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Related Party Transactions

9 Months Ended

Sep. 30, 2019

15	RELATED PARTY TRANSACTIONS

The Company’s former chief executive officer has advanced the Company various amounts on a non-interest-bearing basis, which is being used for working capital. The advance has no fixed maturity. As noted, Mr. Matzinger elected to exchange outstanding non-interest-bearing debt totaling $389,502 owed by the Company into 6,232 shares of Preferred C stock. As of September 30, 2019 and December 31, 2018, the outstanding balance due was $0 and $389,502, respectively.

For the nine months ended September 30, 2019 and 2018, outsourced management services fees of $765,000 was paid to Axia Management, LLC (“Axia”) as compensation for services provided. These costs are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. Axia is owned by the majority owner of the Company.

At September 30, 2019 and December 31, 2018, the Company had trade payables to Axia of $160,018 and $66,535, respectively.

For the nine months ended September 30, 2019 and 2018, the Company purchased telecom services and access to wireless networks from 321 Communications in the amount of $499,356 and $826,401, respectively. These costs are included in Cost of revenue in the Condensed Consolidated Statements of Operations. The owner of the majority of the Company’s voting shares is a minority owner of 321 Communications.

At September 30, 2019 and December 31, 2018, the Company had trade payables to 321 Communications of $63,561 and $52,161, respectively.

The Company contracted with CenterCom Global, S.A. de C.V. (“CenterCom Global”) to provide customer service call center services, manage the sales process to include handling incoming orders, the collection and verification of all documents to comply with FCC regulations, monthly audit of all subscribers to file the USAC 497 form, yearly audit of all subscribers that have been active over one year to file the USAC 555 form (Recertification), information technology professionals to maintain company websites, sales portals and server maintenance. Billings for these services in the nine months ended September 30, 2019 and 2018 were $1,594,068 and $1,612,126, respectively, and are included in Cost of revenue in the Condensed Consolidated Statements of Operations. A director, officer, and minority owner of the Company has a controlling interest in CenterCom Global. As discussed in Note 1, on January 17, 2019 the Company announced the completion of an agreement to acquire a 40% equity ownership of Centercom for $178,508, the Company’s ownership percentage of the net book value of Centercom upon completion of the transaction.

At September 30, 2019 and December 31, 2018, the Company had trade payables to CenterCom Global of $203,095 and $175,000, respectively.

See Note 5 for long-term debt due to related parties.