Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 26, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | INTELLINETICS, INC. | ||
Entity Central Index Key | 0001081745 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 6,333,549 | ||
Entity Common Stock, Shares Outstanding | 2,823,072 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 1,907,882 | $ 404,165 |
Accounts receivable, net | 792,380 | 329,571 |
Accounts receivable, unbilled | 523,522 | 23,371 |
Parts and supplies, net | 79,784 | 4,184 |
Prepaid expenses and other current assets | 162,166 | 110,841 |
Total current assets | 3,465,734 | 872,132 |
Property and equipment, net | 698,752 | 6,919 |
Right of use assets | 2,641,005 | 97,239 |
Intangible assets, net | 1,184,971 | |
Goodwill | 2,322,887 | |
Other assets | 31,284 | 10,284 |
Total assets | 10,344,633 | 986,574 |
Current liabilities: | ||
Accounts payable | 141,823 | 160,911 |
Accrued compensation | 271,889 | 70,027 |
Accrued expenses, other | 131,685 | 140,079 |
Lease liabilities - current | 518,531 | 47,397 |
Deferred revenues | 996,131 | 754,073 |
Deferred compensation | 100,828 | 117,166 |
Earnout liabilities - current | 877,522 | |
Accrued interest payable - current | 5,941 | 1,212,498 |
Notes payable - current | 580,638 | 3,339,963 |
Notes payable - related party - current | 1,467,400 | |
Total current liabilities | 3,624,988 | 7,309,514 |
Long-term liabilities: | ||
Notes payable | 1,802,184 | |
Lease liabilities - net of current portion | 2,196,951 | 53,318 |
Earnout liabilities - net of current portion | 1,566,478 | |
Total long-term liabilities | 5,565,613 | 53,318 |
Total liabilities | 9,190,601 | 7,362,832 |
Stockholders' equity (deficit): | ||
Common stock, $0.001 par value, 25,000,000 shares authorized; 2,810,865 and 370,497 shares issued and outstanding at December 31, 2020 and 2019, respectively | 2,811 | 371 |
Additional paid-in capital | 24,147,488 | 14,419,437 |
Accumulated deficit | (22,996,267) | (20,796,066) |
Total stockholders' equity (deficit) | 1,154,032 | (6,376,258) |
Total liabilities and stockholders' equity (deficit) | $ 10,344,633 | $ 986,574 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 2,810,865 | 370,497 |
Common stock, shares outstanding | 2,810,865 | 370,497 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues: | ||
Total revenues | $ 8,253,391 | $ 2,535,955 |
Cost of revenues: | ||
Total cost of revenues | 3,262,653 | 567,843 |
Gross profit | 4,990,738 | 1,968,112 |
Operating expenses: | ||
General and administrative | 3,499,400 | 2,131,385 |
Change in fair value of earnout liabilities | 1,554,800 | |
Significant transaction costs | 636,440 | |
Sales and marketing | 1,041,367 | 981,618 |
Depreciation and amortization | 296,935 | 7,701 |
Total operating expenses | 7,028,982 | 3,120,704 |
Loss from operations | (2,038,244) | (1,152,592) |
Other income (expense) | ||
Gain on extinguishment of debt | 287,426 | |
Interest expense, net | (637,683) | (980,689) |
Total other expense | (350,257) | (980,689) |
Loss before income taxes | (2,388,501) | (2,133,281) |
Income tax benefit | 188,300 | |
Net loss | $ (2,200,201) | $ (2,133,281) |
Basic and diluted net loss per share: | $ (0.91) | $ (5.76) |
Weighted average number of common shares outstanding - basic and diluted | 2,406,830 | 370,279 |
Sale of Software [Member] | ||
Revenues: | ||
Total revenues | $ 194,787 | $ 189,165 |
Cost of revenues: | ||
Total cost of revenues | 56,664 | 8,633 |
Software as a Service [Member] | ||
Revenues: | ||
Total revenues | 1,055,016 | 859,637 |
Cost of revenues: | ||
Total cost of revenues | 273,368 | 254,999 |
Software Maintenance Services [Member] | ||
Revenues: | ||
Total revenues | 1,257,446 | 1,011,278 |
Cost of revenues: | ||
Total cost of revenues | 159,122 | 87,280 |
Professional Services [Member] | ||
Revenues: | ||
Total revenues | 5,007,617 | 475,875 |
Cost of revenues: | ||
Total cost of revenues | 2,553,053 | 216,931 |
Storage and Retrieval Services [Member] | ||
Revenues: | ||
Total revenues | 738,525 | |
Cost of revenues: | ||
Total cost of revenues | $ 220,446 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity (Deficit) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2018 | $ 355 | $ 14,131,838 | $ (18,662,785) | $ (4,530,592) |
Balance, shares at Dec. 31, 2018 | 354,588 | |||
Stock Issued to Directors and Employee | $ 16 | 87,484 | 87,500 | |
Stock Issued to Directors and Employee, shares | 15,909 | |||
Stock Option Compensation | 200,115 | 200,115 | ||
Net Loss | (2,133,281) | (2,133,281) | ||
Balance at Dec. 31, 2019 | $ 371 | 14,419,437 | (20,796,066) | (6,376,258) |
Balance, shares at Dec. 31, 2019 | 370,497 | |||
Stock Issued to Directors | $ 16 | 57,484 | 57,500 | |
Stock Issued to Directors, shares | 16,428 | |||
Stock Option Compensation | 58,770 | 58,770 | ||
Stock Issued | $ 955 | 3,819,045 | 3,820,000 | |
Stock Issued, shares | 955,000 | |||
Stock Issued for Convertible Notes | $ 1,469 | 5,728,566 | 5,730,035 | |
Stock Issued for Convertible Notes, shares | 1,468,914 | |||
Equity Issuance Costs | (307,867) | (307,867) | ||
Note Offer Warrants | 372,053 | 372,053 | ||
Net Loss | (2,200,201) | (2,200,201) | ||
Balance at Dec. 31, 2020 | $ 2,811 | $ 24,147,488 | $ (22,996,267) | $ 1,154,032 |
Balance, shares at Dec. 31, 2020 | 2,810,839 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (2,200,201) | $ (2,133,281) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 296,935 | 7,701 |
Bad debt expense | 54,834 | 28,307 |
Parts and supplies reserve change | 15,000 | |
Amortization of deferred financing costs | 117,091 | 183,851 |
Amortization of beneficial conversion option | 11,786 | 70,718 |
Amortization of debt discount | 88,889 | |
Amortization of right of use asset | 405,227 | 41,310 |
Stock issued for services | 57,500 | 87,500 |
Stock options compensation | 58,770 | 200,115 |
Note conversion stock issue expense | 141,000 | |
Warrant issue expense | 236,761 | |
Interest on converted debt | 176,106 | |
Gain on extinguishment of debt | (287,426) | |
Amortization of original issue discount on notes | 18,296 | 11,931 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 605,094 | (222,139) |
Accounts receivable, unbilled | (224,128) | 41,747 |
Parts and supplies | 796 | 1,531 |
Prepaid expenses and other current assets | 6,745 | (19,179) |
Right of use assets | (63,375) | (138,549) |
Accounts payable and accrued expenses | (645,596) | 62,896 |
Lease liabilities, current and long-term | (332,917) | 100,715 |
Deferred compensation | (16,338) | (48,000) |
Accrued interest, current and long-term | 5,940 | 710,203 |
Earnout liabilities, current and long-term | 1,554,800 | |
Deferred revenues | 43,399 | 30,454 |
Total adjustments | 2,325,189 | 1,151,112 |
Net cash provided by/(used in) operating activities | 124,988 | (982,169) |
Cash flows from investing activities: | ||
Cash paid to acquire business, net of cash acquired | (4,019,098) | |
Purchases of property and equipment | (76,854) | (5,489) |
Net cash used in investing activities | (4,095,952) | (5,489) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 3,167,500 | |
Offering costs paid on issuance of common stock | (307,867) | |
Payment of deferred financing costs | (175,924) | |
Proceeds from notes payable | 3,008,700 | |
Proceeds from notes payable - related parties | 350,000 | |
Repayment of notes payable | (170,000) | |
Repayment of notes payable - related parties | (47,728) | (46,807) |
Net cash provided by financing activities | 5,474,681 | 303,193 |
Net increase (decrease) in cash | 1,503,717 | (684,465) |
Cash - beginning of period | 404,165 | 1,088,630 |
Cash - end of period | 1,907,882 | 404,165 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 202,291 | 7,706 |
Cash paid during the period for income taxes | 117,072 | |
Supplemental disclosure of non-cash financing activities: | ||
Accrued interest notes payable converted to equity | 796,074 | |
Accrued interest notes payable related parties converted to equity | 238,883 | |
Discount on notes payable for beneficial conversion feature | 320,000 | |
Discount on notes payable for warrants | 135,292 | |
Notes payable converted to equity | 3,421,063 | |
Notes payable converted to equity - related parties | 1,465,515 | |
Supplemental disclosure of non-cash investing activities relating to business acquisitions: | ||
Cash | 17,269 | |
Accounts receivable | 1,122,737 | |
Accounts receivable, unbilled | 276,023 | |
Parts and supplies | 91,396 | |
Prepaid expenses | 73,116 | |
Other current assets | 5,954 | |
Right of use assets | 2,885,618 | |
Property and equipment | 735,885 | |
Intangible assets | 1,361,000 | |
Accounts payable | (168,749) | |
Accrued expenses | (162,426) | |
Lease liabilities | (2,947,684) | |
Federal and state taxes payable | (168,900) | |
Deferred revenues | (198,659) | |
Deferred tax liabilities, net | (149,900) | |
Net assets acquired in acquisition | 2,772,680 | |
Total goodwill acquired in acquisition | 2,322,887 | |
Total purchase price of acquisition | 5,095,567 | |
Purchase price of business acquisition financed with earnout liability | (889,200) | |
Purchase price of business acquisition financed with installment payments | (170,000) | |
Cash paid to acquire business, excluding cash acquired | $ 4,036,367 |
Business Organization and Natur
Business Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Organization and Nature of Operations | 1. Business Organization and Nature of Operations Intellinetics, Inc., formerly known as GlobalWise Investments, Inc., (“Intellinetics”), is a Nevada corporation incorporated in 1997, with two subsidiaries: (i) Intellinetics, Inc., an Ohio corporation that is wholly-owned by the Company (“Intellinetics Ohio), and (ii) Graphic Sciences, Inc., a Michigan corporation that is also wholly-owned by the Company (“Graphic Sciences”). Intellinetics Ohio was incorporated in 1996, and on February 10, 2012, Intellinetics Ohio became the sole operating subsidiary of the Company as a result of a reverse merger and recapitalization. On March 2, 2020, the Company purchased all the outstanding capital stock of Graphic Sciences. The Company is a document management company, providing comprehensive document solutions, software, and services to its customers in both the public and private sectors. The Company’s software platform allows customers to capture and manage all documents across operations such as scanned hard-copy documents and all digital documents including those from Microsoft Office 365, digital images, audio, video and emails. The Company’s suite of document services includes indexing, conversion, and physical document storage and retrieval. The Company’s comprehensive solutions create value for customers by making it easy to connect business-critical documents to the processes they drive by making them easy to find, secure and compliant with its customers’ audit requirements. |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 2. Basis of Presentation The accompanying audited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The Company has evaluated subsequent events through the issuance of this Form 10-K. |
Liquidity and Management's Plan
Liquidity and Management's Plans | 12 Months Ended |
Dec. 31, 2020 | |
Underwriting Expenses | |
Liquidity and Management's Plans | 3. Liquidity and Management’s Plans Through December 31, 2020, the Company had incurred an accumulated deficit since its inception of $22,996,267, including operating losses and operating cash flow deficits in recent years. Since inception, the Company’s operations have primarily been funded through a combination of gross profits, government-sponsored loans, and the sale of both equity and debt securities. At December 31, 2020, the Company had a cash balance of $1,907,882. On March 2, 2020, the Company issued shares and debt totaling $5.5 million, and converted approximately $6 million in existing debt principal and interest to equity. This resulted in a recapitalization of the balance sheet and new debt of $2 million, reducing the Company’s interest burden. Simultaneously, the Company used the proceeds from the capital raise to purchase Graphic Sciences, Inc. On April 21, 2020, the Company purchased substantially all the assets of CEO Imaging Systems, Inc. The acquisitions significantly helped the Company reach its current monthly cash flow. Further, the Company received a loan through the Paycheck Protection Program (“PPP”) in April 2020 amounting to $838,700, and received notice on January 20, 2021 that its forgiveness application was accepted by the Small Business Administration. With improved operating results over the course of the latter half of 2020, the consolidated Company has significantly better liquidity than in prior years. Our ability to meet our capital needs in the future will depend on many factors, including maintaining and enhancing our operating cash flow, successfully managing the transition of our recent acquisitions of Graphic Sciences and CEO Image, successfully retaining and growing our client base in the midst of general economic uncertainty, and managing the continuing effects of the COVID-19 pandemic on our business. We will need to successfully manage our revenues to support potential future earnout commitments for previous transactions and current debt service commitments, and our future cash resources and capital requirements may vary materially from those now planned. Our ability to obtain additional capital or debt financing on favorable terms, if needed, would likely be adversely affected by our history of operating losses. Prior to 2020, management has historically assessed that there was substantial doubt regarding our ability to continue as a going concern. These conditions raise substantial doubt over the Company’s ability to meet all of its obligations over the twelve months following the date of this Report. However, management has evaluated these conditions and believes, based on its improved balance sheet, improved consolidated cash flow, and current plans and expectations, that it will be able to meet those obligations, although there is no assurance. Based on our plans and assumptions as of the date of this report, we believe our capital resources, including our cash and cash equivalents, along with funds expected to be generated from our operations, will be sufficient to meet our anticipated cash needs, including for working capital, earnout liability payments for previous transactions, capital spending, and debt service commitments, for at least the next 12 months. However, any projections of future cash needs and cash flows are subject to risks and uncertainties, such as our history of operating losses, the current COVID-19 pandemic, as well as general overall economic conditions. |
Corporate Actions
Corporate Actions | 12 Months Ended |
Dec. 31, 2020 | |
Deferred Interest Expense | |
Corporate Actions | 4. Corporate Actions On March 20, 2020, the Company effected a one-for-fifty (1-for-50) reverse stock split of the Company’s common stock. All share and per share amounts herein have been adjusted to reflect the reverse stock split. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 5. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Intellinetics and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Intellinetics Ohio and Graphic Sciences. The Company considers the criteria established under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses. Actual results could differ from estimated amounts. Significant estimates and assumptions include valuation allowances related to receivables, accounts receivable -unbilled, allowance for obsolescence or slow-moving parts and supplies inventory, the recoverability of long-term assets, depreciable lives of property and equipment, purchase price allocations for acquisitions including earnout liabilities, fair value for goodwill and intangibles, the lease liabilities, estimates of fair value deferred taxes and related valuation allowances. The Company’s management monitors these risks and assesses its business and financial risks on a quarterly basis. Revenue Recognition In accordance with ASC 606, the Company follows a five-step model to assess each contract of a sale or service to a customer: identify the legally binding contract, identify the performance obligations, determine the transaction price, allocate the transaction price, and determine whether revenue will be recognized at a point in time or over time. Revenue is recognized when a performance obligation is satisfied and the customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services. In addition, ASC 606 requires disclosures of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We categorize revenue as software, software as a service, software maintenance services, professional services, and storage and retrieval services. We earn the majority of our revenue from the sale of professional services, followed by the sale of software maintenance services and software as a service. Specific revenue recognition policies apply to each category of revenue. a) Sale of software Revenues included in this classification typically include sales of licenses with professional services to new customers, additional software licenses to existing customers, and sales of software with or without services to the Company’s resellers (See section j) - Reseller Agreements, below. Our software licenses are functional intellectual property and typically provide customers with the right to use our software in perpetuity as it exists when made available to the customer. We recognize revenue from software licenses at a point in time upon delivery, provided all other revenue recognition criteria are met. b) Sale of software as a service Sale of software as a service (“SaaS”) consists of revenues from arrangements that provide customers the use of the Company’s software applications, as a service, typically billed on a monthly or annual basis. Advance billings of these services are not recorded to the extent that the term of the arrangement has not commenced and payment has not been received. Revenue on these services is recognized over the contract period. c) Sale of software maintenance services Software maintenance services revenues consist of revenues derived from arrangements that provide post-contract support (“PCS”), including software support and bug fixes, to the Company’s software license holders. Advance billings of PCS are not recorded to the extent that the term of the PCS has not commenced and payment has not been received. PCS are considered distinct services. However, these distinct services are considered a single performance obligation consisting of a series of services that are substantially the same and have the same pattern of transfer to the customer. These revenues are recognized over the term of the maintenance contract. d) Sale of professional services Professional services revenues consist of revenues from document scanning and conversion services, consulting, discovery, training, and advisory services to assist customers with document management needs, as well as repair and maintenance services for customer equipment. We recognize professional services revenue over time as the services are delivered using an input or output method (e.g., labor hours incurred as a percentage of total labor hours budgeted, images scanned, or similar milestones), as appropriate for the contract, provided all other revenue recognition criteria are met. e) Sale of storage and retrieval services Sale of document storage and retrieval services consist principally of secured warehouse storage of customer documents, which are typically retained for many years, as well as retrieval per agreement terms and certified destruction if desired. We recognize revenue from document storage and retrieval services over the term of the contract for storage and for the retrieval and destructions components, as the services are delivered. Customers are generally billed monthly based upon contractually agreed-upon terms. f) Arrangements with multiple performance obligations In addition to selling software licenses, software as a service, software maintenance services, professional services, and storage and retrieval services on a stand-alone basis, a portion of our contracts include multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each distinct performance obligation, on a relative basis using its standalone selling price. The Company determines the standalone selling price based on the price charged for the deliverable when sold separately. g) Contract balances When the timing of our delivery of goods or services is different from the timing of payments made by customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Customers that prepay are represented by deferred revenue until the performance obligation is satisfied. Contract assets represent arrangements in which the good or service has been delivered but payment is not yet due. Our contract assets consisted of accounts receivable, unbilled, which are disclosed on the consolidated balance sheets. Our contract liabilities consisted of deferred (unearned) revenue, which is generally related to software as a service or software maintenance contracts. We classify deferred revenue as current based on the timing of when we expect to recognize revenue, which are disclosed on the consolidated balance sheets. The following table presents changes in our contract assets and liabilities during the twelve months ended December 31, 2020, and 2019: Balance at Addition Revenue Billings Balance at Twelve months ended December 31, 2020 Contract assets: Accounts receivable, unbilled $ 23,371 $ 276,023 $ 917,361 $ (693,233 ) $ 523,522 Twelve months ended December 31, 2019 Contract assets: Accounts receivable, unbilled $ 65,118 $ - $ 156,876 $ (198,623 ) $ 23,371 h) Deferred revenue Amounts that have been invoiced are recognized in accounts receivable, deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet be recognized. Deferred revenues typically relate to maintenance and software-as-a-service agreements which have been paid for by customers prior to the performance of those services, and payments received for professional services and license arrangements and software-as-a-service performance obligations that have been deferred until fulfilled under our revenue recognition policy. Remaining performance obligations represent the transaction price from contracts for which work has not been performed or goods and services have not been delivered. We expect to recognize revenue on approximately 95% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. As of December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations for software as a service and software maintenance contracts with a duration greater than one year was $45,323. As of December 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations for software as a service and software maintenance contracts with a duration greater than one year was $69,381. This does not include revenue related to performance obligations that are part of a contract whose original expected duration is one year or less. Balance at Addition Billings Recognized Balance at Twelve months ended December 31, 2020 Contract liabilities: Deferred revenue $ 754,073 $ 198,659 $ 3,038,446 $ (2,995,047 ) $ 996,131 Twelve months ended December 31, 2019 Contract liabilities: Deferred revenue $ 723,619 $ - $ 2,637,191 $ (2,606,737 ) $ 754,073 i) Rights of return and customer acceptance The Company does not generally offer variable consideration, financing components, rights of return or any other incentives such as concessions, product rotation, or price protection and, therefore, does not provide for or make estimates of rights of return and similar incentives. Our contracts with customers generally do not include customer acceptance clauses. j) Reseller agreements The Company executes certain sales contracts through resellers. The Company recognizes revenues relating to sales through resellers when all the recognition criteria have been met including passing of control. In addition, the Company assesses the credit-worthiness of each reseller, and if the reseller is undercapitalized or in financial difficulty, any revenues expected to emanate from such resellers are deferred and recognized only when cash is received and all other revenue recognition criteria are met. k) Contract costs The Company capitalizes the incremental costs of obtaining a contract with a customer. We have determined that certain sales commissions meet the requirement to be capitalized, and we amortize these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain contracts were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets. l) Sales taxes Sales taxes charged to and collected from customers as part of the Company’s sales transactions are excluded from revenues, as well as the determination of transaction price for contracts with multiple performance obligations, and recorded as a liability to the applicable governmental taxing authority. m) Disaggregation of revenue The Company provides disaggregation of revenue based on product groupings in our consolidated statements of operations as it believes this best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Revenues from contracts are primarily within the United States. International revenues were not material to the consolidated financial statements for the twelve months ended December 31, 2020 and 2019. n) Significant financing component The Company’s customers typically do not pay in advance for goods or services to be transferred in excess of one year. As such, it is not necessary to determine if the Company benefits from the time value of money and should record a component of interest income related to the upfront payment due to the practical expedient of ASC 606-10-32-18. Concentrations of Credit Risk The Company maintains its cash with high credit quality financial institutions. At times, the Company’s cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit. The number of customers that comprise the Company’s customer base, along with the different industries, governmental entities and geographic regions, in which the Company’s customers operate, limits concentrations of credit risk with respect to accounts receivable, with the exception of the State of Michigan. In the twelve months ended December 31, 2020, the Company’s sales to the State of Michigan totaled approximately 47% of revenues. The Company has not experienced any losses, nor is not aware of any losses by Graphic Sciences, resulting from nonpayment by the State of Michigan. The Company does not generally require collateral or other security to support customer receivables; however, the Company may require its customers to provide retainers, up-front deposits or irrevocable letters-of-credit when considered necessary to mitigate credit risks. The Company has established an allowance for doubtful accounts based upon facts surrounding the credit risk of specific customers and past collections history. Credit losses have been within management’s expectations. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $65,927 and $35,733, respectively. Parts and Supplies Parts and supplies are valued at the lower of cost or net realizable value. Costs are determined using the first-in, first-out method. Parts and supplies are used for scanning and document conversion services. A provision for potentially obsolete or slow-moving parts and supplies inventory is made based on parts and supplies levels, future sales forecasted and management’s judgment of potentially obsolete parts and supplies. The Company recorded an allowance of $15,000 at December 31, 2020 and there was no allowance recorded as of December 31, 2019. Property and Equipment Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed over the estimated useful lives of the related assets on a straight-line basis. Furniture and fixtures, computer hardware and purchased software are depreciated over three to seven years. Leasehold improvements are amortized over the life of the lease or the asset, whichever is shorter, generally seven to ten years. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation and amortization of these assets are removed from the accounts and the resulting gains and losses are reflected in the results of operations. Intangible Assets All intangible assets have finite lives and are stated at cost, net of amortization. Amortization is computed over the useful life of the related assets on a straight-line method. Goodwill The carrying value of goodwill is not amortized, but is tested for impairment annually as of December 31, as well as on an interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unity may not be recoverable. An impairment charge is recognized for the amount by which the carrying amount exceeds the recorded fair value. Impairment of Long-Lived Assets The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, “Property, Plant, and Equipment.” The Company tests long-lived assets or asset groups, such as property and equipment, for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed of before the end of its estimated useful life. Recoverability is assessed based on comparing the carrying amount of the asset to the aggregate pre-tax undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group. Impairment is recognized when the carrying amount is not recoverable and exceeds the fair value of the asset or asset group. The impairment loss, if any, is measured as the amount by which the carrying amount exceeds fair value, which for this purpose is based upon the discounted projected future cash flows of the asset or asset group. There were no impairment of long lived assets in the periods ended December 31, 2020 or 2019. Purchase Accounting Related Fair Value Measurements The Company allocates the purchase price, including contingent consideration, of its acquisitions to the assets and liabilities acquired, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Such fair market value assessments are primarily based on third-party valuations using assumptions developed by management that require significant judgments and estimates that can change materially as additional information becomes available. The purchase price allocated to intangibles is based on unobservable factors, including but not limited to, projected revenues, expenses, customer attrition rates, a weighted average cost of capital, among others. The weighted average cost of capital uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows. The approach to valuing the initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected revenues and expenses over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured, and volatility rates. The Company finalizes the purchase price allocation once certain initial accounting valuation estimates are finalized, and no later than 12 months following the acquisition date. Financial Instruments Cash equivalents, accounts receivable, accounts payable, and other accrued liabilities are stated at amounts which approximate fair value due to the near-term maturities of these instruments. The Company’s long-term debt balances related to its notes payable are carried at their principal amounts less any unamortized debt discount, issuance and beneficial conversion feature costs, and are not carried at fair value at each period end. Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. The Company does not have any finance leases, as a lessee, and no long-term leases for which it is the lessor. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the reasonably certain lease term. As the Company’s leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and reduced by lease incentives, such as tenant improvement allowances. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Stock-Based Compensation The Company accounts for stock-based payments to employees in accordance with ASC 718, “Compensation - Stock Compensation.” Stock-based payments to employees include grants of stock that are recognized in the consolidated statement of operations based on their fair values at the date of grant. The Company accounts for stock-based payments to non-employees in accordance with ASC 718, “Compensation - Stock Compensation,” which requires that such equity instruments are recorded at their fair values on the grant date. The grant date fair value of stock option awards is recognized in earnings as stock-based compensation cost over the requisite service period of the award using the straight-line attribution method. The Company estimates the fair value of the stock option awards using the Black-Scholes-Merton option pricing model. The exercise price of options is specified in the stock option agreements. The expected volatility is based on the historical volatility of the Company’s stock for the previous period equal to the expected term of the options. The expected term of options granted is based on the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected term of the options. The expected dividend yield is based upon the yield expected on date of grant to occur over the term of the option. Software Development Costs The Company designs, develops, tests, markets, licenses, and supports new software products and enhancements of current products. The Company continuously monitors its software products and enhancements to remain compatible with standard platforms and file formats. In accordance with ASC 985-20, “Costs of Software to be Sold, Leased or Otherwise Marketed,” the Company expenses software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization. Based on the Company’s software development process, technical feasibility is established upon completion of a working model. Technological feasibility is typically reached shortly before the release of such products. No such costs were capitalized during the periods presented in this report. In accordance with ASC 350-40, “Internal-Use Software,” the Company capitalizes purchase and implementation costs of internal use software. Once an application has reached development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon complete of all substantial testing. The Company also capitalize costs related to specific upgrades and enhancements when it is probable that the expenditure will result in additional functionality. No such costs were capitalized during the periods presented in this report. For the twelve months ended December 31, 2020, and 2019, our expensed software development costs were $293,092 and $467,364, respectively. Recent Accounting Pronouncements Intangibles – Goodwill and Other – Internal-Use Software In August 2018, the FASB issued ASU 2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ASC 2018-15 was effective for the Company beginning in its first quarter of 2020. The Company has concluded that the impact on its consolidated financial statements and related disclosures is not material. Fair Value In August 2018, the FASB issued ASU 2018-13, which is guidance that changes the fair value measurement disclosure requirements of ASC 820. ASU 2018-13 was effective for the Company beginning in its first quarter of 2020. The Company has concluded that the impact on its consolidated financial statements and related disclosures is not material. Recently Issued Accounting Pronouncements Not Yet Effective Financial Instruments – Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional relief through specific exceptions and practical expedients for transitioning away from reference rates that are expected to be discontinued. The relief generally applies to eligible modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows related to replacement of a reference rate. The relief allows such modifications to be accounted for as continuations of existing contracts without additional analysis. The optional relief is available from March 2020 through December 31, 2022. The Company is currently evaluating the impact of this ASU. Income Taxes In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” which removes certain exceptions related to intra-period tax allocations and deferred tax accounting on outside basis differences in foreign subsidiaries and equity method investments. Additionally, it provides other simplifying measures for the accounting for income taxes. The new standard is effective for fiscal years beginning after December 15, 2021 with early adoption permitted. The Company is currently evaluating the impact of this ASU. Equity Securities, Equity Method Investments and Certain Derivatives In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This ASU clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives. The effective date of the standard will be for annual periods beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on its consolidated financial statements and related disclosures. All other Accounting Standards Updates issued but not yet effective are not expected to have a material effect on the Company’s future consolidated financial statements. Advertising The Company expenses the cost of advertising as incurred. Advertising expense for the twelve months ended December 31, 2020, and 2019 amounted to $7,362 and $4,255, respectively. Earnings (Loss) Per Share Basic income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted income or loss per share is computed by dividing net income or loss by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares gives effect to all dilutive potential common shares outstanding during the period using the treasure stock method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive, including warrants or options which are out-of-the-money and for those periods with a net loss. The twelve months ended December 31, 2020 and 2019 reported a net loss. Income Taxes The Company and its subsidiaries file a consolidated federal income tax return. The provision for income taxes is computed by applying statutory rates to income before taxes. Deferred income taxes are recognized for the tax consequences in future years of temporary differences between the financial reporting and tax bases of assets and liabilities as of each period-end based on enacted tax laws and statutory rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. A 100% valuation allowance has been established on deferred tax assets at December 31, 2020 and 2019, due to the uncertainty of our ability to realize future taxable income. For the twelve months ended December 31, 2020 the Company recovered a net $179,400 of its valuation allowance in conjunction with the consolidation of the net deferred tax liability of its wholly owned subsidiary, Graphic Sciences. The Company accounts for uncertainty in income taxes in its consolidated financial statements as required under ASC 740, “Income Taxes.” The standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition accounting. Management determined there were no material uncertain positions taken by the Company in its tax returns. Segment Information Operating segments are defined in the criteria established under ASC 280, “Segment Reporting,” as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: Document Management and Document Conversion. These segments contain individual business components that have been combined on the basis of common management, customers, solutions offered, service processes and other economic characteristics. The Company currently has no intersegment sales. The Company evaluates the segments’ performance based on gross profits. The Document Management Segment provides cloud-based content services software. Its modular suite of solutions complements existing operating and accounting systems to serve a mission-critical role for organizations to make content secure, compliant, and process-ready. This segment conducts its primary operations in the United States. Markets served include highly regulated, risk and compliance-intensive markets in healthcare, K-12 education, public safety, other public sector, risk management, financial services, and others. Solutions are sold both directly to end-users and through resellers. The Document Conversion Segment provides services for scanning and indexing, converting images from paper to digital, paper to microfilm, and microfiche to microfilm, as well as long-term physical document storage and retrieval. This segment conducts its primary operations in the United States. Markets served include business and federal, county, and municipal governments. Solutions are sold both directly to end-users and through a reseller distributor. Information by operating segment is as follows: Twelve months ended Twelve months ended Revenues Document Management $ 2,816,848 $ 2,368,140 Document Conversion 5,436,543 167,815 Total revenues $ 8,253,391 $ 2,535,955 Gross profit Document Management $ 2,160,807 $ 1,868,471 Document Conversion 2,829,931 99,641 Total gross profit $ 4,990,738 $ 1,968,112 Capital additions, net Document Management $ 6,440 $ - Document Conversion 70,414 5,489 Total capital additions, net $ 76,854 $ 5,489 December 31, 2020 December 31, 2019 Total assets Document Management $ 1,658,921 $ 981,085 Document Conversion 5,177,854 5,489 Corporate 3,507,858 - Total assets $ 10,344,633 $ 986,574 Statement of Cash Flows For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks. Reclassifications Certain amounts reported in prior filings of the consolidated financial statements have been reclassified to conform to current presentation. |
Business Acquisitions
Business Acquisitions | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Business Acquisitions | 6. Business Acquisitions On March 2, 2020, the Company entered into a stock purchase agreement to acquire all of the issued and outstanding stock of Graphic Sciences. The acquisition was accounted for in accordance with GAAP and was made to expand the Company’s market share in the document management industry and due to synergies of product lines and services between the Companies. On April 21, 2020, the Company entered into an asset purchase agreement to acquire substantially all of the assets of CEO Image. The acquisition was accounted for in accordance with GAAP and was made to expand the Company’s market share in the document management industry and due to synergies of product lines and services between the Companies. The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of acquisitions as follows: Total March 2, 2020 April 21, 2020 Assets acquired: Cash $ 17,269 $ 17,269 $ - Accounts receivable 1,122,737 1,071,770 50,967 Accounts receivable, unbilled 276,023 276,023 - Parts and supplies 91,396 91,396 - Prepaid expenses 73,116 73,116 - Other current assets 5,954 5,954 - Right of use assets 2,885,618 2,885,618 - Property and equipment 735,885 732,372 3,513 Intangible assets (see Note 7) 1,361,000 1,230,000 131,000 6,568,998 6,383,518 185,480 Liabilities assumed: Accounts payable 168,749 129,622 39,127 Accrued expenses 162,426 155,949 6,477 Lease liabilities 2,947,684 2,947,684 - Federal and state taxes payable 168,900 168,900 - Deferred revenue 198,659 39,186 159,473 Deferred tax liabilities - Net 149,900 149,900 - 3,796,318 3,591,241 205,077 Total identifiable net assets/(liabilities) 2,772,680 2,792,277 (19,597 ) Purchase price 5,095,567 4,592,453 503,114 Goodwill - Excess of purchase price over fair value of net assets acquired $ 2,322,887 $ 1,800,176 $ 522,711 The purchase price of Graphic Sciences was financed with a $686,200 seller earnout liability and $3,906,253 was paid in cash. Goodwill in the amount of $1,800,176 was recognized in the acquisition of Graphic Sciences and is attributable to the cash flows of the business derived from the potential of the Company to outperform the market due to its existing relationship and other synergies created within the Company. The purchase price of CEO Image was partially financed with a $203,000 seller earnout liability and $170,000 in installment payments. $128,832 was paid in cash at the closing. On August 3, 2020, $1,282 was paid for a net working capital adjustment and $70,000 was paid, along with accrued interest, in installment payments. On November 3, 2020, $100,000 was paid, along with accrued interest, in installment payments. Goodwill in the amount of $522,711 was recognized in the acquisition of CEO Image and is attributable to the cash flows of the business derived from the potential of the Company to outperform the market due to its existing relationship and other synergies created within the Company. Acquisition costs which include legal and other professional fees of approximately $636,440 were expensed as nonrecurring transaction costs and are included in significant transaction costs in the accompanying consolidated statement of operations. The earnout arrangement for Graphic Sciences requires the Company to pay the seller up to $833,000 annually for a three-year period based on a gross profit level achieved by Graphic Sciences on an annual basis, resulting in a max payout to the seller over a three year period of $2,500,000, as defined, with no minimum requirement. At acquisition, management estimated a fair value of the earnout liability of $686,200 which would be owed to the seller based on the terms of the earnout, and accordingly, recorded this liability at the acquisition date in accordance with GAAP. At December 31, 2020, the assumptions were updated to reflect the improved performance of the acquisitions against its threshold target and a reduction of uncertainty driven by the pandemic, and the Company had accrued a liability of $2,110,000. The fair value was based on projections of future gross profit over a three-year period and valuation techniques that utilized expected volatility, threshold probability, and discounting of future payments. The increase in earnout liability of $1,423,800 was recorded as adjustment to contingent consideration-earnout for the twelve months ended December 31, 2020. The earnout arrangement for CEO Image requires the Company to pay the seller up to $185,000 annually for a two-year period based on a sales revenue level achieved by certain customers of CEO Image on an annual basis, resulting in a max payout to the seller over a two year period of $370,000, as defined, with no minimum requirement. At acquisition, management estimated a fair value of the earnout of $203,000 which would be owed to the seller based on the terms of the earnout, and accordingly, recorded this liability at the acquisition date in accordance with GAAP. At December 31, 2020, the assumptions were updated to reflect the improved performance of the acquisition against its threshold target and a reduction of uncertainty driven by the pandemic, and the Company had accrued a liability of $334,000. The fair value was based on projections of future revenue over a two-year period and valuation techniques that utilized threshold probability, and discounting of future payments. The increase in earnout liability of $131,000 was recorded as adjustment to contingent consideration-earnout for the twelve months ended December 31, 2020. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded. The finalization of the purchase accounting assessment may result in changes in the valuation of assets acquired and liabilities assumed and may have an impact on the Company’s results of operations and financial position. The following unaudited pro forma information presents a summary of the consolidated results of operations for the Company as if the acquisitions of Graphic Sciences and CEO Image had occurred on January 1, 2019. For the Twelve months ended (unaudited) (unaudited) December 31, 2020 December 31, 2019 Total revenues $ 9,686,354 $ 10,324,486 Net loss $ (1,993,389 ) $ (1,565,961 ) Basic and diluted net loss per share $ (0.70 ) $ (0.56 ) The unaudited pro forma consolidated results are based on the Company’s historical financial statements and those of Graphic Sciences and CEO Image and do not necessarily indicate the results of operations that would have resulted had the acquisition actually been completed at the beginning of the applicable period presented. The pro forma financial information assumes that the companies were combined as of January 1, 2019. The following table presents the amounts of revenue and earnings of the acquirees since the acquisition date included in the consolidated income statement for the reporting period. For the twelve months ended December 31, 2020 Graphic Sciences CEO Image Total revenues $ 5,238,654 $ 375,863 Net income $ 645,042 $ (a) (a) Total earnings from the CEO Image acquisition is impracticable to disclose as the operations were merged with existing operations and not accounted for separately. |
