KTEL 10-K & 10-Q changes, risk factors and insider trading
KonaTel, Inc. · OTC · Communications Services, Nec · CIK 845819 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “Our business operations could be impacted by public health crises.”
Removed heading “Legal challenge to the Universal Service Fund (“USF”) could adversely affect our business.”
Removed heading “Recent reductions in force (“RIF”) could adversely affect our business.”
Largest changes
“Legal challenge to the Universal Service Fund (“USF”) could adversely affect our business.”see in full comparison
“Recent reductions in force (“RIF”) could adversely affect our business.”see in full comparison
“Our business operations could be impacted by public health crises.”see in full comparison
“We are subject to risks related to public health crises, such as the 2020 COVID-19 pandemic, which impacted our operations. Actions taken around the world to help mitigate the spread of the coronavirus included restrictions on travel and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in which we operate. …”see in full comparison
“Currently before the U.S. Supreme Court is a challenge to the 1996 statute creating the USF to promote the infrastructure necessary to provide nationwide communications service to rural communities, schools and low-income consumers. The plaintiffs in the case argue that the statute creating the USF delegated too much power to the FCC to administer the fund through the establishment of contribution rates paid into the fund by telecommunications companies. …”see in full comparison
“In November of 2024, we determined that in order to achieve certain necessary cost reductions created by the expiration of the Affordable Connectivity Program, a RIF of certain positions within the Company was necessary. This RIF included several key personnel with significant knowledge of the industry and operation of the Company. This reduction in personnel could create a strain on our ability to execute new business opportunities that may arise prevent our future growth.”see in full comparison
Full comparison: every changed paragraph (12)
RISK FACTORS
For
the year endended December 31, 2024,2025, we reported gross
revenues of $15,503,251,$8,452,885, cost of revenues of $12,088,944,$5,840,675, operating expenses of $7,905,600, $5,290,592,
other income and expenses of $9,213,940 and
a net income of $4,722,647.$31,329 and a net loss of ($2,647,053).
For
the prior year ended December 31, 2023,2024, we reported
gross revenues of $18,223,745,$15,503,251, cost of revenues of $14,850,105,$12,088,944, operating expenses
of $6,494,243,$7,953,378, other income and expenses of ($820,224)
$9,524,723 and net lossincome of ($3,940,827).$4,801,601.
The
United States Government’s dissolution or reduction of the
Lifeline Program or the elimination of “resellers” of these
services will and has had a substantial adverse effect on our
current and planned businesspartnership operations.
Our business operations could be impacted by public health crises.
We are subject to risks related to public health
crises, such as the 2020 COVID-19 pandemic, which impacted our operations. Actions taken around the world to help mitigate the
spread of the coronavirus included restrictions on travel and quarantines in certain areas, and forced closures for certain types of
public places and businesses. The coronavirus and actions taken to mitigate it have had and are expected to continue to have an
adverse impact on the economies and financial markets of many countries, including the geographical areas in which we operate. While
it is unknown how long these conditions will last and what the complete financial affect will be on us, to date, and as a result of
actions taken by management to mitigate a material impact to our financial statements or our operational results, we are not
currently experiencing a material impact to our financial statements or our results of operations; however, a pandemic typically
results in social distancing, travel bans and quarantines, which may result in limited access to our facilities, customers,
management, support staff and professional advisors. These, in turn, may not only impact our operations, financial condition
and demand for our services, but our overall ability to react timely to mitigate the impact of this event. Given our small staff, if
a key member of our team were disabled by COVID-19 or some other similar crisis, it could have a material negative impact on our
business. Also, it may substantially hamper our efforts to provide our investors with timely information and to comply with our
filing obligations under the Exchange Act with the SEC. If any pandemic were to last a prolonged period of time, we could see a
decline in revenue due to the closure of customer businesses, which could then impact our ability to pay our short-term debts. Our
concentration of revenue from a small group of Apeiron Systems’ customers makes it reasonably possible that we are vulnerable
to the risk of a long-term severe impact. Our dependence on certain suppliers to provide equipment to be distributed or sold to our
customers could also be impacted if inventory shortages occur due to import or export restrictions resulting from any pandemic.
Legal challenge to the Universal Service Fund (“USF”)
could adversely affect our business.
