Financial Analysis

NOTE 9 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, 2025, and December 31, 2024, there are no such legal proceedings. Contract Contingencies The Company has the customary obligation for the completion of its cellular provider contracts in accordance with the appropriate standards of the industry and that may be provided in the contractual agreements. 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 had no outstanding regulatory determinations as of December 31, 2025, or December 31, 2024. Tax Audits In June of 2021, the Company received an audit determination and assessment from the State of Pennsylvania related to sales and use tax for the audit period of January 1, 2016, through September 30, 2019. The assessment was in the amount of $ 115,000 , including interest and penalties calculated on sales made inside and outside Pennsylvania. The Company recorded the full amount of this assessment in 2022. The Company appealed the assessment …

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NOTE 8 LINES OF CREDIT The Company had no lines of credit as of December 31, 2025, and December 31, 2024, respectively. …

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NOTE 12 INCOME TAX The Company provides for income taxes using an asset and liability-based approach. Deferred income tax assets and liabilities are recorded to reflect the future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Tax Cuts and Jobs Act was enacted on December 22, 2017, which reduced the U.S. corporate statutory tax rate from 35 % to 21 %. The Company changed its effective federal rate to 21 % as the expected rate for our deferred tax items. The significant components of net deferred tax assets (liabilities) were as follows at December 31, 2025, and 2024: SCHEDULE OF COMPONENTS OF NET DEFERRED TAX ASSETS LIABILITIES 2025 2024 December 31, 2025 2024 Net operating losses $ 1,320,354 $ 573,726 Depreciation and amortization (37,030 ) (18,493 ) Stock option expense 420,976 426,275 Valuation allowance (1,704,300 ) (981,508 ) Net Deferred Tax Asset $ $ As of December 31, 2025, the Company had no unrecognized tax benefits that, if recognized, would affect the Companys effective income tax rate over the next twelve (12) months. A reconciliation of the expected income tax benefit at the U.S. Federal …

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NOTE 6 RIGHT-OF-USE ASSETS Right-of-Use Assets consist of assets accounted for under ASC 842. The assets are recorded at present value using implied interest rates between 4.75 % and 7.50 %. The Right-of-Use Assets were $ 217,432 and $ 319,549 in 2025 and 2024, respectively. The Company has right-of-use assets through leases of properties under non-cancelable leases. As of December 31, 2025, the Company had four (4) leased properties. Of these four (4) leases, two (2) leases expired in 2025; one (1) lease expires in 2026; and one (1) lease expires in 2030. Lease payables as of December 31, 2025, was $ 227,779 . Future lease liability payments under the terms of these leases are as follows: SCHEDULE OF FUTURE LEASE LIABILITY PAYMENTS 2026 $ 65,967 2027 $ 54,000 2028 $ 54,000 2029 $ 54,000 2030 $ 36,000 Total $ 263,967 Less Interest $ 36,188 Present value of minimum lease payments $ 227,779 Less Current Maturities $ 51,736 Long Term Maturities $ 176,043 The weighted average term of the right-to-use leases is 54.1 months recorded with a weighted average discount of 7.40 %. For the year ended December 31, 2025, total lease expense was $ 129,056 . …

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Effect of Recent Accounting Pronouncements The Company adopted Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, effective January 1, 2025. The amendments in this update enhance the transparency and decision usefulness of income tax disclosures by requiring (i) disaggregation of the effective tax rate reconciliation into specified categories and (ii) additional disclosures of income taxes paid, net of refunds, by jurisdiction. The Company applied the guidance prospectively. Accordingly, prior-period disclosures have not been adjusted and continue to be presented in accordance with the accounting guidance in effect for those periods. The adoption of ASU 2023-09 did not have an impact on the Companys consolidated financial position, results of operations, or cash flows, as the amendments relate solely to income tax disclosures. The Company will prospectively adopt Accounting Standards Update (ASU) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) effective with our annual 2027 10K filing and interim reporting periods effective with our interim report for the quarter ended March 31, 2028. Accordingly, prior-period disclosures will not be made. …

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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 prim …

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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. 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 P …

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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. Mr. McEwen was the sole shareholder of KonaTel Nevada and received merger consideration of 13,500,000 shares of the Companys common stock and 1,500,000 non-compensatory options to acquire shares of the Companys Common Stock under the merger, at an exercise price of $ 0.22 per share, vesting quarterly, from March 18, 2018, to December 18, 2019. On September 17, 2024, the Companys Board of Directors adopted resolutions to extend D, Sean McEwens 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 17, 2025. On September 17, 2025, Mr. McEwen exercised these last two tranches of stock options. Stock Compensation The Company offers incentive stock option equity awards to directors and key employees. Options vest in tranches and typically expire in five (5) years. During the year ended December 31, 2025, and 2024, the Company recorded options expense of $ 126,578 and $ 992,735 , respectively. The option expense not taken as of December 31, 2025, is $ 2,087,605 , with a weighted average term of 2.06 years. The Aggregate Intrinsic Value is based on …

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NOTE 13 SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of this filing, and except for the following, no material subsequent events have occurred: Closure of IM Telecoms Atmore Alabama Call Center On January 1, 2026, IM Telecom provided notice to the landlord of its Atmore, Alabama, Call Center that it would be vacating the premises effective January 31, 2026. Seven (7) full-time employees employed at this facility were terminated as part of this closure. So Stock Option Expiration On April 1, 2026, 150,000 incentive stock options granted and vested to employee Jonathan So expired without being exercised. …

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