Intangible Assets, Net
Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, Net | 7. Intangible Assets, Net At December 31, 2020, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 years $ 119,000 $ (9,917 ) $ 109,083 Customer contracts 5-8 years 1,242,000 (166,112 ) 1,075,888 $ 1,361,000 $ (176,029 ) $ 1,184,971 Amortization expense for the twelve months ended December 31, 2020, amounted to $176,029, respectively. The following table represents future amortization expense for intangible assets subject to amortization. For the Twelve Months Ending December 31, Amount 2021 $ 216,475 2022 216,475 2023 216,475 2024 216,475 2025 199,008 Thereafter 120,063 $ 1,184,971 |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 8. Fair Value Measurements Under U.S. GAAP, 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. The fair value hierarchy consists of the following three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs consist of quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. The carrying values of cash and equivalents, accounts receivable, accounts payable, accrued expenses, and the PPP Note Payable and 2019 Related Notes approximate fair value because of their short maturity. Management believes that the carrying value of the 2020 Notes approximate fair value given the March 2, 2020 transaction proximity to December 31, 2020 in conjunction with the absence of significant net change in the overall economic environment with regards to availability of credit to Company. The table below reflects all other notes payable at December 31, 2019. December 31, 2019 Fair Value 2016 Unrelated Notes (a) $ 942,256 2017 Unrelated Notes (a) 2,011,859 2018 Unrelated Notes (a) 1,028,792 Total $ 3,982,907 December 31, 2019 Fair Value 2016 Related Notes (a) $ 405,784 2017 Related Notes (a) 445,810 2018 Related Notes (a) 457,241 Total $ 1,308,835 (a) The fair value was based upon Level 2 inputs. See Note 10 for additional information about the Company’s 2016, 2017, and 2018 Unrelated Notes. See Note 11 for additional information about the Company’s 2016, 2017, and 2018 Related Notes. The Company has contingent consideration liabilities related to acquisitions which are measured on a recurring basis and recorded at fair value, determined using the discounted cash flow method. The inputs used to calculate the fair value of the contingent consideration liabilities are considered to be Level 3 inputs due to the lack of relevant market activity and significant management judgment. Key unobservable inputs include revenue growth rates, which ranged from 0% to 7%, and volatility rates, which were 20% for gross profits. An increase in future revenues and gross profits may result in a higher estimated fair value while a decrease in future revenues and gross profits may result in a lower estimated fair value of the contingent consideration liabilities. Remeasurements to fair value are recorded in adjustment to fair value of contingent consideration in the Consolidated Statements of Operations. See Note 6 for the estimated fair value of the contingent consideration-earnout as of December 31, 2020. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 9. Property and Equipment Property and equipment are comprised of the following: December 31, 2020 December 31, 2019 Computer hardware and purchased software $ 1,019,259 $ 259,959 Leasehold improvements 275,106 221,666 Furniture and fixtures 82,056 82,056 1,376,421 563,681 Less: accumulated depreciation and amortization (677,669 ) (556,762 ) Property and equipment, net $ 698,752 $ 6,919 Total depreciation expense on the Company’s property and equipment for the twelve months ended December 31, 2020, and 2019 amounted to $120,906 and $7,701, respectively. |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable | 10. Notes Payable Summary of Notes Payable The table below reflects all notes payable at December 31, 2020 and 2019, respectively, with the exception of related party notes disclosed in Note 11 - Notes Payable - Related Parties. December 31, 2020 December 31, 2019 PPP Note Payable (a) $ 838,700 $ - 2020 Notes 2,000,000 - 2018 Unrelated Notes - 900,000 2017 Unrelated Notes - 1,760,000 2016 Unrelated Notes, net of beneficial conversion feature of $50,703 - 824,297 Total notes payable $ 2,838,700 $ 3,484,297 Less unamortized debt issuance costs (224,767 ) (144,334 ) Less unamortized debt discount (231,111 ) - Less current portion (580,638 ) 3,339,963 Long-term portion of notes payable $ 1,802,184 $ - Future minimum principal payments of these notes payable as described in this Note 10 are as follows: As of December 31, Amount 2021 (a) $ 580,638 2022 (a) 258,062 2023 2,000,000 Total $ 2,838,700 (a) The PPP Note Payable totaling $838,700 was fully forgiven January 20, 2021, as described below and in Note 19 – Subsequent Events. As of December 31, 2020 and 2019, accrued interest for these notes payable with the exception of the related party notes in Note 11 - Notes Payable - Related Parties, was $5,941 and $918,307, respectively. As of December 31, 2020, unamortized deferred financing costs and unamortized debt discount were reflected within long term liabilities on the consolidated balance sheets. As of December 31, 2019, unamortized deferred financing costs were $144,334, and was reflected within current liabilities on the consolidated balance sheets. With respect to all notes outstanding (other than the notes to related parties), for the twelve months ended December 31, 2020 and 2019, interest expense, including the amortization of deferred financing costs, accrued loan participation fees, original issue discounts, deferred interest and related fees, interest expense related to warrants issued for the conversion of convertible notes, and the embedded conversion feature was $548,742 and $735,474, respectively. Seller Notes Payable On April 21, 2020, the Company entered into an asset purchase agreement under which the Company agreed to pay a principal amount of $170,000 (“Seller Notes Payable”) as further discussed in Note 6. The terms of the Seller Notes Payable were approximately three and six months, with $70,000 plus accrued interest paid August 3, 2020 and $100,000 plus accrued interest paid November 3, 2020. The Seller Notes Payable bore an interest rate of 1.5% per annum. Paycheck Protection Program Note Payable On April 15, 2020, the Company entered into an unsecured promissory note (“PPP Note Payable”) under the Paycheck Protection Program (the “PPP”), through PNC Bank with a principal amount of $838,700. The term of the PPP Note Payable is two years, with an interest rate of 1.0% per annum, which shall be deferred for the first six months of the term of the loan. PPP loan recipients can be granted forgiveness for all or a portion of loans granted under the PPP, based on the use of loan proceeds for payroll costs and mortgage interest, rent or utility costs and the maintenance of employee and compensation levels. The Company received notice on January 20, 2021 that our forgiveness application was accepted by the Small Business Administration. 2020 Note Issuance On March 2, 2020, the Company issued and sold 2,000 units (“Units”) to certain accredited investors in a private offering, with each Unit consisting of $1,000 in 12% Subordinated Notes (“2020 Notes”) and 40 shares of common stock, for aggregate gross proceeds of $2,000,000 in Units . 2020 Note Conversion On March 2, 2020, the Company entered into amendments to all of its then-outstanding convertible promissory notes, which were issued by the Company to various related and unrelated investors in 2016, 2017, and 2018. The Note Amendments permitted the Company to convert all of the then-outstanding principal and accrued and unpaid interest payable with respect to the 2016-2018 Notes into shares of Common Stock upon the same terms as such private placement. Pursuant to the Note Amendments, on March 2, 2020, the Company converted all of the then-outstanding principal and accrued and unpaid interest payable with respect to the 2016-2018 Notes into the aggregate amount of 1,433,689 shares of Common Stock at a conversion price of $4.00 per share. Taglich Brothers, Inc. acted as the exclusive placement agent for the Note Conversion, and earned fees in the form of 35,250 shares of Common Stock at a price of $4.00 per share (with such fees relating to the conversion of both the related and unrelated notes). 2018 Notes On September 20 and September 26, 2018, the Company issued convertible promissory notes in an aggregate amount of $900,000 (“2018 Unrelated Notes”) to unrelated accredited investors (the “2018 Note Investors”). Placement agent and escrow agent fees of $106,740 were paid out of the cash proceeds. The 2018 Unrelated Notes matured on December 31, 2020, and bore interest at an annual rate of interest of 8% until maturity, with interest of 8% payable quarterly beginning January 2, 2019. The 2018 Note Investors had the right, in their sole discretion, to convert the 2018 Unrelated Notes into shares of Company common stock under certain circumstances at a conversion rate of $6.50 per share. These notes were further amended and converted into equity on March 2, 2020, as described further below in this note, see “2020 Note Conversion.” 2017 Notes On November 17 and November 30, 2017, the Company issued convertible promissory notes in an aggregate amount of $1,760,000 (“2017 Unrelated Notes”) to unrelated accredited investors (the “2017 Note Investors”). Placement agent and escrow agent fees of $174,810 were paid out of the cash proceeds. The 2017 Unrelated Notes had an original maturity date of November 30, 2019. On September 14, 2018, the 2017 Unrelated Notes were amended to mature on December 31, 2020. The amendment was accounted for as a troubled debt restructuring with the future undiscounted cash flows being greater than the carrying value of the debt prior to extension. No gain was recorded on the amendment, and a new effective interest rate on the 2017 Unrelated Notes was established based on the carrying value of the debt and the revised future cash flows. The 2017 Unrelated Notes bore interest at an annual rate of interest of 8% until maturity, with interest of 8% payable quarterly beginning July 1, 2018. The 2017 Note Investors had the right, in their sole discretion, to convert the 2017 Unrelated Notes into shares of Company common stock under certain circumstances at a conversion rate of $10.00 per share. These notes were further amended and converted into equity on March 2, 2020, as described further below in this note, see “2020 Note Conversion.” 2016 Notes The Company issued convertible promissory notes on December 30, 2016 in an aggregate amount of $315,000, and on January 6, 2017 and January 31, 2017 in an aggregate amount of $560,000 (collectively, the “2016 Unrelated Notes”), to unrelated accredited investors (the “2016 Note Investors”). Placement agent and escrow agent fees of $100,255 in the aggregate for those issuances, were paid out of the cash proceeds of those issuances. The 2016 Unrelated Notes bore interest at an annual rate of interest of 12% until maturity, with partial interest of 6% payable quarterly, and an original maturity date of December 31, 2018. The 2016 Note Investors had the right, in their sole discretion, to convert the 2016 Unrelated Notes into shares of Company common stock at a conversion rate of $32.50 per share. On September 17, 2018, the 2016 Unrelated Notes were amended to mature on December 31, 2020, and bore interest at an annual rate of interest of 10% until maturity, with partial interest of 5% payable quarterly. With the amendment, the 2016 Note Investors had the right, in their sole discretion, to convert the 2016 Unrelated Notes into shares of Company common stock at a conversion rate of $20.00 per share. The amendment was accounted for as a troubled debt restructuring with the future undiscounted cash flows being greater than the carrying value of the debt prior to extension. No gain was recorded on the amendment, and a new effective interest rate on the 2016 Unrelated Notes was established based on the carrying value of the debt and the revised future cash flows. The Company recognized an initial beneficial conversion feature in the amount of $369,677, plus a fair value adjustment of $56,661 under the troubled debt restructuring accounting. Interest expense recognized on the amortization of the beneficial conversion feature of the 2016 Unrelated Notes was $50,703 for the twelve months ended December 31, 2020 and 2019. These notes were further amended and converted into equity on March 2, 2020, as described further below in this note, see “2020 Note Conversion.” The Company has evaluated the terms of its convertible notes payable in accordance with ASC 815 – 40, “Derivatives and Hedging - Contracts in Entity’s Own Stock” and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion feature did not meet the definition of a derivative and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared with the market price on the date of each note. If the conversion price was deemed to be less than the market value of the underlying common stock at the inception of the note, then the Company recognized a beneficial conversion feature resulting in a discount on the note payable, upon satisfaction of the contingency. The beneficial conversion features were amortized to interest expense over the life of the respective notes, starting from the date of recognition. |
Notes Payable - Related Parties
Notes Payable - Related Parties | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Parties | 11. Notes Payable - Related Parties Summary of Related Notes The table below reflects the notes payable to related parties at December 31, 2020 and 2019, respectively: December 31, 2020 December 31, 2019 2019 Related Notes $ - $ 397,728 2018 Related Notes - 400,000 2017 Related Notes - 390,000 2016 Related Notes, net of beneficial conversion feature of $20,015 - 354,985 Total notes payable - related party $ - $ 1,542,713 Unamortized original issue discount and debt issuance costs - (75,313 ) Less current portion - (1,467,400 ) Long-term portion of notes payable-related party $ - $ - As of December 31, 2019, accrued interest for these notes payable – related parties amounted to $294,191, and on the consolidated balance sheets was reflected within current liabilities as of December 31, 2019. For the twelve months ended December 31, 2020 and 2019, interest expense in connection with notes payable – related parties was $88,941 and $245,215, respectively. 2020 Note Conversion On March 2, 2020, the Company entered into amendments to all of its currently outstanding Convertible Promissory Notes, which were issued by the Company to various related and unrelated investors in 2016, 2017, and 2018. The Note Amendments permitted the Company to convert all of the then-outstanding principal and accrued and unpaid interest payable with respect to the 2016-2018 Notes into shares of Common Stock upon the same terms as such private placement. Pursuant to the Note Amendments, on March 2, 2020, the Company converted all of the then-outstanding principal and accrued and unpaid interest payable with respect to the 2016-2018 Notes into the aggregate amount of 1,433,689 shares of Common Stock at a conversion price of $4.00 per share. Taglich Brothers, Inc. acted as the exclusive placement agent for the Note Conversion, and earned fees in the form of 35,250 shares of Common Stock at a price of $4.00 per share (with such fees relating to the conversion of both the related and unrelated notes). 2019 Notes On November 15, 2019, the Company issued promissory notes in an aggregate principal amount of $397,728 (the “2019 Related Notes”) to Robert Taglich and Michael Taglich (each holding more than 5% beneficial interest in the Company’s Shares). The notes included an original issue discount of $47,728. Interest expense recognized on the amortization of the original discount was $11,932, for the twelve months ended December 31, 2019. The notes bore no interest in addition to the original issue discount, which was 12%, and matured on May 15, 2020. If the 2019 Related Notes had not been either fully repaid by the Company or converted into Company shares or other securities by the maturity date, then the 2019 Related Notes would have accrued interest at the annual rate of 12% from the maturity date until the date of repayment. The Company used the proceeds of the 2019 Related Notes for working capital, general corporate purposes, and debt repayment. On March 2, 2020, $350,000 of such notes were converted into equity in connection with a private placement of common stock at a conversion price of $4.00 per share. On May 15, 2020, the remaining balance of $47,728 was repaid by the Company in cash. 2018 Notes On September 26, 2018, the Company issued convertible promissory notes in an aggregate amount of $400,000 (the “2018 Related Notes”) to accredited investors, including Robert Taglich and Michael Taglich (each holding more than a 5% beneficial interest in the Company’s shares). The 2018 Related Notes matured on December 31, 2020, and bore interest at an annual rate of 8% until maturity, with interest payable quarterly beginning January 2, 2019. The 2018 Related Note investors had the right, in their sole discretion, to convert the 2018 Related Notes into shares of Company common stock under certain circumstances at a conversion rate of $6.50 per share. These notes were further amended and converted into equity on March 2, 2020, as described further below in this note, see “2020 Note Conversion.” 2017 Notes On September 21, 2017, the Company issued convertible promissory notes in an aggregate principal amount of $154,640 (the “2017 Bridge Notes”) to Robert Taglich and Michael Taglich (each holding more than a 5% beneficial interest in the Company’s shares). The 2017 Bridge Notes included an original issue discount of $4,640. Interest expense recognized on the amortization of the original discount was $889 for the twelve months ended December 31, 2017. The 2017 Bridge Notes bore interest at an annual rate of 8% beginning March 21, 2018 until maturity on September 21, 2018. The effective interest rate was 7% for the term of the 2017 Bridge Notes. The 2017 Bridge Note investors had the right, in their sole discretion, to convert the 2017 Bridge Notes into securities to be issued by the Company in a private placement of equity, equity equivalents, convertible debt or debt financing. In conjunction with the issue of the 2016 Bridge Notes, 3,000 warrants were issued to the 2017 Bridge Note investors. The warrants have an exercise price equal to $15.00 per share and contain a cashless exercise provision. All warrants are immediately exercisable and are exercisable for five years from issuance. The Company recognized debt issuance costs, recorded as a debt discount, on the issue of the warrants in the amount of $38,836. Interest expense recognized on the amortization of the debt discount was $38,836 for the twelve months ended December 31, 2017. On November 30, 2017, principal in the amount of $150,000 of the 2017 Bridge Notes was converted by the 2017 Bridge Note investors into the 2017 Related Notes, described below. On November 17, 2017, the Company issued convertible promissory notes in an aggregate amount of $390,000 (the “2017 Related Notes”) to accredited investors, including Robert Taglich and Michael Taglich (each holding more than a 5% beneficial interest in the Company’s shares) and James DeSocio (President, Chief Executive Officer and Director), in exchange for the conversion of $150,000 principal amount under the 2017 Bridge Notes and the receipt of $240,000 cash. The 2017 Related Notes were initially scheduled to mature on November 30, 2019. On September 14, 2018, the 2017 Related Notes were amended to mature on December 31, 2020. The amendment was accounted for as a troubled debt restructuring with the future undiscounted cash flows being greater than the carrying value of the debt prior to extension. No gain was recorded, and a new effective interest rate was established based on the carrying value of the debt and the revised future cash flows. The 2017 Related Notes bore interest at an annual rate of 8% until maturity, with interest payable quarterly beginning July 1, 2018. The 2017 Related Note investors had the right, in their sole discretion, to convert the 2017 Related Notes into shares of Company common stock under certain circumstances at a conversion rate of $10.00 per share. These notes were further amended and converted into equity on March 2, 2020, as described further below in this note, see “2020 Note Conversion.” 2016 Notes On December 30, 2016, the Company issued convertible promissory notes in an aggregate amount of $375,000 (the “2016 Related Notes”) to accredited investors (the “2016 Related Note Investors”), including Robert Taglich and Michael Taglich (each holding more than 5% beneficial interest in the Company’s shares) and Robert Schroeder (a director of the Company). The 2016 Related Notes bore interest at an annual rate of interest of 12% until maturity, with partial interest of 6% payable quarterly, and an initial maturity date of December 31, 2018. The 2016 Related Note Investors had a right, in their sole discretion, to convert the 2016 Related Notes into shares of Company common stock at a conversion rate of $32.50 per share. On September 17, 2018, the 2016 Related Notes were amended to mature on December 31, 2020, and to bear interest at an annual rate of interest of 10% until maturity, with partial interest of 5% payable quarterly. With the amendment, the 2016 Related Note Investors had the right, in their sole discretion, to convert the 2016 Related Notes into shares at a conversion rate of $20.00 per share. The amendment was accounted for as a troubled debt restructuring with the future undiscounted cash flows being greater than the carrying value of the debt prior to extension. No gain was recorded on the amendment, and a new effective interest rate on the 2016 Related Notes was established based on the carrying value of the debt and the revised future cash flows. The Company recognized an initial beneficial conversion feature in the amount of $144,231, plus a fair value adjustment of $24,710 under the troubled debt restructuring accounting. Interest expense recognized on the amortization of the beneficial conversion feature of the 2016 Related Notes was $20,015 for the twelve months ended December 31, 2020 and 2019. These notes were further amended and converted into equity on March 2, 2020, as described further below in this note, see “2020 Note Conversion.” |
Deferred Compensation
Deferred Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Compensation Related Costs [Abstract] | |
