What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-04-15 compared with 2024-04-01 · 490 added, 324 removed, 554 unchanged (60% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

the Board of Directors and

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of KonaTel, Inc.

on the Financial Statements

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

(the Company) as of December 31, 2023 and 2022, and the related

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

ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the

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

2023 and 2022, and the results of its consolidated operations and its cash flows for each of the years in the two-year period ended December

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of KonaTel, Inc.

KONATEL INC (the Company) as of December

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

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

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

In our opinion, the consolidated

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

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

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

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

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

Our responsibility is to express an opinion

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

We are a public accounting firm registered with the Public

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

with the U.S.

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

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

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

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

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.

Substantial Doubt about the Company’s

Ability to Continue as a Going Concern

The accompanying consolidated financial statements

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

As discussed in Note 2 of the financial statements, the

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

The losses in conjunction with uncertainty

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

plans are described in Note 2.

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

of this uncertainty.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

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

statements based on our audits.

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

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

federal securities laws and

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

We conducted our audits in accordance with the

standards of the PCAOB.

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

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

The Company is not required to have, nor were we

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

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

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

internal control over financial reporting.

Accordingly, we express no such opinion.

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

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

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

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

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

Audit Matters

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

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

(1) relate to accounts or disclosures that are

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

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

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

accounts or disclosures to which they relate.

of Stock Based Compensation

of the Matter:

discussed in Note 10 to the consolidated financial statements, the Company offers stock option awards that involve complex accounting

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.

We Addressed the Matter in Our Audit

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

Our audits included performing procedures to assess

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

that respond to those risks.

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

consolidated financial statements.

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

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

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below

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

to the audit committee and that:

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

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

The communication of critical audit matters does not alter

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

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

Valuation of Stock Based Compensation

Description of the Matter:

As discussed in Note 11 to the consolidated

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

Management evaluates the stock

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

the stock option awards.

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

Additionally, we note the

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

How We Addressed the Matter

We gained an understanding of management’s

processes and methodology to develop the estimates.

We reviewed the underlying option agreements.

We evaluated management’s selection of a valuation method, tested the inputs used in the valuation method (Black-Scholes) calculation

by agreeing terms of the underlying agreements and market information to third-party sites, and recalculated the value of the options.

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

Haynie & Company

We evaluated management’s selection

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

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

We also evaluated

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

/s/ Haynie & Company

Haynie & Company

Salt Lake City, Utah

April 1, 2024

have served as the Company’s auditor since 2019.

We have served as the Company’s auditor since

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KONATEL, INC.

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Accounts Receivable, Net

Notes Receivable

Inventory, Net

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Total Other Income and Expenses

$ ( 3,940,827 )

Income Before Income Taxes

Income Tax Expense

Net Income (Loss)

$ ( 3,940,827 )

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KONATEL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

Common Shares

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$ ( 12,238,691 )

$ ( 3,013,405 )

Exercised Stock Options

Stock Based Compensation

( 3,940,827 )

Balances as of December 31, 2024

$ ( 7,747,873 )

$ ( 3,013,405 )

The accompanying notes are an integral part of these

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Cash Flows from Operating Activities:

$ ( 3,940,827 )

Net Income (Loss)

$ ( 3,940,827 )

Adjustments to reconcile net loss to net cash used in operating activities:

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

Depreciation and Amortization

Gain on Sale of IM Telecom (49%)

( 9,247,726 )

Loan Origination Cost Amortization

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Accounts Payable and Accrued Expenses

Net cash used in operating activities

( 1,432,094 )

Income Tax Payable

Net cash used in operating

( 3,992,767 )

( 1,792,032 )

Cash Flows from Investing Activities

Sale of Assets

Sale of IM Telecom (49%)

Notes Receivable

( 1,000,000 )

Net cash provided by investing activities

Cash Flows from Financing Activities

Proceeds from short-term note payable

Loan origination cost

Repayments of amounts of Notes Payable

Proceeds from Note Payable

Repayments of Note Payable

( 3,704,750 )

Loan Origination Costs

Cash Received From Stock Options Exercised

Net cash provided by financing activities

Net cash provided by (used in) financing activities

( 3,663,500 )

Net Change in Cash

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Cash paid for taxes

Non-cash investing and financing activities:

Right of use assets obtained in exchange for new operating lease liabilities

The accompanying notes are an integral part of these

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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 eleven (11) states.

