KTEL filing — read by section

UNITED STATES 

 SECURITIES EXCHANGE COMMISSION 

 Washington, D.C. 20549 

 FORM 10-K 

 x 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 

 ACT OF 1934 

 For the fiscal year ended December 31, 2021 

 o 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 

 ACT OF 1934 

 For the transition period from

 Commission File No. 001-10171 

 KonaTel, Inc. 

 (Name of Small Business Issuer in its Charter) 

 Delaware 
 
 80-0973608 

 (State or other Jurisdiction of Incorporation or organization) 
 
 (I.R.S. Employer Identification No.) 

 500 N. Central Expressway , Ste. 202 

 Plano , Texas 75074 
 
 (Address of Principal Executive Offices) 

 214 - 323-8410 

 (Registrant’s Telephone Number, including area code) 

 Securities Registered Pursuant to Section 12(b) of
the Act: None

 Securities Registered Pursuant to Section 12(g) of
the Act: Common Stock, par value $0.001

 Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x 
 No 

 Indicate by check mark if the Registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x 
 No 

 Indicate by check mark whether the Registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 x Yes o 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). x 
 Yes o No

 Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to
the best of Registrant ’ s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o 

 Indicate by check mark whether the Registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See
definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer o 
 Accelerated filer o 

 Non-accelerated filer x 
 (Do not check if a smaller reporting company) 

 Smaller reporting company x 
 Emerging Growth company o 

 1 

 Our website is KonaTel.com.

 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. o 

 Indicate by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). o Yes x No 

 On June 30, 2021, the last business day of the Registrant ’ s
most recently completed second quarter, the aggregate market value of the Registrant’s common stock held by non-affiliates of the
Registrant was $ 14,735,983 , based upon 18,842,286 shares of the Registrant’s common stock being currently owned by such persons,
and based upon the closing price of the common stock of the Registrant on the OTC Markets Group Inc. (“OTC Markets”) “OTC
Pink Tier” (“KTEL”) of $0.78 per share on June 30, 2021.

 As of December 31, 2021, the Registrant had 41,615,406 
shares of its common stock, $0.001 par value, issued and outstanding.

 REFERENCES 

 In this Annual 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”), Apeiron Systems, Inc., a Nevada corporation (“Apeiron
Systems” or “Apeiron”), IM Telecom, LLC, an Oklahoma limited liability company doing business as “Infiniti Mobile”
(sometimes called “IM Telecom” or “Infiniti Mobile”).

 FORWARD LOOKING STATEMENTS 

 This Annual 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 Annual Report. We cannot assure you that the forward-looking
statements in this Annual 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 Annual 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”). 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.

 CAUTIONARY STATEMENT 

 Summaries of all agreements or other documents referenced
herein and attached hereto by Hyperlink in Part IV, Item 15, or otherwise, do not purport to be all inclusive of the terms, conditions
and other provisions of such agreements or documents, and accordingly, all such summaries are modified in their entirety to the referenced
and Hyperlinked respective agreement or document in Part IV, Item 15 hereof.

 2 

 TABLE OF CONTENTS 

 PART I. 
 
 Item 1. Business 
 
 4 

 Item 1.A. Risk Factors 
 
 9 

 Item 1.B. Unresolved Staff Comments 
 
 18 

 Item 2. Properties 
 
 18 

 Item 3. Legal Proceedings 
 
 19 

 Item 4. Mine Safety Disclosures 
 
 19 

 PART II. 
 
 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 
 
 19 

 Item 6. [Reserved] 
 
 20 

 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
 21 

 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 
 
 24 

 Item 8. Financial Statements and Supplementary Data 
 
 25 

 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 
 
 26 

 Item 9A. Controls and Procedures 
 
 26 

 Item 9B. Other Information 
 
 27 

 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevents Inspection 
 
 27 

 PART III. 
 
 Item 10. Directors, Executive Officers and Corporate Governance 
 
 28 

 Item 11. Executive Compensation 
 
 32 

 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 
 
 37 

 Item 13. Certain Relationships and Related Transactions, and Director Independence 
 
 38 

 Item 14. Principal Accounting Fees and Services 
 
 38 

 PART IV. 
 
 Item 15. Exhibit and Financial Statement Schedules 
 
 40 

 Item 16. Form 10-K Summary 
 
 41 

 Signatures 
 
 42 

 3 

 PART I 

 ITEM 1. BUSINESS 

 Corporate History and Business Development 

 We were 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. At that time, all of our prior operations were conducted through Lee Building Products and T. A. Kilgore &
Company, which owned and operated a home center in League City, Texas, about 30 miles southeast of downtown Houston, Texas. During 1990,
we ceased these operations, and the secured lenders took possession our assets.

 We changed our name to “Dala Petroleum Corp.”
on August 29, 2014; and then to “KonaTel, Inc.” on February 5, 2018, following the closing of two respective mergers that
are discussed below.

 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”). Dala Nevada was wholly owned by Chisholm Partners II, LLC,
a Louisiana limited liability company (“Chisholm II”). We operated as an early-stage oil exploration company focused on our
leased acreage acquired by Dala Nevada until 2016, when Chisholm II returned a total of 8,567,800 shares of the 10,000,000 shares of our
common stock exchanged under the Dala Merger to us for cancellation in exchange for our assignment of approximately 55,000 acres, more
or less, of our leased acreage or approximately 68.75% of our total holdings, to Chisholm II. All of 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 July 20, 2017, pursuant to a Common Stock Purchase
Agreement dated July 19, 2017, M2 Equity Partners, LLC, a privately held Minnesota limited liability company (“M2”), acquired
12,100,000 shares of our common stock in consideration of the sum of $367,500, which resulted in a change in control of our Company.

 On November 13, 2017, we filed an Amended and Restated
Certificate of Incorporation with the State of Delaware, which removed all of the designations of our preferred stock from our Certificate
of Incorporation, while reserving our 50,000,000 authorized and unissued one mill ($0.01) par value shares of preferred stock for future
issuance as the Board of Directors may designate and approve. See Part IV, Item 15, Exhibit 3(i).

 Effective December 18, 2017, we completed an Agreement
and Plan of Merger (the “KonaTel Merger Agreement”) with KonaTel, Inc., a Nevada corporation (the “KonaTel Nevada”),
under which KonaTel Nevada became our wholly owned subsidiary on the closing of the merger (the “KonaTel Nevada Merger”),
and we succeeded to the business operations of KonaTel Nevada.

 Effective February 7, 2018 (dated as of February 5,
2018), we entered into an Agreement for the Purchase and Sale of Membership Interest (the “PSMI”), with the transaction documents
being deposited in escrow on February 7, 2018, respecting the acquisition of 100% of the membership interest in IM Telecom, LLC, an Oklahoma
limited liability company, (doing business as “Infiniti Mobile”) (“IM Telecom” or “Infiniti Mobile), from
its sole owner, Trevan Morrow (“Mr. Morrow”). The principal asset of IM Telecom, at that time, was a “Lifeline
Program” license of the Federal Communications Commission (“FCC”) (an FCC approved wireless Compliance Plan).

 On August 9, 2018, we entered into an Asset Purchase
Agreement (the “Telecon Wireless Agreement”) with Telecon Wireless Resources, Inc., a New York corporation (the “Telecon
Wireless”), whereby we sold various assets, including furniture, fixtures, equipment, account receivable and a customer list, among
other assets and liabilities. Additional information on the Telecon Agreement can be accessed in Part IV, Item 15 hereof, under the heading
“Telecon Wireless Sale Current Report.”

 Effective December 31, 2018, we completed an Agreement
and Plan of Merger with Apeiron Systems, Inc., a Nevada corporation (respectively, “Apeiron Systems” and the “Apeiron
Systems Merger Agreement”), under which Apeiron Systems became our wholly owned subsidiary on the closing of the merger (the “Apeiron
Systems Merger”). We issued 7,000,000 shares of our common stock in exchange for all of the outstanding shares of common stock
of Apeiron Systems, to Apeiron Systems’ two (2) shareholders, Joshua Ploude (6,300,000 shares) and Vyacheslav Yanson (700,000 shares),
pro rata, in accordance with their respective equity interests in Apeiron Systems. Closing conditions to the Apeiron Systems Merger Agreement
included, among other conditions, that the Apeiron Systems shareholders would have a $1.00 per share “Guaranteed Value” on
the KonaTel shares they received under the Apeiron

 4 

 Systems Merger if the KonaTel shares do not trade
at or above $1.00 for ten (10) consecutive days during the period commencing on December 31, 2020, and ending December 31, 2021, on the
applicable trading market for our common stock during that period, and subject to such shares being continuously owned of record by the
Apeiron Systems shareholders, as outlined in Section 5.10 of the Apeiron Systems Merger Agreement. This condition was fully satisfied
effective June 16, 2021. See the Company’s 8-KA Current Report dated and filed with the SEC on that date and which is available
by Hyperlink in Part IV, Item 15.

 On April 14, 2020, our operating subsidiaries made
loan applications to participate in the Small Business Administration’s (the “SBA”) Paycheck Protection Program (the
“PPP”) created under the “Cares Act” as a result of the COVID-19 pandemic. On April 15, 2020, the loan applications
of Apeiron Systems, IM Telecom and KonaTel Nevada were approved and loan proceeds in the amounts of $101,800, $20,900 and $186,300, respectively,
were received. We followed all prescribed loan forgiveness guidelines provided by our local bank and the SBA by using these loan proceeds
to fund employee payroll through the 60-day period ending on June 15, 2020. All PPP loans were forgiven by the SBA in 2021.

 On December 14, 2020, the shares of the Company’s
common stock were approved for up listing to the OTC Markets OTCQB® Venture Market (“OTCQB”). OTCQB is a venture market
operated by the OTC Markets. To be eligible for quotation on the OTCQB, companies must be current in their reporting obligations under
Section 13 or 15(d) of the Exchange Act and undergo an annual verification and management certification process. Companies must also meet
a minimum bid price test and other financial conditions. The OTC Markets is recognized by the SEC as a “Qualified Interdealer Quotation
System” (“IDQS”) under SEC Rule 15c2-11(e)(6); and the OTCQB is an established public market that provides current public
information to investors that need to analyze, value and trade securities.

 On August 25, 2021, the Company filed a registration
statement with the SEC on Form S-8 to register 5,901,884 shares of its common stock underlying granted and unexercised employee incentive
stock options under its 2018 Incentive Stock Option Plan.

 BUSINESS 

 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, 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 Systems” or “Apeiron”), which is also our wholly owned subsidiary.
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), doing business as Infiniti Mobile (“IM Telecom” or “Infiniti Mobile”).
On October 23, 2018, the FCC approved our acquisition of IM Telecom, and on January 31, 2019, we completed the purchase of IM Telecom.
IM Telecom operates 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 (granted) a new wireless reseller
Lifeline Compliance Plan since 2012. As a licensed ETC, IM Telecom is currently authorized to distribute Lifeline subsidized mobile voice/data
service in nine (9) states. In addition to Lifeline, IM Telecom is also an FCC licensed Emergency Broadband Benefit (“EBB”)
provider, authorized to distribute EBB subsidized high-speed mobile data service in the forty-eight (48) contiguous states plus Washington
D.C. and Puerto Rico. EBB is expected to be replaced by the Affordable Connectivity Program (“ACP”) in 2022 under new terms
and conditions. Lifeline is an FCC program that provides subsidized, fixed or mobile telecommunications services to low-income Americans.
EBB is an FCC program that provides subsidized

 5 

 high-speed wireless data services to low-income Americans.
IM Telecom distributes Lifeline and EBB services under its Infiniti Mobile brand name through its website, sales staff, retail location
and ISOs. IM Telecom also offers non-Lifeline and non-EBB services throughout the United States.

 Apeiron Systems is headquartered in Los Angeles, California.
It also has some management staff in Plano, Texas, customer service and software engineering resources staffed in Johnstown, Pennsylvania
and software engineering services staffed in Europe and Asia. IM Telecom is headquartered in Plano, Texas, and operates a retail operation
in Tulsa, Oklahoma.

 We are headquartered in Plano, Texas, shared with
IM Telecom’s offices. Apeiron Systems has thirteen (13) full-time employees; IM Telecom has four (4) full-time employees and two
(2) part-time employees; and we have four (4) full-time employees.

 Principal Products
or Services and their Markets 

 Our principal products and
services, across our two wholly owned subsidiaries, 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 and EBB subsidized services
for low-income Americans. Except for our ETC Lifeline services distributed in up to nine (9) states and our EBB services distributed in
the forty-eight (48) contiguous states, Washington D.C. and Puerto Rico, 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 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. 

 · 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 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 and/or the FCC’s temporary EBB mobile data program, with EBB to eventually be replaced by
FCC’s ACP program in 2022. Even though government programs like Lifeline have existed since 1985, these programs, along with newer
programs like the temporary EBB program and future ACP program, are subject to change and may have a material impact on our Mobile Services
business if changed, reduced or eliminated. 

 Distribution Methods of the Products or Services 

 We primarily distribute our
Hosted Services through our website, sales staff, independent sales agents and ISOs. We primarily distribute our Mobile Services through
our website, sales staff, retail location, independent sales agents and ISOs. In early 2021, we increased our Mobile Service online marketing
effort and by the end of 2021, online mobile service distribution increased by approximately 320% compared to 2020 online distribution.

 Sources and Availability of Raw Materials
and the Names of Principal Suppliers 

 Wholesale wireless services
are sourced either directly from the wireless carrier or from wholesalers that sit between us (Apeiron Systems and IM Telecom) and the
wireless carrier. Carriers can include Verizon, T-Mobile, Sprint, and AT&T. Wholesalers can include Prepaid Wireless Group (“PWG”)
and Telispire.

 Wireless resellers like us traditionally do not own
the wireless infrastructure over which services are provided. We purchase services from the following sources:

 · Telispire: Verizon voice, text and data service. Telispire, through a contract
with us, has set per unit pricing for voice, text, and data wireless services. Pricing per unit is in the form of a monthly recurring
charge (“MRC”) that may or may not include minutes of use, text units or data units. Additional data units are available for
purchase; 

 6 

 · AT&T: AT&T voice, text or data service and AT&T IoT service
under a contract with us, has set “unit based” pricing for voice, text, and data and IoT wireless services. Pricing per unit
is in the form of an MRC that may or may not include minutes of use, text units or data units. Additional data units are available for
purchase; 

 · Verizon Wireless VPP, a Verizon IoT product: Verizon VPP, also through a
contract with us, has set per unit pricing for IoT wireless services. Pricing per unit is in the form of an MRC that includes data units
with defined over plan use pricing; 

 · Sprint: Sprint voice, text or data service. Sprint, through a contract with
us, has set pricing for bundled voice, text and data wireless services. Pricing bundles are in the form of an MRC that include minutes
of use, text units or data units. Bundled plans include unlimited talk, text and a set amount of data. Larger data plans are available
for purchase for consumers requiring larger data packages; and 

 · Prepaid Wireless Group (“PWG”): T-Mobile voice, text or data
Lifeline service. PWG, through a contract with us, has set pricing for bundled voice, text and data wireless services. Pricing bundles
are in the form of an MRC that include minutes of use, text units or data units. Larger data plans are available for purchase for consumer
requiring larger voice and data packages. 

 Patents, Trademarks, Licenses, Franchises,
Concessions, Royalty Agreements or Labor Contracts 

 Our wholly owned subsidiary, IM Telecom, is an FCC
licensed ETC and is one of the original twenty-two (22) FCC licensed wireless cellular resellers to hold an FCC approved wireless Lifeline
Compliance Plan in the United States since 2012, of which approximately twelve (12) license holders remain active today. As a licensed
ETC, IM Telecom is currently authorized to distribute Lifeline subsidized mobile voice/data service in nine (9) states. IM Telecom is
also an FCC licensed EBB carrier, authorized to distribute EBB subsidized mobile data services in the forty-eight (48) contiguous states
and Washington D.C. and Puerto Rico. Infiniti Mobile also offers non-Lifeline and non-EBB services.

 We hold a United States Patent
and Trademark Office registered trademark “Lifeline+®” and use this Trademark in our marketing materials.

 Competition 

 The telecommunications industry is highly competitive.
Our primary cellular competitors include other resellers and national carriers, such as AT&T, Verizon, Sprint, and T-Mobile. These
national cellular carriers are facility-based, are significantly larger than us and enjoy trade name and trademark public recognition,
as well as greater resources, scale, and competitive advantages, among other substantial factors, as compared to us. In addition, our
cellular competitors also include numerous smaller regional carriers, existing MVNOs and ETCs, such as Metro PCS, Cricket Wireless, TracFone
Wireless, QLink Wireless, TruConnect, and Assurance Wireless, many of which offer or may offer cellular, mobile data, Lifeline and EBB
services along with no-contract postpaid and prepaid service plans. Our CPaaS competitors include, but are not limited to, Twilio, Plivo,
Bandwidth, Thinq, VoIP Innovations, Telnyx, Coredial, Vonage/Nexmo, CLX Comm, Genband Kandy, Tropo, Telestax, 2600Hz, and Signal Wire.
Competitive factors within the telecommunications industry include pricing, market saturation, service and product offerings, customer
experience, network investment and quality, development and deployment of technologies, and regulatory changes. Some competitors have
shown a willingness to use aggressive pricing as a source of differentiation. Other competitors have sought to add ancillary services,
like mobile video, to enhance their offerings. Taken together, the competitive factors we face continue to put pressure on margins as
companies compete to retain their current customer base and continue to add new developments, many proprietary or patented, and customers.

 Need for any Governmental Approval of Principal
Products or Services 

 On October 23, 2018, the FCC approved our acquisition
of IM Telecom, an FCC licensed wireless Lifeline carrier. In 1985, during the Reagan administration, the FCC established the Lifeline
Assistance program through generic powers afforded the FCC under Communications Act of 1934. Cellular service was added to the Lifeline
program in 2009. Approximately nineteen (19) ETCs hold an FCC approved wireless reseller Lifeline Compliance Plan, but only about twelve
(12) are active today. The FCC has not approved any new wireless reseller Lifeline Compliance Plans since 2012. Approximately one-half
of our future gross revenues may come from government subsidized mobile voice and mobile data service.

 Existing and Probable Government Regulation to Our Current and Intended
Business 

 The FCC has a number of complex requirements and proceedings
that affect our operations and that could increase our costs or diminish our revenues. For example, the FCC has rules regarding provision
of 911 and E-911 services, porting telephone numbers, roaming, disabilities access, privacy and cyber security, consumer protection, and
the universal service and Lifeline programs, including eligibility, reimbursement and program requirements. Many of these and other issues
are being considered in ongoing

 7 

 proceedings, and we cannot predict whether or how
such actions will affect our business, financial condition, or results of operations. Our ability to provide services and generate revenues
could be harmed by adverse regulatory action or changes to existing laws and regulations. In addition, regulation of companies that offer
competing services can impact our business indirectly.

 Smaller Reporting Company 

 We are subject to the reporting requirements of Section
13 of the Exchange Act, and we are subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting
company.” That designation will relieve us of some of the informational requirements of Regulation S-K and Article 8
of Regulation S-X of the SEC.