Currently before the U.S. Supreme Court is a challenge
to the 1996 statute creating the USF to promote the infrastructure necessary to provide nationwide communications service to rural communities,
schools and low-income consumers. The plaintiffs in the case argue that the statute creating the USF delegated too much power to the FCC
to administer the fund through the establishment of contribution rates paid into the fund by telecommunications companies. The FCC created
a separate not-for-profit corporation called the Universal Service Administrative Company to oversee the fund and
its receipts and disbursements. Historically, courts have unanimously rejected such claims; however, the U.S. Court of Appeals for the
5th Circuit ruled that the statute is unconstitutional. If the plaintiffs in this case are successful, the U.S. Supreme Court
could agree with the U.S. Court of Appeals and the USF could be abolished, creating a barrier for low-income consumers to receive the
benefits they have received since 1996. Without funding received from the Lifeline Program, our IM Telecom business will be adversely
impacted.
Recent reductions in force (“RIF”)
could adversely affect our business.
In November of 2024, we determined that in order to
achieve certain necessary cost reductions created by the expiration of the Affordable Connectivity Program, a RIF of certain positions
within the Company was necessary. This RIF included several key personnel with significant knowledge of the industry and operation of
the Company. This reduction in personnel could create a strain on our ability to execute new business opportunities that may arise prevent
our future growth.
Supply
chain dislocations resulting from global geopolitical
and public health issues such as the Ukraine-RussiaUkraine-Russia, Israel-Hamas and Israel-HamasIran wars,
any resurgence in the COVID-19 health crises and other causes
may have a material adverse impact on our business and results of operations.
Such disruptions may increase our costs of doing business,
including significant increases in the price of our products and their components
and materials and the related costs of shipment, including
equipment used in the Lifeline Program. Supply chain disruptions may also
adversely affect our access to suppliers, manufacturers, customers
and vendors and may impair our ability to perform contracted services.
Delays in our ability to meet our obligations as a result of supply
chain issues may negatively affect our reputation, our relationships
with customers and our ability to deliver products and services.
As
of the date of this Annual Report, D. Sean McEwen,
our Chairman and Chief Executive Officer, beneficially owns approximately 37% of our
issued and outstanding shares of common voting stock
by reason of his personal holdings. This percentage includes certain vested non-compensatory stock options which he owns and that can
be exercised on or before midnight on September 18 and December 18, 2025, for 187,500 shares, respectively, at an exercise price of $0.22
per share, and all of which options are described under the caption “Security Ownership of Certain Beneficial Owners and Management”
in Part III, Item 12 hereof. As a result, Mr. McEwen may have the ability
to substantially control the election of our board of directors,
the outcome of issues requiring approval by our shareholders and other
corporate actions. This concentration of ownership may also have
the effect of delaying or preventing a change in control of our Company
that may be favored by other shareholders; and could prevent transactions
in which shareholders might otherwise recover a premium for
their shares over current market prices. This concentration of ownership and
influence in management and board decision making could
also harm the price of our capital stock by, among other things, discouraging
a potential acquirer from seeking to acquire shares of
our capital stock, whether by making a tender offer or attempting to obtain control
of our Company. Also see the caption “Executive
Compensation” of Part III, Item 11 hereof.