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

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

Under the Lifeline program,

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

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

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

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

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

Pursuant to the Membership

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

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

change of control approval by the “FCC.”

Additional agreements were also executed by the parties

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

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

Basis of Presentation

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The consolidated financial statements for the year

ended December 31, 2023, and 2022, include the Company and its three (3) wholly owned corporate subsidiaries, KonaTel Nevada, Apeiron

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

Systems, and IM Telecom.

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

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, 2023, and 2022, management has determined that

no allowance for doubtful receivables is necessary.

for Credit Losses

The allowance for credit losses is

determined by management based on customer credit history, specific customer circumstances and general economic conditions.

Periodically, management reviews our accounts receivable and adjusts the allowance based on current circumstances and charges off

uncollectible receivables against the allowance when all attempts to collect the receivable have failed.

As of December 31, 2024,

and 2023, management has determined that no

allowance for credit losses is necessary.

Inventory consists primarily of the cost of cellular

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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.

Leasehold improvements are amortized over the lesser of

the lease term or estimated useful life, furniture and fixtures, equipment, and vehicles are depreciated over periods ranging from five

to seven (5-7) years, and billing software is depreciated over three (3) years which represents the estimated useful life of the assets.

and repairs are charged to expense as incurred while major replacements and improvements are capitalized.

When property and equipment

are retired or sold, the cost and applicable accumulated depreciation are removed from the respective accounts and the related gain or

loss is recognized.

The Company recognizes impairment losses for long-lived

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customer would change.

The Company held $ 0 in collateral deposits from various

sub-reseller customers at December 31, 2023, and 2022, respectively.

The Company held $ 0 in collateral deposits from

various sub-reseller customers at December 31, 2024, and 2023, respectively.

Notes Receivable

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

Payment of the note is contingent upon the satisfaction of certain underlying provisions noted in the Membership Interest Purchase Agreement.

There is no stated interest or term under this note.

Fair Market Value of Assets

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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.

These bills include an

amount for the monthly recurring charge and a usage charge.

We earn revenue from contracts with customers, primarily

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As part of the distribution process, we deliver mobile phones and/or tablets (devices) to our Master Agents, who

then are responsible to subscribe qualifying consumers under a government

sponsored program (ACP and/or Lifeline).

cases, devices that have been delivered to our Master Agents are subscribed to and activated by qualifying consumers within sixty (60)

days, at which point we would receive a subsidy from a governing body ( the

“Universal Service Administrative Company” or “ USAC”

or certain states) and recognize revenue.

Once a device is activated, and the intended service provided under the government program is

deemed to have occurred, the program revenue is recognized, the expense is recognized, and the device is removed from inventory.

then are responsible to subscribe qualifying consumers under a government sponsored program (ACP and/or Lifeline).

In most cases, devices

that have been delivered to our Master Agents are subscribed to and activated by qualifying consumers within sixty (60) days, at which

point we would receive a subsidy from a governing body (the Universal Service Administrative Company (“USAC”) or certain states)

and recognize revenue.

Once a device is activated, and the intended service provided under the government program is deemed to have occurred,

the program revenue is recognized, the expense is recognized, and the device is removed from inventory.

Excess Telecom (Related Party) Revenue ( see

NOTE 14 below)

Pursuant to the Excess Telecom Membership

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

the same manner as other distribution partners.

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

license was $ 108,328,000 for

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

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

they are netted.

Deferred Revenue

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

The increase in advertising/marketing

costs was a result of the expansion of the marketing for Infiniti Mobile throughout our independent agent footprint.

The decrease in

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

Stock-based Compensation

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calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive.

dilutive common shares for the years ended December 31, 2023, and 2022, are not included in the computation of diluted earnings per share

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

because to do so would be anti-dilutive.

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and net income used in the computations of both basic and diluted earnings per share of common stockholders:

Summary of Significant

Accounting Policies -Schedule of Earnings Per Share, Basic and Diluted

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

Years Ended December 31,

$ ( 3,940,827 )

Net Income (Loss)

$ ( 3,940,827 )

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however, from time to time, the deposit levels may exceed FDIC coverage levels.

