Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2021 | Mar. 10, 2022 | Jun. 30, 2021 | |
Cover [Abstract] | |||
Entity Registrant Name | WidePoint Corporation | ||
Entity Central Index Key | 0001034760 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false | ||
Entity Current Reporting Status | Yes | ||
Document Period End Date | Dec. 31, 2021 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Entity Common Stock Shares Outstanding | 8,679,394 | ||
Entity Public Float | $ 660 | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Entity File Number | 001-33035 | ||
Entity Incorporation State Country Code | DE | ||
Entity Tax Identification Number | 52-2040275 | ||
Entity Address Address Line 1 | 11250 Waples Mill Road | ||
Entity Address Address Line 2 | South Tower, Suite 210 | ||
Entity Address City Or Town | Fairfax | ||
Entity Address State Or Province | VA | ||
Entity Address Postal Zip Code | 22030 | ||
City Area Code | 703 | ||
Icfr Auditor Attestation Flag | false | ||
Local Phone Number | 349-2577 | ||
Security 12b Title | Common Stock, $0.001 par value per share | ||
Trading Symbol | WYY | ||
Security Exchange Name | NYSE | ||
Entity Interactive Data Current | Yes | ||
Auditor Name | Moss Adams LLP | ||
Auditor Location | San Diego, California | ||
Auditor Firm Id | 659 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 6,479,980 | $ 15,996,749 |
Accounts receivable, net of allowance for doubtful accounts of $62,988 and $114,169 in 2021 and 2020, respectively | 12,536,584 | 35,882,661 |
Unbilled accounts receivable | 10,937,415 | 13,848,726 |
Other current assets | 3,194,009 | 1,763,633 |
Total current assets | 33,147,988 | 67,491,769 |
NONCURRENT ASSETS | ||
Property and equipment, net | 841,133 | 573,039 |
Lease right of use asset, net | 6,273,211 | 6,095,376 |
Intangible assets, net | 6,228,886 | 2,187,503 |
Goodwill | 22,088,578 | 18,555,578 |
Deferred tax assets, net | 5,127,482 | 5,606,079 |
Other long-term assets | 1,782,060 | 815,007 |
Total assets | 75,489,338 | 101,324,351 |
CURRENT LIABILITIES | ||
Accounts payable | 10,263,015 | 36,221,981 |
Accrued expenses | 12,344,426 | 15,626,313 |
Deferred revenue | 2,280,894 | 2,016,282 |
Current portion of lease liabilities | 794,175 | 577,855 |
Current portion of contingent consideration | 358,000 | 0 |
Total current liabilities | 26,040,510 | 54,442,431 |
NONCURRENT LIABILITIES | ||
Lease liabilities, net of current portion | 6,025,691 | 5,931,788 |
Contingent consideration, net of current portion | 1,347,000 | 0 |
Deferred revenue, net of current portion | 400,142 | 398,409 |
Total liabilities | 33,813,343 | 60,772,628 |
Commitments and contingencies (Note 19) | 0 | 0 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,045,714 shares issued and none outstanding | 0 | 0 |
Common stock, $0.001 par value; 30,000,000 shares authorized; 8,842,026 and 8,876,515 shares issued and outstanding, respectively | 8,842 | 8,876 |
Additional paid-in capital | 101,424,922 | 100,504,741 |
Accumulated other comprehensive loss | (241,586) | (104,615) |
Accumulated deficit | (59,516,183) | (59,857,279) |
Total stockholders' equity | 41,675,995 | 40,551,723 |
Total liabilities and stockholders' equity | $ 75,489,338 | $ 101,324,351 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Consolidated Balance Sheets | ||
Allowance for doubtful accounts receivable | $ 62,988 | $ 114,169 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 2,045,714 | 2,045,714 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 8,842,026 | 8,876,515 |
Common stock, shares outstanding | 8,842,026 | 8,876,515 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Consolidated Statements of Operations | ||
REVENUES | $ 87,338,097 | $ 180,343,015 |
COST OF REVENUES (including amortization and depreciation of $541,842 and $922,455, respectively) | 70,970,391 | 159,887,807 |
GROSS PROFIT | 16,367,706 | 20,455,208 |
OPERATING EXPENSES | ||
Sales and marketing | 2,008,733 | 1,871,146 |
General and administrative expenses (including share-based compensation of $810,281 and $717,987, respectively) | 12,724,522 | 14,270,342 |
Depreciation and amortization | 1,026,838 | 1,091,463 |
Total operating expenses | 15,760,093 | 17,232,951 |
Income from Operations | 607,613 | 3,222,257 |
OTHER INCOME (EXPENSE) | ||
Interest income | 4,158 | 3,944 |
Interest expense | (273,228) | (302,924) |
Other income | 643,000 | 456 |
Total other income (expense) | (373,930) | (298,524) |
INCOME BEFORE INCOME TAX PROVISION (BENEFIT) | 981,543 | 2,923,733 |
INCOME TAX PROVISION (BENEFIT) | (640,447) | 7,399,951 |
NET INCOME | $ 341,096 | $ 10,323,684 |
BASIC EARNINGS PER SHARE | $ 0.04 | $ 1.22 |
BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING | 9,069,903 | 8,460,558 |
DILUTED EARNINGS PER SHARE | $ 0.04 | $ 1.20 |
DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING | 9,160,195 | 8,603,170 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Consolidated Statements of Operations | ||
Amortization and depreciation | $ 632,399 | $ 541,842 |
Share-based compensation expense | $ 883,763 | $ 810,281 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Consolidated Statements of Comprehensive Loss | ||
NET INCOME | $ 341,096 | $ 10,323,684 |
Other comprehensive (loss) income: | ||
Foreign currency translation adjustments, net of tax | (136,971) | 137,979 |
Other comprehensive (loss) income | (136,971) | 137,979 |
COMPREHENSIVE INCOME | $ 204,125 | $ 10,461,663 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders Equity - USD ($) | Total | Common Stock | Additional Paid-In Capital | Accumulated other comprehensive loss | Retained Earnings (Accumulated Deficit) |
Balance, shares at Dec. 31, 2019 | 8,386,146 | ||||
Balance, amount at Dec. 31, 2019 | $ 24,939,418 | $ 83,861 | $ 95,279,114 | $ (242,594) | $ (70,180,963) |
Reverse split adjustment | 0 | $ (75,475) | 75,475 | 0 | 0 |
Issuance of shares for rounding on the reverse split, shares | 2,546 | ||||
Issuance of shares for rounding on the reverse split, amount | 0 | $ 2 | (2) | 0 | 0 |
Common stock repurchased, shares | 2,416 | ||||
Common stock repurchased, amount | (10,113) | $ (2) | (10,111) | 0 | 0 |
Issuance of common stock options exercises, shares | 32,803 | ||||
Issuance of common stock options exercises, amount | 4,999 | $ 33 | 4,966 | 0 | 0 |
Issuance of common stock restricted, shares | 58,123 | ||||
Issuance of common stock restricted, amount | 0 | $ 58 | (58) | 0 | 0 |
Issuance of common stock through at-the-market offering program, shares | 399,313 | ||||
Issuance of common stock through at-the-market offering program, amount | 4,345,475 | $ 399 | 4,345,076 | 0 | 0 |
Stock compensation expense restricted | 704,973 | 0 | 704,973 | 0 | 0 |
Stock compensation expense non-qualified stock options | 105,308 | 0 | 105,308 | 0 | 0 |
Foreign currency translation (loss) | 137,979 | 0 | 0 | 137,979 | 0 |
Net income | 10,323,684 | $ 0 | 0 | 0 | 10,323,684 |
Balance, shares at Dec. 31, 2020 | 8,876,515 | ||||
Balance, amount at Dec. 31, 2020 | 40,551,723 | $ 8,876 | 100,504,741 | (104,615) | (59,857,279) |
Common stock repurchased, shares | 299,494 | ||||
Common stock repurchased, amount | (1,243,069) | $ (299) | (1,242,770) | 0 | 0 |
Issuance of common stock options exercises, shares | 41,086 | ||||
Issuance of common stock options exercises, amount | 179,273 | $ 40 | 179,233 | 0 | 0 |
Issuance of common stock restricted, shares | 123,232 | ||||
Issuance of common stock restricted, amount | (140,894) | $ 124 | (141,018) | 0 | 0 |
Issuance of common stock through at-the-market offering program, shares | 100,687 | ||||
Issuance of common stock through at-the-market offering program, amount | 1,071,074 | $ 101 | 1,070,973 | 0 | 0 |
Stock compensation expense restricted | 804,192 | 0 | 804,192 | 0 | 0 |
Stock compensation expense non-qualified stock options | 79,571 | 0 | 79,571 | 0 | 0 |
Foreign currency translation (loss) | (136,971) | 0 | 0 | (136,971) | 0 |
Net income | 341,096 | 0 | 0 | 0 | 341,096 |
Issuance of warrants in acquisition of IT Authorities, Inc. | 170,000 | $ 0 | 170,000 | 0 | 0 |
Balance, shares at Dec. 31, 2021 | 8,842,026 | ||||
Balance, amount at Dec. 31, 2021 | $ 41,675,995 | $ 8,842 | $ 101,424,922 | $ (241,586) | $ (59,516,183) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 341,096 | $ 10,323,684 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Deferred income tax expense (benefit) | 470,355 | (7,465,922) |
Depreciation expense | 1,026,080 | 1,150,530 |
(Recovery) provision for doubtful accounts | (24,445) | 571 |
Amortization of intangibles | 632,399 | 482,204 |
Amortization of deferred financing costs | 0 | 1,667 |
Share-based compensation expense | 883,763 | 810,281 |
Change in fair value of contingent consideration | (590,000) | 0 |
Changes in assets and liabilities: | ||
Accounts receivable and unbilled receivables | 27,283,860 | (21,027,396) |
Inventories | 400,565 | (776,883) |
Prepaid expenses and other current assets | (1,774,725) | 115,517 |
Other assets | 27,159 | 18,604 |
Accounts payable and accrued expenses | (30,187,502) | 23,059,452 |
Income tax payable | (1,631) | (41,432) |
Deferred revenue and other liabilities | 290,463 | (264,594) |
Net cash (used in) provided by operating activities | (1,222,563) | 6,386,283 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition of IT Authorities, net of cash acquired | (4,688,829) | 0 |
Purchases of property and equipment | (258,176) | (254,448) |
Capitalized hardware and software development costs | (2,496,520) | (902,577) |
Net cash used in investing activities | (7,443,525) | (1,157,025) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Advances on bank line of credit | 0 | 1,895,676 |
Repayments of bank line of credit advances | 0 | 1,895,676 |
Principal repayments under finance lease obligations | (572,083) | (608,004) |
Withholding taxes paid on behalf of employees on net settled restricted stock awards | (140,894) | 0 |
Common stock repurchased | 1,243,069 | 10,113 |
Issuance of common stock/At-the-market offering, net of issuance costs | 1,071,074 | 4,345,475 |
Proceeds from exercise of stock options | 179,273 | 4,999 |
Net cash (used in) provided by financing activities | (705,699) | 3,732,357 |
Net effect of exchange rate on cash and equivalents | (144,982) | 155,507 |
NET (DECREASE) INCREASE IN CASH | (9,516,769) | 9,117,122 |
CASH AND CASH EQUIVALENTS, beginning of period | 15,996,749 | 6,879,627 |
CASH AND CASH EQUIVALENTS, end of period | 6,479,980 | 15,996,749 |
SUPPLEMENTAL CASH FLOW INFORMATION | ||
Cash paid for interest | 254,926 | 308,260 |
Cash paid for income taxes | 214,736 | 65,990 |
NONCASH INVESTING AND FINANCING ACTIVITIES | ||
Capitalized hardware and software development costs in accounts payable | 110,209 | 0 |
Contingent consideration | 2,295,000 | 0 |
Warrants issued in connection with ITA acquisition | 170,000 | 0 |
Cashless exercise of stock options | 0 | 25 |
Leased assets obtained in exchange for new lease liabilities | $ 876,281 | $ 943,290 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2021 | |
Organization and Nature of Operations | |
Organization and Nature of Operations | 1. Organization and Nature of Operations Organization WidePoint Corporation (“WidePoint” or the “Company”) was incorporated in Delaware on May 30, 1997 and conducts operations through its wholly-owned operating subsidiaries in the United States, Ireland, the Netherlands and the United Kingdom. The Company’s principal executive and administrative headquarters is located in Fairfax, Virginia. Nature of Operations The Company is a leading provider of Technology Management as a Service (TMaaS). The Company’s TMaaS platform and service solutions enable its customers to efficiently secure, manage and analyze the entire lifecycle of their mobile communications assets through its federally compliant platform Intelligent Telecommunications Management System (ITMS™). The Company’s ITMS platform is SSAE 18 compliant and was granted an Authority to Operate by the U.S. Department of Homeland Security. Additionally, the Company was granted an Authority to Operate by the General Services Administration with regard to its identity credentialing component of its TMaaS platform. The Company’s TMaaS platform is internally hosted and accessible on-demand through a secure customer portal that is specially configured for each customer. The Company can deliver these solutions in a number of configurations ranging from utilizing the platform as a service to a full-service solution that includes full lifecycle support for all end users and the organization. A significant portion of the Company’s expenses, such as personnel and facilities costs, are fixed in the short term and may be not be easily modified to manage through changes in the Company’s market place that may create pressure on pricing and/or costs to deliver its services. The Company has periodic capital expense requirements to maintain and upgrade its internal technology infrastructure tied to its hosted solutions and other such costs may be significant when incurred in any given quarter. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2021 | |
Significant Accounting Policies | |
Significant Accounting Policies | 2. Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the financial statement rules and regulations of the Securities and Exchange Commission. Common Stock Reverse Split On October 23, 2020, the Company filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation with the Secretary of Delaware to effect a one-for-ten reverse stock split of the shares of the Company’s common stock, effective as of 5:00 p.m. Eastern Time on November 6, 2020. The Certificate of Amendment also decreased the number of authorized shares of Common Stock from 110,000,000 to 30,000,000. All share, restricted stock awards (“RSA”) and per share information included in the consolidated financial statements has been retroactively adjusted to reflect the stock split. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and acquired entities since their respective dates of acquisition. All significant inter-company amounts were eliminated in consolidation. Government Subsidies On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, provides employer payroll tax credits for qualified wages and options to defer payroll tax payments for a limited period. Based on our evaluation of the CARES Act, in certain circumstances, we qualify for certain employer payroll tax credits as well as the deferral of payroll tax payments in the future. The Company records government subsidies as offsets to the related operating expenses. During the year ended December 31, 2021, qualified payroll credits reduced general and administrative expenses by $1.3 million on our condensed consolidated statements of operations. The Company recorded the payroll tax credit as a receivable in other current assets on the consolidated balance sheets as of December 31, 2021. As of December 31, 2021, deferred payroll tax payments of $246,000 were included in accrued liabilities on our condensed consolidated balance sheets. As of December 31, 2020, total deferred payroll tax payments of $492,000 were included in accrued liabilities and other long-term liabilities on our consolidated balance sheets. Reclassifications Certain reclassifications have been made to prior period consolidated balance sheet to conform to current period presentation. Such reclassifications had no effect on net income as previously reported. Accounting Standards Update Accounting Standards under Evaluation In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument (“Topic 326”). Topic 326 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. This update is effective for the company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of this new standard on its consolidated financial statements. Foreign Currency Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of each reporting period. The resulting translation adjustments, along with any related tax effects, are included in accumulated other comprehensive (loss) income, a component of stockholders’ equity. Translation adjustments are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other than the functional currency, including operations outside the U.S. where the functional currency is the U.S. dollar, are reported net in the Company’s Consolidated Statements of Operations, depending on the nature of the activity. See Note 18 for additional information. Segment Reporting Segments are defined by authoritative guidance as components of a company in which separate financial information is available and is evaluated by the chief operating decision maker (CODM), or a decision-making group, in deciding how to allocate resources and in evaluating financial performance. The Company’s CODM is its chief executive officer. The Company’s customers view our market as a singular business and demand an integrated and scalable suite of enterprise-wide solutions. The Company’s TMaaS offerings are substantially managed service driven solutions that use our proprietary technology platform to deliver our services. The amount of labor required to perform our contract obligations may vary significantly contract to contract depending on the customer’s specific requirements; however, the way in which we perform these services is consistent across the company and requires a connected group of internal subject matter experts and support personnel. In order to evaluate a managed service business model the Company’s CODM and the senior executive team measure financial performance based on our overall mixture of managed and carrier services and related margins. These financial metrics provide a stronger indication of how we are managing our key customer relationships; and it also determines our overall profitability. The Company presents a single segment for purposes of financial reporting and prepared its consolidated financial statements upon that basis. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. 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. The more significant areas requiring use of estimates and judgment relate to revenue recognition, accounts receivable valuation reserves, ability to realize intangible assets and goodwill, ability to realize deferred income tax assets, contingent consideration, fair value of certain financial instruments and the evaluation of contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability. GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows: Level 1 Level 2 · Quoted prices for similar assets or liabilities in active markets · Quoted prices for identical or similar assets or liabilities in markets that are not active · Inputs other than quoted prices that are observable for the asset or liability · Inputs that are derived principally from or corroborated by observable market data by correlation or other means Level 3 The Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Company elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred. The Company identifies the individual assets acquired and liabilities assumed in connection with a business combination and purchase consideration in each business combination. The Company utilizes third party valuation professionals to estimate the initial fair value of significant assets acquired and liabilities assumed. See Note 3 for a detailed description of a material business combination and see Note 4 for changes in fair value of liabilities recorded in connection with material business combinations that are measured at fair value on a recurring basis. Financial Instruments Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. Cash and Cash Equivalents The Company maintains interest-bearing cash deposits and short-term overnight investments with large financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents for purposes of these consolidated financial statements. Interest-bearing cash deposits maintained by financial institutions in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000. At December 31, 2021 and 2020, the Company had deposits in excess of FDIC limits of approximately $3,072,000 and $13,197,000, respectively. Allowances for Doubtful Accounts The Company determines its allowance for doubtful accounts by considering a number of factors, including the type of customer, credit worthiness, payment history, length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are deemed to be uncollectible, having exhausted all collection efforts. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Customer account balances outstanding longer than the contractual payment terms are reviewed for collectability and after 90 days are considered past due unless arrangements were made at the time of the transaction that specified different payment terms. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Inventories Inventories consist of mobile devices and accessories and identity credential hardware components. Inventories are valued at the lower of cost, using first-in, first-out method, or market. The Company may record a write-down for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. If future demand or market conditions for our products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of inventory, we may be required to record additional write-downs, which would adversely affect our gross profit. For the years ended December 31, 2021 and 2020, there were no inventory write-downs. Property and Equipment Property and equipment are stated at historical cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives based upon the classification of the property and/or equipment or lease period for assets acquired under lease arrangements. The estimated useful lives of the assets are as follows: Estimated Useful Life Computer hardware and software 3-5 years Furniture and fixtures 5 years Mobile equipment 3 years The Company assesses the recoverability of property and equipment by determining whether the depreciation of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of December 31, 2021 and 2020, the Company’s management has not identified any material impairment of its property and equipment. Leases The Company has operating and finance leases for corporate offices, data centers, computer hardware and automobiles that are accounted for under ASC 842, Leases (Topic 842). The leases have remaining lease terms ranging from one year to eighteen years. The Company determines if an arrangement is a lease at inception. The Company considers any contract where there is an identified asset and that it has the right to control the use of such asset in determining whether the contract contains a lease. A right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and the lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s operating leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date in determining the present value of lease payments. The operating lease ROU assets include any lease payments made prior to the rent commencement date. Lease expense for lease payments are recognized on a straight-line basis over the lease term. Goodwill and Other Intangible Assets The Company accounts for goodwill and other indefinite-lived intangible assets in accordance with ASC 350, Intangibles (Topic 350). Under ASC Topic 350, goodwill and certain indefinite-lived intangible assets are not amortized but are subject to an annual impairment test as of December 31, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company has a single reporting unit and all goodwill relates to that reporting unit. The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. The Company did not recognize any impairment of goodwill during the years ended December 31, 2021 and 2020. Revenue from Contracts with Customers Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company reports products and services under the categories managed services and carrier services as described below: Carrier Services. Managed Services. · Managed Service Fees: o Revenue for fixed price services are generally completed and billed in the same accounting period and we charge a fixed fee for each performance obligation which may be tied to the number of units managed, percentage of supplier spend and/or savings, units delivered, certificates issued by the Company, certificate validation services installed in a customer’s environment, accessories sold and billable hours. Revenue from this service requires accounting estimates due to delays between completion of the service and the normal billing cycle. o Revenue for fixed price software sold as a term license is recognized ratably over the license term from the date the software is accepted by the customer. Maintenance services, if contracted, are recognized ratably over the term of the maintenance agreement, generally twelve months. Revenue for fixed price software licenses that are sold as a perpetual license with no significant customization are recognized when the software is delivered. Implementation fees are recognized when the work is completed. Revenue from this service does not require significant accounting estimates. · Billable Service Fees. · Reselling and Other Service Fees. Judgments and Estimates The Company’s contracts with customers often include promises to transfer multiple products and services to a customer under a fixed rate or fixed fee arrangement. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require judgment. Components of our managed service solution are generally distinct performance obligations that are not interdependent and can be completed within a month. The Company’s products are generally sold with a right of return. Historically the returns have been immaterial and recognized in the period which the products are returned. The Company may provide other event driven credits or disincentives for not meeting performance obligations which are accounted for as variable consideration and recognized in the period which the event occurs. Contract Balances A significant portion of contract balances represent revenues earned on federal government contracts. Timing of revenue recognition may differ materially from the timing of invoicing to customers due a long-standing practice of issuing a consolidated managed service invoice. A consolidated invoice usually requires data such as billable hours, units managed, credentials issued, accessories sold and usage data from telecommunications providers and other suppliers. As a result it could take between thirty (30) to sixty (60) days after all performance obligations have been met to deliver a complete customer invoice. As a result, the Company may have both accounts receivables (invoiced revenue) and unbilled receivables (revenue recognize but not yet invoiced) that could represent one or more months of revenue. Additionally, the Company may be required under contractual terms to bill for services in advance and deferred recognition of revenue until all performance obligations have been met. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within thirty (30) to ninety (90) days. Payment terms and conditions for government and commercial customers are described below: · Government contract billings are generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer. · Commercial contracts are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in uncollected accounts receivable. Customer accounts receivable balances that remain uncollected for more than 45 days are reviewed for collectability and are considered past due after 90 days unless different contractual repayment terms were extended under a contract with a customer. The Company determines its allowance for doubtful accounts after considering factors that could affect collectability of past due accounts receivable and such factors regularly include the customers’ financial condition and credit worthiness, recent payment history, type of customer and the length of time accounts receivable are past due. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Customer accounts receivable balances that remain uncollected for more than 120 days and/or that have not been settled in accordance with contractual repayment terms and for which no firm payment commitments exist are placed with a third-party collection agency and a reserve is established for the entire uncollected balance. The Company writes off accounts receivable after 180 days or earlier when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. If the accounts receivable has been written off and no allowance for doubtful accounts exist subsequent payments received are credited to bad debt expense as a recovery. Costs to Obtain a Contract with a Customer The Company does not recognize assets from the costs to obtain a contract with a customer and generally expenses these costs as incurred. The Company primarily uses internal labor to manage and oversee the customer acquisition process and to finalize contract terms and conditions and commence customer start-up activities, if any. Internal labor costs would be incurred regardless of the outcome of a contract with a customer and as such those costs are not considered incremental to the cost to obtain a contract with a customer. The Company does not typically incur significant incremental costs to obtain a contract with a customer after such contract has been awarded. Incremental costs to obtain a contract with a customer may include payment of commissions to certain internal and/or external sales agents upon collection of invoiced sales from the customer. The Company does not typically prepay sales commissions in advance of being paid for services delivered. Product Development Product development expenses include payroll, employee benefits, and other employee related expenses associated with product development. Product development expenses also include third-party development and programming costs, subject matter experts, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Costs related to product development are expensed until the point that technological feasibility is reached. Costs incurred during the implementation of product development and enhancements are capitalized and amortized to cost of revenue over the estimated lives of the solution. For the years ended December 31, 2021 and 2020, the Company incurred product development costs associated with TMaaS platform application of approximately $2.6 million and $903,000, respectively, which were capitalized. See Note 10 to the consolidated financial statements for additional information about capitalization of product development costs. Income Taxes The Company accounts for income taxes in accordance with authoritative guidance which requires that deferred tax assets and liabilities be computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The guidance requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. The Company recognizes the impact of an uncertain tax position taken or expected to be taken on an income tax return in the financial statements at the amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained upon audit by the relevant taxing authority. Basic and Diluted Earnings Per Share (EPS) Basic EPS includes no dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common and restricted stock were exercised or converted into common and restricted stock. The number of incremental shares from assumed conversions of stock options and unvested restricted stock awards included in the calculation of diluted EPS was calculated using the treasury stock method. See Note 17 to the consolidated financial statements for computation of EPS. Employee Stock-Based Compensation The Company accounts for stock-based employee compensation arrangements under provisions of ASC 718-10. The Company recognizes the cost of employee stock awards granted in exchange for employee services based on the grant-date fair value of the award using a Black-Scholes option-pricing model, net of expected forfeitures. Those costs are recognized ratably over the vesting period. Each stock option has an exercise price equal to the market price of the Company’s common stock on the date of grant and a contractual term ranging from 3 to 10 years. See Note 16 to the consolidated financial statements for additional information about stock-based compensation programs. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2021 | |
