SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2025

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of Company

KonaTel Inc., a Delaware corporation, formerly known as Dala Petroleum Corp. (the “Company,” “we,” “our,” or “us”), also formerly known as “Westcott Products Corporation,” was 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 (“Westcott”). During 1990, we ceased our then current operations. On March 11, 2000, our Board of Directors began the process of re-entering the development stage, and on June 2, 2014, we completed a merger with Dala Petroleum Corp., a Nevada corporation (respectively, “Dala Nevada” and the “Dala Merger”). We operated as an early-stage oil exploration company focused on our leased acreage acquired by Dala Nevada until 2016, at which time we assigned substantially all of our leased acreage to the former owner of Dala Nevada, and our remaining oil and gas leasehold interests, comprising leases covering approximately 7,489 and 403 acres, more or less, expired in 2017 and 2018, respectively.

On December 18, 2017, we acquired KonaTel, Inc, a Nevada subchapter S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly owned subsidiary, and we succeeded to its operations; and we changed our name to “KonaTel, Inc.” on February 5, 2018.

KonaTel Nevada was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D. Sean McEwen, our current Chairman and CEO, to conduct the business of a full-service cellular provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets. Through its sales network, it provided 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 its customer list, all 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. With the completion of the KonaTel Nevada Merger, we succeeded to the current and intended business operations of KonaTel Nevada.

On December 31, 2018, we acquired Apeiron Systems (www.apeiron.io). Apeiron was organized in 2013 and is an international hosted services Communications Platform as a Service (“CPaaS”) provider that designed, built, owns and operates its national private core network, supporting a suite of business communications services, all accessible via proprietary Applications Programming Interfaces (“APIs”). As an FCC licensed Internet Telephony Service Provider (“ITSP”), Apeiron also holds an FCC numbering authority license. Some of Apeiron’s hosted services include Voice over IP (“VoIP”), cellular and Over-The-Top (“OTT”) telephony, SMS/MMS messaging and broadcast services, numbering features, including Cloud IVRs, Voicemail, Fax, Call Recording and other services through local, toll-free and international phone numbers. Supported by its national redundant network, Apeiron also provides public and private IP network services, including Multiprotocol Label Switching (“MPLS”), Dedicated Internet and LTE Wireless WAN solutions. Apeiron’s cloud services include Information Data Dips, Software-Defined Wide Area Networking (“SD-WAN”) and Internet of Things (“IoT”) data and device management. Apeiron primarily distributes its services nationally through its website, its sales staff, independent sales agents and Independent Sales Organizations (“ISOs”).

Apeiron Systems is headquartered in Johnstown, Pennsylvania, where it has customer service and software engineering resources staffed. Additional development resources are staffed out of Los Angeles, California, as well as in Europe and Asia.

On February 5, 2018, we entered into a purchase agreement to acquire IM Telecom (www.infinitimobile.com). On October 23, 2018, the FCC approved our acquisition of IM Telecom, and on January 31, 2019, we completed the purchase of IM Telecom. Following the purchase, IM Telecom operated as a wholly owned subsidiary of KonaTel. It is an FCC licensed Eligible Telecommunications Carrier (“ETC”) and is one of twenty-two (22) original FCC licensed wireless cellular resellers to hold an FCC approved Lifeline Compliance Plan since 2012, of which approximately twelve (12) license holders remain active today. The FCC has not approved or granted a new wireless reseller Lifeline Compliance Plan since 2012. In addition to being an FCC licensed ETC in forty (40) states, IM Telecom was also an approved provider in the currently expired Affordable Connectivity Program of the FCC (the “ACP Program” or the “ACP”). Lifeline is an FCC program that provides subsidized, fixed or mobile telecommunications services to low-income Americans. The ACP is an expired FCC program that provided subsidized high-speed wireless data services to low-income Americans. IM Telecom distributes Lifeline services under its Infiniti Mobile brand name through its website, sales staff, retail locations and ISOs. IM Telecom also offers non-Lifeline services throughout the United States. IM Telecom has a US-based customer support center located in Atmore, Alabama.

