When used in this Quarterly 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. Persons reviewing this Quarterly 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 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 continue to pursue market opportunities for the distribution of our current
products and services described in our "Principal Products or Services and their
Markets" summary on page 8 of this Quarterly Report. In addition, we continue to
pursue expanded market distribution opportunities, development of new products
and services, the addition of new lines of business and accretive acquisition
opportunities that may enhance or expand our current product and service
offerings.
Results of Operations
Comparison of the quarter ended March 31, 2022, to the quarter ended March 31,
2021
For the quarter ended March 31, 2022, we had $4,227,856 in revenues from
operations compared to $2,392,838 for the quarter ended March 31, 2021, for a
total revenue increase of $1,835,018. This increase in first quarter revenue was
caused by an increase in both our Hosted Services and Mobile Services segments,
with Mobile Services expanding due to the introduction of the ACP program, which
also boosted the Lifeline program, adding additional revenues for the
distribution of high-speed mobile data service to low-income consumers.
For the quarter ended March 31, 2022, our cost of revenue was $2,580,595
compared to $1,481,677 in the quarter ended March 31, 2021, for a cost of
revenue increase of $1,098,918. Our first quarter cost of revenue increase was
primarily the result of increased network, handset and sales commission costs
related to distributing additional services.
For the quarter ended March 31, 2022, we had a gross profit of $1,647,261
compared to $911,161 in the quarter ended March 31, 2021, for a gross profit
increase of $736,100 in the first quarter.
For the quarter ended March 31, 2022, total operating expenses were $1,596,556
compared to $1,141,641 in the quarter ended March 31, 2021, for an increase of
$454,915 in the first quarter. This increase was due primarily to increases in
payroll and related expenses resulting mostly from the hiring of management
level operations positions in both our subsidiaries Apeiron Systems and IM
Telecom.
For the quarter ended March 31, 2022, other income (expense) was $(95,154)
compared to $(2,242) in the quarter ended March 31, 2021.
For the quarter ended March 31, 2022, we had a net loss of $44,449 compared to a
net loss of $232,722 in the quarter ended March 31, 2021. The loss for the
quarter ended March 31, 2022, was impacted by an acceleration of growth in our
Mobile Services segment that increased our customer acquisition cost and some
one-time charges described below.
As part of the Company's Mobile Service expansion plan, the Company took
one-time legal and regulatory charges in the first quarter 2022 of approximately
$103,000 to support expansion into additional Mobile Service distribution
territories (i.e., states).
Due to the success we are having with growing our Mobile Services subscriber
base, Management has chosen, over the next two quarters, to accelerate growth
within this segment, primarily influenced by expanded government subsidies and
new wireless voice/data services for eligible low-income families. As a result,
the Company recognized increases in Mobile Services revenue and direct costs
during the quarter ending March 31, 2022. Since the Company may not capitalize
customer acquisition costs over the average life of a customer, we recognize the
full incremental cost of each new Mobile Service customer at the start of
service, which is typically recovered within 100 days after activation. During
this period of intentional accelerated growth, Management foresees a temporary
reduction of gross margins as the Company continues to accelerate the expansion
of its Mobile Service customer base.
15
Liquidity and Capital Resources
As of March 31, 2022, we had $1,452,869 in cash and cash equivalents on hand.
In comparing liquidity between the three-month periods ending March 31, 2022,
and March 31, 2021, cash assets increased by 155.2%. This increase was primarily
attributable to adding more Mobile Services subscribers. Liabilities and total
overall debt declined by 5.1% in the three-month period ended March 31, 2022,
when compared to March 31, 2021. Growth in our Mobile Services customer base is
expected to provide additional long-term liquidity, however, in the near term,
additional operating capital may be required to support a period of expanding
Mobile Services growth. Therefore, Management is currently working to secure
short term debt financing to support the growth of our government subsidized
Mobile Services.
Our current ratio (current assets divided by our current liabilities) decreased
to 2.81 as of March 31, 2022, compared to .94 as of March 31, 2021. Working
capital increased by 3,151.8%.
Cash Flow from Operations
During the three months ended March 31, 2022, cash flow provided by operating
activities was $520,084, and for the three months ended March 31, 2021, cash
flow used in operating activities was $114,538.
Cash Flows from Investing Activities
During the three months ended March 31, 2022, and 2021, no cash flow was used in
investing activities.
Cash Flows from Financing Activities
During the three months ended March 31, 2022, no cash flow was used in financing
activities. For the three months ended March 31, 2021, net cash flow used in
financing activities was $31,321, for repayments of notes payable.
Going Concern
For the three months ended March 31, 2022, the Company generated a net loss of
$44,449, compared to a net loss for the three months ended March 31, 2021, of
$232,722. The Company has continued to sustain itself through the operations of
the business, indicated by net cash from operations of $520,084 for the three
months ended March 31, 2022. The accumulated deficit as of March 31, 2022, is
$5,389,954.
The Company has continued to ameliorate any substantial going concern doubt by
generating additional cash flow in the first quarter of 2022, the year ended
2021 and the year ended 2020; however, as the Company has started to increase
its Mobile Services customer base in the first quarter of 2022 and for the
foreseeable future, additional operating capital to may be required to support
expanding customer acquisition costs (sales).
Off-Balance Sheet Arrangements
We had no Off-Balance Sheet arrangements during the three-month period ended
March 31, 2022.
Critical Accounting Policies
Earnings Per Share
We follow ASC Topic 260 to account for the earnings per share. Basic earnings
per common share calculations are determined by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per common share calculations are determined by dividing net
income available to common stockholders by the weighted average number of common
shares and dilutive common share equivalents outstanding. As of March 31, 2022,
and March 31, 2021, there are 2,875,000 and 3,475,000 respectively, potentially
dilutive common shares.
16
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist primarily of receivables, cash and cash equivalents.
All cash and cash equivalents are held at high credit financial institutions.
These deposits are generally insured under the FDIC's deposit insurance
coverage; however, from time to time, the deposit levels may exceed FDIC
coverage levels.
The Company has a concentration of risk with respect to trade receivables from
customers and cellular providers. As of March 31, 2022, the Company had a
significant concentration of receivables (defined as customers whose receivable
balances are greater than 10% of total receivables) due from two (2) customers
in the amounts of $802,886, or 85.5% and $109,975, or 11.7%. It should be noted
that the largest customer is the FCC. As of December 31, 2021, the Company had a
significant concentration of receivables from two (2) customers in the amounts
of $783,431, or 63.9%, and $194,647, or 15.9%.
Concentration of Major Customer
A significant amount of the revenue is derived from contracts with major
customers and cellular partners. For the three months ended March 31, 2022, the
Company had two (2) customers that accounted for $915,837 or 21.7% and
$2,431,569 or 57.5% of revenue, respectively. For the three-month period ended
March 31, 2021, the Company had one (1) customer that accounted for $830,134, or
34.7%, of revenue.
Effect of Recent Accounting Pronouncements
The Company has evaluated all recent accounting pronouncements and believes that
none will have a significant effect on the Company's financial statements.
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