Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 12, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2021 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2021 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 000-31671 | |
Entity Registrant Name | INTELLINETICS, INC. | |
Entity Central Index Key | 0001081745 | |
Entity Tax Identification Number | 87-0613716 | |
Entity Incorporation, State or Country Code | NV | |
Entity Address, Address Line One | 2190 Dividend Drive | |
Entity Address, City or Town | Columbus | |
Entity Address, State or Province | OH | |
Entity Address, Postal Zip Code | 43228 | |
City Area Code | (614) | |
Local Phone Number | 921-8170 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 2,823,072 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 1,829,247 | $ 1,907,882 |
Accounts receivable, net | 948,508 | 792,380 |
Accounts receivable, unbilled | 653,075 | 523,522 |
Parts and supplies, net | 58,427 | 79,784 |
Other contract assets | 70,412 | 31,283 |
Prepaid expenses and other current assets | 190,134 | 130,883 |
Total current assets | 3,749,803 | 3,465,734 |
Property and equipment, net | 1,091,020 | 698,752 |
Right of use assets | 4,005,709 | 2,641,005 |
Intangible assets, net | 1,022,615 | 1,184,971 |
Goodwill | 2,322,887 | 2,322,887 |
Other assets | 14,784 | 31,284 |
Total assets | 12,206,818 | 10,344,633 |
Current liabilities: | ||
Accounts payable | 121,525 | 141,823 |
Accrued compensation | 525,013 | 271,889 |
Accrued expenses, other | 153,643 | 131,685 |
Lease liabilities - current | 596,295 | 518,531 |
Deferred revenues | 1,336,863 | 996,131 |
Deferred compensation | 100,828 | 100,828 |
Earnout liabilities - current | 923,109 | 877,522 |
Accrued interest payable - current | 5,941 | |
Notes payable - current | 580,638 | |
Total current liabilities | 3,757,276 | 3,624,988 |
Long-term liabilities: | ||
Notes payable - net of current portion | 1,701,926 | 1,802,184 |
Lease liabilities - net of current portion | 3,491,765 | 2,196,951 |
Earnout liabilities - net of current portion | 643,369 | 1,566,478 |
Total long-term liabilities | 5,837,060 | 5,565,613 |
Total liabilities | 9,594,336 | 9,190,601 |
Stockholders’ equity: | ||
Common stock, $0.001 par value, 25,000,000 shares authorized; 2,823,072 and 2,810,865 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 2,823 | 2,811 |
Additional paid-in capital | 24,274,270 | 24,147,488 |
Accumulated deficit | (21,664,611) | (22,996,267) |
Total stockholders’ equity | 2,612,482 | 1,154,032 |
Total liabilities and stockholders’ equity | $ 12,206,818 | $ 10,344,633 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2021 | Dec. 31, 2020 |
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 | 2,823,072 | 2,810,865 |
Common stock, shares outstanding | 2,823,072 | 2,810,865 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenues: | ||||
Total revenues | $ 3,171,362 | $ 2,511,282 | $ 8,716,227 | $ 5,557,586 |
Cost of revenues: | ||||
Total cost of revenues | 1,255,641 | 1,020,988 | 3,381,535 | 2,150,655 |
Gross profit | 1,915,721 | 1,490,294 | 5,334,692 | 3,406,931 |
Operating expenses: | ||||
General and administrative | 1,027,932 | 844,186 | 3,125,019 | 2,533,046 |
Change in fair value of earnout liabilities | 77,211 | |||
Significant transaction costs | 636,440 | |||
Sales and marketing | 372,399 | 285,462 | 1,004,305 | 759,024 |
Depreciation and amortization | 105,923 | 89,475 | 302,239 | 204,317 |
Total operating expenses | 1,506,254 | 1,219,123 | 4,508,774 | 4,132,827 |
Income (loss) from operations | 409,467 | 271,171 | 825,918 | (725,896) |
Other income (expense) | ||||
Gain on extinguishment of debt | 845,083 | 287,426 | ||
Interest expense, net | (113,030) | (115,498) | (339,345) | (522,724) |
Total other income (expense) | (113,030) | (115,498) | 505,738 | (235,298) |
Income (loss) before income taxes | 296,437 | 155,673 | 1,331,656 | (961,194) |
Income tax benefit | 188,300 | |||
Net income (loss) | $ 296,437 | $ 155,673 | $ 1,331,656 | $ (772,894) |
Basic net income (loss) per share: | $ 0.11 | $ 0.06 | $ 0.47 | $ (0.34) |
Diluted net income (loss) per share: | $ 0.10 | $ 0.06 | $ 0.43 | $ (0.34) |
Weighted average number of common shares outstanding - basic | 2,823,072 | 2,810,865 | 2,822,938 | 2,271,169 |
Weighted average number of common shares outstanding - diluted | 3,104,334 | 2,810,865 | 3,105,175 | 2,271,169 |
Sale of Software [Member] | ||||
Revenues: | ||||
Total revenues | $ 58,779 | $ 53,767 | $ 73,971 | $ 153,999 |
Cost of revenues: | ||||
Total cost of revenues | 3,691 | 10,050 | 40,117 | |
Software as a Service [Member] | ||||
Revenues: | ||||
Total revenues | 352,192 | 281,810 | 1,052,072 | 756,497 |
Cost of revenues: | ||||
Total cost of revenues | 73,596 | 65,712 | 241,717 | 209,508 |
Software Maintenance Services [Member] | ||||
Revenues: | ||||
Total revenues | 336,732 | 340,129 | 1,012,251 | 915,483 |
Cost of revenues: | ||||
Total cost of revenues | 18,270 | 49,354 | 64,930 | 127,439 |
Professional Services [Member] | ||||
Revenues: | ||||
Total revenues | 2,165,030 | 1,615,445 | 5,715,273 | 3,221,154 |
Cost of revenues: | ||||
Total cost of revenues | 1,042,249 | 841,016 | 2,765,241 | 1,637,308 |
