x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
NEVADA | 27-4079982 | ||||
(STATE OF INCORPORATION) | (I.R.S Employer I.D.) | ||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, par value $0.0001 per share | CTM | NYSE American LLC |
Large accelerated filer | Accelerated filer | |||||||||||
Non-accelerated filer x | Smaller reporting company x | |||||||||||
Emerging growth company x |
Class | Outstanding as of May 10, | ||||
Common Stock, par value $0.0001 per share |
March 31, 2023 | December 31, 2022 | ||||||||||
(unaudited) | |||||||||||
Assets | |||||||||||
Current Assets: | |||||||||||
Cash | $ | 2,270,987 | $ | 4,640,896 | |||||||
Accounts receivable | 8,246,053 | 5,193,562 | |||||||||
Contract asset | 184,325 | 257,434 | |||||||||
Prepaid income taxes | 329,036 | 351,116 | |||||||||
Prepaid expenses and other current assets | 393,568 | 222,995 | |||||||||
Total current assets | 11,423,969 | 10,666,003 | |||||||||
Fixed assets, net | 337,242 | 173,350 | |||||||||
Non-Current Assets: | |||||||||||
Deferred tax asset | — | — | |||||||||
Right of use asset - operating lease | — | 35,524 | |||||||||
Intangible assets, net | 10,860,535 | 6,634,167 | |||||||||
Goodwill | 17,356,430 | 15,533,964 | |||||||||
Total non-current assets | 28,554,207 | 22,377,005 | |||||||||
Total Assets | $ | 39,978,176 | $ | 33,043,008 | |||||||
Liabilities and Stockholders' Equity | |||||||||||
Liabilities | |||||||||||
Current Liabilities | |||||||||||
Accounts payable and accrued expenses | $ | 1,715,776 | $ | 1,617,596 | |||||||
Accrued payroll and payroll related expenses | 2,900,703 | 1,869,517 | |||||||||
Due to seller | 350,000 | 280,000 | |||||||||
Obligation to issue common and preferred stock | 86,560 | — | |||||||||
Contingent earnout | 794,000 | 812,000 | |||||||||
Derivative liabilities | 960,000 | 824,000 | |||||||||
Revolving credit facility | 625,025 | 300,025 | |||||||||
Current portion of notes payable, net of discount | 1,936,569 | 2,033,348 | |||||||||
Current portion of lease liability - operating lease | 17,608 | 22,054 |
Total current liabilities | 9,386,241 | 7,758,540 | |||||||||
Non-Current Liabilities | |||||||||||
Deferred Tax Liability | — | — | |||||||||
Lease liability - operating lease, net of current portion | — | 12,632 | |||||||||
Note payable - related party, net of current portion | 400,000 | 400,000 | |||||||||
Convertible promissory notes - related parties, net of discount, net of current portion | 1,299,173 | 999,430 | |||||||||
Notes payable, net of discount, net of current portion | 6,002,514 | 6,340,490 | |||||||||
Total non-current liabilities | 7,701,687 | 7,752,552 | |||||||||
Total Liabilities | 17,087,928 | 15,511,092 | |||||||||
Stockholders' Equity | |||||||||||
Preferred stock, 50,000,000 shares authorized | |||||||||||
Series A Preferred stock, par value $0.0001; 10,000,000 shares authorized; 5,875,000 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 588 | 588 | |||||||||
Series B Preferred stock, par value $0.0001; 10,000,000 shares authorized; 0 and 0 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | — | — | |||||||||
Series C Preferred stock, par value $0.0001; 10,000,000 shares authorized; 770,000 and 770,000 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 77 | 77 | |||||||||
Common stock, par value, $0.0001, 3,000,000,000 shares authorized, 47,247,687 and 41,699,363 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 4,725 | 4,170 | |||||||||
Additional paid in capital | 53,333,138 | 43,621,651 | |||||||||
Accumulated deficit | (30,448,280) | (26,094,570) | |||||||||
Total stockholders' equity | 22,890,248 | 17,531,916 | |||||||||
Total Liabilities and Stockholders' Equity | $ | 39,978,176 | $ | 33,043,008 |
SEPTEMBER 30, | DECEMBER 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 1,853,388 | $ | 2,017,915 | ||||
Accounts receivable | 8,465,979 | 5,414,401 | ||||||
Contract asset | - | 591,055 | ||||||
Prepaid expenses and other current assets | 310,569 | 185,824 | ||||||
Total current assets | 10,629,936 | 8,209,195 | ||||||
Fixed assets, net | 190,942 | 145,792 | ||||||
NON-CURRENT ASSETS: | ||||||||
Deferred tax asset | - | 610,033 | ||||||
Right of use asset - operating lease | 65,503 | 132,690 | ||||||
Intangible assets, net | 7,131,860 | 7,595,599 | ||||||
Goodwill | 15,533,964 | 14,062,964 | ||||||
Total non-current assets | 22,731,327 | 22,401,286 | ||||||
TOTAL ASSETS | $ | 33,552,205 | $ | 30,756,273 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
LIABILITIES | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 1,644,838 | $ | 1,437,827 | ||||
Accrued payroll and payroll related expenses | 2,106,252 | 1,511,622 | ||||||
Contract liability | 82,583 | - | ||||||
Due to seller | 591,003 | 200,000 | ||||||
Obligation to issue common and preferred stock | 125,000 | 25,000 | ||||||
Contingent consideration | - | 275,000 | ||||||
Contingent earnout | 1,121,000 | 257,000 | ||||||
Derivative liabilities | 789,000 | - | ||||||
Revolving credit facility | 300,025 | - | ||||||
Current portion of notes payable, net of discount | 1,960,402 | 1,279,390 | ||||||
Current portion of lease liability - operating lease | 47,617 | 111,999 | ||||||
Total current liabilities | 8,767,720 | 5,097,838 | ||||||
NON-CURRENT LIABILITIES | ||||||||
Lease liability - operating lease, net of current portion | 16,743 | 18,715 | ||||||
Note payable - related party, net of current portion | 400,000 | 400,000 | ||||||
Convertible promissory notes - related parties, net of discount, net of current portion | 696,826 | 2,805,184 | ||||||
Notes payable, net of discount, net of current portion | 6,512,019 | 7,112,419 | ||||||
Total non-current liabilities | 7,625,588 | 10,336,318 | ||||||
Total Liabilities | 16,393,308 | 15,434,156 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock, 50,000,000 shares authorized | ||||||||
Series A Preferred stock, par value $0.0001; 10,000,000 shares authorized; | ||||||||
5,875,000 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 588 | 588 | ||||||
Series B Preferred stock, par value $0.0001; 10,000,000 shares authorized; | ||||||||
3,075,000 and 3,610,000 issued and outstanding as of September 30, 2022 and | ||||||||
December 31, 2021, respectively | 307 | 361 | ||||||
Series C Preferred stock, par value $0.0001; 10,000,000 shares authorized; | ||||||||
770,000 and 620,000 issued and outstanding as of September 30, 2022 and | ||||||||
December 31, 2021, respectively | 77 | 62 | ||||||
