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Item 8. Financial Statements and Supplementary Data

2026-04-16 compared with 2025-04-15 · 702 added, 829 removed, 215 unchanged (88% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

KONATEL, INC.

FINANCIAL STATEMENTS

December 31, 2024, and 2023

31, 2025, and 2024

Report of Independent Registered Public Accounting Firm

4 unchanged sentences

Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of KonaTel, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of KonaTel, Inc.

KONATEL INC (the Company) as of December

31, 2024 and 2023 and the related consolidated statements of operations,

stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December

31, 2024 and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2024 and 2023 , and the results of its operations and its cash

flows for each of the years in the two-year period ended December 31, 2024 ,

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

of KonaTel, Inc.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of KonaTel, Inc.

(the Company) as of December 31, 2025 and 2024, and the related

consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period

ended December 31, 2025, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the

consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31,

2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025,

in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s

Ability to Continue as a Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 of the financial statements, the

Company has suffered recurring losses from operations and has an accumulated deficit of ($7,747,873).

The losses in conjunction with uncertainty

around of the success of management’s future plans, raise substantial doubt about its ability to continue as a going concern.

plans are described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and

the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Doubt about the Company’s Ability to Continue as a Going Concern

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 2 of the consolidated financial statements, the Company has suffered recurring losses from operations and has an accumulated

deficit of $10,084,143.

The losses in conjunction with uncertainty around the success of management’s future plans, raise substantial

doubt about its ability to continue as a going concern.

Management’s plans are described in Note 2.

The consolidated financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Stock Based Compensation

Description of the Matter:

As discussed in Note 11 to the consolidated

financial statements, the Company offers stock option awards that involve complex accounting estimates.

Management evaluates the stock

option awards in accordance with ASC Topic 718, “Compensation-Stock Compensation” and uses the Black Scholes Model to value

the stock option awards.

This model requires management to make assumptions, use judgment, and can be complex.

Additionally, we note the

company has repriced their options and these repricings require complex accounting calculations.

How We Addressed the Matter

We gained an understanding of management’s

processes and methodology to develop the estimates.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements

that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are

material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,

and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the

accounts or disclosures to which they relate.

of Stock Based Compensation & Related Forfeitures

of the Matter:

discussed in Note 11 to the consolidated financial statements, the Company offers stock option awards that involve complex accounting

Management evaluates the stock option awards and related forfeitures in accordance with ASC Topic 718, “Compensation-Stock

Compensation” and uses the Black Scholes Model to value the stock option awards and related forfeitures.

This model requires management

to make assumptions, use judgment, and can be complex.

We Addressed the Matter in Our Audit

gained an understanding of management’s processes and methodology to develop the estimates.

We reviewed the underlying option agreements.

We evaluated management’s selection

of a valuation method, tested the inputs used in the valuation method (Black-Scholes) calculation by agreeing terms of the underlying

agreements and market information to third-party sites, and recalculated the value of the options and related repricings.

We also evaluated

the adequacy of the disclosures related to these fair value measurements.

/s/ Haynie & Company

Haynie & Company

Salt Lake City, Utah

We have served as the Company’s auditor since

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KONATEL, INC.

CONSOLIDATED BALANCE SHEETS

To test both the value of options, we evaluated management’s selection of a valuation method, tested the inputs used in the valuation

method (Black-Scholes) calculation by agreeing terms of the underlying agreements and market information to third-party sites, and performed

recalculations.

In order to assess forfeitures, we reviewed the guidance in ASC 718, as well as the option agreements related to forfeiture

for the 3 employees to determine vesting periods.

We then ensured the Company was correctly reversing the unvested portion of the expense.

We also evaluated the adequacy of the disclosures related to these fair value measurements.

Lake City, Utah

have served as the Company’s auditor since 2019.

BALANCE SHEETS

December 31, 2025

3 unchanged sentences

Accounts Receivable, Net

Notes Receivable

Inventory, Net

5 unchanged sentences

Right of Use Asset

Notes Receivable

Total Other Assets

2 unchanged sentences

Accounts Payable and Accrued Expenses

Loans Payable, Net of Loan Fees

Right of Use Operating Lease Obligation - Current

Income Tax Payable

Total Current Liabilities

11 unchanged sentences

Total Stockholders’ Equity

( 3,013,405 )

Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of these

consolidated financial statements.

KONATEL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

accompanying notes are an integral part of these consolidated financial statements.

STATEMENTS OF OPERATIONS

2024 (Restated)

Years Ended December 31,

2024 (Restated)

Cost of Revenue

1 unchanged sentence

Payroll and Related Expenses

Stock Option Expense

Operating and Maintenance

11 unchanged sentences

Other Income and Expense

Sale of Interest in IM Telecom ( 49 %)

Interest Expense

Other Income/(Expense), net

Other Income, net

Total Other Income and Expenses

Income Before Income Taxes

( 2,647,053 )

Income Tax Expense

1 unchanged sentence

$ ( 2,647,053 )

Loss per Share

Earnings (Loss) per Share

Weighted Average Outstanding Shares

The accompanying notes are an integral part of these

consolidated financial statements.

KONATEL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

accompanying notes are an integral part of these consolidated financial statements.

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Paid-in Capital

For the Year Ending December 31, 2024 (Restated)

Common Shares

2 unchanged sentences

$ ( 12,238,691 )

$ ( 3,013,405 )

Exercised Stock Options

Stock Based Compensation

( 3,940,827 )

Balances as of December 31, 2024

$ ( 7,437,090 )

For the Year Ending December 31, 2025

Common Shares

Paid-in Capital

Balances as of December 31, 2024

3 unchanged sentences

Stock Based Compensation

( 2,647,053 )

Net Income (Loss)

( 2,647,053 )

Balances as of December 31, 2025

$ ( 10,084,143 )

The accompanying notes are an integral part of these

consolidated financial statements.

Common Shares

Additional Paid-in Capital

Accumulated Deficit

KONATEL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

$ ( 10,084,143 )

accompanying notes are an integral part of these consolidated financial statements.