Storage and Retrieval Services [Member] | ||||
Revenues: | ||||
Total revenues | 258,629 | 220,131 | 862,660 | 510,453 |
Cost of revenues: | ||||
Total cost of revenues | $ 117,835 | $ 64,906 | $ 299,597 | $ 136,283 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2019 | $ 371 | $ 14,419,437 | $ (20,796,066) | $ (6,376,258) |
Beginning balance, shares at Dec. 31, 2019 | 370,497 | |||
Stock Issued to Directors | $ 16 | 57,484 | 57,500 | |
Stock Issued to Directors, shares | 16,429 | |||
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 | 1,468,939 | |||
Equity Issuance Costs | (307,867) | (307,867) | ||
Note Offer Warrants | 372,053 | 372,053 | ||
Stock Option Compensation | 32,652 | 32,652 | ||
Net Income (loss) | (772,894) | (772,894) | ||
Ending balance, value at Sep. 30, 2020 | $ 2,811 | 24,121,370 | (21,568,960) | 2,555,221 |
Ending balance, shares at Sep. 30, 2020 | 2,810,865 | |||
Beginning balance, value at Jun. 30, 2020 | $ 2,811 | 24,107,401 | (21,724,633) | 2,385,579 |
Beginning balance, shares at Jun. 30, 2020 | 2,810,865 | |||
Stock Option Compensation | 13,969 | 13,969 | ||
Net Income (loss) | 155,673 | 155,673 | ||
Ending balance, value at Sep. 30, 2020 | $ 2,811 | 24,121,370 | (21,568,960) | 2,555,221 |
Ending balance, shares at Sep. 30, 2020 | 2,810,865 | |||
Beginning balance, value at Dec. 31, 2020 | $ 2,811 | 24,147,488 | (22,996,267) | 1,154,032 |
Beginning balance, shares at Dec. 31, 2020 | 2,810,865 | |||
Stock Issued to Directors | $ 12 | 57,488 | 57,500 | |
Stock Issued to Directors, shares | 12,207 | |||
Stock Option Compensation | 69,294 | 69,294 | ||
Net Income (loss) | 1,331,656 | 1,331,656 | ||
Ending balance, value at Sep. 30, 2021 | $ 2,823 | 24,274,270 | (21,664,611) | 2,612,482 |
Ending balance, shares at Sep. 30, 2021 | 2,823,072 | |||
Beginning balance, value at Jun. 30, 2021 | $ 2,823 | 24,251,172 | (21,961,048) | 2,292,947 |
Beginning balance, shares at Jun. 30, 2021 | 2,823,072 | |||
Stock Option Compensation | 23,098 | 23,098 | ||
Net Income (loss) | 296,437 | 296,437 | ||
Ending balance, value at Sep. 30, 2021 | $ 2,823 | $ 24,274,270 | $ (21,664,611) | $ 2,612,482 |
Ending balance, shares at Sep. 30, 2021 | 2,823,072 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 1,331,656 | $ (772,894) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 302,239 | 204,317 |
Bad debt (recovery) expense | (10,304) | 40,325 |
Parts and supplies reserve change | 9,000 | 10,500 |
Amortization of deferred financing costs | 77,804 | 91,156 |
Amortization of beneficial conversion option | 11,786 | |
Amortization of debt discount | 80,000 | 62,222 |
Amortization of right of use asset | 472,402 | 278,879 |
Stock issued for services | 57,500 | 57,500 |
Stock options compensation | 69,294 | 32,652 |
Note conversion stock issue expense | 141,000 | |
Warrant issue expense | 236,761 | |
Interest on converted debt | 176,106 | |
Amortization of original issue discount on notes | 18,296 | |
Gain on extinguishment of debt | (845,083) | (287,426) |
Change in fair value of earnout liabilities | 77,211 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (145,824) | 333,121 |
Accounts receivable, unbilled | (129,553) | (204,248) |
Parts and supplies | 12,357 | 5,105 |
Prepaid expenses and other current assets | (81,880) | (25,790) |
Accounts payable and accrued expenses | 325,016 | (589,461) |
Lease liabilities, current and long-term | (464,528) | (269,748) |
Deferred compensation | (16,338) | |
Accrued interest, current and long-term | 442 | 4,504 |
Deferred revenues | 270,500 | 69,520 |
Total adjustments | 76,593 | 380,739 |
Net cash provided by (used in) operating activities | 1,408,249 | (392,155) |
Cash flows from investing activities: | ||
Cash paid to acquire business, net of cash acquired | (4,019,098) | |
Purchases of property and equipment | (532,151) | (55,603) |
Net cash used in investing activities | (532,151) | (4,074,701) |
Cash flows from financing activities: | ||
Payment of earnout liabilities | (954,733) | |
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 | |
Repayment of notes payable | (70,000) | |
Repayment of notes payable - related parties | (47,728) | |
Net cash (used in) provided by financing activities | (954,733) | 5,574,681 |
Net (decrease) increase in cash | (78,635) | 1,107,825 |
Cash - beginning of period | 1,907,882 | 404,165 |
Cash - end of period | 1,829,247 | 1,511,990 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 182,198 | 142,018 |
Cash paid during the period for income taxes | 2,106 | 112,954 |
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 | |
Right-of-use asset obtained in exchange for operating lease liability | 1,483,962 | |
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 used in business acquisition | $ 4,036,367 |
Business Organization and Natur
Business Organization and Nature of Operations | 9 Months Ended |
Sep. 30, 2021 | |
