Konatel, Inc.  (DALP)
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Konatel, Inc.

Business Description

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. 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 all operations, and the secured lenders took possession of all of its assets.

On March 11, 2000, our Board of Directors began the process of re-entering the development stage with the appointment of new officers and directors, and began the process of seeking the acquisition of new business opportunities. These efforts resulted in the completion of the acquisition of Dala Petroleum Corp., a Nevada Corporation (“Dala Nevada”), pursuant to a transaction that is more specifically described below.

On June 2, 2014, we and our newly formed and wholly-owned subsidiary, Dala Acquisition Corp., a Nevada corporation (“Dala Acquisition”), and Dala Nevada, which was wholly-owned by Chisholm Partners II, LLC, a Louisiana limited liability company (“Chisholm II”), executed and delivered an Agreement and Plan of Merger (the “Dala Merger Agreement”) and all required or necessary documentation to complete the merger (collectively, the “Dala Merger Transaction Documents”), whereby Dala Acquisition merged with and into Dala Nevada, with Dala Nevada being the surviving company and becoming our wholly-owned subsidiary on the closing of the merger (the “Dala Merger”). Articles of Merger were filed with the Secretary of State of the State of Nevada on such date, which was the effective date of the Dala Merger. We issued 10,000,000 shares of our common stock in exchange for all of the outstanding shares of common stock of Dala Nevada, to Dala Nevada’s sole shareholder. Following the receipt of the 10,000,000 shares, Chisholm II’s managing director approved the transfer of all of these shares to its members (or its members’ designees) on a pro rata basis. The transfer of shares to the members of Chisholm II occurred on June 8, 2014. A condition precedent to the closing of the Dala Merger was that we would raise no less than $2,000,000 (the “Offering”) from persons who were “accredited investors” in consideration of the issuance (or the conversion) of a minimum of 2,000 shares and up to a maximum of 2,500 shares of our Series A 6% Convertible Preferred Stock at the offering price of $1,000 per Unit. Upon the closing of the Offering, we sold 2,025 Units in the Offering, raising $2,025,000, which funds were planned to be utilized in the development of the 300 oil and gas leases we acquired in north central Kansas under the Dala Merger, with total leased acreage of approximately 80,000 acres, more or less. For additional information about the Dala Merger, see our 8-K Current Report dated June 2, 2014, and filed with the SEC on June 3, 2014, which is accessible by Hyperlink in Part IV, Item 15 hereof.

On August 29, 2014, we filed a Certificate of Amendment of Certificate of Incorporation with the State of Delaware changing our name to “Dala Petroleum Corp.,” as approved by a majority of the common shareholders and 67% of our preferred shareholders.

Since the time of the Dala Merger, we have been operating as an early-stage oil exploration company focused on the leased acreage, which has oil potential at depths of less than 6,000 feet. We assigned the rights to explore the leased acreage to Chisholm II, which is an exploration and production company focused on the acquisition of Kansas oil leasehold interests and exploration and development and was Dala Nevada’s sole shareholder prior to the Dala Merger.

In June 2015, we temporarily suspended or exploration program due to the decline in the price of oil and difficult market conditions. During our fiscal year ended September 30, 2016, we did not drill any wells.

We established a land position over a shallow, conventional oil play in north central Kansas. The “Play” or exploration concept was located across a four county area and was geographically defined by the boundaries of the productive North American Rift System. The land position is concentrated over a lightly explored portion of the rift, bordered immediately on the south by productive rift-related oil fields, and to the north by significant new discoveries in southeast Nebraska, where productive rates had then been reported. This Play concept was developed by a team of highly experienced international geologists, geophysicists and land experts, who applied regional geologic theory, proprietary geophysical databases and high resolution seismic data.

KonaTel was organized under the laws of the State of Nevada on October 14, 2014, by its founder and sole shareholder, D. Sean McEwen, to conduct the business of a full service cellular provider that delivers cellular products and services to individual and business customers in various retail and wholesale markets. Through its sales network, it provides 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 goodwill 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 related to the cellular industry, in consideration of assuming liabilities of CS Agency in the approximate amount of $300,000.

KonaTel’s principal products and services include its wholesale priced minutes, text and data to mobile resellers, wireless data services, its Cross System for provisioning or activating and managing mobile devices and its Lifeline (virtual), through which it recently commenced marketing eligible FCC subsidized, fixed or mobile, telecommunications services to low-income consumers through an existing agreement with an ETC in over 20 states. All of these product offerings are available nationwide, except the Lifeline services, from its three current locations in Johnstown, New York, Johnstown, Pennsylvania and Dallas, Texas.

The following are the principal revenue streams of KonaTel

The first revenue channel is our voice, text and data MVNO channel. The MVNO, mobile virtual network operator or retail channel, is a wireless communications services provider that does not own the wireless network infrastructure over which the MVNO provides services to its customers. The MVNO channel provides KonaTel with the greatest ARPU (average revenue per unit) and the highest gross profit per unit. The products sold are traditional post-paid wireless plans that include voice, text and data, wireless data only plans, and equipment that support the wireless plans. The equipment includes, but is not limited to, phones, tablets and accessories. We market the MVNO channel products through our retail store in Johnstown, New York, under the “Telecon Wireless” brand. These current products are sold to consumers, B2C business to consumer, out of the storefront, and to businesses direct, B2B business to business, by our Area Sales Manager. We also market our products and services through independent (commissioned) sales agents through the KonaTel brand. These agents market to small and medium sized businesses throughout the United States. This type of marketing is also considered B2B.

The second revenue channel that provides us the greatest revenue is the voice, text and data MNVE channel. The MVNE, or mobile virtual network enabler, or wholesale channel, provides network infrastructure and related services, such as network subsystems, business support systems, provisioning, administration and operations support systems to MVNOs. KonaTel provides a suite of services to the MVNOs. All of our MVNO customers purchase the wireless network service from us and can choose, if they require, any suite of services KonaTel provides. The services that KonaTel provides include, but are not limited to, customer service, billing service and equipment procurement.

The third revenue channel is our Sprint commission channel. This channel is exclusive to the Johnstown, New York, retail location. It is a consumer product, and the customer is a Sprint direct customer. KonaTel receives a commission from Sprint for selling the product. All products that are sold by a direct Sprint store, including their Boost product, are sold at the Johnstown, New York, location.

The fourth revenue channel for us is the VETC, virtual eligible telecommunications carrier, our Lifeline service in California. KonaTel operates under the license an ETC or eligible telecommunications carrier. We currently market through four master agencies that specialize in Lifeline products. These master agencies support hundreds of agents who market directly to the individuals requesting Lifeline cellular phone service. KonaTel provides phones and wireless service to the individual requiring Lifeline service. This channel is currently KonaTel’s fourth largest revenue producer.

Our final revenue channel is relatively new to KonaTel. It is the IoT or Internet of Things wireless data channel. IoT refers to the ever-growing network of physical objects that feature an IP address for Internet connectivity, and the communication that occurs between these objects and other Internet-enabled devices and systems. KonaTel markets as an IoT B2B MVNO or retailer through the independent agents and an IoT MVNE or distributor. KonaTel offers the wireless data service to an MVNO or a direct product producer. The direct product producer may be a company that has developed an IoT product and needs to have a wireless data carrier to make the product work. Although, this is our newest revenue stream, we expect it to eventually be our largest.

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