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STATEMENTS OF CASH FLOWS

2024 (Restated)

For Years Ended December 31,

2024 (Restated)

Cash Flows from Operating Activities:

1 unchanged sentence

$ ( 2,647,053 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and Amortization

Gain on Sale of IM Telecom (49%)

Sale of IM Telecom ( 49 %)

( 9,558,509 )

1 unchanged sentence

Stock-based Compensation

Non-Compensatory Stock Options Exercised

Change in Right of Use Asset

2 unchanged sentences

Accounts Receivable

Prepaid Expenses

Prepaid Expenses and Other Asset

Accounts Payable and Accrued Expenses

1 unchanged sentence

Income Tax Payable

Net cash used in operating

Net cash used in operating activities

( 1,907,128 )

1 unchanged sentence

Cash Flows from Investing Activities

Sale of IM Telecom (49%)

Sale of Interest in IM Telecom ( 49 %)

Notes Receivable

2 unchanged sentences

Cash Flows from Financing Activities

Proceeds from Note Payable

Repayments of Note Payable

Repayments of amounts of Notes Payable

( 3,704,750 )

Loan Origination Costs

Cash received from Stock Options Exercised

2 unchanged sentences

Net Change in Cash

( 1,278,531 )

Cash - Beginning of Year

3 unchanged sentences

Cash paid for taxes

The accompanying notes are an integral part of these

consolidated financial statements.

KONATEL, INC.

Notes to Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of Company

KonaTel Nevada (as defined below) was organized under

the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D.

Sean McEwen, to conduct the business

of a full-service MVNO (“Mobile Virtual Network Operator”) provider that delivered cellular products and services to individual

and business customers in various retail and wholesale markets.

KonaTel Inc., formerly known as Dala Petroleum Corp.

(“KonaTel,” 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.

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”).

On December 18, 2017, we acquired

KonaTel, Inc, a Nevada sub S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel

Nevada became our wholly owned subsidiary.

On December 31, 2018, we acquired Apeiron Systems,

Inc., a Nevada corporation d/b/a “Apeiron” (“Apeiron Systems”), which is also our wholly owned subsidiary.

Systems was organized in 2013 and is an international hosted services CPaaS (“Communications Platform as a Service”) provider

that designed, built, owns and operates its private core network, supporting a suite of real-time business communications services and

Applications Programming Interfaces (“APIs”).

As an Internet Telephony Service Provider (“ITSP”), Apeiron Systems

holds a Federal Communications Commission (“FCC”) numbering authority license.

Some of Apeiron Systems’ hosted services

include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”)

and number services, including mobile, toll free and DID landline numbers, SMS to Email services, Database Dip services, SD-WAN, voice

termination, and numerous API driven services including voice, messaging and network management.

On January 31, 2019, we acquired IM Telecom, an Oklahoma

limited liability company, d/b/a Infiniti Mobile, (“IM Telecom” or “Infiniti Mobile”), which became our wholly

owned subsidiary.

Infiniti Mobile is an FCC licensed ETC (“Eligible Telecommunications Carrier”) and is one of approximately

nineteen (19) FCC licensed carriers to hold an FCC approved Lifeline Compliance Plan in the United States.

Under the Lifeline program,

Infiniti Mobile is currently authorized to provide government subsidized mobile telecommunications services to eligible low-income Americans

currently in forty (40) states with pending Study Area Codes (SACs) applications with the FCC in an additional eight (8) states.

On January 22, 2024 (the “Effective Date”),

KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement with Excess Telecom, Inc., a Nevada corporation (respectively,

“Excess Telecom” and the “Excess Telecom Membership Interest Purchase Agreement”).

Pursuant to the Membership

Interest Purchase Agreement, KonaTel agreed to sell a membership interest in IM Telecom (the “Membership Interest”) to Excess

Telecom, initially 49 % (the “Initial Closing”), with the remaining 51% (the “Final Closing”) subject to final

change of control approval by the “FCC.”

Additional agreements were also executed by the parties

at the Initial Closing Date of the Membership Interest Purchase Agreement, including a Management Service Agreement, a Master Distribution

Agreement and an Amended and Restated Operating Agreement (collectively, the “Transaction Documents”).

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.

accompanying notes are an integral part of these consolidated financial statements.

to Consolidated Financial Statements

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nevada (as defined below) was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder,

Sean McEwen, to conduct the business of a full-service MVNO (“Mobile Virtual Network Operator”) provider that delivered

cellular products and services to individual and business customers in various retail and wholesale markets.

Inc., formerly known as Dala Petroleum Corp.

(“KonaTel,” 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”).

On December 18, 2017, we acquired KonaTel, Inc, a Nevada sub S-Corporation (“KonaTel Nevada”),

in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly owned subsidiary.

December 31, 2018, we acquired Apeiron Systems, Inc., a Nevada corporation d/b/a “Apeiron” (“Apeiron Systems”),

which is also our wholly owned subsidiary.

Apeiron Systems was organized in 2013 and is an international hosted services CPaaS (“Communications

Platform as a Service”) provider that designed, built, owns and operates its private core network, supporting a suite of real-time

business communications services and Applications Programming Interfaces (“APIs”).

As an Internet Telephony Service Provider

(“ITSP”), Apeiron Systems holds a Federal Communications Commission (“FCC”) numbering authority license.

of Apeiron Systems’ hosted services include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language

Processing”), ML (“Machine Learning”) and number services, including mobile, toll free and DID landline numbers, SMS

to Email services, Database Dip services, SD-WAN, voice termination, and numerous API driven services including voice, messaging and

network management.

January 31, 2019, we acquired IM Telecom, an Oklahoma limited liability company, d/b/a Infiniti Mobile, (“IM Telecom” or

“Infiniti Mobile”), which became our wholly owned subsidiary.

Infiniti Mobile is an FCC licensed ETC (“Eligible Telecommunications

Carrier”) and is one of approximately nineteen (19) FCC licensed carriers to hold an FCC approved Lifeline Compliance Plan in the

United States.

Under the Lifeline program, Infiniti Mobile is currently authorized to provide government subsidized mobile telecommunications

services to eligible low-income Americans currently in forty (40) states with pending Study Area Codes (SACs) applications with the FCC

in an additional eight (8) states.

January 22, 2024 (the “Effective Date”), KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement with

Excess Telecom, Inc., a Nevada corporation (respectively, “Excess Telecom” and the “Excess Telecom Membership Interest

Purchase Agreement”).

Pursuant to the Membership Interest Purchase Agreement, KonaTel agreed to sell a membership interest in IM

Telecom (the “Membership Interest”) to Excess Telecom, initially 49 % (the “Initial Closing”), with the remaining

51 % (the “Final Closing”) subject to final change of control approval by the “FCC.”

agreements were also executed by the parties at the Initial Closing Date of the Membership Interest Purchase Agreement, including a Management

Service Agreement, a Master Distribution Agreement and an Amended and Restated Operating Agreement (collectively, the “Transaction

September 19, 2025, KonaTel and Excess Telecom executed a First Omnibus Amendment to Transaction Documents (the “First Omnibus

Agreement”) and a Third Amended and Restated Operating Agreement of IM Telecom (the “Amended Operating Agreement”).

