KonaTel, Inc 10-Q for FY2025 Q1
KonaTel, Inc. (KTEL)
About this 10-Q
KonaTel, Inc filed this 10-Q on May 15, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.17M
- down 61.5% from $5.64M a year earlier
- Net loss
- $917.53K
- compared with net income of $8.08M a year earlier
- Diluted EPS
- -$0.02
- compared with $0.19 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM
For the quarterly period ended
For the transition period from ____________to____________
Commission File No.
(Exact name of the issuer as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer I.D. No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number)
The Registrant does not have any securities registered pursuant to Section 12(b) of the Exchange Act.
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was
required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o |
| Smaller reporting company | |
| Emerging Growth company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
Our website is www.konatel.com.
Our common stock is quoted on the OTC Markets Group, LLC (the “OTC Markets”) in its “OTCQB Tier” under the symbol “KTEL.”
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:
| Common Capital Voting Stock, $0.001 par value per share | shares | |
| Class | Outstanding as of May 15, 2025 |
References
In this Quarterly Report, references to “KonaTel, Inc.,” “KonaTel,” the “Company,” “we,” “our,” “us” and words of similar import, refer to KonaTel, Inc., a Delaware corporation, formerly named “Dala Petroleum Corp.,” which is the Registrant; and our wholly owned subsidiaries, KonaTel, Inc., a Nevada corporation (“KonaTel Nevada”), and Apeiron Systems, Inc., a Nevada corporation doing business as “Apeiron” (“Apeiron Systems”); and IM Telecom, LLC, an Oklahoma limited liability company doing business as “Infiniti Mobile” (“IM Telecom” or “Infiniti Mobile”), of which we own 51%, which is subject to conveyance, if approved by the Federal Communications Commission (the “FCC”), to Excess Telecom, Inc., a Nevada corporation (“Excess Telecom”), under a Membership Interest Purchase Agreement effective at January 22, 2024. For additional information on the conditions of this conveyance and related agreements, see our 8-K Current Report dated January 22, 2024, filed with the United States Securities and Exchange Commission (the “SEC”) on January 30, 2024, and our 8-K/A-1 Current Report dated January 22, 2024, filed with the SEC on March 10, 2025, which are Hyperlinked in Part II, Other Information, Item 6, Exhibits, hereof, and are incorporated herein by reference.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Quarterly Report completely, and it should be read and considered with all other reports filed by us with the SEC that are contained in the SEC Edgar Archives, including the “Risk Factors” enumerated in “Part I, Item IA. Risk Factors” of our 10-K Annual Report for the year ended December 31, 2024, filed with the SEC on April 15, 2025, which Risk Factors commence on page ten (10) thereof. A copy of the Annual Report is attached hereto by Hyperlink in Part II-Other Information, in Item 6, Exhibits, hereof, and is incorporated herein by reference. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.
Documents Incorporated by Reference
See Part II-Other Information, in Item 6, Exhibits, hereof.
| 2 |
KONATEL, INC.
FORM 10-Q
March 31, 2025
INDEX
| Page No. | |
| PART I – FINANCIAL INFORMATION | |
| Item 1. Financial Statements & Footnotes | 3 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 18 |
| Item 4. Controls and Procedures | 18 |
| PART II – OTHER INFORMATION | |
| Item 1. Legal Proceedings | 19 |
| Item 1A. Risk Factors | 19 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
| Item 3. Defaults Upon Senior Securities | 19 |
| Item 4. Mine Safety Disclosures | 19 |
| Item 5. Other Information | 19 |
| Item 6. Exhibits | 19-20 |
| SIGNATURES | 20 |
PART I - FINANCIAL STATEMENTS
March 31, 2025
Table of Contents
| 3 |
KonaTel, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Accounts Receivable, Net | ||||||||
| Inventory, Net | ||||||||
| Prepaid Expenses | ||||||||
| Other Current Assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, Net | ||||||||
| Other Assets | ||||||||
| Intangible Assets, Net | ||||||||
| Right of Use Asset | ||||||||
| Notes Receivable | ||||||||
| Other Assets | ||||||||
| Total Other Assets | 1,535,141 | 1,717,345 | ||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable and Accrued Expenses | $ | $ | ||||||
| Right of Use Operating Lease Obligation - Current | ||||||||
| Income Tax Payable | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Right of Use Operating Lease Obligation - Long Term | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value, shares authorized outstanding and issued at March 31, 2025 and outstanding and issued at December 31, 2024 | ||||||||