Common stock, par value, $0.0001, 3,000,000,000 shares authorized, | ||||||||
24,788,132 and 19,960,632 issued and outstanding as of September 30, 2022 and | ||||||||
December 31, 2021, respectively | 2,479 | 1,996 | ||||||
Additional paid in capital | 37,546,787 | 26,405,126 | ||||||
Accumulated deficit | (20,391,341 | ) | (11,086,016 | ) | ||||
Total stockholders' equity | 17,158,897 | 15,322,117 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 33,552,205 | $ | 30,756,273 |
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Revenues | $ | 9,937,013 | $ | 9,990,141 | |||||||||||||||||||
Cost of Revenues | 5,899,231 | 5,855,641 | |||||||||||||||||||||
Gross Profit | 4,037,782 | 4,134,500 | |||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Indirect costs | 2,210,879 | 1,729,195 | |||||||||||||||||||||
Overhead | 467,682 | 418,970 | |||||||||||||||||||||
General and administrative expenses | 6,046,530 | 2,842,140 | |||||||||||||||||||||
Gain from change in fair value of contingent earnout | (18,000) | — | |||||||||||||||||||||
Total operating expenses | 8,707,091 | 4,990,305 | |||||||||||||||||||||
Loss From Operations Before Other Income (Expense) | (4,669,309) | (855,805) | |||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
Gain on disposal of fixed assets | (1,075) | — | |||||||||||||||||||||
Loss on induced conversion | (300,000) | — | |||||||||||||||||||||
Gain from change in fair value of derivative liability | 251,625 | — | |||||||||||||||||||||
Interest expense, net of interest income | (830,281) | (689,626) | |||||||||||||||||||||
Total other income (expense) | (879,731) | (689,626) | |||||||||||||||||||||
Loss From Operations Before Benefit For Income Taxes | (5,549,040) | (1,545,431) | |||||||||||||||||||||
Income Tax Benefit | 1,225,649 | 149,628 | |||||||||||||||||||||
Net Loss | (4,323,391) | (1,395,803) | |||||||||||||||||||||
Less: Preferred Stock Dividends | 30,319 | 10,912 | |||||||||||||||||||||
Net Loss To Common Shareholders | $ | (4,353,710) | $ | (1,406,715) | |||||||||||||||||||
Net Loss Per Share - Basic And Diluted | $ | (0.10) | $ | (0.07) | |||||||||||||||||||
Weighted Average Shares Outstanding - Basic And Diluted | 43,065,128 | 19,970,438 |
Series A Preferred | Series B Preferred | Series C Preferred | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - December 31, 2021 | 5,875,000 | $ | 588 | 3,610,000 | $ | 361 | 620,000 | $ | 62 | 19,960,632 | $ | 1,996 | $ | 26,405,126 | $ | (11,086,016) | $ | 15,322,117 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation - options | — | — | — | — | — | — | — | — | 875,640 | — | 875,640 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation - restricted shares | — | — | — | — | — | — | — | — | 30,937 | — | 30,937 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in acquisition of MFSI | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of shares in acquisition of MFSI | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for service, net of amounts prepaid | — | — | — | — | — | — | 7,500 | 1 | 6,187 | — | 6,188 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in exercise of stock options | — | — | — | — | — | — | 15,000 | 2 | 11,998 | — | 12,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued for cash in Series C Preferred | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subscription Agreement | — | — | — | — | 150,000 | 15 | 15,000 | 2 | 149,983 | — | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | — | — | — | (1,406,715) | (1,406,715) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - March 31, 2022 | 5,875,000 | 588 | 3,610,000 | 361 | 770,000 | 77 | 19,998,132 | 2,001 | 27,479,871 | (12,492,731) | 14,990,167 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - December 31, 2022 | 5,875,000 | 588 | — | — | 770,000 | 77 | 41,699,363 | 4,170 | 43,621,651 | (26,094,570) | 17,531,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation - options | — | — | — | — | — | — | — | — | 2,436,299 | — | 2,436,299 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | — | — | — | — | — | — | — | — | 1,076,969 | — | 1,076,969 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation - restricted stock and shares issued for services | — | — | — | — | — | — | 125,504 | 12 | 149,987 | — | 149,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued to acquire GTMR | — | — | — | — | — | — | 4,866,570 | 487 | 5,304,075 | — | 5,304,562 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued in induced conversion of Crom note | — | — | — | — | — | — | 556,250 | 56 | 589,944 | — | 590,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on induced conversion | — | — | — | — | — | — | — | — | 300,000 | — | 300,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Extinguishment of debt discount - derivative liability | — | — | — | — | — | — | — | — | (171,128) | — | (171,128) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Extinguishment of debt discount - debt issuance costs | — | — | — | — | — | — | — | — | (8,034) | — | (8,034) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Extinguishment of derivative liability | — | — | — | — | — | — | — | — | 33,375 | — | 33,375 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | — | — | — | (4,353,710) | (4,353,710) |
Balance - March 31, 2023 | 5,875,000 | $ | 588 | — | $ | — | 770,000 | $ | 77 | 47,247,687 | $ | 4,725 | $ | 53,333,138 | $ | (30,448,280) | $ | 22,890,248 |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
REVENUES | $ | 11,120,712 | $ | 7,378,094 | $ | 32,166,104 | $ | 15,587,246 | ||||||||
COST OF REVENUES | 6,474,261 | 4,309,439 | 18,698,820 | 8,921,153 | ||||||||||||
GROSS PROFIT | 4,646,451 | 3,068,655 | 13,467,284 | 6,666,093 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Indirect costs | 2,130,513 | 738,239 | 7,458,319 | 1,512,370 | ||||||||||||
Overhead | 407,804 | 248,540 | 1,167,346 | 431,987 | ||||||||||||
General and administrative expenses | 3,297,319 | 6,682,034 | 9,633,064 | 10,389,922 | ||||||||||||
Loss from change in fair value of contingent earnout | 864,000 | - | 864,000 | - | ||||||||||||
Total operating expenses | 6,699,636 | 7,668,813 | 19,122,729 | 12,334,279 | ||||||||||||
LOSS FROM OPERATIONS BEFORE OTHER INCOME (EXPENSE) | (2,053,185 | ) | (4,600,158 | ) | (5,655,445 | ) | (5,668,186 | ) | ||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Realized gain on investment | - | - | - | 38,851 | ||||||||||||
Gain on disposal of fixed assets | - | - | 303 | - | ||||||||||||