Business Combinations | |
Business Combination | 3. Business Combination On October 1, 2021, the Company completed the acquisition of specified assets of IT Authorities, Inc. (ITA) to increase its capabilities and broaden its footprint in the commercial sector. The closing purchase price paid by the Company consisted of $4.75 million in cash and 75,000 fully vested warrants to purchase an equal number of shares of the Company’s common stock at an exercise price of $5.33 per share (“Warrants”) exercisable for a period of four years. In addition, the Company agreed to pay contingent consideration to the seller as follows: (i) up to an additional $250,000 and 75,000 Warrants exercisable for four years depending on the EBITDA of the business in 2021; (ii) up to an additional $1.0 million and 150,000 Warrants exercisable for three years depending on the EBITDA of the business in 2022; (iii) up to an additional $1.0 million and 125,000 Warrants exercisable for three years depending on the EBITDA of the business in 2023; and (iv) up to an additional $1.0 million and 125,000 Warrants exercisable for three years depending on the EBITDA of the Business in 2024. In addition, the Company entered into employment agreements with two of the founders of the seller and in the event of the termination of either employee without cause (or by the employee for good reason), the contingent consideration payable under the purchase agreement will be deemed earned and payable for earn-out periods that have not been completed at the time of termination. The cash portion of the acquisition was funded using cash on hand. Purchase Consideration The following table sets forth the fair value of consideration paid in connection with the acquisition of ITA as of October 1, 2021: Cash consideration $ 4,750,000 Net working capital escrow adjustment to consideration paid (61,172 ) Fair value of vested warrants issued at closing date 170,000 Fair value of contingent consideration payable (cash) 1,597,000 Fair value of contingent consideration payable (warrants) 698,000 Fair value of consideration paid $ 7,153,828 Transaction Costs The Company incurred related due diligence, legal and accounting and transaction costs in connection with acquisition of ITA of approximately $237,000. Fair Value of Assets Acquired and Liabilities Assumed The acquisition has been accounted for as a business combination under the acquisition method and, accordingly, the total purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair value on the acquisition date. The Company used valuation methods including the “monte carlo simulation” method to estimate the fair value of the contingent consideration, the “multi-period excess earnings method” to estimate the fair value of customer relationships and the “relief from royalty” method to estimate the fair value of the acquired tradename. The goodwill recognized was primarily attributed to increased synergies that are expected to be achieved from the integration of ITA and is not expected to be deductible for income tax purposes. The following table summarizes the allocation of the aggregate purchase consideration to the fair value of the assets and liabilities acquired as of October 1, 2021: Fair value of identifiable assets acquired and liabilities assumed: Trade receivables $ 871,028 Unbilled receivables 145,707 Other current assets 63,262 Customer relationships 2,392,000 Tradename 1,040,000 Accounts payable and accrued expenses (875,290 ) Deferred revenue (15,878 ) Total identifiable net assets acquired 3,620,829 Goodwill 3,532,999 Total purchase price $ 7,153,828 Supplemental Unaudited Pro Forma Information YEARS ENDED DECEMBER 31, 2021 2020 (a) (a) Revenues $ 94,839,000 $ 193,283,000 Net Income 848,000 11,755,000 (a) To reflect on a pro forma basis unaudited consolidated financial information for the years ended December 31, 2021 and 2020 for the Company. The unaudited financial information presented herein were derived from historical internally prepared financial statements with certain adjustments for ITA and WidePoint’s Form 10-K audited financial statements. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2021 | |
Fair Value Measurements | |
Fair Value Measurements | 4. Fair Value Measurements The consolidated financial statements include financial instruments for which the fair value may differ from amounts reflected on a historical basis. Financial Assets and Financial Liabilities Carried at Other Than Fair Value The Company’s financial instruments include cash equivalents, accounts receivable, short and long-term debt (except for contingent promissory notes) and other financial instruments associated with the issuance of the common stock. The carrying values of cash equivalents and accounts receivable approximate their fair value because of the short maturity of these instruments and past evidence indicates that these instruments settle for their carrying value. The carrying amounts of the Company’s bank borrowings under its credit facility approximate fair value because the interest rates reflect current market rates. The following table present information about the Company's liabilities measured at fair value on a recurring basis in the consolidated balance sheets: Quoted Prices in Significant Other DECEMBER 31, Active Markets Observable Inputs Unobservable Inputs Description 2021 (Level 1) (Level 2) (Level 3) Liabilities: Contingent consideration - cash $ 250,000 $ - $ - $ 250,000 Contingent consideration - warrants 108,000 - - 108,000 Contingent consideration - cash, net of current portion 1,095,000 - - 1,095,000 Contingent consideration - warrants, net of current portion 252,000 - - 252,000 Total liabilities measured and recorded at fair value $ 1,705,000 $ - $ - $ 1,705,000 The Company’s contingent consideration is categorized as Level 3 within the fair value hierarchy. The contingent consideration has been recorded at their fair value using a Monte Carlo simulation model. This model incorporates probability of achievement of certain milestones, risk-free rates and volatility. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist. Management estimates the fair value of the contingent consideration liability based on financial projections of ITA’s business and forecasted results, including revenue growth rates, costs and expenses, volatility, and discount rates. The Company evaluates, on a routine, periodic basis, the estimated fair value of the contingent consideration and quarterly changes in estimated fair value are reflected in other income in the consolidated statements of operations. Changes in the fair value of contingent consideration obligations may result from changes in changes of any of the key assumptions that are used. Changes in the estimated fair value of contingent consideration liability may have a material impact on the Company’s operating results. The following table presents a reconciliation of the change in fair value of contingent consideration for the year ended December 31, 2021: Beginning fair value balance on the acquisition date (October 1, 2021) $ 2,295,000 Change in fair value (gain) reported in the consolidated statement of operations (590,000 ) Beginning fair value balance reported in the consolidated balance sheet at December 31, 2021 $ 1,705,000 |
Accounts Receivable and Signifi
Accounts Receivable and Significant Concentrations | 12 Months Ended |
Dec. 31, 2021 | |
Accounts Receivable and Significant Concentrations | |
Accounts Receivable and Significant Concentrations | 5. Accounts Receivable and Significant Concentrations A significant portion of the Company’s revenue arrangements consist of firm fixed price contracts with agencies of the U.S. federal government and several large multinational publicly traded and private corporations. Accounts receivable consist of the following by customer type in the table below as of the periods presented: DECEMBER 31, DECEMBER 31, 2021 2020 U.S. Federal, State and Local Government (1) $ 11,010,794 $ 34,097,906 Commercial (2) 1,588,778 1,898,924 Gross accounts receivable 12,599,572 35,996,830 Less: allowances for doubtful accounts (3) 62,988 114,169 Accounts receivable, net $ 12,536,584 $ 35,882,661 (1) Government contracts are generally firm fixed price not to exceed arrangements with a term of five (5) years, which consists of a base year and four (4) annual option year renewals. Government receivables are billed under a single consolidated monthly invoice and are billed approximately thirty (30) to sixty (60) days in arrears from the date of service and payment is generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer. (2) Commercial contracts are generally fixed price arrangements with contract terms ranging from two (2) to three (3) years. Commercial accounts receivables are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. Commercial receivables are stated at amounts due from customers net of an allowance for doubtful accounts if deemed necessary. (3) During the year ended December 31, 2021 and 2020, the Company recorded net recoveries of bad debt totaling approximately $24,400. During the year ended December 31, 2020, the Company recorded provisions for bad debt expense related to commercial customers totaling approximately $1,000. The Company has not historically maintained a bad debt reserve for its government customers as it has not experienced material or recurring bad debt charges and the nature and size of the contracts has not necessitated the Company’s establishment of such a bad debt reserve. Significant Concentrations The following table presents revenue by customer for each of the periods presented: YEARS ENDED DECEMBER 31, Customer Type 2021 2020 U.S. Federal Government (1) 83.7% 91.9% U.S. State & Local and Foreign Governments 0.4% 0.1% Commercial 15.9% 7.9% (1) Sales to the U.S. federal government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. government. |
Unbilled Accounts Receivable an
Unbilled Accounts Receivable and Significant Concentrations | 12 Months Ended |
Dec. 31, 2021 | |
Accounts Receivable and Significant Concentrations | |
Unbilled Accounts Receivable and Significant Concentrations | 6. Unbilled Accounts Receivable and Significant Concentrations Unbilled accounts receivable represent revenues earned in connection with products and/or services delivered for which we are unable to issue a formal billing to the customer at the balance sheet due to either timing of invoice processing or delays due to fixed contractual billing schedules. A significant portion of our unbilled accounts receivable consist of carrier services and cybersecurity hardware and software products delivered but not invoiced at the end of the reporting period. The following table presents customers that represent ten (10) percent or more of consolidated unbilled accounts receivable as of the periods presented below: DECEMBER 31, DECEMBER 31, 2021 2020 As a % of As a % of Customer Type Receivables Receivables U.S. Federal Government 99% 99% Commercial 1% 1% |
Other Current Assets and Other
Other Current Assets and Other Long Term Assets | 12 Months Ended |
Dec. 31, 2021 | |
Other Current Assets and Other Long Term Assets | |
Other Current Assets and Other Long Term Assets | 7. Other Current Assets and Other Long Term Assets Other current assets consisted of the following as of the periods presented below: DECEMBER 31, DECEMBER 31, 2021 2020 Inventories $ 590,065 $ 990,976 Prepaid rent, insurance and other assets 1,307,548 772,657 Qualified payroll credit receivable 1,296,396 - Total other current assets $ 3,194,009 $ 1,763,633 Other long term assets consisted of the following as of the periods presented below: DECEMBER 31, DECEMBER 31, 2021 2020 Security deposits $ 94,908 $ 122,069 Capital work in progress 1,687,152 692,938 Other long term assets $ 1,782,060 $ 815,007 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2021 | |
Property and Equipment | |
Property and Equipment | 8. Property and Equipment Major classes of property and equipment consisted of the following as of the periods presented below: DECEMBER 31, DECEMBER 31, 2021 2020 Computer hardware and software $ 2,700,807 $ 2,271,000 Furniture and fixtures 454,401 462,361 Leasehold improvements 298,352 318,449 Automobiles 137,105 31,913 Gross property and equipment 3,590,665 3,083,723 Less: accumulated depreciation and amortization 2,749,532 2,510,684 Property and equipment, net $ 841,133 $ 573,039 During the years ended December 31, 2021 and 2020, the Company purchased for cash property and equipment totaling approximately $258,200 and $254,000, respectively. During the years ended December 31, 2021 and 2020, property and equipment depreciation expense was approximately $333,800 and $402,700, respectively. During the years ended December 31, 2021 and 2020, there were no material disposals of owned property and equipment. There were no changes in the estimated useful lives used to depreciate property and equipment during the years ended December 31, 2021 and 2020. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2021 | |
Leases | |
Leases | 9. Leases The Company entered into leases for corporate and operational facilities (“real estate leases”), computer hardware for datacenters and automobiles (collectively “all other leases”). Real estate leases The components of lease expense were as follows: YEARS ENDED DECEMBER 31, 2021 2020 Operating lease expense $ 15,043 $ 32,367 Finance lease expense: Amortization of right of use assets $ 703,530 $ 673,378 Interest on finance lease liabilities 273,224 293,493 Total finance lease expense $ 976,754 $ 966,871 Operating lease expense is included in general and administrative expenses in the consolidated statement of operations. Amortization of right of use assets is include in depreciation and amortization in the consolidated statement of operations. Supplemental cash flow information related to leases was as follows: YEARS ENDED DECEMBER 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from leases $ 288,267 $ 325,860 Financing cash flows from leases 572,083 608,004 Supplemental balance sheet information related to leases was as follows: DECEMBER 31, 2021 2020 Lease right of use assets, net $ 6,273,211 $ 6,095,376 Current portion of lease liabilities 794,175 577,855 Lease liabilities, net of current portion 6,025,691 5,931,788 Weighted average remaining lease term Operating leases 10.9 11.4 Finance leases - 0.3 Weighted average discount rate Operating leases 3.5 % 5 % Finance leases 3.5 % 5 % Maturities of lease liabilities as of December 31, 2021, were as follows: 2022 $ 1,033,506 2023 995,765 2024 1,022,289 2025 935,772 2026 823,282 Thereafter 3,557,724 Total undiscounted operating lease payments 8,368,337 Less: Imputed interest 1,548,471 Total lease liability $ 6,819,866 During the year ended December 31, 2020, the Company entered into a lease amendment, effective July 24, 2020, for additional office space and a one year extension of the original lease term. The Company accounted for the lease amendment under the lease modification guidance in ASC 842. As a result, the Company re-measured its lease liability and recognized an additional lease liability and corresponding right-of-use asset of $943,290. The lease liability was discounted using the Company’s incremental borrowing rate of 3.5%. During the year ended December 31, 2021, the Company entered into a lease agreement, with a related party, for 4,410 square feet of office space in Tampa, Florida. The lease commenced on December 15, 2021 and is for a term of five years, with a monthly rent obligation of $15,000, subject to annual rent increases of 3% per year. The Company recorded approximately $861,300 of right of use assets and lease-related liabilities, respectively. The lease liability was discounted using the Company’s incremental borrowing rate of 3.5%. Subsequent to December 31, 2021, the Company entered into a lease amendment to terminate the lease on June 30, 2022. See Note 21 to the consolidated financial statements for additional information about subsequent events. |
Intangibles
Intangibles | 12 Months Ended |
Dec. 31, 2021 | |
Intangibles | |