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” or the “Company” or “we” or “us”), is a Nevada corporation incorporated in 1997, with two subsidiaries: Intellinetics, Inc., an Ohio corporation that is wholly-owned by the Company (“Intellinetics Ohio”), and 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. Our products and services are provided through two reporting segments: Document Management and Document Conversion. Our Document Management segment, which includes the CEO Imaging Systems, Inc. (“CEO Image”) asset acquisition in April 2020, consists primarily of solutions involving our software platform, allowing customers to capture and manage their documents across operations such as scanned hard-copy documents and digital documents including those from Microsoft Office 365, digital images, audio, video and emails. Our Document Conversion segment, which includes and primarily consists of the Graphic Sciences acquisition, provides assistance to customers as a part of their overall document strategy to convert documents from one medium to another, predominantly paper to digital, including migration to our software solutions, as well as long-term storage and retrieval services. Our solutions create value for customers by making it easy to connect business-critical documents to the people who need them by making those documents easy to find and access, while also being secure and compliant with the customers’ audit requirements. Solutions are sold both directly to end-users and through resellers. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 2. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The financial statements presented in this Quarterly Report on Form 10-Q are unaudited. However, in the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with GAAP applicable to interim periods. The financial data and other financial information disclosed in these notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2021 or any other future period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC filed on March 30, 2021. |
Liquidity and Management_s Plan
Liquidity and Management’s Plans | 9 Months Ended |
Sep. 30, 2021 | |
Liquidity And Managements Plans | |
Liquidity and Management’s Plans | 3. Liquidity and Management’s Plans We have financed our operations primarily through a combination of cash on hand, cash generated from operations, borrowings from third parties and related parties, and proceeds from private sales of equity. Since 2012, we have raised a total of approximately $ 18.6 million in cash through issuances of debt and equity securities. As of September 30, 2021, we had $ 1,829,247 in cash and cash equivalents, net working capital deficit of $ 7,473 , and an accumulated deficit of approximately $ 22 million. In June 2021, we paid $ 954,733 in annual earnout liabilities. In 2020, we engaged in several actions that significantly improved our liquidity and cash flows, including: ● acquiring Graphic Sciences and CEO Image, resulting in increased cash flow from operations, ● receiving aggregate gross proceeds of $ 3.5 ● converting all of the outstanding principal and accrued interest payable on our then-existing convertible debt in the approximate amount of $ 6.0 4.00 ● receiving $ 2.0 12 February 28, 2023 ● obtaining the loan under the Paycheck Protection Program through PNC Bank in the principal amount of $ 838,700 Overall, we reduced our outstanding debt by approximately $ 3 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 cash flows to support potential future earnout commitments and debt service commitments. Based on our current plans and assumptions, 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 arising in the ordinary course of business for at least the next 12 months, including to satisfy our expected working capital needs, earnout obligations and capital and debt service commitments. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 4. Summary of Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements accompanying these notes include the accounts of Intellinetics and the accounts of all its subsidiaries in which it holds a controlling interest. Under GAAP, consolidation is generally required for investments of more than 50 Use of Estimates The preparation of condensed consolidated financial statements in conformity with 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 condensed consolidated financial statements and the reported amounts of revenues and expenses. By their nature, these estimates and assumptions are subject to an inherent degree of uncertainty. The impact of COVID-19 has significantly increased economic and demand uncertainty. Because future events and their effects cannot be determined with precision, actual results could differ significantly 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, fair value for goodwill and intangibles, the lease liabilities, estimates of fair value deferred taxes and related valuation allowances. Our management monitors these risks and assesses our business and financial risks on a quarterly basis. Revenue Recognition In accordance with ASC 606, “Revenue From Contracts With Customers,” we follow 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. We apply our revenue recognition policies as required in accordance with ASC 606 based on the facts and circumstances of each category of revenue. More detail regarding each category of revenue is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC filed on March 30, 2021 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 condensed consolidated balance sheets, as well as other contract assets which are comprised of employee sales commissions paid in advance of contract periods ending. 