Deferred Compensation | 12. Deferred Compensation Pursuant to the Company’s employment agreements with the founders, the founders have earned incentive compensation totaling $100,828 and $117,166 in cash, as of December 31, 2020 and 2019, respectively, which payment obligation has been deferred by the Company until it reasonably believes it has sufficient cash to make the payment. Following the retirement of founder A. Michael Chretien on December 8, 2017, the Company made bi-weekly payments of $1,846 until his portion of the deferred compensation had been paid, which occurred in May, 2020. For the twelve months ended December 31, 2020 and 2019, the Company paid $16,338 and $48,000, respectively, which is reflected as a reduction in the deferred compensation liability. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 13. Commitments and Contingencies From time to time the Company is involved in legal proceedings, claims and litigation related to employee claims, contractual disputes and taxes in the ordinary course of business. Although the Company cannot predict the outcome of such matters, currently the Company has no reason to believe the disposition of any current matter could reasonably be expected to have a material adverse impact on the Company’s financial position, results of operations or the ability to carry on any of its business activities. Employment Agreements The Company has entered into employment agreements with three of its key executives. Under their respective agreements, the executives serve at will and are bound by typical confidentiality, non-solicitation and non-competition provisions. Deferred compensation for a founder of the Company, as disclosed in Note 12 above, is still outstanding as of December 31, 2020 and 2019. Operating Leases On January 1, 2010, the Company entered into an agreement to lease 6,000 rentable square feet of office space in Columbus, Ohio. The lease commenced on January 1, 2010 and, pursuant to a lease extension dated August 9, 2016, the lease expires on December 31, 2021. The Company is currently evaluating its renewal options. Our subsidiary, Graphic Sciences, uses 36,000 square feet of leased space in Madison Heights as its main facility. Graphic Sciences uses about 20,000 square feet for its records storage services, with the remainder of the space used for production, sales, and administration. The monthly rental payment is $41,508, with increases annually in September up to $45,828 for the final year, with a lease term continuing until August 31, 2026. Graphic Sciences also leases and uses a separate 20,000 square foot building for document storage in Highland Park, MI, and a satellite office in Traverse City, MI for production. The monthly Highland Park rental payment is $11,250, with a lease term continuing until September 30, 2021. The monthly Traverse City rental payment is $4,500, with a lease term continuing until January 31, 2024. Graphic Sciences also leases and uses four leased vehicles for logistics. The monthly rental payments for these vehicles total $2,618, with lease terms continuing until October 31, 2024. Graphic Sciences also leases and uses additional temporary storage space in Madison Heights, MI. This Madison Heights temporary storage space monthly rental payment is $12,500, with a lease term on a month-to-month basis. The Company has made an accounting policy election to not record a right-of-use asset and lease liability for short-term leases, which are defined as leases with a lease term of 12 months or less. Instead, the lease payments are recognized as rent expense in the general and administrative expenses on the statement of operations. Future minimum lease payments under these operating leases are as follows: For the Twelve Months Ending December 31, Amount 2021 $ 840,812 2022 617,255 2023 617,085 2024 550,878 2025 542,750 Thereafter 366,626 $ 3,535,406 Lease costs charged to operations for the twelve months ended December 31, 2020 and 2019 amounted to $743,373 and $51,254, respectively. Included in the lease costs for the twelve months ended December 31, 2020 was short-term lease costs of $71,411. Additional information pertaining to the Company’s lease are as follows: For the Twelve Months Ending December 31, 2020: Operating cash flows from operating leases $ 482,425 Weighted average remaining lease term – operating leases 5.1 years Weighted average discount rate – operating leases 7.96 % As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | 14. Stockholders’ Equity Description of Authorized Capital The Company is authorized to issue up to 25,000,000 shares of common stock with $0.001 par value. The holders of the Company’s common stock are entitled to one vote per share. The holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. However, the current policy of the Board of Directors is to retain earnings, if any, for the operation and expansion of the business. Upon liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share ratably in all assets of the Company that are legally available for distribution. Reverse Stock Split Effective February 27, 2020, upon recommendation and authorization by the Board of Directors, stockholders holding a majority in interest of the issued and outstanding shares of Common Stock, acting by written consent, adopted an amendment to the Company’s Articles of Incorporation to (i) effectuate the Reverse Split at a ratio of one-for-fifty (1-for-50) and (ii) reduce the number of authorized shares of Common Stock of the Company as of the effective date of such amendment to 25,000,000 shares. On March 3, 2020, the Company filed the Reverse Split Amendment, which became effective on March 20, 2020. On March 1, 2020, upon recommendation and authorization by the Board of Directors, stockholders holding a majority in interest of the issued and outstanding shares of Common Stock of the Company, acting by written consent, adopted an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of Common Stock to 160,000,000 shares (representing 3,200,000 on a post-split basis) from 75,000,000 shares (representing 1,500,000 on a post-split basis), in order to facilitate the acquisition of Graphic Sciences, the 2020 private placement of equity and debt, and the 2020 Note Conversion. On March 2, 2020, the Company filed the Shares Increase Amendment, which was effective immediately upon filing. The reverse stock split did not cause an adjustment to par value of the common stock. As a result of the reverse stock split, the Company also adjusted the share amounts for shares reserved for issuance upon the exercise of outstanding warrants, outstanding stock options, and shares reserved for the 2015 Plan. All disclosures of common shares and per share data in the accompanying consolidated financial statements related notes have been adjusted to reflect the reverse stock split for all periods presented. The December 31, 2019 balances of common stock and additional paid in capital were adjusted to $371 and $14,419,437, from previously reported amounts of $31,528 and $14,388,280, respectively. Issuance of Restricted Common Stock to Directors On January 2, 2020 and January 7, 2019, the Company issued 16,429 and 10,454 shares, respectively, of restricted common stock to directors of the Company as part of an annual compensation plan for directors. The grant of shares was not subject to vesting. Stock compensation of $57,500 was recorded over the requisite service period for the twelve months ending December 31, 2020. Stock compensation of $57,500 was recorded on the issuance of the common stock for the twelve months ended December 31, 2019. Issuance of Warrants Between December 30, 2016 and January 31, 2017, the Company issued convertible promissory notes, the 2016 Unrelated Notes and the 2016 Related Notes (collectively, the “2016 Notes”), in an aggregate amount of $1,250,000 to certain accredited investors, including related parties, in private placements. The Company retained Taglich Brothers, Inc. as the exclusive placement agent for the private placement offering of the 2016 Notes. In January 2017, in compensation for the placement agent’s services in the private placement offering of the 2016 Notes, the Company paid the placement agent a cash payment of $100,000, equal to 8% of the gross proceeds of the offering, along with warrants to purchase 3,077 shares of Company common stock, and the reimbursement for the placement agent’s reasonable out of pocket expenses, FINRA filing fees and related legal fees. The warrants issued to the placement agent contained an exercise price at $37.50 per share, are exercisable for a period of five years after issuance, contain customary cashless exercise provisions and anti-dilution protection and, pursuant to piggyback registration rights, the underlying shares were registered in the Company’s a Registration Statement on Form S-1 declared effective in February 2018. Of the warrants issued to the placement agent, 1,699 warrants were issued in conjunction with proceeds raised in December 2016, and underwriting expense of $65,243 was recorded for the issuance of these warrants, utilizing the Black-Scholes valuation model to value the warrants issued. The remaining 1,378 warrants were issued in conjunction with proceeds raised in January 2017, and underwriting expense of $52,951 was recorded for the issuance of these warrants, utilizing the Black-Scholes valuation model. The fair value of warrants issued was determined to be $38.50. On September 21, 2017, the Company issued warrants to purchase 3,000 shares of Company common stock to Robert Taglich and Michael Taglich (each holding more than a 5% beneficial interest in the Company’s shares) in connection with the 2017 Bridge Notes. The warrants are exercisable at an exercise price of $15.00 per share, contain a cashless exercise provision, antidilution protection and are exercisable for five years after issuance. A debt discount of $38,837 was recorded for the issuance of these warrants, utilizing the Black-Scholes valuation model. The 2017 Bridge Notes were converted into the 2017 Related Notes in November 2017. The fair value of warrants issued was determined to be $13.00 utilizing the Black-Scholes valuation model. Between November 17 and November 30, 2017, the Company issued convertible promissory notes, the 2017 Unrelated Notes and the 2017 Related Notes (collectively, the “2017 Notes”), in an aggregate amount of $2,150,000 to certain accredited investors, including related parties, in private placements. The Company retained Taglich Brothers, Inc. as the exclusive placement agent for the private placement offering of the 2017 Notes. In compensation for the placement agent’s services in the private placement offering of the 2017 Notes, the Company paid the placement agent a cash payment of 8% of the gross proceeds of the offering, along with warrants to purchase shares of Company common stock, and the reimbursement for the placement agent’s reasonable out of pocket expenses, FINRA filing fees and related legal fees. On November 17, 2017, the Company paid the placement agent cash in the amount of $172,000 and issued the placement agent warrants to purchase 7,080 shares at an exercise price at $12.50 per share, which are exercisable for a period of five years after issuance, contain customary cashless exercise provisions and anti-dilution protection and were entitled to piggyback registration rights that were exercised in connection with the Company’s Registration Statement on Form S-1 declared effective in February 2018. On November 30, 2017, the Company issued the placement agent warrants to purchase 10,120 shares at an exercise price at $12.50 per share, which are exercisable for a period of five years after issuance, contain customary cashless exercise provisions and anti-dilution protection and are entitled to registration rights that were exercised in connection with the Company’s Registration Statement on Form S-1 declared effective in February 2018. Debt issuance costs of $126,603 was recorded for the issuance of the November 17 and November 30, 2017 warrants, utilizing the Black-Scholes valuation model. The fair value of warrants issued was determined to be $8.50 and $6.50 for the November 17 and November 30 warrants, respectively. For the twelve months ended December 31, 2020 and 2019, interest expense of $14,726 and $88,356, respectively, was recorded as amortization of the debt issuance costs. Between September 20 and September 26, 2018, the Company issued convertible promissory notes, the 2018 Unrelated Notes and the 2018 Related Notes (collectively, the “2018 Notes”), in an aggregate amount of $1,300,000 to certain accredited investors, including related parties, in private placements. The Company retained Taglich Brothers, Inc. as the exclusive placement agent for the private placement offering of the 2018 Notes. In compensation, the Company paid the placement agent a cash payment of 8% of the gross proceeds of the offering, along with warrants to purchase shares of Company common stock, and reimbursement for the placement agent’s reasonable out of pocket expenses, FINRA filing fees and related legal fees. On September 20, 2018, the Company paid the placement agent cash in the amount of $40,000 and issued the placement agent warrants to purchase 6,153 shares at an exercise price at $9.00 per share, which are exercisable for a period of five years after issuance, contain customary cashless exercise provisions and anti-dilution protection and are entitled to limited piggyback registration rights. On September 26, 2018, the Company paid the placement agent cash in the amount of $64,000 and issued the placement agent warrants to purchase 9,846 shares at an exercise price at $9.00 per share, which are exercisable for a period of five years after issuance, contain customary cashless exercise provisions and anti-dilution protection and are entitled to limited piggyback registration rights. Debt issuance costs of $64,348 was recorded for the issuance of the September 20 and September 26, 2018 warrants, utilizing the Black-Scholes valuation model. The fair value of warrants issued was determined to be $5.00 and $3.50 for the September 20 and September 26 warrants, respectively. For the twelve months ended December 31, 2020, and 2019, interest expense of $14,458 and $86,750, respectively, was recorded as amortization of the debt issuance costs. On March 2, 2020, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors, pursuant to which the Company issued and sold (i) 875,000 shares of the Company’s Common Stock, at a price of $4.00 per share, for aggregate gross proceeds of $3,500,000 and (ii) 2,000 units (“Units”), with each Unit consisting of $1,000 in 12% Subordinated Notes and 40 shares, for aggregate gross proceeds of $2,000,000 in Units and $5,500,000 for the combined private placement pursuant to the Securities Purchase Agreement . The estimated values of warrants, as well as the assumptions that were used in calculating such values were based on estimates at the issuance date as follows: Placement Bridge Risk-free interest rate 1.93 % 1.89 % Weighted average expected term 5 years 5 years Expected volatility 123.07 % 130.80 % Expected dividend yield 0.00 % 0.00 % Placement Placement Risk-free interest rate 2.06 % 2.14 % Weighted average expected term 5 years 5 years Expected volatility 129.87 % 129.34 % Expected dividend yield 0.00 % 0.00 % Placement Placement Risk-free interest rate 2.96 % 2.96 % Weighted average expected term 5 years 5 years Expected volatility 122.52 % 122.92 % Expected dividend yield 0.00 % 0.00 % Placement Risk-free interest rate 0.88 % Weighted average expected term 5 years Expected volatility 130.12 % Expected dividend yield 0.00 % Shares Issued and Outstanding and Shares Reserved for Exercise of Warrants, Convertible Notes, and the 2015 Plan The Company had 2,810,865 Shares issued and outstanding, 150,216 Shares reserved for issuance upon the exercise of outstanding warrants, and 197,330 Shares reserved for issuance under the 2015 Plan, as of December 31, 2020. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 15. Stock-Based Compensation On April 30, 2015, the Company entered into a Non-qualified Stock Option Agreement with Sophie Pibouin, a director of the Company, in accordance with the 2015 Plan. The agreement granted options to purchase 2,560 shares prior to the expiration date of April 29, 2025 at an exercise price of $37.50. The options granted vested on a graded scale over a period of time through October 31, 2015. On January 1, 2016, the Company granted employees stock options to purchase 5,000 shares at an exercise price of $45.00 per share in accordance with the 2015 Plan. The options were fully vested as of January 1, 2019. The total fair value of $196,250 for these stock options was recognized by the Company over the requisite service period. On February 10, 2016, the Company granted employees stock options to purchase 4,200 shares at an exercise price of $48.00 per share in accordance with the 2015 Plan. The options were fully vested as of February 10, 2020. The total fair value of $174,748 for these stock options was recognized by the Company over the requisite service period. On December 6, 2016, the Company granted one employee stock options to purchase 2,000 shares at an exercise price of $38.00 per share in accordance with the 2015 Plan, with vesting continuing until December 2020. The total fair value of $63,937 for these stock options was recognized by the Company over the requisite service period. On September 25, 2017, the Company granted an employee stock options to purchase 15,000 shares at an exercise price of $15.00 per share and 10,000 shares at an exercise price of $19.00 per share, in accordance with the 2015 Plan. The options were fully vested as of September 25, 2019. The total fair value of $321,011 for these stock options was recognized by the Company over the requisite service period. On January 30, 2019, the Company entered into a Non-qualified Stock Option Agreement with an individual consultant to the Company, in accordance with the 2015 Plan. The agreement granted options to purchase 250 shares prior to the expiration date of December 31, 2025 at an exercise price of $45.00. The options granted were 100% vested as of the grant date. On March 11, 2019, the Company canceled previously granted stock options to employees in the following amounts: 3,000 shares at an exercise price of $45.00 per share; 3,200 shares at an exercise price of $48.00 per share; 2,000 shares at an exercise price of $38.00 per share; 15,000 shares at an exercise price of $15.00 per share; and 10,000 shares at an exercise price of $19.00 per share. On March 11, 2019, the Company replaced those canceled stock options exercisable for a total of 33,200 shares with virtually identical stock options at an exercise price of $6.50 per share in accordance with the 2015 Plan. The incremental fair value of $24,898 for these stock options was recognized by the Company over the requisite service periods, which ranged by tranche from fully vested at issuance through vesting by December 2020. On March 11, 2019, the Company granted employees stock options to purchase 10,100 shares at an exercise price of $6.50 per share in accordance with the 2015 Plan, with vesting continuing until 2023. The total fair value of $44,591 for these stock options is being recognized by the Company over the requisite service period. On September 2, 2020, the Company granted employees stock options to purchase 99,000 shares, including 37,500 shares of performance-based options, at an exercise price of $4.00 per share in accordance with the 2015 Plan, with vesting continuing until 2024. The total fair value of $327,181 for these stock options is being recognized by the Company over the requisite service period. The weighted average estimated values of director and employee stock option grants, as well as the weighted average assumptions that were used in calculating such values during the twelve months ended December 31, 2020 and 2019, were based on estimates at the date of grant as follows: April 30, January 1, February 10, 2015 Grant 2016 Grant 2016 Grant Risk-free interest rate 1.43 % 1.76 % 1.15 % Weighted average expected term 5 years 5 years 5 years Expected volatility 143.10 % 134.18 % 132.97 % Expected dividend yield 0.00 % 0.00 % 0.00 % December 6, September 25, January 30, 2016 Grant 2017 Grant 2019 Grant Risk-free interest rate 1.84 % 1.85 % 2.54 % Weighted average expected term 5 years 5 years 5 years Expected volatility 123.82 % 130.79 % 115.80 % Expected dividend yield 0.00 % 0.00 % 0.00 % March 11, September 2, 2019 Grant 2020 Grant Risk-free interest rate 2.44 % 0.26 % Weighted average expected term 5 years 5 years Expected volatility 116.46 % 121.33 % Expected dividend yield 0.00 % 0.00 % A summary of stock option activity during the twelve months ended December 31, 2020, and 2019 is as follows: Weighted- Weighted- Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life Value Outstanding at January 1, 2020 46,860 $ 9.02 9 years 19,200 Granted 99,000 4.00 Forfeited and expired (500 ) 6.50 Outstanding at December 31, 2020 145,360 $ 5.61 9 years $ 19,200 Exercisable at December 31, 2020 39,160 $ 9.51 8 years $ 19,200 Weighted- Weighted- Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life Value Outstanding at January 1, 2019 36,760 $ 25.04 8 years 79,200 Granted 43,550 6.72 Forfeited and expired (33,450 ) 43.00 Outstanding at December 31, 2019 46,860 $ 9.02 9 years $ 19,200 Exercisable at December 31, 2019 35,460 $ 9.82 9 years $ 19,200 The weighted-average grant date fair value of options granted during the twelve months ended December 31, 2020 and 2019 was $3.30 and $4.49, respectively. As of December 31, 2020 and 2019, there was $322,874 and $56,012, respectively, of total unrecognized compensation costs related to stock options granted under our stock option agreements. The unrecognized compensation cost is expected to be recognized over a weighted-average period of four years. The total fair value of stock options that vested during the twelve months ended December 31, 2020, and 2019 was $16,650 and $108,035, respectively. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentrations | 16. Concentrations Revenues from the Company’s services to a limited number of customers have accounted for a substantial percentage of the Company’s total revenues. For the twelve months ended December 31, 2020, the Company’s two largest customers, State of Michigan (“Michigan”), a direct customer, and Quicken Loans, a direct customer, accounted for approximately 47% and 8%, respectively, of the Company’s total revenue for that period. For the twelve months ended December 31, 2019, the Company’s two largest customers, Loffler, Inc. (including their acquisition of Laser Systems, Inc.), a reseller, and Franklin County Board of Developmental Disabilities, a direct client, each accounted for approximately 6%, of the Company’s revenues for that period. For the twelve months ended December 31, 2020, and 2019, government contracts represented approximately 64% and 41% of the Company’s net revenues, respectively. A significant portion of the Company’s sales to Resellers represent ultimate sales to government agencies. As of December 31, 2020, accounts receivable concentrations from the Company’s two largest customers were 54% and 16% of gross accounts receivable, respectively, and as of December 31, 2019, accounts receivable concentrations from the Company’s four largest customers were 25%, 25%, 16% and 12% of gross accounts receivable, respectively. Accounts receivable balances from the Company’s two largest customers at December 31, 2020 have been partially collected. |
Provision for Income Taxes