The First Omnibus Amendment was executed to create IM Telecom as a standalone partnership entity owned 51 % by KonaTel and 49 % by Excess

For KonaTel’s part, this entity change included transferring certain employees previously working for IM Telecom on KonaTel’s

payroll to the new entity.

As agreed by KonaTel and Excess Telecom, effective October 1, 2025, all combined net income of IM Telecom

will be reported for federal income tax purposes as a partnership (Form 1065), 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.

of Presentation

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

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

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

The consolidated financial statements for the year

ended December 31, 2024, and 2023, include the Company and its three (3) owned corporate subsidiaries, KonaTel Nevada, Apeiron

Systems, and IM Telecom.

All significant intercompany transactions are eliminated.

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

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 $ 1,533,015 and

$ 1,496,799 as of December 31, 2024, and December 31, 2023, respectively.

reclassifications have been made to prior year amounts to conform with the current year presentation.

of Consolidation

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

and Cash Equivalents

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

Accounts Receivable

Company accounts for trade receivables based on amounts billed to customers.

Past due receivables are determined based on contractual

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.

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.

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

and 2023, management has determined that no

allowance for credit losses is necessary.

Inventory consists primarily of the cost of cellular

phones and tablets.

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.

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.

is determined by the first-in, first-out (“FIFO”) method.

As of December 31, 2025, total inventory owned by the Company was

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, 2024, and 2023, the allowance for

inventory obsolescence was $ 0 .

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.

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, 2024, and 2023.

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.

$ 272,229 , which includes POTS related equipment consigned to customer premise locations.

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.

and Equipment

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.

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.

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 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

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, 2024, and 2023, respectively.

Notes Receivable

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.

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.

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.

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

January 22, 2024, the Company accepted a $ 1,000,000 note receivable from Excess Telecom as part of the 49 % membership interest sale of

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.

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

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:

Observable inputs such as quoted prices (unadjusted) in

active markets for identical assets or liabilities.

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.

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

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.

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, 2024,

and December 31, 2023, our operating lease liabilities were $ 341,516 and $ 458,227 , respectively.

Revenue Recognition

Services revenues are generated from cellular and

telecommunication services.

As of December 31, 2025, there was $ 150,000 outstanding on this

note receivable.

Market Value of Assets

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.

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:

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

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.

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.

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

The standard also expands the disclosures regarding the amount, timing and uncertainty of cash flows arising from leases.

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.

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.

of Previously Issued Financial Statements

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

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.

correction resulted in an increase in the proceed on sale recognized of $ 310,783 and a corresponding increase in net assets of $ 310,783

There was no additional impact to prior periods.

STATEMENTS OF OPERATIONS

SCHEDULE OF CONSOLIDATED STATEMENTS OF OPERATIONS

Cost of Revenue

Operating Expenses

General and Administrative

Stock Option Expense

Application Development Costs

Total Operating Expenses

Operating (Loss)

( 4,539,071 )

Other Income and Expense

Sale of IM Telecom ( 49 %)

Interest Expense

Other Income, net

Total Other Income and Expenses

Income Before Income Taxes

Income Tax Expense

BALANCE SHEET

SCHEDULE OF CONSOLIDATED BALANCE SHEET

Current Assets

Cash and Cash Equivalents

Accounts Receivable, Net

Inventory, Net

Prepaid Expenses

Other Current Assets

Total Current Assets

Property and Equipment, Net

Intangible Assets, Net

Right of Use Asset

Notes Receivable

Total Other 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, $.001 par value

Additional Paid In Capital

Accumulated Deficit

( 7,747,873 )

( 7,437,090 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

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 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.

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

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.

Excess Telecom (Related Party) Revenue ( see

NOTE 14 below)

Pursuant to the Excess Telecom Membership

Interest Purchase Agreement and the related Master Distribution Agreement, Excess Telecom markets under the IM Telecom license, in

the same manner as other distribution partners.

Annual revenue generated from Excess Telecom and marketed under the IM Telecom

license was $ 108,328,000 for

Annual management expense, directly related to the Excess Telecom revenues, was $ 108,328,000 for

Excess Telecom revenues and expenses are recorded on IM Telecom’s books, but are not presented on our statements since

they are netted.

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.

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 includes the cost of communication

services, equipment and accessories, shipping costs, and agent compensation.

bills include an amount for the monthly recurring charge and a usage charge.

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.

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.

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.

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.

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

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 expense in the periods in which

they are incurred.

Advertising/marketing expense was $ 99,759 and $ 154,533 for 2024, and 2023, respectively.

The decrease in

advertising/marketing costs was a result of a small investment into marketing for Infiniti Mobile throughout our independent agent footprint.

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

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.

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

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.

dilutive common shares for the year ended December 31, 2023, are not included in the computation of diluted earnings per share

because to do so would be anti-dilutive.

As of December 31, 2023, there were potentially 641,155 dilutive shares.

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:

Summary of Significant Accounting Policies -Schedule of Earnings Per Share, Basic

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.

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

The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

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.

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.

changes in tax laws or rate are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

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.

Income (Loss) Per Share

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.

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

of common stockholders:

SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED

Years Ended December 31,

5 unchanged sentences

Net income per common share

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 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, 2024, the Company had a significant concentration of receivables

(defined as customers whose receivable balances are greater than 10% of total receivables) due from one (1) customer in the amount of

$ 1,055,337 or 68.5 %.

It should be noted that the largest customer is the state of California, as administered by the California

Public Utilities Commission (CPUC).

As of December 31, 2023, the Company had a significant concentration of receivables from two

(2) customers in the amounts of $ 1,024,308 or 68.5 % and $ 283,536 or 19.0 %.

Concentration of Major Customer

A significant amount of the revenue is derived from

contracts with major customers.

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.

For the year ended December 31, 2023, the Company had two (2) customers that

accounted for $ 10,492,430 or 57.6 % and $ 3,000,498 or 16.5 % 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.

should be noted that the largest customer is the federal government, as administered by USAC under the authority of the FCC, as part of

our participation in the federal Lifeline and ACP Program.

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 statement.

NOTE 2 – GOING

With no visible progress towards an extension of the

ACP Program, or the creation of a similar program, the Company may face further cost reduction measures, including additional reductions

in our workforce.