 Emerging Growth Company 

 In 2020, our “emerging growth company”
designation as defined in the “Jumpstart Our Business Startups Act of 2012,” or the “JOBS Act,” expired as
of the fifth anniversary of our initial registered public offering. During our “emerging growth company” designation we did
not utilize any financial statement waivers as a result of that designation.

 Sarbanes/Oxley Act 

 We are also subject to the Sarbanes-Oxley Act of 2002. The
Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies
and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management
for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit,
and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’
appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls;
auditor attestation to management’s conclusions about internal controls; prohibits certain insider trading during pension fund blackout
periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud,
among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act could substantially increase our legal and accounting
costs.

 Exchange Act Reporting Requirements 

 Section 14(a) of the Exchange Act requires all companies
with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the SEC regarding
proxy solicitations, as outlined in Regulation 14A. Matters submitted to our shareholders at a special or annual meeting thereof or pursuant
to a written consent will require us to provide our shareholders with the information outlined in Schedules 14A or 14C of Regulation 14;
preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this
information are forwarded to our shareholders.

 We are required to file annual reports on Form 10-K
and quarterly reports on Form 10-Q with the SEC on a regular basis, and are required to timely disclose certain material events (e.g.,
changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business;
and bankruptcy) in a Current Report on Form 8-K.

 Number of Total Employees and Number of Full-Time
Employees 

 Across our companies, we have a total of twenty-three
(23) employees; twenty-one (21) full-time employees and two (2) part-time employees.

 Subsidiaries 

 We have three (3) wholly owned operating subsidiaries:
KonaTel, Inc., a Nevada corporation; IM Telecom, LLC (d/b/a Infiniti Mobile) an Oklahoma limited liability company; and Apeiron Systems,
Inc., a Nevada corporation. Our subsidiary KonaTel, Inc., a Nevada corporation, has remained inactive since the start of 2021.

 Additional Information 

 You may read and copy any materials that we file with
the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all the reports
or registration statements that we have previously filed electronically with the SEC at its Internet site at www.sec.gov in the Edgar
Archives of the SEC.

 8 

 ITEM 1A. RISK FACTORS 

 RISK FACTORS 

 As we are a “smaller reporting company”
as defined by Section 12b-2 of the Exchange Act, we are not required to provide the information under this Item or in our annual or quarterly
reports filed with the SEC; however, we believe this information may be of value to our shareholders or potential investors in our Company
for this filing. These risk factors should be considered in light of the caption “Forward-Looking Statements” at the forepart
of this Annual Report. We reserve the right not to provide risk factors in our future filings. Our primary risk factors and other considerations
include:

 Risks Related to the Company 

 We have a limited operating history and cannot
ensure the long-term successful operation of our business or the execution of our business plan. 

 We have a limited operating history, having commenced
our business operations in November of 2014, and our wireless marketing technology and solutions are an evolving business offering. As
a result, investors have a limited track record by which to evaluate our future performance. Our prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets. We may be unable
to successfully accomplish and fund our current endeavors, which would materially impact our ability to implement our business plan, including:

 · establishing and maintaining broad market acceptance of our technology,
solutions, services and platforms, and converting that acceptance into direct and indirect sources of revenue; 

 · establishing and maintaining adoption of our technology, solutions, services
and platforms in and on a variety of environments, experiences and types of devices; 

 · timely and successfully developing new technologies, solutions, services
and platform features, and increasing the functionality and features of our existing technologies, solutions, services and platform offerings; 

 · developing technologies, solutions, services and platforms that result in
a high degree of customer satisfaction and a high level of end-customer usage; 

 · successfully responding to competition, including competition from emerging
technologies and solutions; 

 · developing and maintaining strategic relationships to enhance the distribution,
features, content and utility of our technologies, solutions, services and platforms; 

 · identifying, attracting and retaining talented engineering, network operations,
program management, technical services, creative services and other personnel at reasonable market compensation rates in the markets in
which we employ such personnel; and 

 · integration of potential evolving offerings of products and acquisitions. 

 Our business strategy may be unsuccessful, and we
may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully accomplish these tasks,
our business will be harmed, and we may fail.

 For the year end December 31, 2021, we reported gross revenues of $12,834,844,
cost of revenues of $7,105,464, operating expenses of $5,091,033, other expenses of ($15,361) and net income of $622,986. We anticipate
additional revenue and net income growth in 2022, further reducing our accumulated deficit balance.

 For the prior year ended December 31, 2020, we reported
gross revenues of $9,358,999, cost of revenues of $5,823,552, operating expenses of $3,895,466, other income of $598,637 and net income
of $238,618.

 For the year ended December 31, 2021, we had $833,016
in non-cash depreciation/amortization expense, which was mostly exhausted at the end 2021. As of December 31, 2021, our accumulated deficit
was $5,345,504.

 9 

 The United States Government’s dissolution
or reduction of the Lifeline Program or the elimination of “resellers” of these services would have a substantial adverse
effect on our current and planned business operations. 

 · Considering there are approximately 6,600,000 current Lifeline users and
approximately 34,300,000 eligible Lifeline customers (according to USAC), this would be a draconian move; however, it is a possibility.
Federal or state governmental agencies could also significantly reduce or delay Lifeline reimbursement payments to Lifeline carriers,
forcing Lifeline carriers to continue to provide minimum Lifeline services and at a reduced reimbursement rate. Depending on any reimbursement
reduction, a reduction would diminish earnings and could make Lifeline unprofitable. The FCC established the Lifeline program in 1985
to ensure that qualifying low-income consumers could afford phone service and the opportunities and security it provides. Congress supported
and strengthened Lifeline in the Telecommunications Act of 1996, requiring that affordable service and advanced communications be available
to low-income consumers across the country. 

 · Lifeline and EBB require several factors to be successful. The impact of
negative governmental changes and negative national carrier pricing have been outlined above. In addition to those two risks, an interruption
to the supply of low-cost phones and/or a reduction of Lifeline agents (no access to or not enough access to agents) would have a negative
impact on Lifeline and/or EBB. 

 · Adequate equipment financing and available cash resources to pay up-front
commission payments (sometimes required) is critical to facilitate Lifeline, EBB, B2B and retail sales, and the lack of these resources
would have a negative impact on our business. 

 The increase in the number of resellers of services
and products that we provide by any national carrier could saturate the markets and market segments of our targeted customers, which could
affect our business adversely. 

 Market saturation could occur when a national carrier
allows too many resellers into the market and margins drop so low where the reseller business model is no longer profitable, and our business
may suffer and fail.

 A decrease in the amount of wholesale voice and
mobile data available to purchase from wholesale aggregators could cause a substantial reduction in our business and customers. 

 We purchase a portion of our mobile data service (“IOT”)
directly from national carriers and purchase the remainder of our wholesale voice and mobile data from wholesale aggregators or MVNEs
like PWG and Telispire. If one of these aggregators vacated the market, such action could strand many resellers of these services,
like us, and could substantially reduce our current and anticipated revenues from our IoT or cellular service.

 A wireless reseller could gain a significant price
advantage over other wireless resellers by entering into a special national carrier pricing agreement not available to other resellers. 

 Any special national carrier pricing agreement that
was not available to us would allow that particular reseller to “undercut” all other resellers. This scenario could
also apply to a national wireless carrier acquiring a reseller then allowing that reseller to operate with special wholesale pricing not
available to other resellers. This scenario has happened in the past with Cricket Communications, Inc. and Ultra Mobile, resellers
that were acquired by a national carrier. Any such event could have a substantial adverse impact on our business and revenues.

 Adequate funds for our current and intended operations
may not be available, requiring us to raise additional financing or curtail our current and planned operations significantly. 

 We might be required to raise additional funding through
public or private debt or equity financings. Any additional equity financings may be dilutive to our current shareholders and may be completed
at a discount to the then-current market price of our common stock. Debt financing, if available, would likely involve restrictive covenants
on our operations or pertaining to future debt or equity financing arrangements. Nevertheless, we may not successfully complete any future
equity or debt financing. Adequate funds for our operations, whether from financial markets, collaborative or other arrangements, may
not be available when needed or on terms attractive to us. If adequate funds are not available, our plans to operate our business may
be adversely affected, and we could be required to curtail our activities significantly and/or cease operations.

 We will be unable to implement our business plan if
we cannot raise sufficient capital and may be required to pay higher prices for capital based on the current illiquid market for our common
stock, among other factors.

 10 

 We may need to raise additional capital to implement
our business plan and meet financial obligations as they come due. If we do need to raise additional capital, and cannot attract sufficient
capital from customary sources, we may be required to pay a higher price for capital. 

 Factors affecting the availability and price of capital
may include the following:

 · the availability and cost of capital generally; 

 · our financial results; 

 · the experience and reputation of our management team; 

 · market interest, or lack of interest, in our industry, industry segments
and our business plan; 

 · the trading volume of, and volatility in, the market for our common stock,
assuming there is a reasonable trading market for our common stock; 

 · our ongoing success, or failure, in executing our business plan; 

 · the amount of our capital needs; and 

 · the amount of debt, options, warrants and convertible securities that may
be outstanding in our Company at any time. 

 A national carrier (Verizon, AT&T, T-Mobile
or Sprint) could dissolve, reduce or restrict any wholesale program, agent program or reseller program. This includes both voice
and data IoT, which would adversely affect our business. 

 We, like all voice and data resellers, are dependent
on the FCC licensed national carriers to provide services that can be resold for a profit. The wireless carriers own/control their
respective network (towers) and provide the wireless service. Resellers do not own their own network and are dependent on the national
carriers to provide a reseller program. These carriers could eliminate a reseller program or implement new policies that could reduce
profit margins making any applicable program unprofitable. They could also implement market restorations reducing markets we could
sell into, which would have a direct adverse effect on our current and future prospects.

 Similarly, one of these national carriers could reduce
their own retail pricing, with no corresponding reduction in their wholesale pricing, which could create a situation where a reseller
is unable to make enough profit to sustain operations. This has happened in the past with Verizon until Verizon’s wholesale
(reseller) division finally reduced wholesale prices.

 We may be unable to meet our current or future obligations
or to adequately exploit existing or future opportunities if we cannot raise sufficient capital. If we are unable to obtain any required
capital for an extended period of time, we may be forced to discontinue or curtail our business operations and we may fail.

 We expect that there will be significant consolidation
in our industry. Our failure or inability to lead that consolidation would have a severe adverse impact on our access to financing, customers,
technologies, and human resources. 

 Our industry is currently composed of a small number
of substantial entities, and a relatively large number of small businesses, no single one of which is dominant, or which provides integrated
solutions and product offerings incorporating much of the available technology. Accordingly, we believe that substantial consolidation
of the smaller companies may occur in our industry in the near future as has occurred with many larger participants. If we do not play
a positive role in that consolidation, either as a leader or as a participant whose capabilities and offerings are merged into a larger
entity, we may be left out of this process, with product and service offerings of limited value compared with those of our competitors.
Moreover, even if we lead the consolidation process, the market may not validate the decisions we make in that process and our business
will suffer and may fail.

 Our success depends on our product and service
technologies achieving and maintaining widespread acceptance in our targeted markets. 

 Our success will depend to a large extent on broad
market acceptance of our telecommunications solutions among our current and prospective customers. Our prospective customers may be unwilling
to use our solutions for a number of other reasons, including preference for static advertising, lack of familiarity with our technologies,
preference for competing technologies or perceived lack of reliability. We believe that the acceptance of our technologies by prospective
customers will depend primarily on the following factors:

 · our ability to demonstrate the economic and other benefits attendant to
our products and services; 

 11 

 · our customers becoming comfortable with using our telecommunications technologies;
and 

 · the reliability of these services and technologies. 

 Because we do not have long-term purchase commitments
from our customers, the failure to obtain anticipated orders or the deferral or cancellation of commitments could have an adverse effect
on our business and future prospects. 

 Our business is characterized by short-term purchase
orders and contracts that do not require that purchases be made. This makes forecasting our sales difficult. The failure to obtain anticipated
orders and deferrals or cancellations of purchase commitments because of changes in customer requirements, or otherwise, could have a
material adverse effect on our business, financial condition and results of operations. We have experienced such challenges in the past
and may experience such challenges in the future.

 Most of our contracts are terminable by our customers
with limited notice and without penalty payments, and early terminations could have a material adverse effect on our business, operating
results, and financial condition. 

 Most of our contracts are terminable by our customers
following limited notice and without early termination payments or liquidated damages due from them. In addition, each stage of a project
often represents a separate contractual commitment, at the end of which the customer may elect to delay or not to proceed to the next
stage of the project. We cannot assure you that one or more of our customers will not terminate a material contract or materially reduce
the scope of any large project. The delay, cancellation, or significant reduction in the scope of a large project or a number of projects
could have a material adverse effect on our business, operating results, and financial condition.

 Our industry is characterized by frequent technological
change. If we are unable to adapt our products and services and develop new products and services to keep up with these rapid changes,
we will not be able to obtain or maintain market share and our business may fail. 

 We must respond to changing technology and industry
standards in a timely and cost-effective manner. We may not be successful in using new technologies, developing new products and services
or enhancing existing products and services in a timely and cost-effective manner.

 Furthermore, even if we successfully adapt our products
and services, these new technologies or enhancements may not achieve market acceptance. The market for our products and services
is characterized by rapidly changing technology, evolving industry standards, changes in customer needs, heavy competition, and frequent
new product and service introductions. If we fail to develop new products and services or modify or improve our existing products and
services in response to these changes in technology, customer demands or industry standards, our products and services could become less
competitive or obsolete.

 A portion of our business involves the use of software
technologies that we have developed or licensed. Industries involving the ownership and licensing of software-based intellectual property
are characterized by frequent intellectual property litigation, and we could face claims of infringement by others in the industry. Such
claims are costly and add uncertainty to our operational results. 

 A portion of our business involves our ownership and/or
licensing of software. This market space is characterized by frequent intellectual property claims and litigation. We could be subject
to claims of infringement of third-party intellectual property rights resulting in significant expense and the potential loss of our own
intellectual property rights. From time to time, third parties may assert copyright, trademark, patent, or other intellectual property
rights to technologies that are important to our business.

 Any litigation to determine the validity of these
claims, including claims arising through our contractual indemnification of our business partners, regardless of their merit or resolution,
would likely be costly and time consuming and divert the efforts and attention of our management and technical personnel. If any such
litigation resulted in an adverse ruling, we could be required to:

 · pay substantial damages; 

 · cease the development, use, licensing or sale of infringing products; 

 · discontinue the use of certain technologies; or 

 · obtain a license under the intellectual property rights of the third-party
claiming infringement, which license may not be available on reasonable terms or at all. 

 12 

 Our business may be adversely affected by malicious applications that
interfere with, or exploit security flaws in, our products and services. 

 Our business may be adversely affected by malicious
applications that make changes to our customers’ computer systems and interfere with the operation and use of our products or products
that impact our business. These applications may attempt to interfere with our ability to communicate with our customers’ devices.
The interference may occur without disclosure to or consent from our customers, resulting in a negative experience that our customers
may associate with our products and services. These applications may be difficult or impossible to uninstall or disable, may reinstall
themselves and may circumvent other applications’ efforts to block or remove them. The ability to provide customers with a superior
interactive marketing technology experience is critical to our success. If our efforts to combat these malicious applications fail, or
if our products and services have actual or perceived vulnerabilities, there may be claims based on such failures and our reputation may
be harmed, which would damage our business and financial condition and our ability to continue our business.

 We compete with other companies that have substantially
greater resources, and we are at a distinct competitive disadvantage in our chosen industry. 

 The market for our products and service solution technologies
is generally highly competitive, and we expect competition to increase in the future. Some of our competitors or potential competitors
have significantly greater financial, technical, and marketing resources than we have. These competitors may be able to respond more rapidly
than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development,
promotion, and sale of their products than we do.

 We expect competitors to continue to improve the performance
of their current products and to introduce new products, services, and technologies. Successful new product and service introductions
or enhancements by our competitors could reduce sales and the market acceptance of our products and services, cause intense price competition
or make our products and services obsolete. To be competitive, we must continue to invest significant resources in research and development,
sales and marketing and customer support. If we do not have sufficient resources to make these investments or are unable to make the technological
advances necessary to be competitive, our competitive position will suffer, and we may fail. Increased competition could result in price
reductions, fewer customer orders, reduced margins, and loss of market share. Our failure to compete successfully against current or future
competitors could also adversely affect our business and financial condition.

 Our future success depends on key personnel and
our ability to attract and retain additional personnel. 

 Our success is dependent upon attracting and maintaining
key personnel, including our founder, Chairman and CEO, D. Sean McEwen, and various key executive employees, including Joshua Ploude from
whom we acquired Apeiron Systems and who serves as CEO of Apeiron Systems, and Charles D. Griffin, our President and COO, among others,
some of whom are listed in Part III, Item 10 of this Annual Report.

 Further, if we fail to retain our key personnel or
to attract, retain, and motivate other qualified employees, our ability to maintain and develop our business may be adversely affected.
Our future success depends significantly on the continued service of our key technical, sales, and senior management personnel and their
ability to execute our growth strategy. The loss of the services of our key employees could harm our business. We may be unable to retain
our employees or to attract, assimilate, and retain other highly qualified employees who could migrate to other employers who offer competitive
or superior compensation packages.

 Unpredictability in financing markets could impair
our ability to grow our business through acquisitions. 

 We anticipate that opportunities to acquire similar
businesses will materially depend on the availability of financing alternatives with acceptable terms. As a result, poor credit and other
market conditions or uncertainty in financial markets could materially limit our ability to grow through acquisitions since such conditions
and uncertainty make obtaining financing more difficult.

 Our reliance on information management and transaction
systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service provider
experiences a security breach. 

 Effective information security internal controls are
necessary for us to protect our sensitive information from illegal activities and unauthorized disclosure, in addition to preventing service
attacks and corruption of our data. Further, we rely on the information security internal controls maintained by our outsourced service
provider. Breaches of our information management system could also adversely affect our business reputation. Finally, significant information
system disruptions could adversely affect our ability to effectively manage operations or reliably report results.

 13 

 Because our technology, products, platforms, and services are complex
and are deployed in and across complex environments, they may have errors or defects that could seriously harm our business. 

 Our technology, proprietary platforms, products, and
services are highly complex and are designed to operate in and across data centers, large and complex networks and other elements of the
digital media workflow that we do not own or control. On an ongoing basis, we need to perform proactive maintenance services on our platform
and related software services to correct errors and defects. In the future, there may be additional errors and defects in our software
that may adversely affect our services. We may not have in place adequate reporting, tracking, monitoring, and quality assurance procedures
to ensure that we can detect errors in our software in a timely manner. If we are unable to efficiently and cost-effectively correct errors
or other problems that may be identified, or if there are unidentified errors that allow persons to improperly access our services, we
could experience loss of revenues and market share, damage to our reputation, increased expenses and legal actions by our customers and
our business may fail.

 We may have insufficient network or server capacity
for our current and planned business, which could result in interruptions in our services and the loss of revenues resulting in a negative
impact on our business. 

