KonaTel, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 001-10171 KonaTel, Inc. (Exact name of the issuer as specified in its charter) Delaware 80-0973608 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer I.D. No.) 500 N. Central Expressway , Ste. 500 Plano , Texas 75074 (Address of Principal Executive Offices) 214 - 323-8410 (Registrant’s Telephone Number) The Registrant does not have any securities registered pursuant to Section 12(b) of the Exchange Act. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging Growth company ☐ If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Our website is www.konatel.com . Our common stock is quoted on the OTC Markets Group, LLC (the “OTC Markets”) in its “OTCQB Tier” under the symbol “KTEL.” APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date. The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date: Common Capital Voting Stock, $ 0.001 par value per share 43,979,064 shares Class Outstanding as of August 14, 2026 References In this Quarterly Report, references to “KonaTel, Inc.,” “KonaTel,” the “Company,” “we,” “our,” “us” and words of similar import, refer to KonaTel, Inc., a Delaware corporation, formerly named “Dala Petroleum Corp.,” which is the Registrant; and our wholly owned subsidiaries, KonaTel, Inc., a Nevada corporation (“KonaTel Nevada”), and Apeiron Systems, Inc., a Nevada corporation doing business as “Apeiron” (“Apeiron Systems”); and IM Telecom, LLC, an Oklahoma limited liability company doing business as “Infiniti Mobile” (“IM Telecom” or “Infiniti Mobile”), of which we own 51%. Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate, and therefore, prospective investors are encouraged not to place undue reliance on forward-looking statements. You should carefully read this Quarterly Report completely, and it should be read and considered with all other reports filed by us with the United States Securities and Exchange Commission (the “SEC”) that are contained in the SEC Edgar Archives, including the “Risk Factors” enumerated in “Part I, Item IA. Risk Factors” of our 10-K Annual Report for the year ended December 31, 2025 (the “2025 10-K”), filed with the SEC on April 16, 2026, which Risk Factors commence on page ten (10) thereof. A copy of the 2025 10-K is attached hereto by Hyperlink in Part II-Other Information, in Item 6, Exhibits, hereof, and is incorporated herein by reference. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future. Documents Incorporated by Reference See Part II-Other Information, in Item 6, Exhibits, hereof. 2 KONATEL, INC. FORM 10-Q June 30, 2026 INDEX Page No. PART I – FINANCIAL INFORMATION Item 1. Financial Statements 4 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 Item 4. Controls and Procedures 21 PART II – OTHER INFORMATION Item 1. Legal Proceedings 22 Item 1A. Risk Factors 22 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Mine Safety Disclosures 22 Item 5. Other Information 22 Item 6. Exhibits 22 SIGNATURES 23 3 PART I - FINANCIAL STATEMENTS Item 1. Financial Statements. June 30, 2026 Table of Contents Condensed Consolidated Balance Sheets as of June 30, 2026 (unaudited), and December 31, 2025 5 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026, and 2025 (unaudited) 6 Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2026, and 2025 (unaudited) (Restated) 7 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026, and 2025 (unaudited) 8 Notes to Condensed Consolidated Financial Statements (unaudited) 9 4 KonaTel, Inc. Condensed Consolidated Balance Sheets (Unaudited) June 30, 2026 December 31, 2025 Assets Current Assets Cash and Cash Equivalents $ 200,013 $ 704,867 Accounts Receivable, Net 167,094 284,167 Inventory, Net 217,227 187,339 Prepaid Expenses 79,055 109,442 Other Current Assets 15,063 15,063 Total Current Assets 678,452 1,300,878 Property and Equipment, Net 95,663 89,343 Other Assets Intangible Assets, Net 634,251 634,251 Right of Use Asset 190,698 217,432 Notes Receivable 150,000 150,000 Other Assets 70,086 72,375 Total Other Assets 1,045,035 1,074,058 Total Assets $ 1,819,150 $ 2,464,279 Liabilities and Stockholders’ Equity Current Liabilities Accounts Payable and Accrued Expenses $ 1,661,819 $ 1,668,244 Right of Use Operating Lease Obligation - Current 40,680 51,736 Income Tax Payable 184,051 184,051 Total Current Liabilities 1,886,550 1,904,031 Long Term Liabilities Right of Use Operating Lease Obligation - Long Term 155,320 176,043 Total Long-Term Liabilities 155,320 176,043 Total Liabilities 2,041,870 2,080,074 Commitments and Contingencies - - Stockholders’ Equity Common stock, $ .001 par value, 50,000,000 shares authorized 43,979,064 outstanding and issued at June 30, 2026 and 43,979,064 outstanding and issued at December 31, 2025 43,979 43,979 Additional Paid In Capital 10,299,377 10,424,369 Accumulated Deficit ( 10,566,076 ) ( 10,084,143 ) Total Stockholders’ Equity ( 222,720 ) 384,205 Total Liabilities and Stockholders’ Equity $ 1,819,150 $ 2,464,279 See accompanying notes to unaudited condensed consolidated financial statements. 5 KonaTel, Inc. Condensed Consolidated Statements of Operations (Unaudited) 2026 2025 2026 2025 Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 Revenue $ 1,869,848 $ 2,158,656 $ 3,774,910 $ 4,327,370 Cost of Revenue 1,376,954 1,608,416 2,476,412 3,125,237 Gross Profit 492,894 550,240 1,298,498 1,202,133 Operating Expenses Payroll and Related Expenses 340,482 1,081,633 1,073,809 2,192,333 Operating and Maintenance 22,650 2,069 45,423 3,489 Credit Loss 9,838 13,910 29,342 13,910 Professional and Other Expenses 106,113 325,750 190,055 483,181 Utilities and Facilities 1,018 48,528 11,094 94,939 Depreciation and Amortization 11,076 782 19,596 1,565 General and Administrative 44,109 64,975 84,484 114,962 Marketing and Advertising 111 5,396 2,502 10,482 Application Development Costs 81,744 172,967 197,572 351,493 Taxes and Insurance 26,960 32,788 77,042 63,981 Total Operating Expenses 644,101 1,748,798 1,730,919 3,330,335 Operating Income/(Loss) ( 151,207 ) ( 1,198,558 ) ( 432,421 ) ( 2,128,202 ) Other Income and Expense Gain (Loss) on Sale ( 32,131 ) - ( 31,981 ) - Interest Expense ( 17,195 ) - ( 21,361 ) ( 577 ) Other Income/(Expense), net 1,190 10,917 3,830 23,610 Total Other Income and Expenses ( 48,136 ) 10,917 ( 49,512 ) 23,033 Income Before Income Taxes ( 199,343 ) ( 1,187,641 ) ( 481,933 ) ( 2,105,169 ) Income Tax Expense (Benefit) - - - - Net Income (Loss) $ ( 199,343 ) $ ( 1,187,641 ) $ ( 481,933 ) $ ( 2,105,169 ) Earnings (Loss) per Share Basic $ ( 0.00 ) $ ( 0.03 ) $ ( 0.01 ) $ ( 0.05 ) Diluted $ ( 0.00 ) $ ( 0.03 ) $ ( 0.01 ) $ ( 0.05 ) Weighted Average Outstanding Shares Basic 43,979,064 43,412,602 43,979,064 43,301,670 Diluted 43,979,064 43,412,602 43,979,064 43,301,670 See accompanying notes to unaudited condensed consolidated financial statements. 