Management's Discussion & Analysis (MD&A)
Largest changes
“In addition to the copper-wire POTS replacement program, the Company continues to pursue the launch of the Viva USA MVNO opportunity. The first 10,000 SIM cards have been purchased by and delivered to Viva for deployment. The Company has completed its pre-launch obligations; we continue to wait for launch implementation by Viva. We continue to remain optimistic that the IM Telecom health care vertical will begin to accelerate in 2026. …”see in full comparison
“As of December 31, 2024, and with no visible progress towards an extension of the ACP Program within Congress, we took cost reduction measures, including reductions within our workforce. Although we eliminated our outstanding debt and increased our cash position earlier in the year, uncertainty around the ACP Program (or a similarly funded program), the impacts to our business in the State of California, the program launch timing of VIVA-US Telecommunications, Inc. …”see in full comparison
“As of June 1, 2024, funding for the ACP Program ended, which accounted for approximately 15% of our revenues in Q2 2024 and 33% of our revenues in Q1 2024. Legislative efforts to extend funding remain within Congress; however, the decision to further fund the ACP Program (or a similar program) is still uncertain. In light of this uncertainty, we took initial steps to reduce costs in Q2 2024 while discussions continued in Congress, and we moved resources and focus to our mobile services segment to California. …”see in full comparison
“Effective with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, under “the Annual Plan,” on October 1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel; and KonaTel will continue to receive distributions based upon a new Distribution Agreement for compensation from it sales only under the IM Telecom’s vertical sales channels, including all new sales stemming from our new healthcare vertical partnership as originally agreed. …”see in full comparison
During the year ended December 31, 2025, and the year ended December 31, 2024,see in full comparisonand the year ended December 31, 2023,cash flow provided by (used in) financing activities was $82,500 and ($3,663,500)and $513,501,, respectively. In2024,2025, cash flowusedreceived in financing activities consisted of $82,500 cash received from incentive or non-compensatory stock options that were exercised in September 2025 and $150 received on the sale of certain equipment. In 2024, cash flow generated from financing activities consisted of ($3,704,750) cash used to repay CCURloanLoan principal and loan fees, and $41,250 cash received from incentive or non-compensatory stock options that were exercised.In 2023, cash flow generated from financing activities consisted of $554,750 cash received from short-term notes payable, ($132,000) cash used for payment of loan origination costs and $90,751 cash received from incentive or non-compensatory stock option exercises.
“Based on FCC data, it is estimated there are approximately 22 million commercial (i.e., used in commercial operations) copper-wire Plain Old Telephone Service (“POTS”) analog phone lines. These lines are scheduled to be phased out (terminated) across the United States by the end of the decade. So, in support of the increasing demand from end-of-life copper-wire POTS service, one of the Company’s new services, deployed and tested throughout 2025, includes a wireless POTS replacement solution targeted at large national telecommunication service providers.”see in full comparison
Full comparison: every changed paragraph (16)
In
comparing our Statements of Operations between
the years ended December 31, 2024,2025, and 2023,2024, we had declines in revenue and costs of revenue, increases
decreases in operating expenses, and lower
net income.
For
the year ended December 31, 2024,2025, we had gross
profit of $3,414,307$2,612,210 compared to $3,373,640$3,414,307 in the prior year ended December 31, 2023, 2024,
for a gross profit increasedecrease of $40,667($802,097) in 2024.
2025. This increasedecrease was primarily due to a reduction in acquisition costs in 2024.2025 as a result
of the elimination of the ACP Program.
For
the year ended December 31, 2024,2025, total operating
expenses were $7,953,378$5,290,592 compared to $6,494,243$7,953,378 in the prior year ended December 31, 2023,
2024, for ana increasedecrease of $1,459,135
($2,662,786) in 2024.2025. This increasedecrease was due primarily due to higherlower payroll and related expenses for IM Telecom
and Apeiron Systems.
For
the year ended December 31, 2024,2025, other income
(expense) was $9,213,940$31,329 compared to ($820,224)$9,524,723 in the prior year ended December 31, 2023.2024. This increase decrease
was due primarily to our sale
of 49% of the Membership Interest in IM Telecom to Excess Telecom on January 22, 2024, for an aggregate
purchase price of $10,000,000,
and, if approved the FCC, Excess can acquire the remaining 51% for $100.$10,000,000.
For
the year ended December 31, 2024,2025, we had a net
income of $4,490,818 compared to a net loss of ($3,940,827$2,647,053) compared to a net income of $4,801,601 in the prior year ended December
31, 2023.2024. The increasedecrease in net income
was also primarily the result of the sale of the 49% Membership Interest in IM Telecom to Excess
Telecom in the first quarter of 2024.
In
comparing liquidity between the years ending December
31, 2025, and 2024, and 2023, cash increaseddecreased by 116%.58%. The increasedecrease was primarily the result
of the cash received sale of the 49% Membership Interest in IM Telecom
to Excess Telecom in the first quarter of 2024. Total liabilities
decreased by 64.2%25.8% in 20242025 when compared to 2023,2024, as the result
of the repayment of the CCUR Loan and the ACP Finance loan for device
financing from funds received from Excess Telecom under the Excess
Telecom Purchase Agreement. We also had working capital of $2,006,701 ($518,263)
for the year ended December 31, 2024,2025, also primarily
resulting from the additional cash and cash equivalents received from the Excess
Telecom Purchase Agreement. In January,January 2024, the CCUR
Loan and the outstanding obligations to ACP Finance, were fully paid off with a
part of these proceeds.