Company has a concentration of risk with respect to trade receivables from customers and cellular providers.

As of December 31, 2023,

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 $ 1,024,308 or 68.5 % and $ 283,536 or 19.0 %.

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

of December 31, 2022, the Company had a significant concentration of receivables from two (2) customers in the amounts of $ 859,334 or

57.0 % and $ 255,136 or 16.9 %.

The Company has a concentration of risk with respect

to trade receivables from customers and cellular providers.

As of December 31, 2024, the Company had a significant concentration of receivables

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

$ 1,055,337 or 68.5 %.

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

Public Utilities Commission (CPUC).

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

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

Concentration of Major Customer

significant amount of the revenue is derived from contracts with major customers.

For the year ended December 31, 2023, the Company had

two (2) customers that accounted for $ 10,492,430 or 57.6 % and $ 3,000,498 or 16.5 % of revenue, respectively.

For the year ended December

31, 2022, the Company had two (2) customers that accounted for $ 12,852,384 or 64.2 % and $ 3,431,875 or 17.1 % of revenue, respectively.

The loss of a major customer would have a negative impact on the Company, and would subsequently require the Company to make significant

changes to reduce expenses.

It should be noted that the largest customer is

the federal government, as administered by USAC under the authority of the FCC ,

as part of our participation in the federal Lifeline and ACP programs.

A significant amount of the revenue is derived from

contracts with major customers.

For the year ended December 31, 2024, the Company had two (2) customers that accounted for $ 5,295,202 or 34.2 %

and $ 3,483,080 or 22.5 % of revenue, respectively.

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

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

The loss of a major customer

would have a negative impact on the Company and would subsequently require the Company to make significant changes to reduce expenses.

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

our participation in the federal Lifeline and ACP Program.

Effect of Recent Accounting Pronouncements

The Company has evaluated all other recent accounting

The Company has evaluated all recent accounting

pronouncements and believes that none will have a significant effect on the Company’s financial statement.

NOTE 2 – GOING

With no visible progress towards an extension of the

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

in our workforce.

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

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

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

replacement and VIVA-US Telecommunications, Inc.

The lack of our success in one or more of these foregoing initiatives raises

substantial doubt about our ability to remain a going concern for the twelve (12) month period from the date of this Annual Report.

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

through its’ additional state funding and Linkup program.

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

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

If necessary, we will also consider additional reductions

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

NOTE 3 – INVENTORY

Inventory primarily consists of sim cards, cell phones and

tablets, which are stored at our warehouse, or have been delivered to distributors in the field.

Inventory primarily consists of sim cards, cell phones

and tablets, which are stored at our warehouse, or have been delivered to distributors in the field.

Inventories are stated at cost using

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NOTE 4 – SIGNIFICANT TRANSACTIONS

CCUR Loan ( and Extension)

CCUR Loan and Payoff

In 2022, the Company and its wholly owned subsidiary

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

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

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

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

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

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

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

which amount was also amortized over a 12-month period.

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

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

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

optional extensions.

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

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

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

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

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

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

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

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

In 2023, the Company exercised the first draw under

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

In 2024, as a result of the Excess Telecom

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

Line of Credit

In December 2023, IM Telecom entered into a structured

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

The facility is used for mobile device purchases in support of our growing

mobile services group.

Approximately $ 1,500,000

was immediately available under the terms of the agreement.

In 2023, IM Telecom entered into a structured credit,

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

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

services group.

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

Due to the expiration of the

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

NOTE 5 – PROPERTY AND EQUIPMENT

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Depreciation expense amounted to $ 9,056 and

for the years ended December 31, 2023, and 2022, respectively.

Depreciation expense is included as a component of operating expenses in

the accompanying statements of operations.

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

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

accompanying statements of operations.

NOTE 6 – RIGHT-OF-USE ASSETS

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

The Right-of-Use Assets

were $ 443,328 and $ 553,686 in 2023 and 2022, respectively.

The Right-of-Use

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

The Company has right-of-use assets through leases

of properties under non-cancelable leases.