| Additional Paid In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
KonaTel, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of Revenue | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Payroll and Related Expenses | ||||||||
| Operating and Maintenance | ||||||||
| Credit Loss | ||||||||
| Professional and Other Expenses | ||||||||
| Utilities and Facilities | ||||||||
| Depreciation and Amortization | ||||||||
| General and Administrative | ||||||||
| Marketing and Advertising | ||||||||
| Application Development Costs | ||||||||
| Taxes and Insurance | ||||||||
| Total Operating Expenses | ||||||||
| Operating Loss | ( | ) | ( | ) | ||||
| Other Income and Expense | ||||||||
| Gain on Sale | ||||||||
| Interest Expense | ( | ) | ( | ) | ||||
| Other Income/(Expense), net | ( | ) | ||||||
| Total Other Income | ||||||||
| Income (Loss) Before Income Taxes | ( | ) | ||||||
| Income Tax Expense | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ||||
| Earnings (Loss) per Share | ||||||||
| Basic | $ | ( | ) | $ | ||||
| Diluted | $ | ( | ) | $ | ||||
| Weighted Average Outstanding Shares | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
KonaTel, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
| Common Shares | Additional | Accumulated | |||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Total | |||||||||||||||
| Balances as of January 1, 2025 | $ | $ | $ | ( | ) | $ | |||||||||||||
| Exercised Stock Options | ( | ) | |||||||||||||||||
| Stock Based Compensation | — | ||||||||||||||||||
| Net Loss | — | ( | ) | ( | ) | ||||||||||||||
| Balances as of March 31, 2025 | $ | $ | $ | ( | ) | $ | |||||||||||||
| Common Shares | Additional | Accumulated | |||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Total | |||||||||||||||
| Balances as of January 1, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||
| Exercised Stock Options | |||||||||||||||||||
| Stock Based Compensation | — | ||||||||||||||||||
| Net Income | — | ||||||||||||||||||
| Balances as of March 31, 2024 | $ | $ | $ | ( | ) | $ | |||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Common Shares
Additional Paid-in Capital
Accumulated Deficit
| 6 |
KonaTel, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and Amortization | ||||||||
| Gain on Sale of IM Telecom (49%) | ( | ) | ||||||
| Loan Origination Cost Amortization | ||||||||
| Credit Loss | ||||||||
| Stock-based Compensation | ||||||||
| Change in Right of Use Asset | ||||||||
| Change in Lease Liability | ( | ) | ( | ) | ||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts Receivable | ( | ) | ||||||
| Inventory | ||||||||
| Prepaid Expenses | ( | ) | ||||||
| Accounts Payable and Accrued Expenses | ( | ) | ( | ) | ||||
| Income Tax Payable | ||||||||
| Net cash used in / provided by operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities | ||||||||
| Sale of IM Telecom (49%) | ||||||||
| Notes Receivable | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Repayments of amounts of Notes Payable | ( | ) | ||||||
| Cash received from Stock Options Exercised | ||||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net Change in Cash | ||||||||
| Cash - Beginning of Year | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
KonaTel, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 $
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, CA, 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. IM Telecom currently operates as a 51% 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 (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. 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.
| 8 |
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 a minority
Additionally, and as disclosed below in NOTE 9 SUBSEQUENT EVENTS, on May 3, 2025, IM Telecom received a request from Excess Telecom to withdraw IM Telecom’s Change of Control Petition, in favor of Excess Telecom, submitted to the FCC on January 22, 2024. This withdrawal request was initiated by Excess Telecom. IM Telecom accepted Excess Telecom’s withdrawal request and submitted a Change of Control Petition Withdrawal Request to the FCC on May 9, 2025. As previously mentioned, the Company retains its majority 51% controlling ownership of IM Telecom and Excess Telecom currently retains its minority 49% non-controlling interest in IM Telecom. All other agreements between the Company and Excess Telecom, including but not limited to the Membership Interest Purchase Agreement and Master Distribution Agreement, remain in full force and effect. No monies paid by Excess Telecom to the Company are refundable under Excess Telecom’s request for the withdrawal of the Change of Control Petition submitted on January 22, 2024, to the FCC.
