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KonaTel Reports Second Quarter Financial Results

Company Improves Gross Profit by 550%-Achieves Positive Cash from Operations

DALLAS, Aug. 19, 2019 /PRNewswire/ -- KonaTel, Inc. (KTEL) (www.konatel.com), a voice/data communications holding company, today announced financial results for the second quarter and six month period ended June 30, 2019.

Second Quarter Financial Summary

  • Revenues decreased 17%, reflecting a focus on higher-margin revenue, which resulted in a shedding of lower-margin, commoditized business;
  • Gross profit improved 550% and gross margin improved from 3.3% to 25.9%, validating the effort to shed lower-margin revenue;
  • Total operating expenses increased 40%, primarily related to a significant increase in depreciation and amortization; and
  • Net loss of $605,000, or $(0.01) per share, compared to a net loss of $774,000, or $(0.02) per share.

"During the first six months of 2019, KonaTel has taken significant steps to position the company for accelerating growth and sustainable profitability," commented KonaTel Chairman/CEO Sean McEwen. "Our primary focus for the last six months has been to merge our two recent acquisitions, Infiniti Mobile and Apeiron, while streamlining administrative costs and gaining efficiencies through economies of scale. I am encouraged with our progress and expect incremental efficiencies as we grow. Simultaneously, we have been working to reduce low margin service revenue in favor of higher margin service revenue. This effort caused a temporary reduction in revenue, but a significant increase in gross profit as our margin increased from 3.3% to 25.9%."

"As part of our ongoing direct cost assessment procedures, we continuously review our wholesale bundling strategy to more efficiently leverage our wholesale consumption of minutes, SMS and data," added Mr. McEwen. "We also periodically reevaluate our direct wholesale supplier agreements searching for ways to reduce direct costs. Over the past six months and through our cost assessment procedures, we have been able to reduce costs at June 30, 2018, by 27%. The improved margin and more efficient utilization of minutes, SMS and data has enabled us to reduce our operating loss by 20.8%, reduce our net loss by 21.8% and achieve positive cash flow from operations."

Second Quarter Financial Detail (Second Quarter of 2019 vs. Second Quarter of 2018)

Revenues decreased 17.4% to $2.3 million compared to $2.7 million, reflecting a focus on high-margin service revenue. Gross profit was $586,000, or 25.9% profit margin, compared to gross profit of $90,000, or 3.3% profit margin.

Total operating expenses were $1.2 million, up 39.3%. Approximately $213,000 of the $336,000 increase in operating expenses was related to an increase in depreciation and amortization, reflecting primarily intangible assets such as customer lists, software and licenses related to the Apeiron acquisition.

Net loss was $605,000, or $(0.01) per share (based on 40.7 million weighted average shares) compared to a net loss of $774,000, or $(0.02) per share (based on 32.8 million weighted average shares).

Year-to-Date Financial Detail (First Six Months of 2019 vs. First Six Months of 2018)

Revenues decreased 4.5% to $4.9 million compared to $5.1 million. Gross profit was $1.6 million, or 32.4% profit margin, compared to gross profit of $549,000, or 10.7% profit margin.

Total operating expenses were $2.5 million, up 35.6%, primarily due to a 247% increase in depreciation and amortization expenses. 

Net loss was $902,000, or $(0.02) per share (based on 40.7 million weighted average shares) compared to a net loss of $1.3 million, or $(0.04) per share (based on 32.8 million weighted average shares).

Balance Sheet

The Company ended the quarter with $201,000 in cash, compared to $57,000 in cash at December 31, 2018. KonaTel has successfully completed and integrated two acquisitions without incurring additional long or short-term debt.

About KonaTel

KonaTel provides a variety of retail and wholesale telecommunications services including mobile voice/text/data service supported by national U.S. mobile networks, mobile numbers, SMS/MMS services, and IoT mobile data service. KonaTel's subsidiary, Infiniti Mobile (www.infinitimobile.com) is an FCC authorized wireless Lifeline carrier with an FCC approved wireless Lifeline Compliance Plan, authorized to provide government subsidized phone service to low income Americans.  KonaTel's other subsidiary, Apeiron Systems (www.apeiron.io), is a global cloud communications service provider employing a dynamic "as a service" (CPaaS/UCaaS/CCaaS/PaaS) platform. Apeiron provides voice, messaging, network and platform products using innovative network and software designs. All Apeiron's services can be accessed through legacy interfaces and rich communications APIs. KonaTel is headquartered in Dallas, Texas.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 press release. This press release should be considered in light of the disclosures contained in the filings of KonaTel and its "forward-looking statements" in such filings that are contained in the EDGAR Archives of the SEC at www.sec.gov.