Provision for Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Provision for Income Taxes | 17. Provision For Income Taxes The Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. For the twelve months ended December 31, 2020, and 2019, we have recognized the minimum amount of state income tax as required by the states in which we are required to file taxes. We are not currently subject to further federal or state tax since we have incurred losses since our inception. Income tax benefit consists of the following Federal, deferred components for the twelve months ended December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Benefit of net operating losses $ (72,541 ) $ (524,000 ) Other timing differences (91,770 ) 76,070 Change in valuation allowance, including $188,000 reduction in valuation allowance due to purchased deferred tax liability (23,989 ) 447,930 Tax benefit $ (188,300 ) $ - A reconciliation is provided below of the U.S. Federal income tax expense at a statutory rate of 21% for the twelve months ended December 31, 2020 and 2019: December 31, 2020 December 31, 2019 U.S. statutory rate 21 % 21 % U.S. Federal income tax at statutory rate $ (501,690 ) $ (447,930 ) Increase (decrease) in income taxes due to: Non-deductible earnout expense 299,040 - Non-deductible goodwill amortization 33,390 - Other differences 4,949 - Benefit of acquisition-date purchased deferred tax liability (188,300 ) - Other change in valuation allowance 164,311 447,930 Income tax benefit $ (188,300 ) $ - The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below: December 31, 2020 December 31, 2019 Deferred tax assets Reserves and accruals not currently deductible for tax purposes $ 51,000 $ 35,000 Amortizable assets 72,000 - Net operating loss carryforwards 4,020,000 3,987,000 4,143,000 4,022,000 Deferred tax liabilities Property and equipment (143,000 ) - Net Deferred tax assets 4,000,000 4,022,000 Valuation allowance (4,000,000 ) (4,022,000 ) $ - $ - As of December 31, 2020 and 2019, we had federal net operating loss carry forwards of approximately $19,129,000 and $18,986,000, respectively, which can be used to offset future federal income tax. The federal and state net operating loss carry forwards expire at various dates through 2040. We recorded a valuation allowance against all of our deferred tax assets as of both December 31, 2020, and December 31, 2019. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve. |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Certain Relationships and Related Transactions | 18. Certain Relationships and Related Transactions Certain Relationships and Related Transactions The following is a summary of the related person transactions that Intellinetics has participated in at any time during the reporting period. Notes Payable – Related Parties See Note 11 for a summary of notes issued to related parties and the subsequent conversion of such related party notes into shares of our common stock on March 2, 2020. 2020 Private Placement The following related persons participated as investors a private placement of securities by the Company, on the same terms as all other investors participating in the offering. The Company issued and sold (i) shares of common stock, at a price of $4.00 per share and (ii) units, with each unit consisting of $1,000 in 12% subordinated notes and 40 shares . Name of Investor Relationship to the Company Number of Date of Michael N. Taglich Beneficially owns more than 5% of the common stock of the Company. 148,750 03/02/2020 Robert F. Taglich Beneficially owns more than 5% of the Common Stock of the Company. 118,750 03/02/2020 Robert C. Schroeder Director and Chairman of the Board of the Company 5,000 03/02/2020 James F. DeSocio President and Chief Executive Officer; Director of the Company 7,500 03/02/2020 Joseph D. Spain Chief Financial Officer of the Company 2,000 03/02/2020 Promoters and Certain Control Persons Robert C. Schroeder, a director of the Company, is the Vice President of Investment Banking at Taglich Brothers, Inc. Robert F. Taglich and Michael N. Taglich, each beneficial owners of more than 5% of the Company’s common stock, are also both principals of Taglich Brothers, Inc. We retained Taglich Brothers, Inc. on an exclusive basis to render financial advisory and investment banking services to the Company in connection with our acquisition of Graphic Sciences. Pursuant to an Engagement Agreement, dated April 15, 2019, we paid Taglich Brothers, Inc. a success fee of $300,000 as a result of the successful completion of the acquisition of Graphic Sciences, Inc. We retained Taglich Brothers, Inc., as the exclusive placement agent for the 2020 private placement, as described above, pursuant to a Placement Agent Agreement. In connection with the 2020 private placement, we paid Taglich Brothers, Inc. $440,000, which represented an 8% commission based upon the gross proceeds of the 2020 private placement. In addition, for its services in the 2020 private placement, Taglich Brothers, Inc. was issued warrants to purchase 95,500 shares of common stock, which amount is equal to 10% of the shares and unit shares sold in the 2020 private placement, which have an exercise price of $4.00 per share of common stock, are exercisable for a period of five years, contain customary cashless exercise and anti-dilution protection rights and are entitled to piggy-back registration rights. We retained Taglich Brothers, Inc. as the exclusive placement agent for the 2020 note conversion, as described above in Note 11 (Notes Payable – Related Parties), pursuant to the Placement Agent Agreement. In connection with the 2020 note conversion, we issued 35,250 shares of common stock to Taglich Brothers, Inc., which, based on the conversion price of $4.00 per share, was equal to 3% of the original principal amount of the converted notes. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 19. Subsequent Events PPP Loan Forgiveness As discussed in Note 10 – Notes Payable, the Company applied for forgiveness of its PPP loan, and the entire principal balance and interest were forgiven in January 2021. The forgiveness income, totaling $845,083, will be recorded as other income for the year ended December 31, 2021. Issuance of Restricted Common Stock to Directors On February 15, 2021, the Company issued 12,207 new Shares of restricted common stock to directors of the Company in accordance with the Company’s director compensation policy. Stock compensation of $57,500 was recorded on the issuance of the common stock. Commitment to Purchase Capital Equipment and Enter Into a Lease On February 18, 2021, the Company committed to purchase warehouse racking in the amount of $326,864. The Company is evaluating equipment financing options to finance the equipment purchase. On February 5, 2021, the Company signed a lease for 37,000 square foot building, primarily for document storage, in Sterling Heights, MI, with monthly rental payments of $20,452 commencing on May 1, 2021 and a lease term continuing to April 30, 2028. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Intellinetics and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Intellinetics Ohio and Graphic Sciences. The Company considers the criteria established under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses. Actual results could differ from estimated amounts. Significant estimates and assumptions include valuation allowances related to receivables, accounts receivable -unbilled, allowance for obsolescence or slow-moving parts and supplies inventory, the recoverability of long-term assets, depreciable lives of property and equipment, purchase price allocations for acquisitions including earnout liabilities, fair value for goodwill and intangibles, the lease liabilities, estimates of fair value deferred taxes and related valuation allowances. The Company’s management monitors these risks and assesses its business and financial risks on a quarterly basis. |
Revenue Recognition | Revenue Recognition In accordance with ASC 606, the Company follows a five-step model to assess each contract of a sale or service to a customer: identify the legally binding contract, identify the performance obligations, determine the transaction price, allocate the transaction price, and determine whether revenue will be recognized at a point in time or over time. Revenue is recognized when a performance obligation is satisfied and the customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services. In addition, ASC 606 requires disclosures of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We categorize revenue as software, software as a service, software maintenance services, professional services, and storage and retrieval services. We earn the majority of our revenue from the sale of professional services, followed by the sale of software maintenance services and software as a service. Specific revenue recognition policies apply to each category of revenue. a) Sale of software Revenues included in this classification typically include sales of licenses with professional services to new customers, additional software licenses to existing customers, and sales of software with or without services to the Company’s resellers (See section j) - Reseller Agreements, below. Our software licenses are functional intellectual property and typically provide customers with the right to use our software in perpetuity as it exists when made available to the customer. We recognize revenue from software licenses at a point in time upon delivery, provided all other revenue recognition criteria are met. b) Sale of software as a service Sale of software as a service (“SaaS”) consists of revenues from arrangements that provide customers the use of the Company’s software applications, as a service, typically billed on a monthly or annual basis. Advance billings of these services are not recorded to the extent that the term of the arrangement has not commenced and payment has not been received. Revenue on these services is recognized over the contract period. c) Sale of software maintenance services Software maintenance services revenues consist of revenues derived from arrangements that provide post-contract support (“PCS”), including software support and bug fixes, to the Company’s software license holders. Advance billings of PCS are not recorded to the extent that the term of the PCS has not commenced and payment has not been received. PCS are considered distinct services. However, these distinct services are considered a single performance obligation consisting of a series of services that are substantially the same and have the same pattern of transfer to the customer. These revenues are recognized over the term of the maintenance contract. d) Sale of professional services Professional services revenues consist of revenues from document scanning and conversion services, consulting, discovery, training, and advisory services to assist customers with document management needs, as well as repair and maintenance services for customer equipment. We recognize professional services revenue over time as the services are delivered using an input or output method (e.g., labor hours incurred as a percentage of total labor hours budgeted, images scanned, or similar milestones), as appropriate for the contract, provided all other revenue recognition criteria are met. e) Sale of storage and retrieval services Sale of document storage and retrieval services consist principally of secured warehouse storage of customer documents, which are typically retained for many years, as well as retrieval per agreement terms and certified destruction if desired. We recognize revenue from document storage and retrieval services over the term of the contract for storage and for the retrieval and destructions components, as the services are delivered. Customers are generally billed monthly based upon contractually agreed-upon terms. f) Arrangements with multiple performance obligations In addition to selling software licenses, software as a service, software maintenance services, professional services, and storage and retrieval services on a stand-alone basis, a portion of our contracts include multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each distinct performance obligation, on a relative basis using its standalone selling price. The Company determines the standalone selling price based on the price charged for the deliverable when sold separately. g) Contract balances When the timing of our delivery of goods or services is different from the timing of payments made by customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Customers that prepay are represented by deferred revenue until the performance obligation is satisfied. Contract assets represent arrangements in which the good or service has been delivered but payment is not yet due. Our contract assets consisted of accounts receivable, unbilled, which are disclosed on the consolidated balance sheets. Our contract liabilities consisted of deferred (unearned) revenue, which is generally related to software as a service or software maintenance contracts. We classify deferred revenue as current based on the timing of when we expect to recognize revenue, which are disclosed on the consolidated balance sheets. The following table presents changes in our contract assets and liabilities during the twelve months ended December 31, 2020, and 2019: Balance at Addition Revenue Billings Balance at Twelve months ended December 31, 2020 Contract assets: Accounts receivable, unbilled $ 23,371 $ 276,023 $ 917,361 $ (693,233 ) $ 523,522 Twelve months ended December 31, 2019 Contract assets: Accounts receivable, unbilled $ 65,118 $ - $ 156,876 $ (198,623 ) $ 23,371 h) Deferred revenue Amounts that have been invoiced are recognized in accounts receivable, deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet be recognized. Deferred revenues typically relate to maintenance and software-as-a-service agreements which have been paid for by customers prior to the performance of those services, and payments received for professional services and license arrangements and software-as-a-service performance obligations that have been deferred until fulfilled under our revenue recognition policy. Remaining performance obligations represent the transaction price from contracts for which work has not been performed or goods and services have not been delivered. We expect to recognize revenue on approximately 95% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. As of December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations for software as a service and software maintenance contracts with a duration greater than one year was $45,323. As of December 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations for software as a service and software maintenance contracts with a duration greater than one year was $69,381. This does not include revenue related to performance obligations that are part of a contract whose original expected duration is one year or less. Balance at Addition Billings Recognized Balance at Twelve months ended December 31, 2020 Contract liabilities: Deferred revenue $ 754,073 $ 198,659 $ 3,038,446 $ (2,995,047 ) $ 996,131 Twelve months ended December 31, 2019 Contract liabilities: Deferred revenue $ 723,619 $ - $ 2,637,191 $ (2,606,737 ) $ 754,073 i) Rights of return and customer acceptance The Company does not generally offer variable consideration, financing components, rights of return or any other incentives such as concessions, product rotation, or price protection and, therefore, does not provide for or make estimates of rights of return and similar incentives. Our contracts with customers generally do not include customer acceptance clauses. j) Reseller agreements The Company executes certain sales contracts through resellers. The Company recognizes revenues relating to sales through resellers when all the recognition criteria have been met including passing of control. In addition, the Company assesses the credit-worthiness of each reseller, and if the reseller is undercapitalized or in financial difficulty, any revenues expected to emanate from such resellers are deferred and recognized only when cash is received and all other revenue recognition criteria are met. k) Contract costs The Company capitalizes the incremental costs of obtaining a contract with a customer. We have determined that certain sales commissions meet the requirement to be capitalized, and we amortize these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain contracts were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets. l) Sales taxes Sales taxes charged to and collected from customers as part of the Company’s sales transactions are excluded from revenues, as well as the determination of transaction price for contracts with multiple performance obligations, and recorded as a liability to the applicable governmental taxing authority. m) Disaggregation of revenue The Company provides disaggregation of revenue based on product groupings in our consolidated statements of operations as it believes this best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Revenues from contracts are primarily within the United States. International revenues were not material to the consolidated financial statements for the twelve months ended December 31, 2020 and 2019. n) Significant financing component The Company’s customers typically do not pay in advance for goods or services to be transferred in excess of one year. As such, it is not necessary to determine if the Company benefits from the time value of money and should record a component of interest income related to the upfront payment due to the practical expedient of ASC 606-10-32-18. |
Concentrations of Credit Risk | Concentrations of Credit Risk The Company maintains its cash with high credit quality financial institutions. At times, the Company’s cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit. The number of customers that comprise the Company’s customer base, along with the different industries, governmental entities and geographic regions, in which the Company’s customers operate, limits concentrations of credit risk with respect to accounts receivable, with the exception of the State of Michigan. In the twelve months ended December 31, 2020, the Company’s sales to the State of Michigan totaled approximately 47% of revenues. The Company has not experienced any losses, nor is not aware of any losses by Graphic Sciences, resulting from nonpayment by the State of Michigan. The Company does not generally require collateral or other security to support customer receivables; however, the Company may require its customers to provide retainers, up-front deposits or irrevocable letters-of-credit when considered necessary to mitigate credit risks. The Company has established an allowance for doubtful accounts based upon facts surrounding the credit risk of specific customers and past collections history. Credit losses have been within management’s expectations. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $65,927 and $35,733, respectively. |
Parts and Supplies | Parts and Supplies Parts and supplies are valued at the lower of cost or net realizable value. Costs are determined using the first-in, first-out method. Parts and supplies are used for scanning and document conversion services. A provision for potentially obsolete or slow-moving parts and supplies inventory is made based on parts and supplies levels, future sales forecasted and management’s judgment of potentially obsolete parts and supplies. The Company recorded an allowance of $15,000 at December 31, 2020 and there was no allowance recorded as of December 31, 2019. |
Property and Equipment | Property and Equipment Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed over the estimated useful lives of the related assets on a straight-line basis. Furniture and fixtures, computer hardware and purchased software are depreciated over three to seven years. Leasehold improvements are amortized over the life of the lease or the asset, whichever is shorter, generally seven to ten years. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation and amortization of these assets are removed from the accounts and the resulting gains and losses are reflected in the results of operations. |
Intangible Assets | Intangible Assets All intangible assets have finite lives and are stated at cost, net of amortization. Amortization is computed over the useful life of the related assets on a straight-line method. |
Goodwill | Goodwill The carrying value of goodwill is not amortized, but is tested for impairment annually as of December 31, as well as on an interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unity may not be recoverable. An impairment charge is recognized for the amount by which the carrying amount exceeds the recorded fair value. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, “Property, Plant, and Equipment.” The Company tests long-lived assets or asset groups, such as property and equipment, for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed of before the end of its estimated useful life. Recoverability is assessed based on comparing the carrying amount of the asset to the aggregate pre-tax undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group. Impairment is recognized when the carrying amount is not recoverable and exceeds the fair value of the asset or asset group. The impairment loss, if any, is measured as the amount by which the carrying amount exceeds fair value, which for this purpose is based upon the discounted projected future cash flows of the asset or asset group. There were no impairment of long lived assets in the periods ended December 31, 2020 or 2019. |
Purchase Accounting Related Fair Value Measurements | Purchase Accounting Related Fair Value Measurements The Company allocates the purchase price, including contingent consideration, of its acquisitions to the assets and liabilities acquired, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Such fair market value assessments are primarily based on third-party valuations using assumptions developed by management that require significant judgments and estimates that can change materially as additional information becomes available. The purchase price allocated to intangibles is based on unobservable factors, including but not limited to, projected revenues, expenses, customer attrition rates, a weighted average cost of capital, among others. The weighted average cost of capital uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows. The approach to valuing the initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected revenues and expenses over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured, and volatility rates. The Company finalizes the purchase price allocation once certain initial accounting valuation estimates are finalized, and no later than 12 months following the acquisition date. |
Leases | Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. The Company does not have any finance leases, as a lessee, and no long-term leases for which it is the lessor. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the reasonably certain lease term. As the Company’s leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and reduced by lease incentives, such as tenant improvement allowances. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based payments to employees in accordance with ASC 718, “Compensation - Stock Compensation.” Stock-based payments to employees include grants of stock that are recognized in the consolidated statement of operations based on their fair values at the date of grant. The Company accounts for stock-based payments to non-employees in accordance with ASC 718, “Compensation - Stock Compensation,” which requires that such equity instruments are recorded at their fair values on the grant date. The grant date fair value of stock option awards is recognized in earnings as stock-based compensation cost over the requisite service period of the award using the straight-line attribution method. The Company estimates the fair value of the stock option awards using the Black-Scholes-Merton option pricing model. The exercise price of options is specified in the stock option agreements. The expected volatility is based on the historical volatility of the Company’s stock for the previous period equal to the expected term of the options. The expected term of options granted is based on the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected term of the options. The expected dividend yield is based upon the yield expected on date of grant to occur over the term of the option. |