Intangible Assets | 10. Intangible Assets The Company’s intangible assets are comprised of purchased intangibles consisting of customer relationships, channel relationships, telecommunications software, trade names and trademarks and non-compete agreements. Intangible assets acquired in connection with a business combination are valued at fair value and amortized on a straight-line basis over the expected useful life which may range from three (3) to fifteen (15) years or more depending on the intangible asset characteristics. The Company’s intangible assets also include internally developed software used in the sales and delivery of its information technology service offerings. The Company capitalizes certain internal costs related to software development to deliver its information technology services including but not limited to its Intelligent Telecommunications Management System (ITMS™), Public Key Infrastructure (PKI) and Optimiser Telecom Data Intelligence (TDI™) applications. Significant development costs are capitalized from the point of demonstrated technological feasibility until the point in time that the product is available for general release to customers. Once the product is available for general release, capitalized costs are amortized based on units sold, or on a straight-line basis generally over the expected functional life which may range from two (2) to five (5) years. The following tables summarize purchased and internally developed intangible assets subject to amortization as of the periods presented below: DECEMBER 31, 2021 Gross Carrying Accumulated Net Book Amount Amortization Value Customer Relationships $ 2,392,000 $ (61,650 ) $ 2,330,350 Channel Relationships 2,628,080 (1,343,241 ) 1,284,839 Internally Developed Software 3,082,705 (1,633,516 ) 1,449,189 Trade Name and Trademarks 1,330,472 (165,964 ) 1,164,508 $ 9,433,257 $ (3,204,371 ) $ 6,228,886 DECEMBER 31, 2020 Gross Carrying Accumulated Net Book Amount Amortization Value Customer Relationships $ 1,980,000 $ (1,980,000 ) $ - Channel Relationships 2,628,080 (1,168,036 ) 1,460,044 Internally Developed Software 1,846,194 (1,280,108 ) 566,086 Trade Name and Trademarks 290,472 (129,099 ) 161,373 $ 6,744,746 $ (4,557,243 ) $ 2,187,503 Purchased Intangibles For the year ended December 31, 2021, the Company disposed of fully amortized purchased intangible assets with a historical cost and accumulated amortization of approximately $1,980,000. For the year ended December 31, 2020, there were no disposals or sales of purchased intangible assets. Internally Developed For the year ended December 31, 2021, the Company recorded capitalized software development costs of approximately $2.6 million related to costs associated with upgrading the ITMS™ platform, secure identity management technology and network operations center of which $209,400 was transferred from capital work in progress to internally developed software during the year. Capital work in progress is included in other long-term assets in the consolidated balance sheet. For the year ended December 31, 2020 the Company recorded capitalized software development costs of approximately $903,000 related to costs associated with upgrading the ITMS™ platform, secure identity management technology and network operations center of which $1.2 million was transferred from capital work in progress to internally developed software during the year. Capital work in progress is included in other long-term assets in the consolidated balance sheet. The aggregate amortization expense recorded was approximately $632,400 and $482,200 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, estimated annual amortization for our intangible assets for each of the next five years is approximately: 2022 $ 1,104,166 2023 1,045,400 2024 833,133 2025 511,170 2026 511,170 Thereafter 2,223,847 Total $ 6,228,886 |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill | |
Goodwill | 11. Goodwill The following table summarizes the changes in the carry amount of goodwill for the years ended December 31, 2021 and 2020: DECEMBER 31, DECEMBER 31, 2021 2020 Balances, January 1 $ 18,555,578 $ 18,555,578 Additions: Aquisition of IT Authorities, Inc. (See Note 3) 3,533,000 - Balances, December 31 $ 22,088,578 $ 18,555,578 As of December 31, 2021 and 2020, goodwill was not impaired and there were no accumulated impairment losses. |
Other Current Liabilities
Other Current Liabilities | 12 Months Ended |
Dec. 31, 2021 | |
Other Current Liabilities | |
Other Current Liabilities | 12. Other Current Liabilities Accrued expenses consisted of the following as of the periods presented below: DECEMBER 31, DECEMBER 31, 2021 2020 Carrier service costs $ 8,771,660 $ 11,832,170 Salaries and payroll taxes 2,213,356 2,774,138 Inventory purchases, consultants and other costs 1,345,900 1,004,303 Severance costs 7,612 7,612 U.S. income tax payable (23,570 ) 28,130 Foreign income tax payable 29,460 (20,040 ) Total accrued expenses $ 12,344,418 $ 15,626,313 |
Line of Credit
Line of Credit | 12 Months Ended |
Dec. 31, 2021 | |
Line of Credit | |
Line of Credit | 13. Line of Credit On June 15, 2017, the Company entered into a Loan and Security Agreement with Atlantic Union Bank (formerly known as Access National Bank) (the “Loan Agreement”). The Loan Agreement provides for a $5.0 million working capital revolving line of credit. Effective, April 30, 2021, the Company entered into a sixth modification agreement (“Modification Agreement”) with Atlantic Union Bank to amend the existing Loan Agreement. The Modification Agreement extended the maturity date of the facility from April 30, 2021 through June 15, 2022. The Loan Agreement requires that the Company meet the following financial covenants on a quarterly basis: (i) maintain a minimum adjusted tangible net worth of at least $2.0 million, (ii) maintain minimum consolidated adjusted EBITDA of at least two times interest expense and (iii) maintain a current ratio of 1.1 to 1.0 (excluding finance lease liabilities reported under recently adopted lease accounting standards). The available amount under the working capital line of credit is subject to a borrowing base, which is equal to the lesser of (i) $5.0 million or (ii) 50% of the net unpaid balance of the Company’s eligible accounts receivable. The facility is secured by a first lien security interest on all of the Company’s personal property, including its accounts receivable, general intangibles, inventory and equipment maintained in the United States. As of December 31, 2021, the Company was eligible to borrow up to $4.9 million under the borrowing base formula. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2021 | |
Income Taxes | |
Income Taxes | 14. Income Taxes Income tax provision (benefit) is as follows for the years ended: DECEMBER 31, 2021 2020 Current provision State $ 100,000 $ 68,541 Foreign 50,165 6,577 Total 150,165 75,118 Deferred provision (benefit) Federal 567,316 (6,651,247 ) State (83,032 ) (823,822 ) Foreign 5,998 - Total 490,282 (7,475,069 ) Income tax provision (benefit) $ 640,447 $ (7,399,951 ) Income tax provision (benefit) effective rates, which differs from the federal and state statutory rate as follows for the years ended: DECEMBER 31, 2021 2020 Statutory federal income tax rate 21.0 % 21.0 % State, net of federal benefit 7.5 % 7.0 % Non-deductible expenses 19.7 % 0.8 % Change in valuation allowance 15.1 % 281.2 % Foreign rate differential 3.8 % 0.0 % Return to accrual difference true-ups 15.1 % 1.4 % Other (0.1 )% 1.1 % Deferred tax adjustment and true-up 88.2 % 3.4 % Combined effective tax rate 62.9 % 253.1 % The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets (liabilities) consisted of the following: DECEMBER 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 9,501,008 $ 9,711,726 Alternative minimum tax credit 45,650 45,650 Share-based compensation 659,338 627,980 Intangible amortization 208,036 473,882 Lease liability 1,554,888 1,522,560 Other assets 251,553 107,682 Total deferred tax assets 12,220,473 12,489,480 Less: valuation allowance (1,999,630 ) (2,152,768 ) Total deferred tax assets, net 10,220,843 10,336,712 Deferred tax liabilities: Goodwill amortization 3,041,451 2,786,029 Depreciation 210,755 177,170 Foreign intangible amortization 409,269 336,759 Other liabilities 12,830 12,819 Lease asset 1,419,056 1,417,856 Total deferred tax liabilities 5,093,361 4,730,633 Net deferred tax asset $ 5,127,482 $ 5,606,079 As of December 31, 2021, the Company had approximately $34.4 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes. These federal NOL carry forwards expire between 2022 to 2038. Included in the recorded deferred tax asset, the Company had a benefit of approximately $38.4 million available to offset future taxable income for state income tax purposes. These state NOL carry forwards expire between 2024 and 2036. Under the provisions of the Internal Revenue Code, the net operating losses (“NOL”) and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. This annual limitation may result in the expiration of the net operating losses and credits before utilization. Changes in the valuation allowance for the years ended were as follows: DECEMBER 31, 2021 2020 Beginning balance $ (2,152,768 ) $ (10,364,787 ) Decreases (increases) 153,138 8,212,019 Ending balance $ (1,999,630 ) $ (2,152,768 ) The Company’s valuation allowance predominantly consisted of domestic net operating loss carryforwards and certain state net operating loss carryforwards. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2020, in part because in the prior year we achieved three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes are realizable. It therefore reduced the valuation allowance accordingly. During 2020, the Company released $8.2 million of the deferred tax asset valuation allowance to offset the regular tax expense generated by current earnings. In the future, changes in the Company’s valuation allowance may result from, among other things, additional pretax operating losses resulting in increases in our valuation allowance or pretax operating income resulting in decreases in our valuation allowance. The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states and certain foreign countries. The Company may be subject to examination by the IRS for tax years 2003 and forward. The Company may be subject to examinations by various state taxing jurisdictions for tax years 2003 and forward. The Company may be subject to examination by various foreign countries for tax years 2014 forward. As of December 31, 2021, the Company is currently not under examination by the IRS, any state or foreign tax jurisdiction. The Company did not have any unrecognized tax benefits at either December 31, 2021 or 2020. In the future, any interest and penalties related to uncertain tax positions will be recognized in income tax expense. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2021 | |
Stockholders' Equity | |
Stockholders' Equity | 15. Stockholders’ Equity Preferred Stock The Company’s Certificate of Incorporation authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.001 par value per share. Under the terms of the Company’s Certificate of Incorporation, the board of directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue such shares of preferred stock in one or more series. Each such series of preferred stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the board of directors. In November 2004, the Company filed a certificate of designation designating 2,045,714 shares of the Company’s preferred stock as shares of Series A Convertible Preferred Stock, which shares were later issued. All of the shares of Series A Convertible Preferred Stock that were issued was converted into common stock and may not be reissued. Accordingly, as of December 31, 2021, there were 7,954,286 undesignated shares of preferred stock remaining available for issuance. There were no issuances of preferred stock during the years ended December 31, 2021 and 2020. Common Stock The Company is authorized to issue 30,000,000 shares of common stock, $0.001 par value per share. As of December 31, 2021, there were 8,842,026 shares issued and outstanding. Common Stock Issuances - Employee Stock Option Exercises Shares of common stock issued as a result of stock option exercises and realized gross proceeds for the year ended December 31, 2021 were 41,086 and $179,273, respectively. Shares of common stock issued as a result of stock option exercises and realized gross proceeds for the year ended December 31, 2020 were 32,803 and $4,999, respectively. Common Stock Issuances – Restricted Stock Awards During the year ended December 31, 2021, there were 123,356 shares of common stock were issued in accordance with the vesting terms of the RSAs. Two employees received less than the shares vested because they elected to have a total of 12,526 shares withheld in satisfaction of each of the employees corresponding tax liability of approximately $140,900. The Company’s payment of this tax liability was recorded as a cash flow from financing activity on the consolidated statement of cash flows. During the year ended December 31, 2020, there were 58,123 shares of common stock vested in accordance with the vesting terms of RSAs. See Note 16 for additional information regarding stock option plans. Warrants As part of the consideration for the acquisition of ITA, the Company issued warrants to purchase 75,000 shares of common stock based on a strike price of $5.33. The Company valued the warrants using the Black Scholes Model using the following assumptions for October 1, 2021 as set forth below: Warrants issued 75,000 Expected dividend yield - Expected volatility 66.0% Risk-free interest rate 0.71% Term 4 years The warrants to acquire shares of common stock issued on October 1, 2021 were recorded in equity upon issuance. During its evaluation of equity classification for the warrants issued at closing to acquire shares of common stock issued in 2021, the Company considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entity’s own Equity Distinguishing Liabilities from Equity Contingent Warrants Liability-classified warrants consist of warrants to acquire common stock at an exercise price of $5.33 per share as part of the consideration for the acquisition of ITA, during the earn-out period from 2021 to 2024. Refer to Note 3 for more information about the terms of the contingent warrants. Based on our consideration of the ASC 815-40 guidance, we account for these contingent warrants as a liability. The estimated fair value of outstanding contingent warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of operations as a non-operating income (expense). Refer to Note 4 for more information about the fair value measurements. Stock Repurchase Program On October 7, 2019, the Company announced that its Board of Directors approved a stock repurchase plan (the “Repurchase Plan”) to purchase up to $2.5 million of the Company’s common stock. Any repurchases will be made in compliance with the SEC’s Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions. During the three months ended March 31, 2020, we repurchased 2,416 shares for a total of $10,100 under the Repurchase Plan. This plan was suspended on March 9, 2020, as a precaution due to the COVID-19 pandemic, which suspension was removed on September 27, 2021. During November 2021, the Board increased the size of the Repurchase Plan to up to $5.0 million of the Company common stock, increase the amount available for future purchases under the Repurchase Plan to $4.6 million. During the year ended December 31, 2021, we repurchased 299,494 of our common stock for a total of approximately $1.2 million. At The Market Offering Agreement On August 18, 2020, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley FBR”), The Benchmark Company, LLC (“Benchmark”) and Spartan Capital Securities, LLC (“Spartan”, and together with B. Riley FBR and Benchmark, the “Sales Agents”) which establishes an at-the-market equity program pursuant to which we may offer and sell shares of our common stock, par value $0.001 per share, from time to time as set forth in the Sales Agreement. The Sales Agreement provides for the sale of shares of the Company’s common stock having an aggregate offering price of up to $24,000,000. The Sales Agreement will terminate upon the earlier of sale of all of the shares under the Sales Agreement or termination of the Sales Agreement as permitted. During the first quarter ended March 31, 2021, the Company sold 100,687 shares for gross proceeds of $1.1 million and has incurred $62,700 of offering costs. During the year ended December 31, 2020, we sold 399,313 shares of our common stock through the Sales Agents for a total of approximately $4,678,381, resulting in net proceeds to us of approximately $4,345,475. |