6 KonaTel, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the periods ended June 30, 2026, and June 30, 2025 (Restated) (Unaudited) Shares Amount Capital Deficit Total Common Shares Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balances as of January 1, 2026 43,979,064 $ 43,979 $ 10,424,369 $ ( 10,084,143 ) $ 384,205 Exercised Stock Options - - - - - Stock Based Compensation - - ( 124,992 ) - ( 124,992 ) Net Loss - - - ( 481,933 ) ( 481,933 ) Balances as of June 30, 2026 43,979,064 $ 43,979 $ 10,299,377 $ ( 10,566,076 ) $ ( 222,720 ) Common Shares Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balances as of April 1, 2026 43,979,064 $ 43,979 $ 10,518,974 $ ( 10,366,733 ) $ 196,220 Exercised Stock Options - - - - - Stock Based Compensation - - ( 219,597 ) - ( 219,597 ) Net Income - - - ( 199,343 ) ( 199,343 ) Balances as of June 30, 2026 43,979,064 $ 43,979 $ 10,299,377 $ ( 10,566,076 ) $ ( 222,720 ) Common Shares Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balances as of January 1, 2025 43,503,658 $ 43,504 $ 10,215,766 $ ( 7,747,873 ) $ 2,511,398 Exercised Stock Options 37,482 37 ( 37 ) - - Stock Based Compensation - - 484,014 - 484,014 Net Loss - - - ( 2,105,169 ) ( 2,105,169 ) Balances as of June 30, 2025 43,541,140 $ 43,541 $ 10,699,743 $ ( 9,853,042 ) $ 890,242 Common Shares Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balances as of April 1, 2025 43,526,417 $ 43,527 $ 10,455,081 $ ( 8,665,401 ) $ 1,833,207 Exercised Stock Options 14,723 14 ( 14 ) - - Stock Based Compensation - - 244,677 - 244,677 Net Income - - - ( 1,187,641 ) ( 1,187,641 ) Balances as of June 30, 2025 43,541,140 $ 43,541 $ 10,699,743 $ ( 9,853,042 ) $ 890,242 See accompanying notes to unaudited condensed consolidated financial statements. 7 KonaTel, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) 2026 2025 Six Months Ended June 30, 2026 2025 Cash Flows from Operating Activities: Net Loss $ ( 481,933 ) $ ( 2,105,169 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and Amortization 19,596 1,565 Credit Loss 29,342 13,910 Stock-based Compensation ( 124,992 ) 484,014 Change in Right of Use Asset 26,734 62,050 Change in Lease Liability ( 31,780 ) ( 67,059 ) Changes in Operating Assets and Liabilities: Accounts Receivable 87,730 1,009,534 Inventory and Consigned Equipment ( 55,653 ) 44,821 Prepaid Expenses and Other Assets 32,676 ( 179,672 ) Accounts Payable and Accrued Expenses ( 6,425 ) 398,007 Net cash used in operating activities ( 504,705 ) ( 337,999 ) Cash Flows from Investing Activities Sale of Office Equipment ( 149 ) - Notes Receivable - 150,000 Net cash provided by (used in) investing activities ( 149 ) 150,000 Cash Flows from Financing Activities Net cash provided by (used in) financing activities - - Net Change in Cash ( 504,854 ) ( 187,999 ) Cash - Beginning of Year 704,867 1,679,345 Cash - End of Period $ 200,013 $ 1,491,346 Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 3 $ - Cash paid for taxes $ 970 $ - See accompanying notes to unaudited condensed consolidated financial statements. 8 KonaTel, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview of Company KonaTel Inc., a Delaware corporation, formerly known as Dala Petroleum Corp. (the “Company,” “we,” “our,” or “us”), also formerly known as “Westcott Products Corporation,” was incorporated as “Light Tech, Inc.” under the laws of the State of Nevada on May 24, 1984. A subsidiary in the name “Westcott Products Corporation” was organized by us under the laws of the State of Delaware on June 24, 1986, for the purpose of changing our name and domicile to the State of Delaware. On June 27, 1986, we merged with the Delaware subsidiary, with the survivor being Westcott Products Corporation, a Delaware corporation (“Westcott”). During 1990, we ceased our current operations. On March 11, 2000, our Board of Directors began the process of re-entering the development stage, and on June 2, 2014, we completed a merger with Dala Petroleum Corp., a Nevada corporation (respectively, “Dala Nevada” and the “Dala Merger”). We operated as an early-stage oil exploration company focused on our leased acreage acquired by Dala Nevada until 2016, at which time we assigned substantially all of our leased acreage to the former owner of Dala Nevada, and our remaining oil and gas leasehold interests, comprising leases covering approximately 7,489 and 403 acres, more or less, expired in 2017 and 2018, respectively. On December 18, 2017, we acquired KonaTel, Inc, a Nevada subchapter S-Corporation (“KonaTel Nevada”), in a merger with our acquisition subsidiary under which KonaTel Nevada became our wholly owned subsidiary, and we succeeded to its operations; and we changed our name to “KonaTel, Inc.” on February 5, 2018. KonaTel Nevada was organized under the laws of the State of Nevada on October 14, 2014, by its founder and then sole shareholder, D. Sean McEwen, our current Chairman and CEO, to conduct the business of a full-service cellular provider that delivered cellular products and services to individual and business customers in various retail and wholesale markets. Through its sales network, it provided these services nationwide. In furtherance of its proposed business, on November 1, 2014, it acquired most of the assets of Coast to Coast Cellular, Inc. (“Coast to Coast”), including inventories, property, plant and equipment and its customer list, all valued at approximately $ 950,000 net of liabilities in the approximate amount of $ 415,000 ; and on November 1, 2016, it acquired the assets of CS Agency LLC (“CS Agency”), consisting of contract rights related to the cellular industry, in consideration of assuming liabilities of CS Agency in the approximate amount of $ 300,000 . With the completion of the KonaTel Nevada Merger, we succeeded to the current and intended business operations of KonaTel Nevada. On December 31, 2018, we acquired Apeiron Systems (www.apeiron.io). Apeiron was organized in 2013 and is an international hosted services Communications Platform as a Service (“CPaaS”) provider that designed, built, owns and operates its national private core network, supporting a suite of business communications services, all accessible via proprietary Applications Programming Interfaces (“APIs”). As an FCC licensed Internet Telephony Service Provider (“ITSP”), Apeiron also holds an FCC numbering authority license. Some of Apeiron’s hosted services include Voice over IP (“VoIP”), cellular and Over-The-Top (“OTT”) telephony, SMS/MMS messaging and broadcast services, numbering features, including Cloud IVRs, Voicemail, Fax, Call Recording and other services through local, toll-free and international phone numbers. Supported by its national redundant network, Apeiron also provides public and private IP network services, including Multiprotocol Label Switching (“MPLS”), Dedicated Internet and LTE Wireless WAN solutions. Apeiron’s cloud services include Information Data Dips, Software-Defined Wide Area Networking (“SD-WAN”) and Internet of Things (“IoT”) data and device management. Apeiron primarily distributes its services nationally through its website, its sales staff, independent sales agents and Independent Sales Organizations (“ISOs”). On February 5, 2018, we entered into a purchase agreement to acquire IM Telecom (www.infinitimobile.com). On October 23, 2018, the FCC approved our acquisition of IM Telecom, and on January 31, 2019, we completed the purchase of IM Telecom. Following the purchase, IM Telecom operated as a wholly owned subsidiary of KonaTel. It is an FCC licensed Eligible Telecommunications Carrier (“ETC”) and is one of twenty-two (22) original FCC licensed wireless cellular resellers to