Software Development Costs | Software Development Costs The Company designs, develops, tests, markets, licenses, and supports new software products and enhancements of current products. The Company continuously monitors its software products and enhancements to remain compatible with standard platforms and file formats. In accordance with ASC 985-20, “Costs of Software to be Sold, Leased or Otherwise Marketed,” the Company expenses software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization. Based on the Company’s software development process, technical feasibility is established upon completion of a working model. Technological feasibility is typically reached shortly before the release of such products. No such costs were capitalized during the periods presented in this report. In accordance with ASC 350-40, “Internal-Use Software,” the Company capitalizes purchase and implementation costs of internal use software. Once an application has reached development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon complete of all substantial testing. The Company also capitalize costs related to specific upgrades and enhancements when it is probable that the expenditure will result in additional functionality. No such costs were capitalized during the periods presented in this report. For the twelve months ended December 31, 2020, and 2019, our expensed software development costs were $293,092 and $467,364, respectively. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Intangibles – Goodwill and Other – Internal-Use Software In August 2018, the FASB issued ASU 2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. ASC 2018-15 was effective for the Company beginning in its first quarter of 2020. The Company has concluded that the impact on its consolidated financial statements and related disclosures is not material. Fair Value In August 2018, the FASB issued ASU 2018-13, which is guidance that changes the fair value measurement disclosure requirements of ASC 820. ASU 2018-13 was effective for the Company beginning in its first quarter of 2020. The Company has concluded that the impact on its consolidated financial statements and related disclosures is not material. |
Recently Issued Accounting Pronouncements Not Yet Effective | Recently Issued Accounting Pronouncements Not Yet Effective Financial Instruments – Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which provides optional relief through specific exceptions and practical expedients for transitioning away from reference rates that are expected to be discontinued. The relief generally applies to eligible modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows related to replacement of a reference rate. The relief allows such modifications to be accounted for as continuations of existing contracts without additional analysis. The optional relief is available from March 2020 through December 31, 2022. The Company is currently evaluating the impact of this ASU. Income Taxes In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” which removes certain exceptions related to intra-period tax allocations and deferred tax accounting on outside basis differences in foreign subsidiaries and equity method investments. Additionally, it provides other simplifying measures for the accounting for income taxes. The new standard is effective for fiscal years beginning after December 15, 2021 with early adoption permitted. The Company is currently evaluating the impact of this ASU. Equity Securities, Equity Method Investments and Certain Derivatives In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815.” This ASU clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives. The effective date of the standard will be for annual periods beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on its consolidated financial statements and related disclosures. All other Accounting Standards Updates issued but not yet effective are not expected to have a material effect on the Company’s future consolidated financial statements. |
Advertising | Advertising The Company expenses the cost of advertising as incurred. Advertising expense for the twelve months ended December 31, 2020, and 2019 amounted to $7,362 and $4,255, respectively. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted income or loss per share is computed by dividing net income or loss by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares gives effect to all dilutive potential common shares outstanding during the period using the treasure stock method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive, including warrants or options which are out-of-the-money and for those periods with a net loss. The twelve months ended December 31, 2020 and 2019 reported a net loss. |
Income Taxes | Income Taxes The Company and its subsidiaries file a consolidated federal income tax return. The provision for income taxes is computed by applying statutory rates to income before taxes. Deferred income taxes are recognized for the tax consequences in future years of temporary differences between the financial reporting and tax bases of assets and liabilities as of each period-end based on enacted tax laws and statutory rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. A 100% valuation allowance has been established on deferred tax assets at December 31, 2020 and 2019, due to the uncertainty of our ability to realize future taxable income. For the twelve months ended December 31, 2020 the Company recovered a net $179,400 of its valuation allowance in conjunction with the consolidation of the net deferred tax liability of its wholly owned subsidiary, Graphic Sciences. The Company accounts for uncertainty in income taxes in its consolidated financial statements as required under ASC 740, “Income Taxes.” The standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition accounting. Management determined there were no material uncertain positions taken by the Company in its tax returns. |
Segment Information | Segment Information Operating segments are defined in the criteria established under ASC 280, “Segment Reporting,” as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: Document Management and Document Conversion. These segments contain individual business components that have been combined on the basis of common management, customers, solutions offered, service processes and other economic characteristics. The Company currently has no intersegment sales. The Company evaluates the segments’ performance based on gross profits. The Document Management Segment provides cloud-based content services software. Its modular suite of solutions complements existing operating and accounting systems to serve a mission-critical role for organizations to make content secure, compliant, and process-ready. This segment conducts its primary operations in the United States. Markets served include highly regulated, risk and compliance-intensive markets in healthcare, K-12 education, public safety, other public sector, risk management, financial services, and others. Solutions are sold both directly to end-users and through resellers. The Document Conversion Segment provides services for scanning and indexing, converting images from paper to digital, paper to microfilm, and microfiche to microfilm, as well as long-term physical document storage and retrieval. This segment conducts its primary operations in the United States. Markets served include business and federal, county, and municipal governments. Solutions are sold both directly to end-users and through a reseller distributor. Information by operating segment is as follows: Twelve months ended Twelve months ended Revenues Document Management $ 2,816,848 $ 2,368,140 Document Conversion 5,436,543 167,815 Total revenues $ 8,253,391 $ 2,535,955 Gross profit Document Management $ 2,160,807 $ 1,868,471 Document Conversion 2,829,931 99,641 Total gross profit $ 4,990,738 $ 1,968,112 Capital additions, net Document Management $ 6,440 $ - Document Conversion 70,414 5,489 Total capital additions, net $ 76,854 $ 5,489 December 31, 2020 December 31, 2019 Total assets Document Management $ 1,658,921 $ 981,085 Document Conversion 5,177,854 5,489 Corporate 3,507,858 - Total assets $ 10,344,633 $ 986,574 |
Statement of Cash Flows | Statement of Cash Flows For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks. |
Reclassifications | Reclassifications Certain amounts reported in prior filings of the consolidated financial statements have been reclassified to conform to current presentation. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Contract Assets and Liabilities | The following table presents changes in our contract assets and liabilities during the twelve months ended December 31, 2020, and 2019: Balance at Addition Revenue Billings Balance at Twelve months ended December 31, 2020 Contract assets: Accounts receivable, unbilled $ 23,371 $ 276,023 $ 917,361 $ (693,233 ) $ 523,522 Twelve months ended December 31, 2019 Contract assets: Accounts receivable, unbilled $ 65,118 $ - $ 156,876 $ (198,623 ) $ 23,371 Balance at Addition Billings Recognized Balance at Twelve months ended December 31, 2020 Contract liabilities: Deferred revenue $ 754,073 $ 198,659 $ 3,038,446 $ (2,995,047 ) $ 996,131 Twelve months ended December 31, 2019 Contract liabilities: Deferred revenue $ 723,619 $ - $ 2,637,191 $ (2,606,737 ) $ 754,073 |
Schedule of Segment Information | Information by operating segment is as follows: Twelve months ended Twelve months ended Revenues Document Management $ 2,816,848 $ 2,368,140 Document Conversion 5,436,543 167,815 Total revenues $ 8,253,391 $ 2,535,955 Gross profit Document Management $ 2,160,807 $ 1,868,471 Document Conversion 2,829,931 99,641 Total gross profit $ 4,990,738 $ 1,968,112 Capital additions, net Document Management $ 6,440 $ - Document Conversion 70,414 5,489 Total capital additions, net $ 76,854 $ 5,489 December 31, 2020 December 31, 2019 Total assets Document Management $ 1,658,921 $ 981,085 Document Conversion 5,177,854 5,489 Corporate 3,507,858 - Total assets $ 10,344,633 $ 986,574 |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Fair Value of Assets Acquired and Liabilities Assumed | The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of acquisitions as follows: Total March 2, 2020 April 21, 2020 Assets acquired: Cash $ 17,269 $ 17,269 $ - Accounts receivable 1,122,737 1,071,770 50,967 Accounts receivable, unbilled 276,023 276,023 - Parts and supplies 91,396 91,396 - Prepaid expenses 73,116 73,116 - Other current assets 5,954 5,954 - Right of use assets 2,885,618 2,885,618 - Property and equipment 735,885 732,372 3,513 Intangible assets (see Note 7) 1,361,000 1,230,000 131,000 6,568,998 6,383,518 185,480 Liabilities assumed: Accounts payable 168,749 129,622 39,127 Accrued expenses 162,426 155,949 6,477 Lease liabilities 2,947,684 2,947,684 - Federal and state taxes payable 168,900 168,900 - Deferred revenue 198,659 39,186 159,473 Deferred tax liabilities - Net 149,900 149,900 - 3,796,318 3,591,241 205,077 Total identifiable net assets/(liabilities) 2,772,680 2,792,277 (19,597 ) Purchase price 5,095,567 4,592,453 503,114 Goodwill - Excess of purchase price over fair value of net assets acquired $ 2,322,887 $ 1,800,176 $ 522,711 |
Schedule of Pro Forma Information | The following unaudited pro forma information presents a summary of the consolidated results of operations for the Company as if the acquisitions of Graphic Sciences and CEO Image had occurred on January 1, 2019. For the Twelve months ended (unaudited) (unaudited) December 31, 2020 December 31, 2019 Total revenues $ 9,686,354 $ 10,324,486 Net loss $ (1,993,389 ) $ (1,565,961 ) Basic and diluted net loss per share $ (0.70 ) $ (0.56 ) The unaudited pro forma consolidated results are based on the Company’s historical financial statements and those of Graphic Sciences and CEO Image and do not necessarily indicate the results of operations that would have resulted had the acquisition actually been completed at the beginning of the applicable period presented. The pro forma financial information assumes that the companies were combined as of January 1, 2019. The following table presents the amounts of revenue and earnings of the acquirees since the acquisition date included in the consolidated income statement for the reporting period. For the twelve months ended December 31, 2020 Graphic Sciences CEO Image Total revenues $ 5,238,654 $ 375,863 Net income $ 645,042 $ (a) (a) Total earnings from the CEO Image acquisition is impracticable to disclose as the operations were merged with existing operations and not accounted for separately. |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | At December 31, 2020, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 years $ 119,000 $ (9,917 ) $ 109,083 Customer contracts 5-8 years 1,242,000 (166,112 ) 1,075,888 $ 1,361,000 $ (176,029 ) $ 1,184,971 |
Schedule of Amortization Expense for Intangible Assets | The following table represents future amortization expense for intangible assets subject to amortization. For the Twelve Months Ending December 31, Amount 2021 $ 216,475 2022 216,475 2023 216,475 2024 216,475 2025 199,008 Thereafter 120,063 $ 1,184,971 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Summary of Notes Payable | The table below reflects all other notes payable at December 31, 2019. December 31, 2019 Fair Value 2016 Unrelated Notes (a) $ 942,256 2017 Unrelated Notes (a) 2,011,859 2018 Unrelated Notes (a) 1,028,792 Total $ 3,982,907 December 31, 2019 Fair Value 2016 Related Notes (a) $ 405,784 2017 Related Notes (a) 445,810 2018 Related Notes (a) 457,241 Total $ 1,308,835 (a) The fair value was based upon Level 2 inputs. See Note 10 for additional information about the Company’s 2016, 2017, and 2018 Unrelated Notes. See Note 11 for additional information about the Company’s 2016, 2017, and 2018 Related Notes. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment are comprised of the following: December 31, 2020 December 31, 2019 Computer hardware and purchased software $ 1,019,259 $ 259,959 Leasehold improvements 275,106 221,666 Furniture and fixtures 82,056 82,056 1,376,421 563,681 Less: accumulated depreciation and amortization (677,669 ) (556,762 ) Property and equipment, net $ 698,752 $ 6,919 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | The table below reflects all notes payable at December 31, 2020 and 2019, respectively, with the exception of related party notes disclosed in Note 11 - Notes Payable - Related Parties. December 31, 2020 December 31, 2019 PPP Note Payable (a) $ 838,700 $ - 2020 Notes 2,000,000 - 2018 Unrelated Notes - 900,000 2017 Unrelated Notes - 1,760,000 2016 Unrelated Notes, net of beneficial conversion feature of $50,703 - 824,297 Total notes payable $ 2,838,700 $ 3,484,297 Less unamortized debt issuance costs (224,767 ) (144,334 ) Less unamortized debt discount (231,111 ) - Less current portion (580,638 ) 3,339,963 Long-term portion of notes payable $ 1,802,184 $ - |
Schedule of Future Minimum Principal Payments of Notes Payable | Future minimum principal payments of these notes payable as described in this Note 10 are as follows: As of December 31, Amount 2021 (a) $ 580,638 2022 (a) 258,062 2023 2,000,000 Total $ 2,838,700 (a) The PPP Note Payable totaling $838,700 was fully forgiven January 20, 2021, as described below and in Note 19 – Subsequent Events. |
Notes Payable - Related Parti_2
Notes Payable - Related Parties (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable Due to Related Parties | The table below reflects the notes payable to related parties at December 31, 2020 and 2019, respectively: December 31, 2020 December 31, 2019 2019 Related Notes $ - $ 397,728 2018 Related Notes - 400,000 2017 Related Notes - 390,000 2016 Related Notes, net of beneficial conversion feature of $20,015 - 354,985 Total notes payable - related party $ - $ 1,542,713 Unamortized original issue discount and debt issuance costs - (75,313 ) Less current portion - (1,467,400 ) Long-term portion of notes payable-related party $ - $ - |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Rental Payments for Operating Leases | Future minimum lease payments under these operating leases are as follows: For the Twelve Months Ending December 31, Amount 2021 $ 840,812 2022 617,255 2023 617,085 2024 550,878 2025 542,750 Thereafter 366,626 $ 3,535,406 |
Schedule of Operating Lease Costs | Additional information pertaining to the Company’s lease are as follows: For the Twelve Months Ending December 31, 2020: Operating cash flows from operating leases $ 482,425 Weighted average remaining lease term – operating leases 5.1 years Weighted average discount rate – operating leases 7.96 % |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Schedule of Estimated Values of Warrants Valuation Assumptions | The estimated values of warrants, as well as the assumptions that were used in calculating such values were based on estimates at the issuance date as follows: Placement Bridge Risk-free interest rate 1.93 % 1.89 % Weighted average expected term 5 years 5 years Expected volatility 123.07 % 130.80 % Expected dividend yield 0.00 % 0.00 % Placement Placement Risk-free interest rate 2.06 % 2.14 % Weighted average expected term 5 years 5 years Expected volatility 129.87 % 129.34 % Expected dividend yield 0.00 % 0.00 % Placement Placement Risk-free interest rate 2.96 % 2.96 % Weighted average expected term 5 years 5 years Expected volatility 122.52 % 122.92 % Expected dividend yield 0.00 % 0.00 % Placement Risk-free interest rate 0.88 % Weighted average expected term 5 years Expected volatility 130.12 % Expected dividend yield 0.00 % |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Estimated Values of Stock Option Grants Valuation Assumptions | The weighted average estimated values of director and employee stock option grants, as well as the weighted average assumptions that were used in calculating such values during the twelve months ended December 31, 2020 and 2019, were based on estimates at the date of grant as follows: April 30, January 1, February 10, 2015 Grant 2016 Grant 2016 Grant Risk-free interest rate 1.43 % 1.76 % 1.15 % Weighted average expected term 5 years 5 years 5 years Expected volatility 143.10 % 134.18 % 132.97 % Expected dividend yield 0.00 % 0.00 % 0.00 % December 6, September 25, January 30, 2016 Grant 2017 Grant 2019 Grant Risk-free interest rate 1.84 % 1.85 % 2.54 % Weighted average expected term 5 years 5 years 5 years Expected volatility 123.82 % 130.79 % 115.80 % Expected dividend yield 0.00 % 0.00 % 0.00 % March 11, September 2, 2019 Grant 2020 Grant Risk-free interest rate 2.44 % 0.26 % Weighted average expected term 5 years 5 years Expected volatility 116.46 % 121.33 % Expected dividend yield 0.00 % 0.00 % |
Schedule of Stock Option Activity | A summary of stock option activity during the twelve months ended December 31, 2020, and 2019 is as follows: Weighted- Weighted- Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life Value Outstanding at January 1, 2020 46,860 $ 9.02 9 years 19,200 Granted 99,000 4.00 Forfeited and expired (500 ) 6.50 Outstanding at December 31, 2020 145,360 $ 5.61 9 years $ 19,200 Exercisable at December 31, 2020 39,160 $ 9.51 8 years $ 19,200 Weighted- Weighted- Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life Value Outstanding at January 1, 2019 36,760 $ 25.04 8 years 79,200 Granted 43,550 6.72 Forfeited and expired (33,450 ) 43.00 Outstanding at December 31, 2019 46,860 $ 9.02 9 years $ 19,200 Exercisable at December 31, 2019 35,460 $ 9.82 9 years $ 19,200 |
Provision for Income Taxes (Tab
Provision for Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Summary of Income Tax Benefits | Income tax benefit consists of the following Federal, deferred components for the twelve months ended December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Benefit of net operating losses $ (72,541 ) $ (524,000 ) Other timing differences (91,770 ) 76,070 Change in valuation allowance, including $188,000 reduction in valuation allowance due to purchased deferred tax liability (23,989 ) 447,930 Tax benefit $ (188,300 ) $ - |
Summary of Reconciliation of Income Tax Expense | A reconciliation is provided below of the U.S. Federal income tax expense at a statutory rate of 21% for the twelve months ended December 31, 2020 and 2019: December 31, 2020 December 31, 2019 U.S. statutory rate 21 % 21 % U.S. Federal income tax at statutory rate $ (501,690 ) $ (447,930 ) Increase (decrease) in income taxes due to: Non-deductible earnout expense 299,040 - Non-deductible goodwill amortization 33,390 - Other differences 4,949 - Benefit of acquisition-date purchased deferred tax liability (188,300 ) - Other change in valuation allowance 164,311 447,930 Income tax benefit $ (188,300 ) $ - |
Summary of Deferred Tax Assets and Liabilities | The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below: December 31, 2020 December 31, 2019 Deferred tax assets Reserves and accruals not currently deductible for tax purposes $ 51,000 $ 35,000 Amortizable assets 72,000 - Net operating loss carryforwards 4,020,000 3,987,000 4,143,000 4,022,000 Deferred tax liabilities Property and equipment (143,000 ) - Net Deferred tax assets 4,000,000 4,022,000 Valuation allowance (4,000,000 ) (4,022,000 ) $ - $ - |
Certain Relationships and Rel_2
Certain Relationships and Related Transactions (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | Name of Investor Relationship to the Company Number of Date of Michael N. Taglich Beneficially owns more than 5% of the common stock of the Company. 148,750 03/02/2020 Robert F. Taglich Beneficially owns more than 5% of the Common Stock of the Company. 118,750 03/02/2020 Robert C. Schroeder Director and Chairman of the Board of the Company 5,000 03/02/2020 James F. DeSocio President and Chief Executive Officer; Director of the Company 7,500 03/02/2020 Joseph D. Spain Chief Financial Officer of the Company 2,000 03/02/2020 |
Liquidity and Management's Pl_2
Liquidity and Management's Plans (Details Narrative) - USD ($) | Mar. 02, 2020 | Apr. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Accumulated deficit | $ (22,996,267) | $ (20,796,066) | ||
Cash | 1,907,882 | $ 404,165 | ||
Issuance of shares and debt, value | $ 5,500,000 | |||
Debt instrument, coversion of debt | $ 6,000,000 | |||
Recapitalization and new debt | $ 2,000,000 | |||
Paycheck Protection Program [Member] | ||||
Proceeds from loan | $ 838,700 |
Corporate Actions (Details Narr
Corporate Actions (Details Narrative) | Mar. 20, 2020 |
Deferred Interest Expense | |
Reverse stock split | (1-for-50) reverse stock split |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | |||
Dec. 31, 2020USD ($)Segment | Dec. 31, 2019USD ($) | Mar. 02, 2019USD ($) | Jan. 02, 2019USD ($) | |
Percentage of voting rights outstanding | 50.00% | |||
Revenue performance obligations percentage | 95.00% | |||
Revenue performance obligations amount | $ 45,323 | $ 69,381 | ||
Allowance for doubtful accounts receivable | 65,927 | 35,733 | ||
Inventory allowances | 15,000 | |||
Impairment of long lived assets | ||||
Research and development expense | 293,092 | 467,364 | ||
Operating lease, right-of-use asset | 2,641,005 | 97,239 | ||
Advertising expense | $ 7,362 | $ 4,255 | ||
Percentage of valuation allowance established on deferred tax assets | 100.00% | 100.00% | ||
Valuation allowance of net deferred tax liabilities | $ 179,400 | $ 4,022,000 | ||
Number of operating segments | Segment | 2 | |||
Furniture and Fixtures [Member] | Minimum [Member] | ||||
Property, plant and equipment, useful life | 3 years | |||
Furniture and Fixtures [Member] | Maximum [Member] | ||||
Property, plant and equipment, useful life | 7 years | |||
Computer Hardware and Purchased Software [Member] | Minimum [Member] | ||||
Property, plant and equipment, useful life | 3 years | |||
Computer Hardware and Purchased Software [Member] | Maximum [Member] | ||||
Property, plant and equipment, useful life | 7 years | |||
Leasehold Improvements [Member] | Minimum [Member] | ||||
Property, plant and equipment, useful life | 7 years | |||
Leasehold Improvements [Member] | Maximum [Member] | ||||
Property, plant and equipment, useful life | 10 years | |||
Sales Revenue, Net [Member] | Michigan [Member] | ||||
Concentration of risk | 47.00% | |||
ASU 2016-02 [Member] | ||||
Operating lease, lease liability | $ 2,947,684 | $ 143,761 | ||
Operating lease, right-of-use asset | $ 2,885,619 | $ 138,549 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Changes in Contract Assets and Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Unbilled Accounts receivables, balance at beginning of period | $ 23,371 | $ 65,118 |
