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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 12 Months Ended
Dec. 31, 2025
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

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

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and intangible assets. Actual results could differ from those estimates. Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

 

 
Basis of Consolidation

Basis of Consolidation

 

The consolidated financial statements for the year ended December 31, 2025, and 2024, include the Company and its two (2) owned corporate subsidiaries, KonaTel Nevada and Apeiron Systems, as well the 51% share of IM Telecom. All significant intercompany transactions are eliminated.

 
Cash and Cash Equivalents

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand and all short-term investments with maturities of three months or less.

 
Trade Accounts Receivable

Trade Accounts Receivable

 

The Company accounts for trade receivables based on amounts billed to customers. Past due receivables are determined based on contractual terms. The Company does not accrue interest and does not require collateral on any of its trade receivables. Net receivables from transactions with customers were $284,167 and $1,533,015 as of December 31, 2025, and December 31, 2024, respectively.

 
Allowance for Credit Losses

Allowance for Credit Losses

 

The allowance for credit losses is determined by management based on customer credit history, specific customer circumstances and general economic conditions. Periodically, management reviews our accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables against the allowance when all attempts to collect the receivable have failed. As of December 31, 2024, management determined the no allowance for credit losses was necessary. As of December 31, 2025, management determined that an allowance for credit losses of $29,648 was necessary.

 
Inventory

Inventory

 

Inventory consists primarily of the cost of cellular phones and tablets. Inventory is reported at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (“FIFO”) method. As of December 31, 2025, total inventory owned by the Company was $272,229, which includes POTS related equipment consigned to customer premise locations.

 

Due to rapidly changing technology within the industry, inventory is evaluated on a regular basis to determine if any obsolescence exists. As of December 31, 2025, and December 31, 2024, inventory obsolescence was $256 and $0 respectively.

 
Property and Equipment

Property and Equipment

 

Property and equipment are recorded at cost and are depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are amortized over the lesser of the lease term or estimated useful life, furniture and fixtures, equipment, and vehicles are depreciated over periods ranging from five to seven (5-7) years, and billing software is depreciated over three (3) years which represents the estimated useful life of the assets. Maintenance and repairs are charged to expense as incurred while major replacements and improvements are capitalized. When property and equipment are retired or sold, the cost and applicable accumulated depreciation are removed from the respective accounts and the related gain or loss is recognized.

 

The Company recognizes impairment losses for long-lived assets whenever changes in circumstances result in the carrying amount of the assets exceeding the sum of the expected future cash flows associated with such assets. Management has concluded that no impairment reserves are required as of December 31, 2025, and 2024.

 
Intangible Assets

Intangible Assets

 

The Company accounts for intangible assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. As of December 31, 2025, intangible assets include our ETC License.

 

 
Other Assets

Other Assets

 

Other Assets represent items classified as long-term assets in accordance with the Statement of Financial Accounting Standards ASC 210-10-45. Other Assets include security deposits held with vendors.

 
Customer Deposits

Customer Deposits

 

Before entering into a contract with a sub-reseller customer, the Company requires the customer to either secure a formal letter of credit with a bank or require a certain level of cash collateral deposits from the customer. These collateral requirements are determined by management and may be adjusted upward or downward depending on the volume of business with the sub-reseller customer, or if management’s assessment of credit risk for a sub-reseller customer would change.

 

The Company held $0 in collateral deposits from various sub-reseller customers at December 31, 2025, and 2024, respectively.

 
Notes Receivable

Notes Receivable

 

On January 22, 2024, the Company accepted a $1,000,000 note receivable from Excess Telecom as part of the 49% membership interest sale of IM Telecom. Payment of the note is contingent upon the satisfaction of certain underlying provisions noted in the Membership Interest Purchase Agreement. There is no stated interest or term under this note. As of December 31, 2025, there was $150,000 outstanding on this note receivable.

 
Fair Market Value of Assets

Fair Market Value of Assets

 

The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable, accrued expenses, deposits received from customers for receivables and short-term loans the carrying amounts approximate fair value due to their short maturities. Long-term assets purchased through acquisitions are valued at the Fair Market Value of the asset at the time of acquisition. The Fair Market Value is based on observable inputs of assets in active market- places for fixed assets, and estimations and assumptions developed by us for Other Intangibles.

 

The Company follows accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices, which are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 
Leases

Leases

 

In February 2016, the FASB updated the accounting guidance related to leases. The most significant change in the updated accounting guidance requires lessees to recognize lease assets and liabilities on the balance sheet for all operating leases with the exception of short-term leases. The standard also expands the disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. For a lessee, the recognition, measurement and presentation of expenses and cash flows arising from a lease did not significantly change from previous guidance. See NOTE 6 below.

 

Upon adoption, we recorded $151,471 for operating lease assets and liabilities, which includes the impact of fair value adjustments, prepaid and deferred rent. As of December 31, 2025, and December 31, 2024, our operating lease liabilities were $227,779 and $341,516, respectively.