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 condensed consolidated balance sheets. The following table presents changes in our contract assets during the nine months ended September 30, 2021 and 2020: Schedule of Changes in Contract Assets and Liabilities Balance at Addition Revenue Billings Balance at Nine months ended September 30, 2021 Accounts receivable, unbilled $ 523,522 $ - $ 3,281,320 $ (3,151,767 ) $ 653,075 Other contract assets $ 31,283 $ - $ 107,364 $ 68,235 $ 70,412 Nine months ended September 30, 2020 Accounts receivable, unbilled $ 23,371 $ 276,023 $ 602,692 $ (398,444 ) $ 503,642 Other contract assets $ 19,670 $ - $ 39,975 $ 28,695 $ 30,950 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 98 24,509 45,323 The following table presents changes in our contract liabilities during the nine months ended September 30, 2021 and 2020: Schedule of changes in contract deferred revenue Balance at Addition Billings Recognized Balance at Nine months ended September 30, 2021 Deferred revenue $ 996,131 $ - $ 2,954,212 $ (2,613,480 ) $ 1,336,863 Nine months ended September 30, 2020 Deferred revenue $ 754,073 $ 198,659 $ 2,215,742 $ (2,146,222 ) $ 1,022,252 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. We recorded an allowance of $ 24,000 15,000 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 seven years seven ten years Purchase Accounting Related Fair Value Measurements We allocate the purchase price, including contingent consideration, of our 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 earnout period, discounted for the period over which the initial contingent consideration is measured, and volatility rates. We finalize the purchase price allocation once certain initial accounting valuation estimates are finalized, and no later than 12 months following the acquisition date. Software Development Costs We design, develop, test, market, license, and support new software products and enhancements of current products. We continuously monitor our 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,” we expense 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 our 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,” we capitalize 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 completion of all substantial testing. We 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 three and nine months ended September 30, 2021 and 2020, our expensed software development costs were $ 97,157 294,726 60,085 228,834 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. No other Accounting Standards Updates that have been issued but are not yet effective are expected to have a material effect on the Company’s future condensed consolidated financial statements. Advertising We expense the cost of advertising as incurred. Advertising expense for the three and nine months ended September 30, 2021 and 2020 amounted to $ 3,022 4,063 1,651 5,331 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 treasury 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 three and nine months ended September 30, 2021 reported net income, as did the three months ended September 30, 2020, while the nine months ended September 30, 2020 reported a net loss. Income Taxes We file a consolidated federal income tax return with our subsidiaries. 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 We account for uncertainty in income taxes in our 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 us in our tax returns. Segment Information Operating segments are defined in the criteria established under the FASB ASC Topic 280 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 our chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. Our CODM assesses performance and allocates resources based on two The Document Management Segment provides cloud-based and premise-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: Schedule of Segment Information For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Revenues Document Management $ 792,548 $ 780,834 $ 2,319,370 $ 2,018,208 Document Conversion 2,378,814 1,730,448 6,396,857 3,539,378 Total revenues $ 3,171,362 $ 2,511,282 $ 8,716,227 $ 5,557,586 Gross profit Document Management $ 673,237 $ 605,451 $ 1,898,799 $ 1,526,283 Document Conversion 1,242,484 884,843 3,435,893 1,880,648 Total gross profit $ 1,915,721 $ 1,490,294 $ 5,334,692 $ 3,406,931 Capital additions, net Document Management $ 5,935 $ - $ 44,051 $ 7,911 Document Conversion 126,578 33,676 488,100 51,205 Total capital additions, net $ 132,513 $ 33,676 $ 532,151 $ 59,116 As of September 30, As of December 31, 2021 2020 Total assets Document Management $ 2,249,183 $ 2,295,165 Document Conversion 9,957,635 8,049,468 Total assets $ 12,206,818 $ 10,344,633 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 condensed consolidated financial statements have been reclassified to conform to current period presentation. |
Business Acquisitions _ Earnout