hold an FCC approved Lifeline Compliance Plan since 2012, of which approximately twelve (12) license holders remain active today. The FCC has not approved or granted a new wireless reseller Lifeline Compliance Plan since 2012. In addition to being an FCC licensed ETC in forty (40) states, IM Telecom was also an approved provider in the currently expired Affordable Connectivity Program of the FCC (the “ACP Program” or the “ACP”). Lifeline is an FCC program that provides subsidized, fixed or mobile telecommunications services to low-income Americans. The ACP is an expired FCC program that provided subsidized high-speed wireless data services to low-income Americans. IM Telecom distributes Lifeline services under its Infiniti Mobile brand name through its website, sales staff, retail locations and ISOs. IM Telecom also offers non-Lifeline services throughout the United States. IM Telecom has a US-based customer support center located in Atmore, Alabama. On January 22, 2024 (the “Effective Date”), KonaTel and IM Telecom entered into a Membership Interest Purchase Agreement (the “Excess Telecom Membership Purchase Agreement”) with Excess Telecom, Inc., a Nevada corporation (“Excess Telecom”), pursuant to which KonaTel conveyed 49 % of its Membership Interest in IM Telecom to Excess Telecom on the “Initial Closing Date” in consideration of the sum of $ 10,000,000 , and if approved by the FCC, will convey the remaining 51% of the Membership Interest in IM Telecom to Excess Telecom for the sum of $100 on the “Final Closing.” If not approved by the FCC, KonaTel shall retain 51% of IM Telecom; Excess Telecom shall retain 49% of IM Telecom ; and KonaTel shall have no obligation to refund any portion of the funds paid by Excess Telecom to KonaTel . In the furtherance of this process, certain of the initial Transaction Documents have been restated by signature dated March 4, 2025, but effective as of the date or dates set forth at the beginning of each of the referenced Transaction Documents. See Part II-Other Information, in Item 6, Exhibits, hereof, for additional information in the Hyperlinked and referenced Current Reports related to the Excess Telecom Membership Purchase Agreement and related Transaction Documents. 9 On 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 Telecom, and the parties withdrew the application for FCC approval. 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 its sales under IM Telecom’s vertical sales channels, including all new sales stemming from our new healthcare vertical partnership as originally agreed. The Management Agreement originally signed on the Initial Closing date of January 22, 2024, has been terminated and is of no further force or effect and all ongoing business operations with continue under the “new” IM Telecom entity. The First Omnibus Agreement facilitated the payment of $ 700,000 to KonaTel from the remaining note receivable from Excess Telecom from the Initial Closing Date, and currently, there is a $ 150,000 note receivable due KonaTel from Excess Telecom under the Transaction Documents. See our 8-KA-2 Current Report dated January 22, 2024, filed with the SEC on September 30, 2025, which is Hyperlinked in Part II-Other Information, in Item 6, Exhibits, hereof. KonaTel and IM Telecom are headquartered in Plano, Texas where certain executive and finance resources are staffed. Apeiron Systems is headquartered in Johnstown, Pennsylvania, where it has customer service and software engineering resources staff. Additional development resources are staffed out of Los Angeles, California, as well as in Europe and Asia. As of June 30, 2026, KonaTel has one (1) full-time employee and Apeiron Systems has ten (10) full-time employees. Principal Products or Services and their Markets Our principal products and services, provided through Apeiron Systems and IM Telecom, include our CPaaS suite of services (“SIP/VoIP, SMS/MMS”), wholesale and retail mobile voice and mobile data IoT services, wholesale voice termination services, and our ETC subsidized services for low-income Americans. Except for our ETC Lifeline services distributed in partnership with Excess Telecom distributed in up to forty (40) states, our Apeiron Systems’ products and services are available worldwide and subject to U.S., international and local/national regulations. We generate revenue from two (2) primary sources, Hosted Services and Mobile Services: ● Our Hosted Services include a suite of hosted CPaaS services within Apeiron Systems’ cloud platform, including Cloud IVRs, Voicemail, Fax, Call Recording and other services provided with local, toll-free and international phone numbers. Apeiron also delivers public and private IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management, of which IoT provides device connectivity via wireless 4G/5G. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs. ● Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through Apeiron Systems and the IM Telecom partnership. Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers. Mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. Also included in our Mobile Services segment is the distribution of government subsidized mobile voice service and mobile data service by IM Telecom under its Infiniti Mobile brand and FCC license to low-income American households that qualify for the FCC’s Lifeline mobile voice service program. Even though government programs like Lifeline have existed since 1985, these programs, along with programs currently expired or not yet adopted, are subject to change and any change, reduction or elimination may have a material impact on our Mobile Services business. 10 Basis of Presentation Interim Financial Statements The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with audited financial statements of the Company for the year ended December 31, 2025. 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. Estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and stock-based compensation. Actual results could differ from those estimates. Basis of Consolidation The condensed consolidated financial statements include the Company and our two (2) wholly owned corporate subsidiaries, KonaTel Nevada and Apeiron Systems, and IM Telecom, presently owned 51 % by us. All significant intercompany transactions are eliminated. Reclassifications Certain reclassifications between inventory and property and equipment have been made to the financial statements for the year ended December 31, 2025, to conform to the financial presentation for the quarter ended June 30, 2026. These reclassifications had no effect on the net loss or cash flows as previously reported. Stock Option Expense Adjustments For the quarter ended June 30, 2026, certain adjustments have been made to stock option expense and the number of stock options outstanding as the result of a discovery of a non-employee stock option grant of 60,000 shares made and vested in Q3 of 2023. The effect of this adjustment was an increase in the number of stock options of 60,000 shares and an increase in stock option expense of $ 51,090 . An additional stock option grant of 650,000 shares made in 2023 expired without vesting on November 29, 2025. The effect of this adjustment is a decrease in