During
the year ended December 31, 2025, and the year ended December 31, 2024, and the year
ended December 31, 2023, cash flow used in operating activities was $(3,992,767$1,907,128) and $(1,792,032$3,992,767),
respectively. Cash flows providedused by
operating activities were mainly impacted by the adjustment to net income due to the gainon onthe sale of
49% of IM Telecom.
During
the year ended December 31, 2025, and the year ended December 31, 2024, and the year
ended December 31, 2023, cash flow provided by (used in) financing activities was $82,500
and ($3,663,500) and $513,501,, respectively. In 2024,2025, cash
flow usedreceived in financing activities consisted of $82,500 cash received from incentive
or non-compensatory stock options that were exercised in September 2025 and $150 received on the sale of certain equipment. In 2024,
cash flow generated from financing activities consisted of ($3,704,750) cash used to repay CCUR loanLoan principal and loan fees, and $41,250
cash received
from incentive or non-compensatory stock options that were exercised. In 2023, cash flow generated from financing activities consisted
of $554,750 cash received from short-term notes payable, ($132,000) cash used for payment of loan origination costs and $90,751 cash received
from incentive or non-compensatory stock option exercises.
We
generated a net incomeloss of $4,490,818($2,647,053) during
the year ended December 31, 2024,2025, and we had a restated net lossincome of ($3,940,827)$4,801,601 in 2023. 2024.
The Company had a net change in cash of $902,242($974,478) and
($1,278,531) $902,242 in 2024,2025, and 2023,2024, respectively. The accumulated deficit as of December
31, 2024,2025, was ($7,747,873$10,084,143). The Company’s
sale of the 49% Membership Interest in IM Telecom to Excess Telecom allowed us to pay
off all outstanding debt and retain additive cash.
Effective with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, under “the Annual Plan,” on October 1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel; and KonaTel will continue to receive distributions based upon a new Distribution Agreement for compensation from it sales only under the IM Telecom’s vertical sales channels, including all new sales stemming from our new healthcare vertical partnership as originally agreed. In addition, during 2025, the Company began to refocus its efforts on the Hosted Services solutions operated by its subsidiary, Apeiron Systems. While KonaTel continues to receive regular monthly distributions from the IM Telecom partnership, our focus is now on growing our Hosted Services, which enjoy substantially higher margins and substantially lower customer churn characteristics.
Based on FCC data, it is estimated there are approximately 22 million commercial (i.e., used in commercial operations) copper-wire Plain Old Telephone Service (“POTS”) analog phone lines. These lines are scheduled to be phased out (terminated) across the United States by the end of the decade. So, in support of the increasing demand from end-of-life copper-wire POTS service, one of the Company’s new services, deployed and tested throughout 2025, includes a wireless POTS replacement solution targeted at large national telecommunication service providers.
We are also focused on ongoing retail and wholesale sales of our Short Messaging Service (SMS) product, which saw continued growth from Q3 to Q4 of 2025.
In addition to the copper-wire POTS replacement program, the Company continues to pursue the launch of the Viva USA MVNO opportunity. The first 10,000 SIM cards have been purchased by and delivered to Viva for deployment. The Company has completed its pre-launch obligations; we continue to wait for launch implementation by Viva. We continue to remain optimistic that the IM Telecom health care vertical will begin to accelerate in 2026. The growth of this vertical relies on the marketing/communication efforts of our healthcare partner to inform their millions of current/eligible customers of the opportunity to obtain wireless Lifeline services. The lack of our 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 Annual Report.
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. In Q2 2024, we added an additional ten (10) state licenses, which continues to expand our nationally
licensed wireless service coverage. We have continued to target and expand into additional ETC licensed states.