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 ten (10) full-time employees. The current employees of IM Telecom, fourteen (14) full-time, 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. |
9
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 condensed 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 doubtful receivables, 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.
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 months ended March 31, 2025, is not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of March 31, 2025, there were potentially dilutive shares.
Summary of Significant Accounting Policies -Schedule of Earnings Per Share, Basic and Diluted
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator | ||||||||
| Net Income/(Loss) | $ | ( | ) | $ | ||||
| Denominator | ||||||||
| Weighted-average common shares outstanding, basic | ||||||||
| Dilutive impact of stock options | ||||||||
| Weighted-average common shares outstanding, diluted | ||||||||
| Net income/(Loss) per common share | ||||||||
| Basic | $ | ( | ) | $ | ||||
| Diluted | $ | ( | ) | $ | ||||
Concentrations of Credit Risk
Trade Account Receivables
Sales Revenue
Customer Concentration
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.
10
The Company has a concentration of risk with respect
to trade receivables from customers and cellular providers. As of March 31, 2025, the Company had a significant concentration of receivables
(defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amount of
$
Concentration of Major Customer
A significant amount of the revenue is derived from
contracts with major customers. For the three months ended March 31, 2025, the Company had three (3) customers that accounted for $
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 months ended March 31, 2025,
the Company generated net loss of ($
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. With the expiration of the ACP Program on June 1, 2024, we have shifted our focus back to marketing exclusively under our ETC license, with a primary focus on states with additional state subsidies such as the state of California. With the additional state funding and a Linkup program in California, we have been able to retain continuity in the mobile services market. We continue to target and expand into additional ETC licensed states and currently have pending requests to market Lifeline services in eight (8) additional states with the FCC.
We continue to focus on a program launch date for our hosted services initiative with VIVA-US Telecommunications, Inc. (“VIVA-US”), and our ongoing health care sales initiative in the state of California. The launch of both of these 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.
NOTE 2 – INVENTORY
Inventory primarily consists of sim cards, cell phones
and tablets, which are stored at our warehouse, or have been delivered to distributors in the field. Inventories are stated at cost using
the first-in, first-out (“FIFO”) valuation method. On a monthly basis, inventory is counted at our warehouse facility and
is reviewed for obsolescence and counted for accuracy with distributors. At March 31, 2025, and December 31, 2024, the Company had inventory
of $
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following major classifications as of March 31, 2025, and December 31, 2024:
Property and Equipment - Schedule of Property and Equipment
| March 31, 2025 | December 31, 2024 | |||||||
| Lease Improvements Lease Improvements | $ | $ | ||||||
| Furniture and Fixtures Furniture and Fixtures | ||||||||
| Billing Software | ||||||||
| Office Equipment Office Equipment | ||||||||
| Less: Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation related to Property and Equipment amounted
to $
| 11 |
NOTE 4 – RIGHT-OF-USE ASSETS
Minimum
Maximum
Right-of-Use Assets consist of assets accounted for
under ASC 842. The assets are recorded at present value using implied interest rates between
The Company has Right-of-Use Assets through leases
of property under non-cancelable leases. As of March 31, 2025,
Future lease liability payments under the terms of these leases are as follows:
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | ||||
| Less Interest | ||||
| Present value of minimum lease payments | ||||
| Less Current Maturities | ||||
| Long Term Maturities | $ |
The weighted average term of the Right-to-Use leases
is
NOTE 5 – INTANGIBLE ASSETS
Intangible Assets with definite useful life consist
of licenses, customer lists and software that were acquired through acquisitions. Intangible Assets with indefinite useful life consist
of the Lifeline license granted by the FCC. The license, because of the nature of the asset and the limitation on the number of granted
Lifeline licenses by the FCC, will not be amortized. The license was acquired through an acquisition. The fair market value of the license
as of March 31, 2025, and December 31, 2024, was $
| March 31, 2025 | December 31, 2024 | |||||||
| Customer List | $ | $ | ||||||
| Software | ||||||||
| ETC License | ||||||||
| Less: Amortization | ( | ) | ( | ) | ||||
| Net Amortizable Intangibles | ||||||||
| Right of Use Assets - net | ||||||||
| Intangible Assets net | $ | $ | ||||||
Amortization expense amounted to $
NOTE 6 – CONTINGENCIES AND COMMITMENTS
Litigation
From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of March 31, 2025, there are no ongoing legal proceedings.
