NOTE 2 – GOING CONCERN

Effective with the creation of the First Omnibus Agreement between KonaTel and Excess Telecom, “the Annual Plan,” which was effective on October 1, 2025, IM Telecom began to operate as a standalone entity with employees not shared by KonaTel. In addition, during 2025, the Company began to refocus its efforts on the Hosted Services solutions operated by its subsidiary, Apeiron Systems. While KonaTel continues to receive regular monthly distributions from the IM Telecom partnership under the new Distribution Agreement for compensation from it sales only under the IM Telecom’s vertical sales channels, including all new sales stemming from our new healthcare vertical partnership as originally agreed, our focus is now on growing our Hosted Services, which enjoy substantially higher margins and substantially lower customer churn characteristics.

Based on FCC data, it is estimated there are approximately 22 million commercial (i.e., used in commercial operations) copper-wire Plain Old Telephone Service (“POTS”) analog phone lines. These lines are scheduled to be phased out (terminated) across the United States by the end of the decade. So, in support of the increasing demand from end-of-life copper-wire POTS service, one of the Company’s new services, deployed and tested throughout 2025, includes a wireless POTS replacement solution targeted at large national telecommunication service providers.

We are also focused on ongoing retail and wholesale sales of our Short Messaging Service (SMS) product, which saw continued growth from Q3 to Q4 of 2025.

We continue to keep our $5M line of credit facility open as well as actively pursuing additional credit facility options with the goal of focusing our growth efforts on our hosted services sector. The lack of our success in one or more of these foregoing initiatives raises substantial doubt about our ability to remain a going concern for the twelve (12) month period from the date of this Annual Report.

The Company has several pending transactions such as a Master Sales Agreement with Lingo Communication to convert their imbedded base of existing POTS lines to wireless technology and to sell new wireless solutions including primary 4G/5G and backup wireless internet products. The transaction to sell the Tempo ETC license in the amount of $4.5M, pending FCC approval. Release of the remaining Excess Transaction Escrow of $150,000 related to the sale of the IM Telecom ETC license is expected by the end of the second quarter of 2026.

In addition to the copper-wire POTS replacement program, the Company continues to pursue the launch of the Viva USA MVNO opportunity. The first 10,000 SIM cards have been purchased by and delivered to Viva for deployment. The Company has completed its pre-launch obligations; we continue to wait for launch implementation by Viva. We continue to remain optimistic that the IM Telecom health care vertical will begin to accelerate in 2026. The growth of this vertical relies on the marketing/communication efforts of our healthcare partner to inform their millions of current/eligible customers of the opportunity to obtain wireless Lifeline services.

In order to mitigate any going concern risks, the Company continues to implement broad reductions and improve efficiencies to extend and utilize cash resources in the most efficient manner possible. The aforementioned product applications and sales initiatives will require capital to expand infrastructure as sales increase. The growth of new products and the launch of the aforementioned business programs, along with the ability to raise capital, will play a significant role in our ability to continue operations without additional cost reduction measures. 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.