As of June 1, 2024, funding for the ACP Program ended,
which accounted for approximately 15% of our revenues in Q2 2024 and 33% of our revenues in Q1 2024. Legislative efforts to extend funding
remain within Congress; however, the decision to further fund the ACP Program (or a similar program) is still uncertain. In light of this
uncertainty, we took initial steps to reduce costs in Q2 2024 while discussions continued in Congress, and we moved resources and focus
to our mobile services segment to California. With the California Lifeline Program, through its additional state funding and Linkup program,
our business was able to retain continuity in the mobile services market. In Q3 2024, we received a cease and desist letter from the State
of California CPUC, specific to a marketing program by one of our master distribution partners. The inquiry into this matter impacted
the timing of payments on our qualified claims through Q4 2024 (see the heading “Concentration of Credit Risk” in NOTE 1 of our audited consolidated financial statements contained in Part
II, Item 8 hereof).
Since the end of the year, the cease and desist issue has been rectified and all payments are now being received timely.
As of December 31, 2024, and with no visible
progress towards an extension of the ACP Program within Congress, we took cost reduction measures, including reductions within our
workforce. Although we eliminated our outstanding debt and increased our cash position earlier in the year, uncertainty around the
ACP Program (or a similarly funded program), the impacts to our business in the State of California, the program launch timing of
VIVA-US Telecommunications, Inc. (“VIVA-US”), and our ongoing health care sales initiative will play significant roles
in our ability to continue operations without additional reductions. The lack of our 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 Annual
Report.
What changed in the latest 10-Q
Risk Factors
Not required; however, see Part I, Item 1A. Risk Factors, commencing on page ten (10) of our 2025 10-K for the year ended December 31, 2025, filed with the SEC on April 16, 2026, for a list of Risk Factors, which Annual Report can be accessed by Hyperlink in Part II-Other Information, in Item 6, Exhibits, hereof.
Full comparison: every changed paragraph (1)
Not
required; however, see Part I, Item 1A. Risk Factors, commencing on page ten (10) of our 2025 10-K for the year ended December 31, 2025,
filed with the SEC on April 16, 2026, for a list of Risk Factors, which 2025Annual 10-KReport can be accessed by Hyperlink in Part II-Other Information,
in Item 6, Exhibits, hereof.
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the six (6) months ended June 30, 2026, to the six (6) months ended June 30, 2025”
Largest changes
“As in previous quarters, the Company continues to implement broad reductions and improve efficiencies to extend and utilize cash resources in the most efficient manner. The above-mentioned product applications and sales initiatives will require capital to expand infrastructure as sales increase. The growth of these products and the launch of certain contracted programs, along with the ability to raise additional capital, will play a significant role in our ability to continue operations with additional cost reduction measures. …”see in full comparison
“We continue to pursue additional financing opportunities to grow the aforementioned initiatives at higher growth rates than we are currently experiencing. The lack of our success in this effort as well as 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.”see in full comparison
“Comparison of the six (6) months ended June 30, 2026, to the six (6) months ended June 30, 2025”see in full comparison
The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As ofsee in full comparisonMarchJune31,30, 2026, 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 theamountamounts of$56,227$100,709 or27.4%,45.6%,29,648$29,648 or14.4%,13.4% and$23,085$28,679 or11.2%.11.9%. As ofMarchJune31,30, 2025,2025,the Company had a significant concentration of receivables(defined as customers whose receivable balances are greater than 10% of total receivables) duefromtwothree (23) customers in theamountamounts of$281,661$183,185 or49.8%,35.6%, $96,017 or 18.7% and$101,223$63,848 or17.9%. It should be noted that the largest customer was the California Public Utilities Commission (“CPUC”).12.4%.