As of December 31, 2023, the Company had four (4) properties with lease terms in excess of

one (1) year.

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

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

Of these four (4)

leases, two (2) leases expire in 2025;

one (1) lease expires in 2026;

and one (1) lease expires in 2030 .

Lease payables as of December 31, 2023, was $ 458,227 .

Lease payables as of December

31, 2024, was $ 341,516 .

Future lease liability payments under the terms of

these leases are as follows:

Right-of-Use Assets

- Schedule of Future Minimum Lease Payments for Operating Leases

2028 and Thereafter

Assets - Schedule of Future Minimum Lease Payments for Operating Leases

Less Interest

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

For the year ended December 31, 2023, total lease expense was $ 145,485 .

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

was $ 164,308 .

NOTE 7 – INTANGIBLE ASSETS

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Intangible Assets net

Amortization expense amounted to $ 0 and $ 0 for the

years ended December 31, 2023, and 2022, 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

Amortization expense amounted to $ 0 and $ 0 for

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

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

accompanying statements of operations.

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

as of December 31, 2022.

Intangible Assets with indefinite useful life consist

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The fair market value of the license

as of December 31, 2023, and December 31, 2022, was $ 634,251 .

as of December 31, 2024 was $ 323,468 ,

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

During the first quarter of 2024, the

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

of $10,000,000.

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

NOTE 8 – LINES OF CREDIT

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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

Regulatory Determination

has the customary obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry

and that may be provided in the contractual agreements.

The Membership Interest Purchase

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

The completion of the sale

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

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

Regulatory Determinations

The Company has no outstanding regulatory determinations

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

The Company will pay $ 5,500 per month, over

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

The Company will pay $ 5,500 per month,

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

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

Letters of Credit

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N OTE 10 – SEGMENT REPORTING

In November 2023, the Financial Accounting

Standards Board (FASB) issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”

(ASU 2023-07).

Beginning with our 2024 annual reporting, we adopted ASU No.

2023-07, which requires that a public entity disclose, on

an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision

maker (“CODM”) and included in each reported measure of segment profit or loss.

An entity must also disclose, by reportable segment, the

amount and composition of other expenses.

The standard requires an entity disclose the title and position of its CODM and explain how

the CODM uses these reported measures in assessing segment performance and determining how to allocate resources.

Our segments are comprised of strategic

business units or other operations that offer products and services to different customer segments over various technology platforms

and/or in different geographies that are managed accordingly.

We have two reportable segments:

Hosted Serves and Mobile Services.

Our CODM is our President.

Our CODM uses operating income to evaluate performance and allocate resources, including capital

allocations, when managing the business.

Our CODM manages operations through the review of actual and forecasted “Operations

and Support Expenses” information at a segment and business unit level, of which segments are primarily evaluated on a direct

cost basis and comprised of equipment, compensation, network and technology, sales, advertising and other costs.

Direct costs are

incurred in support of products and services offered by the business units, such as equipment costs (predominantly wireless

devices), network access, rents, leases, sales support, customer provisioning and compensation expenses.

The Company operates within two ( 2 ) reportable segments.

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IP network services from its national redundant network backbone, including MPLS, Dedicated Internet and LTE Wireless WAN solutions.

Additionally,

Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management.

These Hosted Services are marketed

nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs.

Mobile Services – Our Mobile Services

include retail and wholesale cellular voice/text/data services and IoT mobile data services through our subsidiaries Apeiron Systems and

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 ACP mobile

data program.

Even though government programs like Lifeline have existed since 1985, these programs, along with newer programs like the

ACP program, are subject to change and may have a material impact on our Mobile Services business if changed, reduced or eliminated.

The following table reflects the result of operations of the

Company’s reportable segments:

Segment Reporting - Schedule of Segment

Reporting Information

Additionally, Apeiron’s Cloud Services include Information Data Dips, SD-WAN and IoT data and device management.

These Hosted Services

are marketed nationally and internationally through the Apeiron website, its sales staff, independent sales agents and ISOs.

Mobile Services – Our Mobile

Services include retail and wholesale cellular voice/text/data services and IoT mobile data services through our subsidiaries

Apeiron Systems and IM Telecom.