Change in fair value of derivative liability | 76,000 | - | (97,000 | ) | - | |||||||||||
Interest expense, net of interest income | (978,314 | ) | (648,175 | ) | (2,579,915 | ) | (1,838,032 | ) | ||||||||
Total other income (expense) | (902,314 | ) | (648,175 | ) | (2,676,612 | ) | (1,799,181 | ) | ||||||||
LOSS FROM OPERATIONS BEFORE BENEFIT | ||||||||||||||||
FOR INCOME TAXES | (2,995,499 | ) | (5,248,333 | ) | (8,332,057 | ) | (7,467,367 | ) | ||||||||
INCOME TAX (EXPENSE) BENEFIT | (159,025 | ) | 328,735 | (902,820 | ) | 890,995 | ||||||||||
NET LOSS | (3,114,524 | ) | (4,919,598 | ) | (9,234,877 | ) | (6,576,372 | ) | ||||||||
Less: Preferred Stock Dividends | 29,911 | 3,320 | 70,447 | 3,320 | ||||||||||||
NET LOSS TO COMMON SHAREHOLDERS | $ | (3,144,435 | ) | $ | (4,922,918 | ) | $ | (9,305,324 | ) | $ | (6,579,692 | ) | ||||
NET LOSS PER SHARE - BASIC AND DILUTED | $ | (0.12 | ) | $ | (0.26 | ) | $ | (0.39 | ) | $ | (0.38 | ) | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED | 25,868,849 | 18,679,462 | 23,621,551 | 17,414,469 |
2023 | 2022 | ||||||||||
Cash Flow From Operating Activities | |||||||||||
Net loss | $ | (4,323,391) | $ | (1,395,803) | |||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | |||||||||||
Depreciation and amortization | 510,568 | 490,836 | |||||||||
Amortization of discounts, premium and deferred costs | 561,851 | 475,629 | |||||||||
Stock-based compensation | 3,721,828 | 942,765 | |||||||||
Deferred tax provision | (1,244,366) | (202,795) | |||||||||
Financing fee and bank charges for note payable and advances on revolving credit line | — | 3,750 | |||||||||
Lease cost | 838 | 277 | |||||||||
Change in fair value of contingent earnout | (18,000) | — | |||||||||
Change in fair value of derivative liability | (251,625) | — | |||||||||
Changes in assets and liabilities | |||||||||||
Accounts receivable | (2,102,056) | 317,951 | |||||||||
Proceeds from factoring accounts receivable | 411,975 | — | |||||||||
Prepaid expenses and other current assets | 132,996 | 33,035 | |||||||||
Contract asset (liability) | 73,108 | (140,615) | |||||||||
Accounts payable and accrued expenses | 98,409 | (440,257) | |||||||||
Net cash (used in) provided by operating activities | (2,427,865) | 84,773 | |||||||||
Cash Flows From Investing Activities | |||||||||||
Acquisition of business, cash paid to seller | (470,233) | — | |||||||||
Cash paid to seller from factoring | (411,975) | — | |||||||||
Cash received in acquisition of GTMR | 475,000 | — | |||||||||
Purchase of fixed assets | (20,526) | (67,613) | |||||||||
Net cash (used in) provided by investing activities | (427,734) | (67,613) | |||||||||
Cash Flows From Financing Activities | |||||||||||
Proceeds from revolving credit line | 325,000 | — | |||||||||
Payment of debt issuance costs | (15,000) | — | |||||||||
Proceeds from issuance of preferred and common stock | — | 125,000 | |||||||||
Proceeds from notes payable | 800,000 | 500,000 | |||||||||
Preferred stock dividend | (30,319) | (10,912) | |||||||||
Proceeds from exercise of stock options | — | 12,000 | |||||||||
Conversion of note payable | — | — | |||||||||
Repayment of amounts due to seller | (280,000) | (40,000) | |||||||||
Loss on induced conversion | 300,000 | — | |||||||||
Repayment of note payable | (613,991) | (311,378) | |||||||||
Net cash provided by financing activities | 485,690 | 274,710 | |||||||||
Net (Decrease) Increase in Cash | (2,369,909) | 291,870 | |||||||||
Cash - Beginning of Period | 4,640,896 | 2,017,915 | |||||||||
Cash - End of Period | $ | 2,270,987 | $ | 2,309,785 | |||||||
Supplemental Disclosures | |||||||||||
Cash paid for interest expense | $ | (247,541) | $ | (196,474) | |||||||
Cash refunded from income taxes | $ | 9,900 | $ | — | |||||||
Summary of Non-Cash Activities: | |||||||||||
Debt discount on note payable applied to obligation to issue common stock | $ | 28,000 | $ | 500,000 | |||||||
Derivative liability incurred for note payable | 421,000 | - | |||||||||
Extinguishment of debt discount - derivative liability | 171,128 | - | |||||||||
Extinguishment of debt discount - debt issuance costs | 8,034 | - | |||||||||
Extinguishment of derivative liability on Crom note | $ | 33,375 | $ | - |
Additional | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred | Series B Preferred | Series C Preferred | Common Stock | Paid-In | Subscription | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||||||||||||||
Balance - December 31, 2020 | 5,875,000 | $ | 588 | 3,610,000 | $ | 361 | - | $ | - | 15,411,264 | $ | 1,541 | $ | 6,133,332 | $ | - | $ | (3,527,296 | ) | $ | 2,608,526 | |||||||||||||||||||||||||||
Stock-based compensation - options | - | - | - | - | - | - | - | - | 263,610 | - | - | 263,610 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | - | - | - | - | - | - | - | - | 188,186 | - | - | 188,186 | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | - | - | (829,532 | ) | (829,532 | ) | ||||||||||||||||||||||||||||||||||
Balance - March 31, 2021 | 5,875,000 | 588 | 3,610,000 | 361 | - | - | 15,411,264 | 1,541 | 6,585,128 | - | (4,356,828 | ) | 2,230,790 | |||||||||||||||||||||||||||||||||||
Shares issued in acquisition of MFSI | - | - | - | - | - | - | 1,114,023 | 111 | 1,782,326 | - | - | 1,782,437 | ||||||||||||||||||||||||||||||||||||
Cancellation of shares in acquisition of MFSI | - | - | - | - | - | - | (250,000 | ) | (25 | ) | (399,975 | ) | - | - | (400,000 | ) | ||||||||||||||||||||||||||||||||
Stock-based compensation - options | - | - | - | - | - | - | - | - | 407,271 | - | - | 407,271 | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | - | - | (827,242 | ) | (827,242 | ) | ||||||||||||||||||||||||||||||||||
Balance - June 30, 2021 | 5,875,000 | 588 | 3,610,000 | 361 | - | - | 16,275,287 | 1,627 | 8,374,750 | - | (5,184,070 | ) | 3,193,256 | |||||||||||||||||||||||||||||||||||
Shares issued in acquisition of Merrison | - | - | - | - | - | - | 500,000 | 50 | 1,699,950 | - | - | 1,700,000 | ||||||||||||||||||||||||||||||||||||
Shares issued in acquisition of SSI, net of transaction costs | - | - | - | - | - | - | 2,600,000 | 260 | 5,149,240 | - | - | 5,149,500 | ||||||||||||||||||||||||||||||||||||
Shares issued for cash in Series C Preferred Subscription Agreements | - | - | - | - | 520,000 | 52 | 52,000 | 5 | 519,943 | (100,000 | ) | - | 420,000 | |||||||||||||||||||||||||||||||||||