On January 22, 2024 (the “Effective Date”), KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement (the “Excess Telecom Membership Purchase Agreement”) with Excess Telecom, Inc., a Nevada corporation (“Excess Telecom”), pursuant to which KonaTel conveyed 49% of its Membership Interest in IM Telecom to Excess Telecom on the “Initial Closing Date” in consideration of the sum of $10,000,000, and if approved by the FCC, will convey the remaining 51% of the Membership Interest in IM Telecom to Excess Telecom for the sum of $100 on the “Final Closing.” If not approved by the FCC, KonaTel shall retain 51% of IM Telecom; Excess Telecom shall retain 49% of IM Telecom; and KonaTel shall have no obligation to refund any portion of the funds paid by Excess Telecom to KonaTel. In the furtherance of this process, certain of the initial Transaction Documents have been restated by signature dated March 4, 2025, but effective of the date or dates set forth at the beginning of each of the referenced Transaction Documents. See Part II-Other Information, in Item 6, Exhibits, hereof, for additional information in the Hyperlinked and referenced Current Reports related to the Excess Telecom Membership Purchase Agreement and related Transaction Documents.

IM Telecom is headquartered in Plano, Texas, and has a warehouse operation in Tulsa, Oklahoma, and a customer service center in Atmore, Alabama.

Apeiron Systems has twelve (12) full-time employees. The current employees of IM Telecom, twelve (12) full-time employees, novated to Excess Telecom under the Excess Telecom Membership Purchase Agreement at the time of the Initial Closing Date. These employees continue to engage in the same manner and function of service provided prior to the aforementioned agreement. KonaTel has four (4) full-time employees.

Principal Products or Services and their Markets

Our principal products and services, provided through Apeiron Systems and IM Telecom, include our CPaaS suite of services (SIP/VoIP, SMS/MMS), wholesale and retail mobile voice and mobile data IoT services, wholesale voice termination services, and our ETC subsidized services for low-income Americans. Except for our ETC Lifeline services distributed in up to forty (40) states, our Apeiron Systems’ products and services are available worldwide and subject to U.S., international and local/national regulations.

We generate revenue from two (2) primary sources, Hosted Services and Mobile Services:

· Our Hosted Services include a suite of hosted CPaaS services within Apeiron Systems’ cloud platform, including Cloud IVRs, Voicemail, Fax, Call Recording and other services provided with local, toll-free and international phone numbers. Apeiron also delivers public and private IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management, of which IoT provides device connectivity via wireless 4G/5G. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs.

· Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through Apeiron Systems and IM Telecom. Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers. Mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. Also included in our Mobile Services segment is the distribution of government subsidized mobile voice service and mobile data service by IM Telecom under its Infiniti Mobile brand and FCC license to low-income American households that qualify for the FCC’s Lifeline mobile voice service program. Even though government programs like Lifeline have existed since 1985, these programs, along with programs currently expired or not yet adopted, are subject to change and any change, reduction or elimination may have a material impact on our Mobile Services business.

Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These condensed unaudited interim financial

statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2024, which are available by Hyperlink in our 10-K Annual Report for the year ended December 31, 2024, filed with the SEC on April 15, 2025, in Item 6, Exhibits, hereof, and which is incorporated herein by reference.

The accompanying financial statements have been prepared using the accrual basis of accounting.

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. Estimates in these financial statements include the allowance for credit losses, allowance for inventory obsolescence, the estimated useful lives of property and equipment and stock-based compensation. Actual results could differ from those estimates.

Basis of Consolidation

The condensed consolidated financial statements include the Company and our two (2) wholly owned corporate subsidiaries, KonaTel Nevada and Apeiron Systems, and IM Telecom, presently owned 51% by us. All significant intercompany transactions are eliminated.

Net Income (Loss) Per Share

Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the three (3) months ended June 30, 2025, and the six (6) months ended June 30, 2025, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of June 30, 2025, there were potentially 2,801,664 dilutive shares. 