Although the Company eliminated its outstanding debt and increased its cash position earlier in 2024, the uncertainty

surrounding the ACP and Lifeline Programs or the creation of other similar support programs, the Company’s ability to remain a going

concern is dependent upon the success of IM Telecom’s ongoing health care initiative, Apeiron System’s SMS messaging, POTS

replacement and VIVA-US Telecommunications, Inc.

Concentrations

of Credit Risk

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

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

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

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.

of Recent Accounting Pronouncements

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.

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.

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.

2 – GOING CONCERN

with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, “the Annual Plan,” which was effective

on October 1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel.

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 under the 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, our focus is now on growing our Hosted Services, which enjoy substantially higher margins and substantially

lower customer churn characteristics.

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.

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.

continue to keep our $ 5 M line of credit facility open as well as actively pursuing additional credit facility options with the goal of

focusing our growth efforts on our hosted services sector.

The lack of our success in one or more 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.

mitigate any going concern risks, we continue to focus on our mobile services segment in California with the California Lifeline Program,

through its’ additional state funding and Linkup program.

We also shifted our focus to our ongoing health care sales initiative

as well as Apeiron System’s SMS messaging and POTS replacement initiatives.

If necessary, we will also consider additional reductions

in force, which will create more than a twelve (12) month net working capital in order to mitigate further risk.

NOTE 3 – 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 December 31, 2024, and December 31, 2023, the Company had

inventory of $ 163,063 and $ 1,229,770 , respectively.

NOTE 4 – SIGNIFICANT TRANSACTIONS

CCUR Loan and Payoff

In 2022, the Company and its wholly owned subsidiary

companies entered into a Note Purchase Agreement and related Guarantee and Security Agreement with CCUR Holdings, Inc.

(as “Collateral

Agent”), and Symbolic Logic, Inc., whereby the Company pledged its assets to secure $ 3,150,000 in debt financing (the “CCUR

The term was for a period of twelve ( 12 ) months, at an initial interest rate of 15 %, with two (2) successive six-month

optional extensions.

As a condition of securing the CCUR Loan, the Company paid a 3% origination fee, and other legal and closing expenses

to the lender in the amount of $ 153,284 , resulting in a net loan balance of $ 2,984,181 .

The loan costs of $ 153,284 and the net loan

balance of $ 2,984,181 were amortized over a 12-month period.

The Company incurred an additional $ 20,248 in legal expense related

to the closing, which amount was also amortized over a 12-month period.

Proceeds of the CCUR Loan were used to retire the $ 150,000 SBA

“EIDL” Loan and were used in an ongoing capacity to support the acceleration of our mobile services growth strategy.

In 2023, the Company exercised the first draw under

the First Amendment to the NPA of $ 500,000 .

As part of the First Amendment to NPA, the Company paid $ 15,000 to CCUR, which was equal

to 1.5% of the initial delayed draw, and the initial interest rate established in the NPA was increased by 3 %.

In 2024, as a result of the Excess Telecom

Membership Interest Purchase Agreement, the CCUR loan was paid off in the amount of $ 3,681,660 .

Line of Credit

In 2023, IM Telecom entered into a structured credit,

non-dilutive facility, with ACP Financing VII, LLC.

The facility was used for mobile device purchases in 2024 in support of our mobile

services group.

Approximately $ 1,500,000 was immediately available under the terms of the agreement.

Due to the expiration of the

ACP Program, all outstanding amounts due to ACP Finance were paid off in November, 2024.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following major classifications as

of December 31, 2024, and 2023:

and Equipment - Schedule of Property and Equipment

Company has several pending transactions such as a Master Sales Agreement with Lingo Communication to convert their imbedded base of

existing POTS lines to wireless technology and to sell new wireless solutions including primary 4G/5G and backup wireless internet products.

The transaction to sell the Tempo ETC license in the amount of $ 4.5 M, pending FCC approval.

Release of the remaining Excess Transaction

Escrow of $ 150,000 related to the sale of the IM Telecom ETC license is expected by the end of the second quarter of 2026.

addition to the copper-wire POTS replacement program, the Company continues to pursue the launch of the Viva USA MVNO opportunity.

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.

order to mitigate any going concern risks, the Company continues to implement broad reductions and improve efficiencies to extend and

utilize cash resources in the most efficient manner possible.

The aforementioned product applications and sales initiatives will require

capital to expand infrastructure as sales increase.

The growth of new products and the launch of the aforementioned business programs,

along with the ability to raise capital, will play a significant role in our ability to continue operations without additional cost reduction

If necessary, we will also consider additional reductions in force, which will create more than a twelve (12) month net working

capital in order to mitigate further risk.

3 – INVENTORY

consist primarily of wireless router equipment necessary for the conversion of analog phone lines (POTS) to digital phone lines.

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 December 31, 2025, and December 31,

2024, the Company had inventory of $ 272,229 and $ 163,063 , respectively.

4 – SIGNIFICANT TRANSACTIONS

Company had no significant transactions as of December 31, 2025.

As of December 31, 2024, as a result of the funds received from the

Excess Telecom Membership Interest Purchase Agreement in 2024, the CCUR Loan entered into in 2022 and the ACP Financing facility entered

into in 2023 were both paid in full.

5 – PROPERTY AND EQUIPMENT

and equipment consist of the following major classifications as of December 31, 2025, and 2024:

SCHEDULE OF PROPERTY AND EQUIPMENT

December 31, 2025

December 31, 2024

Lease Improvements Lease Improvements

Furniture and Fixtures Furniture and Fixtures

Lease Improvements

Furniture and Fixtures

Billing Software

Office Equipment

Property and equipment, gross

Accumulated Depreciation

Property and equipment, net

Depreciation expense amounted to $ 9,056 and

the years ended December 31, 2024, and 2023, respectively.

Depreciation expense is included as a component of operating expenses in the

accompanying statements of operations.

NOTE 6 – RIGHT-OF-USE ASSETS

Right-of-Use Assets consist of assets accounted for

under ASC 842.

The assets are recorded at present value using implied interest rates between 4.75 % and 7.50 %.

The Right-of-Use

Assets were $ 319,549 and $ 443,328 in 2024 and 2023, respectively.

The Company has right-of-use assets through leases

of properties under non-cancelable leases.

As of December 31, 2024, the Company had four (4) leased properties.