 Our operations are dependent, in part, upon network
capacity provided by our telecommunications network and third-party telecommunications networks; data center services provider owned and
leased infrastructure and capacity; server capacity located at the data center services provider partner or partners; and our own infrastructure
and equipment. Collectively, this infrastructure, equipment and capacity must be sufficiently robust to handle all of our customers’
wireless requirements, particularly in the event of unexpected surges in high-definition video traffic and network services incidents.
We may not be adequately prepared for unexpected increases in bandwidth and related infrastructure demands from our customers. In addition,
the bandwidth we have contracted to purchase may become unavailable for a variety of reasons, including payment disputes, outages, or
such service providers going out of business. Any failure of these service providers or our own infrastructure to provide the capacity
we require due to financial or other reasons may result in a reduction in or the interruption of service to our customers, leading to
an immediate decline in revenue and possible additional decline in revenue, as a result of subsequent customer losses, which could result
in the cessation of all or part of our business operations.

 We do not have sufficient capital to engage in
substantial research and development, which may harm our long-term growth. 

 In light of our limited resources in general, we have
made no substantial investments in research and development. This conserves capital in the short term. In the long term, as a result of
our limited investment in research and development, our technologies and product offerings may not keep pace with the market, and we may
lose any existing competitive advantage. Over the long term, this may harm our revenue growth and our ability to be profitable.

 Our business operations are susceptible to interruptions
caused by events beyond our control. 

 Our business operations are susceptible to interruptions
caused by events beyond our control. We are vulnerable to the following potential problems, among others:

 · our platform, technologies, products, services and underlying infrastructure,
or that of our key suppliers, may be damaged or destroyed by events beyond our control, such as fires, earthquakes, pandemics, war, floods,
power outages or telecommunications failures; 

 · we and our customers and/or partners may experience interruptions in service
as a result of the accidental or malicious actions of Internet users, hackers, hostile nation states or current /former employees; 

 · we may face liability for transmitting viruses to third parties that damage
or impair their access to computer networks, programs, data or information. Eliminating computer viruses and alleviating other security
problems may require interruptions, delays or cessation of service to our customers; and 

 · the failure of our systems or those of our suppliers may disrupt service
to our customers (and from our customers to their customers), which could materially impact our operations (and the operations of our
customers), adversely affecting our relationships with our customers and lead to lawsuits and contingent liabilities. 

 The occurrence of any of the foregoing could result
in claims for consequential and other damages, significant repair and recovery expenses and extensive customer losses and otherwise have
a material adverse effect on our business, financial condition, and results of operations.

 14 

 Our business operations could be impacted by the current world health
crisis. 

 On January 30, 2020, the World Health Organization
declared the coronavirus (the “Covid-19”) outbreak a “Public Health Emergency of International Concern,” and on
March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions
on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The coronavirus and
actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of
many countries, including the geographical areas in which we operate. While it is unknown how long these conditions will last and what
the complete financial affect will be on us, to date, and as a result of actions taken by management to mitigate a material impact to
our financial statements or our operational results, we are not currently experiencing a material impact to our financial statements or
our results of operations; however, a pandemic typically results in social distancing, travel bans and quarantines, which may result in
limited access to our facilities, customers, management, support staff and professional advisors. These, in turn, may not only impact
our operations, financial condition and demand for our services, but our overall ability to react timely to mitigate the impact of this
event. Given our small staff, if a key member of our team were disabled by COVID-19, it could have a material negative impact on
our business. Also, it may substantially hamper our efforts to provide our investors with timely information and to comply with
our filing obligations under the Exchange Act with the SEC. If this pandemic were to last a prolonged period of time, we could see a decline
in revenue due to the closure of customer businesses, which could then impact our ability to pay our short-term debts. Our concentration
of revenue from a small group of Apeiron Systems’ customers makes it reasonably possible that we are vulnerable to the risk of a
long-term severe impact. Our dependence on certain suppliers to provide equipment to be distributed or sold to our customers could also
be impacted if inventory shortages occur due to import or export restrictions resulting from the pandemic.

 General global market and economic conditions may have an adverse impact
on our operating performance and results of operations. 

 Our business has been and could continue to be affected
by general economic and market conditions. Weakness in the United States and worldwide economy could have a negative effect on our operating
results. Additionally, in a down-cycle economic environment, we may experience the negative effects of increased competitive pricing pressure,
customer loss, slowdown in commerce over the Internet and corresponding decrease in traffic delivered over our network and failures by
our customers to pay amounts owed to us on a timely basis or at all. Suppliers on which we rely for equipment, field services, servers,
bandwidth, co-location, and other services could also be negatively impacted by economic conditions that, in turn, could have a negative
impact on our business operations or revenues. Flat or worsening economic conditions may harm our operating results and financial condition.

 The markets in which we operate are rapidly emerging,
and we may be unable to compete successfully against existing or future competitors to our business. 

 The markets in which we operate are becoming increasingly
competitive. Our current competitors generally include those that offer similar products and services. These competitors, including future
new competitors who may emerge, may be able to develop comparable or superior solution capabilities, platforms, services, products and/or
a series of services that provide a similar or more robust set of features and functionality than the technologies, products, and services
we offer. If this occurs, we may be unable to grow as necessary to make our business profitable.

 Regardless of whether we have superior products, many
of these current and potential future competitors have a longer operating history in their current respective business areas and greater
market presence, brand recognition, engineering, and marketing capabilities, and financial, technological and personnel resources than
we do. Existing and potential competitors with an extended operating history, even if not directly related to our business, have an inherent
marketing advantage because of the reluctance of many potential customers to entrust key operations to a company that may be perceived
as unproven or in the early stage of its development. In addition, our existing and potential future competitors may be able to use their
extensive resources:

 · to develop and deploy new products and services more quickly and effectively
than we can; 

 · to develop, improve and expand their platforms and related infrastructures
more quickly than we can; 

 · to reduce costs, particularly hardware costs, because of discounts associated
with large volume purchases and longer-term relationships and commitments; 

 · to offer less expensive products, technologies, platforms and services as
a result of a lower cost structure, greater capital reserves or otherwise; 

 15 

 · to adapt more swiftly and completely to new or emerging technologies and
changes in customer requirements; 

 · to take advantage of acquisition and other opportunities more readily; and 

 · to devote greater resources to the marketing and sales of their products,
technology, platform, and services. 

 If we are unable to compete effectively in our various
markets, or if competitive pressures place downward pressure on the prices at which we offer our products and services, our business,
financial condition and results of operations may suffer and our business may fail.

 Compliance with the reporting requirements of federal
securities laws can be expensive. 

 We are a public “reporting company” in
the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities
laws, rules and regulations, including compliance obligations under the Sarbanes-Oxley Act of 2002. The costs of preparing and filing
annual and quarterly reports and other information with the SEC and furnishing audited and reviewed financial statements in reports filed
with the SEC, along with required communications with our shareholders, are substantial. We have incurred and expect to continue to incur
costs associated with becoming and continuing as a public company, including, but not limited to, legal, accounting, filing, and other
related costs and expenses. Failure to comply with the applicable securities laws could result in private or governmental legal action
against us or our officers and directors, which could have a detrimental impact on our business and financial condition, the value of
our common stock and the ability of our shareholders to resell their common stock.

 We do not intend to pay dividends on our common
stock for the foreseeable future. 

 All future revenues are anticipated to be utilized
for research, development, and the furtherance of our business plan and our technologies, products, services and platform, and accordingly,
it is highly unlikely that you will receive any dividends from us in the near future, if ever.

 We do not intend to provide guidance about future events in the foreseeable
future. 

 Our Board of Directors anticipates adopting a policy
that will preclude us from providing guidance about matters that may happen in the foreseeable future, though any such policy will not
prohibit our responsibilities to provide forward-looking information to our shareholders and to the public in our Exchange Act filings
with the SEC, including our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
required in a number of SEC reports and registration statements.

 Risks Related to Our Common Stock 

 There is a limited active trading market for our
shares of common stock. 

 In general, there has been a limited trading volume
in our common stock. The small trading volume will likely make it difficult for shareholders to sell their shares as and when they choose.
Furthermore, small trading volumes are generally understood to depress market prices. As a result, you may not always be able to resell
shares of our common stock publicly at the time and prices that you feel are fair or appropriate.

 Additionally, if we do not timely file our reports
required to be filed with the SEC under the Exchange Act, broker-dealers may not be able or willing to trade our common stock, and the
OTC Markets will post adverse warnings on its website about such failures, which, unless such failures are corrected by us, could have
an additional adverse impact on the viability of any market that may develop for our common stock. Other adverse warnings of the OTC Markets
under their current and future policies could similarly have an adverse effect on any market for our common stock, and there is no assurance
that we will be able to satisfy comments or concerns of the OTC Markets, if any are expressed.

 If an active market for our common stock develops,
there is a significant risk that the Company’s common stock price may fluctuate dramatically in the future in response to any of
the following factors, some of which are beyond our control, including, but not limited to: 

 · variations in our quarterly operating results; 

 · announcements that our revenue or income are below analysts’ expectations; 

 · general economic slowdowns; 

 16 

 · sales of large blocks of our common stock by insiders and others; and 

 · announcements by us or our competitors of significant contracts, acquisitions,
strategic partnerships, joint ventures or capital raises. 

 Our common stock is subject to the “penny
stock” rules of the SEC, which may make it more difficult for shareholders to sell our common stock. 

 The SEC has adopted Rule 15g-9, which established
the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that
a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receive from the investor
a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 In order to approve a person’s account for transactions
in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person and make a
reasonable determination that the transactions in penny stocks are suitable for that person and that the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on
which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.

 Generally, brokers may be less willing to execute
transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of
the Company’s common stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock.

 Because of increased regulatory efforts of governmental
and quasi-governmental agencies regarding the trading of securities that are deemed to be penny stocks, the cost and expense of depositing
and inducing a broker-dealer to effect sales of these shares is very costly, which can be in excess of value of the shares sought to be
sold, and often includes requirements of legal opinions of both the selling shareholder’s counsel and the broker-dealer’s
counsel, both at the expense of the selling shareholder. 

 Currently, broker-dealers require legal opinions of
shareholders of almost all over-the-counter stocks to deposit and sell these shares, and all of these legal opinions are required to be
paid for by the shareholder; and often, two (2) legal opinions are required, one (1) from the shareholder’s legal counsel and one
(1) from the broker-dealer’s legal counsel. This policy has been required of mostly all low-priced over-the-counter shares, regardless
of whether the shares have been registered with the SEC, or whether there is no legend on the stock certificate representing the shares
and always if the shares are designated as “restricted securities.” Larger, national broker-dealers will generally not even
trade these securities. The high cost of these types of legal opinions is often more than the value of the shares sought to be sold, and
the process can take two (2) to three (3) weeks or more. Accordingly, shareholders with limited shares of low-priced stocks will be unable
to economically sell their shares, regardless of whether an “established trading market” for the shares exists, and if they
could sell their shares, the required selling process will inhibit their ability to sell the shares when they desire to sell their shares.

 Because we became public by means of a reverse
acquisition, we may not be able to attract the attention of brokerage firms. 

 Because we became public through a “reverse
acquisition,” securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage
firms to recommend the purchase of our common stock. Moreover, no assurance can be given that brokerage firms will want to conduct capital
raises on our behalf, presently or in the future.

 Our investors’ ownership in the Company may
be diluted in the future. 

 In the future, we may issue additional authorized
but previously unissued equity securities, resulting in the dilution of ownership interests of our present shareholders. We expect to
need to issue a substantial number of shares of our common stock or other securities convertible into or exercisable for our common stock
in connection with hiring or retaining employees, future acquisitions, raising additional capital in the future to fund our operations
and other business purposes. We currently offer incentive stock options for our officers, directors and certain significant employees
and may extend this policy to others. Additional shares of common stock issued by us in the future will dilute an investor’s investment
in the Company.

 17 

 Directors, executive officers, principal shareholders,
and affiliated entities own a significant percentage of our capital stock, and they may make decisions that our shareholders do not consider
to be in their best interests. 

 As of the date of this Annual Report, D. Sean McEwen,
our Chairman and Chief Executive Officer, beneficially owns approximately 38% of our issued and outstanding shares of common voting stock
by reason of his personal holdings. This percentage does not include certain vested incentive stock options that can be exercised within
sixty (60) days of the date of this Annual Report, all of which options are described under the heading “Outstanding Equity Awards”
of the caption “Executive Compensation” in Part III, Item 11, below, and a portion of which are reflected in Mr. McEwen’s
beneficial ownership of shares of our common stock under the caption “Security Ownership of Certain Beneficial Owners and Management”
in Part III, Item 12 hereof. As a result, Mr. McEwen may have the ability to substantially control the election of our board of directors,
the outcome of issues requiring approval by our shareholders and other corporate actions. This concentration of ownership may also have
the effect of delaying or preventing a change in control of our Company that may be favored by other shareholders; and could prevent transactions
in which shareholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and
influence in management and board decision making could also harm the price of our capital stock by, among other things, discouraging
a potential acquirer from seeking to acquire shares of our capital stock, whether by making a tender offer or attempting to obtain control
of our Company. See the captions “Executive Compensation” and “Security Ownership of Certain Beneficial Owners
and Management” of Part III, Items 11 and 12, respectively, hereof.

 If we fail to maintain an effective system of internal
controls, we may not be able to accurately report our financial results in a timely manner or detect fraud. Consequently, investors could
lose confidence in our financial reporting, and this may adversely affect any trading price of our common stock that may then exist. 

 We must maintain effective internal controls to provide
reliable financial reports and to detect and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not
be able to manage our business as effectively as would be possible with an effective control system in place. We have not performed an
in-depth analysis to determine if historical undiscovered failures of internal controls exist and may in the future discover areas of
our internal controls that need improvement.

 We are continually in the process of evaluating our
internal controls for effectiveness as well as evaluating the need for additional internal controls. Failure to implement changes to our
internal controls that we may deem to be ineffective or any others that we may identify as necessary to maintain an effective system of
internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such
loss of confidence could have a substantial negative affect on the trading price of our common stock.

 ITEM 1B. UNRESOLVED STAFF COMMENTS 

 None.

 ITEM 2: PROPERTIES 

 We do not own any property.

 KonaTel, Inc. has a lease on the following property:

 On December 18, 2020, we entered into a lease of an
office suite in Plano, TX, which commenced on January 25, 2021. Lease payments were deferred until May 1, 2021. Commencing on May 1, 2021,
lease payments are $3,650 per month for the twelve (12)-month period ended April 30, 2022. The lease term is for five (5) years.

 Through our wholly owned subsidiary, IM Telecom, we
have a lease on the following property:

 Our Tulsa, Oklahoma retail storefront and office consisting
of approximately 1,100 square feet and located at 3401 East Admiral Place, Tulsa, Oklahoma 74115, is under a lease that commenced February
1, 2019, and expires on November 30, 2021, at monthly rent of $950 for 2019 and $1,000 for 2020 and 2021. This lease is currently on a
month-to-month term at a rate of $1,000 per month.

 Through our wholly owned subsidiary, Apeiron Systems, we have leases on
the following properties:

 Our Culver City, California office is subleased from
Chambers Design Group, consisting of approximately 1,636 feet, located at 5855 Green Valley Circle, Culver City, CA 90230, and expires
May14, 2022, at a monthly rent of $4,663.

 Our Johnstown, Pennsylvania office, consisting of
approximately 1,500 square feet and located at 112 Lindberg Ave, Johnstown, Pennsylvania 15905, is under a lease that commenced April
15, 2019, and is under a month-to-month term at a monthly rent of $1,073.

 18 

 ITEM 3: LEGAL PROCEEDINGS 

 We are not party to any material legal proceedings

 ITEM 4: MINE SAFETY DISCLOSURES 

 None; not applicable.

 PART II 

 ITEM 5: MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 

 Market Information 

 Until December 14, 2020, our common stock was quoted
on the OTC Pink Tier of the OTC Markets under the symbol “KTEL.” On December 14, 2020, our common was approved for up-listing
on the OTC Markets’ OTCQB® Venture Market or the OTCQB Tier. No assurance can be given that any established trading market for
our common stock will develop or be maintained.

 For any market that develops for our common stock,
the sale of shares of our common stock comprised of “restricted securities” pursuant to Rule 144 of the SEC, any other available
exemption from registration under the Securities Act or by registration under the Securities Act by members of management or others, including
any person to whom any such securities may be issued in the future, may have a substantial adverse impact on any such public market. For
information regarding the requirements of resales under Rule 144, see the heading “Rule 144” of this Item below

 The common stock that can be acquired under vested
and exercised incentive stock options that we have granted may also have an impact on any public trading market in our common stock. See
the heading “Outstanding Equity Awards” of the caption “Executive Compensation” in Part III, Item 11 hereof, for
a description of all of our outstanding incentive stock options.

 Also, see the heading “Risks Related to Our
Common Stock” of the caption “Risk Factors” in Part I, Item 1A hereof.

 The following table sets forth, for the periods indicated
over the last two (2) years, the high and low closing bid quotations, as reported by the OTC and OTCQB Markets, and represents prices
between dealers, does not include retail markups, markdowns, or commissions, and may not represent actual transactions:

 For the Years Ended December 31, 

 2021 
 2020 

 High 
 Low 
 High 
 Low 

 First Quarter 
 $ 0.77 
 $ 0.24 
 $ 0.19 
 $ 0.11 

 Second Quarter 
 $ 1.06 
 $ 0.39 
 $ 0.29 
 $ 0.11 

 Third Quarter 
 $ 0.91 
 $ 0.65 
 $ 0.19 
 $ 0.05 

 Fourth Quarter 
 $ 1.93 
 $ 0.82 
 $ 0.42 
 $ 0.05 

 These prices were obtained from OTC Markets and do
not necessarily reflect actual transactions, retail markups, mark downs or commissions.

 19 

 Rule 144 

 The following is a summary of the current requirements of Rule 144, excluding
issues related to companies that are or have ever been a “shell company”:

 Securities 
 
 Affiliate or Person Selling on Behalf of an Affiliate 
 
 Non-Affiliate (and has not been an Affiliate During the Prior Three Months) 
 
 Restricted Securities of Reporting Issuers 
 
 During six-month holding period – no resales
 under Rule 144 Permitted.

 After six-month holding period – may resell
 in accordance with all Rule 144 requirements including:

 *Current public information,

 Volume limitations,

 Manner of sale requirements for equity
 securities, and

 Filing of Form 144.

 *Current public information is continually required for resales
 under Rule 144 because the Company was a former “shell company.”

 During six-month holding period – no resales under Rule 144
 permitted.

 After six-month holding period but before one year – unlimited
 public resales under Rule 144 except that the current public information requirement still applies.

 After one-year holding period – unlimited public resales under
 Rule 144; need not comply with any other Rule 144 requirements.
 
 Restricted Securities of Non-Reporting Issuers 
 
 During one-year holding period – no resales
 under Rule 144 permitted.