 
Revision of Previously Issued Financial Statements

Revision of Previously Issued Financial Statements

 

In connection with the preparation of the Company’s 2025 financial statements, Management identified an immaterial error in the previously issued 2024 financial statements related to the proceeds recognized as a result of the sale of 49% of IM Telecom. Management evaluated the error under SAB Topic 1.M (SAB 99) and SAB Topic 1.N (SAM 108) and concluded that the error was not material to the previously issued financial statements. Accordingly, the Company has revised the comparative 2024 financial statements presented herein to correct the error.

 

 

The Company performed an in-depth evaluation of the recognition of revenue related to the sale of 49% of IM Telecom in 2024. In that evaluation, Management took into account the facts and circumstances of the transaction as to whether accounting for the transaction should be treated in accordance with ASC 810 under the consolidation, equity or joint venture accounting methodology or whether we should look to ASC 606 regarding the selling a “right to use” or “right to access” an asset accounting. Management considered the relevant facts of the transaction, including the $10,000,000 non-refundable consideration received and payable regardless of whether future regulatory approval is received. While we came to the conclusion that ASC 810 would generally apply in similar transactions, we determined that a purchase of a right to use was made and ASC 606 revenue recognition should be used for purposes of financial statement presentation.

 

The correction resulted in an increase in the proceed on sale recognized of $310,783 and a corresponding increase in net assets of $310,783 in 2024. There was no additional impact to prior periods.

 

KONATEL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

  

12/31/2024

as reported

   Adjustment  

12/31/2024

as Restated

 
Revenue  $15,503,251    -    15,503,251 
Cost of Revenue   12,088,944    -    12,088,944 
Gross Profit   3,414,307    -    3,414,307 
                
Operating Expenses               
General and Administrative   6,819,763    -    6,819,763 
Stock Option Expense   992,735    -    992,735 
Application Development Costs   140,880    -    140,880 
Total Operating Expenses   7,953,378    -    7,953,378 
                
Operating (Loss)   (4,539,071)   -    (4,539,071)
                
Other Income and Expense               
Sale of IM Telecom (49%)   9,247,726    310,783    9,558,509 
Interest Expense   (104,737)   -    (104,737)
Other Income, net   70,951    -    70,951 
Total Other Income and Expenses   9,213,940    310,783    9,524,723 
                
Income Before Income Taxes   4,674,869    310,783    4,985,652 
Income Tax Expense   184,051    -    184,051 
Net Income  $4,490,818    310,783    4,801,601 

 

 

KONATEL, INC.

CONSOLIDATED BALANCE SHEET

 

  

12/31/2024

as reported

   Adjustment  

12/31/2024

as Restated

 
Assets            
Current Assets               
Cash and Cash Equivalents  $1,679,345    -   $1,679,345 
Accounts Receivable, Net   1,533,015    -    1,533,015 
Inventory, Net   163,063    -    163,063 
Prepaid Expenses   94,496    -    94,496 
Other Current Assets   112,170    -    112,170 
Total Current Assets   3,582,089    -    3,582,089 
                
Property and Equipment, Net   15,128    -    15,128 
                
Other Assets               
Intangible Assets, Net   323,468    310,783    634,251 
Right of Use Asset   319,549    -    319,549 
Notes Receivable   1,000,000    -    1,000,000 
Other Assets   74,328    -    74,328 
Total Other Assets   1,717,345    310,783    2,028,128 
Total Assets   5,314,562    310,783    5,625,345 
                
Liabilities and Stockholders’ Equity               
Current Liabilities               
Accounts Payable and Accrued Expenses   2,277,597    -    2,277,597 
Right of Use Operating Lease Obligation - Current   113,740    -    113,740 
Income Tax Payable   184,051    -    184,051 
Total Current Liabilities   2,575,388    -    2,575,388 
                
Long Term Liabilities               
Right of Use Operating Lease Obligation - Long Term   227,776    -    227,776 
Total Long Term Liabilities   227,776    -    227,776 
Total Liabilities   2,803,164    -    2,803,164 
Commitments and Contingencies   -    -    - 
Stockholders’ Equity               
Common stock, $.001 par value   43,504    -    43,504 
Additional Paid In Capital   10,215,767    -    10,215,767 
Accumulated Deficit   (7,747,873)   310,783    (7,437,090)
Total Stockholders’ Equity   2,511,398    310,783    2,822,181 
Total Liabilities and Stockholders’ Equity   5,314,562    310,783    5,625,345 

 
Revenue Recognition

Revenue Recognition

 

Services revenues are generated from cellular and telecommunication services. The revenue is derived from wholesale and retail services. Telecommunications and mobile telecommunication services include network platforms, voice, data, and text services. The Company recognizes revenue as telecommunications and mobile services are provided in service revenue. Telecommunications and mobile services are billed and paid on a monthly basis. These bills include an amount for the monthly recurring charge and a usage charge.