Of these four (4)

leases, two (2) leases expire in 2025;

expense amounted to $ 10,525 and $ 9,056 for the years ended December 31, 2025, and 2024, respectively.

Depreciation expense is included

as a component of operating expenses in the accompanying statements of operations.

6 – RIGHT-OF-USE ASSETS

Assets consist of assets accounted for under ASC 842.

The assets are recorded at present value using implied interest rates between 4.75 %

The Right-of-Use Assets were $ 217,432 and $ 319,549 in 2025 and 2024, respectively.

Company has right-of-use assets through leases of properties under non-cancelable leases.

As of December 31, 2025, the Company had four

(4) leased properties.

Of these four (4) leases, two (2) leases expired in 2025;

one (1) lease expires in 2026;

and one (1) lease expires in 2030 .

Lease payables as of December

31, 2024, was $ 341,516 .

Future lease liability payments under the terms of

these leases are as follows:

Assets - Schedule of Future Minimum Lease Payments for Operating Leases

and one (1) lease expires

Lease payables as of December 31, 2025, was $ 227,779 .

lease liability payments under the terms of these leases are as follows:

SCHEDULE OF FUTURE LEASE LIABILITY PAYMENTS

Less Interest

2 unchanged sentences

Long Term Maturities

The weighted average term of the right-to-use leases

is 55.6 months recorded with a weighted average discount of 7.08 %.

For the year ended December 31, 2024, total lease expense

was $ 164,308 .

NOTE 7 – INTANGIBLE ASSETS

Intangible Assets with definite useful life consist

of licenses, customer lists and software that were acquired through acquisitions:

Intangible Assets - Schedule of Acquired Finite-Lived Intangible Assets

weighted average term of the right-to-use leases is 54.1 months recorded with a weighted average discount of 7.40 %.

For the year ended

December 31, 2025, total lease expense was $ 129,056 .

7 – INTANGIBLE ASSETS (Restated)

Assets with definite useful life consist of licenses, customer lists and software that were acquired through acquisitions:

SCHEDULE OF INTANGIBLE ASSETS

Customer List

4 unchanged sentences

Intangible Assets net

Amortization expense amounted to $ 0 and $ 0 for

the years ended December 31, 2024, and 2023, respectively.

Amortization expense is included as a component of operating expenses in the

accompanying statements of operations.

With the exception of the license granted by the FCC, all intangible assets are fully amortized

as of December 31, 2022.

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 December 31, 2024 was $ 323,468 ,

and as of December 31, 2023, was $ 634,251 .

During the first quarter of 2024, the

Company entered into a Membership Interest Purchase Agreement with Excess Telecom to sell 49% of IM Telecom in consideration of the sum

of $10,000,000.

As a result of this transaction, we reduced the value of our ETC License by 49% in 2024 .

NOTE 8 – LINES OF CREDIT

The Company has no lines of credit as of December

NOTE 9 – CONTINGENCIES AND COMMITMENTS

From time to time, the Company may be subject to legal

proceedings and claims that arise in the ordinary course of business.

As of December 31, 2024, there are no such legal proceedings.

Contract Contingencies

has the customary 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.

The Membership Interest Purchase

Agreement with Excess Telecom includes the right to distribute Lifeline services under the IM Telecom license.

The completion of the sale

of IM Telecom is contingent upon approval of the sale by the FCC, as IM Telecom is the holder of a Lifeline license and is designated

as an Eligible Telecommunications Carrier (“ETC”) for purposes of marketing Lifeline services to low-income consumers.

Regulatory Determinations

The Company has no outstanding regulatory determinations

expense amounted to $ 0 and $ 0 for the years ended December 31, 2025, and 2024, respectively.

Amortization expense is included as a component

of operating expenses in the accompanying statements of operations.

With the exception of the license granted by the FCC, all intangible

assets are fully amortized as of December 31, 2022.

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

The fair market value of the license as of December 31, 2025, was $ 634,251 , and as of December 31, 2024, was $ 634,251 .

the first quarter of 2024, the Company entered into a Membership Interest Purchase Agreement with Excess Telecom to sell 49% of IM Telecom

in consideration of the sum of $10,000,000.

8 – LINES OF CREDIT

Company had no lines of credit as of December 31, 2025, and December 31, 2024, respectively.

9 – CONTINGENCIES AND COMMITMENTS

time to time, the Company may be subject to legal proceedings and claims that arise in the ordinary course of business.

As of December

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

The assessment was in the amount of $ 115,000 , including interest and penalties calculated on sales made inside and outside Pennsylvania.

31, 2025, and December 31, 2024, there are no such legal proceedings.

Contingencies

Company has the customary 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.

Membership Interest Purchase Agreement with Excess Telecom includes the right to distribute Lifeline services under the IM Telecom license.

The completion of the sale of IM Telecom is contingent upon approval of the sale by the FCC, as IM Telecom is the holder of a Lifeline

license and is designated as an Eligible Telecommunications Carrier (“ETC”) for purposes of marketing Lifeline services to

low-income consumers.

Determinations

Company had no outstanding regulatory determinations as of December 31, 2025, or December 31, 2024.

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 was in the amount of $ 115,000 , including interest

and penalties calculated on sales made inside and outside Pennsylvania.

The Company recorded the full amount of this assessment in 2022.

The Company appealed the assessment in August, 2021, and at the request

of the state, provided additional information to support its appeal.

The Company’s position is that Pennsylvania has no sales tax

authority to levy and collect sales tax on sales made outside of Pennsylvania.

The Company appealed the assessment in August 2021, and at the request of the state, provided additional information to support its appeal.

The Company’s position is that Pennsylvania has no sales tax authority to levy and collect sales tax on sales made outside of Pennsylvania.

The State of Pennsylvania rejected an appeal by the Company.

On November 6, 2023, the Company agreed to a payment plan with the State of Pennsylvania.

The Company will pay $ 5,500 per month,

over a twenty-four (24) month period, which commenced in December, 2023.

As of December 31, 2024, the Company has paid $ 71,500 .

Letters of Credit

The Company had no outstanding letters of credit as

of December 31, 2024.

N OTE 10 – SEGMENT REPORTING

In November 2023, the Financial Accounting

Standards Board (FASB) issued ASU No.

On November 6, 2023, the Company agreed to a payment plan with the State

of Pennsylvania.

The Company will pay $ 5,500 per month, over a twenty-four (24) month period, which commenced in December 2023.

December 31, 2025, the Company has completed the payment plan agreement.

Company had no outstanding letters of credit as of December 31, 2025, or December 31, 2024.

