insight

Investors should closely examine KonaTel's strategies for customer diversification and revenue stability in light of the disclosed customer concentration risks.

Key Numbers

• 2023-12-31 — Fiscal Year End (Reporting period)
• 2024-04-01 — Filing Date (Date of 10-K submission)
• 4899 — SIC Code (Industry classification)

Key Players & Entities

• KonaTel, Inc. (company) — Filer name
• DALA PETROLEUM CORP. (company) — Former company name
• WESTCOTT PRODUCTS CORP (company) — Former company name
• CustomerOne (company) — Key customer mentioned for concentration risk
• CustomerTwo (company) — Key customer mentioned for concentration risk
• CcurHoldingsInc (company) — Entity related to note purchase agreement

FAQ

Risk Factors

• Customer Concentration Risk [medium — financial]: The company's revenue and trade accounts receivable are significantly impacted by a small number of customers, specifically 'CustomerOne' and 'CustomerTwo', posing a risk of revenue volatility.

Key Dates

• 2023-12-31: Fiscal Year End — End of the reporting period for the 10-K
• 2024-04-01: 10-K Filing Date — Date KonaTel submitted its annual report

Glossary

10-K

An annual report required by the U.S. Securities and Exchange Commission (SEC), which gives a comprehensive summary of a company's financial performance. (This filing provides the official financial and operational overview for KonaTel for the fiscal year 2023.)

Customer Concentration Risk

A situation where a company's revenue or accounts receivable are heavily dependent on a small number of customers. (This risk is explicitly mentioned in the filing, indicating potential instability in KonaTel's revenue streams.)

Key Financial Figures

• $0.001 — (g) of the Act: Common Stock, par value $0.001 Indicate by check mark if the Registra
• $0.83 — "OTC Markets") "OTCQB Tier" ("KTEL") of $0.83 per share on June 30, 2023. As of Marc
• $367,500 — on stock in consideration of the sum of $367,500, which resulted in a change in control
• $0.01 — 0,000 authorized and unissued one cent ($0.01) par value shares of preferred stock fo
• $3,150,000 — wnership of its subsidiaries) to secure $3,150,000 (the "Principal Amount") in debt financ
• $2,000,000 — an aggregate principal amount of up to $2,000,000; and in consideration therefor, we prov
• $4,500,000 — greed to pay us the "Purchase Price" of $4,500,000 for our "Contract Rights" under the Tem
• $10,000,000 — ng Date" in consideration of the sum of $10,000,000, and will convey the remaining 51% of t
• $100.00 — in IM Telecom to Excess for the sum of $100.00 on the Final Closing. The Final Closing
• $5,000,000 — s will pay KonaTel an additional sum of $5,000,000 (the "ACP Renewal Earnout). The ACP Con
• $3,681,660 — tal payoff amount for the CCUR Loan was $3,681,660, inclusive of unpaid interest and legal
• $1,462,345 — Finance Installment Sale Agreement was $1,462,345. For additional information on the Exc
• $950,000 — tomer list, all valued at approximately $950,000 net of liabilities in the approximate a
• $415,000 — iabilities in the approximate amount of $415,000; and on November 1, 2016, it acquired t
• $300,000 — CS Agency in the approximate amount of $300,000. With the completion of the KonaTel Nev

Filing Documents

• ktel10k123123.htm (10-K) — 1016KB
• exhibit311.htm (EX-31) — 9KB
• exhibit312.htm (EX-31) — 9KB
• exhibit32.htm (EX-32) — 6KB
• 0001515971-24-000035.txt (&nbsp;) — 4612KB
• ktel-20231231.xsd (EX-101.SCH) — 33KB
• ktel-20231231_cal.xml (EX-101.CAL) — 50KB
• ktel-20231231_def.xml (EX-101.DEF) — 103KB
• ktel-20231231_lab.xml (EX-101.LAB) — 323KB
• ktel-20231231_pre.xml (EX-101.PRE) — 255KB
• ktel10k123123_htm.xml (XML) — 536KB

FORWARD LOOKING STATEMENTS

FORWARD LOOKING STATEMENTS This Annual 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 Annual Report. We cannot assure you that the forward-looking on forward-looking statements. You should carefully read this Annual 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. CAUTIONARY STATEMENT Summaries of all agreements or other documents referenced herein or attached hereto by Hyperlink in Part IV, Item 15, and incorporated herein by reference or otherwise, d

Business

Item 1. Business 4

Risk Factors

Item 1A. Risk Factors 10

Unresolved Staff Comments

Item 1B. Unresolved Staff Comments 20

Cybersecurity

Item 1C. Cybersecurity 20

Properties

Item 2. Properties 20

Legal Proceedings

Item 3. Legal Proceedings 21

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 21 PART II.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22

[Reserved]

Item 6. [Reserved] 24

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 24

Quantitative and Qualitative Disclosures about Market Risk

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 28

Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 29

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 30

Controls and Procedures

Item 9A. Controls and Procedures 30

Other Information

Item 9B. Other Information 31

Disclosure Regarding Foreign Jurisdictions that Prevents Inspection

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevents Inspection 31 PART III.