Stock-based compensation - options | - | - | - | - | - | - | - | - | 1,600,217 | - | - | 1,600,217 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | - | - | - | - | - | - | - | - | 2,846,416 | - | - | 2,846,416 | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | - | - | (4,922,918 | ) | (4,922,918 | ) | ||||||||||||||||||||||||||||||||||
Balance - September 30, 2021 | 5,875,000 | $ | 588 | 3,610,000 | $ | 361 | 520,000 | $ | 52 | 19,427,287 | $ | 1,942 | $ | 20,190,516 | $ | (100,000 | ) | $ | (10,106,988 | ) | $ | 9,986,471 | ||||||||||||||||||||||||||
Balance - December 31, 2021 | 5,875,000 | $ | 588 | 3,610,000 | $ | 361 | 620,000 | $ | 62 | 19,960,632 | $ | 1,996 | $ | 26,405,126 | $ | - | $ | (11,086,016 | ) | $ | 15,322,117 | |||||||||||||||||||||||||||
Stock-based compensation - options | - | - | - | - | - | - | - | - | 875,640 | - | - | 875,640 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - restricted shares | - | - | - | - | - | - | - | - | 30,937 | - | - | 30,937 | ||||||||||||||||||||||||||||||||||||
Shares issued in acquisition of MFSI | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Cancellation of shares in acquisition of MFSI | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Shares issued for service, net of amounts prepaid | - | - | - | - | - | - | 7,500 | 1 | 6,187 | - | - | 6,188 | ||||||||||||||||||||||||||||||||||||
Shares issued in exercise of stock options | - | - | - | - | - | - | 15,000 | 2 | 11,998 | - | - | 12,000 | ||||||||||||||||||||||||||||||||||||
Shares issued for cash in Series C Preferred | ||||||||||||||||||||||||||||||||||||||||||||||||
Subscription Agreement | - | - | - | - | 150,000 | 15 | 15,000 | 2 | 149,983 | - | - | 150,000 | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | - | - | (1,406,715 | ) | (1,406,715 | ) | ||||||||||||||||||||||||||||||||||
Balance - March 31, 2022 | 5,875,000 | 588 | 3,610,000 | 361 | 770,000 | 77 | 19,998,132 | 2,001 | 27,479,871 | - | (12,492,731 | ) | 14,990,167 | |||||||||||||||||||||||||||||||||||
Shares issued for services, net of amounts prepaid | - | - | - | - | - | - | 7,500 | 1 | 11,939 | - | - | 11,940 | ||||||||||||||||||||||||||||||||||||
Shares issued for cash, including fair value adjustment | - | - | - | - | - | - | 1,250,000 | 125 | 592,875 | - | - | 593,000 | ||||||||||||||||||||||||||||||||||||
Shares issued for commitment fees | - | - | - | - | - | - | 125,000 | 12 | 59,288 | - | - | 59,300 | ||||||||||||||||||||||||||||||||||||
Shares issued to satisfy obligation to issue common stock | - | - | - | - | - | - | 132,500 | 13 | 533,737 | - | - | 533,750 | ||||||||||||||||||||||||||||||||||||
Shares issued to acquire LSG | - | - | - | - | - | - | 600,000 | 60 | 2,279,940 | - | - | 2,280,000 | ||||||||||||||||||||||||||||||||||||
Common shares issued in conversion of Series B Preferred Stock | - | - | (535,000 | ) | (54 | ) | - | - | 2,675,000 | 267 | (213 | ) | - | - | - | |||||||||||||||||||||||||||||||||
Stock-based compensation - options | - | - | - | - | - | - | - | - | 1,117,335 | - | - | 1,117,335 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | - | - | - | - | - | - | - | - | 1,603,219 | - | - | 1,603,219 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - restricted shares | - | - | - | - | - | - | - | - | 30,938 | - | - | 30,938 | ||||||||||||||||||||||||||||||||||||
Gain on extinguishment of related party convertible note | - | - | - | - | - | - | - | - | 2,667,903 | - | - | 2,667,903 | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | - | - | (4,754,175 | ) | (4,754,175 | ) | ||||||||||||||||||||||||||||||||||
Balance - June 30, 2022 | 5,875,000 | $ | 588 | 3,075,000 | $ | 307 | 770,000 | $ | 77 | 24,788,132 | $ | 2,479 | $ | 36,376,832 | $ | - | $ | (17,246,906 | ) | $ | 19,133,377 | |||||||||||||||||||||||||||
Stock-based compensation - options | - | - | - | - | - | - | - | - | 1,139,018 | - | - | 1,139,018 | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - warrants | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Stock-based compensation - restricted shares | - | - | - | - | - | - | - | - | 30,937 | - | - | 30,937 | ||||||||||||||||||||||||||||||||||||
Gain on extinguishment of related party convertible note | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | - | - | - | - | (3,144,435 | ) | (3,144,435 | ) | ||||||||||||||||||||||||||||||||||
Balance - September 30, 2022 | 5,875,000 | $ | 588 | 3,075,000 | $ | 307 | 770,000 | $ | 77 | 24,788,132 | $ | 2,479 | $ | 37,546,787 | $ | - | (20,391,341 | ) | $ | 17,158,897 |
2022 | 2021 | |||||||
CASH FLOW FROM OPERATING ACTIVIITES | ||||||||
Net loss | $ | (9,234,877 | ) | $ | (6,576,372 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ||||||||
Depreciation and amortization | 1,520,329 | 1,126,047 | ||||||
Amortization of discounts, premium and deferred costs | 1,869,152 | 1,342,181 | ||||||
Stock-based compensation | 4,906,152 | 5,305,700 | ||||||
Deferred tax provision | 610,033 | (1,025,852 | ) | |||||
Gain on disposal of fixed assets | (303 | ) | - | |||||
Financing fee and bank charges for note payable and advances on revolving credit line | 3,775 | - | ||||||
Realized gain on investment | - | (38,851 | ) | |||||
Lease cost | 833 | 476 | ||||||
Legal fees paid out of proceeds from a note payable | 30,000 | - | ||||||
Change in fair value of contingent earnout | 864,000 | - | ||||||
Change in fair value of derivative liability | 97,000 | - | ||||||
Changes in assets and liabilities | ||||||||
Accounts receivable | (2,637,969 | ) | 144,601 | |||||
Prepaid expenses and other current assets | (58,051 | ) | (2,014 | ) | ||||
Contract asset (liability) | 673,638 | (569,610 | ) | |||||
Payment of transaction costs in acquisition of SSI | - | (50,500 | ) | |||||
Accounts payable and accrued expenses | 801,641 | 511,806 | ||||||
Net cash (used in) provided by operating activities | (554,647 | ) | 167,612 | |||||
CASH FLOWS FROM INVESTING ACTIVITES | ||||||||
Cash received in acquisition of MFSI | - | 93,240 | ||||||
Cash received in acquisition of Merrison, net of amounts paid | - | 183,588 | ||||||
Cash received in acquisition of SSI, net of amounts paid | - | 198,935 | ||||||
Cash paid in acquisition of LSG | (250,000 | ) | - | |||||
Sale of investment | - | 365,572 | ||||||
Purchase of fixed assets | (92,436 | ) | (5,346 | ) | ||||
Net cash (used in) provided by investing activities | (342,436 | ) | 835,989 | |||||
CASH FLOWS FROM FINANCING ACTIVITES | ||||||||
Proceeds from revolving credit line | 300,000 | - | ||||||
Proceeds from issuance of preferred and common stock | 625,000 | 420,000 | ||||||