Stock Options and Award Program
Stock Options and Award Programs | 12 Months Ended |
Dec. 31, 2021 | |
Stock Options and Award Programs | |
Stock Options and Award Programs | 16. Stock Options and Award Programs The Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, non-qualified stock options (NQSO), restricted stock awards (RSA), stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below. Valuation of Stock Awards Restricted Stock Non-Qualified Stock Options Restricted Stock Awards A summary of RSA activity as of December 31, 2021 and 2020, and changes for the years then ended are set forth below: 2021 2020 NON-VESTED AWARDS Non-vested awards outstanding, January 1, 173,748 50,750 Granted (+) 83,326 231,873 Cancelled (-) - - Vested (-) 135,758 108,875 Non-vested awards outstanding, December 31, 121,316 173,748 Weighted-average remaining contractual life (in years) 0.9 1.2 Unamortized RSA compensation expense $ 338,263 $ 362,426 Aggregate intrinsic value of RSAs non-vested, December 31 $ 476,772 $ 1,683,618 Aggregate intrinsic value of RSAs vested, December 31 $ 1,388,903 $ 708,920 Non-Qualified Stock Option Awards A summary of NQSO activity as of December 31, 2021 and 2020, and changes during the years then ended are set forth below: 2021 2020 Weighted Weighted Average Average Grant Date Grant Date NON-VESTED AWARDS Shares Fair Value Shares Fair Value Non-vested balances, January 1, 52,500 $ 3.93 84,166 $ 3.81 Cancelled (-) - - 1,666 $ 2.60 Vested/Excercised (-) 27,500 $ 0.00 30,000 $ 3.68 Non-vested balances, December 31, 25,000 $ 3.98 52,500 $ 3.93 2021 2020 Weighted Weighted Average Average OUTSTANDING AND EXERCISABLE AWARDS Shares Exercise Price Shares Exercise Price Awards outstanding, January 1, 187,334 $ 5.66 350,833 $ 5.89 Cancelled (-) 834 $ 4.60 11,666 $ 4.47 Expired (-) 5,000 $ 13.04 49,333 $ 6.03 Exercised (-) 41,500 $ 4.38 102,500 $ 6.40 Awards outstanding, December 31, 140,000 $ 3.54 187,334 $ 5.66 Awards vested and expected to vest, December 31, 140,000 $ 5.79 186,197 $ 5.67 Awards outstanding and exercisable, December 31, 115,000 $ 5.63 134,834 $ 5.37 The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of the Company’s stock exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2021 are as follows: Vested and Outstanding Expected to and Outstanding Vest Exercisable Weighted-average remaining contractual life (in years) 0.83 0.83 0.89 Aggregate intrinsic value $ - $ - $ - Stock Compensation Expense Share-based compensation recognized under ASC 718-10 (including restricted stock awards) represents both stock options based expense and stock grant expense. The Company recognized share-based compensation expense for the years then ended December 31 as set forth below: YEAR ENDED DECEMBER 31, 2021 YEAR ENDED DECEMBER 31, 2020 Shared-Based Compensation Expense Shared-Based Compensation Expense Employees Directors Total Employees Directors Non-Employees Total Restricted stock compensation expense $ 539,658 $ 264,534 $ 804,192 $ 375,122 $ 329,851 $ - $ 704,973 Non-qualified option stock compensation expense 79,571 - 79,571 98,789 - 6,519 105,308 Total share-based compensation before taxes $ 619,229 $ 264,534 $ 883,763 $ 473,911 $ 329,851 $ 6,519 $ 810,281 |
Earnings Per Common Share (EPS)
Earnings Per Common Share (EPS) | 12 Months Ended |
Dec. 31, 2021 | |
Earnings Per Common Share (EPS) | |
Earnings Per Common Share (EPS) | 17. Earnings Per Common Share (EPS) The computations of basic and diluted EPS for the years ended were as follows: YEARS ENDED DECEMBER 31, 2021 2020 Basic Earnings Per Share Computation: Net income $ 341,096 $ 10,323,684 Weighted average number of common shares 9,069,903 8,460,558 Basic Earnings Per Share $ 0.04 $ 1.22 Diluted Earnings Per Share Computation: Net income $ 341,096 $ 10,323,684 Weighted average number of common shares 9,069,903 8,460,558 Incremental shares from assumed conversions of dilutive securities 90,292 142,612 Adjusted weighted average number of common shares 9,160,195 8,603,170 Diluted Earnings Per Share $ 0.04 $ 1.20 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 12 Months Ended |
Dec. 31, 2021 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | 18. Accumulated Other Comprehensive Loss Changes in the Company’s cumulative foreign currency translation adjustments due to translation of its foreign subsidiaries’ Euro currency financial statements into the Company’s reporting currency were as and for the periods presented below: YEARS ENDED DECEMBER 31, 2021 2020 Balances, January 1 $ (104,615 ) $ (242,594 ) Net foreign currency translation (loss) gain (136,971 ) 137,979 Balances, December 31 $ (241,586 ) $ (104,615 ) |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | 19. Commitments and Contingencies Employment Agreements The Company has employment agreements with certain executives that set forth compensation levels and provide for severance payments in certain instances. Litigation The Company is not involved in any material legal proceedings. |
Revenue by Service Type, Custom
Revenue by Service Type, Customer Type and by Geographic Region | 12 Months Ended |
Dec. 31, 2021 | |
Revenue by Service Type, Customer Type and by Geographic Region | |
Revenue by Service Type, Customer Type and by Geographic Region | 20. Revenue by Service Type, Customer Type and by Geographic Region The Company recognized revenues by the following broad service types: YEARS ENDED DECEMBER 31, 2021 2020 Carrier Services $ 49,730,946 $ 137,640,021 Managed Services 37,607,151 42,702,994 $ 87,338,097 $ 180,343,015 The Company recognized revenues for the following customer types as set forth below: YEARS ENDED DECEMBER 31, 2021 2020 U.S. Federal Government $ 73,130,465 $ 165,799,500 U.S. State and Local Governments 240,473 101,079 Foreign Governments 69,718 127,512 Commercial Enterprises 13,897,441 14,314,924 $ 87,338,097 $ 180,343,015 The Company recognized revenues from customers in the following geographic regions: YEARS ENDED DECEMBER 31, 2021 2020 North America $ 83,016,107 $ 175,994,756 Europe 4,321,990 4,348,259 $ 87,338,097 $ 180,343,015 |
Subsequent Event
Subsequent Event | 12 Months Ended |
Dec. 31, 2021 | |
Subsequent Event | |
15. Subsequent Event | 21. Subsequent Events Subsequent to December 31, 2021, we repurchase 196,586 shares of our common stock for a total of $.8 million. The repurchased plan was suspended on March 14, 2022. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the financial statement rules and regulations of the Securities and Exchange Commission. |
Common Stock Reverse Split | Common Stock Reverse Split On October 23, 2020, the Company filed a Certificate of Amendment to the Amended and Restated Certificate of Incorporation with the Secretary of Delaware to effect a one-for-ten reverse stock split of the shares of the Company’s common stock, effective as of 5:00 p.m. Eastern Time on November 6, 2020. The Certificate of Amendment also decreased the number of authorized shares of Common Stock from 110,000,000 to 30,000,000. All share, restricted stock awards (“RSA”) and per share information included in the consolidated financial statements has been retroactively adjusted to reflect the stock split. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and acquired entities since their respective dates of acquisition. All significant inter-company amounts were eliminated in consolidation. |
Government Subsidies | Government Subsidies On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, provides employer payroll tax credits for qualified wages and options to defer payroll tax payments for a limited period. Based on our evaluation of the CARES Act, in certain circumstances, we qualify for certain employer payroll tax credits as well as the deferral of payroll tax payments in the future. The Company records government subsidies as offsets to the related operating expenses. During the year ended December 31, 2021, qualified payroll credits reduced general and administrative expenses by $1.3 million on our condensed consolidated statements of operations. The Company recorded the payroll tax credit as a receivable in other current assets on the consolidated balance sheets as of December 31, 2021. As of December 31, 2021, deferred payroll tax payments of $246,000 were included in accrued liabilities on our condensed consolidated balance sheets. As of December 31, 2020, total deferred payroll tax payments of $492,000 were included in accrued liabilities and other long-term liabilities on our consolidated balance sheets. |
Reclassifications | Reclassifications Certain reclassifications have been made to prior period consolidated balance sheet to conform to current period presentation. Such reclassifications had no effect on net income as previously reported. |
Accounting Standards under Evaluation | Accounting Standards Update Accounting Standards under Evaluation In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument (“Topic 326”). Topic 326 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. This update is effective for the company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the pending adoption of this new standard on its consolidated financial statements. |
Foreign Currency | Foreign Currency Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of each reporting period. The resulting translation adjustments, along with any related tax effects, are included in accumulated other comprehensive (loss) income, a component of stockholders’ equity. Translation adjustments are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other than the functional currency, including operations outside the U.S. where the functional currency is the U.S. dollar, are reported net in the Company’s Consolidated Statements of Operations, depending on the nature of the activity. See Note 18 for additional information. |
Segment Reporting | Segment Reporting Segments are defined by authoritative guidance as components of a company in which separate financial information is available and is evaluated by the chief operating decision maker (CODM), or a decision-making group, in deciding how to allocate resources and in evaluating financial performance. The Company’s CODM is its chief executive officer. The Company’s customers view our market as a singular business and demand an integrated and scalable suite of enterprise-wide solutions. The Company’s TMaaS offerings are substantially managed service driven solutions that use our proprietary technology platform to deliver our services. The amount of labor required to perform our contract obligations may vary significantly contract to contract depending on the customer’s specific requirements; however, the way in which we perform these services is consistent across the company and requires a connected group of internal subject matter experts and support personnel. In order to evaluate a managed service business model the Company’s CODM and the senior executive team measure financial performance based on our overall mixture of managed and carrier services and related margins. These financial metrics provide a stronger indication of how we are managing our key customer relationships; and it also determines our overall profitability. The Company presents a single segment for purposes of financial reporting and prepared its consolidated financial statements upon that basis. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. 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. The more significant areas requiring use of estimates and judgment relate to revenue recognition, accounts receivable valuation reserves, ability to realize intangible assets and goodwill, ability to realize deferred income tax assets, contingent consideration, fair value of certain financial instruments and the evaluation of contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability. GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows: Level 1 Level 2 · Quoted prices for similar assets or liabilities in active markets · Quoted prices for identical or similar assets or liabilities in markets that are not active · Inputs other than quoted prices that are observable for the asset or liability · Inputs that are derived principally from or corroborated by observable market data by correlation or other means Level 3 The Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Company elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred. The Company identifies the individual assets acquired and liabilities assumed in connection with a business combination and purchase consideration in each business combination. The Company utilizes third party valuation professionals to estimate the initial fair value of significant assets acquired and liabilities assumed. See Note 3 for a detailed description of a material business combination and see Note 4 for changes in fair value of liabilities recorded in connection with material business combinations that are measured at fair value on a recurring basis. |
Financial Instruments | Financial Instruments Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company maintains interest-bearing cash deposits and short-term overnight investments with large financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents for purposes of these consolidated financial statements. Interest-bearing cash deposits maintained by financial institutions in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000. At December 31, 2021 and 2020, the Company had deposits in excess of FDIC limits of approximately $3,072,000 and $13,197,000, respectively. |
Allowances for Doubtful Accounts | Allowances for Doubtful Accounts The Company determines its allowance for doubtful accounts by considering a number of factors, including the type of customer, credit worthiness, payment history, length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are deemed to be uncollectible, having exhausted all collection efforts. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Customer account balances outstanding longer than the contractual payment terms are reviewed for collectability and after 90 days are considered past due unless arrangements were made at the time of the transaction that specified different payment terms. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. |
Inventories | Inventories Inventories consist of mobile devices and accessories and identity credential hardware components. Inventories are valued at the lower of cost, using first-in, first-out method, or market. The Company may record a write-down for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. If future demand or market conditions for our products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of inventory, we may be required to record additional write-downs, which would adversely affect our gross profit. For the years ended December 31, 2021 and 2020, there were no inventory write-downs. |
Property and Equipment | Property and Equipment Property and equipment are stated at historical cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives based upon the classification of the property and/or equipment or lease period for assets acquired under lease arrangements. The estimated useful lives of the assets are as follows: Estimated Useful Life Computer hardware and software 3-5 years Furniture and fixtures 5 years Mobile equipment 3 years The Company assesses the recoverability of property and equipment by determining whether the depreciation of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of December 31, 2021 and 2020, the Company’s management has not identified any material impairment of its property and equipment. |