Mobile voice/text/data and IoT mobile data services are supported by a blend of reseller agreements

with select national wireless carriers and national wireless wholesalers.

A wireless communications service reseller typically does

not own the wireless network infrastructure over which services are provided to its customers.

Mobile voice/text/data and mobile

data solutions are generally sold as traditional post-paid service plans that may include voice/text/data or wireless data only

Sometimes equipment is provided, which can include, but is not limited to, phones, tablets, modems, routers and accessories.

Also included in our Mobile Services segment is the distribution of government subsidized mobile voice service and mobile data

service by IM Telecom under its Infiniti Mobile brand and FCC license to low-income American households that qualify for the

FCC’s Lifeline mobile voice service program and/or the FCC’s ACP mobile data program.

Even though government programs

like Lifeline have existed since 1985, these programs, along with newer programs like the ACP Program, are subject to change and may

have a material impact on our Mobile Services business if changed, reduced or eliminated.

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

reportable segments:

Reporting - Reconciliation of Revenues to Segment Contribution

For the year ended December 31, 2024

Hosted Services

$ ( 903,689 )

Mobile Services

For the year ended December 31, 2023

Depreciation and amortization

Additions to property and equipment

Segment Total

Operating Segments

( 1,378,473 )

Parent administration

support Parent Administration Support

( 3,146,606 )

Gain on sale of subsidiary

Total Corporate Total

KonaTel, Inc.

For the year ended December 31, 2023

Depreciation and amortization

Additions to property and equipment

Hosted Services

$ ( 423,546 )

Mobile Services

Segment Total

( 1,187,319 )

Parent administration support

( 2,753,508 )

Gain on sale of subsidiary

Total Corporate

( 2,753,508 )

KonaTel, Inc.

$ ( 3,940,827 )

*Operating Expenses includes Cost of Revenue, Operating

Expenses, Other Income/Expense and Income Tax Expense.

NOTE 11 – STOCKHOLDERS’ EQUITY

Non-Compensatory Stock Options

Effective December

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

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

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

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

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

Sole Shareholder

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

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

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

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

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

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

See NOTE 11 below.

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

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

McEwen’s expiration dates on his

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

Stock Compensation

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

In 2023, 3,245,000 share incentive stock options were

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

Each independent Board member was granted

25,000 shares in the first and second quarter of 2023, for a total of 50,000 shares each.

Three (3) key employees were granted a total

of 2,050,000 share options.

An independent member of the Board of Directors was granted 750,000 share options, and a total of 345,000

share options were granted among nine (9) employees.

During the year ended December 31, 2023, 200,000 shares were exercised by two (2)

independent members of the Board of Directors.

During the year ended 2023, 700,000 partially vested share options were forfeited by two

(2) key employees of the Company.

The Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $0.89

In 2024, 100,000 share

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

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

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

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

on December 31, 2024.

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December 31, 2023

In 2022, 900,000 share incentive stock options were granted

to two (2) independent members of the Board of Directors and two (2) key employees.

Each independent Board member was granted 25,000 shares

per quarter of service in 2022, for a total of 100,000 shares each.

The key employees were granted 700,000 share options as part of their

employment agreements.

During the year ended December 31, 2022, 625,000 shares were exercised by three (3) former employees of the Company,

who received these options as part of their employment agreements.

During 2022, 130,000 share options were forfeited, of which 50,000

options were forfeited by an independent consultant, and 80,000 options were forfeited by two (2) former employees of the Company.

Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $1.10 on December 31, 2022.

In 2023, 3,245,000 share

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

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

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

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

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

During the year ended December 31, 2023, 200,000

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

During the year ended 2023, 700,000 partially vested

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

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

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

NOTE 12 – INCOME TAX

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

The significant components of net deferred tax assets

(liabilities) were as follows at December 31, 2023, and 2022:

The significant components of net deferred tax

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

Income Tax - Schedule of Deferred Tax Assets

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( 1,947,945 )

( 1,178,294 )

Net Deferred Tax Asset

As of December 31, 2023, the Company had no unrecognized tax

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

A reconciliation

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

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

December 31, 2023, and 2022 is set forth below:

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

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

A reconciliation of the expected

income tax benefit at the U.S.