Proceeds from note s payable | 1,470,000 | - | ||||||
Preferred stock dividend | (70,449 | ) | (3,320 | ) | ||||
Proceeds from exercise of stock options | 12,000 | - | ||||||
Repayment of convertible note payable - related parties | (500,000 | ) | (70,000 | ) | ||||
Repayment of amounts due to seller | (160,000 | ) | - | |||||
Repayment of line of credit, net | - | (3,460 | ) | |||||
Repayment of note payable | (943,995 | ) | (104,244 | ) | ||||
Net cash provided by financing activities | 732,556 | 238,976 | ||||||
NET (DECREASE) INCREASE IN CASH | (164,527 | ) | 1,242,577 | |||||
CASH - BEGINNING OF PERIOD | 2,017,915 | 2,412,382 | ||||||
CASH - END OF PERIOD | $ | 1,853,388 | $ | 3,654,959 | ||||
SUPPLEMENTAL DISCLOSURES | ||||||||
Cash paid for interest expense | $ | 559,234 | $ | 474,414 | ||||
Cash paid for income taxes | $ | 118,885 | $ | 16,400 | ||||
SUMMARY OF NON-CASH ACTIVITIES: | ||||||||
Debt discount on note payable applied to obligation to issue common stock | $ | 500,000 | $ | - | ||||
Adjustment to contingent consideration and customer relationships | $ | 275,000 | $ | - | ||||
Gain on extinguishment of convertible note payable - related party applied to APIC | $ | 2,667,903 | $ | - | ||||
Common shares issued for obligation to issue common stock | $ | 533,750 | $ | - | ||||
Derivative liability recognized as discount of note payable | $ | 692,000 | $ | - | ||||
Deferred issuance costs recognized for note payable | $ | 59,300 | $ | - | ||||
Fair value adjustment recognized on issuance of common stock in Securities Purchase Agreement | $ | 93,000 | $ | - | ||||
Common shares issued in conversion of Series B Preferred shares | $ | 5,350 | $ | - | ||||
Cancellation of shares offsetting acquisition of MFSI | $ | - | $ | 400,000 |
2022 | 2021 | 2023 | 2022 | ||||||||||||||||
Revenue: | Revenue: | ||||||||||||||||||
Time and material | $ | 17,924,100 | $ | 10,860,224 | Time and material | $ | 5,723,610 | $ | 4,884,186 | ||||||||||
Firm fixed price | 3,607,597 | 2,820,041 | Firm fixed price | 943,875 | 1,774,092 | ||||||||||||||
Cost plus fixed fee | 10,634,407 | 1,837,869 | Cost plus fixed fee | 3,269,528 | 3,331,863 | ||||||||||||||
Other | - | 69,112 | |||||||||||||||||
Total | $ | 32,166,104 | $ | 15,587,246 | Total | $ | 9,937,013 | $ | 9,990,141 |
Cash | $ | 475,000 | |||
Accounts receivable other receivables | 1,380,203 | ||||
Income tax receivable | 155,449 | ||||
Prepaid expenses | 116,892 | ||||
Other asset | 17,182 | ||||
Furniture and equipment | 163,301 | ||||
Customer relationships | 2,426,000 | ||||
Tradenames | 517,000 | ||||
Backlog | 1,774,000 | ||||
Goodwill | 1,822,466 | ||||
Deferred tax liability | (1,244,368) | ||||
Lease liability – operating lease | (17,608) | ||||
Accounts payable and accrued expenses | $ | (1,030,957) | |||
Net assets acquired | $ | 6,554,560 |
Cash | $ | 93,240 | ||
Accounts receivable | 33,540 | |||
Unbilled receivable | 45,316 | |||
Other assets | 329,509 | |||
Right of use asset – operating lease | 14,862 | |||
Customer relationships | 348,000 | |||
Non-compete agreement | 4,000 | |||
Goodwill | 685,072 | |||
Deferred tax liability | (97,419 | ) | ||
Line of credit | (12,249 | ) | ||
Lease liability – operating lease | (13,862 | ) | ||
Accounts payable and accrued expenses | (47,572 | ) | ||
Net assets acquired | $ | 1,382,437 |
Cash | $ | 470,233 | |||
Due to Seller | 350,000 | ||||
Other consideration | 17,791 | ||||
Cash from factoring | 411,975 | ||||
Stock | $ | 5,304,561 | |||
Total consideration paid | $ | 6,554,560 |
Cash | $ | 183,588 | ||
Accounts receivable and unbilled receivables | 391,049 | |||
Customer relationships | 322,000 | |||
Non-compete agreements | 7,000 | |||
Trademarks | 164,000 | |||
Backlog | 115,000 | |||
Goodwill | 780,730 | |||
Deferred tax liability | (243,730 | ) | ||
Accounts payable and accrued expenses | (102,354 | ) | ||
Net assets acquired | $ | 1,617,283 |
Common stock | $ | 1,595,000 | ||
Cash | 22,283 | |||
$ | 1,617,283 |
Cash | $ | 998,935 | ||
Accounts receivable and unbilled receivables | 2,222,004 | |||
Prepaid expenses | 147,600 | |||
Other asset | 6,750 | |||
Furniture and equipment | 148,931 | |||
Right of use asset – operating lease | 169,063 | |||
Customer relationships | 3,102,000 | |||
Non-compete agreements | 65,000 | |||
Trademarks | 367,000 | |||
Backlog | 50,000 | |||
Goodwill | 8,461,150 | |||
Deferred tax liability | (880,150 | ) | ||
Lease liability – operating lease | (167,333 | ) | ||
Contract liability | (226,591 | ) | ||
Accounts payable and accrued expenses | (1,134,509 | ) | ||
Net assets acquired | $ | 13,329,850 |
Common stock | $ | 7,872,850 | ||
Seller note | 400,000 | |||
Cash | 800,000 | |||
Contingent earnout | 257,000 | |||
Lender financing | 4,000,000 | |||
$ | 13,329,850 |
Customer relationships (contracts) (a) | $ | 2,400,000 | ||
Net assets acquired | $ | 2,400,000 |
Common stock | $ | 1,925,000 | ||
Contingent consideration represented by obligation to issue shares (a) | 275,000 | |||
Cash (included in amounts due to seller as of December 31, 2021) (b) | 200,000 | |||
$ | 2,400,000 |
Receivable from seller | $ | 413,609 | |||
Due from employee/travel advance | 5,000 | ||||
Miscellaneous license | 2,394 | ||||
Customer relationships | 785,000 | ||||
Non-compete agreements | 10,000 | ||||
Backlog | 489,000 | ||||
Goodwill | 1,471,000 | ||||
Net assets acquired | $ | 3,176,003 |
Receivable from Seller | $ | 413,609 | ||
Due from Employee/Travel Advance | 5,000 | |||
Miscellaneous license | 2,394 | |||
Customer relationships | 785,000 | |||
Non-compete agreements | 10,000 | |||
Backlog | 489,000 | |||
Goodwill | 1,471,000 | |||
Net assets acquired | $ | 3,176,003 |
Common stock (600,000 shares issued May 4, 2022) | $ | 2,280,000 | ||
Holdback shares (25,000 shares due six months after the closing date) (in obligation to issue common stock) | 95,000 | |||
Cash | 250,000 | |||
Due to seller (cash) | 551,003 | |||
$ | 3,176,003 |
Common stock (600,000 shares issued May. 4, 2022) | $ | 2,280,000 | |||
Holdback shares (25,000 shares due six months after the closing date) | 95,000 | ||||
Cash | 250,000 | ||||
Due to seller (cash) | 551,003 | ||||
$ | 3,176,003 |
For the three months ended March 31, 2023 | |||||
Revenues | $ | 12,583,985 | |||
Net loss | $ | (6,532,634) | |||
Net loss per share - basic | $ | (0.16) | |||
For the three months ended March 31, 2022 | |||||
Revenues | $ | 13,932,618 | |||
Net loss | $ | (961,653) | |||
Net loss per share - basic | $ | (0.05) |