“In addition to the copper-wire POTS replacement program, the Company continues to pursue the launch of the Viva USA MVNO opportunity. The first 10,000 SIM cards have been purchased by and delivered to Viva for deployment. The Company has completed its pre-launch obligations; we continue to wait for launch implementation by Viva. We continue to remain optimistic that the IM Telecom healthcare vertical will begin to accelerate in 2026. …”see in full comparison
“For the six (6) months ended June 30, 2026, we had $3,774,910 in revenues from operations compared to $4,327,370 for the six (6) months ended June 30, 2025, for a total revenue decrease of $552,460, a decrease of 12.8%. The decrease in revenue was primarily due to the decline in revenues in our mobile services segment resulting from the shift in sales efforts from Lifeline to our Hosted Services product offerings.”see in full comparison
Full comparison: every changed paragraph (34)
In
the six months and quarter ended MarchJune 31,30, 2026, Hosted Services (“CPaaS services”) accounted for approximately 74%87% of total
Company revenue,
and Mobile Services accounted for approximately 26%13% of Company revenue. While the Mobile Services segment does include
distributions distributions
from our IM Telecom partnership, management continues to prioritize itsit growth initiatives withinwith the Company’s Hosted
Services Services
segment as we focus our efforts on new sales opportunities with our expanded short-code messaging (“SMS”) service,
which which
has doubled in revenue over the past twelve (12) months, and our newly released wholesale POTS service currently provided to regional carriers
carriers and resellers who, as of the end of this quarter, have activated approximately 8001,000 POTS lines during our initial deployment
period, and a health care related initiative within our Mobile Services segment.period.
Comparison
of the three (3) months ended MarchJune 31,30, 2026, to the three (3) months ended MarchJune 31,30, 2025
For
the three (3) months ended MarchJune 31,30, 2026, we had $1,905,062$1,869,848 in revenues from operations compared to $2,168,714$2,158,656 for the three (3) months
ended MarchJune 31,30, 2025, for a total revenue decrease of $263,653.$288,808. The decrease in revenue was primarily due to fewerthe activationsdecline andin aLifeline subscribers
lowerin revenue-per-userthe formobile eachservices activation from our Mobile Services Segment.segment. The Company continues to explore new revenue streams such
as delivery of mobile services through certain
health care initiatives and hosted services partnerships.
For
the three (3) months ended MarchJune 31,30, 2026, our cost of revenue was $1,099,458$1,376,954 compared to $1,516,821$1,608,415 in the three (3) months ended MarchJune
31,30, 2025, for a cost of revenue decrease of $417,363.$231,462. Our cost of revenue decrease was primarily a result of a decrease in sales compensation
and device costs related to fewer Lifeline activations during the threeMobile (3)Services monthssegment endedand Marchadditional 31,cost 2026.control efforts in our Hosted Services segment.
For
the three (3) months ended MarchJune 31,30, 2026, we had gross profit of $805,604$492,894 compared to $651,893$550,240 in the three (3) months ended MarchJune 31,30,
2025, for a gross profit increasedecrease of $153,711.$57,346. This increasedecrease primarily resulted from a 40.7%significant improvementdecline in activations in our grossMobile
Services margin percentage
resulting from higher gross margins on our POTS replacement business.segment.
For
the three (3) months ended MarchJune 31,30, 2026, total operating expenses were $1,086,819$644,101 compared to $1,581,538$1,748,798 in the three (3) months ended
MarchJune 31,30, 2025, for a decrease of $494,719.$1,104,696. This decrease resultedwas fromprimarily due to lower payroll due tocosts, a transfer in workforce to the IM Telecom
partnership as well as continued declinesreduction in legal and other professional
fees and a reduction of application development costs, respectively.costs.
For
the three (3) months ended MarchJune 31,30, 2026, other income (expense) was ($1,375$48,136) compared to $12,117$10,917 in the quarter ended MarchJune 31,30, 2025.
ThisThe decrease of $59,053 was adue resultprimarily to an increase in accrued interest and the loss on sale of lowerremaining interestLifeline incomerelated received on cash deposits.inventory.
For
the three (3) months ended MarchJune 31,30, 2026, we had a net loss of ($282,590$199,343) compared to a net loss of ($917,528$1,187,641) in the three (3) months
ended MarchJune 31,30, 2025. The decrease in losses of $988,297 was primarily related to lower operating costs.
Comparison of the six (6) months ended June 30, 2026, to the six (6) months ended June 30, 2025
For the six (6) months ended June 30, 2026, we had $3,774,910 in revenues from operations compared to $4,327,370 for the six (6) months ended June 30, 2025, for a total revenue decrease of $552,460, a decrease of 12.8%. The decrease in revenue was primarily due to the decline in revenues in our mobile services segment resulting from the shift in sales efforts from Lifeline to our Hosted Services product offerings.