Leases | Leases The Company has operating and finance leases for corporate offices, data centers, computer hardware and automobiles that are accounted for under ASC 842, Leases (Topic 842). The leases have remaining lease terms ranging from one year to eighteen years. The Company determines if an arrangement is a lease at inception. The Company considers any contract where there is an identified asset and that it has the right to control the use of such asset in determining whether the contract contains a lease. A right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and the lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s operating leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the adoption date in determining the present value of lease payments. The operating lease ROU assets include any lease payments made prior to the rent commencement date. Lease expense for lease payments are recognized on a straight-line basis over the lease term. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The Company accounts for goodwill and other indefinite-lived intangible assets in accordance with ASC 350, Intangibles (Topic 350). Under ASC Topic 350, goodwill and certain indefinite-lived intangible assets are not amortized but are subject to an annual impairment test as of December 31, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company has a single reporting unit and all goodwill relates to that reporting unit. The Company performs its annual goodwill impairment test in the fourth quarter of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. The Company did not recognize any impairment of goodwill during the years ended December 31, 2021 and 2020. |
Revenues from Contracts with Customers | Revenue from Contracts with Customers Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company reports products and services under the categories managed services and carrier services as described below: Carrier Services. Managed Services. · Managed Service Fees: o Revenue for fixed price services are generally completed and billed in the same accounting period and we charge a fixed fee for each performance obligation which may be tied to the number of units managed, percentage of supplier spend and/or savings, units delivered, certificates issued by the Company, certificate validation services installed in a customer’s environment, accessories sold and billable hours. Revenue from this service requires accounting estimates due to delays between completion of the service and the normal billing cycle. o Revenue for fixed price software sold as a term license is recognized ratably over the license term from the date the software is accepted by the customer. Maintenance services, if contracted, are recognized ratably over the term of the maintenance agreement, generally twelve months. Revenue for fixed price software licenses that are sold as a perpetual license with no significant customization are recognized when the software is delivered. Implementation fees are recognized when the work is completed. Revenue from this service does not require significant accounting estimates. · Billable Service Fees. · Reselling and Other Service Fees. Judgments and Estimates The Company’s contracts with customers often include promises to transfer multiple products and services to a customer under a fixed rate or fixed fee arrangement. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require judgment. Components of our managed service solution are generally distinct performance obligations that are not interdependent and can be completed within a month. The Company’s products are generally sold with a right of return. Historically the returns have been immaterial and recognized in the period which the products are returned. The Company may provide other event driven credits or disincentives for not meeting performance obligations which are accounted for as variable consideration and recognized in the period which the event occurs. Contract Balances A significant portion of contract balances represent revenues earned on federal government contracts. Timing of revenue recognition may differ materially from the timing of invoicing to customers due a long-standing practice of issuing a consolidated managed service invoice. A consolidated invoice usually requires data such as billable hours, units managed, credentials issued, accessories sold and usage data from telecommunications providers and other suppliers. As a result it could take between thirty (30) to sixty (60) days after all performance obligations have been met to deliver a complete customer invoice. As a result, the Company may have both accounts receivables (invoiced revenue) and unbilled receivables (revenue recognize but not yet invoiced) that could represent one or more months of revenue. Additionally, the Company may be required under contractual terms to bill for services in advance and deferred recognition of revenue until all performance obligations have been met. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within thirty (30) to ninety (90) days. Payment terms and conditions for government and commercial customers are described below: · Government contract billings are generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer. · Commercial contracts are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in uncollected accounts receivable. Customer accounts receivable balances that remain uncollected for more than 45 days are reviewed for collectability and are considered past due after 90 days unless different contractual repayment terms were extended under a contract with a customer. The Company determines its allowance for doubtful accounts after considering factors that could affect collectability of past due accounts receivable and such factors regularly include the customers’ financial condition and credit worthiness, recent payment history, type of customer and the length of time accounts receivable are past due. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Customer accounts receivable balances that remain uncollected for more than 120 days and/or that have not been settled in accordance with contractual repayment terms and for which no firm payment commitments exist are placed with a third-party collection agency and a reserve is established for the entire uncollected balance. The Company writes off accounts receivable after 180 days or earlier when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. If the accounts receivable has been written off and no allowance for doubtful accounts exist subsequent payments received are credited to bad debt expense as a recovery. Costs to Obtain a Contract with a Customer The Company does not recognize assets from the costs to obtain a contract with a customer and generally expenses these costs as incurred. The Company primarily uses internal labor to manage and oversee the customer acquisition process and to finalize contract terms and conditions and commence customer start-up activities, if any. Internal labor costs would be incurred regardless of the outcome of a contract with a customer and as such those costs are not considered incremental to the cost to obtain a contract with a customer. The Company does not typically incur significant incremental costs to obtain a contract with a customer after such contract has been awarded. Incremental costs to obtain a contract with a customer may include payment of commissions to certain internal and/or external sales agents upon collection of invoiced sales from the customer. The Company does not typically prepay sales commissions in advance of being paid for services delivered. |
Product Development | Product Development Product development expenses include payroll, employee benefits, and other employee related expenses associated with product development. Product development expenses also include third-party development and programming costs, subject matter experts, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Costs related to product development are expensed until the point that technological feasibility is reached. Costs incurred during the implementation of product development and enhancements are capitalized and amortized to cost of revenue over the estimated lives of the solution. For the years ended December 31, 2021 and 2020, the Company incurred product development costs associated with TMaaS platform application of approximately $2.6 million and $903,000, respectively, which were capitalized. See Note 10 to the consolidated financial statements for additional information about capitalization of product development costs. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with authoritative guidance which requires that deferred tax assets and liabilities be computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The guidance requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. The Company recognizes the impact of an uncertain tax position taken or expected to be taken on an income tax return in the financial statements at the amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained upon audit by the relevant taxing authority. |
Basic and Diluted Earnings Per Share (EPS) | Basic and Diluted Earnings Per Share (EPS) Basic EPS includes no dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common and restricted stock were exercised or converted into common and restricted stock. The number of incremental shares from assumed conversions of stock options and unvested restricted stock awards included in the calculation of diluted EPS was calculated using the treasury stock method. See Note 17 to the consolidated financial statements for computation of EPS. |
Employee Stock-Based Compensation | Employee Stock-Based Compensation The Company accounts for stock-based employee compensation arrangements under provisions of ASC 718-10. The Company recognizes the cost of employee stock awards granted in exchange for employee services based on the grant-date fair value of the award using a Black-Scholes option-pricing model, net of expected forfeitures. Those costs are recognized ratably over the vesting period. Each stock option has an exercise price equal to the market price of the Company’s common stock on the date of grant and a contractual term ranging from 3 to 10 years. See Note 16 to the consolidated financial statements for additional information about stock-based compensation programs. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Significant Accounting Policies | |
Schedule of property plant and equipment estimated useful lives | Estimated Useful Life Computer hardware and software 3-5 years Furniture and fixtures 5 years Mobile equipment 3 years |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Business Combinations | |
Schedule of fair value of consideration paid | Cash consideration $ 4,750,000 Net working capital escrow adjustment to consideration paid (61,172 ) Fair value of vested warrants issued at closing date 170,000 Fair value of contingent consideration payable (cash) 1,597,000 Fair value of contingent consideration payable (warrants) 698,000 Fair value of consideration paid $ 7,153,828 |
Schedule of allocation of aggregate purchase consideration fair value assets and liabilities | Fair value of identifiable assets acquired and liabilities assumed: Trade receivables $ 871,028 Unbilled receivables 145,707 Other current assets 63,262 Customer relationships 2,392,000 Tradename 1,040,000 Accounts payable and accrued expenses (875,290 ) Deferred revenue (15,878 ) Total identifiable net assets acquired 3,620,829 Goodwill 3,532,999 Total purchase price $ 7,153,828 |
Schedule of unaudited pro forma | YEARS ENDED DECEMBER 31, 2021 2020 (a) (a) Revenues $ 94,839,000 $ 193,283,000 Net Income 848,000 11,755,000 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Fair Value Measurements | |
Schedule of liabilities measured at fair value on a recurring basis | Quoted Prices in Significant Other DECEMBER 31, Active Markets Observable Inputs Unobservable Inputs Description 2021 (Level 1) (Level 2) (Level 3) Liabilities: Contingent consideration - cash $ 250,000 $ - $ - $ 250,000 Contingent consideration - warrants 108,000 - - 108,000 Contingent consideration - cash, net of current portion 1,095,000 - - 1,095,000 Contingent consideration - warrants, net of current portion 252,000 - - 252,000 Total liabilities measured and recorded at fair value $ 1,705,000 $ - $ - $ 1,705,000 |
Fair value of contingent consideration | Beginning fair value balance on the acquisition date (October 1, 2021) $ 2,295,000 Change in fair value (gain) reported in the consolidated statement of operations (590,000 ) Beginning fair value balance reported in the consolidated balance sheet at December 31, 2021 $ 1,705,000 |
Accounts Receivable and Signi_2
Accounts Receivable and Significant Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounts Receivable and Significant Concentrations | |
Schedule of accounts receivable | DECEMBER 31, DECEMBER 31, 2021 2020 U.S. Federal, State and Local Government (1) $ 11,010,794 $ 34,097,906 Commercial (2) 1,588,778 1,898,924 Gross accounts receivable 12,599,572 35,996,830 Less: allowances for doubtful accounts (3) 62,988 114,169 Accounts receivable, net $ 12,536,584 $ 35,882,661 |
Schedule of concentration of risk | YEARS ENDED DECEMBER 31, Customer Type 2021 2020 U.S. Federal Government (1) 83.7% 91.9% U.S. State & Local and Foreign Governments 0.4% 0.1% Commercial 15.9% 7.9% |
Unbilled Accounts Receivable _2
Unbilled Accounts Receivable and Significant Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accounts Receivable and Significant Concentrations | |
Schedule of concentration of risk | DECEMBER 31, DECEMBER 31, 2021 2020 As a % of As a % of Customer Type Receivables Receivables U.S. Federal Government 99% 99% Commercial 1% 1% |
Other Current Assets and Othe_2
Other Current Assets and Other Long Term Assets (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Other Current Assets and Other Long Term Assets | |
Schedule of Other current assets | DECEMBER 31, DECEMBER 31, 2021 2020 Inventories $ 590,065 $ 990,976 Prepaid rent, insurance and other assets 1,307,548 772,657 Qualified payroll credit receivable 1,296,396 - Total other current assets $ 3,194,009 $ 1,763,633 |
Schedule of other long term assets | DECEMBER 31, DECEMBER 31, 2021 2020 Security deposits $ 94,908 $ 122,069 Capital work in progress 1,687,152 692,938 Other long term assets $ 1,782,060 $ 815,007 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Property and Equipment | |
Property, plant and equipment | DECEMBER 31, DECEMBER 31, 2021 2020 Computer hardware and software $ 2,700,807 $ 2,271,000 Furniture and fixtures 454,401 462,361 Leasehold improvements 298,352 318,449 Automobiles 137,105 31,913 Gross property and equipment 3,590,665 3,083,723 Less: accumulated depreciation and amortization 2,749,532 2,510,684 Property and equipment, net $ 841,133 $ 573,039 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Leases | |
Lease cost | YEARS ENDED DECEMBER 31, 2021 2020 Operating lease expense $ 15,043 $ 32,367 Finance lease expense: Amortization of right of use assets $ 703,530 $ 673,378 Interest on finance lease liabilities 273,224 293,493 Total finance lease expense $ 976,754 $ 966,871 |
Supplemental information related to leases | YEARS ENDED DECEMBER 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from leases $ 288,267 $ 325,860 Financing cash flows from leases 572,083 608,004 DECEMBER 31, 2021 2020 Lease right of use assets, net $ 6,273,211 $ 6,095,376 Current portion of lease liabilities 794,175 577,855 Lease liabilities, net of current portion 6,025,691 5,931,788 Weighted average remaining lease term Operating leases 10.9 11.4 Finance leases - 0.3 Weighted average discount rate Operating leases 3.5 % 5 % Finance leases 3.5 % 5 % |
Maturities of lease liabilities | 2022 $ 1,033,506 2023 995,765 2024 1,022,289 2025 935,772 2026 823,282 Thereafter 3,557,724 Total undiscounted operating lease payments 8,368,337 Less: Imputed interest 1,548,471 Total lease liability $ 6,819,866 |
Intangibles (Tables)
Intangibles (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Intangibles | |