 

We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services. We account for these revenues under Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers.” This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard under U.S. GAAP. The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The adoption of this guidance did not have a material impact on the consolidated financial statements.

 

 

We distribute government subsidized mobile services through Master Agents. As part of the distribution process, we deliver mobile phones and/or tablets (devices) to our Master Agents, who then are responsible to subscribe qualifying consumers under a government sponsored program (ACP and/or Lifeline). In most cases, devices that have been delivered to our Master Agents are subscribed to and activated by qualifying consumers within sixty (60) days, at which point we would receive a subsidy from a governing body (the Universal Service Administrative Company (“USAC”) or certain states) and recognize revenue. Once a device is activated, and the intended service provided under the government program is deemed to have occurred, the program revenue is recognized, the expense is recognized, and the device is removed from inventory.

 
Deferred Revenue

Deferred Revenue

 

Services for cellular and telecommunication services have a monthly recurring charge that is billed in advance. This charge covers a thirty (30) or thirty-one (31)-day period. This charge is deferred for the period in which it was received and recorded as revenue at the conclusion of this period. Costs, mainly from outside providers, associated with the deferred revenue are recognized in the same period as revenue is recognized.

 
Cost of Revenue

Cost of Revenue

 

Cost of Revenue includes the cost of communication services, equipment and accessories, shipping costs, and agent compensation.

 
Advertising/Marketing

Advertising/Marketing

 

Costs for advertising/marketing of products and services, as well as other promotional and sponsorship costs, are charged to selling, general and administrative expenses in the periods in which they are incurred. Advertising/marketing expense was $13,580 and $99,759 for 2025, and 2024, respectively. The decrease in advertising/marketing costs was a result of decline in marketing costs due to the expiration of the ACP program in 2024.

 
Stock-based Compensation

Stock-based Compensation

 

The Company records stock-based compensation in accordance with the guidance in ASC 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This requires that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from nonemployees in accordance with ASC 718-10 and the conclusions reached by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services.

 
Income Taxes

Income Taxes

 

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the consolidated financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rate are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

 

The benefits of uncertain tax positions are recorded in the Company’s Consolidated Financial Statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. The Company records interest and penalties related to unrecognized tax benefits in interest expense in the Company’s Consolidated Statements of Operations.

 
Net Income (Loss) Per Share

Net Income (Loss) Per Share

 

Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the year ended December 31, 2025, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive.

 

 

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

 

   2025   2024 
   Years Ended December 31, 
   2025   2024 
Numerator        
Net Income (Loss)  $(2,647,053)  $4,801,601 
           
Denominator          
Weighted-average common shares outstanding   43,706,214    43,402,219 
Dilutive impact of stock options   -    54,163 
Weighted-average common shares outstanding, diluted   43,706,214    43,526,417 
           
Net income per common share          
Basic  $(0.06)  $0.11 
Diluted  $(0.06)  $0.11 

 
Concentrations of Credit Risk

Concentrations of Credit Risk

 

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of receivables, cash, and cash equivalents.

 

All cash and cash equivalents and restricted 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 December 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 amount of $75,387 or 23.9%, $50,000 or 15.8%, and $32,955 or 10.4%. As of December 31, 2024, the Company had a significant concentration of receivables from one (1) customer in the amount of $1,055,337 or 68.5%.

 
Concentration of Major Customer

Concentration of Major Customer

 

A significant amount of the revenue is derived from contracts with major customers. For the year ended December 31, 2025, the Company had two (2) customers that accounted for $2,897,636 or 34.3% and $1,019,357 or 12.1% of revenue, respectively. For the year ended December 31, 2024, the Company had two (2) customers that accounted for $5,295,202 or 34.2% and $3,483,080 or 22.5% of revenue, respectively. The loss of a major customer would have a negative impact on the Company and would subsequently require the Company to make significant changes to reduce expenses.

 
Effect of Recent Accounting Pronouncements

Effect of Recent Accounting Pronouncements

 

The Company adopted Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, effective January 1, 2025. The amendments in this update enhance the transparency and decision usefulness of income tax disclosures by requiring (i) disaggregation of the effective tax rate reconciliation into specified categories and (ii) additional disclosures of income taxes paid, net of refunds, by jurisdiction.

 

The Company applied the guidance prospectively. Accordingly, prior-period disclosures have not been adjusted and continue to be presented in accordance with the accounting guidance in effect for those periods. The adoption of ASU 2023-09 did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows, as the amendments relate solely to income tax disclosures.

 

The Company will prospectively adopt Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) effective with our annual 2027 10K filing and interim reporting periods effective with our interim report for the quarter ended March 31, 2028. Accordingly, prior-period disclosures will not be made.