For the six (6) months ended June 30, 2026, our cost of revenue was $2,476,412 compared to $3,125,237 in the six (6) months ended June 30, 2025, for a cost of revenue decrease of $648,825, or a decrease of 20.8%. Our cost of revenue decrease was primarily the result of lower network and sales compensation costs, as the Company refocused sales efforts in our Hosted Services segment.
For the six (6) months ended June 30, 2026, we had gross profit of $1,298,498 compared to $1,202,133 in the six (6) months ended June 30, 2025, for a gross profit increase of $96,365. This increase primarily resulted from the marketing of higher margin products such as POTS replacement and SMS messaging.
For the six (6) months ended June 30, 2026, total operating expenses were $1,730,920 compared to $3,330,335 in the six (6) months ended June 30, 2025, for a decrease of $1,599,416. This decrease was primarily due to lower payroll related expenses, reduced professional fee expenses and lower application development costs in the period.
For the six (6) months ended June 30, 2026, other income (expense) was ($49,511) compared to $23,033 in the six (6) months ended June 30, 2025. This decrease was a result of the loss on sale of remaining Lifeline related inventory and a reduction in the amount of interest income earned in 2026.
For the six (6) months ended June 30, 2026, we had a net loss of ($481,933) compared to a net loss of ($2,105,169) in the six (6) months ended June 30, 2025. The decrease in losses of $1,623,236 was a result in decreases in costs of revenue and operating expenses.
As
of MarchJune 31,30, 2026, we had $665,068$200,013 in cash and cash equivalents on hand.
In
comparing liquidity between the threesix (36) month periodsperiod endedending MarchJune 31,30, 2026, and December 31, 2025, cash decreased by 5.6%.71.6%. This decrease
is the result of less cash flow generated for the period as compared to cash requirements. Liabilities
and total overall debt increased decreased
by 0.5%1.8% in the threesix (36) month period ended MarchJune 31,30, 2026, when compared to December 31, 2025.2025, primarily due to a decrease in right of
use operating lease obligations.
Our
current ratio (current assets divided by our current liabilities) decreased to 0.59.36 as of MarchJune 31,30, 2026, compared to 0.68.68 as of December
31, 2025. Working capital decreasedincreased by 31.4%.100.3%.
During the six (6) months ended June 30, 2026, the net cash flow used in operating activities was ($504,706), primarily as a result of changes in stock-based compensation and inventory and consigned equipment. The net cash flow used in operations for the six (6) month period ended June 30, 2025, was ($337,999).
During
the three (3) months ended March 31, 2026, cash flow used by operating activities was $39,650, compared to $269,037 provided by operating
activities in the three (3) months ended March 31, 2025, primarily related to a decrease in accounts receivable.
During
the threesix (36) months ended MarchJune 31,30, 2026, cash flow used in investing activities was $148. During the six (6) months ended June 30, 2025,
the net cash flow provided by investing activities was $150 as compared tothe $150,000 providednote byreceivable investing
activitiespayment for the three (3) months ended March 31, 2025.received.
During
the threesix (36) months ended MarchJune 31,30, 2026 and theJune three (3) months ended March 31,30, 2025, respectively, there were no cash flows generatedprovided by Financing
Activities.or used in financing activities.
For
the three (3) months ended MarchJune 31,30, 2026, the Company generated a net loss of ($282,590$199,343), compared to a net loss of ($1,187,641) for
the three (3) months ended June 30, 2025. For the six (6) months ended June 30, 2026, the Company generated a net loss of ($481,933),
compared to a net loss for the threesix (36) months
ended MarchJune 31,30, 2025, of ($917,528$2,105,169). The accumulated deficit as of MarchJune 31,30, 2026, is ($10,366,733$10,566,076).
Effective
with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, under “the Annual Plan,” on October
1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel; and KonaTel will continue to receive
distributions based upon a new Distribution Agreement for compensation from its sales only under the IM Telecom’s vertical sales
channel, including all new sales stemming from our new healthcare vertical partnership as originally agreed. In addition, during 2025,
the Company began to refocus its sales efforts on the Hosted Services solutions segment operated by its subsidiary, Apeiron Systems.
