Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When used in this Annual 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 Annual 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 at the forepart of this Annual Report under the heading "Forward-Looking Statements" on page 2 hereof.

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 contained on page 7of this Annual 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.

Comparison of the Year Ended December 31, 2024, to the Year ended December 31, 2023

Results of Operations

In comparing our Statements of Operations between the years ended December 31, 2024, and 2023, we had declines in revenue and costs of revenue, increases in operating expenses, and lower net income.

For the year ended December 31, 2024, we had $15,503,251 in revenues from operations compared to $18,223,745 in the prior year ended December 31, 2023, for a total revenue decrease of ($2,720,494) in 2024. The decrease in 2024 revenue was due to fewer activations within our Mobile Services segment. A major influence in this decline in revenue was the result of the ACP Program ending on June 1, 2024, which reduced government subsidized revenues for Infiniti Mobile.

For the year ended December 31, 2024, our cost of revenue was $12,088,944 compared to $14,850,105 in the prior year ended December 31, 2023, for a cost of revenue decrease of ($2,761,161) in 2024. Our cost of revenue decrease was the result of delivering fewer devices to subscribers, which reduced the costs of devices, network and compensation, as a result of the elimination of the ACP Program.

For the year ended December 31, 2024, we had gross profit of $3,414,307 compared to $3,373,640 in the prior year ended December 31, 2023, for a gross profit increase of $40,667 in 2024. This increase was primarily due to a reduction in acquisition costs in 2024.

For the year ended December 31, 2024, total operating expenses were $7,953,378 compared to $6,494,243 in the prior year ended December 31, 2023, for an increase of $1,459,135 in 2024. This increase was due primarily due to higher payroll and related expenses for Apeiron Systems.

For the year ended December 31, 2024, other income (expense) was $9,213,940 compared to ($820,224) in the prior year ended December 31, 2023. This increase was due primarily to our sale of 49% of the Membership Interest in IM Telecom to Excess Telecom on January 22, 2024, for an aggregate purchase price of $10,000,000, and, if approved the FCC, Excess can acquire the remaining 51% for $100.

For the year ended December 31, 2024, we had a net income of $4,490,818 compared to a net loss of ($3,940,827) in the prior year ended December 31, 2023. The increase in net income was also primarily the result of the sale of the 49% Membership Interest in IM Telecom to Excess Telecom in the first quarter of 2024.

Liquidity and Capital Resources

As of December 31, 2024, we had $1,679,345 in cash and cash equivalents on hand.

Our ability to continue as a business is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve (12) months with revenues from operations, cash on hand and potentially the use of financing for growth accelerating opportunities.

In comparing liquidity between the years ending December 31, 2024, and 2023, cash increased by 116%. The increase was primarily the result of the sale of the 49% Membership Interest in IM Telecom to Excess Telecom in the first quarter of 2024. Total liabilities decreased by 64.2% in 2024 when compared to 2023, as the result of the repayment of the CCUR Loan and the ACP Finance loan for device financing from funds received from Excess Telecom under the Excess Telecom Purchase Agreement. We also had working capital of $2,006,701 for the year ended December 31, 2024, also primarily resulting from the additional cash and cash equivalents received from the Excess Telecom Purchase Agreement. In January, 2024, the CCUR Loan and the outstanding obligations to ACP Finance, were fully paid off with a part of these proceeds.

Our current ratio (current assets divided by current liabilities) was 1.78 as of December 31, 2024, and .48 as of December 31, 2023.

Cash Flows from Operations

During the year ended December 31, 2024, and the year ended December 31, 2023, cash flow used in operating activities was $(3,992,767) and $(1,792,032), respectively. Cash flows provided by operating activities were mainly impacted by the adjustment to net income due to the gain on sale of 49% of IM Telecom.

Cash Flows from Investing Activities

During the year ended December 31, 2024, and the year ended December 31, 2023, cash flow provided by investing activities was $8,558,509 and $0, respectively. This increase was the result of the sale of the 49% Membership Interest in IM Telecom to Excess Telecom.