the number of stock options of 650,000 and a decrease in stock option expense of $ 327,255 . The net effect of both adjustments is a decrease in stock option expense in the six (6) months ended June 30, 2026, of $ 276,165 . Net Income (Loss) Per Share Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the three (3) months ended June 30, 2026, and the six (6) months ended June 30, 2026, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of June 30, 2026, there were potentially 2,955,134 dilutive shares. The following table reconciles the number of shares outstanding and net income (loss) used in the computations of both basic and diluted earnings per share of common stockholders: SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED 2026 2025 Three Months Ended June 30, 2026 2025 Numerator Net Loss $ ( 199,343 ) $ ( 1,187,641 ) Denominator Weighted-average common shares outstanding 43,979,064 43,412,602 Dilutive impact of stock options - - Weighted-average common shares outstanding, diluted 43,979,064 43,412,602 Net income per common share Basic $ ( 0.00 ) $ ( 0.03 ) Diluted $ ( 0.00 ) $ ( 0.03 ) 11 2026 2025 Six Months Ended June 30, 2026 2025 Numerator Net Loss $ ( 481,933 ) $ ( 2,105,169 ) Denominator Weighted-average common shares outstanding 43,979,064 43,301,670 Dilutive impact of stock options - - Weighted-average common shares outstanding, diluted 43,979,064 43,301,670 Net income per common share Basic $ ( 0.01 ) $ ( 0.05 ) Diluted $ ( 0.01 ) $ ( 0.05 ) Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash and cash equivalents. All cash and cash equivalents 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 June 30, 2026, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from three (3) customers in the amounts of $ 100,709 or 45.6 %, $ 29,648 or 13.4 % and $ 28,679 or 13.0 %. As of June 30, 2025, the Company had a significant concentration of receivables from three (3) customers in the amounts of $ 183,185 or 35.6 %, $ 96,017 or 18.7 % and $ 63,848 or 12.4 %. Concentration of Major Customer A significant amount of the revenue is derived from contracts with major customers. For the three (3) months ended June 30, 2026, the Company had two (2) customers that accounted for $ 701,879 or 37.5 % of revenue and $ 320,346 or 17.1 % of revenue, respectively. For the three (3) months ended June 30, 2025, the Company had one (1) customer that accounted for $ 746,954 or 34.6 % of revenue, respectively. For the six (6) months ended June 30, 2026, the Company had three (3) customers that accounted for $ 1,412,566 or 37.4 %, $ 590,760 or 15.6 % and $ 407,513 or 10.8 % of revenue, respectively. For the six (6) months ended June 30, 2025, the Company had three (3) customers that accounted for $ 1,430,589 or 33.1 %, $ 469,671 or 10.9 % and $ 464,388 or 10.7 % of revenue, respectively. Effect of Recent Accounting Pronouncements The Company will prospectively adopt Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) effective with our annual 2027 10-K 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. Going Concern For the three (3) months ended June 30, 2026, the Company generated a net loss of ($ 199,343 ), compared to a net loss of ($ 1,187,641 ) for the three (3) months ended June 30, 2025. For the six (6) months ended June 30, 2026, the Company generated a net loss of ($ 481,933 ), compared to a net loss for the six (6) months ended June 30, 2025, of ($ 2,105,169 ). The accumulated deficit as of June 30, 2026, is ($ 10,566,076 ). Effective with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, under “the Annual Plan,” on October 1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel; and KonaTel will continue to receive distributions based upon a new Distribution Agreement for compensation from its sales only under the IM Telecom’s vertical sales channel, including all new sales stemming from our new healthcare vertical partnership as originally agreed. 12 Our Hosted Services offering in particular, is the replacement of copper-wire Plain Old Telephone Service (“POTS”) analog phone lines. Based upon data from the FCC, it is estimated there are approximately 22 million commercial (i.e., used in commercial operations) copper-wire POTS analog phone lines. These lines are scheduled to be phased out (terminated) across the United States by the end of the decade. So, in support of the increasing demand from end-of-life copper-wire POTS service providers, one of the Company’s new services, deployed and tested throughout 2025 and the first and second quarters of 2026, includes a wireless POTS replacement solution targeted at large national telecommunication service providers. Our primary sales efforts over the next four (4) years will be focused on this project. We are also focused on ongoing retail and wholesale sales of our Short Messaging Service (“SMS”) product, which saw continued growth through Q2 of 2026. In May of this year the Company took additional steps to further reduce our operating costs by executing an additional reduction in force of six (6) full-time equivalents. In addition, certain key personnel agreed to take reductions in salary. We have also reduced our reliance on outside application development resources in order to reduce operating costs. Since the quarter ended on June 30, 2026, we have signed an agreement to increase our current capital expenditure line of credit facility from $ 5 M to $ 10 M in order facilitate the growth of our POTS replacement and SMS messaging product offerings. We continue to pursue additional credit facilities to fund the operational growth of the Company. As in previous quarters, the Company continues to implement broad reductions and improve efficiencies to extend and utilize cash resources in the most efficient manner. The above-mentioned product applications and sales initiatives will require capital to expand infrastructure as sales increase. The growth of these products and the launch of certain contracted programs, along with the ability to raise additional capital, will play a significant role in our ability to continue operations with additional cost control measures. A lack of success in executing on any one of these initiatives raises doubt about our ability to remain a going concern for the twelve (12) month period from the date of this Quarterly Report. NOTE 2 – INVENTORY Inventory primarily consists of routers and other equipment associated with our POTS conversion project which are stored at our warehouse or have been deployed to customer locations for installation. 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. As of June 30, 2026, and December 31, 2025, the Company had net inventory of $ 217,227 and $ 187,339 , respectively. NOTE 3 – PROPERTY AND EQUIPMENT Property and equipment consist of the following major classifications as of June 30, 2026, and December 31, 2025: SCHEDULE OF PROPERTY AND EQUIPMENT June 30, 2026 December 31, 2025 Lease Improvements $ 46,950 $ 46,950 Furniture and Fixtures 102,946 102,946 Billing Software 217,163 217,163 Office Equipment 94,552 94,402 POTS Consignment Equipment 110,657 84,890 Property and equipment, gross 572,268 546,351 Less: Accumulated Depreciation ( 476,605 ) ( 457,008 ) Property and equipment, net $ 95,663 $ 89,343 Depreciation related to Property and Equipment amounted to $ 11,076 and $ 782 for the three (3) months ended June 30, 2026, and 2025, respectively. Depreciation related to Property and Equipment amounted to $ 19,596 and $ 1,565 for the six (6) months ended June 30, 2026, and 2025, respectively. Depreciation and amortization expenses are included as a component of operating expenses in the accompanying statements of operations. 