Business Acquisitions – Earnout Liability | 9 Months Ended |
Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Business Acquisitions – Earnout Liability | 5. Business Acquisitions – Earnout Liability On March 2, 2020, we acquired all of the issued and outstanding stock of Graphic Sciences. The purchase price paid for Graphic Sciences was $ 3,906,253 833,000 2,500,000 686,200 0 77,211 769,733 1,410,217 On April 21, 2020, we acquired substantially all of the assets of CEO Image. The purchase price paid for the assets of CEO Image consisted of $ 128,832 170,000 185,000 370,000 203,000 0 7,261 185,000 156,261 The following unaudited pro forma information presents a summary of the condensed consolidated results of operations for the Company as if the acquisitions of Graphic Sciences and CEO Image had occurred on January 1, 2020. Schedule of Pro Forma Information For the nine months ended September 30, 2020 (unaudited) September 30, 2020 Total revenues $ 6,990,549 Net loss $ (566,082 ) Basic and diluted net loss per share $ (0.20 ) 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, 2020. The following tables present the amounts of revenue and earnings of the acquirees since the acquisition date included in the condensed consolidated income statement for the reporting period. For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Graphic Sciences: Total revenues $ 2,257,038 $ 1,660,775 $ 6,129,057 $ 3,409,193 Net income 256,016 $ 239,555 $ 753,911 $ 380,881 For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 CEO Image: Total revenues $ 147,380 $ 155,414 $ 419,576 $ 219,934 Net income $ - (a) $ - (a) $ - (a) $ - (a) (a) Total earnings from the CEO Image acquisition are impracticable to disclose as they are not accounted for separately because its operations and financial reporting were merged with existing operations and financial reporting. |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, Net | 6. Intangible Assets, Net At September 30, 2021, intangible assets consisted of the following: Schedule of Intangible Assets Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 119,000 $ (18,842 ) $ 100,158 Customer contracts 5 8 1,242,000 (319,543 ) 922,457 $ 1,361,000 $ (338,385 ) $ 1,022,615 At December 31, 2020, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 119,000 $ (9,917 ) $ 109,083 Customer contracts 5 8 1,242,000 (166,112 ) 1,075,888 $ 1,361,000 $ (176,029 ) $ 1,184,971 Amortization expense for the three and nine months ended September 30, 2021 and September 30, 2020, amounted to $ 54,119 162,356 54,119 121,910 Schedule of Amortization Expense for Intangible Assets For the Twelve Months Ending September 30, Amount 2022 $ 216,475 2023 216,475 2024 216,475 2025 205,558 2026 98,108 Thereafter 69,524 Intangible assets $ 1,022,615 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 7. Fair Value Measurements Under 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 loan (prior to forgiveness) approximate fair value because of its 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. We have earnout liabilities related to our two 2020 acquisitions which are measured on a recurring basis and recorded at fair value, measured using probability-weighted analysis and discounted using a rate that appropriately captures the risks associated with the obligation. The inputs used to calculate the fair value of the earnout 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 earnout liabilities The following table provides a summary of the changes in fair value of the earnout liabilities for the three and nine months ended September 30, 2021: Summary of Changes in Fair Value of Earnout Liabilities Three months ended Fair value at June 30, 2021 $ 1,566,478 Payment - Change in fair value - Fair value at September 30, 2021 $ 1,566,478 Nine months ended Fair value at December 31, 2020 $ 2,444,000 Payment (954,733 ) Change in fair value 77,211 Fair value at September 30, 2021 $ 1,566,478 The fair values of amounts owed are recorded in the current and long-term portions of earnout liabilities in our condensed consolidated balance sheets. Changes in fair value are recorded in change in fair value of earnout liabilities in our condensed consolidated statements of operations. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 8. Property and Equipment Property and equipment are comprised of the following: Schedule of Property and Equipment September 30, 2021 December 31, 2020 Computer hardware and purchased software $ 1,538,049 $ 1,019,259 Leasehold improvements 288,467 275,106 Furniture and fixtures 82,056 82,056 Property and equipment, gross 1,908,572 1,376,421 Less: accumulated depreciation (817,552 ) (677,669 ) Property and equipment, net $ 1,091,020 $ 698,752 Total depreciation expense on our property and equipment for the three and nine months ended September 30, 2021 and 2020 amounted to $ 51,804 139,883 35,357 82,407 |
Notes Payable _ Unrelated Parti
Notes Payable – Unrelated Parties | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