Contract Contingencies
The Company has the normal obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry and that may be provided in the contractual agreements.
| 12 |
Tax Audits
In June of 2021, the Company received an audit determination
and assessment from the State of Pennsylvania related to sales and use tax for the audit period of January 1, 2016, through September
30, 2019. The assessment is in the amount of $
Letters of Credit
The Company had no outstanding letters of credit as of March 31, 2025.
NOTE 7 – SEGMENT REPORTING
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07). Beginning with our 2024 annual reporting, we adopted ASU No. 2023-07, which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (“CODM”) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity to disclose the title and position of its CODM and explain how the CODM uses these reported measures in assessing segment performance and determining how to allocate resources.
Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have two (2) reportable segments: Hosted Serves and Mobile Services. Our CODM is our President. Our CODM uses operating income to evaluate performance and allocate resources, including capital allocations, when managing the business. Our CODM manages operations through the review of actual and forecasted “Operations and Support Expenses” information at a segment and business unit level, of which segments are primarily evaluated on a direct cost basis and comprised of equipment, compensation, network and technology, sales, advertising and other costs. Direct costs are incurred in support of products and services offered by the business units, such as equipment costs (predominantly wireless devices), network access, rents, leases, sales support, customer provisioning and compensation expenses.
The Company operates within two (
The reportable segments consist of Hosted Services and Mobile Services.
Hosted Services – Our Hosted Services include a suite of hosted CPaaS services within the 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. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs.
Mobile Services – 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 Lifeline license to low-income American households that qualify for the FCC’s Lifeline mobile voice service program and/or the FCC’s ACP mobile data program. Even though government programs like Lifeline have existed since 1985, these programs, along with newer programs like the ACP program, are subject to change and may have a material impact on our Mobile Services business if changed, reduced or eliminated.
| 13 |
The following table reflects the results of operations of the Company’s reportable segments:
Segment Reporting - Reconciliation of Revenues to Segment Contribution
| Three Months ended March 31, 2025 | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| and | Other | Net | ||||||||||||||||||
| Revenues | Expenses | Amortization | Gain/Loss | (Loss) | ||||||||||||||||
| Segment | ||||||||||||||||||||
| Hosted Services | $ | $ | $ | $ | $ | ( | ) | |||||||||||||
| Mobile Services | ( | ) | ||||||||||||||||||
| Segment Total Operating Segments | ( | ) | ||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Parent administration support Parent Administration Support | ( | ) | ||||||||||||||||||
| Gain on sale of subsidiary | ||||||||||||||||||||
| Total Corporate Total Corporate | ( | ) | ||||||||||||||||||
| KonaTel, Inc. | $ | $ | $ | $ | $ | ( | ) | |||||||||||||
| Three Months ended March 31, 2024 | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| and | Other | Net Income | ||||||||||||||||||
| Revenues | Expenses | Amortization | Gain/Loss | (Loss) | ||||||||||||||||
| Segment | ||||||||||||||||||||
| Hosted Services | $ | $ | $ | $ | $ | ( | ) | |||||||||||||
| Mobile Services | ( | ) | ||||||||||||||||||
| Segment Total | ( | ) | ||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Parent administration support | ( | ) | ||||||||||||||||||
| Gain on sale of subsidiary | ||||||||||||||||||||
| Total Corporate | ||||||||||||||||||||
| KonaTel, Inc. | $ | $ | $ | $ | $ | |||||||||||||||
NOTE 8 – STOCKHOLDERS’ EQUITY
Stock Compensation
The Company offers incentive stock option grants to
directors and key employees. Options vest in tranches and typically expire five (5) years from the date of grant. For the three months
ended March 31, 2025, and 2024, the Company recorded options expense of $
| 14 |
Stockholders’ Equity - Schedule of Share-Based Compensation, Stock Option Activity
| Number of | Weighted Average | Weighted Average | Aggregate | |||||||||||||
| Shares | Exercise Price | Remaining Life | Intrinsic Value | |||||||||||||
| Options Outstanding – December 31, 2024 | $ | $ | ||||||||||||||
| Granted | — | — | — | — | ||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | — | |||||||||||||
| Options Outstanding – March 31, 2025 | $ | $ | ||||||||||||||
| Exercisable and Vested, March 31, 2025 | $ | $ | ||||||||||||||
The aggregate intrinsic value for options outstanding as of March 31, 2025, is not calculated because the closing stock price on March 31, 2025, is less than the weighted average exercise price of outstanding options on that date.