10 – SEGMENT REPORTING

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).

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 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.

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 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.

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 reportable segments:

Hosted Serves and Mobile Services.

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 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 ( 2 ) reportable segments.

The Company’s management evaluates performance and allocates resources based on the profit or loss from operations.

Company is a recurring revenue service business with very few physical assets, management does not use total assets by segment to make

decisions regarding operations, and therefore, the total assets disclosure by segment has not been included.

The reportable segments consist of Hosted Services

and Mobile Services.

Mobile Services reporting will now consist of our post-paid and pre-paid cellular business.

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 our subsidiaries

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

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.

Company operates within two ( 2 ) reportable segments.

The Company’s management evaluates performance and allocates resources based

on the profit or loss from operations.

Because the Company is a recurring revenue service business with very few physical assets, management

does not use total assets by segment to make decisions regarding operations, and therefore, the total assets disclosure by segment has

not been included.

reportable segments consist of Hosted Services and Mobile Services.

Mobile Services reporting will now consist of our post-paid and pre-paid

cellular business.

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.

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

These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent

sales agents and ISOs.

Services – Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services

through our subsidiaries 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

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 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.

The following table reflects the result of operations of the Company’s

reportable segments:

Reporting - Reconciliation of Revenues to Segment Contribution

For the year ended December 31, 2024

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 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.

following table reflects the result of operations of the Company’s reportable segments:

SCHEDULE OF REPORTABLE SEGMENTS

the year ended December 31, 2025

Hosted Services

2 unchanged sentences

Segment Total

Operating Segments

Administration support

( 1,795,070 )

Parent administration

support Parent Administration Support

Sale of subsidiary ( 49 %)

Total Corporate

( 1,795,070 )

Gain on sale of subsidiary

Total Corporate Total

KonaTel, Inc.

For the year ended December 31, 2023

$ ( 2,647,053 )

the year ended December 31, 2024 (Restated)

Hosted Services

3 unchanged sentences

( 1,378,473 )

Parent administration support

Administration support

( 3,378,435 )

Gain on sale of subsidiary

Sale of subsidiary ( 49 %)

Total Corporate

( 2,753,508 )

KonaTel, Inc.

$ ( 3,940,827 )

*Operating Expenses includes Cost of Revenue, Operating

Expenses, Other Income/Expense and Income Tax Expense.

NOTE 11 – STOCKHOLDERS’ EQUITY

Non-Compensatory Stock Options

Sole Shareholder

December 18, 2017, the Company completed an Agreement and Plan of Merger whereby a newly formed wholly owned subsidiary merged with

and into KonaTel Nevada, and under which KonaTel Nevada was the surviving corporation and became a wholly owned subsidiary of the

McEwen was the sole shareholder of KonaTel Nevada and received merger consideration of 13,500,000 shares

of the Company’s common stock and 1,500,000 non-compensatory

options to acquire shares of the Company’s Common Stock under the merger, at an exercise price of $ 0.22 per

share, vesting quarterly, from March 18, 2018, to December 18, 2019.

See NOTE 11 below.

Chief Executive Officer

Sean McEwen, the Chairman and CEO of the

Company, exercised 375,000 equity stock options for 375,000 shares of common stock at a price of $ 0.22 per share.

On September 17, 2024, the Company’s Board of Directors adopted resolutions to extend Mr.

McEwen’s expiration dates on his

* Operating Expenses

includes Cost of Revenue, Operating Expenses, Other Income/Expense and Income Tax Expense.

11 – STOCKHOLDERS’ EQUITY

Non-Compensatory

Stock Options

December 18, 2017, the Company completed an Agreement and Plan of Merger whereby a newly formed wholly owned subsidiary merged with and

into KonaTel Nevada, and under which KonaTel Nevada was the surviving corporation and became a wholly owned subsidiary of the Company.

McEwen was the sole shareholder of KonaTel Nevada and received merger consideration of 13,500,000 shares of the Company’s common

stock and 1,500,000 non-compensatory options to acquire shares of the Company’s Common Stock under the merger, at an exercise price

of $ 0.22 per share, vesting quarterly, from March 18, 2018, to December 18, 2019.

September 17, 2024, the Company’s Board of Directors adopted resolutions to extend D, Sean McEwen’s expiration dates on his

last two (2) 187,500 share option tranches by one (1) year, or to respectively expire at midnight on September 17, 2025, and December

Stock Compensation

The Company offers incentive stock option equity awards

to directors and key employees.

Options vest in tranches and typically expire in five (5) years.

During the year ended December 31, 2024,

and 2023, the Company recorded options expense of $ 992,735 and $ 257,557 , respectively.

The option expense not taken as of December

31, 2024, is $ 2,565,244 , with a weighted average term of 3.30 years.

In 2024, 100,000 share

incentive stock options were granted to one (1) employee.

During the year ended December 31, 2024, 75,000

shares were exercised by one (1) independent member of the Board of Directors.

Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $ 0.18

on December 31, 2024.

The estimated grant date fair value of stock option

grants was calculated using the Black-Scholes-Merton option-pricing model using the following assumptions:

Stockholders’ Equity - Schedule of Fair Value of Stock Options Valuation Assumptions

On September 17, 2025, Mr.

McEwen exercised these last two tranches of stock options.

Company offers incentive stock option equity awards to directors and key employees.

Options vest in tranches and typically expire in

five (5) years.

During the year ended December 31, 2025, and 2024, the Company recorded options expense of $ 126,578 and $ 992,735 , respectively.

The option expense not taken as of December 31, 2025, is $ 2,087,605 , with a weighted average term of 2.06 years.

Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $ 0.30 on December 31, 2025.

estimated grant date fair value of stock option grants was calculated using the Black-Scholes-Merton option-pricing model using the following

SCHEDULE OF ESTIMATED GRANT DATE FAIR VALUE OF STOCK OPTION GRANTS

Weighted average volatility

2 unchanged sentences

Expected dividend yield

The following table represents incentive stock option activity

as of and for the year ended December 31, 2024:

Stockholders’ Equity - Schedule of

Share-Based Compensation, Stock Option Activity

SCHEDULE OF STOCK OPTION ACTIVITY

following table represents incentive stock option activity as of and for the year ended December 31, 2025:

Weighted Average

6 unchanged sentences

Exercisable and Vested, December 31, 2025

The following table represents stock option activity

as of and for the year ended December 31, 2023:

following table represents stock option activity as of and for the year ended December 31, 2024:

Weighted Average

9 unchanged sentences

December 31, 2024

In 2023, 3,245,000 share

incentive stock options were granted to two (2) independent members of the Board of Directors and twelve (12) employees.

independent Board member was granted 25,000 shares in the first and second quarter of 2023, for a total of 50,000 shares each.