For the nine months ended September 30, 2022 | ||||
Revenues | $ | 33,685,580 | ||
Net loss | $ | (7,843,711 | ) | |
Net loss per share - basic | $ | (0.33 | ) | |
For the nine months ended September 30, 2021 | ||||
Revenues | $ | 20,333,508 | ||
Net loss | $ | (127,660 | ) | |
Net loss per share - basic | $ | (0.00 | ) |
March 31, 2023 | December 31, 2022 | ||||||||||
Equipment | $ | 210,572 | $ | 141,732 | |||||||
Furniture | 40,267 | 32,574 | |||||||||
Software | 62,671 | - | |||||||||
Leasehold improvements | 120,830 | 83,266 | |||||||||
Total fixed assets | 434,340 | 257,572 | |||||||||
Accumulated depreciation | (97,098) | (84,222) | |||||||||
Fixed assets, net | $ | 337,242 | $ | 173,350 |
September 30, 2022 (unaudited) | December 31, 2021 | |||||||
Equipment | $ | 96,986 | $ | 60,148 | ||||
Furniture | 32,574 | 32,574 | ||||||
Software | 44,746 | - | ||||||
Leasehold improvements | 83,266 | 75,265 | ||||||
Total fixed assets | 257,572 | 167,987 | ||||||
Accumulated depreciation | (66,630 | ) | (22,195 | ) | ||||
Fixed assets, net | $ | 190,942 | $ | 145,792 |
March 31, 2023 | December 31, 2022 | ||||||||||||||||
Customer relationships | 4.5– 15 years | $ | 11,961,000 | $ | 9,535,000 | ||||||||||||
Tradename | 4.5 years | 783,000 | 266,000 | ||||||||||||||
Trademark | 10-15 years | 533,864 | 533,864 | ||||||||||||||
Backlog | 2-5 years | 3,210,000 | 1,436,000 | ||||||||||||||
Non-compete agreement | 3-5 years | 684,000 | 684,000 | ||||||||||||||
17,171,864 | 12,454,864 | ||||||||||||||||
Accumulated amortization | (6,311,329) | (5,820,697) | |||||||||||||||
Intangible assets, net | $ | 10,860,535 | $ | 6,634,167 |
September 30, 2022 (unaudited) | December 31, 2021 | |||||||||||
Customer relationships | 4.5– 15 years | $ | 9,535,000 | $ | 9,025,000 | |||||||
Trade name | 4.5 years | 266,000 | 266,000 | |||||||||
Trademark | 10-15 years | 533,863 | 533,863 | |||||||||
Backlog | 2-5 years | 1,436,000 | 947,000 | |||||||||
Non-compete agreement | 3-5 years | 684,000 | 674,000 | |||||||||
12,454,863 | 11,445,863 | |||||||||||
Accumulated amortization | (5,323,003 | ) | (3,850,264 | ) | ||||||||
Intangible assets, net | $ | 7,131,860 | $ | 7,595,599 |
2023 | $ | 1,889,671 | |||
2024 | 2,074,686 | ||||
2025 | 1,453,000 | ||||
2026 | 1,242,863 | ||||
2027 | 1,034,302 | ||||
Thereafter | 3,166,013 | ||||
Total | $ | 10,860,535 |
September 30, 2023 | $ | 1,969,588 | ||
September 30, 2024 | 1,653,245 | |||
September 30, 2025 | 985,482 | |||
September 30, 2026 | 721,751 | |||
September 30, 2027 | 526,950 | |||
Thereafter | 1,274,844 | |||
Total | $ | 7,131,860 |
2022 | 2021 | |||||||
Balance – beginning of period | $ | 14,062,964 | $ | 4,136,011 | ||||
Additions | 1,471,000 | 9,926,953 | ||||||
Disposals | - | - | ||||||
Impairment | - | - | ||||||
$ | 15,533,964 | $ | 14,062,964 |
Corvus | SSI | MFSI | Total | ||||||||||||||||||||
December 31, 2022 | 6,387,741 | 8,461,150 | 685,073 | 15,533,964 | |||||||||||||||||||
Goodwill acquired through acquisitions | — | 1,822,466 | — | 1,822,466 | |||||||||||||||||||
March 31, 2023 | 6,387,741 | 10,283,616 | 685,073 | 17,356,430 |
March 31, 2023 | December 31, 2022 | ||||||||||
Convertible note payable with a trust related to one of the Company’s directors, convertible at $0.26 per share, at 5% interest (amended April 4, 2022) | 3,209,617 | 3,209,617 | |||||||||
Less: BCF Discount | (1,910,444) | (2,210,187) | |||||||||
$ | 1,299,173 | $ | 999,430 |
September 30, 2022 (unaudited) | December 31, 2021 | |||||||
Convertible note payable with a trust related to one of the Company’s directors, convertible at $0.26 per share, at 5% interest (extinguished on April 4, 2022 for new note) (a) | $ | - | 4,209,617 | |||||
Convertible note payable with a trust related to one of the Company’s directors, convertible at $0.26 per share, at 5% interest (amended April 4, 2022) | 3,709,617 | - | ||||||
Total Convertible Notes Payable – Related Parties | $ | 3,709,617 | $ | 4,209,617 | ||||
Add: Premiums recorded on convertible note due to fair value adjustment at date of acquisition of Corvus | - | 2,569 | ||||||
Less: BCF Discount | (3,012,791 | ) | (1,407,002 | ) | ||||
$ | 696,826 | $ | 2,805,184 |
March 31, 2023 | December 31, 2022 | ||||||||||
Note payable at 7% originally due November 2023, maturing September 30, 2024 | $ | 5,600,000 | $ | 5,600,000 | |||||||
Note payable at 10% interest dated February 28, 2022 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note including the successful completion of an equity offering of at least $15,000,000 (a) | 400,000 | 400,000 | |||||||||
Convertible note payable, convertible at $1.60 per share, at 7%, maturing April 4, 2023 (b) | — | 890,000 | |||||||||
Convertible note payable, convertible at $1.20 per share, at 10%, maturing February 13, 2024 (b) | 840,000 | — | |||||||||
Term note payable, at prime plus 3% interest, applied on a deferred basis (7.75% at March 31, 2023 and 6.25% at December 31, 2022) maturing August 11, 2024 | 2,010,245 | 2,324,236 | |||||||||
Total Notes Payable | 8,850,245 | 9,214,236 | |||||||||
Less: Debt Discount | (911,162) | (840,398) | |||||||||
$ | 7,939,083 | $ | 8,373,838 |
September 30, 2022 (unaudited) | December 31, 2021 | |||||||
Note payable at 7% originally due November 2023, now maturing September 30, 2024 (a) | $ | 5,600,000 | $ | 5,600,000 | ||||
Note payable at 10% interest dated February 28, 2022 and matures the earlier of (i) September 30, 2024 or (ii) the acceleration of the obligations as contemplated under the promissory note including the successful completion of an equity offering of at least $15,000,000 (b) | 500,000 | - | ||||||
Convertible note payable, convertible at $1.60 per share, at 7%, maturing April 4, 2023 (c) | 1,050,000 | - | ||||||
Term note payable , at prime plus 3% interest , applied on a deferred basis (7.75% at September 30, 2022 and 6.25% at December 31, 2021) maturing August 11, 2024 | 2,644,280 | 3,588,374 | ||||||
0 | ||||||||
Total Notes Payable | 9,794,380 | 9,188,374 | ||||||
Less: Debt Discount | (1,321,959 | ) | (796,565 | ) | ||||
$ | 8,472,421 | $ | 8,391,809 |
September 30, 2023 | $ | 1,960,121 | ||
September 30, 2024 | 6,512,300 | |||
Total | $ | 8,472,421 |
March 31, 2023 (unaudited) | December 31, 2022 | ||||||||||
Note payable at 5% due December 31, 2024, in connection with the acquisition of SSI | $ | 400,000 | $ | 400,000 |
September 30, 2022 (unaudited) | December 31, 2021 | |||||||
Note payable at 5% due December 31, 2024, in connection with the acquisition of SSI | $ | 400,000 | $ | 400,000 |