NOTE 9 – SUBSEQUENT EVENTS
Below are events that have occurred since March 31, 2025:
Director
Subsequent Events
Pearl Stock Option Exercise
On April 25, 2025, Jeffrey Pearl, an independent Board member, conveyed to the Company shares of the Company’s common stock at a price of $, in an exempt transaction pursuant to Section 16b-3(c), and in full payment of the exercise of incentive stock options granted to him in 2020 at a price of $ per share or an aggregate of $, which was 110% of the fair market value of our common stock on the date of such grant.
Beaty Stock Option Expiration
At midnight, May 11, 2025, a incentive stock option granted on May 12, 2020, at an exercise price of $, to Robert Beaty, an independent Board member, expired.
Health Care Initiative and VIVA-US Contract
Our ongoing health care initiative experienced an initial launch in March 2025, and Advice Letter Number 20 is pending before the CPUC, authorizing an expanded launch to all current “Medicaid” recipients within the state of California. The full program launch timing for our VIVA-US sales initiative has now been tentatively set for June, 2025.
Excess Telecom Request to Withdraw IM Telecom Transfer of Ownership Petition
During the first quarter of 2024, the Company entered
into a Membership Interest Purchase Agreement with Excess Telecom to sell a minority (
On May 3, 2025, IM Telecom received a request from Excess Telecom to withdraw IM Telecom’s Change of Control Petition, in favor of Excess Telecom, submitted to the FCC on January 22, 2024. This withdrawal request was initiated by Excess Telecom. IM Telecom accepted Excess Telecom’s withdrawal request and submitted a Change of Control Petition Withdrawal Request to the FCC on May 9, 2025. As previously mentioned, the Company retains its majority 51% controlling ownership of IM Telecom and Excess Telecom currently retains its minority 49% non-controlling interest in IM Telecom. All other agreements between the Company and Excess Telecom, including but not limited to the Membership Interest Purchase Agreement and Master Distribution Agreement, remain in full force and effect. No monies paid by Excess Telecom to the Company are refundable under Excess Telecom’s request for the withdrawal of the Change of Control Petition submitted on January 22, 2024, to the FCC.
| 15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
When used in this Quarterly 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 Quarterly 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 Quarterly Report under the caption “Forward-Looking Statements” and include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.
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 commencing on page nine (9) of this Quarterly Report. In addition, we continue to pursue additional market distribution opportunities, such as our expanded short-code messaging (“SMS”) service, development of new products and services, including our newly released wholesale POTS (“Plain Old Telephone Service”) replacement service, and pursuit of accretive acquisition opportunities that may enhance or expand our current product and service offerings.
Results of Operations
With the expiration of the ACP on June 1, 2024, throughout 2024, the Company chose to expand and reallocate its resources in California to offset the potential risk of an ACP Program end. In lieu of retaining the ACP subsidy, California offers state and federal subsidies which are similar in value to the ACP subsidy. Since Lifeline services are funded by the Federal Universal Service Fund (“FUSF”), and not subject to enactment or renewal of government funded appropriations, the Company chose to redirect resources to California Lifeline, where Average Revenue Per User (“ARPU”) is equal to or greater than that of ACP in California. As of March 31, 2025, we are currently approved to operate in forty (40) Lifeline states. This expanded footprint provides our mobile services business with additional opportunities to serve customers. Under IM Telecom’s national ETC license, the Company will continue to enroll and provide services to qualifying consumers in the FCC Lifeline Program. In the event another program similar to the ACP Program is approved, we are prepared to rapidly offer qualified consumers affordable communication services.
