KonaTel, Inc. Files Q3 2024 10-Q

Ticker: KTEL · Form: 10-Q · Filed: Nov 14, 2024

Sentiment: neutral

Topics: 10-Q, financials, communication-services

TL;DR

KonaTel's Q3 2024 10-Q is in. Check financials for comms services biz.

AI Summary

KonaTel, Inc. filed its 10-Q for the period ending September 30, 2024. The company, previously known as DALA PETROLEUM CORP and WESTCOTT PRODUCTS CORP, operates in the Communication Services sector. Financial details for the third quarter and the year-to-date period are presented, including balance sheet information as of December 31, 2023, and June 30, 2024.

Why It Matters

This filing provides investors with an update on KonaTel's financial performance and position for the third quarter of 2024, crucial for understanding the company's operational health and future prospects.

Risk Assessment

Risk Level: medium — As a publicly traded company filing regular reports, KonaTel presents a medium risk level due to the inherent volatility and information asymmetry typical in the stock market.

Key Numbers

Key Players & Entities

FAQ

What is the primary business of KonaTel, Inc. as indicated by its SIC code?

KonaTel, Inc.'s Standard Industrial Classification (SIC) code is 4899, which corresponds to COMMUNICATION SERVICES, NEC (Not Elsewhere Classified).

When was KonaTel, Inc. previously known by other names?

KonaTel, Inc. was formerly known as DALA PETROLEUM CORP, with a name change on September 2, 2014, and prior to that, as WESTCOTT PRODUCTS CORP, with a name change on January 24, 1989.

What is the fiscal year end for KonaTel, Inc.?

KonaTel, Inc.'s fiscal year ends on December 31.

What is the filing date of this 10-Q report?

This 10-Q report was filed on November 14, 2024.

What is the reporting period covered by this 10-Q filing?

This 10-Q filing covers the period ending September 30, 2024.

Filing Stats: 4,405 words · 18 min read · ~15 pages · Grade level 15.3 · Accepted 2024-11-14 16:10:49

Key Financial Figures

Filing Documents

, Other Information, Item 6, Exhibits, hereof, and is incorporated herein by reference

Part II, Other Information, Item 6, Exhibits, hereof, and is incorporated herein by reference.

Forward-Looking Statements

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 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 United States Securities and Exchange Commission (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, 2023, which commence on page ten (10) thereof; and issues related to "Cybersecurity" enumerated in "Part I, Item 1C. Cybersecurity," which commence on page twenty (20) t

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements & Footnotes

Item 1. Financial Statements & Footnotes 3

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 20

Controls and Procedures

Item 4. Controls and Procedures 21

– OTHER INFORMATION

PART II – OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 22

Risk Factors

Item 1A. Risk Factors 22

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 22

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 22

Other Information

Item 5. Other Information 22

Exhibits

Item 6. Exhibits 23

- FINANCIAL STATEMENTS

PART I - FINANCIAL STATEMENTS September 30, 2024 Table of Contents Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited), and December 31, 2023 4 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024, and 2023 (unaudited) 5 Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the three and nine months ended September 30, 2024, and 2023 (unaudited) 6 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024, and 2023 (unaudited) 7 Notes to Condensed Consolidated Financial Statements (unaudited) 8 3 KonaTel, Inc. Condensed Consolidated Balance Sheets (Unaudited) September 30, 2024 December 31, 2023 Assets Current Assets Cash and Cash Equivalents $ 2,688,303 $ 777,103 Accounts Receivable, Net 1,860,328 1,496,799 Inventory, Net 360,061 1,229,770 Prepaid Expenses 133,235 129,706 Other Current Assets 1,301,876 — Total Current Assets 6,343,803 3,633,378 Property and Equipment, Net 16,836 24,184 Other Assets Intangible Assets, Net 323,468 634,251 Right of Use Asset 351,240 443,328 Other Assets 74,543 74,543 Total Other Assets 749,251 1,152,122 Total Assets $ 7,109,890 $ 4,809,684 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable and Accrued Expenses $ 3,175,696 $ 3,709,691 Loans Payable, Net of Loan Fees — 3,655,171 Right of Use Operating Lease Obligation - Current 125,364 127,716 Total Current Liabilities 3,301,060 7,492,578 Long Term Liabilities Right of Use Operating Lease Obligation - Long Term 248,826 330,511 Total Long Term Liabilities 248,826 330,511 Total Liabilities 3,549,886 7,823,089 Commitments and Contingencies Stockholders' Equity Common stock, $ 0.001 par value, 50,000,000 shares authorized, 43,472,950 outstanding and issued at September 30, 2024 and 43,145,720 outstanding and issued at Decemb