Three Months Ended March 31, 2023 | Year Ended December 31, 2022 | ||||||||||||||||||||||
Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | ||||||||||||||||||||
Beginning balance | 5,678,836 | $ | 1.84 | 3,161,568 | $ | 1.60 | |||||||||||||||||
Granted | 1,765,862 | 1.17 | 2,517,268 | 2.22 | |||||||||||||||||||
Ending balance | 7,444,698 | $ | 1.68 | 5,678,836 | $ | 1.84 | |||||||||||||||||
Warrants exercisable | 7,444,698 | 5,678,836 | |||||||||||||||||||||
Intrinsic value of warrants | $ | 1,242,174 | $ | 1,374,303 | |||||||||||||||||||
Weighted Average Remaining Contractual Life (Years) | 6.15 | 5.48 |
Nine Months Ended September 30, 2022 | Year Ended December 31, 2021 | ||||||||||||||
Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | ||||||||||||
Beginning balance | 3,161,568 | $ | 1.60 | 1,090,717 | $ | 0.00 | |||||||||
Granted | 1,017,268 | 2.60 | 2,070,851 | 2.40 | |||||||||||
Exercised Cashless | - | - | - | - | |||||||||||
Forfeited | - | - | - | - | |||||||||||
Expired | - | - | - | - | |||||||||||
Ending balance | 4,178,836 | $ | 1.79 | 3,161,568 | $ | 1.60 | |||||||||
Warrants exercisable | 4,178,836 | 3,161,568 | |||||||||||||
Intrinsic value of warrants | $ | 10,468,925 | $ | 5,706,473 | |||||||||||
Weighted Average Remaining Contractual Life (Years) | 5.26 |
Nine Months Ended September 30, 2022 | Year Ended December 31, 2021 | |||||||||||||||
Number | Weighted Average Exercise Price | Number | Weighted Average Exercise Price | |||||||||||||
Beginning balance | 4,594,688 | $ | 2.094 | 1,856,250 | $ | 0.80 | ||||||||||
Granted | 2,535,000 | 3.60 | 4,087,500 | 2.40 | ||||||||||||
Exercised | (15,000 | ) | (0.80 | ) | (10,000 | ) | (0.80 | ) | ||||||||
Forfeited | (289,688 | ) | (0.60 | ) | (1,339,062 | ) | (0.60 | ) | ||||||||
Expired | - | - | - | - | ||||||||||||
Ending balance | 6,825,000 | $ | 0.1368 | 4,594,688 | $ | 2.094 | ||||||||||
Vested options | 1,610,506 | 1,410,938 | ||||||||||||||
Nonvested options | 5,214,494 | 3,183,750 | ||||||||||||||
Intrinsic value of options | $ | 12,876,650 | $ | 6,140,313 | ||||||||||||
Weighted Average Remaining Contractual Life (Years) | 6.14 | 6.21 |
Number | Weighted Average Exercise Price | Weighted-Average Remaining Contractual Term (in Years) | Weighted Average Fair Value | ||||||||||||||||||||
Outstanding, December 31, 2022 | 6,425,000 | $ | 2.69 | 5.63 | $ | 4.26 | |||||||||||||||||
Granted | 812,500 | 1.62 | 6.84 | 1.10 | |||||||||||||||||||
Outstanding. March 31, 2023 | 7,237,500 | $ | 2.57 | 5.55 | $ | 3.91 | |||||||||||||||||
As of March 31, 2023 | |||||||||||||||||||||||
Vested and exercisable | 3,178,870 | $ | 2.24 | 5.21 | $ | 3.20 | |||||||||||||||||
Three Months Ended | Year Ended December 31, 2021 | |||||||||||||||
Expected term | 7 years | 7 years | ||||||||||||||
Expected volatility | 116 – 162% | 114 – | ||||||||||||||
Expected dividend yield | — | — | ||||||||||||||
Risk-free interest rate | 3.53 – 3.89% |
Fair Value Measurements at March 31, 2023 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Crom Derivative Liabilities | $ | — | $ | — | $ | 421,000 | $ | 421,000 | |||||||||||||||
Prior Crom Note warrant liability | $ | — | $ | — | $ | 539,000 | $ | 539,000 | |||||||||||||||
Contingent earnout | $ | — | $ | — | $ | 794,000 | $ | 794,000 | |||||||||||||||
Total | $ | — | $ | — | $ | 1,754,000 | $ | 1,754,000 |
Fair Value Measurements at December 31, 2022 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Crom Derivative Liabilities | $ | - | $ | - | $ | 824,000 | $ | 824,000 | |||||||||||||||
Contingent earnout | $ | - | $ | - | $ | 812,000 | $ | 812,000 | |||||||||||||||
Total | $ | - | $ | - | $ | 1,636,000 | $ | 1,636,000 |
Fair Value Measurements at September 30, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Crom Derivative Liabilities | $ | - | $ | - | $ | 789,000 | $ | 789,000 | ||||||||
Contingent Earnout | $ | - | $ | - | $ | 1,121,000 | $ | 1,121,000 | ||||||||
Total | $ | - | $ | - | $ | 1,910,000 | $ | 1,910,000 |
Fair Value Measurements at December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Crom Derivative Liabilities | $ | - | $ | - | $ | - | $ | - | ||||||||
Contingent Earnout | $ | - | $ | - | $ | 257,000 | $ | 257,000 | ||||||||
Total | $ | - | $ | - | $ | 257,000 | $ | 257,000 |
March 31, 2023 | December 31, 2022 | Inception | |||||||||||||||
Fair value of conversion option of Prior Crom note | $ | — | $ | 191,000 | $ | 314,000 | |||||||||||
Fair value of 656,250 warrants on April 4, 2022 | 539,000 | 633,000 | 378,000 | ||||||||||||||
Fair value of conversion option of Crom Cortana Fund LLC convertible note | 162,000 | — | 162,000 | ||||||||||||||
Fair value of 700,000 warrants on February 13, 2023 | 259,000 | — | 259,000 | ||||||||||||||
$ | 960,000 | $ | 824,000 |
September 30, 2022 (unaudited) | December 31, 2021 | Inception | ||||||||||
Fair value of conversion option of Crom Cortana Fund LLC convertible note | $ | (345,000 | ) | $ | - | $ | (314,000 | ) | ||||
Fair value of 656,250 warrants on April 4, 2022 | (444,000 | ) | - | (378,000 | ) | |||||||
$ | (789,000 | ) | $ | - | (692,000 | ) |
Beginning balance as of December 31, 2021 | $ | - | ||
Issuances of convertible note/warrants – derivative liabilities | (692,000 | ) | ||
Warrants exchanged for common stock | - | |||
Change in fair value of warrant derivative liabilities | (97,000 | ) | ||
Ending balance as of September 30, 2022 | $ | (789,000 | ) |
3/31/2023 | |||||
Expected term – conversion option | 1 year | ||||
Expected term - warrants | 5 years | ||||
Stock price as of measurement date | $ | 1.12 | |||
Equity volatility - unadjusted | 131.90 | % | |||
Volatility haircut | 5.00 | % | |||
Selected volatility – post haircut | 124.20 | % | |||
Senior unsecured synthetic credit rating | CCC+ | ||||
OAS differential between CCC+ and B- bonds | 1047bps | ||||
Risk-free interest rate | 4.90 | % |
September 30, 2022 | Inception – April 4, 2022 | |||||||
Expected term – conversion option | 0.51 years | 1 year | ||||||
Expected term - warrants | 4.51 years | 5 years | ||||||
Stock price as of Measurement Date | $ | 4.30 | $ | 3.80 | ||||
Equity volatility - unadjusted | 284.80 | % | 278.80 | % | ||||
Volatility haircut | 5.00 | % | 5.00 | % | ||||
Selected volatility – post haircut | 115.0 | % | 112.60 | % | ||||
Senior unsecured synthetic credit rating | CCC + | CCC + | ||||||
B- market yield | 7.90 | % | 4.50 | % | ||||
OAS differential between CCC+ and B- bonds | 458 | 383 | bps | |||||