Schedule of finite-lived intangible assets | DECEMBER 31, 2021 Gross Carrying Accumulated Net Book Amount Amortization Value Customer Relationships $ 2,392,000 $ (61,650 ) $ 2,330,350 Channel Relationships 2,628,080 (1,343,241 ) 1,284,839 Internally Developed Software 3,082,705 (1,633,516 ) 1,449,189 Trade Name and Trademarks 1,330,472 (165,964 ) 1,164,508 $ 9,433,257 $ (3,204,371 ) $ 6,228,886 DECEMBER 31, 2020 Gross Carrying Accumulated Net Book Amount Amortization Value Customer Relationships $ 1,980,000 $ (1,980,000 ) $ - Channel Relationships 2,628,080 (1,168,036 ) 1,460,044 Internally Developed Software 1,846,194 (1,280,108 ) 566,086 Trade Name and Trademarks 290,472 (129,099 ) 161,373 $ 6,744,746 $ (4,557,243 ) $ 2,187,503 |
Schedule of finite-lived intangible assets, future amortization expense | 2022 $ 1,104,166 2023 1,045,400 2024 833,133 2025 511,170 2026 511,170 Thereafter 2,223,847 Total $ 6,228,886 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Goodwill | |
Schedule of goodwill | DECEMBER 31, DECEMBER 31, 2021 2020 Balances, January 1 $ 18,555,578 $ 18,555,578 Additions: Aquisition of IT Authorities, Inc. (See Note 3) 3,533,000 - Balances, December 31 $ 22,088,578 $ 18,555,578 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Other Current Liabilities | |
Schedule of accrued liabilities | DECEMBER 31, DECEMBER 31, 2021 2020 Carrier service costs $ 8,771,660 $ 11,832,170 Salaries and payroll taxes 2,213,356 2,774,138 Inventory purchases, consultants and other costs 1,345,900 1,004,303 Severance costs 7,612 7,612 U.S. income tax payable (23,570 ) 28,130 Foreign income tax payable 29,460 (20,040 ) Total accrued expenses $ 12,344,418 $ 15,626,313 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Income Taxes | |
Schedule of components of income tax expense (benefit) | DECEMBER 31, 2021 2020 Current provision State $ 100,000 $ 68,541 Foreign 50,165 6,577 Total 150,165 75,118 Deferred provision (benefit) Federal 567,316 (6,651,247 ) State (83,032 ) (823,822 ) Foreign 5,998 - Total 490,282 (7,475,069 ) Income tax provision (benefit) $ 640,447 $ (7,399,951 ) |
Schedule of effective income tax rate reconciliation | DECEMBER 31, 2021 2020 Statutory federal income tax rate 21.0 % 21.0 % State, net of federal benefit 7.5 % 7.0 % Non-deductible expenses 19.7 % 0.8 % Change in valuation allowance 15.1 % 281.2 % Foreign rate differential 3.8 % 0.0 % Return to accrual difference true-ups 15.1 % 1.4 % Other (0.1 )% 1.1 % Deferred tax adjustment and true-up 88.2 % 3.4 % Combined effective tax rate 62.9 % 253.1 % |
Schedule of deferred tax assets and liabilities | DECEMBER 31, 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 9,501,008 $ 9,711,726 Alternative minimum tax credit 45,650 45,650 Share-based compensation 659,338 627,980 Intangible amortization 208,036 473,882 Lease liability 1,554,888 1,522,560 Other assets 251,553 107,682 Total deferred tax assets 12,220,473 12,489,480 Less: valuation allowance (1,999,630 ) (2,152,768 ) Total deferred tax assets, net 10,220,843 10,336,712 Deferred tax liabilities: Goodwill amortization 3,041,451 2,786,029 Depreciation 210,755 177,170 Foreign intangible amortization 409,269 336,759 Other liabilities 12,830 12,819 Lease asset 1,419,056 1,417,856 Total deferred tax liabilities 5,093,361 4,730,633 Net deferred tax asset $ 5,127,482 $ 5,606,079 |
Summary of valuation allowance | DECEMBER 31, 2021 2020 Beginning balance $ (2,152,768 ) $ (10,364,787 ) Decreases (increases) 153,138 8,212,019 Ending balance $ (1,999,630 ) $ (2,152,768 ) |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Stockholders' Equity | |
Schedule of stockholder equity note warrants | Warrants issued 75,000 Expected dividend yield - Expected volatility 66.0% Risk-free interest rate 0.71% Term 4 years |
Stock Options and Award Progr_2
Stock Options and Award Programs (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Stock Options and Award Programs | |
Nonvested restricted stock shares activity | 2021 2020 NON-VESTED AWARDS Non-vested awards outstanding, January 1, 173,748 50,750 Granted (+) 83,326 231,873 Cancelled (-) - - Vested (-) 135,758 108,875 Non-vested awards outstanding, December 31, 121,316 173,748 Weighted-average remaining contractual life (in years) 0.9 1.2 Unamortized RSA compensation expense $ 338,263 $ 362,426 Aggregate intrinsic value of RSAs non-vested, December 31 $ 476,772 $ 1,683,618 Aggregate intrinsic value of RSAs vested, December 31 $ 1,388,903 $ 708,920 |
Schedule of nonvested share activity | 2021 2020 Weighted Weighted Average Average Grant Date Grant Date NON-VESTED AWARDS Shares Fair Value Shares Fair Value Non-vested balances, January 1, 52,500 $ 3.93 84,166 $ 3.81 Cancelled (-) - - 1,666 $ 2.60 Vested/Excercised (-) 27,500 $ 0.00 30,000 $ 3.68 Non-vested balances, December 31, 25,000 $ 3.98 52,500 $ 3.93 |
Schedule of stock option activity | 2021 2020 Weighted Weighted Average Average OUTSTANDING AND EXERCISABLE AWARDS Shares Exercise Price Shares Exercise Price Awards outstanding, January 1, 187,334 $ 5.66 350,833 $ 5.89 Cancelled (-) 834 $ 4.60 11,666 $ 4.47 Expired (-) 5,000 $ 13.04 49,333 $ 6.03 Exercised (-) 41,500 $ 4.38 102,500 $ 6.40 Awards outstanding, December 31, 140,000 $ 3.54 187,334 $ 5.66 Awards vested and expected to vest, December 31, 140,000 $ 5.79 186,197 $ 5.67 Awards outstanding and exercisable, December 31, 115,000 $ 5.63 134,834 $ 5.37 |
Weighted-average remaining life, share-based compensation | Vested and Outstanding Expected to and Outstanding Vest Exercisable Weighted-average remaining contractual life (in years) 0.83 0.83 0.89 Aggregate intrinsic value $ - $ - $ - |
Schedule of employee service share-based compensation | YEAR ENDED DECEMBER 31, 2021 YEAR ENDED DECEMBER 31, 2020 Shared-Based Compensation Expense Shared-Based Compensation Expense Employees Directors Total Employees Directors Non-Employees Total Restricted stock compensation expense $ 539,658 $ 264,534 $ 804,192 $ 375,122 $ 329,851 $ - $ 704,973 Non-qualified option stock compensation expense 79,571 - 79,571 98,789 - 6,519 105,308 Total share-based compensation before taxes $ 619,229 $ 264,534 $ 883,763 $ 473,911 $ 329,851 $ 6,519 $ 810,281 |
Earnings Per Common Share (EP_2
Earnings Per Common Share (EPS) (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Earnings Per Common Share (EPS) | |
Schedule of earnings per share, basic and diluted | YEARS ENDED DECEMBER 31, 2021 2020 Basic Earnings Per Share Computation: Net income $ 341,096 $ 10,323,684 Weighted average number of common shares 9,069,903 8,460,558 Basic Earnings Per Share $ 0.04 $ 1.22 Diluted Earnings Per Share Computation: Net income $ 341,096 $ 10,323,684 Weighted average number of common shares 9,069,903 8,460,558 Incremental shares from assumed conversions of dilutive securities 90,292 142,612 Adjusted weighted average number of common shares 9,160,195 8,603,170 Diluted Earnings Per Share $ 0.04 $ 1.20 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Accumulated Other Comprehensive Loss | |
Schedule of accumulated other comprehensive income (loss) | YEARS ENDED DECEMBER 31, 2021 2020 Balances, January 1 $ (104,615 ) $ (242,594 ) Net foreign currency translation (loss) gain (136,971 ) 137,979 Balances, December 31 $ (241,586 ) $ (104,615 ) |
Revenue by Service Type, Cust_2
Revenue by Service Type, Customer Type and by Geographic Region (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Revenue by Service Type, Customer Type and by Geographic Region | |
Schedule of consolidated revenues | YEARS ENDED DECEMBER 31, 2021 2020 Carrier Services $ 49,730,946 $ 137,640,021 Managed Services 37,607,151 42,702,994 $ 87,338,097 $ 180,343,015 |
Revenue from external customers by customers type | YEARS ENDED DECEMBER 31, 2021 2020 U.S. Federal Government $ 73,130,465 $ 165,799,500 U.S. State and Local Governments 240,473 101,079 Foreign Governments 69,718 127,512 Commercial Enterprises 13,897,441 14,314,924 $ 87,338,097 $ 180,343,015 |
Revenue from external customers by geographic areas | YEARS ENDED DECEMBER 31, 2021 2020 North America $ 83,016,107 $ 175,994,756 Europe 4,321,990 4,348,259 $ 87,338,097 $ 180,343,015 |
Significant Accounting Polici_4
Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2021 | |
Computer Equipment | Maximum | |
Estimated useful life | 3 years |
Computer Equipment | Minimum | |
Estimated useful life | 5 years |
Furniture and Fixtures | |
Estimated useful life | 5 years |
Mobile Equipment | |
Estimated useful life | 3 years |
Significant Accounting Polici_5
Significant Accounting Policies (Details Narrative) | 12 Months Ended | |||
Dec. 31, 2021USD ($)shares | Dec. 31, 2020USD ($)shares | Dec. 31, 2021EUR (€)shares | Oct. 23, 2020shares | |
Cash, uninsured amount | $ 3,072,000 | $ 13,197,000 | ||
Cash, FDIC Insured Amount | 250,000 | |||
Inventory write-downs | 0 | 0 | ||
Impairment of goodwill and other indefinite-lived intangible assets | $ 0 | $ 0 | ||
Common stock, shares authorized | shares | 30,000,000 | 30,000,000 | 30,000,000 | 110,000,000 |
Product development costs | $ 2,600,000 | $ 903,000 | ||
Deferred payroll tax payments | 246,000 | 492,000 | ||
General and administration | 12,724,522 | 14,270,342 | ||
Foreign | ||||
Cash, uninsured amount | 1,698,000 | $ 2,045,000 | ||
Qualified Payroll Taxes [Member] | ||||
General and administration | $ 1,300,000 | |||
Minimum | ||||
Contractual term | 3 years | |||
Maximum | ||||
Contractual term | 10 years | |||
Ireland [Member] | ||||
Cash, FDIC Insured Amount | € | € 100,000 | |||
United Kingdom [Member] | ||||
Cash, FDIC Insured Amount | $ 75,000 |
Business Combination (Details)
Business Combination (Details) - ITA [Member] | Oct. 01, 2021USD ($) |
Cash Consideration | $ 4,750,000 |
Net working capital escrow adjustment to consideration paid | (61,172) |
Fair value of vested warrants issued at closing date | 170,000 |
Fair value of contingent consideration payable (cash) | 1,597,000 |
Fair value of contingent consideration payable (warrants) | 698,000 |
Fair value of consideration paid | $ 7,153,828 |
Business Combination (Details 1
Business Combination (Details 1) - USD ($) | Oct. 01, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Goodwill | $ 22,088,578 | $ 18,555,578 | $ 18,555,578 | |
ITA [Member] | ||||
Unbilled receivables | $ 145,707 | |||
Other Current Assets | 63,262 | |||
Acoounts Payable And Accured Expenses | 875,290 | |||
Derrered Revenues | 15,878 | |||
Total identifiable net assets acquired | 3,620,829 | |||
Goodwill | 3,532,999 | |||
Trade Recivables | 871,028 | |||
Total Purchase Price | 7,153,828 | |||
ITA [Member] | Trademarks [Member] | ||||
Intangible Assets | 1,040,000 | |||
ITA [Member] | Customer Relationships | ||||
Intangible Assets | $ 2,392,000 |
Business Combination (Details 2
Business Combination (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Business Combinations | ||
Revenues | $ 94,839,000 | $ 193,283,000 |
Net income | $ 848,000 | $ 11,755,000 |
Business Combination (Details N
Business Combination (Details Narrative) - USD ($) | Oct. 01, 2021 | Dec. 31, 2021 |
Transaction costs | $ 237,000 | |
Warrants to purchase common stock shares | 196,586 | |
2021 | ||
Additional Warrants exercisable | 250,000 | |
Warrants exercisable period | four | |
Acquisition of specified assets purchase price paid in cash | $ 4,750,000 | |
Warrants to purchase common stock shares | 75,000 | |
Warrants to purchase common stock shares exercise price | $ 5.33 | |
2022 | ||
Additional Warrants exercisable | 100,000 | |
Warrants exercisable period | three | |
Warrants exercisable | 150,000 | |
2024 | ||
Additional Warrants exercisable | 100,000 | |
Warrants exercisable period | three | |
Warrants exercisable | 125,000 | |
2023 | ||
Additional Warrants exercisable | 100,000 | |
Warrants exercisable period | three | |
Warrants exercisable | 125,000 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Contingent consideration - cash | $ 250,000 |
Contingent consideration - warrants | 108,000 |
Contingent consideration - warrants, net of current portion | 1,095,000 |
Contingent consideration - cash, net of current portion | 252,000 |
Total liabilities measured and recorded at fair value | 1,705,000 |
Fair Value, Inputs, Level 1 [Member] | |
Contingent consideration - cash | 0 |
Contingent consideration - warrants | 0 |
Contingent consideration - warrants, net of current portion | 0 |
Contingent consideration - cash, net of current portion | 0 |
Total liabilities measured and recorded at fair value | 0 |
Fair Value, Inputs, Level 2 [Member] | |
Contingent consideration - cash | 0 |
Contingent consideration - warrants | 0 |
Contingent consideration - warrants, net of current portion | 0 |
Contingent consideration - cash, net of current portion | 0 |
Total liabilities measured and recorded at fair value | 0 |
Fair Value, Inputs, Level 3 [Member] | |
Contingent consideration - cash | 250,000 |
Contingent consideration - warrants | 108,000 |
Contingent consideration - warrants, net of current portion | 1,095,000 |
Contingent consideration - cash, net of current portion | 252,000 |
Total liabilities measured and recorded at fair value | $ 1,705,000 |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Oct. 01, 2021 | |
Fair Value Measurements | ||
Beginning fair value balance on acquisition | $ 1,705,000 | |
Beginning fair value balance on acquisition | $ 2,295,000 | |
Change in fair value (gain) | $ (590,000) |
Accounts Receivable and Signi_3
Accounts Receivable and Significant Concentrations (Details) - USD ($) | Dec. 31, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Accounts receivable, gross | $ 12,599,572 | $ 35,996,830 | |
Less: allowances for doubtful accounts | 62,988 | 114,169 | |
Accounts receivable, net | $ 12,536,584 | 12,536,584 | 35,882,661 |
Commercial | |||
Accounts receivable, gross | 1,588,778 | 1,898,924 | |
U.S. Federal, State and Local Government | |||
Accounts receivable, gross | $ 11,010,794 | $ 34,097,906 |
Accounts Receivable and Signi_4
Accounts Receivable and Significant Concentrations (Details 1) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Commercial | ||
Concentration risk | 1.00% | 1.00% |
Sales Revenue, Net | Commercial | ||
Concentration risk | 15.90% | 7.90% |
Sales Revenue, Net | US Treasury and Government [Member] | ||
Concentration risk | 83.70% | 91.90% |
Sales Revenue, Net | US States and Political Subdivisions Debt Securities [Member] | ||
Concentration risk | 0.40% | 0.10% |
Accounts Receivable and Signi_5
Accounts Receivable and Significant Concentrations (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Accounts Receivable and Significant Concentrations | ||
Bad debts recovery | $ 24,400 | $ 24,400 |
Provisions for bad debt expense | $ 1,000 |
Unbilled Accounts Receivable _3
Unbilled Accounts Receivable and Significant Concentrations (Details 1) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
U.S. Federal Government [Member] | ||
As a % of receivables | 99.00% | 99.00% |
Commercial | ||
As a % of receivables | 1.00% | 1.00% |
Other Current Assets and Othe_3
Other Current Assets and Other Long Term Assets (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Other Current Assets | ||
Inventories | $ 590,065 | $ 990,976 |
Prepaid rent, insurance, and other assets | 1,307,548 | 772,657 |
Qualified payroll credit receivable | 1,296,396 | 0 |
Other current assets | 3,194,009 | 1,763,633 |
Other long term assets | ||
Security deposits | 94,908 | 122,069 |
Capital work in progress | 1,687,152 | 692,938 |
Other long term assets | $ 1,782,060 | $ 815,007 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Gross property and equipment | $ 3,590,665 | $ 3,083,723 |
Less: accumulated depreciation and amortization3E | 2,749,532 | 2,510,684 |
Property and equipment, net | 841,133 | 573,039 |
Computer Hardware Software | ||
Gross property and equipment | 2,700,807 | 2,271,000 |
Furniture and Fixtures | ||
Gross property and equipment | 454,401 | 462,361 |
Leaseholds and Leasehold Improvements | ||
Gross property and equipment | 298,352 | 318,449 |
Automobiles | ||
Gross property and equipment | $ 137,105 | $ 31,913 |
Property and Equipment (Detai_2
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Property and Equipment | ||