13 NOTE 4 – 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 %. Right-of-Use Assets are recorded on the balance sheet as intangible assets. The Company has Right-of-Use Assets through leases of property under non-cancelable leases. As of June 30, 2026, the Company had one (1) property with a lease term in excess of one (1) year. This lease expires in 2030. Lease payable as of June 30, 2026, is $ 196,000 . Future lease liability payments under the terms of these leases are as follows: SCHEDULE OF FUTURE LEASE LIABILITY PAYMENTS 2026 54,000 2027 54,000 2028 54,000 2029 54,000 2030 36,000 Total 252,000 Less Interest 56,000 Present value of minimum lease payments 196,000 Less Current Maturities 40,680 Long Term Maturities $ 155,320 The weighted average term of the Right-to-Use leases is 50.0 months recorded with a weighted average discount of 7.50 %. Total lease expense for the three (3) months ended June 30, 2026, and 2025, was $ 22,650 and $ 35,517 , respectively. Total lease expense for the six (6) months ended June 30, 2026, and 2025, was $ 45,423 and $ 69,410 , respectively. NOTE 5 – INTANGIBLE ASSETS Intangible Assets with definite useful life consist of licenses, customer lists and software that were acquired through acquisitions. Intangible Assets with indefinite useful life consist of the Lifeline license granted by the FCC. The license, because of the nature of the asset and the limitation on the number of granted Lifeline licenses by the FCC, will not be amortized. The license was acquired through an acquisition. The fair market value of the license as of June 30, 2026, and December 31, 2025, was $ 634,251 . SCHEDULE OF INTANGIBLE ASSETS June 30, 2026 December 31, 2025 Customer List $ 1,135,962 $ 1,135,962 Software 2,407,001 2,407,001 ETC License 634,251 634,251 Less: Amortization ( 3,542,963 ) ( 3,542,963 ) Net Amortizable Intangibles 634,251 634,251 Right of Use Assets - net 190,698 217,432 Intangible Assets net $ 824,949 $ 851,683 Amortization expense amounted to $ 0 , and $ 0 for the three (3) months ended June 30, 2026, and 2025, respectively. Amortization expense amounted to $ 0 , and $ 0 for the six (6) months ended June 30, 2026, and 2025, respectively. Amortization expense is included as a component of operating expenses in the accompanying statements of operations. With the exception of the Lifeline license granted by the FCC, all intangible assets were fully amortized as of December 31, 2021. NOTE 6 – CONTINGENCIES AND COMMITMENTS Litigation From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of June 30, 2026, there are no ongoing legal proceedings. 14 Contract Contingencies The Company has the normal obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry and that may be provided in the contractual agreements. Tax Audits As of June 30, 2026, the Company has no ongoing tax audits. Letters of Credit The Company had a $ 5 M outstanding letter of credit with ACP Financing VII Limited Liability Company (“ACP Financing”) as of June 30, 2026. As of this filing, no funds are payable on this line of credit. NOTE 7 – SEGMENT REPORTING In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07). Beginning with our 2024 annual reporting, we adopted ASU No. 2023-07, which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (“CODM”) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity to disclose the title and position of its CODM and explain how the CODM uses these reported measures in assessing segment performance and determining how to allocate resources. Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have two reportable segments: Hosted Serves and Mobile Services. Our CODM is our President. Our CODM uses operating income to evaluate performance and allocate resources, including capital allocations, when managing the business. Our CODM manages operations through the review of actual and forecasted “Operations and Support Expenses” information at a segment and business unit level, of which segments are primarily evaluated on a direct cost basis and comprised of equipment, compensation, network and technology, sales, advertising and other costs. Direct costs are incurred in support of products and services offered by the business units, such as equipment costs (predominantly wireless devices), network access, rents, leases, sales support, customer provisioning and compensation expenses. The Company operates within two ( 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. The reportable segments consist of Hosted Services and Mobile Services. Hosted Services – Our Hosted Services include a suite of hosted CPaaS services within the Apeiron Systems’ cloud platform, including Cloud IVRs, Voicemail, Fax, Call Recording and other services provided with local, toll-free and international phone numbers. Apeiron also delivers public and private IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions. Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management. These Hosted Services are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and independent sales organizations (ISOs). Mobile Services – Our Mobile Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through Apeiron Systems and IM Telecom. Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements with select national wireless carriers and national wireless wholesalers. A wireless communications service reseller typically does not own the wireless network infrastructure over which services are provided to its customers. Mobile voice/text/data and mobile data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only plans. Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories. 15 The following table reflects the results of operations of the Company’s reportable segments: SCHEDULE OF REPORTABLE SEGMENTS Three (3) Months ended June 30, 2026 Depreciation and Other Net Revenues Expenses Amortization Gain/Loss (Loss) Segment Hosted Services $ 1,630,858 $ 1,760,763 $ 9,661 $ - $ ( 139,566 ) Mobile Services 238,990 187,839 1,415 - 49,736 Segment Total 1,869,848 1,948,602 11,076 - ( 89,830 ) Corporate Parent administration support - 109,513 - - ( 109,513 ) Total Corporate - 109,513 - - ( 109,513 ) KonaTel, Inc. $ 1,869,848 $ 2,058,115 $ 11,076 $ - $ ( 199,343 ) Three (3) Months ended June 30, 2025 Depreciation Net and Other Income Revenues Expenses Amortization Gain/Loss (Loss) Segment Hosted Services $ 1,578,248 $ 1,884,191 $ 572 $ - $ ( 306,515 ) Mobile Services 580,408 809,053 210 - ( 228,854 ) Segment Total 2,158,656 2,693,244 782 - ( 535,369 ) Corporate Parent administration support - 652,271 - - ( 652,271 ) Total Corporate - 652,271 - - ( 652,271 ) KonaTel, Inc. $ 2,158,656 $ 3,345,515 $ 782 $ - $ ( 1,187,641 ) Six (6) Months ended June 30, 2026 Depreciation and Other Net Revenues Expenses Amortization Gain/Loss (Loss) Segment Hosted Services $ 3,296,733 $ 3,253,324 $ 17,114 $ - $ 26,295 Mobile Services 478,177 393,755 2,482 - 81,940 Segment Total 3,774,910 3,647,079 19,596 - 108,235 Corporate Parent administration support - 590,168 - - ( 590,168 ) Total Corporate - 590,168 - - ( 590,168 ) KonaTel, Inc. $ 3,774,910 $ 4,237,247 $ 19,596 $ - $ ( 481,933 ) 16 Six (6) Months ended June 30, 2025 Depreciation Net and Other Income Revenues Expenses Amortization Gain/Loss (Loss) Segment Hosted Services $ 3,007,571 $ 3,478,645 $ 1,088 $ - $ ( 472,162 ) Mobile Services 1,319,799 1,636,254 477 - ( 316,932 ) Segment Total 4,327,370 5,114,899 1,565 - ( 789,094 ) Corporate Parent administration support - 1,316,075 - - ( 1,316,075 ) Total Corporate - 1,316,075 - - ( 1,316,075 ) KonaTel, Inc. $ 4,327,370 $ 6,430,974 $ 1,565 $ - $ ( 2,105,169 ) NOTE 8 – STOCKHOLDERS’ EQUITY Stock Compensation The Company offers incentive stock option grants to directors and key employees. Options vest in tranches and typically expire five ( 5 ) years from the date of grant. For the six (6) months ended June 30, 2026, and 2025, the Company recorded stock option expense of ($ 124,992 ) and $ 484,014 , respectively. For the three (3) months ended June 30, 2026, and 2025, the Company recorded stock option expense of ($ 219,597 ) and $ 244,677 , respectively. The option expense not taken as of June 30, 2026, is $ 1,854,294 , with a weighted average term of 2.42 years. The following table represents stock option activity as of and for the six (6) months ended June 30, 2026: SCHEDULE OF STOCK OPTION ACTIVITY Number of Shares Weighted Average Exercise Price Weighted Average Remaining Life Aggregate Intrinsic Value Options Outstanding – December 31, 2025 3,495,000 $ 0.44 1.04 $ - Granted 60,000 - Exercised - - Expired ( 1,130,000 ) - Forfeited - - - Options Outstanding – June 30, 2026 2,425,000 $ 0.87 0.51 $ - Exercisable and Vested, June 30, 2026 2,069,997 $ 0.68 1.43 $ - The aggregate intrinsic value for options outstanding as of June 30, 2026, is not calculated because the closing stock price on June 30, 2026, is less than the weighted average exercise price of outstanding options on that date. NOTE 9 – SUBSEQUENT EVENTS Below are events that have occurred since June 30, 2026: Contract Acquisition Agreement between the Company and Apeiron Copper Replacement Servicing, LLC On July 10, 2026, the Company signed an agreement with Apeiron Copper Replacement Servicing, LLC to terminate the existing $ 5 M line of credit with ACP Financing and enter into a new agreement to purchase certain contracts related to the Company’s POTs replacement project. The agreement increases the maximum line of credit to $ 10 M and is subject to a condition precedent that requires the Company to raise at least $ 1,500,000 for effectiveness of this agreement. This agreement will facilitate the availability of funds to support the necessary capital expenditures necessary to scale the Company’s existing POTs replacement service offering, assuming the condition precedent can be accomplished. Beaty Stock Option Expiration At midnight on August 11, 2026, 25,000 incentive stock options granted and vested to director Robert Beaty expired without being exercised. IM Telecom Notice from the FCC On August 13, 2026, we received notice from IM Telecom that on July 27, 2026, IM Telecom received notice from the FCC regarding certain alleged violations of the FCC’s Lifeline program rules. For additional information, please see our 8-K Current Report dated July 29, 2026, filed with the SEC on August 14, 2026, which is Hyperlinked in Part II-Other Information, in Item 6, Exhibits, hereof. Payments Received on Note Payable On August 11, 2026, the Company received a payment from Excess Telecom in the amount of $ 30,000 and in respect of the remaining $ 150,000 note payable on the purchase of 49 % of IM Telecom. On August 18, 2026, the Company received an additional payment of $ 100,000 on this note payable leaving balance due of $ 20,000 . 17 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. When used in this Quarterly Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions and financial trends that may affect our future plans of operations, business strategy, operating results and financial position. Persons reviewing this Quarterly Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed at the forepart of this Quarterly Report under the caption “Forward-Looking Statements” and include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations. Overview of Current and Planned Business Operations We continue to pursue market opportunities for the distribution of our current products and services described in our “Principal Products or Services and their Markets” summary commencing on page nine (9) of this Quarterly Report. In addition, we continue to pursue additional market distribution opportunities, such as our expanded short-code messaging (“SMS”) service, development of new products and services, including our newly released wholesale POTS (“Plain Old Telephone Service”) replacement service, and pursuit of accretive acquisition opportunities that may enhance or expand our current product and service offerings. Results of Operations In the six months and quarter ended June 30, 2026, Hosted Services (“CPaaS services”) accounted for approximately 87% of total Company revenue, and Mobile Services accounted for approximately 13% of Company revenue. While the Mobile Services segment does include distributions from our IM Telecom partnership, management continues to prioritize it growth initiatives with the Company’s Hosted Services segment as we focus our efforts on new sales opportunities with our expanded short-code messaging (“SMS”) service, which has doubled in revenue over the past twelve (12) months, and our wholesale POTS service currently provided to regional carriers and resellers who, as of the end of this quarter, have activated approximately 1,000 POTS lines during our initial deployment period. Comparison of the three (3) months ended June 30, 2026, to the three (3) months ended June 30, 2025 For the three (3) months ended June 30, 2026, we had $1,869,848 in revenues from operations compared to $2,158,656 for the three (3) months ended June 30, 2025, for a total revenue decrease of $288,808. The decrease in revenue was primarily due to the decline in Lifeline subscribers in the mobile services segment. The Company continues to explore new revenue streams such as delivery of mobile services through certain health care initiatives and hosted services partnerships. For the three (3) months ended June 30, 2026, our cost of revenue was $1,376,954 compared to $1,608,415 in the three (3) months ended June 30, 2025, for a cost of revenue decrease of $231,462. Our cost of revenue decrease was primarily a result of a decrease in sales compensation and device costs related to the Mobile Services segment and additional cost control efforts in our Hosted Services segment. For the three (3) months ended June 30, 2026, we had gross profit of $492,894 compared to $550,240 in the three (3) months ended June 30, 2025, for a gross profit decrease of $57,346. This decrease primarily resulted from a significant decline in activations in our Mobile Services segment. For the three (3) months ended June 30, 2026, total operating expenses were $644,101 compared to $1,748,798 in the three (3) months ended June 30, 2025, for a decrease of $1,104,696. This decrease was primarily due to lower payroll costs, a reduction in legal and other professional fees and a reduction of application development costs. 