 After one-year holding period – may resell
 in accordance with all Rule 144 requirements including:

 Current public information,

 Volume limitations,

 Manner of sale requirements for equity
 securities, and

 Filing of Form 144.
 
 During one-year holding period – no resales under Rule 144
 permitted.

 After one-year holding period – unlimited public resales under
 Rule 144; need not comply with any other Rule 144 requirements.
 
 Holders 

 We currently have 561 shareholders of record as of
December 31, 2021, not including an indeterminate number of shareholders who may hold their shares in “street name.”

 Dividends 

 We have not declared any cash dividends with respect
to our common stock, and do not intend to declare dividends in the foreseeable future. All future earnings are anticipated to be utilized
for research, development and the furtherance of our business plan and our technologies, products, services, and platform, and accordingly,
it is highly unlikely that you will receive any dividends from us in the near future, if ever.

 There are no material restrictions limiting, or that
are likely to limit, our ability to pay dividends on our securities.

 Recent Sales of Unregistered Securities; Use of Proceeds from Registered
Securities 

 There have been no sales by us of any unregistered securities during the
past two (2) years ended December 31, 2021, and 2020.

 Use of Proceeds of Registered Securities 

 None; not applicable.

 Purchases of Equity Securities by Us and Affiliated Purchasers 

 None; not applicable.

 ITEM 6: [RESERVED] 

 20 

 ITEM 7: MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

 When used in this Annual 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 Annual 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 further below under “Trends and Uncertainties,” and also 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 on page 6 of this Annual Report. In addition, we continue to pursue expanded market distribution
opportunities, development of new products and services, the addition of new lines of business (i.e., the FCC’s anticipated ACP
service expansion), and accretive acquisition opportunities that may enhance or expand our current product and service offerings.

 Comparison of the Year Ended December 31, 2021,
to the Year ended December 31, 2020 

 Results of Operations 

 In comparing our Statements of Operations between
the years ended December 31, 2021, and 2020, we grew revenue, realized increased costs of revenue and operating expenses, and increased
net income.

 For the year ended December 31, 2021, we had $12,834,844
in revenues from operations compared to $9,358,999 in the prior year ended December 31, 2020, for a total revenue increase of $3,475,845
in 2021. The increase in 2021 revenue was caused by an increase in both our Hosted Services and Mobile Services segments, with Mobile
Services expanding largely due to the introduction of the EBB program that added additional revenues for the distribution of high-speed
mobile data service to low-income consumers.

 For the year ended December 31, 2021, our cost of
revenue was $7,105,464 compared to $5,823,552 in the prior year ended December 31, 2020, for a cost of revenue increase of $1,281,912
in 2021. Our 2021 cost of revenue increase was primarily the result of increased network, handset and sales commission costs related to
distributing additional services.

 For the year ended December 31, 2021, we had a gross
profit of $5,729,380 compared to $3,535,447 in the prior year ended December 31, 2020, for a gross profit increase of $2,193,933 in 2021.

 For the year ended December 31, 2021, total operating
expenses were $5,091,033 compared to $3,895,466 in the prior the year ended December 31, 2020, for an increase of $1,195,567 in 2021.
This increase was due primarily to increases in payroll and related expenses resulting mostly from the hiring of management level operations
positions in both Apeiron Systems and IM Telecom.

 For the year ended December 31, 2021, other income
(expense) was ($15,361) compared to $598,637 in the prior year ended December 31, 2020 (see Note to of our Consolidated Financial Statements
included in this Annual Report).

 For the year ended December 31, 2021, we had net income
of $622,986 compared to $238,618 in the prior year ended December 31, 2020.

 Liquidity and Capital Resources 

 As of December 31, 2021, we had $932,785 in cash and
cash equivalents on hand.

 The ability to continue as a business is dependent
upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve
(12) months with revenues from our operations.

 In comparing liquidity between the years ending December
31, 2021, and 2020, cash increased by 30.4%. The increase was the result of improved revenues and margins. Liabilities and total overall
debt showed a 10% decrease in 2021 when compared to 2020. Our revolving lines of credit were eliminated through payments in 2020. Going
forward, growth from new service offerings is expected to

 21 

 provide additional liquidity for our business. Working
capital increased by $1,943,386 for the year ended December 31, 2021, resulting from increases in cash, accounts receivable and inventory.

 Our current ratio (current assets divided by current
liabilities) was 2.91 as of December 31, 2021, and 0.94 in 2020.

 Cash Flow from Operations 

 During the year ended December 31, 2021, and the year
ended December 31, 2020, cash flow provided by operating activities was $211,929 and $571,546, respectively. Decreased cash flows
provided by operating activities were primarily attributable to a material increase in inventory purchases to support increased distribution
of Mobile Services.

 Cash Flows from Investing Activities 

 During the year ended December 31, 2021, and the year
ended December 31, 2020, cash flow used in investing activities was $(10,000) and ($10,833), respectively. The cash used in investing
activities during 2021 was the result of the purchase of assets.

 Cash Flows from Financing Activities 

 During the year ended December 31, 2021, and the year
ended December 31, 2020, cash flow provided by (used in) financing activities was $15,661 and ($36,992), respectively. The funds provided
by financing were comprised of cash received from the exercise of incentive stock options in 2021 of $110,000 and proceeds received from
the PPP loans and notes payable of $548,900 in 2020. Cash flow used in financing activities in 2021 was ($94,339) for repayments of notes
payable and repayments of amounts due to a related party ($151,357); repayment of revolving lines of credit ($12,237); repayment of notes
payable ($112,168), and as part of the Apeiron Systems Merger Agreement’s “surplus net working capital settlement provision,”
a paid-in-full payment paid as a dividend to the two (2) former Apeiron Systems shareholders of ($310,130) in 2020.

 Going Concern 

 The Company generated net income of $622,986 during
the year ended December 31, 2021. We had two (2) consecutive years of net income, in 2021 and 2020. The Company experienced positive cash
flow of $217,590 and $523,721 in 2021 and 2020, respectively. The accumulated deficit as of December 31, 2021, was $5,345,504, which continues
to decline.

 The Company has continued to ameliorate any substantial
going concern doubt by generating additional cash flow in 2021 and 2020, respectively, and generating net income in 2021 and 2020. Reduction
of costs in our Hosted Services and Mobile Services businesses and increase in revenues from the growth of our Mobile Services customer
base has allowed the Company to retire debt and other lines of credit, all of which have contributed to an improvement in our working
capital, without the use of lines of credit, borrowings or shareholder dilution.

 Off-Balance Sheet Arrangements 

 The Company entered into an off-balance sheet arrangement
as a result of the purchase of Apeiron Systems. The former Apeiron Systems stockholders had a $1.00 “Guaranteed Value” if
the Company’s common stock trading price did not reach or exceed $1.00 per share over a ten (10) consecutive day period between
December 31, 2020 and ending on December 31, 2021. This condition was fully satisfied effective June 16, 2021. See the Company’s
8-KA Current Report dated and filed with the SEC on that date and which is available by Hyperlink in Part IV, Item 15.

 Critical Accounting Policies and Estimates 

 Use of Estimates 

 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. Actual results could differ from those estimates.
Significant estimates in the accompanying financial statements include the amortization period for intangible assets, valuation and impairment
valuation of intangible assets, depreciable lives of the website and property and equipment, valuation of warrant and beneficial conversion
feature debt discounts, valuation of share-based payments and the valuation allowance on deferred tax assets.

 22 

 Impairment of Long-Lived
Assets 

 We account for long-lived 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.

 Fair Value of Financial
Instruments and Fair Value Measurements 

 We measure their financial assets and liabilities
in accordance with generally accepted accounting principles. For certain of our financial instruments, including cash, accounts payable,
accrued expenses escrow liability and short-term loans the carrying amounts approximate fair value due to their short maturities.

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

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

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

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

 Leases 

 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. We adopted the updated guidance on
January 1, 2019 on a prospective basis and as a result, prior period amounts were not adjusted to reflect the impacts of the updated guidance.
In addition, as permitted under the transition guidance within the new standard, prior scoping and classification conclusions were carried
forward for leases existing as of the adoption date.

 Revenue Recognition 

 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 U.S. GAAP. The standard update also amends current
guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct
costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service.
Revenue from these services is generally recognized monthly as the services are provided. Such revenue is recognized based on usage, which
can vary from month to month or at a contractually committed amount, net of credits or other billing adjustments. Advance billings for
future service in the form of monthly recurring charges are not recognized as revenue until the service is provided.

 Stock-Based Compensation 

 We record 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.

 23 

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

 Income Taxes 

 We account for income taxes in accordance with FASB
ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and
their respective tax bases.

 Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered
or settled.

 The effect of a change in tax rules on deferred tax
assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not”
that a deferred tax asset will not be realized.

 Tax benefits of uncertain tax positions are recognized
only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. We had no
liability for uncertain tax positions as of December 31, 2021, and 2020. Interest and penalties, if any, related to unrecognized tax benefits
would be recognized as interest expense. We do not have any accrued interest or penalties associated with unrecognized tax benefits, nor
was any significant interest expense recognized during the years ended December 31, 2021, and 2020.

 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 available to common stockholders 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.

 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 

 Item 305 of SEC Regulation S-K provides that certain
 registrants are required to categorize market risk sensitive instruments into instruments entered
into for trading purposes and instruments entered into for purposes other than trading purposes. Within both the trading and other than
trading portfolios, separate quantitative information shall be presented, to the extent material, for each market risk exposure category
( i.e. , interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market risks, such as
equity price risk). These requirements are not applicable to smaller reporting companies under subsection thereof. 

 ( This space intentionally left blank )

 24 

 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

 KONATEL, INC. 

 FINANCIAL STATEMENTS 

 December 31, 2021, and 2020 

 TABLE OF CONTENTS 

 Report of Independent Registered Public Accounting Firm 
 F-1 

 Consolidated Balance Sheets 
 F-2 

 Consolidated Statements of Operations 
 F-3 

 Consolidated Statements of Stockholders’ Equity (Deficit) 
 F-4 

 Consolidated Statements of Cash Flow 
 F-5 

 Notes to Consolidated Financial Statements 
 F-6 

 ( This space intentionally left blank )

 25 

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 To
the Board of Directors and

Stockholders of KonaTel, Inc. 

 Opinion
on the Financial Statements 

 We
have audited the accompanying balance sheets of KonaTel, Inc. (the Company) as of December 31, 2021 and 2020, and the related statements
of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the
related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted
in the United States of America. 

 Basis
for Opinion 

 These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
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 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. Accordingly, we express no such opinion. 

 Our
audits included performing procedures to assess the risks of material misstatement of the 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 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 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 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 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 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 10 to the 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. 

 Auditing
management's assessments and valuations can be complex, involves judgment, and requires a thorough understanding of award terms. 

 How
We Addressed the Matter in Our Audit. 

 We
reviewed all contracts to obtain a thorough understanding of the terms. We tested the inputs and assumptions management used in the Black-Scholes
Model. We reperformed the calculation of the stock-based compensation to test management’s valuations. 

 /s/
Haynie & Company 

 Haynie
& Company 

 Salt Lake City, Utah 

April 14, 2022 

 PCAOB
# 457 

 We
have served as the Company’s auditor since 2019. 

 F- 1 

 KONATEL, INC. 

 CONSOLIDATED BALANCE SHEETS 

 Years Ended December 31, 

 2021 
 2020 

 Assets 
 
 Current Assets 
 
 Cash and Cash Equivalents 
 $ 932,785 
 $ 715,195 

 Accounts Receivable, net 
 1,274,687 
 434,801 

 Inventory, Net 
 566,839 
 17,786 

 Prepaid Expenses 
 79,467 
 2,365 

 Other Current Asset 
 164 
 194 

 Total Current Assets 
 2,853,942 
 1,170,341 

 Property and Equipment, Net 
 48,887 
 79,571 

 Other Assets 
 
 Intangible Assets, Net 
 807,775 
 1,517,163 

 Other Assets 
 154,297 
 172,065 

 Investments 
 10,000 
 — 

 Total Other Assets 
 972,072 
 1,689,228 

 Total Assets 
 $ 3,874,901 
 $ 2,939,140 

 Liabilities and Stockholders’ Equity 
 
 Current Liabilities 
 
 Accounts Payable and Accrued Expenses 
 $ 930,449 
 $ 1,042,567 

 Note Payable - current portion 
 — 
 94,339 

 Right of Use Operating Lease Obligation - current 
 50,672 
 66,323 

 Deferred Revenue 
 — 
 37,677 

 Total Current Liabilities 
 981,121 
 1,240,906 

 Long Term Liabilities 
 
 Right of Use Operating Lease Obligation - long term 
 136,445 
 15,399 

 Note Payable - long term 
 150,000 
 150,000 

 Total Long Term Liabilities 
 286,445 
 165,399 

 Total Liabilities 
 $ 1,267,566 
 $ 1,406,305 

 Commitments and contingencies - Footnote 8 
 
 Stockholders’ Equity 
 
 Common stock, $ .001 par value, 50,000,000 shares authorized, 41,615,406 outstanding and issued at December 31, 2021 and 40,692,286 outstanding and issued at December 31, 2020 
 41,615 
 40,692 

 Additional Paid In Capital 
 7,911,224 
 7,460,632 

 Accumulated Deficit 
 ( 5,345,504 ) 
 ( 5,968,489 ) 

 Total Stockholders’ Equity 
 2,607,335 
 1,532,835 

 Total Liabilities and Stockholders’ Equity 
 $ 3,874,901 
 $ 2,939,140 

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

 F- 2 

 KONATEL, INC. 

 CONSOLIDATED STATEMENTS OF OPERATIONS 

 Years Ended December 31, 

 2021 
 2020 

 Revenue 
 $ 12,834,844 
 $ 9,358,999 

 Cost of Revenue 
 7,105,464 
 5,823,552 

 Gross Profit 
 5,729,380 
 3,535,447 

 Operating Expenses 
 
 Payroll and Related Expenses 
 2,702,495 
 2,117,713 

 Professional and Other Expenses 
 965,671 
 553,940 

 Bad Debt 
 31,318 
 2,313 

 Utilities and Facilities 
 146,254 
 129,396 

 Depreciation and Amortization 
 833,016 
 848,865 

 General and Administrative 
 157,344 
 117,570 

 Marketing and Advertising 
 89,678 
 15,840 

 Taxes and Insurance 
 165,257 
 109,829 

 Total Operating Expenses 
 5,091,033 
 3,895,466 

 Operating Income/(Loss) 
 $ 638,347 
 $ ( 360,019 ) 

 Other Income and Expense 
 
 Other Income 
 — 
 625,591 

 Interest Expense 
 ( 15,361 ) 
 ( 26,954 ) 

 Other Expenses 
 — 
 — 

 Total Other Income and Expenses 
 ( 15,361 ) 
 598,637 

 Net Income 
 622,986 
 238,618 

 Earnings per Share 
 
 Basic 
 $ 0.02 
 $ 0.01 

 Diluted 
 $ 0.01 
 $ 0.01 

 Weighted Average Outstanding Shares 
 
 Basic 
 40,909,085 
 40,692,286 

 Diluted 
 42,891,011 
 44,092,286 

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

 ( This space intentionally left blank )

 F- 3 

 KONATEL, INC. 

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(DEFICIT) 

 Common Shares 
 Additional 
 Accumulated 
 
 Shares 
 Amount 
 Paid-in Capital 
 Deficit 
 Total 

 Balances as of January 1, 2020 
 40,692,286 
 $ 40,692 
 $ 7,380,029 
 $ ( 5,896,977 ) 
 $ 1,523,744 

 Stock Based Compensation 
 — 
 — 
 80,603 
 — 
 80,603 

 Dividends Paid to Apeiron Systems shareholders 
 — 
 — 
 — 
 ( 310,130 ) 
 ( 310,130 ) 

 Net Income 
 — 
 — 
 — 
 238,618 
 238,618 

 Balances as of December 31, 2020 
 40,692,286 
 $ 40,692 
 $ 7,460,632 
 $ ( 5,968,489 ) 
 $ 1,532,835 

 Exercised Stock Options 
 923,120 
 923 
 109,077 
 — 
 110,000 

 Stock Based Compensation 
 — 
 — 
 341,515 
 — 
 341,515 

 Net Income 
 — 
 — 
 — 
 622,986 
 622,986 

 Balances as of December 31, 2021 
 41,615,406 
 $ 41,615 
 $ 7,911,224 
 $ ( 5,345,503 ) 
 $ 2,607,335 

 Common Stock 

 Additional Paid-in Capital 

 Accumulated Deficit 

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

 ( This space intentionally left blank )

 F- 4 

 KONATEL, INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 For Years Ended December 31, 

 2021 
 2020 

 Cash Flows from Operating Activities: 
 
 Net Income 
 $ 622,986 
 $ 238,618 

 Adjustments to reconcile net loss to net cash provided by operating activities: 
 
 Depreciation and Amortization 
 833,016 
 838,003 

 Bad Debt 
 31,318 
 2,313 

 Stock-based Compensation 
 341,515 
 80,603 

 Change In Right of Use Assets 
 ( 92,947 ) 
 ( 1,994 ) 

 Change in Lease Liability 
 105,395 
 ( 368 ) 

 Amount recorded as loan forgiveness of SBA Covid-19 Loans 
 
 ( 319,000 ) 

 Changes in Operating Assets and Liabilities: 
 
 Accounts Receivable 
 ( 871,204 ) 
 ( 59,629 ) 

 Inventory 
 ( 549,053 ) 
 ( 13,127 ) 

 Prepaid Expenses 
 ( 77,102 ) 
 ( 621 ) 

 Accounts Payable and Accrued Expenses 
 ( 112,117 ) 
 ( 182,443 ) 

 Deferred Revenue 
 ( 37,677 ) 
 ( 15,397 ) 

 Customer Deposits 
 — 
 ( 31,087 ) 

 Other Assets 
 17,800 
 35,675 

 Net cash provided by operating activities 
 211,930 
 571,546 

 Cash Flows from Investing Activities 
 
 Purchase of Assets 
 ( 10,000 ) 
 ( 10,833 ) 

 Net cash (used in) investing activities 
 ( 10,000 ) 
 ( 10,833 ) 

 Cash Flows from Financing Activities 
 
 Repayment on Revolving Lines of Credit 
 — 
 ( 12,237 ) 

 Cash received from Stock Options Exercised 
 110,000 
 — 

 Proceeds from Federal SBA Covid-19 Loans 
 — 
 468,900 

 Repayments of amounts due to Related Party 
 — 
 ( 151,357 ) 

 Repayments of amounts of Notes Payable 
 ( 94,339 ) 
 ( 112,168 ) 

 Proceeds from Notes Payable 
 — 
 80,000 

 Dividends Paid to Apeiron shareholders 
 — 
 ( 310,130 ) 

 Net cash provided by (used in) financing activities 
 15,661 
 ( 36,992 ) 

 Net Change in Cash 
 217,591 
 523,721 

 Cash - Beginning of Year 
 715,195 
 191,474 

 Cash - End of Period 
 $ 932,785 
 $ 715,195 

 Supplemental Disclosure of Cash Flow Information 
 
 Cash paid for interest 
 6,796 
 21,591 

 Cash paid for taxes 
 — 
 — 

 Non-cash investing and financing activities: 
 
 Right of use assets obtained in exchange for new operating lease liabilities 
 199,245 
 28,576 

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

 F- 5 

 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. 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. At the closing of this merger, our IRS Federal EIN number was changed from 80-0000245 through
customary processing, and EIN number 80-0973608 was assigned to us by the IRS on March 5, 2019.