Purchase of property and equipment | $ 258,200 | $ 254,000 |
Property and equipment depreciation expense | $ 333,800 | $ 402,700 |
Leases (Details)
Leases (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Leases | ||
Operating lease expense | $ 15,043 | $ 32,367 |
Finance lease expense: | ||
Amortization of right of use assets | 703,530 | 673,378 |
Interest on finance lease liabilities | 273,224 | 293,493 |
Total finance lease expense | $ 976,754 | $ 966,871 |
Leases (Details 1)
Leases (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Leases | ||
Operating cash flows from leases | $ 288,267 | $ 325,860 |
Principal repayments under lease obligations | $ 572,083 | $ 608,004 |
Leases (Details 2)
Leases (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Leases | ||
Operating lease right of use assets, net | $ 6,273,211 | $ 6,095,376 |
Current portion of finance leases | 794,175 | 577,855 |
Operating leases, net of current portion | $ 6,025,691 | $ 5,931,788 |
Weighted average remaining lease term operating leases (in years) | 10 years 10 months 24 days | 11 years 4 months 24 days |
Weighted average remaining lease term finance leases (in years) | 0 years | 3 months 18 days |
Weighted average discount rate operating leases | 3.50% | 5.00% |
Weighted average discount rate finance leases | 3.50% | 5.00% |
Leases (Details 3)
Leases (Details 3) | Dec. 31, 2021USD ($) |
Leases | |
2022 | $ 1,033,506 |
2023 | 995,765 |
2024 | 1,022,289 |
2025 | 935,772 |
2026 | 823,282 |
Thereafter | 3,557,724 |
Total undiscounted operating lease payments | 8,368,337 |
Less: imputed interest | 1,548,471 |
Total operating lease liability | $ 6,819,866 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | Dec. 15, 2021 | Dec. 31, 2021 | Dec. 31, 2020 |
Lease Description | for a term of five years, with a monthly rent obligation of $15,000, subject to annual rent increases of 3% per year. | ||
Right-of-use asset | $ 861,300 | $ 943,290 | |
Incremental borrowing rate | 3.50% | 3.50% | |
Minimum | |||
Real estate leases | $ 200,000 | ||
Annual lease payment escalation per year | 3.00% | ||
Maximum | |||
Real estate leases | $ 800,000 | ||
Annual lease payment escalation per year | 4.00% |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Gross carrying amount | $ 9,433,257 | $ 6,744,746 |
Accumulated amortization | (3,204,371) | (4,557,243) |
Net book value | 6,228,886 | 2,187,503 |
Trademarks and Trade Names | ||
Gross carrying amount | 1,330,472 | 290,472 |
Accumulated amortization | (165,964) | (129,099) |
Net book value | 1,164,508 | 161,373 |
Customer Relationships | ||
Gross carrying amount | 2,392,000 | 1,980,000 |
Accumulated amortization | (61,650) | (1,980,000) |
Net book value | 2,330,350 | 0 |
Channel Relationships | ||
Gross carrying amount | 2,628,080 | 2,628,080 |
Accumulated amortization | (1,343,241) | (1,168,036) |
Net book value | 1,284,839 | 1,460,044 |
Internally Developed Software | ||
Gross carrying amount | 3,082,705 | 1,846,194 |
Accumulated amortization | (1,633,516) | (1,280,108) |
Net book value | $ 1,449,189 | $ 566,086 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) | Dec. 31, 2021USD ($) |
Intangibles | |
2022 | $ 1,104,166 |
2023 | 1,045,400 |
2024 | 833,133 |
2025 | 511,170 |
2025 | 511,170 |
Thereafter | 2,223,847 |
Total | $ 6,228,886 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Intangible Assets Acquisition | $ 3,600,000 | |
Amortization Expense | 632,400,000,000 | $ 482,200,000,000 |
Capitalized Software Development Costs | 2,600,000 | 903,000 |
Work In Progress Software Cost | 209,400 | 1,200,000 |
Accumulated Amortization | $ 3,204,371 | $ 4,557,243 |
Internally Development | Minimum | ||
Weighted average remaining life | 2 years | |
Internally Development | Maximum | ||
Weighted average remaining life | 5 years | |
Purchased Intangibles | Minimum | ||
Weighted average remaining life | 3 years | |
Purchased Intangibles | Maximum | ||
Weighted average remaining life | 15 years | |
Historical [Member] | ||
Accumulated Amortization | $ 1,980,000 |
Goodwill (Details)
Goodwill (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Goodwill (Details) | ||
Begin Balance, January 1 | $ 18,555,578 | $ 18,555,578 |
Aquisition of IT Authorities, Inc. | 3,533,000 | 0 |
End Balance, December 31 | $ 22,088,578 | $ 18,555,578 |
Other Current Liabilities (Deta
Other Current Liabilities (Details) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Other Current Liabilities | ||
Carrier service costs | $ 8,771,660 | $ 11,832,170 |
Salaries and payroll taxes | 2,213,356 | 2,774,138 |
Inventory purchases, consultants and other costs | 1,345,900 | 1,004,303 |
Severance costs | 7,612 | 7,612 |
U.S. income tax payable | (23,570) | 28,130 |
Foreign income tax payable (receivable) | 29,460 | (20,040) |
Total accrued expenses | $ 12,344,418 | $ 15,626,313 |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Jun. 15, 2017 | |
Description of date of maturity extention from | April 30, 2021 through June 15, 2022 | |
Quarterly minimum tangible net worth | $ 2 | |
Line of credit borrowing capacity | $ 4.9 | |
Percentage of unpaid balance of eligible accounts receivable | 50.00% | |
Descrioption of Current ratio | a current ratio of 1.1 to 1.0 (excluding finance lease liabilities reported under recently adopted lease accounting standards) | |
Working capital revolving line of credit | $ 5 | |
Loan And Security Agreement [Member] | ||
Working capital revolving line of credit | $ 5 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Current provision (benefit) | ||
State | $ 100,000 | $ 68,541 |
Foreign | 50,165 | 6,577 |
Total | 150,165 | 75,118 |
Deferred provision (benefit) | ||
Federal | 567,316 | (6,651,247) |
State | (83,032) | (823,822) |
Foreign | 5,998 | 0 |
Total | 490,282 | (7,475,069) |
Income tax benefit | $ 640,447 | $ (7,399,951) |
Income Taxes (Details 1)
Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Statutory federal income tax rate | 21.00% | 21.00% |
State, net of federal benefit | 7.50% | 7.00% |
Non-deductible expenses | 19.70% | 0.80% |
Change in valuation allowance | 15.10% | 281.20% |
Foreign rate differential | 3.80% | 0.00% |
Return to accrual difference true-ups | 15.10% | 1.40% |
Other | (0.10%) | 1.10% |
Deferred tax adjustment and true-up | 88.20% | 3.40% |
Combined effective tax rate | 62.90% | 253.10% |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | Dec. 31, 2021 | Dec. 31, 2020 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 9,501,008 | $ 9,711,726 |
Alternative minimum tax credit | 45,650 | 45,650 |
Share-based compensation | 659,338 | 627,980 |
Intangible amortization | 208,036 | 473,882 |
Lease liability | 1,554,888 | 1,522,560 |
Other assets | 251,553 | 107,682 |
Total deferred tax assets | 12,220,473 | 12,489,480 |
Less: valuation allowance | (1,999,630) | (2,152,768) |
Total deferred tax assets, net | 10,220,843 | 10,336,712 |
Deferred tax liabilities: | ||
Goodwill amortization | 3,041,451 | 2,786,029 |
Depreciation | 210,755 | 177,170 |
Foreign intangible amortization | 409,269 | 336,759 |
Other liabilities | 12,830 | 12,819 |
Lease asset | 1,419,056 | 1,417,856 |
Total deferred tax liabilities | 5,093,361 | 4,730,633 |
Net deferred tax liability | $ 5,127,482 | $ 5,606,079 |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Beginning balance | $ 2,152,768 | $ 10,364,787 |
Decreases (Increase) | 153,138 | 8,212,019 |
Ending balance | $ 1,999,630 | $ 2,152,768 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2021 | |
Income Taxes | ||
Offset future taxable income | $ 38.4 | |
Valuation allowance | $ 8.2 | |
Net operating loss carryforwards | $ (34.4) |
Stockholders Equity (Details)
Stockholders Equity (Details) | 9 Months Ended |
Oct. 01, 2021shares | |
Stockholders' Equity | |
Issued Number of Warrants | 75,000 |
Expected dividend yield | 0.00% |
Expected volatility | 66.00% |
Risk-free interest rate | 0.71% |
Term of warrant | 4 years |
Stockholders Equity (Details Na
Stockholders Equity (Details Narrative) | 12 Months Ended | ||||||
Dec. 31, 2021USD ($)$ / sharesshares | Dec. 31, 2020USD ($)shares | Nov. 30, 2021USD ($) | Oct. 23, 2020shares | Aug. 18, 2020USD ($) | Mar. 31, 2020USD ($)shares | Oct. 07, 2019USD ($) | |
Gross proceeds for issuance of common stock for stock option exercises | $ | $ 41,086 | $ 32,803 | |||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||||
Gross proceeds | $ | $ 179,273 | $ 4,999 | |||||
Designated shares of preferred stock | 2,045,714 | ||||||
Undesignated shares of preferred stock | 7,954,286 | ||||||
Preferred stock, par value | $ / shares | $ 0.001 | ||||||
Common stock, shares authorized | 30,000,000 | 30,000,000 | 110,000,000 | ||||
Common stock, par value | $ / shares | $ 0.001 | ||||||
Common stock, shares issued | 8,842,026 | 8,876,515 | |||||
Aggregate offering price | $ | $ 24,000,000 | ||||||
Sold of common stock | 100,687 | 399,313 | |||||
Offering costs | $ | $ 62,700 | $ 4,678,381 | |||||
Common stock, shares outstanding | 8,842,026 | 8,876,515 | |||||
Gross proceeds from sale of common stock | $ | $ 1,100,000 | $ 4,345,475 | |||||
Issued warrants to purchase | 75,000 | ||||||
Strike price | $ | 5.33 | ||||||
Repurchase Plan | |||||||
Stock repurchase plan of common stock | $ | $ 1,200,000 | $ 5,000,000 | $ 10,100,000,000 | $ 2,500,000 | |||
Stock repurchase shares | 299,494 | 2,416 | |||||
Common stock increase amount for future purchases | $ | $ 4,600,000 |
Stock Options and Award Progr_3
Stock Options and Award Programs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Unamortized RSA compensation expense | $ (140,894) | $ 0 |
Employee Stock Option | ||
Non-vested awards outstanding opening | 52,500 | 84,166 |
Cancelled | 1,666 | |
Vested/Excercised | 27,500 | 30,000 |
Non-vested awards outstanding ending | 25,000 | 52,500 |
Weighted average grant date fair value per share, non-vested beginning balance | $ 3.93 | $ 3.81 |
Weighted average grant date fair value per share, cancelled | 0 | 2.60 |
Weighted average grant date fair value per share, vested/excercised | 0 | 3.68 |
Weighted average grant date fair value per share, non-vested ending balance | $ 3.98 | $ 3.93 |
Restricted Stock | ||
Non-vested awards outstanding opening | 173,748 | 50,750 |
Granted | 83,326 | 231,873 |
Vested/Excercised | 135,758 | 108,875 |
Non-vested awards outstanding ending | 121,316 | 173,748 |
Weighted-average remaining contractual life (in years) | 10 months 24 days | 1 year 2 months 12 days |
Unamortized RSA compensation expense | $ 338,263 | $ 362,426 |
Aggregate intrinsic value of RSAs non-vested | 476,772 | 1,683,618 |
Aggregate intrinsic value of RSAs vested | $ 1,388,903 | $ 708,920 |
Stock Options and Award Progr_4
Stock Options and Award Programs (Details 1) - Employee Stock Option - $ / shares | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Number of shares, outstanding and exercisable, options outstanding, Opening balance | 187,334 | 350,833 |
Number of shares, cancelled | 834 | 11,666 |
Number of shares, expired | 5,000 | 49,333 |
Number of shares, exercised | 41,500 | 102,500 |
Number of shares, outstanding and exercisable, options outstanding, ending balance | 140,000 | 187,334 |
Number of shares, options vested and expected to vest, ending balance | 140,000 | 186,197 |
Number of shares, options outstanding and exercisable, ending balance | 115,000 | 134,834 |
Weighted average exercise price per share, outstanding and exercisable, options outstanding, beginning balance | $ 5.66 | $ 5.89 |
Weighted average exercise price per share, cancelled | 4.60 | 4.47 |
Weighted average exercise price per share, expired | 13.04 | 6.03 |
Weighted average exercise price per share, exercised | 4.38 | 6.40 |
Weighted average exercise price per share, outstanding and exercisable, options outstanding, ending balance | 3.54 | 5.66 |
Number of shares, vested and expected to vest, outstanding, weighted average exercise price, ending balance | 5.79 | 5.67 |
Weighted average exercise price per share, options outstanding and exercisable, ending balance | $ 5.63 | $ 5.37 |
Stock Options and Award Progr_5
Stock Options and Award Programs (Details 2) | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Stock Options and Award Programs | |
Weighted-Average remaining contractual life (in years), outstanding | 9 months 29 days |
Weighted-Average remaining contractual life (in years), Vested and Expected to vest | 9 months 29 days |
Weighted-average remaining contractual life (in years), Outstanding and Exercisable | 10 months 20 days |
Aggregate intrinsic value, outstanding | $ 0 |
Aggregate intrinsic value, Vested and expected to Vest | 0 |
Aggregate intrinsic value, outstanding and Exercisable | $ 0 |
Stock Options and Award Progr_6
Stock Options and Award Programs (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Restricted stock compensation expense | $ 804,192 | $ 704,973 |
Non-qualified stock compensation expense | 79,571 | 105,308 |
Total share-based compensation before taxes | 883,763 | 810,281 |
Board of Directors Option | ||
Restricted stock compensation expense | 264,534 | 329,851 |
Non-qualified stock compensation expense | 0 | 0 |
Total share-based compensation before taxes | 264,534 | 329,851 |
Non Employee Stock Option | ||
Restricted stock compensation expense | 0 | |
Non-qualified stock compensation expense | 6,519 | |
Total share-based compensation before taxes | 6,519 | |
Employee Stock Option | ||
Restricted stock compensation expense | 539,658 | 375,122 |
Non-qualified stock compensation expense | 79,571 | 98,789 |
Total share-based compensation before taxes | $ 619,229 | $ 473,911 |
Stock Options and Award Progr_7
Stock Options and Award Programs (Details Narrative) | 12 Months Ended |
Dec. 31, 2021USD ($) | |
Stock Options and Award Programs | |
Unamortized share-based compensation expense | $ 338,263 |
Unamortized share-based compensation expense, recognition period | 2 years 7 months 6 days |
Earnings Per Common Share (EP_3
Earnings Per Common Share (EPS) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Basic EPS Computation: | ||
Net income | $ 341,096 | $ 10,323,684 |
Weighted average number of common shares | 9,069,903 | 8,460,558 |
Basic EPS | $ 0.04 | $ 1.22 |
Diluted EPS Computation: | ||
Net loss | $ 341,096 | $ 10,323,684 |
Weighted average number of common shares | 9,069,903 | 8,460,558 |
Incremental shares from assumed conversions of stock options | 90,292 | 142,612 |
Adjusted weighted average number of common shares | 9,160,195 | 8,603,170 |
Diluted EPS | $ 0.04 | $ 1.20 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Accumulated Other Comprehensive Loss | ||
Balances beginning of the period | $ (104,615) | $ (242,594) |
Net foreign currency translation gain (loss) | (136,971) | 137,979 |
Balances ending of the period | $ (241,586) | $ (104,615) |
Revenue by Service Type Custome
Revenue by Service Type Customer Type and by Geographic Region (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Revenues, net | $ 87,338,097 | $ 180,343,015 |
Carrier Services | ||
Revenues, net | 49,730,946 | 137,640,021 |
Management Services | Managed Service Fees | ||
Revenues, net | $ 37,607,151 | $ 42,702,994 |
Revenue by Service Type Custo_2
Revenue by Service Type Customer Type and by Geographic Region (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue, net | $ 87,338,097 | $ 180,343,015 |
U.S. Federal Government | ||
Revenue, net | 73,130,465 | 165,799,500 |
U.S. State and Local Governments | ||
Revenue, net | 240,473 | 101,079 |
Foreign Governments | ||
Revenue, net | 69,718 | 127,512 |
Commercial Enterprises | ||
Revenue, net | $ 13,897,441 | $ 14,314,924 |
Revenue by Service Type Custo_3
Revenue by Service Type Customer Type and by Geographic Region (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue, net | $ 87,338,097 | $ 180,343,015 |
North America | ||
Revenue, net | 83,016,107 | 175,994,756 |
Europe | ||
Revenue, net | $ 4,321,990 | $ 4,348,259 |
Subsequent Event (Details Narra
Subsequent Event (Details Narrative) $ in Millions | 12 Months Ended |
Dec. 31, 2021USD ($)shares | |
Subsequent Event | |
Payments for repurchase of common stock | $ | $ 8 |
Warrants to repurchase common stock shares | shares | 196,586 |