Risk adjusted rate | 12.50 | % | 8.30 | % | ||||
Risk-free interest rate | 3.90 | % | 1.70 | % |
Three Months Ended March 31, | Change | ||||||||||||||||||||||
2023 | 2022 | Amount | % | ||||||||||||||||||||
Revenues | $ | 9,937,013 | $ | 9,990,141 | $ | (53,128) | (1) | % | |||||||||||||||
Cost of revenues | 5,899,231 | 5,855,641 | 43,590 | 1 | % | ||||||||||||||||||
Gross Profit | 4,037,782 | 4,134,500 | (96,718) | (2) | % | ||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Indirect costs | 2,210,879 | 1,729,195 | 481,684 | 28 | % | ||||||||||||||||||
Overhead | 467,682 | 418,970 | 48,712 | 12 | % | ||||||||||||||||||
General and administrative expenses | 6,046,530 | 2,842,140 | 3,204,390 | 113 | % | ||||||||||||||||||
Gain from change in fair value of contingent earnout | (18,000) | — | (18,000) | — | % | ||||||||||||||||||
Total operating expenses | 8,707,091 | 4,990,305 | 3,716,786 | 74 | % | ||||||||||||||||||
Loss from operations: | (4,669,309) | (855,805) | (3,813,504) | 446 | % | ||||||||||||||||||
Other expense, net | (879,731) | (689,626) | (190,105) | 28 | % | ||||||||||||||||||
Loss before income taxes and preferred stock dividends | (5,549,040) | (1,545,431) | (4,003,609) | 259 | % | ||||||||||||||||||
Income tax benefit (expense) | 1,225,649 | 149,628 | 1,076,021 | 719 | % | ||||||||||||||||||
Preferred stock dividend | 30,319 | 10,912 | 19,407 | 178 | % | ||||||||||||||||||
Net loss | $ | (4,353,710) | $ | (1,406,715) | $ | (2,946,995) | 209 | % |
THREE MONTHS ENDED | ||||||||||||||||
SEPTEMBER 30, | Change | |||||||||||||||
2022 | 2021 | Amount | % | |||||||||||||
Revenues | $ | 11,120,712 | $ | 7,378,094 | $ | 3,742,618 | 51 | % | ||||||||
Cost of revenues | 6,474,261 | 4,309,439 | 2,164,822 | 50 | % | |||||||||||
Gross Profit | 4,646,451 | 3,068,655 | 1,577,796 | 51 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Indirect costs | 2,130,513 | 738,239 | 1,392,274 | 189 | % | |||||||||||
Overhead | 407,804 | 248,540 | 159,264 | 64 | % | |||||||||||
General and administrative expenses | 3,297,319 | 6,682,034 | ( 3,384,715 | ) | (51 | )% | ||||||||||
Loss from change in fair value of contingent earnout | 864,000 | - | 864,000 | 100 | % | |||||||||||
Total operating expenses | 6,699,636 | 7,668,813 | ( 969,177 | ) | (13 | )% | ||||||||||
Income (loss) from operations: | (2, 053,185 | ) | (4,600,158 | ) | 2,546,973 | (55 | )% | |||||||||
Other income (expense) | ( 902,314 | ) | (648,175 | ) | ( 254,139 | ) | 39 | % | ||||||||
Income (loss) before income taxes and preferred stock dividends | ( 2,955,499 | ) | (5,248,333 | ) | 2, 292,834 | (44 | )% | |||||||||
Income tax benefit (expense) | (159,025) | 328,735 | (487,760 | ) | (148 | )% | ||||||||||
Preferred stock dividend | 29,911 | 3,320 | 26,591 | 801 | % | |||||||||||
Net loss | $ | (3,144,435 | ) | $ | (4,922,918 | ) | $ | 1,778,483 | -36 | % |
NINE MONTHS ENDED | ||||||||||||||||
SEPTEMBER 30, | Change | |||||||||||||||
2022 | 2021 | Amount | % | |||||||||||||
Revenues | $ | 32,166,104 | $ | 15,587,246 | $ | 16,578,858 | 106 | % | ||||||||
Cost of revenues | $ | 18,698,820 | 8,921,153 | 9,777,667 | 110 | % | ||||||||||
Gross Profit | $ | 13,467,284 | 6,666,093 | 6,801,191 | 102 | % | ||||||||||
Operating expenses: | ||||||||||||||||
Indirect costs | 7,458,319 | 1,512,370 | 5,945,949 | 393 | % | |||||||||||
Overhead | 1,167,346 | 431,987 | 735,359 | 170 | % | |||||||||||
General and administrative expenses | 9, 633,064 | 10,389,922 | ( 756 , 858 | ) | ( 7 | )% | ||||||||||
Loss from change in fair value of contingent earnout | 864,000 | - | 864,000 | 100 | % | |||||||||||
Total operating expenses | 19,122,729 | 12,334,279 | 6,788,450 | 55 | % | |||||||||||
Income (loss) from operations: | ( 5,655,445 | ) | (5,668,186 | ) | 12,741 | 0 | % | |||||||||
Other income (expense) | (2, 676 ,612 | ) | (1,799,181 | ) | ( 877,431 | ) | 49 | % | ||||||||
Income (loss) before income taxes and preferred stock dividends | (8, 332,057 | ) | (7,467,367 | ) | ( 864,690 | ) | ( 1 2 | )% | ||||||||
Income tax benefit (expense) | ( 902,820 | ) | 890,995 | (1, 793,815 | ) | ( 201 | )% | |||||||||
Preferred stock dividend | 70,447 | 3,320 | 67,127 | 2022 | % | |||||||||||
Net loss | $ | (9, 305,324 | ) | $ | (6,579,692 | ) | $ | (2, 725,632 | ) | 41 | % |
$ | 23,567,806 | ||||||
23,976,539 | |||||||
Priced Options | 121,026,239 | ||||||
Total Backlog | $ |
Three Months Ended March 31, | Change | ||||||||||||||||||||||
2023 | 2022 | Amount | % | ||||||||||||||||||||
Net cash provided (used) by operating activities | $ | (2,427,865) | $ | 84,773 | $ | (2,512,638) | NM | ||||||||||||||||
Net cash provided (used) by investing activities | (427,734) | (67,613) | $ | (360,121) | 533 | % | |||||||||||||||||
Net cash provided (used) by financing activities | 485,690 | 274,710 | $ | 210,980 | 77 | % | |||||||||||||||||
Change in cash | $ | (2,330,737) | $ | 291,870 | $ | (2,622,607) | NM | ||||||||||||||||
NM - not meaningful |
Nine Months Ended September 30, | Change | |||||||||||||||
2022 | 2021 | Amount | % | |||||||||||||
Net cash provided (used) by operating activities | $ | (554,647 | ) | $ | 167,612 | $ | (722,259 | ) | -431 | % | ||||||
Net cash provided (used) by investing activities | (342,436 | ) | 835,989 | $ | (1,178,425 | ) | -141 | % | ||||||||
Net cash provided (used) by financing activities | 732,556 | 238,976 | $ | 493,580 | 207 | % | ||||||||||
Change in cash | $ | (164,527 | ) | $ | 1,242,577 | $ | (1,407,104 | ) | -113 | % |
Incorporated by Reference | ||||||||||||||||||||||||||||||||
Exhibit Number | Exhibit Title | Form | File Number | Exhibit | Filing Date | |||||||||||||||||||||||||||
Incorporated by Reference | ||||||||||
Exhibit Number | Exhibit Title | Form | File Number | Exhibit | Filing Date | |||||
104 | The cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, has been formatted in Inline XBRL and contained in Exhibits 101 |
++ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information is (i) not material and (ii) the type of information the Company treats as confidential. The Company will furnish supplementally an unredacted copy of such exhibit to the Securities and Exchange Commission or its staff upon its request. |
Date: May 15, 2023 | CASTELLUM, INC. | ||||
/s/ Mark C. Fuller | |||||
Mark C. Fuller | |||||
Chief Executive Officer (Principal Executive Officer) | |||||
/s/ David T. Bell | |||||
David T. Bell | |||||
Chief Financial Officer (Principal Financial Officer) |