18 For the three (3) months ended June 30, 2026, other income (expense) was ($48,136) compared to $10,917 in the quarter ended June 30, 2025. The decrease of $59,053 was due primarily to an increase in accrued interest and the loss on sale of remaining Lifeline related inventory. For the three (3) months ended June 30, 2026, we had a net loss of ($199,343) compared to a net loss of ($1,187,641) in the three (3) months ended June 30, 2025. The decrease in losses of $988,297 was primarily related to lower operating costs. Comparison of the six (6) months ended June 30, 2026, to the six (6) months ended June 30, 2025 For the six (6) months ended June 30, 2026, we had $3,774,910 in revenues from operations compared to $4,327,370 for the six (6) months ended June 30, 2025, for a total revenue decrease of $552,460, a decrease of 12.8%. The decrease in revenue was primarily due to the decline in revenues in our mobile services segment resulting from the shift in sales efforts from Lifeline to our Hosted Services product offerings. For the six (6) months ended June 30, 2026, our cost of revenue was $2,476,412 compared to $3,125,237 in the six (6) months ended June 30, 2025, for a cost of revenue decrease of $648,825, or a decrease of 20.8%. Our cost of revenue decrease was primarily the result of lower network and sales compensation costs, as the Company refocused sales efforts in our Hosted Services segment. For the six (6) months ended June 30, 2026, we had gross profit of $1,298,498 compared to $1,202,133 in the six (6) months ended June 30, 2025, for a gross profit increase of $96,365. This increase primarily resulted from the marketing of higher margin products such as POTS replacement and SMS messaging. For the six (6) months ended June 30, 2026, total operating expenses were $1,730,920 compared to $3,330,335 in the six (6) months ended June 30, 2025, for a decrease of $1,599,416. This decrease was primarily due to lower payroll related expenses, reduced professional fee expenses and lower application development costs in the period. For the six (6) months ended June 30, 2026, other income (expense) was ($49,511) compared to $23,033 in the six (6) months ended June 30, 2025. This decrease was a result of the loss on sale of remaining Lifeline related inventory and a reduction in the amount of interest income earned in 2026. For the six (6) months ended June 30, 2026, we had a net loss of ($481,933) compared to a net loss of ($2,105,169) in the six (6) months ended June 30, 2025. The decrease in losses of $1,623,236 was a result in decreases in costs of revenue and operating expenses. Liquidity and Capital Resources As of June 30, 2026, we had $200,013 in cash and cash equivalents on hand. In comparing liquidity between the six (6) month period ending June 30, 2026, and December 31, 2025, cash decreased by 71.6%. This decrease is the result of less cash flow generated for the period as compared to cash requirements. Liabilities and total overall debt decreased by 1.8% in the six (6) month period ended June 30, 2026, when compared to December 31, 2025, primarily due to a decrease in right of use operating lease obligations. Our current ratio (current assets divided by our current liabilities) decreased to .36 as of June 30, 2026, compared to .68 as of December 31, 2025. Working capital increased by 100.3%. Cash Flow from Operations During the six (6) months ended June 30, 2026, the net cash flow used in operating activities was ($504,706), primarily as a result of changes in stock-based compensation and inventory and consigned equipment. The net cash flow used in operations for the six (6) month period ended June 30, 2025, was ($337,999). Cash Flows from Investing Activities During the six (6) months ended June 30, 2026, cash flow used in investing activities was $148. During the six (6) months ended June 30, 2025, the net cash flow provided by investing activities was the $150,000 note receivable payment received. Cash Flows from Financing Activities During the six (6) months ended June 30, 2026 and June 30, 2025, respectively, there were no cash flows provided by or used in financing activities. 19 Going Concern For the three (3) months ended June 30, 2026, the Company generated a net loss of ($199,343), compared to a net loss of ($1,187,641) for the three (3) months ended June 30, 2025. For the six (6) months ended June 30, 2026, the Company generated a net loss of ($481,933), compared to a net loss for the six (6) months ended June 30, 2025, of ($2,105,169). The accumulated deficit as of June 30, 2026, is ($10,566,076). Effective with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, under “the Annual Plan,” on October 1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel; and KonaTel will continue to receive distributions based upon a new Distribution Agreement for compensation from its sales only under the IM Telecom’s vertical sales channel, including all new sales stemming from our new healthcare vertical partnership as originally agreed. Our Hosted Services offering in particular, is the replacement of copper-wire Plain Old Telephone Service (“POTS”) analog phone lines. Based upon data from the FCC, it is estimated there are approximately 22 million commercial (i.e., used in commercial operations) copper-wire POTS analog phone lines. These lines are scheduled to be phased out (terminated) across the United States by the end of the decade. So, in support of the increasing demand from end-of-life copper-wire POTS service providers, one of the Company’s new services, deployed and tested throughout 2025 and the first and second quarters of 2026, includes a wireless POTS replacement solution targeted at large national telecommunication service providers. Our primary sales efforts over the next four (4) years will be focused on this project. We are also focused on ongoing retail and wholesale sales of our Short Messaging Service (“SMS”) product, which saw continued growth through Q2 of 2026. In May of this year the Company took additional steps to further reduce our operating costs by executing an additional reduction in force of six (6) full-time equivalents. In addition, certain key personnel agreed to take reductions in salary. We have also reduced our reliance on outside application development resources in order to reduce operating costs. Since the quarter ended on June 30, 2026 we have signed an agreement to increase our current capital expenditure line of credit facility from $5M to $10M in order facilitate the growth of our POTS replacement and SMS messaging product offerings, subject to the satisfaction of a $1,500,000 funding requirement. We continue to pursue additional credit facilities to fund the operational growth of the Company. As in previous quarters, the Company continues to implement broad reductions and improve efficiencies to extend and utilize cash resources in the most efficient manner. The above-mentioned product applications and sales initiatives