 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. 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. Some of Apeiron Systems’ hosted services
include SIP/VoIP services, SMS/MMS processing, BOT integration, NLP (“Natural Language Processing”), ML (“Machine Learning”),
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 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 eight (8) states.

 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 customer lists. Actual results could differ from those estimates.

 Basis of Consolidation 

 The consolidated financial statements for the year
ended December 31, 2021, include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems, and
Infiniti Mobile (January through December). The consolidated financial statements for the year ended December 31, 2020, include the Company
and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron Systems, and Infiniti Mobile (February through December).
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.

 F- 6 

 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.

 Allowance for Doubtful Receivables 

 The allowance for doubtful receivables is determined
by management based on customer credit history, specific customer circumstances and general economic conditions. Periodically, management
reviews our accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables against
the allowance when all attempts to collect the receivable have failed. As of December 31, 2021, and 2020, management has determined that
no allowance for doubtful receivables is necessary.

 Inventory 

 Inventory consists primarily of the cost of cellular
phones and cellular accessories. Inventory is reported at the lower of cost or net realizable value. Cost is determined by the first-in,
first-out (“FIFO”) method. As of December 31, 2021, total inventory owned by the company was $ 566,839 .

 Due to the rapidly changing technology within the
industry, inventory is evaluated on a regular basis to determine if any obsolescence exists. As of December 31, 2021, and 2020, 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.
Maintenance and repairs are charged to expense as incurred while major replacements and improvements are capitalized. When property and
equipment are retired or sold, the cost and applicable accumulated depreciation are removed from the respective accounts and the related
gain or loss is recognized.

 The Company recognizes impairment losses for long-lived
assets whenever changes in circumstances result in the carrying amount of the assets exceeding the sum of the expected future cash flows
associated with such assets. Management has concluded that no impairment reserves are required as of December 31, 2021, and 2020.

 Intangible Assets – Long-Lived Assets 

 The Company accounts for long-lived 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.

 Other Intangibles 

 The Company accounts for other intangibles 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. During 2019, the Company, through the acquisition of IM Telecom, recorded, at fair market value, an FCC
License in the amount of $ 634,251 . Other Intangible Assets are not amortized. As of December 31, 2021, there is no impairment of the value
of the license.

 Other Assets 

 Other Assets represent items classified as long-term
assets in accordance with the Statement of Financial Accounting Standards ASC 210-10-45. Other Assets include vendor deposits and security
deposits that the Company is required to maintain.

 F- 7 

 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, 2021, and 2020, respectively. Such amounts represent collateral received from the sub-resellers
in order to contract with the Company. The related contracts have an option to terminate within a period of less than one (1) year, and
accordingly, these collateral deposits are classified as current liabilities in the accompanying balance sheet.

 Fair Market Value of Assets 

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

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

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

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

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

 Leases 

 In February 2016, the FASB updated the accounting
guidance related to leases. The most significant change in the updated accounting guidance requires lessees to recognize lease assets
and liabilities on the balance sheet for all operating leases with the exception of short-term leases. The standard also expands the disclosures
regarding the amount, timing and uncertainty of cash flows arising from leases. For a lessee, the recognition, measurement and presentation
of expenses and cash flows arising from a lease did not significantly change from previous guidance. See NOTE 4.

 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, 2021,
and December 31, 2020, our operating lease assets and liabilities were $ 187,117 and $ 81,723 , respectively.

 Revenue Recognition 

 Services revenues are generated from cellular and
telecommunication services. The revenue is derived from wholesale and retail services. Telecommunications and mobile telecommunication
services include network platforms, voice, data, and text services. The Company recognizes revenue as telecommunications and mobile services
are provided in service revenue. Telecommunications and mobile services are billed and paid on a monthly basis. 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 U.S. GAAP. The standard update also amends current
guidance for the recognition of costs to obtain and fulfill

 F- 8 

 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.

 Deferred Revenue 

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

 Cost of Revenue 

 Cost of Revenue includes the cost of communication
services, equipment and accessories, shipping costs, and commissions of sub-agents.

 Advertising 

 Costs for advertising 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 expense was $ 89,678 and $ 15,840 for 2021 and 2020 respectively. The increase in advertising costs was a result of
the expansion of the marketing of Infiniti Mobile via independent agents and local advertising efforts in Oklahoma.

 Professional and Other Expenses 

 Previously for 2020, the Company presented certain
professional fees and other expenses under the category of “Operating and Maintenance.” These expenses are now being presented
under the category of “Professional and Other Expenses” as this change better represents the types of expenses that were incurred
during 2021 and 2020, respectively.

 Stock-based Compensation 

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

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

 Income Taxes 

 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 net income / loss per common share calculations
are determined by dividing net income / loss by the weighted average number of shares of common stock outstanding during the period. Diluted
net income / loss per common share calculations are determined by dividing net income / loss by the weighted average number of common
shares and dilutive common share equivalents outstanding. As of December 31, 2021, there are 1,981,926 potentially dilutive common shares.

 F- 9 

 The
following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income/loss per
common share: Summary of Significant Accounting Policies - Schedule of Earnings Per Share, Basic and
Diluted 

 Years Ended December 31, 

 2021 
 2020 

 Numerator 
 
 Net Income/Loss 
 $ 622,986 
 $ 238,618 

 Denominator 
 
 Weighted-average common shares outstanding 
 40,909,085 
 40,692,286 

 Dilutive impact of stock options 
 1,981,926 
 3,400,000 

 Weighted-average common shares outstanding, diluted 
 42,891,011 
 44,092,286 

 Net income per common share 
 
 Basic 
 $ 0.02 
 $ 0.01 

 Diluted 
 $ 0.01 
 $ 0.01 

 Concentrations of Credit Risk 

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

 All cash and cash equivalents and restricted cash
and cash equivalents are held at high credit financial institutions. These deposits are generally insured under the FDIC’s deposit
insurance coverage; however, from time to time, the deposit levels may exceed FDIC coverage levels.

 The Company has a concentration of risk with respect
to trade receivables from customers and cellular providers. As of December 31, 2021, the Company had a significant concentration of receivables
(defined as customers whose receivable balances are greater than 10% of total receivables) due from two (2) customers in the amounts of
$ 783,431 or 63.9 % and $ 194,647 or 15.9 %. As of December 31, 2020, the Company had a significant concentration of receivables from two
(2) customers in the amounts of $ 194,509 , or 52.4 %, and $ 52,843 , or 14.2 %.

 Concentration of Major Customer 

 A significant amount of the revenue is derived from
contracts with major customers. For the year ended December 31, 2021, the Company had two (2) customers that accounted for $ 5,494,625 
or 42.8 % of revenue and $ 3,617,833 or 28.2 %, of the revenue. For the year ended December 31, 2020, the Company had two (2) customers that
accounted for $ 3,337,262 or 35.7 % and $ 1,472,962 or 15.7 % of revenue. The loss of a major customer would create a very negative impact
on the Company, which would require the Company to make significant changes to reduce expenses. It should be noted that the primary major
customer is the FCC through the federal Lifeline and EBB programs.

 Effect of Recent Accounting Pronouncements 

 The Company has evaluated all other recent accounting
pronouncements and believes that none will have a significant effect on the Company’s financial statement.

 NOTE 2 – SIGNIFICANT TRANSACTIONS 

 Glosser Arbitration Settlement 

 In August 2019, the Company won an arbitration award
(ratified by the court) from Mr. Glosser in the amount of $357,914, together with arbitrator’s compensation of $4,957 , for a total
award of $ 362,871 ; and Mr. Glosser’s counterclaim was found to be without merit. The Company and Mr. Glosser entered into a Settlement
Agreement and Mutual Release on February 24, 2020, pursuant to which this matter was fully settled, resolving all claims, and Mr. Glosser
paid the Company $ 300,000 .

 F- 10 

 Apeiron Systems Working Capital Settlement 

 On December 31, 2018, the Company and the shareholders
of Apeiron Systems entered into an Agreement and Plan of Merger. Section 2.2 Estimated Net Working Capital and Section 2.3 Final Settlement
of that agreement provided for a method to calculate and reconcile any surplus or deficit in net working capital amounts as of December
31, 2018. On November 22, 2019, the Company, Apeiron Systems and the Apeiron Systems’ shareholders reached an agreement on the final
surplus net working capital amount of $ 310,130 owed by Apeiron Systems to the Apeiron Systems shareholders under the Apeiron Systems Merger
Agreement. The net working capital amount was deemed to be payable by Apeiron Systems to the Apeiron Systems shareholders pro rata: 90%
or $ 279,117 to Joshua Ploude and 10% or $ 31,013 to Vyacheslav Yanson.

 On February 14, 2020, the Company, on behalf of Apeiron
Systems, made a partial payment of $ 5,000 towards the surplus net working capital balance of $31,013 Apeiron Systems owed to one (1) of
its officers, Vyacheslav Yanson. On March 5, 2020, the Company, on behalf of Apeiron Systems, paid Mr. Yanson $ 26,013 , representing the
final payment of the surplus net working capital balance owed to Mr. Yanson. On March 8, 2020, the Company, on behalf of Apeiron Systems,
paid another of its officers, Joshua Ploude, $ 225,000 towards the surplus net working capital balance owned to Mr. Ploude. The remaining
surplus net working capital balance of $ 54,117 owed to Mr. Ploude was paid to Mr. Ploude during 2020. With the final payment of $54,117
paid to Mr. Ploude, the Company has fully satisfied its surplus net working capital obligation under the Apeiron Systems Merger Agreement.

 Euler Hermes/Sky Phone Settlement 

 Between March and July of 2019, IM Telecom purchased
wireless handsets from Sky Phone, LLC in the amount of $ 192,293 . Subsequently, a dispute arose between the parties regarding the amount
of the debt, a lack of sufficient transaction documentation and problems with some of the handsets. On or about December 2019, the debt
was transferred to Euler Hermes North America Insurance Company. On April 22, 2020, the parties entered into an agreement to settle the
matter whereby IM Telecom agreed to pay $ 80,000 in monthly payments of $4,000 over twenty (20) months . The first payment was made on May
20, 2020. As of August 2021, the settlement had been paid in full.

 SBA Paycheck Protection Program 

 On April 14, 2020 the operating companies of the Company
made loan applications to participate in the Small Business Administration’s (SBA”) Paycheck Protection Program (“PPP”)
created as a result of the COVID-19 pandemic. On April 15, 2020, the PPP loan applications of Apeiron Systems, IM Telecom and KonaTel
Nevada were approved and loan proceeds in the amounts of $ 101,800 , $ 20,900 and $ 186,300 , respectively, were received. The Company followed
all prescribed PPP loan forgiveness guidelines provided by our local bank and the SBA. As of December 31, 2021, all PPP loans have been
forgiven by the SBA.

 EIDL Loan 

 In 2020, the Company was granted a $ 150,000 Economic
Injury Disaster Loan (“EIDL”) from the SBA. The term of the loan is thirty (30) years, at an interest rate of 3.75% on advanced
funds. Installment payments were to begin twelve (12) months following the loan date. The SBA has subsequently granted automatic deferments
of payments through March of 2022.

 NOTE 3 – PROPERTY AND EQUIPMENT 

 Property and equipment consist of the following major classifications as
of December 31, 2021, and 2020:

 Property
and Equipment - Schedule of Property and Equipment 

 December 31, 

 2021 
 2020 

 Leasehold Improvements Leasehold Improvements 
 $ 46,950 
 $ 46,950 

 Furniture and Fixtures Furniture and Fixtures 
 102,946 
 102,946 

 Billing Software 
 217,163 
 217,163 

 Office Equipment Office Equipment 
 94,552 
 94,552 

 461,611 
 461,611 

 Less: Accumulated Depreciation 
 ( 412,724 ) 
 ( 382,040 ) 

 Property and equipment, net 
 $ 48,887 
 $ 79,571 

 Depreciation expense amounted to $ 30,683 and $ 30,783 
for the years ended December 31, 2021, and 2020, respectively. Depreciation expense is included as a component of operating expenses in
the accompanying statements of operations.

 F- 11 

 NOTE 4 – RIGHT-OF-USE ASSETS 

 Minimum 

 Maximum 

 Right-of-Use Assets consist of assets accounted for
under ASC 842. The assets are recorded at present value using implied interest rates between 3.29 % and 5.34 %. The Right-of-Use Assets
were $ 173,524 and $ 80,578 in 2021 and 2020, respectively.

 The Company has right-of-use assets through leases
of properties under non-cancelable leases. As of December 31, 2021, the Company had one (1) property with lease terms in excess of (1)
year. This lease liability expires December 31, 2026. Lease payables as of December 31, 2020, are $ 81,722 . Future lease liability payments
under the terms of these leases are as follows:

 2022 
 $ 
 58,547 

 2023 
 $ 
 45,578 

 2024 
 $ 
 46,596 

 2025 
 $ 
 47,615 

 2026 
 $ 
 11,967 

 Total 
 $ 
 210,304 

 Less Interest 
 $ 
 23,186 

 Present value of minimum lease payments 
 $ 
 187,117 

 Less Current Maturities 
 $ 
 50,672 

 Long Term Maturities 
 $ 
 136,445 

 The weighted average term of the right-to-use leases
is 15.4 months recorded with a weighted average discount of 3.53 %.

 The Company also leases two (2) office spaces on a
month-to-month basis. Total rent expense for the year ended December 31, 2021, and 2020, amounted to $ 123,843 and $ 109,960 , respectively.

 NOTE 5 – INTANGIBLE ASSETS 

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

 December 31, 

 2021 
 2020 

 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 ) 
 ( 2,740,629 ) 

 Net Amortizable Intangibles 
 634,251 
 1,436,585 

 Right of Use Assets - net 
 173,524 
 80,578 

 Intangible Assets net 
 $ 807,775 
 $ 1,517,163 

 Amortization expense amounted to $ 802,334 and $ 802,334 
for the years ended December 31, 2021, and 2020, 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, 2021.

 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, 2021, and December 31, 2020, was $ 634,251 .

 NOTE 6 – LINES OF CREDIT 

 The Company previously had two (2) lines of credit
with a bank, which provided aggregate maximum borrowing availability of $ 1,050,000 as of 2020. The lines of credit were payable on demand
and bore interest at a variable rate with rate ranges from 7.5% to 8.0%. The lines of credit matured in 2020 and were paid in full on
January 5, 2020, and February 14, 2020, respectively. The Company had no outstanding lines of credit as of December 31, 2021.

 F- 12 

 NOTE 7 – AMOUNT DUE TO STOCKHOLDER 

 The Company received a $ 200,000 advance from a shareholder in 2019, who
is also the CEO of Apeiron Systems. The loan accrued interest at a range rate between 10% and 12% . As of October, 2020, the loan had been
repaid.

 NOTE 8 – CONTINGENCIES AND COMMITMENTS 

 Litigation 

 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, 2021, there are no such legal proceedings.

 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.

 Pursuant to an Independent Contractor Agreement (the
“ICA”) effective October 17, 2019, between the Company and Charles L. Schneider, Jr., in the event that Infiniti Mobile was
granted its request for ETC status from the California Public Utilities Commission (“CPUC”) to distribute Lifeline cellular
phone service within the State of California, Mr. Schneider was to be granted a one (1) year warrant, with a customary “cashless”
exercise feature, to purchase 250,000 shares of the Company’s common stock at an exercise price to be determined on the date of
any such approval. The ICA was for a term of one (1) year, and extendable by the parties yearly. This agreement expired prior to December
31, 2020. 

 Regulatory Determination 

 On May 17, 2019, IM Telecom was notified by USAC of
an over-payment of Universal Service Fund reimbursements in the amount of $168,277. On July 25, 2019, the Company entered into a Letter
of Acknowledgement with the FCC and requested a twenty-four (24)-month payment plan regarding the repayment of the over-payment amounts.
While awaiting approval of this repayment plan, the Company continued to make monthly payments against the outstanding balance. On October
15, 2020, the Company received approval of the payment plan and signed a promissory note with USAC to repay the remainder of the unpaid
balance in the amount of $67,105. The loan had a commencement date of November 13, 2020, a term of twelve (12) months, with an annual
interest rate of 12.75%. The Company agreed to pay USAC $5,986 per month for twelve (12) months, and a $1,000 Administrative Fee due on
October 15, 2020. The promissory note was paid in full in August of 2021. 

 Letters of Credit 

 The Company had no outstanding letters of credit as
December 31, 2021.

 N OTE 9 – SEGMENT REPORTING 

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

 Hosted Services – This segment includes
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 through Apeiron’s website, its own sales staff, independent sales agents, and ISOs.

 Mobile Services – This segment includes
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

 F- 13 

 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 cellular voice service and mobile data service by IM Telecom under its Infiniti Mobile brand to low-income American households
that qualify for the FCC’s Lifeline voice service program and the FCC’s temporary EBB mobile data program, with EBB to eventually
be replaced by FCC’s ACP in 2022. Even though government programs like Lifeline have existed since 1985, these programs, along with
newer programs like the temporary EBB program and future 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:

 Segment Reporting - Schedule of Segment
Reporting Information 

 Hosted Services 
 Mobile Services 
 Total 

 For the year ended December 31, 2021 
 
 Revenue 
 $ 5,740,728 
 $ 7,094,116 
 $ 12,834,844 

 Gross Margin 
 $ 2,013,459 
 $ 3,715,921 
 $ 5,729,380 

 Depreciation and amortization 
 $ 805,469 
 $ 27,547 
 $ 833,016 

 Additions to property and equipment 
 $ — 
 $ — 
 $ — 

 Gross Margin % 
 35.1 % 
 52.4 % 
 44.6 % 

 For the year ended December 31, 2020 
 
 Revenue 
 $ 5,296,151 
 $ 4,062,847 
 $ 9,358,999 

 Gross Margin 
 $ 1,927,060 
 $ 1,608,387 
 $ 3,535,447 

 Depreciation and amortization 
 $ 820,794 
 $ 28,071 
 $ 848,865 

 Additions to property and equipment 
 $ — 
 $ — 
 $ — 

 Gross Margin % 
 36.4 % 
 39.6 % 
 37.8 % 

 NOTE 10 – STOCKHOLDERS’ EQUITY 

 Stock Compensation 

 The Company offers incentive stock option equity awards
to directors and key employees. Options vest in tranches and expire in five (5) years, subject to conditions of their grant. During the
year ended December 31, 2021, and 2020, the Company recorded vested options expense of $ 341,515 and $ 80,603 , respectively. The option
expense not taken as of December 31, 2021, is $ 1,306,337 , with a weighted average term of 2.25 years.

