SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 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 staff. 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 with Excess Telecom, Inc., a Nevada corporation (respectively, “Excess Telecom” and the “Excess Telecom Purchase Agreement”), 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 were restated by signature dated March 4, 2025, but effective as of the date or dates set forth at the beginning of each of the referenced Transaction Documents. KonaTel and Excess Telecom have been working together to establish best practices in compliance and building an expanded Eligible Telecommunications Carrier (“ETC”) footprint in the United States for IM Telecom. In furtherance of their understanding to establish best practices and build an expanded ETC footprint in the United States for IM Telecom, on September 19, 2025, KonaTel and Excess Telecom executed a First Omnibus Amendment to the Transaction Documents and a Third Amended and Restated Operating Agreement of IM Telecom, which were held in escrow pending their exchange between the Parties, which occurred on September 24, 2025. Pursuant to these agreements, IM Telecom withdrew its application for change in control with the FCC. The Management Agreement originally signed on the Initial Closing was terminated, and under the First Omnibus Agreement, the Parties formulated an “Annual Plan” whereby IM Telecom would operate as its standalone entity with employees not shared by KonaTel or Excess Telecom. This plan was filed with the FCC. KonaTel will continue to own 51% of IM Telecom and will receive Distribution Agreement payments for compensation from its sales under the IM Telecom vertical sales channels, including its healthcare vertical. 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, as amended or restated.

IM Telecom is headquartered in Plano, Texas, and has a customer service center staff in Atmore, Alabama.

KonaTel has four (4) full-time employees; Apeiron Systems has twelve (12) full-time employees; and IM Telecom currently has twelve (12) full-time employees. IM Telecom employees had initially novated to KonaTel under the Excess Telecom Membership Purchase Agreement, who then amounted to three (3) employees; with the execution of the First Omnibus Agreement during the quarter ended September 30, 2025, IM Telecom began to operate as a standalone entity under its Annual Plan, with its own employees, who are not shared by KonaTel or Excess Telecom, though the last day of employment of the three (3) referenced employees is reflected in the books and records of KonaTel as of October 4, 2025, with an official termination date of October 15, 2025; however, on October 13, 2025, but effective as of September 19, 2025, the Board of Directors of KonaTel adopted resolutions providing that the incentive stock options of those employees whose service will or may be transferred to IM Telecom shall remain valid and exercisable in accordance with the terms of their respective ISO Agreements, without exception and regardless of when the Final Closing of the Excess Telecom Membership Purchase Agreement is completed.

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 are 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 U.S. 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 September 30, 2025, and the nine (9) months ended September 30, 2025, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of September 30, 2025, there were potentially 1,876,664 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 Months Ended September 30,
	2025			2024
Numerator
Net Loss	$	(45,094	)	$	(1,188,914	)
Denominator
Weighted-average common shares outstanding		43,766,648			43,485,560
Dilutive impact of stock options		—			—
Weighted-average common shares outstanding, diluted		43,766,648			43,485,560
Net loss per common share
Basic	$	(0.00	)	$	(0.03	)
Diluted	$	(0.00	)	$	(0.03	)

	Nine Months Ended September 30,
	2025			2024
Numerator
Net Income/(Loss)	$	(2,149,030	)	$	5,784,473
Denominator
Weighted-average common shares outstanding		43,615,339			43,385,493
Dilutive impact of stock options		—			313,472
Weighted-average common shares outstanding, diluted		43,615,339			43,698,965
Net Income/(Loss) per common share
Basic	$	(0.05	)	$	0.13
Diluted	$	(0.05	)	$	0.13

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 September 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 four (4) customers in the amounts of $116,321 or 22.7%, $88,537 or 17.2%, $86,033 or 16.8% and $85,279 or 16.6%. 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 one (1) customer in the amount of $1,055,337 or 68.5%.

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers. For the three (3) months ended September 30, 2025, the Company had three (3) customers that accounted for $789,241 or 36.3%, $281,046 or 12.9% and $232,369 or 10.7% of revenue. For the three (3) months ended September 30, 2024, the Company had three (3) customers that accounted for $953,260 or 30.3%, $665,665 or 21.1% and $617,440 or 19.6% of revenue, respectively. For the nine (9) months ended September 30, 2025, the Company had two (2) customers that accounted for $2,219,830 or 34.1% and $674,635 or 10.4% of revenue, respectively. For the nine (9) months ended September 30, 2024, the Company had three (3) customers that accounted for $4,829,556 or 36.8%, $3,003,975 or 22.9% and $2,343,426 or 17.9% of revenue, 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

We generated a net loss of ($45,094) during the quarter ended September 30, 2025, and we had a net loss of ($1,188,914) for the quarter ended September 30, 2024. For the nine months ended September 30, 2025, we generated a net loss of ($2,149,030) compared to net income of $5,784,473 for the nine months ended September 30, 2024. The Company had a net change in cash of ($496,916) from December 31, 2024, to September 30, 2025. This decrease was due primarily to a decline in revenues earned during the nine (9) month period. The accumulated deficit as of September 30, 2025, was ($9,896,903).

During the quarter ended September 30, 2025, IM Telecom withdrew its application for change in control with the FCC. The Management Agreement originally signed on the Initial Closing was terminated and, in its place, the First Omnibus Agreement was executed to formulate an “Annual Plan” whereby IM Telecom would operate as a standalone entity with employees not shared by KonaTel or Excess Telecom. This plan was filed with the FCC. KonaTel will continue to own 51% of IM Telecom and will receive Distribution Agreement payments for compensation from its sales under the IM Telecom vertical sales channels, including its healthcare vertical. The aforementioned healthcare vertical, officially launched on October 24, 2025, with a major national healthcare provider, will further generate profits from services provided to the qualified Medicaid recipient base. Additionally, IM Telecom will significantly reduce payroll and benefit costs as employees are transferred to the newly created entity or furloughed due to redundancy. We expect to realize these cost reductions throughout the 4th quarter of 2025.

The hosted services division continues to show positive results within several product sectors. First, we are experiencing continued measured growth in Internet of Things (IoT) sales to replace end of life wired Plain Old Telephone Service (POTS) with our wireless POTS replacement product aimed at large service providers that have imbedded bases of deployed copper resources that the POTS infrastructure which is being phased out in the United States by 2030. The legacy US copper infrastructure has reached end of life and is being retired by all major telecommunications providers. Secondly, we continue our ongoing retail and wholesale sales of our Short Messaging Service (SMS) product which saw continued growth in Q2 and Q3 of 2025. And finally, we continue to build infrastructure and software to support the growing opportunity of the wholesale wireless voice and data platform to support the Mobile Virtual Network Aggregation (“MVNA”) and Mobile Service Network Operator (“MVNO”) applications. We continue to keep our $5M line of credit facility open as well as pursuing additional credit facility options with the goal of focusing our growth efforts on our hosted services sector.

The above product applications and sales initiatives require capital to continue the build-out of any infrastructure improvements. The growth of these products and the launch of the above-mentioned contracted programs 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.