In the quarter ended March 31, 2025, Hosted Services (“CPaaS services”) accounted for approximately 66% of total Company revenue, and Mobile Services (“Lifeline sales”) accounted for approximately 34% of Company revenue. The Lifeline Program is a U.S. government subsidized telecommunication program created in 1985. It is funded through fees collected from all U.S. telecommunication services invoices. Regardless of whether a program similar to the ACP Program is funded in the future, management continues to prioritize its growth initiatives within the Company’s Hosted Services segment as we focus our efforts on new sales opportunities with our expanded short-code messaging (“SMS”) service, which has doubled in revenue over the past twelve months, and our newly released wholesale POTS service currently provided to regional carriers and resellers who, as of the end of this quarter, have activated approximately 600 POTS lines during our initial deployment period, and a health care related initiative within our Mobile Services segment.
During the first quarter of 2024, the Company entered into a Membership Interest Purchase Agreement with Excess Telecom to sell a minority (49%) non-controlling share of IM Telecom in consideration of the sum of $10,000,000. As part of this sale, the Company paid off all existing and outstanding debt and gained substantial additional liquidity and Owner’s Equity into the business. Upon final sale of the remaining 51%, if approved by the FCC, the Company shall have the right to continue providing Lifeline qualified services through a Master Distribution Agreement with Excess Telecom, for not less than ten (10) years. However, as further disclosed above in NOTE 9 – SUBSEQUENT EVENTS, since Excess Telecom requested that IM Telecom, under the Excess Telecom Membership Interest Purchase Agreement, withdraw its Change of Control Petition with the FCC, the Company shall continue to retain its majority 51% controlling share of IM Telecom and no monies paid by Excess Telecom to the Company shall be refundable.
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.
Comparison of the three months ended March 31, 2025, to the three months ended March 31, 2024
For the three months ended March 31, 2025, we had $2,168,714 in revenues from operations compared to $5,635,836 for the three months ended March 31, 2024, for a total revenue decrease of $3,467,122. The decrease in revenue was primarily due to the expiration of the ACP program on June 1, 2024, which resulted in fewer activations and a lower revenue-per-user for each activation. The Company continues to explore new revenue streams such as delivery of mobile services through certain health care initiatives and hosted services partnerships.
| 16 |
For the three months ended March 31, 2025, our cost of revenue was $1,516,821 compared to $4,508,332 in the three months ended March 31, 2024, for a cost of revenue decrease of $2,991,511. Our cost of revenue decrease was primarily a result of a decrease in sales compensation and device costs related to the expiration of the ACP Program, causing a decline in marketing efforts to low-income consumers.
For the three months ended March 31, 2025, we had gross profit of $651,893 compared to $1,127,504 in the three months ended March 31, 2024, for a gross profit decrease of $475,611. This decrease primarily resulted from a significant decline in activations in our Mobile Services segment, which was also due to the expiration of the ACP Program on June 1, 2024.
For the three months ended March 31, 2025, total operating expenses were $1,581,538 compared to $1,974,459 in the three months ended March 31, 2024, for a decrease of $392,921. This decrease was primarily due to lower payroll due to a reduction in force made in November 2024 and a reduction in application development costs in Apeiron.
For the three months ended March 31, 2025, other income (expense) was $12,117 compared to $9,079,467 in the quarter ended March 31, 2024. This decrease was a result of the gain on sale recognized in 2024 as part of the sale of 49% interest in IM Telecom.
For the three months ended March 31, 2025, we had a net loss of ($917,528) compared to net income of $8,083,084 in the three months ended March 31, 2024.
Liquidity and Capital Resources
As of March 31, 2025, we had $2,098,383 in cash and cash equivalents on hand.
In comparing liquidity between the three month periods ended March 31, 2025, and December 31, 2024, cash increased by 25.0%. This increase is the result of additional cash received as part of the Lifeline subsidy claims made in October and November, 2024, which were delayed by certain database and system issues in the state of California. Liabilities and total overall debt decreased by 1.8% in the three month period ended March 31, 2025, when compared to the three month period ended December 31, 2024.
Our current ratio (current assets divided by our current liabilities) decreased to 1.53 as of March 31, 2025, compared to 1.78 as of December 31, 2024. Working capital decreased by 33.2%.
Cash Flow from Operations
During the three months ended March 31, 2025, cash flow used provided by operating activities was $269,038, primarily as a result of changes in accounts receivables due from the state subsidy payments received from the state of California.