While KonaTel will continue to receive monthly distributions from the IM Telecom partnership, our focus is now on growing on growing
our Hosted Services offerings, which enjoy substantially higher margins and substantially lower customer churn characteristics.
OneOur
Hosted Services offering in particular, is the replacement of copper-wire Plain Old Telephone Service (“POTS”) analog phone
lines. Based upon data from the FCC, it is estimated there are approximately 22 million commercial (i.e., used in commercial operations)
copper-wire POTS analog phone lines. These lines are scheduled to be phased out (terminated) across the United States by the end of the
decade. So, in support of the increasing demand from end-of-life copper-wire POTS service providers, one of the Company’s new services,
deployed and tested throughout 2025 and the first quarterand second quarters of 2026, includes a wireless POTS replacement solution targeted
at large national
telecommunication service providers. Our primary sales efforts over the next four (4) years will be focused on this
project.
In May of this year the Company took additional steps to further reduce our operating costs by executing an additional reduction in force of six (6) full-time equivalents. In addition, certain key personnel agreed to take reductions in salary. We have also reduced our reliance on outside application development resources in order to reduce operating costs.
Since the quarter ended on June 30, 2026 we have signed an agreement to increase our current capital expenditure line of credit facility from $5M to $10M in order facilitate the growth of our POTS replacement and SMS messaging product offerings, subject to the satisfaction of a $1,500,000 funding requirement. We continue to pursue additional credit facilities to fund the operational growth of the Company.
As in previous quarters, the Company continues to implement broad reductions and improve efficiencies to extend and utilize cash resources in the most efficient manner. The above-mentioned product applications and sales initiatives will require capital to expand infrastructure as sales increase. The growth of these products and the launch of certain contracted programs, along with the ability to raise additional capital, will play a significant role in our ability to continue operations with additional cost reduction measures. A lack of success in executing on any one of these initiatives raises doubt about our ability to remain a going concern for the twelve (12) month period from the date of this Quarterly Report.
In
addition to the copper-wire POTS replacement program, the Company continues to pursue the launch of the Viva USA MVNO opportunity. The
first 10,000 SIM cards have been purchased by and delivered to Viva for deployment. The Company has completed its pre-launch obligations;
we continue to wait for launch implementation by Viva. We continue to remain optimistic that the IM Telecom healthcare vertical will
begin to accelerate in 2026. The growth of this vertical relies on the marketing/communication efforts of our healthcare partner to inform
millions of current/eligible customers of the opportunity to obtain wireless Lifeline services.
We
continue to pursue additional financing opportunities to grow the aforementioned initiatives at higher growth rates than we are currently
experiencing. The lack of our success in this effort as well as 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.
We
had no Off-Balance Sheet arrangements during both the three (3) and six (6) month periodperiods ended MarchJune 31,30, 2026.2026, respectively.
The
Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of MarchJune 31,30, 2026, 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 amountamounts of $56,227$100,709 or 27.4%,45.6%, 29,648$29,648 or 14.4%,13.4% and $23,085$28,679 or 11.2%.11.9%. As of MarchJune 31,30,
2025, 2025,
the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total
receivables) due from twothree (23) customers in the amountamounts of $281,661$183,185 or 49.8%,35.6%, $96,017
or 18.7% and $101,223$63,848 or 17.9%. It should be noted that the largest
customer was the California Public Utilities Commission (“CPUC”).12.4%.
A
significant amount of the revenue is derived from contracts with major customers. For the three (3) months ended MarchJune 31,30, 2026, the Company
Company had threetwo (32) customers that accounted for $710,687$701,879 or 38.1%37.5% of revenue and $270,414$320,346 or 14.5% and $236,783 or 12.7%17.1% of revenue, respectively.
For the three (3)
months ended MarchJune 31,30, 2025, the Company had threeone (31) customerscustomer that accounted for $683,635$746,954 or 31.4% and $281,661
or 12.9% and $275,162 or 12.6%34.6% of revenue, respectively.revenue.
For the six (6) months ended June 30, 2026, the Company had three (3) customers that accounted for $1,412,566 or 37.4%, $590,760 or 15.6% and $407,513 or 10.8% 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.
KTEL insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding KTEL (13F)
None of the 59 investors we track reported a position in their latest 13F.