Directors, Executive Officers and Corporate Governance

Item 10. Directors, Executive Officers and Corporate Governance 32

Executive Compensation

Item 11. Executive Compensation 37

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 42

Certain Relationships and Related Transactions, and Director Independence

Item 13. Certain Relationships and Related Transactions, and Director Independence 43

Principal Accounting Fees and Services

Item 14. Principal Accounting Fees and Services 43 PART IV.

Exhibit and Financial Statement Schedules

Item 15. Exhibit and Financial Statement Schedules 44

Form 10-K Summary

Item 16. Form 10-K Summary 45

Signatures

Signatures 46 3 PART I

BUSINESS

ITEM 1. BUSINESS Corporate History and Business Development We were incorporated as "Light Tech, Inc." under the laws of the State of Nevada on May 24, 1984. A subsidiary in the name "Westcott Products Corporation" was organized by us under the laws of the State of Delaware on June 24, 1986, for the purpose of changing our name and domicile to the State of Delaware. On June 27, 1986, we merged with the Delaware subsidiary, with the survivor being Westcott Products Corporation, a Delaware corporation. At that time, all of our prior operations were conducted through Lee Building Products and T. A. Kilgore & Company, which owned and operated a home center in League City, Texas, about 30 miles southeast of downtown Houston, Texas. During 1990, we ceased these operations, and the secured lenders took possession of our assets. We changed our name to "Dala Petroleum Corp." on August 29, 2014, after re-entering the development stage and the completion of a merger with our newly formed and wholly owned subsidiary, Dala Acquisition Corp., a Nevada corporation (respectively, "Dala Acquisition" and the "Dala Merger"), on June 2, 2014. Dala Nevada was wholly owned by Chisholm Partners II, LLC, a Louisiana limited liability company ("Chisholm II"). We operated as an early-stage oil exploration company focused on our leased acreage acquired in the Dala Merger until 2016, when Chisholm II returned a total of 8,567,800 shares of the 10,000,000 shares of our common stock exchanged under the Dala Merger to us for cancellation in exchange for our assignment of approximately 55,000 acres, more or less, of our leased acreage or approximately 68.75% of our total leased acreage, to Chisholm II. All of our remaining oil and gas leasehold interests, comprising leases covering approximately 7,489 and 403 acres, more or less, expired in 2017 and 2018, respectively. On July 20, 2017, pursuant to a Common Stock Purchase Agreement dated July 19, 2017, M2 Equity Partners, LLC, a privately he

BUSINESS

BUSINESS KonaTel Nevada was organized under the laws of the the business of a full-service cellular provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets. Through its sales network, it provided these services nationwide. In furtherance of its proposed business, on November 1, 2014, it acquired most of the assets of Coast to Coast Cellular, Inc. ("Coast to Coast"), including inventories, property, plant and equipment and its customer list, all valued at approximately $950,000 net of liabilities in the approximate amount of $415,000; and on November 1, 2016, it acquired the assets of CS Agency LLC ("CS Agency"), consisting of contract rights 6 related to the cellular industry, in consideration of assuming liabilities of CS Agency in the approximate amount of $300,000. With the completion of the KonaTel Nevada Merger, we succeeded to the current and intended business operations of KonaTel Nevada. On December 31, 2018, we acquired Apeiron Systems (www.apeiron.io). Apeiron was organized in 2013 and is an international hosted services Communications Platform as a Service ("CPaaS") provider that designed, built, owns and operates its national private core network, supporting a suite of business communications services, all accessible via proprietary Applications Programming Interfaces ("APIs"). As an FCC licensed Internet Telephony Service Provider ("ITSP"), Apeiron also holds an FCC numbering authority license. Some of Apeiron's hosted services include Voice over IP ("VoIP"), cellular and Over-The-Top ("OTT") telephony, SMS/MMS messaging and broadcast services, numbering features, including Cloud IVRs, Voicemail, Fax, Call Recording and other services through local, toll-free and international phone numbers. Supported by its national redundant network, Ap