Notes Payable – Unrelated Parties | 9. Notes Payable – Unrelated Parties Summary of Notes Payable to Unrelated Parties The table below summarizes all notes payable at September 30, 2021 and December 31, 2020, respectively, with the exception of related party notes disclosed in Note 10 “Notes Payable - Related Parties.” Schedule of Notes Payable to Unrelated Parties September 30, 2021 December 31, 2020 PPP Note (a) $ - $ 838,700 2020 Notes 2,000,000 2,000,000 Total notes payable $ 2,000,000 $ 2,838,700 Less unamortized debt issuance costs (146,963 ) (224,767 ) Less unamortized debt discount (151,111 ) (231,111 ) Less current portion - (580,638 ) Long-term portion of notes payable $ 1,701,926 $ 1,802,184 (a) The full amount of the principal and interest on the PPP Note was forgiven in its entirety in January 2021. Future minimum principal payments of the 2020 Notes are as follows: Schedule of Future Minimum Principal Payments of Notes Payable As of September 30, Amount 2023 $ 2,000,000 Total $ 2,000,000 As of September 30, 2021 and December 31, 2020, accrued interest for these notes payable with the exception of the related party notes in Note 10, “Notes Payable - Related Parties,” was $ 0 5,941 With respect to all notes outstanding (other than the notes to related parties), 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 for the three and nine months ended September 30, 2021 was $ 113,030 339,345 115,498 433,783 We have evaluated the terms of our 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 our common stock. We 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. We 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 we 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. 2016-18 Unrelated Party Notes and 2020 Note Conversion In 2016 through 2018, we issued convertible promissory notes to unrelated parties in an aggregate principal amount of $ 3,535,000 1,433,689 4.00 35,250 4.00 2020 Notes On March 2, 2020, we sold 2,000 40 2,000,000 . February 28, 2023 12 20 14 320,000 80,000 26,667 80,000 26,667 62,222 PPP Note On April 15, 2020, we were issued an unsecured promissory note (“PPP Note”) for the PPP loan through PNC Bank with a principal amount of $ 838,700 1.0 845,083 |
Notes Payable - Related Parties
Notes Payable - Related Parties | 9 Months Ended |
Sep. 30, 2021 | |
Notes Payable - Related Parties | |
Notes Payable - Related Parties | 10. Notes Payable - Related Parties For the three and nine months ended September 30, 2021, there was no 0 88,941 2016-19 Related Party Notes and 2020 Note Conversion In 2016 through 2019, we issued convertible promissory notes to related parties, including 5 1,562,728 1,433,689 4.00 350,000 47,728 |
Deferred Compensation
Deferred Compensation | 9 Months Ended |
Sep. 30, 2021 | |
Compensation Related Costs [Abstract] | |
Deferred Compensation | 11. Deferred Compensation Pursuant to an employment agreement, we have accrued incentive compensation totaling $ 100,828 0 16,338 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 12. Commitments and Contingencies From time to time we are involved in legal proceedings, claims and litigation related to employee claims, contractual disputes and taxes in the ordinary course of business. Although we cannot predict the outcome of such matters, currently we have no reason to believe the disposition of any current matter could reasonably be expected to have a material adverse impact on our financial position, results of operations or the ability to carry on any of our business activities. Employment Agreements We have entered into employment agreements with three of our key executives, including one of our founders. Under their respective employment agreements, the executives are employed on an “at-will” basis and are bound by typical confidentiality, non-solicitation and non-competition provisions. Deferred compensation for one founder remains outstanding as of September 30, 2021. Operating Leases On January 1, 2010 , we 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 September 18, 2021 , the lease expires on December 31, 2028 . The monthly rental payment is $ 4,638 5,850 for the final year. Our subsidiary, Graphic Sciences, uses 36,000 square feet of leased space in Madison Heights, Michigan 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 gradually higher annual increases each September up to $ 45,828 for the final year, and with a lease term continuing until August 31, 2026 . Graphic Sciences also leases and uses a separate 37,000 5,000 The monthly Sterling Heights rental payment is $ 20,452 , with gradually higher annual increases each May up to $ 24,171 for the final year, and with a lease term continuing to April 30, 2028 . 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 an additional temporary storage space in Madison Heights, with a monthly rental payment of $ 1,605 The following table sets forth the future minimum lease payments under these operating leases: Schedule of Future Rental Payments for Operating Leases For the period ending September 30, Amount 2022 $ 932,954 2023 932,995 2024 896,168 2025 876,675 2026 848,540 Thereafter 610,159 Future lease payments under operating lease $ 5,097,491 Lease costs charged to operations for the three months ended September 30, 2021 and 2020 amounted to $ 293,953 216,561 794,317 505,072 29,430 85,848 Schedule of Operating Lease Costs For the Nine Months Ending September 30, 2021: Operating cash flows from operating leases $ 577,244 Weighted average remaining lease term – operating leases 5.6 Weighted average discount rate – operating leases 6.95 % Because these leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. |