 In 2021, 1,635,000 share incentive stock options were
granted to two (2) independent members of the Board of Directors and six (6) key employees. Each independent Board member was granted
25,000 shares per quarter of service for 2020 and 2021 for a total of 200,000 shares each. The key employees were granted 1,435,000 share
options as part of their employment agreements. During the year ended December 31, 2021, 923,210 shares were exercised. 250,000 of these
options were exercised by one (1) former Board member who received his options at the time of the KonaTel Nevada merger in 2017 and who
was not an independent director, and 250,000 of these options were exercised by an officer who also received his options at the time of
the KonaTel Nevada merger; the remaining 423,120 options were exercised by a former key employee. During the year, 251,880 share options
were forfeited. The forfeited options were 76,880 granted to a former key employee and 175,000 granted to former independent Board members.
The Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $1.75 on December 31, 2021. 

 Basic net 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 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 

 Weighted average 
 
 231.59 
 % 
 
 280.02 
 % 

 Weighted average expected term (years) 
 
 2.25 
 
 2.2 
 
 Risk free interest rate 
 
 0.78 
 % 
 
 .90 
 % 

 Expected dividend yield 
 
 — 
 
 — 
 
 F- 14 

 The following table represents stock option activity
as of and for the year ended December 31, 2021:

 Stockholders’ Equity - Schedule of
Share-Based Compensation, Stock Option Activity 

 Number of 
 Shares 
 
 Weighted Average 
 Exercise Price 
 
 Weighted Average 
 Remaining Life 
 
 Aggregate 
 Intrinsic Value 
 
 Options Outstanding: December 31, 2020 
 3,800,000 
 $ .21 
 3.60 
 $ 812,350 

 Granted 
 1,635,000 
 $ .75 
 4.65 
 
 Exercised 
 ( 923,120 ) 
 $ .21 
 
 Forfeited 
 ( 251,880 ) 
 
 Options Outstanding: December 31, 2021 
 4,260,000 
 $ .37 
 2.25 
 $ 5,862,938 

 Exercisable and Vested: December 31, 2021 
 1,981,926 
 $ .25 
 1.65 
 $ 2,970,907 

 The following table represents stock option activity
as of and for the year ended December 31, 2020:

 Number of 
 Shares 
 
 Weighted Average 
 Exercise Price 
 
 Weighted Average 
 Remaining Life 
 
 Aggregate 
 Intrinsic Value 
 
 Options Outstanding: December 31, 2019 
 3,800,000 
 $ .20 
 3.00 
 $ — 

 Granted 
 400,000 
 $ .15 
 4.50 
 
 Exercised 
 
 Forfeited 
 ( 400,000 ) 
 
 Options Outstanding: December 31, 2020 
 3,800,000 
 $ .21 
 3.60 
 $ 812,350 

 Exercisable and Vested: December 31, 2020 
 3,600,000 
 $ .22 
 2.40 
 $ 698,475 

 In 2020, 400,000 share options were granted to two
(2) independent members of the Board of Directors. Each member was granted 25,000 shares per quarter of service for 2019 and 2020 for
a total of 200,000 shares each. During the year 2020, 400,000 share options were forfeited. The forfeited options were 300,000 from a
key employee and 100,000 from an independent Board member who had resigned and had not exercised his options prior to their expiration
following resignation. The Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $0.421 on December
31, 2020. 

 ( This space intentionally left blank )

 F- 15 

 NOTE 11 – INCOME TAX 

 For the years ending December 31, 2021, and 2020,
there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.

 The components of the provision for income taxes for
the years ended December 31, 2021, and 2020 consisted of the following:

 Income
Tax - Schedule of Components of Income Tax Expense 

 2021 
 
 2020 

 Current : 
 
 Federal 
 
 — 
 
 — 

 State 
 
 — 
 
 — 

 Total Current 
 
 Deferred : 
 
 Federal 
 
 — 
 
 — 

 State 
 
 — 
 
 — 

 Total Deferred 
 
 Deferred tax assets: 
 
 Net loss carryforward 
 $ 
 318,892 
 
 $ 
 333,393 

 Depreciation 
 $ 
 269,166 
 
 $ 
 204,362 

 Directors' fees 
 
 $ 
 124,000 

 Stock option expense 
 $ 
 819,341 
 
 $ 
 1,008,761 

 Total deferred tax assets 
 $ 
 1,407,399 
 
 $ 
 1,670,516 

 Deferred tax liabilities: 
 
 Amortization 
 $ 
 153,499 
 
 $ 
 63,291 

 The reconciliation of taxes at the federal statutory rate to our provision
for income taxes for the years ended December 31, 2021 and 2020 

 2021 
 
 2020 

 Tax at statutory federal rate 
 $ 
 130,827 
 
 $ 
 50,110 

 Loss carryforward at statutory tax federal rate 
 $ 
 ( 130,827 ) 
 
 $ 
 ( 50,110 ) 

 Provision for income tax 
 
 — 
 
 — 

 ( This space intentionally left blank )

 F- 16 

 The tax effect of significant components of the Company’s
deferred tax assets and liabilities at December 31, 2021, and 2020, respectively, are as follows:

 Income Tax - Schedule of Deferred Tax
Assets and Liabilities 

 December 31, 

 2021 
 2020 

 Deferred tax assets: 
 
 Net operating loss carryforward 
 $ 318,892 
 $ 333,393 

 Total gross deferred tax assets 
 318,892 
 333,393 

 Less: Deferred tax asset valuation allowance 
 ( 318,892 ) 
 ( 333,393 ) 

 Total net deferred tax assets 
 — 
 — 

 Deferred tax liabilities: 
 
 Federal 
 $ — 
 $ — 

 State - California 
 — 
 — 

 Total net deferred taxes 
 $ — 
 $ — 

 In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment.

 The total NOL as of December 31, 2021, is $ 1,518,534 ,
represented below based on year of expiration;

 Income Tax - Schedule of Operating Loss Carryforward 

 Expiration 
 NOL Amount 

 2037 
 $ 570,143 

 2038 
 $ 463,895 

 2039 
 $ 484,496 

 $ 1,518,534 

 NOTE 12 – SUBSEQUENT EVENTS 

 The Company has evaluated subsequent events through
the date of this filing, and with the exception of the following, no material subsequent events have occurred:

 Changes of Officers and Directors 

 Effective January 1, 2022, Charles D. Griffin was
hired as President and Chief Operating Officer of the Company. Mr. Griffin will lead the Company’s sales and marketing divisions
and all Company operations, subject to advice and consultation with the Chairman and CEO, D. Sean McEwen.

 Mr. McEwen and the Company executed a third amendment
to his Employment Agreement, effective April 12, 2022.

 Effective February 4, 2022, Paul LaPier resigned his
position as Vice President of Finance and Secretary of the Company. Mr. LaPier has agreed to continue to assist the Company as a consultant
through December 31, 2022.

 Effective January 24, 2022, the Company elected Todd
Murcer as Executive Vice President of Finance and Secretary to replace Mr. LaPier.

 Jason N. Welch was elected as the President of IM
Telecom, effective February 14, 2022.

 The Company entered into Employment Agreements with
Messrs. Murcer and Welch, effective January 24, 2022, and February 14, 2022, respectively, or the effective dates of their respective
Employment Agreements.

 Effective February 28, 2022, Nicholas Metherd resigned
as the COO of IM Telecom. Mr. Metherd has agreed to continue to assist the Company as a consultant through December 21, 2022

 Increase in Common Stock reserved for Employee
Stock Option Grants 

 Effective February 10, 2022, the Board of Directors
of the Company increased the shares reserved for issuance under its 2018 Incentive Stock Option Plan by an additional 2,000,000 shares.

 F- 17 

 Employee Stock Option Grants 

 Mr. Murcer was granted 350,000 incentive stock options
as of the effective date of his Employment Agreement at an exercise price of $ 1.165 per share, vesting on the four (4) year anniversary
dates of the grants, at the fair market value of our common stock on the date of grant or January 24, 2022.

 Jeffrey Pearl, an independent Board member, was granted
 25,000 quarterly incentive stock options on January 28, 2022, at an exercise price of $ 1.342 , fully vested, which was 110% of the fair
market value of our common stock on the date of grant.

 Robert Beaty, an independent Board member, was granted
 25,000 quarterly incentive stock options on February 12, 2022, at an exercise price of $ 1.138 , fully vested, which was 110% of the fair
market value of our common stock on the date of grant.

 Mr. Welch was granted 350,000 incentive stock options
as of the effective date of his Employment Agreement at an exercise price of $ 1.04 per share, vesting on the four (4) year anniversary
dates of the grants, at the fair market value of our common stock on the date of grant or February 12, 2022.

 SBA EIDL Loan 

 The Company received notice on March 16, 2022, of
an additional six (6) month automatic repayment deferment on its $ 150,000 SBA EIDL loan, with monthly loan payments to commence on or
about September 2022.

 F- 18 

 ITEM 9: 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
statements, or an independent accountant who was previously engaged to audit a significant subsidiary and on whom the principal accountant
expressed reliance in its report, has resigned (or indicated it has declined to stand for re-election after the completion of the current
audit) or was dismissed. 

 ITEM 9A: CONTROLS AND PROCEDURES 

 Disclosure Controls and Procedures 

 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 December 31, 2021, of our disclosure controls and procedures. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December
31, 2021.

 Management’s Annual Report on Internal
Control Over Financial Reporting 

 Our management is responsible for establishing and
maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control
over financial reporting is a process designed by, or under the supervision of our Chief Executive Officer and our Chief Financial Officer,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Internal controls over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records, which in reasonable detail, accurately and fairly reflect the transactions
and disposition of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being
made in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our
consolidated financial statements.

 Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

 A material weakness is a deficiency or a combination
of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 In evaluating the effectiveness of our internal control
over financial reporting as of December 31, 2021, management used the criteria established in the Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the criteria
established by COSO, management (with the participation of the CEO and the CFO) determined that the internal controls over financial reporting
are effective as of December 31, 2021, and that there are no material weaknesses in the Company’s internal controls over financial
reporting as of such date.

 This Annual Report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management’s report
is not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to satisfy these requirements
by providing the management’s report only.

 26 

 Changes in Internal Control Over Financial Reporting 

 There have been no changes in internal control over
financial reporting during the last fiscal quarter of our fiscal year ended December 31, 2021.

 Limitations on the Effectiveness of Controls 

 Our management does not expect that our disclosure
controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error
or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections
of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 ITEM 9B: OTHER INFORMATION 

 None.

 ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS 

 None, not applicable.

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 27 

 PART III 

 ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 

 Identification of Directors and Executive Officers 

 Our executive officers and directors and their respective
ages, positions and biographical information are set forth below.

 Name 
 
 Age 
 
 Positions Held 
 
 Since 

 D. Sean McEwen 
 
 60 
 
 Chairman, President and CEO 
 
 December 2017 

 Charles D. Griffin 
 
 57 
 
 President and COO 
 
 January 2022 

 Brian R. Riffle 
 
 62 
 
 Chief Financial Officer 
 
 December 2017 

 Paul LaPier 
 
 63 
 
 Vice President of Finance 
 
 November 2018 

 Secretary 
 
 April 2020 (1) 

 B. Todd Murcer 
 
 52 
 
 EVP, Finance and Secretary 
 
 January 2022 

 D. Sean McEwen 
 
 60 
 
 Director 
 
 December 2017 

 Robert Beaty 
 
 52 
 
 Director 
 
 February 2018 

 Jeffrey Pearl 
 
 58 
 
 Director 
 
 October 2018 

 Joshua Ploude 
 
 45 
 
 CEO of Apeiron Systems 
 
 December 2018 

 Jason N. Welch 
 
 51 
 
 President of IM Telecom 
 
 February 2022 

 Nicholas Metherd 
 
 38 
 
 Vice President of IM Telecom 
 
 October 2019 (2) 

 (1) Mr. LaPier resigned effective February 4, 2022, and has agreed to continue as a consultant to the Company
through December 31, 2022. 

 (2) Mr. Metherd resigned effective February 28, 2022, and has agreed to continue as a consultant to the
Company through December 31, 2022. 

 Background and Business Experience 

 D. Sean McEwen 

 Mr. McEwen is 60 years of age and founded KonaTel
Nevada in 2014, a wireless data and voice service reseller, and currently focuses his efforts exclusively on our current and planned business
operations. From 2011 to 2013, Mr. McEwen consulted with multiple international Mobile virtual network operators (“MVNOs”)
in the U.S., Peru, Croatia and China. From 2010 to 2011, he served as a founding board member of One Fund, a NYSE listed (NYSE: ONEF)
exchange traded fund. One Fund pioneered the “ETF of ETFs” concept, and in 2011, came to the attention of Russell Investments,
known for their stock indices (i.e., the Russell 2000). Russell Investments purchased One Fund in 2011. In 2008, Mr. McEwen became a member
of the venture/angel investment group, Sierra Angels (www.sierraangels.com) serving on several high-tech due diligence committees and
participating in early-stage funding transactions. In early 1983, he co-founded Online Data Corp. Through a series of acquisitions/mergers,
this company was eventually renamed “TriTech Software Systems” (www.tritech.com) “TriTech”. From 1983 to 1990,
it developed custom strategic software applications for numerous businesses, including E. F. Hutton Life Insurance, Travel Lodge Hotels,
Foodmaker (Jack in the Box restaurants), AT&T, UCSD’s Scripps Institute of Oceanography and Visa’s Plus Systems national
ATM network.

 In 1991, TriTech transformed from a custom software
development firm to an enterprise software development and systems integration company specializing in mission critical public safety
(e.g., police, fire, and EMS) software solutions. TriTech’s flagship product, VisiCAD, was the world’s first 9-1-1 emergency
dispatching system based on Microsoft technology with integrated GPS based tracking and predictive routing technology. In 1995, TriTech
won the Microsoft Most Innovative Windows Application award competing against all Windows applications worldwide. In 1998, while Mr. McEwen
was CEO, TriTech was named to the Inc. 500 as the 344 th fastest growing privately held company in the United States. The following
year, Bill Gates cited TriTech and VisiCAD in his book Business at the Speed of Thought as an example of a mission critical Windows
based telecom system utilizing GPS.

 Mr. McEwen served as Vice President of TriTech from
1983 to 1988, President from 1988 to 1996, Chairman/CEO from 1996 to 2000, and finally as a member of the Board of Directors, until controlling
interest was sold to Westview Capital Partners in 2006.

 28 

 Charles D. Griffin 

 Mr. Griffin is 57 years of age. Prior to joining
us, Mr. Griffin served as Chairman and Chief Executive Officer of Lingo Communications, a provider of IP-based Cloud voice and data solutions,
following its merger with Impact Telecom, Inc. (“Impact Telecom”) in 2018. In this role, he led the successful integration
of Impact Telecom into Lingo Communications (“Lingo”) under a private equity purchase and facilitated the financing of the
transaction in collaboration with a private equity investor.

 Impact Telecom
and Lingo continue to operate as global providers of voice and data communications services spanning Residential, SMB, Enterprise and
Wholesale markets. Prior to the merger of Lingo and Impact Telecom, Mr. Griffin served as Chief Executive Officer of Impact Telecom, where
he completed eleven (11) accretive M&A transactions and led the successful restructuring of multiple technology portfolio companies,
including PacWest, TNCI and Unipoint Holdings, which resulted in record high net income. As one of the original founders of Impact Telecom,
Mr. Griffin led it from a start-up to a company with annual revenues of over $290 million and more than 300 employees servicing
250,000 customers worldwide. 

 Mr. Griffin
ultimately guided the Impact Telecom to a successful exit in 2020. Previously, Mr. Griffin served as Chief Executive Officer
of Ipath Communications, where he was responsible for building a Class V Broadsoft VoIP network for SMB direct sales distribution with
over 5,000 subscribers nationwide. In this role, he also led the successful merger with Impact Telecom. Prior to his time with Ipath,
Mr. Griffin served in a number of business development, operations and sales roles where he was involved in product development, sales
strategy and distribution and installations, all within the telecommunications industry. 

 Mr. Griffin graduated Summa Cum Laude in business
communications from Metropolitan State University of Colorado. A lover of the outdoors, Mr. Griffin is a commercial pilot, alpinist, and
lives in Colorado with his wife of over 32 years.

 Brian R. Riffle 

 Mr. Riffle is 62 years of age and the founder of CFO
Strategies LLC of Johnstown, Pennsylvania (“CFO Strategies”), an accounting firm and consulting firm, which he founded in
May 2008. CFO Strategies has thirteen (13) employees; approximately 180 small business clients and approximately 650 tax clients. It provides
consulting, CFO, accounting, bookkeeping, payroll and tax services, including: CFO for businesses; entire accounting department for businesses;
temporary staffing for businesses; complete payroll processing; CFO consulting and small business start-up services; and prepares taxes
for corporations, small businesses, non-profits and individuals. Mr. Riffle is the Managing Partner and has extensive experience in various
industries, including: Chief Financial Officer, healthcare industry; telecommunications, security, manufacturing and non-profit industries
experience; Chief Executive Officer in the financial services industry and healthcare; Assistant Controller in the retail industry; Consultant
in non-profit, healthcare and event management arenas; governmental treasurer and board member for over thirty (30) years; and as a masters
level college instructor at Mount Aloysius College since 1994. He is also a Certified Public Accountant (May 1987).

 B. Todd Murcer 

 Mr. Murcer is 52 years of age. Prior to joining
us, Mr. Murcer served as Executive Vice President, FP&A and Treasury of Lingo Communications, a provider of IP-based Cloud voice and
data solutions, following its merger with Impact Telecom, Inc. (“Impact”) in 2018. In this key leadership position,
he directed procedures and policies for the financial operations of the business and had responsibility for planning and implementing
financial projections and reporting activities for the U.S. and its Canadian subsidiary, Vancouver Telephone Company, Limited. As
owner of treasury operations, Mr. Murcer managed the use and sourcing of the company’s cash and banking activities with additional
oversight to credit and collections risk management. Mr. Murcer has been in the telecommunication industry for more than 20
years, and got his start with Matrix Telecom, Inc. (“Matrix”), a Platinum Equity portfolio company that ultimately divested
to Impact. At Matrix, he helped the company grow annual revenues from $10 million to $400 million, serving in a number of business
development and financial roles and leading teams through numerous M&A transactions. Mr. Murcer holds a B.S. in Economics from
the University of Oklahoma and an M.S.M. from Boston University’s Brussels Graduate Center.

 Robert Beaty 

 Mr. Beaty is 52 years of age and currently the President
of AGS Construction Inc., a premier reconstruction company in the Denver metropolitan area. Previously, he was the founder and CEO of
Impact Telecom, a leader in the telecommunications market, which focused on delivering flexible and effective solutions to carriers, businesses
and homes. Impact Telecom is comprised of a family of brands all dedicated to innovation, affordability and execution.

 Mr. Beaty brings twenty-four (24) years of experience
in telecommunications and managing wholesale and commercial customer bases. Prior to starting Impact Telecom in 2005, he served as the
Senior Vice President of Sales for ICG Communications. He helped guide ICG through bankruptcy and was a valued member of the senior executive
team tasked with growing and managing the customer base.