Unbilled Accounts receivables, Addition from acquisition | 276,023 | |
Unbilled Accounts receivables, revenue recognized in advance of billings | 917,361 | 156,876 |
Unbilled Accounts receivables, billings | (693,233) | (198,623) |
Unbilled Accounts receivables, balance at end of period | 523,522 | 23,371 |
Deferred revenue, balance at beginning of period | 754,073 | 723,619 |
Deferred revenue, Addition from acquisition | 198,659 | |
Deferred revenue, billings | 3,038,446 | 2,637,191 |
Deferred revenue, recognized revenue | (2,995,047) | (2,606,737) |
Deferred revenue, balance at end of period | $ 996,131 | $ 754,073 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Segment Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Total revenues | $ 8,253,391 | $ 2,535,955 |
Total gross profit | 4,990,738 | 1,968,112 |
Total capital additions, net | 76,854 | 5,489 |
Total assets | 10,344,633 | 986,574 |
Document Management [Member] | ||
Total revenues | 2,816,848 | 2,368,140 |
Total gross profit | 2,160,807 | 1,868,471 |
Total capital additions, net | 6,440 | |
Total assets | 2,295,165 | 981,085 |
Document Conversion [Member] | ||
Total revenues | 5,436,543 | 167,815 |
Total gross profit | 2,829,931 | 99,641 |
Total capital additions, net | 70,414 | 5,489 |
Total assets | $ 8,049,468 | $ 5,489 |
Business Acquisitions (Details
Business Acquisitions (Details Narrative) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2020 | Nov. 03, 2020 | Aug. 03, 2020 | Apr. 21, 2020 | Mar. 02, 2020 | Dec. 31, 2019 | |
Earnout liability | $ 2,444,000 | |||||
Cash | 17,269 | $ 17,269 | ||||
Goodwill | 2,322,887 | 522,711 | 1,800,176 | |||
Professional fees | 636,440 | |||||
Seller [Member] | ||||||
Earnout liability | 686,200 | |||||
Graphic Sciences, Inc. [Member] | ||||||
Earnout liability | 2,110,000 | 686,200 | ||||
Cash | 3,906,253 | |||||
Goodwill | $ 1,800,176 | |||||
Graphic Sciences, Inc. [Member] | Seller [Member] | Three Year Period [Member] | ||||||
Earnout liability | 833,000 | |||||
Maximum payout | 2,500,000 | |||||
CEO Image Systems [Member] | ||||||
Earnout liability | 334,000 | 203,000 | ||||
Cash | 128,832 | |||||
Goodwill | $ 522,711 | |||||
Installment payments | $ 100,000 | $ 70,000 | $ 170,000 | |||
Net working capital | $ 1,282 | |||||
CEO Image Systems [Member] | Seller [Member] | ||||||
Earnout liability | 203,000 | |||||
CEO Image Systems [Member] | Seller [Member] | Two Year Period [Member] | ||||||
Earnout liability | 185,000 | |||||
Maximum payout | $ 370,000 |
Business Acquisitions - Schedul
Business Acquisitions - Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) | Dec. 31, 2020 | Apr. 21, 2020 | Mar. 02, 2020 |
Business Combinations [Abstract] | |||
Cash | $ 17,269 | $ 17,269 | |
Accounts receivable | 1,122,737 | 50,967 | 1,071,770 |
Accounts receivable, unbilled | 276,023 | 276,023 | |
Parts and supplies | 91,396 | 91,396 | |
Prepaid expenses | 73,116 | 73,116 | |
Other current assets | 5,954 | 5,954 | |
Right of use assets | 2,885,618 | 2,885,618 | |
Property and equipment | 735,885 | 3,513 | 732,372 |
Intangible assets (see Note 7) | 1,361,000 | 131,000 | 1,230,000 |
Assets | 6,568,998 | 185,480 | 6,383,518 |
Accounts payable | 168,749 | 39,127 | 129,622 |
Accrued expenses | 162,426 | 6,477 | 155,949 |
Lease liabilities | 2,947,684 | 2,947,684 | |
Federal and state taxes payable | 168,900 | 168,900 | |
Deferred revenue | 198,659 | 159,473 | 39,186 |
Deferred tax liabilities - Net | 149,900 | 149,900 | |
Liabilities | 3,796,318 | 205,077 | 3,591,241 |
Total identifiable net assets/(liabilities) | 2,772,680 | (19,597) | 2,792,277 |
Purchase price | 5,095,567 | 503,114 | 4,592,453 |
Goodwill - Excess of purchase price over fair value of net assets acquired | $ 2,322,887 | $ 522,711 | $ 1,800,176 |
Business Acquisitions - Sched_2
Business Acquisitions - Schedule of Pro Forma Information (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | ||
Total revenues | $ 9,686,354 | $ 10,324,486 | |
Net income (loss) | $ (1,993,389) | $ (1,565,961) | |
Basic and diluted net loss per share | $ (0.70) | $ (0.56) | |
Graphic Sciences [Member] | |||
Total revenues | $ 5,238,654 | ||
Net income (loss) | 645,042 | ||
CEO Image [Member] | |||
Total revenues | 375,863 | ||
Net income (loss) | [1] | ||
[1] | Total earnings from the CEO Image acquisition is impracticable to disclose as the operations were merged with existing operations and not accounted for separately. |
Intangible Assets, Net (Details
Intangible Assets, Net (Details Narrative) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Amortization expense | $ 176,029 |
Intangible Assets, Net - Schedu
Intangible Assets, Net - Schedule of Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Intangible assets, cost | $ 1,361,000 |
intangible assets, accumulated amortization | (176,029) |
Intangible assets, net | $ 1,184,971 |
Trade Names [Member] | |
Intangible assets, Estimated Useful Life | 10 years |
Intangible assets, cost | $ 119,000 |
intangible assets, accumulated amortization | (9,917) |
Intangible assets, net | 109,083 |
Customer Contracts [Member] | |
Intangible assets, cost | 1,242,000 |
intangible assets, accumulated amortization | (166,133) |
Intangible assets, net | $ 1,075,888 |
Customer Contracts [Member] | Minimum [Member] | |
Intangible assets, Estimated Useful Life | 5 years |
Customer Contracts [Member] | Maximum [Member] | |
Intangible assets, Estimated Useful Life | 8 years |
Intangible Assets, Net - Sche_2
Intangible Assets, Net - Schedule of Amortization Expense for Intangible Assets (Details) | Dec. 31, 2020USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2021 | $ 216,475 |
2022 | 216,475 |
2023 | 216,475 |
2024 | 216,475 |
2025 | 199,008 |
Thereafter | 120,063 |
Intangible assets | $ 1,184,971 |
Fair Value Measurements (Detail
Fair Value Measurements (Details Narrative) | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair value measurement, valuation description | Key unobservable inputs include revenue growth rates, which ranged from 0% to 7%, and volatility rates, which were 20% for gross profits. An increase in future revenues and gross profits may result in a higher estimated fair value while a decrease in future revenues and gross profits may result in a lower estimated fair value of the earnout liabilities. |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Notes Payable (Details) | Dec. 31, 2019USD ($) | |
2016 Unrelated Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | $ 942,256 | [1] |
2017 Unrelated Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | 2,011,859 | [1] |
2018 Unrelated Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | 1,028,792 | [1] |
Unrelated Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | 3,982,907 | |
2016 Related Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | 405,784 | [1] |
2017 Related Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | 445,810 | [1] |
2018 Related Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | 457,241 | [1] |
Related Notes [Member] | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Notes Payable, Fair Value | $ 1,308,835 | |
[1] | The fair value was based upon Level 2 inputs. See Note 10 for additional information about the Company's 2016, 2017, and 2018 Unrelated Notes. See Note 11 for additional information about the Company's 2016, 2017, and 2018 Related Notes. |
Fair Value Measurements - Sum_2
Fair Value Measurements - Summary of Changes in Fair Value of the Earnout Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | ||
Fair value at January 1, 2020 | ||
Additions | 889,200 | |
Change in fair value | 1,554,800 | |
Fair value at December 31, 2020 | $ 2,444,000 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 7,701 | $ 7,701 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Abstract] | ||
Computer hardware and purchased software | $ 1,019,259 | $ 259,959 |
Leasehold improvements | 275,106 | 221,666 |
Furniture and fixtures | 82,056 | 82,056 |
Property and equipment, gross | 1,376,421 | 563,681 |
Less: accumulated depreciation | (677,669) | (556,762) |
Property and equipment, net | $ 698,752 | $ 6,919 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Mar. 02, 2020 | Sep. 26, 2018 | Sep. 17, 2018 | Sep. 14, 2018 | Jan. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Apr. 21, 2020 | Apr. 15, 2020 | Nov. 30, 2017 | Dec. 30, 2016 |
Debt Instrument [Line Items] | |||||||||||
Accrued interest | $ 5,941 | $ 918,307 | |||||||||
Unamortized deferred finance costs, net | 144,334 | ||||||||||
Interest expense, debt | 548,742 | 735,474 | |||||||||
Notes payable | 2,838,700 | 3,484,297 | |||||||||
Debt discount | 18,296 | 11,931 | |||||||||
Asset Purchase Agreement [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Principal amount | $ 170,000 | ||||||||||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, interest percentage | 12.00% | ||||||||||
Number of sale of stock transaction | 875,000 | ||||||||||
Proceeds from issuance of debt | $ 3,500,000 | ||||||||||
Default penalty percentage | 20.00% | ||||||||||
Debt instrument interest rate, effective percentage | 14.00% | ||||||||||
Debt discount | $ 320,000 | 88,889 | |||||||||
Number of stock issued during period, shares | 80,000 | ||||||||||
Sale of stock price per share | $ 4 | ||||||||||
2018 Unrelated Notes [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Notes payable | 900,000 | ||||||||||
2017 Unrelated Notes [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Notes payable | 1,760,000 | ||||||||||
2016 Unrelated Notes [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Notes payable | 824,297 | ||||||||||
Debt instrument, convertible, beneficial conversion feature | 50,703 | ||||||||||
12% Subordinated Notes [Member] | Securities Purchase Agreement [Member] | Accredited Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Number of sale of stock transaction | 2,000 | ||||||||||
Number of convertible units, value | $ 1,000 | ||||||||||
Number of convertible units, shares | 40 | ||||||||||
Proceeds from issuance of debt | $ 2,000,000 | ||||||||||
Debt instrument, maturity date | Feb. 28, 2023 | ||||||||||
Number of stock issued during period, shares | 955,000 | ||||||||||
Convertible Promissory Notes [Member] | 2018 Unrelated Notes [Member] | 2018 Note Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, interest percentage | 8.00% | ||||||||||
Debt instrument, maturity date | Dec. 31, 2020 | ||||||||||
Debt conversion price per share | $ 6.50 | ||||||||||
Convertible Promissory Notes [Member] | 2018 Unrelated Notes [Member] | 2018 Note Investors [Member] | Quarterly [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, interest percentage | 8.00% | ||||||||||
Convertible Promissory Notes [Member] | 2017 Unrelated Notes [Member] | 2017 Note Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, interest percentage | 8.00% | ||||||||||
Debt instrument, maturity date | Dec. 31, 2020 | ||||||||||
Debt conversion price per share | $ 10 | ||||||||||
Convertible Promissory Notes [Member] | 2017 Unrelated Notes [Member] | 2017 Note Investors [Member] | Quarterly [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, interest percentage | 8.00% | ||||||||||
Convertible Promissory Notes [Member] | 2016 Unrelated Notes [Member] | 2016 Note Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest expense, debt | 50,703 | $ 50,703 | |||||||||
Debt instrument, interest percentage | 10.00% | 12.00% | |||||||||
Debt instrument, maturity date | Dec. 31, 2020 | Dec. 31, 2018 | |||||||||
Convertible promissory notes | $ 315,000 | ||||||||||
Debt conversion price per share | $ 20 | $ 32.50 | |||||||||
Debt instrument, convertible, beneficial conversion feature | 369,677 | ||||||||||
Fair value adjustment under troubled debt restructuring accounting | 56,661 | ||||||||||
Convertible Promissory Notes [Member] | 2016 Unrelated Notes [Member] | 2016 Note Investors [Member] | Quarterly [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument interest rate, effective percentage | 5.00% | 6.00% | |||||||||
August 3, 2020 [Member] | Asset Purchase Agreement [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Seller notes payable | $ 70,000 | ||||||||||
Debt instrument, interest percentage | 1.50% | ||||||||||
November 3, 2020 [Member] | Asset Purchase Agreement [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Seller notes payable | $ 100,000 | ||||||||||
Debt instrument, interest percentage | 1.50% | ||||||||||
2016-2018 [Member] | Convertible Promissory Notes [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Common stock at a conversion price | 1,433,689 | ||||||||||
Sale of stock price per share | $ 4 | ||||||||||
September 20 and September 26, 2018 [Member] | Convertible Promissory Notes [Member] | 2018 Unrelated Notes [Member] | 2018 Note Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Convertible promissory notes | $ 900,000 | ||||||||||
Placement agent and escrow agent fees | $ 106,740 | ||||||||||
November 17 and November 30, 2017 [Member] | Convertible Promissory Notes [Member] | 2017 Unrelated Notes [Member] | 2017 Note Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Convertible promissory notes | $ 1,760,000 | ||||||||||
Placement agent and escrow agent fees | $ 174,810 | ||||||||||
Debt conversion price per share | $ 10 | ||||||||||
January 6, 2017 and January 31, 2017 [Member] | Convertible Promissory Notes [Member] | 2016 Unrelated Notes [Member] | 2016 Note Investors [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Convertible promissory notes | $ 560,000 | ||||||||||
Placement agent and escrow agent fees | $ 100,255 | ||||||||||
PNC Bank [Member] | Paycheck Protection Program [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, interest percentage | 1.00% | ||||||||||
Notes payable | $ 838,700 | ||||||||||
Taglich Brothers, Inc.[Member] | Convertible Promissory Notes [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Sale of stock price per share | $ 4 | ||||||||||
Number of common stock share earned fees | 35,250 |
Notes Payable - Schedule of Not
Notes Payable - Schedule of Notes Payable (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 | |
Total notes payable | $ 2,838,700 | $ 3,484,297 | |
Less unamortized debt issuance costs | (224,767) | (144,334) | |
Less unamortized debt discount | (231,111) | ||
Less current portion | (580,638) | (3,339,963) | |
Long-term portion of notes payable | 1,802,184 | ||
PPP Note Payable [Member] | |||
Total notes payable | 838,700 | [1] | |
2020 Notes [Member] | |||
Total notes payable | 2,000,000 | ||
2018 Unrelated Notes [Member] | |||
Total notes payable | 900,000 | ||
2017 Unrelated Notes [Member] | |||
Total notes payable | 1,760,000 | ||
2016 Unrelated Notes [Member] | |||
Total notes payable | $ 824,297 | ||
[1] | The PPP Note Payable totaling $838,700 was fully forgiven January 20, 2021, as described below and in Note 19 Subsequent Events. |
Notes Payable - Schedule of N_2
Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) - USD ($) | Jan. 20, 2021 | Dec. 31, 2019 |
2016 Unrelated Notes [Member] | ||
Beneficial conversion feature | $ 50,703 | |
PPP Note Payable [Member] | Subsequent Event [Member] | ||
Debt forgiven, value | $ 838,700 |
Notes Payable - Schedule of Fut
Notes Payable - Schedule of Future Minimum Principal Payments of Notes Payable (Details) | Dec. 31, 2020USD ($) | |
Debt Disclosure [Abstract] | ||
2021 | $ 580,638 | [1] |
2022 | 258,062 | [1] |
2023 | 2,000,000 | |
Total | $ 2,838,700 | |
[1] | The PPP Note Payable totaling $838,700 was fully forgiven January 20, 2021, as described below and in Note 19 Subsequent Events. |
Notes Payable - Related Parti_3
Notes Payable - Related Parties (Details Narrative) - USD ($) | Mar. 02, 2020 | Nov. 15, 2019 | Sep. 26, 2018 | Sep. 17, 2018 | Sep. 14, 2018 | Nov. 30, 2017 | Nov. 17, 2017 | Sep. 21, 2017 | Dec. 30, 2016 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2017 | May 15, 2020 |
Accrued interest | $ 5,941 | $ 1,212,498 | |||||||||||
Interest expense, debt | 548,742 | 735,474 | |||||||||||
Debt instrument, original issue discount | 231,111 | ||||||||||||
Debt instrument principal converted amount | $ 6,000,000 | ||||||||||||
Proceeds from notes payable | 3,008,700 | ||||||||||||
Notes Payable - Related Parties [Member] | |||||||||||||
Accrued interest | 294,191 | ||||||||||||
Interest expense, debt | 88,941 | 245,215 | |||||||||||
2017 Bridge Notes [Member] | |||||||||||||
Debt instrument principal converted amount | $ 150,000 | ||||||||||||
2016 Related Notes [Member] | |||||||||||||
Debt instrument convertible, beneficial conversion feature | 20,015 | ||||||||||||
Convertible Promissory Notes [Member] | 2018 Related Notes [Member] | Robert Taglich and Michael Taglich [Member] | |||||||||||||
Convertible promissory notes | $ 400,000 | ||||||||||||
Long-term debt, interest rate | 8.00% | ||||||||||||
Debt instrument, maturity date | Dec. 31, 2020 | ||||||||||||
Debt instrument, convertible, conversion price | $ 6.50 | ||||||||||||
Convertible Promissory Notes [Member] | 2018 Related Notes [Member] | Robert Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2018 Related Notes [Member] | Michael Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Bridge Notes [Member] | Robert Taglich and Michael Taglich [Member] | |||||||||||||
Interest expense, debt | $ 889 | ||||||||||||
Convertible promissory notes | $ 154,640 | ||||||||||||
Debt instrument, original issue discount | $ 4,640 | ||||||||||||
Long-term debt, interest rate | 8.00% | ||||||||||||
Debt instrument, interest rate, effective percentage | 7.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Bridge Notes [Member] | Robert Taglich and Michael Taglich [Member] | Warrants [Member] | |||||||||||||
Interest expense, debt | $ 38,836 | ||||||||||||
Debt instrument, original issue discount | $ 38,836 | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Bridge Notes [Member] | Robert Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Debt instrument, maturity date | Sep. 21, 2018 | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Bridge Notes [Member] | Michael Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Debt instrument, maturity date | Sep. 21, 2018 | ||||||||||||
Convertible Promissory Notes [Member] | 2016 Bridge Notes [Member] | Robert Taglich and Michael Taglich [Member] | |||||||||||||
Number of warrants issued in connection with note | 3,000 | ||||||||||||
Warrant exercise price | $ 15 | ||||||||||||
Warrants exercisable term | 5 years | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Related Notes [Member] | Robert Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Related Notes [Member] | Michael Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Related Notes [Member] | Robert Taglich, Michael Taglich And James DeSocio [Member] | |||||||||||||
Convertible promissory notes | $ 390,000 | ||||||||||||
Long-term debt, interest rate | 8.00% | ||||||||||||
Debt instrument, maturity date | Nov. 30, 2019 | ||||||||||||
Debt instrument, convertible, conversion price | $ 10 | ||||||||||||
Debt instrument principal converted amount | $ 150,000 | ||||||||||||
Proceeds from notes payable | $ 240,000 | ||||||||||||
Convertible Promissory Notes [Member] | 2017 Related Notes [Member] | Extended Maturity [Member] | Robert Taglich, Michael Taglich And James DeSocio [Member] | |||||||||||||
Debt instrument, maturity date | Dec. 31, 2020 | ||||||||||||
Convertible Promissory Notes [Member] | 2016 Related Notes [Member] | Robert Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2016 Related Notes [Member] | Michael Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Convertible Promissory Notes [Member] | 2016 Related Notes [Member] | Robert Taglich, Michael Taglich and Robert Schroeder [Member] | |||||||||||||
Interest expense, debt | 20,015 | 20,015 | |||||||||||
Convertible promissory notes | $ 375,000 | ||||||||||||
Long-term debt, interest rate | 10.00% | 12.00% | |||||||||||
Debt instrument, maturity date | Dec. 31, 2020 | Dec. 31, 2018 | |||||||||||
Debt instrument, convertible, conversion price | $ 20 | $ 32.50 | |||||||||||
Debt instrument convertible, beneficial conversion feature | 144,231 | ||||||||||||
Fair value adjustment under troubled debt restructuring accounting | $ 24,710 | ||||||||||||
Convertible Promissory Notes [Member] | 2016 Related Notes [Member] | Robert Taglich, Michael Taglich and Robert Schroeder [Member] | Quarterly [Member] | |||||||||||||
Long-term debt, interest rate | 5.00% | 6.00% | |||||||||||
Promissory Notes [Member] | 2019 Related Notes [Member] | |||||||||||||
Convertible promissory notes | $ 47,728 | ||||||||||||
Promissory Notes [Member] | 2019 Related Notes [Member] | Robert Taglich and Michael Taglich [Member] | |||||||||||||
Interest expense, debt | $ 11,932 | ||||||||||||
Convertible promissory notes | $ 397,728 | ||||||||||||
Debt instrument, original issue discount | $ 47,728 | ||||||||||||
Long-term debt, interest rate | 12.00% | ||||||||||||
Debt instrument, maturity date | May 15, 2020 | ||||||||||||
Number of convertible units, value | $ 350,000 | ||||||||||||
Debt instrument, convertible, conversion price | $ 4 | ||||||||||||
Promissory Notes [Member] | 2019 Related Notes [Member] | Robert Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
Promissory Notes [Member] | 2019 Related Notes [Member] | Michael Taglich [Member] | |||||||||||||
Debt beneficial interest rate | 5.00% | ||||||||||||
2016-2018 [Member] | Convertible Promissory Notes [Member] | |||||||||||||
Common stock at a conversion price | 1,433,689 | ||||||||||||
Sale of stock price per share | $ 4 | ||||||||||||
Taglich Brothers, Inc.[Member] | |||||||||||||
Warrant exercise price | 4 | ||||||||||||
Taglich Brothers, Inc.[Member] | Convertible Promissory Notes [Member] | |||||||||||||
Sale of stock price per share | $ 4 | ||||||||||||
Number of common stock share earned fees | 35,250 |
Notes Payable - Related Parti_4
Notes Payable - Related Parties - Schedule of Notes Payable Due to Related Parties (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Unamortized original issue discount and debt issuance costs | $ (224,767) | $ (144,334) |
Less current portion | (1,467,400) | |
Notes Payable - Related Parties [Member] | ||
Total notes payable - related party | 1,542,713 | |
Unamortized original issue discount and debt issuance costs | (75,313) | |
Less current portion | (1,467,400) | |
Long-term portion of notes payable-related party | ||
2019 Related Notes [Member] | ||
Total notes payable - related party | 397,728 | |
2018 Related Notes [Member] | ||
Total notes payable - related party | 400,000 | |
2017 Related Notes [Member] | ||
Total notes payable - related party | 390,000 | |
2016 Related Notes [Member] | ||
Total notes payable - related party | $ 354,985 |
Notes Payable - Related Parti_5
Notes Payable - Related Parties - Schedule of Notes Payable Due to Related Parties (Details) (Parenthetical) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
2016 Related Notes [Member] | |
Beneficial conversion feature | $ 20,015 |
Deferred Compensation (Details
Deferred Compensation (Details Narrative) - USD ($) | Dec. 08, 2017 | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred compensation liability | $ 100,828 | $ 117,166 | |
Deferred compensation expense | 16,338 | 48,000 | |
A. Michael Chretien [Member] | |||
Deferred compensation arrangement, description | The Company made bi-weekly payments of $1,846 until his portion of the deferred compensation had been paid, which occurred in May, 2020. | ||
Employment Agreements [Member] | Founders [Member] | |||
Deferred compensation liability | $ 100,828 | $ 117,166 | |
Bi-Weekly Payments [Member] | A. Michael Chretien [Member] | |||
Deferred compensation expense | $ 1,846 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) | Jan. 02, 2020USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Jan. 01, 2010ft² |
Area of rental square feet of office space | ft² | 6,000 | |||
Lease commenced date | Jan. 1, 2010 | |||
Lease extension date | Aug. 9, 2016 | |||