will require capital to expand infrastructure as sales increase. The growth of these products and the launch of certain contracted programs, along with the ability to raise additional capital, will play a significant role in our ability to continue operations with additional cost reduction measures. A lack of success in executing on any one of these initiatives raises doubt about our ability to remain a going concern for the twelve (12) month period from the date of this Quarterly Report. Off-Balance Sheet Arrangements We had no Off-Balance Sheet arrangements during both the three (3) and six (6) month periods ended June 30, 2026, respectively. Critical Accounting Policies Earnings Per Share We follow ASC Topic 260 to account for the earnings per share. Basic earnings per common share calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income available to common stockholders by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of receivables, cash and cash equivalents. All cash and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels. The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of June 30, 2026, the Company had a significant concentration of receivables (defined as customers whose receivable balances are greater than 10% of total receivables) due from three (3) customers in the amounts of $100,709 or 45.6%, $29,648 or 13.4% and $28,679 or 11.9%. As of June 30, 2025, the Company had a significant concentration of receivables from three (3) customers in the amounts of $183,185 or 35.6%, $96,017 or 18.7% and $63,848 or 12.4%. 20 Concentration of Major Customer A significant amount of the revenue is derived from contracts with major customers. For the three (3) months ended June 30, 2026, the Company had two (2) customers that accounted for $701,879 or 37.5% of revenue and $320,346 or 17.1% of revenue, respectively. For the three (3) months ended June 30, 2025, the Company had one (1) customer that accounted for $746,954 or 34.6% of revenue. For the six (6) months ended June 30, 2026, the Company had three (3) customers that accounted for $1,412,566 or 37.4%, $590,760 or 15.6% and $407,513 or 10.8% of revenue, respectively. For the six (6) months ended June 30, 2025, the Company had three (3) customers that accounted for $1,430,589 or 33.1%, $469,671 or 10.9% and $464,388 or 10.7% of revenue, respectively. Effect of Recent Accounting Pronouncements The Company will prospectively adopt Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) effective with our annual 2027 10-K 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk. Not required. Item 4. Controls and Procedures. Management’s Quarterly Report on Internal Control Over Financial Reporting We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that material information relating to us is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as of June 30, 2026, of our disclosure controls and procedures. We do acknowledge that the internal controls over financial reporting were not effective as of December 31, 2025, as a material weakness related to the financial reporting of the IM Telecom sales transaction in 2024 was disclosed and financial statements were restated. More recently we discovered certain prior year adjustments to stock option expense, and we continue to take steps to remediate any specific disclosure controls and procedures that have been ineffective and will take the necessary steps over the upcoming quarterly reporting periods to render future evaluations of controls as effective. As such, based upon the evaluation of prior reporting periods, our Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were ineffective as of the quarter ended June 30, 2026. 21 PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 1A. Risk Factors Not required; however, see Part I, Item 1A. Risk Factors, commencing on page ten (10) of our 2025 10-K for the year ended December 31, 2025, filed with the SEC on April 16, 2026, for a list of Risk Factors, which Annual Report can be accessed by Hyperlink in Part II-Other Information, in Item 6, Exhibits, hereof. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None; not applicable. Item 3. Defaults upon Senior Securities None; not applicable. Item 4. Mine Safety Disclosure Not applicable. Item 5. Other Information No director or Section 16 officer adopted or terminated a trading arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a “non-Rule 10b5–1” trading arrangement during the periods reported in this Quarterly Report. On November 10, 2023, Apeiron Systems entered into a five (5) year agreement with Viva-US Telecommunications, Inc. (“Viva-US”), as the exclusive supplier of wholesale cellular voice and data, messaging, international call termination, smart SIM (“Subscriber Identity Module”) and other telecommunications services. Apeiron Systems provides these services through its CPaaS (“Communication Platform as a Service”) cloud platform. Viva-US is a US MVNO (“Mobile Virtual Network Operator”) and part of the Balesia Technologies, Inc. group of companies operating MNOs (“Mobile Network Operator”) and MVNOs throughout North and South America, supporting over three million customers in Bolivia, Mexico and Argentina. The Company has completed its pre-launch obligations; we continue to wait for launch implementation by Viva; however to date, no significant progress has been made for a full launch. Item 6. Exhibits Exhibit Number Description of Exhibit Filing 3(i) Amended and Restated Certificate of Incorporation Filed with the Form 8-K/A filed on December 20, 2017, and incorporated herein by reference. 3(i)(a) Certificate of Amendment to Amended and Restated Certificate of Incorporation (Name Change). Filed with the Form 8-K filed on February 12, 2018, and incorporated herein by reference. 3(ii) Amended and Restated Bylaws Filed with the Form 8-K/A filed on December 20, 2017, and incorporated herein by reference. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith. 101 The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, were formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 104 Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL. Exhibits incorporated by reference: Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 16, 2026. 8-K Current Report dated January 22, 2024 (the “Excess Telecom Membership Purchase Agreement and related Transaction Documents”), filed with the SEC on January 30, 2024. 8-K/A-1 Current Report dated January 22, 2024 (the “Excess Telcom Membership Purchase Agreement and related Transaction Documents,” as amended or restated), filed with the SEC on March 10, 2025. 8-K Current Report dated December 18, 2023 (the “ACP Financing VII Limited Liability Company Installment Sales Agreement”), filed with the SEC on December 22, 2023. 8-K Current Report dated July 29, 2026 (Summary of the “FCC Notice to IM Telecom”) filed with the SEC on August 14, 2026. 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KonaTel, Inc. Date: August 19, 2026 By: /s/ D. Sean McEwen D. Sean McEwen Chairman and CEO Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: August 19, 2026 By: /s/ D. Sean McEwen D. Sean McEwen Chairman and CEO Date: August 19, 2026 By: /s/ Brian R. Riffle Brian R. Riffle Chief Financial Officer 23