SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2023.

The accompanying financial statements have been prepared using the accrual basis of accounting.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates in these financial statements include the allowance for doubtful receivables, allowance for inventory obsolescence, the estimated useful lives of property and equipment, and stock-based compensation. Actual results could differ from those estimates.

Basis of Consolidation

Basis of Consolidation

The condensed consolidated financial statements include the Company and our two (2) wholly owned corporate subsidiaries, KonaTel Nevada and Apeiron Systems, and IM Telecom, presently owned 51% by us. All significant intercompany transactions are eliminated.

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Basic income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. The dilutive common shares for the three (3) months ended September 30, 2024, and 2023, and for the nine (9) months ended September 30, 2023, are not included in the computation of diluted earnings per share because to do so would be anti-dilutive. As of September 30, 2023, there were potentially 870,684 dilutive shares. 

The following table reconciles the shares outstanding and net income used in the computations of both basic and diluted earnings per share of common stockholders: 

	Three Months Ended September 30,
	2024			2023
Numerator
Net Loss	$	(1,188,914	)	$	(113,216	)
Denominator
Weighted-average common shares outstanding, basic		43,485,560			42,707,808
Dilutive impact of stock options		—			—
Weighted-average common shares outstanding, diluted		43,485,560			42,707,808
Net income per common share
Basic	$	(0.03	)	$	(0.00	)
Diluted	$	(0.03	)	$	(0.00	)

	Nine Months Ended September 30,
	2024		2023
Numerator
Net Income/Loss	$	5,784,473	$	(2,250,633	)
Denominator
Weighted-average common shares outstanding		43,385,493		42,658,697
Dilutive impact of stock options		313,472		—
Weighted-average common shares outstanding, diluted		43,698,965		42,658,697
Net income per common share
Basic	$	0.13	$	(0.05	)
Diluted	$	0.13	$	(0.05	)

Concentrations of Credit Risk

Concentrations of Credit Risk

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

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

The Company has a concentration of risk with respect to trade receivables from customers and cellular providers. As of September 30, 2024, 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 amount of $1,369,032 or 73.3%, and $192,508 or 10.3%. It should be noted that the largest customer is the State of California, and the second largest customer is the federal government, as administered by the Universal Service Administrative Company (“USAC”), under the authority of the FCC. 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 $285,536 or 19.0%.

Concentration of Major Customer

Concentration of Major Customer

A significant amount of the revenue is derived from contracts with major customers. For the three (3) months ended September 30, 2024, the Company had three (3) customers that accounted for $953,260 or 30.3%, $665,665 or 21.1% and $617,440 or 19.6% of revenue, respectively. For the (3) three months ended September 30, 2023, the Company had two (2) customers that accounted for $2,793,313 or 59.6% and $772,614 or 16.5% of revenue, respectively.

Other Revenue

Other Revenue

The Company has a shared relationship with distribution of Lifeline services through Excess Telecom, under a Master Distribution relationship. Revenue through this relationship is recorded on a net revenue basis. We have performed a principal versus agent analysis under ASC 606-10-25-25 and have determined that we are acting as agent under this relationship.

Effect of Recent Accounting Pronouncements

Effect of Recent Accounting Pronouncements

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