Lease expiration date | Dec. 31, 2021 | |||
Operating lease costs | $ 743,373 | $ 51,254 | ||
Short term lease costs | $ 71,411 | |||
Graphic Sciences, Inc. [Member] | Traverse City [Member] | ||||
Lease extension date | Jan. 31, 2024 | |||
Monthly rental payment | $ 4,500 | |||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | ||||
Monthly rental payment | $ 12,500 | |||
Graphic Sciences, Inc. [Member] | Vehicles [Member] | ||||
Lease extension date | Oct. 31, 2024 | |||
Monthly rental payment | $ 2,618 | |||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | ||||
Lease extension date | Aug. 31, 2026 | |||
Lease description | Our subsidiary, Graphic Sciences, uses 36,000 square feet of leased space in Madison Heights as its main facility. Graphic Sciences uses about 20,000 square feet for its records storage services, with the remainder of the space used for production, sales, and administration. | |||
Monthly rental payment | $ 41,508 | |||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | Maximum [Member] | ||||
Monthly rental payment | $ 45,828 | |||
Graphic Sciences, Inc. [Member] | Highland Park, MI, and a Satellite Office [Member] | ||||
Lease extension date | Sep. 30, 2021 | |||
Lease description | Graphic Sciences also leases and uses a separate 20,000 square foot building for document storage in Highland Park, MI, a satellite office in Traverse City, MI for production | |||
Monthly rental payment | $ 11,250 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Rental Payments for Operating Leases (Details) | Dec. 31, 2020USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2021 | $ 840,812 |
2022 | 617,255 |
2023 | 617,085 |
2024 | 550,878 |
2025 | 542,750 |
Thereafter | 366,626 |
Future lease payments under operating lease | $ 3,535,406 |
Commitments and Contingencies_3
Commitments and Contingencies - Schedule of Operating Lease Costs (Details) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating cash flows from operating leases | $ 482,425 |
Weighted average remaining lease term - operating leases | 5 years 2 months 12 days |
Weighted average discount rate - operating leases | 7.96% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Mar. 20, 2020 | Mar. 02, 2020 | Feb. 27, 2020 | Jan. 02, 2020 | Jan. 07, 2019 | Sep. 26, 2018 | Sep. 20, 2018 | Nov. 17, 2017 | Sep. 21, 2017 | Jan. 31, 2017 | Jan. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2020 | Dec. 31, 2019 | Feb. 29, 2020 | Nov. 30, 2017 |
Common stock, shares authorized | 25,000,000 | 25,000,000 | ||||||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | ||||||||||||||
Reverse stock split, description | (1-for-50) reverse stock split | |||||||||||||||
Common stock, value | $ 2,811 | $ 371 | ||||||||||||||
Additional paid-in capital | 24,147,488 | 14,419,437 | ||||||||||||||
Debt discount | 231,111 | |||||||||||||||
Interest expense, debt | 548,742 | 735,474 | ||||||||||||||
Amortization of debt issuance costs | $ 117,091 | $ 183,851 | ||||||||||||||
Common stock, shares issued | 2,810,865 | 370,497 | ||||||||||||||
Common stock, shares outstanding | 2,810,865 | 370,497 | ||||||||||||||
Board of Directors [Member] | ||||||||||||||||
Common stock, shares authorized | 75,000,000 | 25,000,000 | 160,000,000 | |||||||||||||
Reverse stock split, description | Effectuate the Reverse Split at a ratio of one-for-fifty (1-for-50) | |||||||||||||||
Directors [Member] | ||||||||||||||||
Shares issued for restricted common stock | 16,429 | 10,454 | ||||||||||||||
Stock compensation expenses | $ 57,500 | $ 57,500 | ||||||||||||||
Placement Agent [Member] | ||||||||||||||||
Underwriting expenses | $ 307,867 | |||||||||||||||
Debt issuance cost | $ 175,924 | |||||||||||||||
Previously Reported [Member] | ||||||||||||||||
Common stock, value | 31,528 | |||||||||||||||
Additional paid-in capital | 14,388,280 | |||||||||||||||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | ||||||||||||||||
Number of sale of stock transaction | 875,000 | |||||||||||||||
Sale of stock price per share | $ 4 | |||||||||||||||
Proceeds from issuance of debt | $ 3,500,000 | |||||||||||||||
Number of stock issued during period, shares | 80,000 | |||||||||||||||
Warrants [Member] | Placement Agent [Member] | ||||||||||||||||
Warrants issued to purchase common stock, shares | 1,378 | 1,378 | 1,699 | |||||||||||||
Underwriting expenses | $ 52,951 | $ 65,243 | ||||||||||||||
Fair value of warrant issued, per share | $ 38.50 | $ 38.50 | ||||||||||||||
Exercise of Warrants [Member] | ||||||||||||||||
Common stock, capital shares reserved for future issuance | 150,216 | |||||||||||||||
2015 Plan [Member] | ||||||||||||||||
Common stock, capital shares reserved for future issuance | 197,330 | |||||||||||||||
2016 Notes [Member] | Warrants [Member] | Private Placement [Member] | Placement Agent [Member] | ||||||||||||||||
Warrants issued to purchase common stock, shares | 3,077 | 3,077 | ||||||||||||||
Class of warrant or right, exercise price of warrants or rights | $ 37.50 | $ 37.50 | ||||||||||||||
Warrant expiration term | 5 years | 5 years | ||||||||||||||
2016 Notes [Member] | Accredited Investors [Member] | Private Placement [Member] | ||||||||||||||||
Convertible promissory note | $ 1,250,000 | $ 1,250,000 | ||||||||||||||
2016 Notes [Member] | Accredited Investors [Member] | Private Placement [Member] | Placement Agent [Member] | ||||||||||||||||
Payment made to placement agent | $ 100,000 | |||||||||||||||
Percentage of placement agent commission on gross proceeds | 8.00% | |||||||||||||||
2017 Bridge Note [Member] | Robert Taglich and Michael Taglich [Member] | ||||||||||||||||
Warrants issued to purchase common stock, shares | 3,000 | |||||||||||||||
Class of warrant or right, exercise price of warrants or rights | $ 15 | |||||||||||||||
Warrant expiration term | 5 years | |||||||||||||||
Fair value of warrant issued, per share | $ 13 | |||||||||||||||
Debt beneficial interest rate | 5.00% | |||||||||||||||
Debt discount | $ 38,837 | |||||||||||||||
2017 Notes [Member] | Warrant [Member] | Placement Agent [Member] | ||||||||||||||||
Warrants issued to purchase common stock, shares | 7,080 | 10,120 | ||||||||||||||
Class of warrant or right, exercise price of warrants or rights | $ 12.50 | $ 12.50 | ||||||||||||||
Warrant expiration term | 5 years | 5 years | ||||||||||||||
Fair value of warrant issued, per share | $ 8.50 | $ 6.50 | ||||||||||||||
Debt issuance cost | $ 126,603 | $ 126,603 | ||||||||||||||
Interest expense, debt | $ 14,726 | 88,356 | ||||||||||||||
2017 Notes [Member] | Warrant [Member] | Private Placement [Member] | Placement Agent [Member] | ||||||||||||||||
Payment made to placement agent | $ 172,000 | |||||||||||||||
Percentage of placement agent commission on gross proceeds | 8.00% | |||||||||||||||
2017 Notes [Member] | Accredited Investors [Member] | Private Placement [Member] | ||||||||||||||||
Convertible promissory note | $ 2,150,000 | |||||||||||||||
2018 Notes [Member] | Warrant [Member] | Placement Agent [Member] | ||||||||||||||||
Payment made to placement agent | $ 64,000 | $ 40,000 | ||||||||||||||
Warrants issued to purchase common stock, shares | 6,153 | 6,153 | ||||||||||||||
Class of warrant or right, exercise price of warrants or rights | $ 9 | $ 9 | ||||||||||||||
Warrant expiration term | 5 years | 5 years | ||||||||||||||
Fair value of warrant issued, per share | $ 3.50 | $ 5 | ||||||||||||||
Debt issuance cost | $ 64,348 | $ 64,348 | ||||||||||||||
Interest expense, debt | 14,458 | 14,458 | ||||||||||||||
Amortization of debt issuance costs | $ 86,750 | $ 86,750 | ||||||||||||||
2018 Notes [Member] | Accredited Investors [Member] | Private Placement [Member] | ||||||||||||||||
Convertible promissory note | $ 1,300,000 | |||||||||||||||
Percentage of placement agent commission on gross proceeds | 8.00% | |||||||||||||||
12% Subordinated Notes [Member] | Securities Purchase Agreement [Member] | Accredited Investors [Member] | ||||||||||||||||
Number of sale of stock transaction | 2,000 | |||||||||||||||
Proceeds from issuance of debt | $ 2,000,000 | |||||||||||||||
Number of convertible units, value | $ 1,000 | |||||||||||||||
Number of convertible units, shares | 40 | |||||||||||||||
Number of stock issued during period, shares | 955,000 | |||||||||||||||
12% Subordinated Notes [Member] | Private Placement [Member] | Securities Purchase Agreement [Member] | Accredited Investors [Member] | ||||||||||||||||
Proceeds from issuance of debt | $ 5,500,000 | |||||||||||||||
Post-split Basis [Member] | Board of Directors [Member] | ||||||||||||||||
Common stock, shares authorized | 1,500,000 | 3,200,000 | ||||||||||||||
Taglich Brothers, Inc.[Member] | ||||||||||||||||
Class of warrant or right, exercise price of warrants or rights | $ 4 | |||||||||||||||
Underwriting expenses | $ 236,761 | |||||||||||||||
Debt issuance cost | 135,291 | |||||||||||||||
Payment of private placement cash | $ 440,000 | |||||||||||||||
Fair value of warrants issued price per share | $ 3.90 | |||||||||||||||
Warrant to purchase of common stock | 95,500 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Estimated Values of Warrants Valuation Assumptions (Details) | Mar. 02, 2020 | Sep. 26, 2018 | Sep. 20, 2018 | Nov. 30, 2017 | Nov. 17, 2017 | Sep. 21, 2017 | Dec. 30, 2016 |
Risk Free Interest Rate [Member] | Placement Agent [Member] | |||||||
Warrants, measurement input percentage | 0.88 | 2.96 | 2.96 | 2.14 | 2.06 | 1.93 | |
Weighted Average Expected Term [Member] | Placement Agent [Member] | |||||||
Warrants, term | 5 years | 5 years | 5 years | 5 years | 5 years | 5 years | |
Expected Volatility [Member] | Placement Agent [Member] | |||||||
Warrants, measurement input percentage | 130.12 | 122.92 | 122.52 | 129.34 | 129.87 | 123.07 | |
Expected Dividend Yield [Member] | Placement Agent [Member] | |||||||
Warrants, measurement input percentage | 0 | 0 | 0 | 0 | 0 | 0 | |
Bridge Noteholders [Member] | Risk Free Interest Rate [Member] | |||||||
Warrants, measurement input percentage | 1.89 | ||||||
Bridge Noteholders [Member] | Weighted Average Expected Term [Member] | |||||||
Warrants, term | 5 years | ||||||
Bridge Noteholders [Member] | Expected Volatility [Member] | |||||||
Warrants, measurement input percentage | 130.80 | ||||||
Bridge Noteholders [Member] | Expected Dividend Yield [Member] | |||||||
Warrants, measurement input percentage | 0 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | Sep. 02, 2020 | Mar. 11, 2019 | Jan. 30, 2019 | Sep. 25, 2017 | Sep. 25, 2017 | Dec. 06, 2016 | Feb. 10, 2016 | Jan. 01, 2016 | Apr. 30, 2015 | Dec. 31, 2020 | Dec. 31, 2019 |
Share-based compensation options, fair value | $ 16,650 | $ 108,035 | |||||||||
Share-based compensation, options, grants in period, weighted average grant date fair value | $ 3.30 | $ 4.49 | |||||||||
Employee service share-based compensation, unrecognized, stock options | $ 322,874 | $ 56,012 | |||||||||
Employee service share-based compensation, unrecognized compensation not yet recognized, period | 4 years | ||||||||||
Employee One [Member] | |||||||||||
Number of shares canceled stock options | 3,000 | ||||||||||
Number of shares canceled, exercise price | $ 45 | ||||||||||
Employee Two [Member] | |||||||||||
Number of shares canceled stock options | 3,200 | ||||||||||
Number of shares canceled, exercise price | $ 48 | ||||||||||
Employee Three [Member] | |||||||||||
Number of shares canceled stock options | 2,000 | ||||||||||
Number of shares canceled, exercise price | $ 38 | ||||||||||
Employee Four [Member] | |||||||||||
Number of shares canceled stock options | 15,000 | ||||||||||
Number of shares canceled, exercise price | $ 15 | ||||||||||
Employee Five [Member] | |||||||||||
Number of shares canceled stock options | 10,000 | ||||||||||
Number of shares canceled, exercise price | $ 19 | ||||||||||
2015 Equity Incentive Plan [Member] | |||||||||||
Share-based compensation granted options to purchase shares | 33,200 | ||||||||||
Share-based compensation options, outstanding, exercise price | $ 6.50 | ||||||||||
Employees stock options vesting period, description | Fully vested at issuance through vesting by December 2020 | ||||||||||
Share-based compensation options, fair value | $ 24,898 | ||||||||||
2015 Equity Incentive Plan [Member] | Non-qualified Stock Option Agreement [Member] | Sophie Pibouin [Member] | |||||||||||
Share-based compensation granted options to purchase shares | 2,560 | ||||||||||
Share-based compensation options expiration date | Apr. 29, 2025 | ||||||||||
Share-based compensation options, outstanding, exercise price | $ 37.50 | ||||||||||
Employees stock options vesting period, description | The options granted vested on a graded scale over a period of time through October 31, 2015. | ||||||||||
2015 Equity Incentive Plan [Member] | Non-qualified Stock Option Agreement [Member] | Individual Consultant [Member] | |||||||||||
Share-based compensation granted options to purchase shares | 250 | ||||||||||
Share-based compensation options expiration date | Dec. 31, 2025 | ||||||||||
Share-based compensation options, outstanding, exercise price | $ 45 | ||||||||||
Share-based compensation options vested percentage | 100.00% | ||||||||||
Employee Stock Option [Member] | 2015 Equity Incentive Plan [Member] | |||||||||||
Share-based compensation granted options to purchase shares | 99,000 | 10,100 | 15,000 | 2,000 | 4,200 | 5,000 | |||||
Share-based compensation options, outstanding, exercise price | $ 4 | $ 6.50 | $ 15 | $ 15 | $ 38 | $ 48 | $ 45 | ||||
Employees stock options vesting period, description | Vesting continuing until 2024. | Vesting continuing until 2023 | The options were fully vested as of September 25, 2019. | Vesting continuing until December 2020 | The options were fully vested as of February 10, 2020. | The options were fully vested as of January 1, 2019 | |||||
Share-based compensation options, fair value | $ 327,181 | $ 44,591 | $ 321,011 | $ 63,937 | $ 174,748 | $ 196,250 | |||||
Shares performance-based options shares | 37,500 | ||||||||||
Employee Stock Option One [Member] | 2015 Equity Incentive Plan [Member] | |||||||||||
Share-based compensation granted options to purchase shares | 10,000 | ||||||||||
Share-based compensation options, outstanding, exercise price | $ 19 | $ 19 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Estimated Values of Stock Option Grants Valuation Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
April 30, 2015 Grant [Member] | ||
Risk-free interest rate | 1.43% | 1.43% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 143.10% | 143.10% |
Expected dividend yield | 0.00% | 0.00% |
January 1 , 2016 Grant [Member] | ||
Risk-free interest rate | 1.76% | 1.76% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 134.18% | 134.18% |
Expected dividend yield | 0.00% | 0.00% |
February 10 , 2016 Grant [Member] | ||
Risk-free interest rate | 1.15% | 1.15% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 132.97% | 132.97% |
Expected dividend yield | 0.00% | 0.00% |
December 6 , 2016 Grant [Member] | ||
Risk-free interest rate | 1.84% | 1.84% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 123.82% | 123.82% |
Expected dividend yield | 0.00% | 0.00% |
September 25, 2017 Grant [Member] | ||
Risk-free interest rate | 1.85% | 1.85% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 130.79% | 130.79% |
Expected dividend yield | 0.00% | 0.00% |
January 30 , 2019 Grant [Member] | ||
Risk-free interest rate | 2.54% | 2.54% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 115.80% | 115.80% |
Expected dividend yield | 0.00% | 0.00% |
March 11 , 2019 Grant [Member] | ||
Risk-free interest rate | 2.44% | 2.44% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 116.46% | 116.46% |
Expected dividend yield | 0.00% | 0.00% |
September 2 , 2020 Grant [Member] | ||
Risk-free interest rate | 0.26% | 0.26% |
Weighted average expected term | 5 years | 5 years |
Expected volatility | 121.33% | 121.33% |
Expected dividend yield | 0.00% | 0.00% |
Stock-Based Compensation - Sc_2
Stock-Based Compensation - Schedule of Stock Option Activity (Details) - Stock Option [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Shares Under Option, Outstanding beginning balance | 46,860 | 36,760 |
Shares Under Option, Granted | 99,000 | 43,550 |
Shares Under Option, Forfeited and expired | (500) | (33,450) |
Shares Under Option, Outstanding ending balance | 145,360 | 46,860 |
Shares Under Option, Exercisable ending balance | 39,160 | 35,460 |
Weighted- Average Exercise Price, Outstanding beginning balance | $ 9.02 | $ 25.04 |
Weighted- Average Exercise Price, Granted | 4 | 6.72 |
Weighted- Average Exercise Price, Forfeited and expired | 6.50 | 43 |
Weighted- Average Exercise Price, Outstanding ending balance | 5.61 | 9.02 |
Weighted- Average Exercise Price, Exercisable ending balance | $ 9.51 | $ 9.82 |
Weighted Average Remaining Contractual Life Outstanding, beginning | 9 years | 8 years |
Weighted Average Remaining Contractual Life Outstanding, ending | 9 years | 9 years |
Weighted Average Remaining Contractual Life, Exercisable, ending | 8 years | 9 years |
Aggregate Intrinsic Value, Outstanding, beginning balance | $ 19,200 | $ 79,200 |
Aggregate Intrinsic Value, Outstanding ending balance | 19,200 | 19,200 |
Aggregate Intrinsic Value, Exercisable ending balance | $ 19,200 | $ 19,200 |
Concentrations (Details Narrati
Concentrations (Details Narrative) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Sales Revenue, Net [Member] | Customer One [Member] | ||
Concentration risk, percentage | 6.00% | |
Sales Revenue, Net [Member] | Customer Two [Member] | ||
Concentration risk, percentage | 6.00% | |
Sales Revenue, Net [Member] | Government Contracts [Member] | ||
Concentration risk, percentage | 64.00% | 41.00% |
Sales Revenue, Net [Member] | The State of Michigan [Member] | ||
Concentration risk, percentage | 47.00% | |
Accounts Receivable [Member] | Customer One [Member] | ||
Concentration risk, percentage | 54.00% | 25.00% |
Accounts Receivable [Member] | Customer Two [Member] | ||
Concentration risk, percentage | 16.00% | 25.00% |
Accounts Receivable [Member] | Customer Three [Member] | ||
Concentration risk, percentage | 16.00% | |
Accounts Receivable [Member] | Customer Four [Member] | ||
Concentration risk, percentage | 12.00% |
Provision for Income Taxes (Det
Provision for Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Operating loss carry forwards expiration period | 2040 | |
Federal [Member] | ||
Operating loss carryforwards | $ 19,129,000 | $ 18,986,000 |
Provision for Income Taxes - Su
Provision for Income Taxes - Summary of Income Tax Benefits (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Benefit of net operating losses | $ (72,541) | $ (524,000) |
Other timing differences | (91,770) | 76,070 |
Change in valuation allowance, including $188,000 reduction in valuation allowance due to purchased deferred tax liability | (23,989) | 447,930 |
Tax benefit | $ (188,300) |
Provision for Income Taxes - _2
Provision for Income Taxes - Summary of Income Tax Benefits (Details) (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Reduction in valuation allowance | $ 188,000 | $ 188,000 |
Provision for Income Taxes - _3
Provision for Income Taxes - Summary of Reconciliation of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
U.S. statutory rate | 21.00% | 21.00% |
U.S. Federal income tax at statutory rate | $ (501,690) | $ (447,930) |
Non-deductible earnout expense | 299,040 | |
Non-deductible goodwill amortization | 33,390 | |
Other differences | 4,949 | |
Benefit of acquisition-date purchased deferred tax liability | (188,300) | |
Other change in valuation allowance | 164,311 | 447,930 |
Income tax benefit | $ (188,300) |
Provision for Income Taxes - _4
Provision for Income Taxes - Summary of Reconciliation of Income Tax Expense (Details) (Parenthetical) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
U.S. statutory rate | 21.00% | 21.00% |
Provision for Income Taxes - _5
Provision for Income Taxes - Summary of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Reserves and accruals not currently deductible for tax purposes | $ 51,000 | $ 35,000 |
Amortizable assets | 72,000 | |
Net operating loss carryforwards | 4,020,000 | 3,987,000 |
Deferred tax assets | 4,143,000 | 4,022,000 |
Property and equipment | (143,000) | |
Net Deferred tax assets | 179,400 | 4,022,000 |
Valuation allowance | (4,000,000) | (4,022,000) |
Deferred tax assets and liabilities |
Certain Relationships and Rel_3
Certain Relationships and Related Transactions (Details Narrative) - USD ($) | Mar. 02, 2020 | Apr. 15, 2019 | Dec. 31, 2020 |
2020 Private Placement [Member] | |||
Shares issued, price per share | $ 4 | ||
Debt instrument, description | The Company issued and sold (i) shares of common stock, at a price of $4.00 per share and (ii) units, with each unit consisting of $1,000 in 12% subordinated notes and 40 shares. The principal amount of the 12% subordinated notes, together with any accrued and unpaid interest thereon, become due and payable on February 28, 2023. | ||
Equity, beneficial ownership, description | Robert C. Schroeder, a director of the Company, is the Vice President of Investment Banking at Taglich Brothers, Inc. Robert F. Taglich and Michael N. Taglich, each beneficial owners of more than 5% of the Company's common stock, are also both principals of Taglich Brothers, Inc. | ||
Engagement Agreement [Member] | |||
Payment of success fee | $ 300,000 | ||
Subordinated Notes [Member] | 2020 Private Placement [Member] | |||
Debt instrument, interest rate | 12.00% | ||
Taglich Brothers, Inc.[Member] | |||
Payments to private placement | $ 440,000 | ||
Number of warrants to purchase common stock | 95,500 | ||
Warrants exercise price, per share | $ 4 | ||
Taglich Brothers, Inc.[Member] | 2020 Private Placement [Member] | |||
Commission percentage | 8.00% | ||
Share sold percentage | 10.00% | ||
Number of common stock issued, shares | 35,250 | ||
Debt, conversion price per share | $ 4 | ||
Original principal amount, percentage | 3.00% |
Certain Relationships and Rel_4
Certain Relationships and Related Transactions - Schedule of Related Party Transactions (Details) | Mar. 02, 2020shares |
Michael N. Taglich [Member] | |
Relationship to the Company | Beneficially owns more than 5% of the common stock of the Company. |
Number of Shares Purchased | 148,750 |
Date of Transaction | Mar. 2, 2020 |
Robert F. Taglich [Member] | |
Relationship to the Company | Beneficially owns more than 5% of the Common Stock of the Company. |
Number of Shares Purchased | 118,750 |
Date of Transaction | Mar. 2, 2020 |
Robert C. Schroeder [Member] | |
Relationship to the Company | Director and Chairman of the Board of the Company |
Number of Shares Purchased | 5,000 |
Date of Transaction | Mar. 2, 2020 |
James F. DeSocio [Member] | |
Relationship to the Company | President and Chief Executive Officer; Director of the Company |
Number of Shares Purchased | 7,500 |
Date of Transaction | Mar. 2, 2020 |
Joseph D. Spain [Member] | |
Relationship to the Company | Chief Financial Officer of the Company |
Number of Shares Purchased | 2,000 |
Date of Transaction | Mar. 2, 2020 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | May 05, 2021USD ($) | Feb. 15, 2021USD ($)shares | Jan. 02, 2020shares | Jan. 07, 2019shares | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Feb. 18, 2021USD ($) | Feb. 05, 2021ft² | Jan. 01, 2010ft² |
Area of land | ft² | 6,000 | |||||||||
Lease term | Dec. 31, 2021 | |||||||||
Directors [Member] | ||||||||||
Shares issued for restricted common stock | shares | 16,429 | 10,454 | ||||||||
Stock compensation | $ 57,500 | $ 57,500 | ||||||||
Subsequent Event [Member] | ||||||||||
Commitment amount | $ 326,864 | |||||||||
Area of land | ft² | 37,000 | |||||||||
Monthly rental payments | $ 20,452 | |||||||||
Lease term | Apr. 30, 2028 | |||||||||
Subsequent Event [Member] | Directors [Member] | ||||||||||
Shares issued for restricted common stock | shares | 12,207 | |||||||||
Stock compensation | $ 57,500 | |||||||||
Forecast [Member] | PPP Loan [Member] | ||||||||||
Forgiveness income | $ 845,083 |