 29 

 He earned a B.A. in Psychology from the University
of Kansas and his M.B.A. in Business Administration from Webster University.

 Jeffrey Pearl 

 Mr. Pearl is 58 years of age and brings more than
thirty-one (31) years of Telecommunications/Cloud Service Provider experience to our Board of Directors. Jeffrey has experience in both
the startup environment as well as working inside of some of the larger incumbent players, both privately held as well as publicly traded
companies. This experience will assist us in building out our go to market strategy, focusing both on direct sales as well as the alternative
channels of distribution. His extensive sales and marketing experience, knowledge of the marketplace and personal connections in the industry
are valuable to us at this stage and throughout our evolution.

 Mr. Pearl currently is involved in running three companies:

 Mr. Pearl is currently CEO and Co-founder of OTG Consulting,
which was founded in May 2016. OTG Consulting is a sales agency formed by a group of industry leaders
in order to fill a gap in the marketplace. The group assists executives of SMB and Enterprise businesses as they make the move to cloud-based
services. OTG Consulting works with most carriers and service providers delivering solutions for voice and data communications,
internet, hosting, managed services and other cloud offerings

 Mr. Pearl also consults under PearlCom, a consulting
practice focusing on telecom companies and service providers which was founded in January 2016.
PearlCom offers strategic advice, providing direction on sales management, technology implementation, product pricing and positioning,
bringing his thirty (30) plus years of experience to the table, accelerating timelines and creating efficiencies. 

 Mr. Pearl also co-founded Secure View, where he is
Chief Revenue Officer and Partner, which was founded in December 2016. Secure View is focused on
delivering “best in class” unified IP-based security solutions. Its systems are designed to be more accessible and simpler
to use allowing customers to feel that their security needs are 100% covered providing peace of mind allowing them to focus elsewhere
on their business. Secure View offers the experience, knowledge and technical understanding coupled with relationships with the players/partners
needed to move security systems to the cloud. 

 Prior to starting
and running these three (3) companies, Jeffrey worked at Broadsoft (recently acquired by Cisco) July 2013 to May 2016, where he
successfully ran North America Carrier Sales. In this role he cultivated strong relationships with C-Level executives within the major
telcos and service providers utilizing BroadSoft in the US. Under his guidance, his organization also pursued new relationships with startups
and providers not utilizing BroadSoft. After successfully fulfilling those duties, Jeffrey was next tasked with starting an entirely new
division: Channel Acceleration, focusing on some of the largest customers in and outside the US. In this role, Jeffrey and his teams engaged
with executives and sales organizations to productively assist in accelerating their efforts around “Go to Market” strategies,
sales training and sales assistance in the area of Hosted VoIP and SIP Trunking services. Prior to Broadsoft Jeffrey successfully started,
operated and sold two VoIP companies.

 Joshua Ploude 

 Mr. Ploude is 45 years old. He is the President
and CEO and Co-Founder of Apeiron Systems, and since 2013, he has been responsible for defining the product vision and operational strategy
for Apeiron Systems. He has worked directly with software, hardware and carrier network vendors to oversee the development of Apeiron
Systems’ product set; and has also had the responsibility to work with internal software development teams to ensure Apeiron Systems’
software provides the requisite function to support product and operational initiatives.

 He has also been responsible for planning and building
Competitive Local Exchange Carrier (“CLEC”) and Internet Service Provider (“ISP”) facilities-based networks since
2001 and has managed 5+ “Greenfield network” (the installation of a network where there was not previously one in use) builds
across all types of wireline and wireless network infrastructures.

 Mr. Ploude holds a Bachelor of Science in Political
Science from UCLA and a Master of Science in Telecommunications Management from Golden Gate University. He has had the following
business experience since 1999: 1999-2005 - CTO of PCS1/Datavo - A facilities-based CLEC serving a California-wide footprint; 2006-2010
- President/CEO of Ethos Communications - A consultancy helping CLECs and ISPs with operational and technology development; 2010-2013
- CTO of TNCI - A facilities-based CLEC & ISP, serving a forty-eight (48)-state footprint; and 2013-Present - Co-Founder, CEO and
President of Apeiron Systems.

 Jason N. Welch 

 Mr. Welch is 51 years of age, President of IM Telecom. 
Prior to joining us, Mr. Welch served as Chief Operations Officer of 46 Labs LLC, a provider of SaaS, voice and data solutions servicing
large enterprise and communications providers internationally. In this key leadership position, he directed procedures and policies
for the operations of the business and had responsibility for service delivery, customer care and vendor management. Prior to joining
46 Labs, Mr. Welch served as Executive Vice President of Impact Telecom, a

 30 

 Lingo Company. In this function, he provided
oversight to carrier wholesale sales acquisition, product strategy, account management, agent channel management, vendor management, pricing,
routing and business analytics. He successfully managed the growth of the carrier wholesale business unit to $40m+ in annual revenues,
processing 18b+ voice minutes annually through hundreds of domestic and international carrier partnerships. Mr. Welch has
been in the telecommunication industry for more than 25 years and has successfully served in management roles across companies such as
Frontier Communications, Global Crossing, Telco Group Inc., KDDI Global, XO Communication and Impact Telecom.

 Family Relationships 

 There are no family relationships between any of our
officers and directors.

 Involvement in Other Public Companies 

 Except as may be indicated above, none of our officers or directors is
an “affiliate” of any other publicly held companies.

 Involvement in Certain Legal Proceedings 

 During the past ten (10) years, none of our directors,
executive officers or persons nominated to become directors or executive officers (or those in similar positions with us) has been the
subject of any of the following:

 (1) A petition under the federal bankruptcy laws or
any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business
or property of such person, or any partnership in which he was a general partner at or within two (2) years before the time of such filing,
or any corporation or business association of which he was an executive officer at or within two (2) years before the time of such filing

 (2) Such person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 (3) Such person was the subject of any order, judgment,
or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining
him or her from, or otherwise limiting, the following activities:

 (i) 
 Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; 

 (ii) 
 Engaging in any type of business practice; or 

 (iii) 
 Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; 

 (4) Such person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting
for more than sixty (60) days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or
to be associated with persons engaged in any such activity;

 (5) Such person was found by a court of competent
jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action
or finding by the SEC has not been subsequently reversed, suspended, or vacated;

 (6) Such person was found by a court of competent
jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 (7) Such person was the subject of, or a party to,
any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated,
relating to an alleged violation of:

 (i) Any federal or state securities or commodities
law or regulation; or

 31 

 (ii) Any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 (iii) Any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or

 (8) Such person was the subject of, or a party to,
any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26)
of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons
associated with a member.

 Compliance with Section 16(a) of the Exchange
Act 

 The common stock of the Company is registered
under the Exchange Act, and therefore, the officers, directors and holders of more than 10% of our outstanding shares are subject to the
provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership
of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations
to furnish us with copies of all Section 16(a) reports they file. Based solely upon review of the copies of such forms furnished to us
during the fiscal year ended December 31, 2021, and based upon a review of the filings contained in the Edgar Archives, all such required
reports were believed to be timely filed.

 Delinquent Reports 

 Section 16(a) beneficial ownership reports filed
by Messrs. Beaty and Pearl during the year ended December 31, 2021, both of whom are independent directors and each of whom receive quarterly
incentive stock options grants for their service, were not timely filed for each of the quarterly incentive stock option grants they received.
The late filings of these reports were not due to any act or lack of action by these persons, and was primarily due to the lack of coordination
between the preparation of the incentive stock option grant documents, obtaining the requisite signatures, completing the beneficial reporting
forms and getting all of them signed and timely filed. We have implemented a pre-timed system to ensure that all applicable documents
necessary for the grants of incentive stock options and documentation of these grants, along with the timely filing of all of these required
reports, are prepared, executed and filed.

 Code of Ethics 

 We have adopted a Code of Ethics for our principal
executive and financial officers. See Exhibit 14 in Part IV, Item 15. We anticipate that our Code of Ethics will be
updated by our Board of Directors as the Board deems necessary.

 Corporate Governance 

 Nominating Committee 

 We have not established a Nominating Committee because
until our closing of the KonaTel Nevada Merger, we had only one (1) director and two (2) executive officers, and we believed that we were
able to effectively manage the issues normally considered by a Nominating Committee and currently believe we can do without a Nominating
Committee.

 If we do establish a Nominating Committee, we will
disclose our procedures in recommending nominees by our Board of Directors.

 Audit Committee 

 We have not established an Audit Committee for the
same reasons why we have not established a Nominating Committee, and a further review of this issue will no doubt be necessitated and
undertaken by our management in the future.

 Insider Trading Policy 

 During the year ended December
31, 2021, our Board of Directors adopted an Insider Trading Policy, which is Exhibit 99.1 hereto. See Item IV, Part 15.

 The Insider Trading Policy was adopted
by the Company to satisfy its obligations to prevent insider trading and to help its personnel avoid the consequences associated with
violations of applicable federal and state securities laws, rules and regulations regarding insider trading of our securities when they
have material non-public information related to the Company. It is also intended to prevent even the appearance of improper conduct
on the part of anyone employed by or associated with us, not just so-called “insiders.” It contains four (4) “Black-Out
Periods”, which are as follows: twenty (20) days prior to the release of financial results for the periods ending March 31, June 30, September
30 and December 31 of each year and end after three (3) full trading days of our securities on the OTCQB (or any other recognized nation
medium on which our securities publicly trade [“Other Medium”]) after financial results are announced for the preceding fiscal
period. If the last day of the month falls on a weekend, the Black-Out Period will start at the close of business on the last trading
day prior to the weekend. Additional Black-Out Periods may occur when other material events occur, such as a press release sent
out to the public, wherein only a select few persons have knowledge of the event. The Black-Out Periods do not apply to the exercise
of outstanding and vested ISOs issued by the Company or other stock issuances approved by the Board of Directors; however, they do apply
to all of our securities that are the subject of a registration statement filed with the SEC. This summary is modified in its entirely
by reference to Exhibit 99.1 .

 ITEM 11: EXECUTIVE COMPENSATION 

 All Compensation 

 32 

 The following Employment Agreements of our officers
and directors (with the exception of Mr. Metherd, for which there is no written Employment Agreement), which are discussed below under
the caption “Executive Compensation” in Part III, Item 11 hereof, can be accessed by Hyperlink in Part IV, Item 15 hereof:

 D. Sean McEwen-Chairman and CEO-8-K Current Report
dated January 1, 2022, filed with the SEC January 14, 2022, along with the third amendment to Mr. McEwen’s Employment Agreement
that is Exhibit 10.1 filed herewith.

 Charles D. Griffin, President-8-K Current Report dated
January 1, 2022, filed with the SEC January 14, 2022.

 Todd C. Murcer-8-K Current Report dated February 4,
2022, filed with the SEC on February 11, 2022.

 Joshua Ploude, President of Apeiron Systems-8-K Current
Report dated December 31, 2018, filed with the SEC on December 31, 2018.

 Jason N. Welch, President of IM Telecom-8-KA-1 Current
Report dated February 4, 2022, filed with the SEC on April 8, 2022.

 Summary Compensation Table 

 Option 
 
 Deferred 
 
 and 
 
 All Other 
 
 Name and 
 
 Compen- 
 
 Stock 
 
 Warrant 
 
 Compen- 
 
 Principal Position 
 
 Salary 
 
 sation 
 
 Bonus 
 
 Awards 
 
 Awards* 
 
 sation 
 
 Total 

 D Sean McEwen, Chairman and CEO 
 
 2021 
 
 $ 
 66,186 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 66,186 

 2020 
 
 $ 
 198,491 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 198,491 

 Robert Beaty, Director 
 
 2021 
 
 $ 
 31,000 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 89,334 
 
 $ 
 — 
 
 $ 
 120,334 

 2020 
 
 $ 
 24,000 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 14,075 
 
 $ 
 — 
 
 $ 
 38,075 

 Jeffrey Pearl, Director 
 
 2021 
 
 $ 
 31,000 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 78,876 
 
 $ 
 — 
 
 $ 
 109,876 

 2020 
 
 $ 
 24,000 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 12,602 
 
 $ 
 — 
 
 $ 
 36,602 

 Brian R. Riffle, Chief Financial Officer 
 
 2021 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 37,160 
 
 $ 
 37,160 

 2020 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 18,954 
 
 $ 
 18,954 

 Paul LaPier, Secretary 
 
 2021 
 
 $ 
 182,442 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 20,513 
 
 $ 
 — 
 
 $ 
 202,955 

 and Vice President of Finance 
 
 2020 
 
 $ 
 140,102 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 20,513 
 
 $ 
 — 
 
 $ 
 160,615 

 Joshua Ploude, President, 
 
 2021 
 
 $ 
 219,679 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 219,679 

 Apeiron Systems 
 
 2020 
 
 $ 
 200,000 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 200,000 

 Nick Metherd, Vice President, IM Telecom 
 
 2021 
 
 $ 
 180,000 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 20,513 
 
 $ 
 — 
 
 $ 
 200,513 

 2020 
 
 $ 
 119,388 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 20,513 
 
 $ 
 — 
 
 $ 
 139,901 

 *See the heading “Outstanding Equity Awards”
below.

 Employment Agreement of D. Sean McEwen 

 At the Effective Time of the KonaTel Merger, we entered
into an Employment Agreement with Mr. McEwen for a term of two (2) years, under which he served as the Chairman, President and CEO of
our Company, with customary duties applicable to these positions, which are described in his McEwen Employment Agreement that can be viewed
under the heading “KonaTel Merger Current Reports” in Part IV, Item 15. After the initial term, the McEwen Employment Agreement
provided that it will continue on a year-to-year basis as specified under Section 3.0 thereof. During the initial term (2018-2019), Mr.
McEwen received the following compensation under his Employment Agreement: $1,000 per month base salary; and inclusion in our healthcare
plan for employees, including medical, dental and vision, which coverage also includes his spouse. Effective January 1, 2020, McEwen’s
Employment Agreement was amended to adjust his monthly base salary to $16,667, including a monthly bonus program tied to a percentage
of EBITDA. Effective January 1, 2022, McEwen’s Employment Agreement was amended a second time to adjust his monthly base salary
to $22,916.66, including a twenty-four (24) month severance compensation package equal to his then current base salary, together with
any accrued and untaken vacation, in the event any employment departure is not “for cause” as defined in the McEwen Employment
Agreement. Additionally, at the time of the second amendment to his Employment Agreement, Mr. McEwen resigned as President of the Company
to allow for Charles D. Griffin to assume the role of President and COO of the Company. Mr. McEwen remains as Chairman of the Board and
CEO of the Company. Mr. McEwen has never claimed the “percentage of EBITDA” bonus program provision of his Employment Agreement;
accordingly, effective April 12, 2022, Mr. McEwen suggested, and the Board of Directors agreed, to a third amendment of his Employment
Agreement thereby eliminating the percentage of EBITDA bonus provision. Mr. McEwen volunteered this third amendment to his Employment
Agreement without receipt of any current or future consideration, and all other terms and conditions of the McEwen Employment Agreement
along with its three amendments remain the same. The third amendment to Mr. McEwen’s Employment Agreement is filed herewith as Exhibit
10.1 , in Part IV, Item 15 hereof.

 33 

 Charles D. Griffin Employment Agreement 

 The Griffin
Employment Agreement covers customary duties performed by persons serving in the capacities of President and COO, and Mr. Griffin, with
the guidance of Mr. McEwen, our Chairman and CEO, will assist in the management and leadership of the Company and is accountable to our
CEO; he will also act as a liaison between the Company, our subsidiaries and our CEO. A complete description of his duties is contained
in Exhibit A of the Griffin Employment Agreement, which provides, among other customary terms and provisions: (i) a monthly
base salary of $20,833.33, along with inclusion in our healthcare plan for employees and spouse, including medical, dental and vision
coverage, effective January 1, 2022, and termination can occur on thirty (30) days’ notice by either party; (ii) customary trade
secret, non-competition and dispute resolution provisions, among other provisions; and (iii) he shall be paid a twelve (12) months’
severance compensation package equal to his then current base salary, together with any accrued and untaken vacation, in the event any
employment departure is not “for cause” as defined in the Griffin Employment Agreement. 

 The Employment Agreement has customary termination,
trade secret and dispute resolution clauses, among others.

 B. Todd Murcer Employment Agreement 

 On January 24, 2022, we entered into an Employment
Agreement with Mr. Murcer (the “Murcer Employment Agreement”), under which Mr. Murcer will serve as our Executive Vice President
of Finance and Secretary of the Company, with customary duties applicable to these positions, and which are described in Exhibit A 
thereof. Under the Murcer Employment Agreement, Mr. Murcer will receive the following compensation: $18,750 per month base salary; and
inclusion in our healthcare plan for employees, including medical, dental and vision, which coverage also includes his immediate family.
The monthly base salary may be increased or decreased from time to time in the sole discretion of the Company, but in no event shall the
monthly base salary be less than the amount stated in this section. Mr. Murcer entitled to four (4) weeks of paid vacation during each
year of his employment in accordance to the Company’s vacation accrual policy as defined by our Company handbook; and he may also
receive an annual bonus under the Company’s bonus program established by us and as approved by our Board of Directors each calendar
year.

 The Murcer Employment Agreement also contained customary
termination, trade secret and dispute resolution clauses, among others.

 Joshua Ploude Employment Agreement 

 Effective December 31, 2018, Apeiron and Mr. Ploude
executed and delivered a 36-month Employment Agreement under which Mr. Ploude will be the Chief Executive Officer of Apeiron, with the
attendant duties and responsibilities outlined in his Employment Agreement, at a monthly salary of $16,667 (the “Ploude Employment
Agreement”). On September 1, 2021, Mr. Ploude’s monthly salary was increased to $20,883.33. The Ploude Employment Agreement
has customary provisions regarding trade secrets; a one (1) year covenant not to compete; confidentiality; Apeiron’s continued ownership
of intellectual property; a duty to cooperate; free, fully-paid licensing to Apeiron of inventions created by Mr. Ploude that he provides
or incorporates into any Employer product or system during his employment with Apeiron; and an assignment of Mr. Ploude’s interest
in all relevant intellectual property utilized by Apeiron, among other terms and conditions.

 Jason N. Welch Employment Agreement 

 On February 2, 2022 (effective February 14, 2022),
we entered into an Employment Agreement with Mr. Welch (the “Welch Employment Agreement”), under which Mr. Welch will serve
as the President of IM Telecom, with customary duties applicable to this position, and which are described in Exhibit A thereof.
Under the Welch Employment Agreement, Mr. Welch will receive the following compensation: $20,833.33 per month base salary; and inclusion
in our healthcare plan for employees, including medical, dental and vision, which coverage also includes his immediate family. The monthly
base salary may be increased or decreased from time to time in the sole discretion of the Company, but in no event shall the monthly base
salary be less than the amount stated in this section. Mr. Welch is entitled to four (4) weeks of paid vacation during each year of his
employment in accordance to the Company’s vacation accrual policy as defined by our Company handbook; and he may also receive an
annual bonus under the Company’s bonus program established by us and as approved by our Board of Directors each calendar year.