Cash Flows from Financing Activities

During the year ended December 31, 2024, and the year ended December 31, 2023, cash flow provided by (used in) financing activities was ($3,663,500) and $513,501, respectively. In 2024, cash flow used in financing activities consisted of ($3,704,750) cash used to repay CCUR loan principal and loan fees, and $41,250 cash received from incentive or non-compensatory stock options that were exercised. 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 incentive or non-compensatory stock option exercises.

Going Concern

We generated a net income of $4,490,818 during the year ended December 31, 2024, and we had a net loss of ($3,940,827) in 2023. The Company had a net change in cash of $902,242 and ($1,278,531) in 2024, and 2023, respectively. The accumulated deficit as of December 31, 2024, was ($7,747,873). The Company's sale of the 49% Membership Interest in IM Telecom to Excess Telecom allowed us to pay off all outstanding debt and retain additive cash.

We are one of only a few telecommunication carriers to hold a national wireless ETC Lifeline license, which provides us with additive reimbursement rates within the states we operate. In Q2 2024, we added an additional ten (10) state licenses, which continues to expand our nationally licensed wireless service coverage. We have continued to target and expand into additional ETC licensed states.

As of June 1, 2024, funding for the ACP Program ended, which accounted for approximately 15% of our revenues in Q2 2024 and 33% of our revenues in Q1 2024. Legislative efforts to extend funding remain within Congress; however, the decision to further fund the ACP Program (or a similar program) is still uncertain. In light of this uncertainty, we took initial steps to reduce costs in Q2 2024 while discussions continued in Congress, and we moved resources and focus to our mobile services segment to California. With the California Lifeline Program, through its additional state funding and Linkup program, our business was able to retain continuity in the mobile services market. In Q3 2024, we received a cease and desist letter from the State of California CPUC, specific to a marketing program by one of our master distribution partners. The inquiry into this matter impacted the timing of payments on our qualified claims through Q4 2024 (see the heading "Concentration of Credit Risk" in NOTE 1 of our audited consolidated financial statements contained in Part II, Item 8 hereof). Since the end of the year, the cease and desist issue has been rectified and all payments are now being received timely.

As of December 31, 2024, and with no visible progress towards an extension of the ACP Program within Congress, we took cost reduction measures, including reductions within our workforce. Although we eliminated our outstanding debt and increased our cash position earlier in the year, uncertainty around the ACP Program (or a similarly funded program), the impacts to our business in the State of California, the program launch timing of VIVA-US Telecommunications, Inc. ("VIVA-US"), and our ongoing health care sales initiative will play significant roles in our ability to continue operations without additional reductions. The lack of our success with any of these foregoing initiatives raises substantial doubt about our ability to remain a going concern for the twelve (12) month period from the date of this Annual Report.

Critical Accounting Policies and Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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.

Impairment of Long-Lived Assets

We account for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Fair Value of Financial Instruments and Fair Value Measurements

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 and non-financial assets and liabilities. The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices which are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Leases

In February, 2016, the FASB updated the accounting guidance related to leases. The most significant change in the updated accounting guidance requires lessees to recognize lease assets and liabilities on the balance sheet for all operating leases with the exception of short-term leases. The standard also expands the disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. For a lessee, the recognition, measurement, and presentation of expenses and cash flows arising from a lease did not significantly change from previous guidance. We adopted the updated guidance on January 1, 2019, on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the updated guidance. In addition, as permitted under the transition guidance within the new standard, prior scoping and classification conclusions were carried forward for leases existing as of the adoption date.

Revenue Recognition

We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services. We account for these revenues under Accounting Standards Codification (ASC) 606, "Revenue from Contracts with Customers." This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard U.S. GAAP. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. Revenue from these services is generally recognized monthly as the services are provided. Such revenue is recognized based on usage, which can vary from month to month or at a contractually committed amount, net of credits or other billing adjustments. Advance billings for 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

We record stock-based compensation in accordance with the guidance in ASC 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This requires that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services.

Income Taxes

We account for income taxes in accordance with FASB ASC 740, "Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is "more likely-than-not" that a deferred tax asset will not be realized.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. We had no liability for uncertain tax positions as of December 31, 2024, and 2023. 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, 2024, and 2023.

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 available to common stockholders 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. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.