financial statements

financial statements. 4 KonaTel, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2024 2023 2024 2023 Revenue $ 3,148,409 $ 4,689,001 $ 13,127,425 $ 13,322,146 Cost of Revenue 2,439,037 3,424,832 10,390,841 10,282,046 Gross Profit 709,372 1,264,169 2,736,584 3,040,100 Operating Expenses Payroll and Related Expenses 1,316,381 686,560 4,108,020 2,933,409 Operating and Maintenance 1,179 1,242 4,143 4,563 Bad Debt — 200 1,448 214 Professional and Other Expenses 94,435 113,546 435,960 576,964 Utilities and Facilities 50,292 53,814 160,410 162,889 Depreciation and Amortization 2,449 3,088 7,348 9,264 General and Administrative 54,006 35,459 159,974 120,103 Marketing and Advertising 24,629 36,633 85,657 120,640 Application Development Costs 259,836 185,350 853,719 628,508 Taxes and Insurance 93,385 17,214 208,442 49,225 Total Operating Expenses 1,896,592 1,133,106 6,025,121 4,605,779 Operating Income/(Loss) ( 1,187,220 ) 131,063 ( 3,288,537 ) ( 1,565,679 ) Other Income and Expense Gain on Sale — — 9,247,726 — Interest Expense ( 407 ) ( 209,991 ) ( 104,737 ) ( 551,123 ) Other Income/(Expense), net ( 1,287 ) ( 34,288 ) ( 69,979 ) ( 133,831 ) Total Other Income and Expenses ( 1,694 ) ( 244,279 ) 9,073,010 ( 684,954 ) Net Income (Loss) $ ( 1,188,914 ) $ ( 113,216 ) $ 5,784,473 $ ( 2,250,633 ) Earnings (Loss) per Share Basic $ ( 0.03 ) $ ( 0.00 ) $ 0.13 $ ( 0.05 ) Diluted $ ( 0.03 ) $ ( 0.00 ) $ 0.13 $ ( 0.05 ) Weighted Average Outstanding Shares Basic 43,485,560 42,707,808 43,385,493 42,658,697 Diluted 43,485,560 42,707,808 43,698,965 42,658,697 See accompanying notes to unaudited condensed consolidated

financial statements

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, 2024 43,145,720 $ 43,146 $ 9,182,140 $ ( 12,238,691 ) $ ( 3,013,405 ) Stock Based Compensation — — 747,686 — 747,686 Stock Options Exercised 343,525 343 40,907 — 41,250 Net Income — — — 5,784,473 5,784,473 Balances as of September 30, 2024 43,489,245 $ 43,489 $ 9,970,733 $ ( 6,454,218 ) $ 3,560,004 Common Shares Additional Accumulated Shares Amount Paid-in Capital Deficit Total Balances as of July 1, 2024 43,472,954 $ 43,473 $ 9,669,809 $ ( 5,265,304 ) $ 4,447,978 Stock Based Compensation — — 300,940 — 300,940 Stock Options Exercised 16,291 16 ( 16 ) — — Net Loss — — — ( 1,188,914 ) ( 1,188,914 ) Balances as of September 30, 2024 43,489,245 $ 43,489 $ 9,970,733 $ ( 6,454,218 ) $ 3,560,004 Common Shares Additional Accumulated Shares Amount Paid-in Capital Deficit Total Balances as of January 1, 2023 42,240,406 $ 42,240 $ 8,710,987 $ ( 8,297,864 ) $ 455,363 Stock Based Compensation — — 85,133 — 85,133 Stock Options Exercised 617,814 618 123,133 — 123,751 Net Loss — — — ( 2,250,633 ) ( 2,250,633 ) Balances as of September 30, 2023 42,858,220 $ 42,858 $ 8,919,253 $ ( 10,548,497 ) $ ( 1,586,386 ) Common Shares Additional Accumulated Shares Amount Paid-in Capital Deficit Total Balances as of July 1, 2023 42,670,720 $ 42,671 $ 9,075,626 $ ( 10,435,281 ) $ ( 1,316,984 ) Stock Based Compensation — — ( 197,436 ) — ( 197,436 ) Stock Options Exercised 187,500 187 41,063 — 41,250 Net Loss — — — ( 113,216 ) ( 113,216 ) Balances as of September 30, 2023 42,858,220 $ 42,858 $ 8,919,253 $ ( 10,548,497 ) $ ( 1,586,386 ) See accompanying notes to unaudited condensed consolidated

financial statements

financial statements. Common Shares Additional Paid-in Capital Accumulated Deficit 6 KonaTel, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2024 2023 Cash Flows from Operating Activities: Net Income (Loss) $ 5,784,473 $ ( 2,250,633 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and Amortization 7,348 9,264 Gain on Sale of IM Telecom (49%) ( 9,247,726 ) Loan Origination Cost Amortization 49,579 131,141 Bad Debt 1,448 214 Stock-based Compensation 747,686 85,133 Non-Compensatory Stock Options Exercised — 82,500 Change in Right of Use Asset 92,088 101,568 Change in Lease Liability ( 84,037 ) ( 87,930 ) Changes in Operating Assets and Liabilities: Accounts Receivable ( 364,977 ) 256,189 Inventory 869,709 ( 152,848 ) Prepaid Expenses ( 305,405 ) ( 7,448 ) Notes Receivable ( 1,000,000 ) — Accounts Payable and Accrued Expenses ( 533,995 ) 635,335 Net cash used in operating activities ( 3,983,809 ) ( 1,197,515 ) Cash Flows from Investing Activities Sale of IM Telecom (49%) 9,558,509 — Net cash provided by investing activities 9,558,509 — Cash Flows from Financing Activities Proceeds from Note Payable — 500,000 Repayments of Note Payable ( 3,704,750 ) — Loan Origination Costs — ( 77,250 ) Cash received from Stock Options Exercised 41,250 41,250 Net cash provided by (used in) financing activities ( 3,663,500 ) 464,000 Net Change in Cash 1,911,200 ( 733,515 ) Cash - Beginning of Year 777,103 2,055,634 Cash - End of Period $ 2,688,303 $ 1,322,119 Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 54,750 $ 167,900 Cash paid for taxes $ — $ — See accompanying notes to unaudited condensed consolidated

financial statements

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 the b

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