(3) key employees were granted a total of 2,050,000 share options.

An independent member of the Board of Directors was granted 750,000

share options, and a total of 345,000 share options were granted among nine (9) employees.

2024, 100,000 share incentive stock options were granted to one (1) employee of the Company.

During the year ended December 31, 2024,

shares were exercised by two (2) independent members of the Board of Directors.

During the year ended 2023, 700,000 partially vested

share options were forfeited by two (2) key employees of the Company.

The Aggregate Intrinsic Value is based on the market value of the

Company’s common stock of $0.89 on December 31, 2023.

NOTE 12 – INCOME TAX

The Company provides for income taxes using an asset

and liability-based approach.

Deferred income tax assets and liabilities are recorded to reflect the future tax consequences of temporary

differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts

in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

and Jobs Act was enacted on December 22, 2017, which reduced the U.S.

corporate statutory tax rate from 35% to 21%.

The Company changed

its effective federal rate to 21% as the expected rate for our deferred tax items.

The significant components of net deferred tax

assets (liabilities) were as follows at December 31, 2024, and 2023:

Income Tax - Schedule of Deferred Tax Assets

and Liabilities

375,000 shares were exercised by D.

Sean McEwen, CEO, and 75,000 shares were exercised by one (1) independent member of the Board of

During the year ended 2025, no incentive stock options were granted.

During the year ended December 31, 2025, 375,000 shares

were exercised by D.

Sean McEwen, CEO, and 125,000 shares were exercised by two (2) independent members of the Board of Directors.

shares were exercised by one (1) former independent member of the Board of Directors.

During the year ended 2025, 1,605,000 partially

vested share options were forfeited by three (3) key employees of the Company.

The Aggregate Intrinsic Value is based on the market value

of the Company’s common stock of $ 0.30 on December 31, 2025.

12 – INCOME TAX

Company provides for income taxes using an asset and liability-based approach.

Deferred income tax assets and liabilities are recorded

to reflect the future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities

that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which

the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax assets

to the amount expected to be realized.

The Tax Cuts and Jobs Act was enacted on December 22, 2017, which reduced the U.S.

corporate statutory

tax rate from 35 % to 21 %.

The Company changed its effective federal rate to 21 % as the expected rate for our deferred tax items.

significant components of net deferred tax assets (liabilities) were as follows at December 31, 2025, and 2024:

SCHEDULE OF COMPONENTS OF NET DEFERRED TAX ASSETS LIABILITIES

Net operating losses

4 unchanged sentences

Net Deferred Tax Asset

As of December 31, 2024, the Company had no unrecognized tax benefits that,

if recognized, would affect the Company’s effective income tax rate over the next twelve (12) months.

A reconciliation of the expected

income tax benefit at the U.S.

Federal income tax rate to the income tax benefit actually recognized for the years ended December 31,

2024, and 2023 is set forth below:

For the Year Ended

of December 31, 2025, the Company had no unrecognized tax benefits that, if recognized, would affect the Company’s effective income

tax rate over the next twelve (12) months.

A reconciliation of the expected income tax benefit at the U.S.

Federal income tax rate to

the income tax benefit actually recognized for the years ended December 31, 2025, and 2024 is set forth below:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSES

For the Year Ended December 31,

Tax at statutory federal rate

$ ( 277,274 )

Non-deductible expenses and other

Change in valuation allowance

Changes in valuation allowance

Non-deductible expenses

Benefit from income taxes

As of December 31, 2024, the Company has a net operating

loss carry-forward for U.S.

to the pretax loss, certain reconciling items as a percentage of pretax income are not meaningful and may not be comparable to prior

of December 31, 2025, the Company has a net operating loss carry-forward for U.S.

federal income tax purposes of approximately ($ 6,287,398 ),

will expire in 2044.

which will expire in 2044.

This carryforward is available to offset future taxable income, if any, and will expire, if not used, from

2037 through 2042.

The utilization of the net operating loss carry-forward is dependent upon the tax laws in effect at the time the net operating

loss carry-forward can be utilized and may be limited by changes in ownership control of the Company.

The utilization of the net operating loss carry-forward is dependent upon the tax laws in effect at the time the net

operating loss carry-forward can be utilized and may be limited by changes in ownership control of the Company.

The Company’s U.S.

tax return, constituting the return of the major taxing jurisdictions, are subject to examination by the taxing authorities for all open

years as prescribed by applicable statute.

No income tax waivers have been executed that would extend the period subject to examination

beyond the period prescribed by statute.

federal tax return, constituting the return of the major taxing jurisdictions, are subject to examination by the taxing authorities for

all open years as prescribed by applicable statute.

No income tax waivers have been executed that would extend the period subject to

examination beyond the period prescribed by statute.

The Company is no longer subject to U.S.

federal tax examinations for tax years before and including

December 31, 2019.

federal tax examinations for tax years

before and including December 31, 2020.

During the years ended December 31, 2025, and 2024, the Company did not incur interest and penalties.

13 – REDUCTION IN FORCE:

KEY EMPLOYEES

Upon shutdown of the Affordable Connectivity

Program, the Company decided to reduce operational costs to pair the spend with its ongoing revenues.

As such, a reduction in force

was executed that contained several key individuals.

Multiple replacement revenue initiatives have been ongoing for some time and

continue to mature.

In an effort to support specific initiatives (Healthcare vertical and Viva-US), KonaTel created consulting arrangements

to keep key employees (Jason N.

Todd Murcer) to maintain their expertise in the business with the intent to rehire the same

key individuals upon successful launch of the growth initiatives.

Welch and Murcer have been very active since the reduction

in force to keep sales and operational items in place while the new programs launch.

Additionally, and to provide headroom

for these growth initiatives, KonaTel extended the exercise option deadline in each independent

stock option plan by one hundred eighty (180) days.

This took place in a Board resolution on February 1, 2025.

This extension

is also discussed below in Note 14 as a subsequent event.

13 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through

the date of this filing, and except for the following, no material subsequent events have occurred:

Amendments and/or Restatements to the Excess

Telecom Membership Interest Purchase Agreement

On January 22, 2024 (the “Effective Date”),

KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement with Excess Telecom.