Cash Flows from Investing Activities
During the three months ended March 31, 2025, cash flow provided by investing activities was $150,000, as a result of the payment received on the note receivable of $1,000,000 from the sale of 49% of IM Telecom.
Cash Flows from Financing Activities
During the three months ended March 31, 2025, there were no cash flows generated by Financing Activities.
Going Concern
For the three months ended March 31, 2025, the Company generated a net loss of ($917,528), compared to net income for the three months ended March 31, 2024, of $8,083,084. The accumulated deficit as of March 31, 2025, is ($8,665,401).
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. With the expiration of the ACP Program on June 1, 2024, we have shifted our focus back to marketing exclusively under our ETC license with a primary focus on states with additional state subsidies such as the state of California. With the additional state funding and Linkup program in California, we have been able to retain continuity in the mobile services market. We continue to target and expand into additional ETC licensed states and currently have pending requests to market Lifeline services in eight (8) additional states with the FCC.
We continue to focus on a program launch date for our hosted services initiative with VIVA-US Telecommunications, Inc. (“VIVA-US”), and our ongoing health care sales initiative in the state of California. The launch of both of these 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
| 17 |
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.
Off-Balance Sheet Arrangements
We had no Off-Balance Sheet arrangements during the three-month period ended March 31, 2025.
Critical Accounting Policies
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 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.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentration 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 March 31, 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 amounts of $281,661 or 49.8%, and $101,223 or 17.9%, and 82,196 or 14.5%. 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 months ended March 31, 2025, the Company had three (3) customers that accounted for $683,635 or 31.4%, $281,661 or 12.9% and $275,162 or 12.6% of revenue, respectively. For the three months ended March 31, 2024, the Company had two (2) customers that accounted for $2,891,992 or 51.3% and $978,544 or 17.4% 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not required.
Item 4. Controls and Procedures.
Management’s Quarterly Report on Internal Control Over Financial Reporting
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as
| 18 |
appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of March 31, 2025, of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Not required; however, see Part I, Item 1A. Risk Factors, commencing on page ten (10) of our Annual Report for the year ended December 31, 2024, filed with the SEC on April 15, 2025, for a list of Risk Factors, which Annual Report can be accessed by Hyperlink in Part II-Other Information, in Item 6, Exhibits, hereof.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None; not applicable.
Item 3. Defaults upon Senior Securities
None; not applicable.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
No director or Section 16 officer
Item 6. Exhibits
|
Exhibit Number |
Description of Exhibit | Filing | ||
| 3(i) | Amended and Restated Certificate of Incorporation | Filed with the Form 8-K/A filed on December 20, 2017, and incorporated herein by reference. | ||
| 3(i)(a) | Certificate of Amendment to Amended and Restated Certificate of Incorporation (Name Change). | Filed with the Form 8-K filed on February 12, 2018, and incorporated herein by reference. | ||
| 3(ii) | Amended and Restated Bylaws | Filed with the Form 8-K/A filed on December 20, 2017, and incorporated herein by reference. | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith. |
| 19 |
| 101 | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, were formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL. |
Exhibits incorporated by reference:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KonaTel, Inc. | ||||
| Date: | May 15, 2025 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Date: | May 15, 2025 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO |
| Date: | May 15, 2025 | By: | /s/ Brian R. Riffle | |
| Brian R. Riffle | ||||
| Chief Financial Officer |
20
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, D. Sean McEwen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of KonaTel, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | May 15, 2025 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian R. Riffle, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of KonaTel, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions);
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: | May 15, 2025 | By: | /s/ Brian R. Riffle | |
| Brian R. Riffle | ||||
| Chief Financial Officer |
Exhibit 32
CERTIFICATION OF
PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of KonaTel, Inc. (the “Registrant”) on Form 10-Q for the quarterly period ending March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), we, D. Sean McEwen, Chief Executive Officer and Brian R. Riffle, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.
| Date: | May 15, 2025 | By: | /s/ D. Sean McEwen | |
| D. Sean McEwen | ||||
| Chairman and CEO |
| Date: | May 15, 2025 | By: | /s/ Brian R. Riffle | |
| Brian R. Riffle | ||||
| Chief Financial Officer |