 The Welch Employment Agreement also contained customary
termination, trade secret and dispute resolution clauses, among others.

 34 

 Securities Authorized for Issuance under Equity Compensation Plans 

 Outstanding Equity Awards 

 Name 
 Option Awards 
 Stock Awards 

 Number of 

 securities 

 underlying 

 unexercised 

 options (#) 

 exercisable 
 
 Number of 

 securities 

 underlying 

 unexercised 

 options (#) 

 not 

 exercisable 
 
 Equity 

 incentive plan 

 awards; 

 number of 

 securities 

 underlying 

 unexercised 

 unearned 

 options (#) 
 
 Option 

 exercise 

 price ($) 
 
 Option 

 expiration 

 date 
 
 Number of 

 shares or 

 units of 

 stock that 

 have not 

 vested (#) 
 
 Market 

 value of 

 shares or 

 units of 

 stock that 

 have not 

 vested (#) 
 
 Equity 

 incentive 

 plan 

 awards; 

 number of 

 unearned 

 shares, 

 units or 

 other 

 rights 

 that have 

 not 

 vested (3) 
 
 Equity 

 incentive 

 plan 

 awards; 

 market or 

 payout 

 value of 

 unearned 

 shares, 

 united or 

 other 

 rights 

 that have 

 not 

 vested 
 
 (a) 
 (b) 
 (c) 
 (d) 
 (e) 
 (f) 
 (g) 
 (h) 
 (i) 
 (j) 

 D. Sean McEwen 
 1,500,000 
 0 
 
 $0.2200 
 (1) 
 0 
 
 0 
 
 John Shadek 
 50,000 
 0 
 
 $0.2000 
 (2) 
 0 
 
 0 
 
 Robert Beaty 
 100,000 
 0 
 
 $0.3300 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.1771 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 50,000 
 0 
 
 $0.1672 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.1650 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.2618 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.1309 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.0627 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.4400 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.6600 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $0.9350 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 25,000 
 0 
 
 $1.9250 
 (3) 
 0 
 
 0 
 
 Robert Beaty 
 0 
 25,000 
 
 $1.1440 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 100,000 
 0 
 
 $0.4950 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.1650 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.1232 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.1672 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.1001 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.4895 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.5970 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $0.8130 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 25,000 
 0 
 
 $1.5950 
 (3) 
 0 
 
 0 
 
 Jeffrey Pearl 
 0 
 25,000 
 
 $1.3420 
 (3) 
 0 
 
 0 
 
 Nick Metherd 
 300,000 
 0 
 
 $0.1500 
 (4) 
 0 
 
 0 
 
 Paul LaPier 
 300,000 
 0 
 
 $0.1500 
 (4) 
 0 
 
 0 
 
 Jonathan So 
 0 
 150,000 
 
 $0.3200 
 (5) 
 0 
 
 0 
 
 Cynthia Collins 
 0 
 75,000 
 
 $0.7300 
 (6) 
 0 
 
 0 
 
 Edward Archuleta 
 0 
 30,000 
 
 $0.7300 
 (7) 
 0 
 
 0 
 
 James Connolly 
 0 
 30,000 
 
 $0.7300 
 (7) 
 0 
 
 0 
 
 Charles D. Griffin 
 0 
 1,100,000 
 
 $0.7800 
 (8) 
 0 
 
 0 
 
 Amy Pearson 
 0 
 50,000 
 
 $0.7500 
 (9) 
 0 
 
 0 
 
 B. Todd Murcer 
 0 
 350,000 
 
 $1.1650 
 (10) 
 0 
 
 0 
 
 Jason N. Welch 
 0 
 350,000 
 
 $1.0400 
 (11) 
 0 
 
 0 
 
 (1) These options vested on the following dates and are exercisable in the following
tranches, as vested, and expire December 18, 2022: 187,500 shares exercisable March 18, 2018; June 18, 2018; September 18, 2018; December
18, 2018; March 18, 2019; June 18, 2019; September 18, 2019; and December 18, 2019. 

 35 

 (2) These options all vested on December 18, 2017 and expire December 18, 2022. 

 (3) As part of their designation as directors, Messrs. Addington, Beaty and
Pearl (commencing with the quarter beginning on January 28, 2019) were granted quarterly stock option grants to purchase 25,000 shares
of our common stock, with the shares being valued at 110% of the fair market value or the closing price of our common stock on the date
of the grant for the first year, and thereafter at 110% of the fair market value or the closing price of our common stock on the quarterly
date of vesting for the remaining quarters of service as a director. These options expire at the earlier of five (5) years from
the date of grant or one (1) year from termination or resignation as a director. These directors were also paid $2,000 per month for their
service on the Board of Directors until June of 2021 when the amount was increased to $3,000 per month. See the “Summary Compensation
Table” above. Mr. Addington resigned as a director of the Company on January 1, 2020, and he forfeited 175,000 options that were
not exercised within the one (1) year period of his resignation on January 1, 2021. 

 (4) These options were granted on October 24, 2019, and vest 100,000 shares
on December 31, 2019; 100,000 shares on December 31, 2020; and 100,000 shares on December 31, 2021; and they expire on the earlier of
five (5) years or three (3) months from the termination of employment. 

 (5) These options were granted on April 1, 2021, and vest 50,000 shares on April
1, 2022; 50,000 shares on April 1, 2023; and 50,000 shares on April 1, 2024; and they expire on the earlier of five (5) years or three
(3) months from the termination of employment. 

 (6) These options were granted on May 17, 2021, and vest 25,000 shares on May
17, 2022; 25,000 shares on May 17, 2023; and 25,000 shares on May 17, 2024; and they expire on the earlier of five (5) years or three
(3) months from the termination of employment. 

 (7) These options were granted on May 17, 2021, and vest 10,000 shares on May
17, 2022; 10,000 shares on May 17, 2023; and 10,000 shares on May 17, 2024; and they expire on the earlier of five (5) years or three
(3) months from the termination of employment. 

 (8) These options were granted on July 6, 2021, and vest 275,000 shares on January
7, 2023; 275,000 shares on January 7, 2024; 275,000 shares on January 7, 2025; and 275,000 shares on January 7, 2026; and they expire
on the earlier of five (5) years or three (3) months from the termination of employment. 

 (9) These options were granted on September 27, 2021, and vest 16,667 shares
on September 27, 2022; 16,667 shares on September 27, 2023, and 16,666 shares on September 27, 2024; and they expire on the earlier of
five (5) years or three (3) months from the termination of employment. 

 (10) These options were granted on January 24, 2022, and vest 87,500 shares on
January 24, 2023, 87,500 shares on January 24, 2024, 87,500 shares on January 24, 2025 and 87,500 shares January 24, 2026; and they expire
on the earlier of five (5) years. 

 (11) These options were granted on February 14, 2022, and vest 87,500 shares
February 14, 2023, 87,500 shares on February 14, 2024, 87,500 shares on February 14, 2025 and 87,500 shares on February 14, 2026; and
they expire on the earlier of five (5) years. 

 Compensation of Directors 

 Mr. McEwen receives no compensation to serve as a
Director and Chairman of the Board. Currently, and except for compensation of Mr. McEwen under his Employment Agreement and the $3,000
monthly compensation set out above for certain directors, our directors do not receive any other compensation other than the incentive
stock options outlined above in this Item under the heading “Outstanding Equity Awards.”

 Transactions with Related Persons 

 For information regarding transactions with related
persons, see the heading “Transactions with Related Persons,” in Part III, Item 13 below.

 Promoters and Certain Control Persons 

 See the heading “Transactions with Related Persons,” under
Item 13 below.

 36 

 Parents of the Smaller Reporting Company 

 We have no parents.

 ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 

 Security Ownership of Certain Beneficial Owners 

 The following table sets forth the ownership by any
person known to us to be the beneficial owner of more than five percent (5%) of any of our outstanding voting securities as of the filing
of this Annual Report with the SEC. Beneficial ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Other than as indicated below in footnotes to this table, the
persons named in the table below have sole voting power and investment power with respect to all shares of common stock shown as beneficially
owned by them.

 Security Ownership of Beneficial Owners 

 Name and Address* 

 of Beneficial Owner 
 
 Title of 

 Class 
 
 Amount and Nature of Beneficial 

 Ownership (1), (2) & (3) 
 
 Percent of 

 Class (1), (2) & (3) 
 
 D. Sean McEwen 
 
 Common 
 
 17,000,000 
 
 38.21% 

 Joshua Ploude 
 
 Common 
 
 6,300,000 
 
 14.16% 

 Shawnee Communications, Inc. 
 
 Common 
 
 2,500,000 
 
 5.62% 

 Security Ownership of Officers and Directors 

 Name and Address* 

 of Officer or Director 
 
 Title of 

 Class 
 
 Amount and Nature of Beneficial 

 Ownership (1), (2) & (3) 
 
 Percent of 

 Class (1), (2) & (3) 
 
 D. Sean McEwen 
 
 Common 
 
 17,000,000 
 
 38.21% 

 Brian R. Riffle 
 
 Common 
 
 0 
 
 0.00% 

 Paul LaPier 
 
 Common 
 
 300,000 
 
 0.67% 

 B. Todd Murcer 
 
 Common 
 
 0 
 
 0.00% 

 Robert Beaty 
 
 Common 
 
 450,000 
 
 1.01% 

 Jeffrey Pearl 
 
 Common 
 
 350,000 
 
 0.79% 

 Joshua Ploude 
 
 Common 
 
 6,300,000 
 
 14.16% 

 Jason N. Welch 
 
 Common 
 
 0 
 
 0.00% 

 Nicholas Metherd 
 
 Common 
 
 300,000 
 
 0.67% 

 All Officers and Directors as a Group 
 
 Common 
 
 24,700,000 
 
 55.52% 

 *The Company’s principal executive office address
on the cover page.

 (1) The number and percentage of shares beneficially
owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power
and also any shares, which the individual has the right to acquire within sixty (60) days through the exercise of any stock option or
other right. The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this
table.

 (2) Based on 41,615,406 issued and outstanding shares
of common stock, together with 2,875,000 vested options, comprised of 1,500,000 for Sean McEwen, 425,000 for Robert Beaty, 350,000 Jeffrey
Pearl, 300,000 for Nick Metherd and 300,000 for Paul LaPier, for a total of 44,490,406 issued (or issuable with respect to such options
within sixty [60] days) and outstanding shares of common stock, as of the date of this Annual Report. SEC Rule 13d-3 generally provides
that management’s beneficial ownership of securities includes any such security that can be acquired within sixty (60) days. Accordingly,
any securities not outstanding, which are subject to such options, warrants or conversion privileges and exercisable within sixty (60)
days, are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person, and are not
treated as outstanding for the purpose of computing the percentage of the class owned by any such person.

 (3) Joshua Ploude acquired 6,300,000 shares of our
common stock under the Apeiron Systems Merger Agreement outlined in our 8-K Current Report dated December 31, 2018 and filed with the
SEC on December 31, 2018. See the heading “Apeiron Systems Merger Current Reports” in Part IV, Item 15 hereof. The beneficial
ownership of Mr. McEwen in the “Beneficial Owners” table includes 15,500,000 shares directly owned; and 1,500,000 shares underlying
personally owned vested options, all of which vested options can be exercised within sixty (60) days of the filing of this Annual Report.

 37 

 Changes in Control 

 There are no additional present arrangements or pledges
of our securities which may result in a change in control of the Company.

 ITEM 13: CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 

 Transactions with Related Persons 

 Transactions with Shareholders 

 During 2019, Apeiron System’s CEO, Joshua Ploude,
advanced $200,000 to the Company. This amount was fully repaid as of October, 2020.

 During 2017, three of the Company’s shareholders,
D. Sean McEwen, Matthew Atkinson, and Mark Savage advanced $191,500, $15,063 and $7,564, respectively, to the Company. The amounts advanced
were used for working capital purposes and did not bear any interest and had no maturity date. All advances were fully repaid as of December
31, 2019.

 Transactions with CFO Strategies LLC 

 Brian R. Riffle, the CFO of the Company, is the Managing
Partner of CFO Strategies, LLC. Payments of $37,160 were made to CFO Strategies LLC as compensation for the CFO services of Mr. Riffle.

 Promoters and Certain Control Persons 

 See the heading “Transactions with Related Persons”
of this Item above, and Part III, Item 12 hereof for identification of control persons.

 Director Independence 

 For purposes of determining director independence,
we have applied the definitions set out in NASDAQ Marketplace Rule 4200(a)(15), which states that “Independent director” means
“a person other than an executive officer or employee of the company or any other individual having a relationship which, in the
opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director.” None of the following named directors come within any of the exceptions to this definition regarding: being
or having been an executive officer; having an employee-employer relationship with us; having received compensation from us in an amount
in excess of $100,000; and having certain relationships with us, in the case of membership of a director on an audit committee, including
applicable family relationships. Accordingly, Messrs. Robert Beaty and Jeffrey Pearl, two (2) of our current directors, are independent
directors.

 Policy on Audit Committee Pre-Approval of Audit
and Permissible Non-Audit Services of Independent Auditors 

 We have not adopted an Audit Committee; therefore,
there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services
to be provided to us by our principal accountant. Additionally, all

 services rendered by our principal accountant are
performed pursuant to a written engagement letter between us and the principal accountant.

 ITEM 14: PRINCIPAL ACCOUNTING FEES
AND SERVICES 

 The following is a summary of the fees billed to us
by our principal accountants, Haynie & Company, CPAs, during the years ended December 31, 2021, and 2020, respectively:

 Fee Category 
 
 2021 
 
 2020 
 
 Audit Fees 
 
 $ 
 106,156 
 
 $ 
 92,525 
 
 Audit-related Fees 
 
 — 
 
 — 
 
 Tax Fees 
 
 — 
 
 — 
 
 All Other Fees 
 
 — 
 
 — 
 
 Total Fees 
 
 $ 
 106,156 
 
 $ 
 92,525 
 
 Audit Fees - Consists of fees for professional
services rendered by our principal accountants for the audit of our annual financial statements for our 10-K Annual Reports and review
of the financial statements included in our 10-Q Quarterly Reports or services that are normally provided by our principal accountants
in connection with statutory and regulatory filings or engagements.

 38 

 Audit-related Fees - Consists of fees for assurance
and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial
statements and are not reported under “Audit fees.”

 Tax Fees - Consists of fees for professional
services rendered by our principal accountants for tax compliance, tax advice and tax planning.

 All Other Fees - Consists of fees for products
and services provided by our principal accountants, other than the services reported under “Audit Fees,” “Audit-related
Fees,” and “Tax Fees” above.

 ( This space intentionally left blank )

 39 

 PART IV 

 ITEM 15: EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 

 (a)(1)(2)

 Financial Statements. See the audited financial
statements of the Company contained in Part II, Item 8 above, of this Annual Report, which are incorporated herein by this reference.

 (a)(3)

 Exhibits. The following exhibits are filed as part of this Annual
Report:

 (a) Exhibits.

 Exhibit 
 
 Description of Exhibit 
 
 Filing 

 Number 
 
 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(ii) 
 
 Amended and Restated Bylaws 
 
 Filed with the Form 8-K/A filed on December 20, 2017 and incorporated herein by reference. 

 10.1 
 
 Third Amended Employment Agreement with D. Sean McEwen 
 
 Filed herewith. 

 14 
 
 Code of Ethics 
 
 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. 

 99.1 
 
 Insider Trading Policy 
 
 Filed herewith. 

 101.INS 
 
 XBRL Instance Document 
 
 101.SCH 
 
 XBRL Taxonomy Extension Schema 
 
 101.CAL 
 
 XBRL Taxonomy Extension Calculation Linkbase 
 
 101.DEF 
 
 XBRL Taxonomy Extension Definition Linkbase 
 
 101.LAB 
 
 XBRL Taxonomy Extension Label Linkbase 
 
 101.PRE 
 
 XBRL Taxonomy Extension Presentation Linkbase 
 
 Exhibits incorporated by reference:

 Apeiron Systems Merger Current Reports 

 8-K Current Report dated January 31, 2019, and filed with the SEC on January 31, 2019 (Press Release) 

 8-K Current Report dated December 31, 2018, and filed with the SEC on December 31, 2018 .

 Agreement and Plan of Merger 

 Ploude Employment Agreement 

 Yanson Employment Agreement 

 Lock-up/Leak-out Agreement 

 Shareholder Voting Agreement 

 8-K/A-2 Current Report dated December 31, 2018, and filed with the SEC on June 21, 2021 

 40 

 Telecon Wireless Sale Current Report 

 8-K Current Report dated August 9, 2018, and filed with the SEC on August 15, 2018 .

 Asset Purchase Agreement 

 Bill of Sale 

 Promissory Note 

 Security Agreement 

 IM Telecom Current Reports 

 8-KA-2 Current Report of the same February 7, 2018, and filed with the SEC on February 6, 2019 .

 IM Telecom PSMI 

 IM Telecom PSMI (First Amendment) 

 IM Telecom PSMI (Second Amendment) 

 Morrow Independent Contractor Agreement and Incentive Stock Option Agreement 

 Morrow Incentive Stock Option Agreement 

 Morrow Lock-Up/Leak-Out Agreement 

 Closing Memorandum (without Exhibits) 

 8-KA-1 Current Report of the February 7, 2018, and filed with the SEC on January 14, 2019 .

 8-K Current Report dated February 19, 2019 and filed with the SEC on February 19, 2019 . 

 Press Release 

 8-K Current Report dated September 4, 2019, filed with the SEC on September 6, 2019 .

 Morrow Settlement Agreement and Release 

 8-K Current Report dated January 1, 2022, and filed with the SEC on January 14, 2022 .

 First Amended Employment Agreement with D. Sean McEwen 

 2nd Amended Employment Agreement with D. Sean McEwen 

 Charles D. Griffin Employment Agreement 

 8-K/A-1 Current Report dated February 4, 2022, and filed with the SEC on April 8, 2022 .

 Jason N. Welch Employment Agreement 

 8-K Current Report dated February 4, 2022, and filed with the SEC on February 11, 2022 .

 Murcer Employment Agreement 

 ITEM 16. FORM 10-K SUMMARY 

 None.

 41 

 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: 
 April 14, 2022 
 
 By: 
 /s/ D. Sean McEwen 

 D. Sean McEwen 

 Chairman and CEO 

 Date: 
 April 14, 2022 
 
 By: 
 /s/ Brian R. Riffle 

 Brian R. Riffle 

 Chief Financial Officer 

 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: 
 April 14, 2022 
 
 By: 
 /s/ D. Sean McEwen 

 D. Sean McEwen 

 Chairman, CEO and a Director 

 Date: 
 April 14, 2022 
 
 By: 
 /s/ Brian R. Riffle 

 Brian R. Riffle 

 Chief Financial Officer 

 Date: 
 April 14, 2022 
 
 By: 
 /s/ Robert Beaty 

 Robert Beaty 

 Director 

 Date: 
 April 14, 2022 
 
 By: 
 /s/ Jeffrey Pearl 

 Jeffrey Pearl 

 Director 

 42
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
KonaTel, Inc. 10-K