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

2024, and 2023 is set forth below:

For the Year Ended

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$ ( 850,623 )

$ ( 619,996 )

Non-deductible expenses and other

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federal income tax purposes of approximately ($ 2,732,030 )

This carryforward is available to offset future

taxable income, if any, and will expire, if not used, from 2037 through 2042.

The utilization of the net operating loss carry-forward

is dependent upon the tax laws in effect at the time the net operating loss carry-forward can be utilized and may be limited by changes

in ownership control of the Company.

will expire in 2044.

This carryforward is available to offset future taxable income, if any, and will expire, if not used, from 2037

through 2042.

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

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

The Company’s U.S.

federal tax return, constituting the return of the major taxing jurisdictions,

are subject to examination by the taxing authorities for all open years as prescribed by applicable statute.

No income tax waivers have

been executed that would extend the period subject to examination beyond the period prescribed by statute.

The Company is no longer subject

federal tax examinations for tax years before and including December 31, 2019.

During the years ended December 31, 2023, and 2022,

the Company did not incur interest and penalties.

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

years as prescribed by applicable statute.

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

beyond the period prescribed by statute.

The Company is no longer subject to U.S.

federal tax examinations for tax years before and including

December 31, 2019.

During the years ended December 31, 2024, and 2023, the Company did not incur interest and penalties.

13 – REDUCTION IN FORCE:

KEY EMPLOYEES

Upon shutdown of the Affordable Connectivity

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

As such, a reduction in force

was executed that contained several key individuals.

Multiple replacement revenue initiatives have been ongoing for some time and

continue to mature.

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

to keep key employees (Jason N.

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

key individuals upon successful launch of the growth initiatives.

Welch and Murcer have been very active since the reduction

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

Additionally, and to provide headroom

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

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

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

This extension

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

14 – SUBSEQUENT EVENTS

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

Subsequent Event

Excess Telecom Sale of IM Telecom

On January 22,

2024 (the “Effective Date”), the Company and IM Telecom entered into a Membership Interest Purchase Agreement (the “Excess

Purchase Agreement”) with Excess Telecom, Inc., a Nevada corporation (“Excess”), pursuant to which we conveyed

49 % of our Membership Interest in IM Telecom to Excess on the “Initial Closing Date”

in consideration of the sum of $ 10,000,000 , and will convey the remaining 51% of the Membership Interest in IM Telecom to Excess for the

sum of $100.00 on the Final Closing.

The Final Closing is conditioned upon obtaining the necessary federal and state governmental approvals

for a change in control of IM Telecom (the “Approvals”), among other customary closing conditions.

If on or before December

31, 2024, the ACP Connectivity Program is renewed by the United States Congress for a duration of greater than four (4) months (the “ACP

Renewal Condition”), Excess will pay the Company an additional sum of $ 5,000,000 (the “ACP Renewal Earnout).

The parties also

entered into a Management Services Agreement governing the management of the business of IM Telecom to be effective until the earlier

of the Final Closing or ninety-nine (99) years, and whereby IM Telecom and Excess will be managing IM Telecom until final regulatory approval;

and a Master Distribution Agreement whereby the Company, doing business as “Infiniti Mobile,” a tradename of IM Telecom that

was excluded from the Excess Purchase Agreement, will be a master distributor of IM Telecom’s wireless services, products, Lifeline

services, ACP services to potential customers and such other ancillary services relating to Lifeline and ACP services offered to the Company’s

customers under the Licenses held by IM Telecom (the “Services”), the term of which will commence upon the Final Closing and

continue for a period of not less than ten (10) years.

The current employees of IM Telecom will novate to employees of Company under these

The CCUR Loan and the total liability of Company under

the ACP Financing Installment Sale Agreement, which are referenced above in NOTE 3, were paid in full on the Initial Closing Date of the

Excess Purchase Agreement.

The total payoff amount for the CCUR Loan was $ 3,681,660 , inclusive of unpaid interest

and legal fees.

The total payoff amount under the ACP Finance

Installment Sale Agreement was $ 1,462,345 .

These respective payments eliminated all of the Company’s long-term debt.