KonaTel, Inc.

Condensed Consolidated Balance Sheets



June 30,


December 31,


2019


2018


(unaudited)



  Assets




    Current Assets




Cash and Cash Equivalents

$                     201,291


$                    56,510

Accounts Receivable, net

729,016


1,035,273

Note Receivable

16,666


66,667

Inventory, Net

1,858


1,085

Prepaid Expenses

5,160


7,354

    Total Current Assets

953,991


1,166,889





    Fixed Asset




Property and Equipment, Net

118,900


132,023

Right to Use Assets, Net

76,754


-

    Total Fixed Assets

195,654


132,023





    Other Assets




Intangible Assets, Net

2,663,658


2,490,922

Advances for Acquisition Target

-


561,309

Other Assets

253,348


57,266

    Total Other Assets

2,917,006


3,109,497





  Total Assets

$                  4,066,651


$              4,408,409





  Liabilities and Stockholders' Equity




    Current Liabilities




      Accounts Payable and Accrued Expenses

$                  1,266,014


$              1,265,080

   Amount Due to Stockholder

233,806


91,152

      Revolving Line of Credit

58,674


103,379

      Lease Liabilities

60,260


-

      Deferred Revenue

44,276


69,988

      Income Tax Payable

108,941


108,941

      Customer Deposits

65,274


28,854

    Total Current Liabilities

1,837,245


1,667,394





    Long Term Liabilities




      Lease Liabilities

17,508


-

      Deferred Tax Liability

10,700


10,700

    Total Long-Term Liabilities

28,208


10,700

    Total Liabilities

1,865,453


1,678,094





    Stockholders' Equity




Common stock, $0.001 par value, 50,000,000 shares authorized, 40,692,286 outstanding and issued at June 30, 2019 and December 31, 2018

40,692


40,692

      Additional Paid In Capital

7,414,595


7,041,696

      Accumulated Deficit

(5,254,089)


(4,352,073)

    Total Stockholders' Equity

2,201,198


2,730,315





  Total Liabilities and Stockholders' Equity

$                  4,066,651


$              4,408,409

 

KonaTel, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended June 30,


Six Months Ended June 30,


2019


2018


2019


2018

















  Revenue

$         2,266,368


$         2,744,349


$         4,906,666


$         5,137,704

  Cost of Revenue

1,680,233


2,654,302


3,318,897


4,588,991









  Gross Profit

586,135


90,047


1,587,769


548,713









  Operating Expenses








    Payroll and Related Expenses

473,440


420,526


942,541


813,239

    Operating and Maintenance

380,892


249,117


809,037


574,047

    Bad Debt

-


-


-


15,210

    Utilities and Facilities

5,008


45,774


59,773


105,507

    Depreciation and Amortization

269,257


56,555


502,231


144,590

    General and Administrative

36,432


20,288


78,334


37,924

    Marketing and Advertising

6,104


16,811


21,469


37,289

    Taxes and Insurance

22,618


48,200


69,893


103,335

  Total Operating Expenses

1,193,751


857,271


2,483,278


1,831,141









  Operating Loss

(607,616)


(767,224)


(895,509)


(1,282,428)









  Other Income and Expense








    Interest Income

664


20


1,341


-

    Other Income

14,836


-


14,836


4,281

    Interest Expense

(12,733)


(6,760)


(22,684)


(23,844)

  Total Other Income and Expenses

2,767


(6,740)


(6,507)


(19,563)









  Net Loss

$         (604,849)


$         (773,964)


$         (902,016)


$    (1,301,991)









  Net loss per share (basic and diluted)

$                (0.01)


$                (0.02)


$                (0.02)


$              (0.04)









  Weighted Average Number of Basic and Diluted Shares

40,692,286


32,766,462


40,692,286


30,650,850

 

Cision

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