Stockholders_ Equity
Stockholders’ Equity | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
Stockholders’ Equity | 13. Stockholders’ Equity Common Stock As of September 30, 2021, 2,823,072 135,902 497,330 On March 2, 2020, we sold 955,000 ● 875,000 4.00 3,500,000 ● 2,000 1,000 1,000 40 2,000,000 In connection with the private placement offering, we paid the placement agent $ 440,000 8 95,500 4.00 five years 236,761 135,291 3.90 307,867 175,924 25,935 77,804 25,935 60,514 Reverse Stock Split In February 2020, upon recommendation and authorization by our Board of Directors, our stockholders holding a majority in interest of the issued and outstanding shares of our common stock, acting by written consent, adopted an amendment to our Articles of Incorporation to effectuate a reverse split of our issued and outstanding shares of common stock at a ratio of one-for-fifty (1-for-50) (the “Reverse Split”), and reduce the number of authorized shares of our common stock to 25,000,000 Effective March 2, 2020, before the Reverse Split and the 25,000,000 Share Amendment became effective, upon recommendation and authorization by the Board of Directors, stockholders holding a majority in interest of the issued and outstanding shares of our common stock, acting by written consent, adopted an amendment to our Articles of Incorporation to increase the authorized number of shares of our common stock to 160,000,000 3,200,000 75,000,000 1,500,000 25,000,000 The Reverse Split did not cause an adjustment to the par value of the common stock. Pursuant to the Reverse Split, we adjusted the amounts for shares reserved for issuance upon the exercise of outstanding warrants, outstanding stock options, and shares reserved for the 2015 Plan. All references to shares of common stock and per share data in the accompanying condensed consolidated financial statements and in these notes related thereto have been adjusted to reflect the Reverse Split for all periods presented. Warrants The following sets forth the warrants to purchase our common stock that were outstanding as of September 30, 2021: ● Warrants to purchase 3,077 37.50 ● Warrants to purchase 3,000 15.00 ● Warrants to purchase 17,200 12.50 ● Warrants to purchase 15,999 9.00 ● Warrants to purchase 95,500 4.00 No warrants were issued during the nine months ended September 30, 2021. Warrants to purchase 95,500 3.90 Schedule of Estimated Values of Warrants Valuation Assumptions Warrants Issued Risk-free interest rate 0.88 % Weighted average expected term 5 years Expected volatility 130.12 % Expected dividend yield 0.00 % |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 14. Stock-Based Compensation From time to time, we issue stock options and restricted stock as compensation for services rendered by our directors and employees. Restricted Stock On February 15, 2021 and January 2, 2020, we issued 12,207 16,429 57,500 57,500 Stock Options We did not make any stock option grants during the nine months ended September 30, 2021. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2020 was $ 3.30 23,098 13,969 69,293 32,652 A summary of stock option activity during the nine months ended September 30, 2021 and 2020 is as follows: Schedule of Stock Option Activity Weighted- Weighted- Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life Value Outstanding at January 1, 2021 145,360 $ 5.61 9 $ 19,200 Granted 99,000 4.00 Outstanding at September 30, 2021 145,360 $ 5.61 8 $ 19,200 Exercisable at September 30, 2021 81,685 $ 6.71 8 $ 19,200 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 $ 19,200 Granted 99,000 4.00 Outstanding at September 30, 2020 145,860 $ 5.61 9 $ 19,200 Exercisable at September 30, 2020 38,785 $ 9.54 8 $ 19,200 As of September 30, 2021 and December 31, 2020, there was $ 253,580 322,874 three years 92,475 14,963 |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2021 | |
Risks and Uncertainties [Abstract] | |
Concentrations | 15. Concentrations Revenues from a limited number of customers have accounted for a substantial percentage of our total revenues. During the three months ended September 30, 2021 and 2020, our largest customer, the State of Michigan, accounted for 38 % and 47 %, respectively, of our total revenues, and our second largest customer, Rocket Mortgage (formerly Quicken Loans), accounted for 7 % and 8 %, respectively, of our total revenues. During the nine months ended September 30, 2021 and 2020, our largest customer, the State of Michigan, accounted for 44 % and 43 %, respectively, of our total revenues, and our second largest customer, Rocket Mortage, accounted for 9 % and 8 %, respectively, of our total revenues. For the three months ended September 30, 2021 and 2020, government contracts represented approximately 52 % and 65 %, respectively, of our net revenues. For the nine months ended September 30, 2021 and 2020, government contracts represented approximately 60 % and 61 %, respectively, of our net revenues. A significant portion of our sales to resellers represent ultimate sales to government agencies. As of September 30, 2021, accounts receivable concentrations from our two largest customers were 42 22 54 12 |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 9 Months Ended |