Additional information about the Excess Purchase Agreement

and related agreements is contained in the Company’s 8-K Current Report dated April 6, 2023, and filed with the SEC on April

Extension of Agreement to Acquire Wireless Carrier

On January 24, 2023, the Company entered into a non-material

purchase agreement to acquire 100% of the membership interest of Tempo Telecom, LLC, a Georgia limited liability company and Eligible

Telecommunications Carrier (“ETC”), pending FCC approval.

Additionally, the Company has assigned its rights under the purchase

agreement to Insight Mobile, Inc., a Delaware corporation, subject to various conditions of closing.

If all conditions are timely satisfied,

including the required FCC approval, this transaction will be materially beneficial to the Company and will not involve any dilution to

the Company’s shareholders.

Additional information about this assignment of the Company’s rights to the referenced purchase

agreement is contained in the 8-K Current Report of the Company dated April 6, 2023, and filed with the SEC on April 17, 2023.

On January 23, 2024, the Company exercised its rights

under the aforementioned assigned agreement, seeking an extension of 180 days for closing or such longer period as may be required to

satisfy the required Governmental Approvals to closing.

Affordable Connectivity Program (ACP) Wind Down

On February 7, 2024 the FCC announced that the Affordable

Connectivity Program would stop accepting new enrollments and stated the last fully funded month for the program is April, 2024.

All consumers

in the program as of this enrollment freeze date will receive their benefit until the program ends unless Congress votes to extend the

Under IM Telecom’s national ETC license, the

Company will continue to enroll and provide services to qualifying consumers in the FCC Lifeline program.

The Lifeline program is a separate

program under the FCC, and remains committed and viable in support of providing affordable communication services for low-income consumers.

Non-Compensatory Stock Option Grant

McEwen exercised his fifth tranche of 187,500 non-compensatory stock options for 187,500 shares of common stock at a price of

$ 0.22 per share or an aggregate price of $ 41,250 , which shares were issued on March 15, 2024.

Stock Option Grant

On March 27, 2024, we granted 100,000 incentive

stock options to an employee who will serve as the Director of Sales for Apeiron Systems at an exercise price of $ 0.626 .

These options

vest as follows, and they expire on the earlier of March 27, 2029, or ninety (90) days from resignation or termination of employment:

33,333 on March 27, 2024;

33,333 on March 27, 2025;

and 33,334 on March 27, 2026 .

Change of Tax Year

The Company petitioned the IRS to change our tax period

to a calendar tax year to coincide with our financial year.

Additions to our State ETC Designations

As of this date,

we have filed for multiple state ETC designations, and have received additional ETC designations in Alabama, Colorado, Michigan, Missouri,

Rhode Island, Tennessee, West Virginia, and Wyoming.

Amendments and/or Restatements to the Excess

Telecom Membership Interest Purchase Agreement

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

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

Pursuant to the Membership Interest

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

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

Additional Transaction Documents were also executed

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

Master Distribution Agreement and an Amended and Restated Operating Agreement.

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

with Excess Telecom were restated by signature;

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

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

the SEC on March 10, 2025.

IM Telecom and Excess Telecom

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

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

Although these state approvals are complete, IM

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

to begin operating in eight (8) additional states.

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

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

The primary purpose for amending the original Management

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

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

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

We remain committed to compliance

in all areas of our business.

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

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

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

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

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

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

for such governmental bodies;

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

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

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

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

The parties formalized their working relationship

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

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

The original Membership

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

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

Interest Purchase Agreement.

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

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

Only minor and non-material modifications were made

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

of the execution of the Transaction Documents.

For additional information

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

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

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

Extension of Incentive Stock Options to Key Employees

The Board of Directors adopted a resolution to extend

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

the official termination of the ACP Program.

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

available to return to further our business.

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

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

eighty (180) days.

Beaty Stock Option Exercise

Subsequent Events

On February 11, 2025, Robert Beaty, an independent

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

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

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

Pearl Stock Option Exercise

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

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

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

on the date of such grant.

Care Initiative and VIVA-Contract

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

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

The program launch timing for

our VIVA-US Telecommunications, Inc.

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

Received on Note Receivable

On March 11, 2025, the Company received a

payment of $ 150,000

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

NOTE 1 above.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data