Pursuant to the Membership Interest

Purchase Agreement, KonaTel agreed to sell a membership interest in IM Telecom to Excess Telecom, 49 % at the Initial Closing, with the

remaining 51% at the Final Closing, subject to the final change of control approval by the FCC.

Additional Transaction Documents were also executed

by the parties at the Initial Closing Date of the Membership Interest Purchase Agreement, including a Management Service Agreement, a

Master Distribution Agreement and an Amended and Restated Operating Agreement.

On March 4, 2025, certain of the initial Transaction Documents

with Excess Telecom were restated by signature;

these restatements became effective as of the date or dates set forth at the beginning

of each of the referenced Transaction Documents and copies of which accompany our 8-KA Current Report dated January 22, 2024, filed with

the SEC on March 10, 2025.

IM Telecom and Excess Telecom

have been working together to establish best practices in compliance and building an expanded ETC footprint in the United States.

to our approved Federal Compliance Plan, IM Telecom has increased its state-authorized ETC approvals and is now approved in forty (40)

Although these state approvals are complete, IM

Telecom is currently awaiting FCC delivery of Study Area Codes (“SACs”)

to begin operating in eight (8) additional states.

In furtherance of this process, certain of the initial Transaction Documents have been

restated by signature dated March 4, 2025, but effective of the date or dates set forth at the beginning of each of the referenced Transaction

The primary purpose for amending the original Management

Services Agreement (the “MSA”) is to further specify items that concur with the intent to operate IM Telecom in compliance

with FCC regulations and to ensure continuity of our working relationship with Excess Telecom during the process of FCC approval.

Telecom and Excess Telecom have been working collaboratively while awaiting FCC change of control approval.

We remain committed to compliance

in all areas of our business.

The Amended and Restated Management Services Agreement has been updated to include several items.

items include specific termination language, cure period language and the establishment of a sunset term in the event of an MSA termination.

A was added to specify compensation for services rendered under the original MSA.

As written in Section 2(vii), the Company shall have

final authority and responsibility on all regulatory, legality and compliance issues, including initial enrollment standards, customer

transfers and submission of claims for federal or state reimbursements from USAC or any other governmental body or the administrator

for such governmental bodies;

provided, that all such activities shall be undertaken in a commercially prudent manner and the Manager

shall not take any actions that would cause the Compliance Plan, ETC Designations or ACP approval to be terminated, suspended or otherwise

“USAC” stands for the Universal Service Administration Company, which is a not-for profit corporation that manages

the FCC’s Universal Service Fund (respectively, “USAC” and “USF”).

The parties formalized their working relationship

by adding a Master Distribution Agreement, wherein Excess Telecom has been and continues to be a master distributor of IM Telecom until

final change of control approval from the FCC and the final closing of the Transaction Documents is completed.

The original Membership

Interest Purchase Agreement predetermines a Master Distribution Agreement (“MDA”) whereby KonaTel, DBA Infiniti Mobile, becomes

the non-exclusive master distributor under IM Telecom upon FCC final change of control approval and the final closing of the Membership

Interest Purchase Agreement.

Each MDA identifies the duties for each party under the MDA to act in a legal, professional and ethical

manner and in compliance with all applicable laws, rules, regulations and orders.

Only minor and non-material modifications were made

to the existing IM Telecom Amended and Restated Operating Agreement to align with our ongoing business practices used since the inception

of the execution of the Transaction Documents.

For additional information

on the initial and amended Transaction Documents, see our 8-K Current Report of dated January 22, 2024, and filed with the SEC on January

30, 2024, and our 8-KA Current Report dated January 22, 2024, filed with the SEC on March 10, 2025, which are Hyperlinked in in Section

9 – Financial Statements and Exhibits, Item 9.01, Part IV, Item 15, below, and are incorporated herein by reference.

Extension of Incentive Stock Options to Key Employees

The Board of Directors adopted a resolution to extend

the option deadline for certain key employees (under their Employment Agreements) who were given notice of termination as a result of

the official termination of the ACP Program.

These employees, given the return of certain growth initiatives for the Company, would be

available to return to further our business.

Post-employment afforded a ninety (90) day exercise period of vested options, whereby this

extension, given their possible return to the Company, extended the exercise period by one hundred

eighty (180) days.

Beaty Stock Option Exercise

Subsequent Events

On February 11, 2025, Robert Beaty, an independent

Board member, conveyed to the Company 13,934 shares of the Company’s common stock at a price of $ 0.30 per share, in an

exempt transaction pursuant to Section 16b-3(c), and in full payment of the exercise of 25,000 incentive stock options granted

to him in 2019 at a price of $ 0.1672 per share, which was 110% of the fair market value of our common stock on the date of such grant.

Pearl Stock Option Exercise

27, 2025, Jeffrey Pearl, an independent Board member, conveyed to the Company 13,307 shares of the Company’s common stock

at a price of $ 0.31 per share, in an exempt transaction pursuant to Section 16b-3(c), and in full payment of the exercise of 25,000 incentive

stock options granted to him in 2019 at a price of $ 0.165 per share, which was 110% of the fair market value of our common stock

on the date of such grant.

Care Initiative and VIVA-Contract

health care initiative experienced an initial launch in March, 2025 and Advice Letter Number 20 is pending before the California Public

Utilities Commission authorizing an expanded launch to all current Medicaid recipients within the state.

The program launch timing for

our VIVA-US Telecommunications, Inc.

(“VIVA-US”) sales initiative has now been tentatively set for June 2025.

Received on Note Receivable

On March 11, 2025, the Company received a

payment of $ 150,000

on the note receivable ($1,000,000) due from Excess Telecom that is referenced under “Notes Receivable” in

NOTE 1 above.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

During our two

(2) most recent fiscal years, no independent accountant who was previously engaged as the principal accountant to audit our financial

Company has evaluated subsequent events through the date of this filing, and except for the following, no material subsequent events

have occurred:

of IM Telecom’s Atmore Alabama Call Center

January 1, 2026, IM Telecom provided notice to the landlord of its Atmore, Alabama, Call Center that it would be vacating the premises

effective January 31, 2026.

Seven (7) full-time employees employed at this facility were terminated as part of this closure.

Stock Option Expiration

April 1, 2026, 150,000 incentive stock options granted and vested to employee Jonathan So expired without being exercised.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

our two (2) most recent fiscal years, no independent accountant who was previously engaged as the principal accountant to audit our financial

statements, or an independent accountant who was previously engaged to audit a significant subsidiary and on whom the principal accountant

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data