The following table reconciles the shares outstanding and net income (loss) used in the computations of both basic and diluted earnings per share of common stockholders:

	Three (3) Months Ended June 30,
	2025			2024
Numerator
Net Loss	$	(1,187,641	)	$	(1,109,697	)
Denominator
Weighted-average common shares outstanding		43,537,102			43,412,602
Dilutive impact of stock options		—			—
Weighted-average common shares outstanding, diluted		43,537,102			43,412,602
Net income per common share
Basic	$	(0.03	)	$	(0.03	)
Diluted	$	(0.03	)	$	(0.03	)

	Six (6) Months Ended June 30,
	2025			2024
Numerator
Net Loss	$	(2,105,169	)	$	6,973,387
Denominator
Weighted-average common shares outstanding		43,536,341			43,301,670
Dilutive impact of stock options		—			—
Weighted-average common shares outstanding, diluted		43,536,341			43,301,670
Net income per common share
Basic	$	(0.05	)	$	0.16
Diluted	$	(0.05	)	$	0.16

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 June 30, 2025, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from three (3) customers in the amount of $183,185 or 35.6%, $96,017 or 18.7% and $63,848 or 12.4%. It should be noted that the largest customer is the California Public Utilities Commission (“CPUC”). As of December 31, 2024, the Company had a significant concentration of receivables from two (2) customers in the amounts of $1,054,726 or 54.0%, and $625,741 or 32.1%.

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers. For the three (3) months ended June 30, 2025, the Company had one (1) customer that accounted for $746,954 or 34.6% of revenue. For the three (3) months ended June 30, 2024, the Company had two (2) customers that accounted for $1,321,520 or 30.3% and $1,071,558 or 24.6% of revenue, respectively. For the six (6) months ended June 30, 2025, the Company had three (3) customers that accounted for $1,430,589 or 33.1%, $469,671 or 10.9% and $464,388 or 10.7% of revenue, respectively. For the six (6) months ended June 30, 2024, the Company had three (3) customers that accounted for $4,212,158 or 42.2%, $2,050,102 or 20.5% and $1,677,762 or 16.8%, respectively.

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.

Going Concern

For the three (3) months ended June 30, 2025, the Company generated a net loss of ($1,187,641), compared to a net loss of (1,109,697) for the three (3) months ended June 30, 2024. For the six (6) months ended June 30, 2025, the Company generated a net loss of ($2,105,169), compared to a net income for the six (6) months ended June 30, 2024, of $6,973,387. During the six (6) months ended June 30, 2024, the Company sold a 49% interest in IM Telecom to Excess Telecom, which provided capital that allowed us to retire all outstanding debt and retain additive cash. The accumulated deficit as of June 30, 2025, is ($9,853,042).

We are one of only approximately 20 telecommunication carriers to hold a national wireless ETC (“Lifeline”) license, which provides us with additive reimbursement rates within the states we operate. We have currently grown our ETC footprint to forty (40) states, eight (8) of which are awaiting FCC Study Area Code (“SAC”) approval to gain operational capability with those new states. We have temporarily withdrawn our IM Telecom change of control application to the FCC. In the interim, we continue to focus our Lifeline marketing efforts primarily within the states of California and Oklahoma, both of which have supplemental Lifeline subsidies that provide for profitable growth and sustainability. We continue to keep our $5M line of credit facility open with the prospect of growing our Lifeline mobile services sector at the opportune time. Additionally, we have a contract with one of the largest healthcare providers in the United States to provide mobile voice service to their qualified Medicaid recipient base of over several million subscribers. We are currently awaiting regulatory approval from the state of California to potentially launch this program before the end of this year.

Our hosted services division continues to show growth across several wholesale product sectors. The US wired “copper” Plain Old Telephone Service (“POTS”) infrastructure has reached its end of life and is being retired by all major telecommunications providers. As such, we are experiencing accelerating growth within our wholesale POTS wireless replacement service, which has been specifically designed to support large service providers with a current imbedded base of POTS subscribers. Next, we continue to expand our wholesale Short Messaging Service (“SMS”) product targeted at high volume SMS companies. And finally, we continue to expand additional infrastructure and software solutions within our Mobile Virtual Network Aggregation (“MVNA”) wireless voice and data platform to support growing opportunities we see in the Mobile Service Network Operator (“MVNO”) market. We also continue to focus on a program launch date for our hosted services initiative with VIVA-US Telecommunications, Inc. (“VIVA-US”).

The above product applications and sales initiatives require capital to sustain our expansion efforts, which we continued to fund through internal resources. The growth and launch of these services will play a significant role in our ability to continue operations without additional cost reduction measures. A lack of 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 Quarterly Report.