Sep. 30, 2021 | |
Related Party Transactions [Abstract] | |
Certain Relationships and Related Transactions | 16. Certain Relationships and Related Transactions We did not participate in any related person transactions during the three and nine months ended September 30, 2021. |
Provision For Income Taxes
Provision For Income Taxes | 9 Months Ended |
Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Provision For Income Taxes | 17. Provision For Income Taxes We file federal and various state income tax returns in the U.S. For the three and nine months ended September 30, 2021 and 2020, 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 any other federal or state taxes because we have incurred losses since our inception. Income tax benefit consists of the following federal, deferred components for the nine months ended September 30, 2021 and 2020: Summary of Income Tax Benefits Nine months ended Nine months ended Benefit of net operating losses $ 81,186 $ (85,536 ) Other timing differences 61,809 (85,209 ) Change in valuation allowance, including $ 188,000 (142,995 ) 17,555 Tax benefit $ - $ (188,300 ) A reconciliation is provided below of the U.S. Federal income tax expense at a statutory rate of 21 Summary of Reconciliation of Income Tax Expense Nine months ended Nine months ended U.S. statutory rate 21 % 21 % U.S. Federal income tax at statutory rate $ 275,448 $ (201,810 ) Increase (decrease) in income taxes due to: Non-taxable PPP loan and accrued interest recovery (177,467 ) - Non-deductible earnout expense 14,690 - Non-deductible goodwill amortization 29,968 22,890 Other differences 356 6,840 Benefit of acquisition-date purchased deferred tax liability - (188,300 ) Other change in valuation allowance (142,995 ) 171,780 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: Summary of Deferred Tax Assets and Liabilities September 30, 2021 December 31, 2020 Deferred tax assets Reserves and accruals not currently deductible for tax purposes $ 48,000 $ 51,000 Amortizable assets 67,000 72,000 Net operating loss carryforwards 3,939,000 4,020,000 Deferred tax assets 4,054,000 4,143,000 Deferred tax liabilities Property and equipment (198,000 ) (143,000 ) Net Deferred tax assets 3,856,000 4,000,000 Valuation allowance (3,856,000 ) (4,000,000 ) Deferred tax assets and liabilities $ - $ - As of September 30, 2021 and December 31, 2020, we had federal net operating loss carry forwards of approximately $ 18,742,533 and $ 19,196,000 , 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 2039 for pre-2020 losses. The operating losses during and after 2020 do not expire. We recorded a valuation allowance against all of our deferred tax assets as of both September 30, 2021 and December 31, 2020. 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. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements accompanying these notes include the accounts of Intellinetics and the accounts of all its subsidiaries in which it holds a controlling interest. Under GAAP, consolidation is generally required for investments of more than 50 |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with 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 condensed consolidated financial statements and the reported amounts of revenues and expenses. By their nature, these estimates and assumptions are subject to an inherent degree of uncertainty. The impact of COVID-19 has significantly increased economic and demand uncertainty. Because future events and their effects cannot be determined with precision, actual results could differ significantly 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, fair value for goodwill and intangibles, the lease liabilities, estimates of fair value deferred taxes and related valuation allowances. Our management monitors these risks and assesses our business and financial risks on a quarterly basis. |
Revenue Recognition | Revenue Recognition In accordance with ASC 606, “Revenue From Contracts With Customers,” we follow 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. We apply our revenue recognition policies as required in accordance with ASC 606 based on the facts and circumstances of each category of revenue. More detail regarding each category of revenue is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC filed on March 30, 2021 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 condensed consolidated balance sheets, as well as other contract assets which are comprised of employee sales commissions paid in advance of contract periods ending. 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 condensed consolidated balance sheets. The following table presents changes in our contract assets during the nine months ended September 30, 2021 and 2020: Schedule of Changes in Contract Assets and Liabilities Balance at Addition Revenue Billings Balance at Nine months ended September 30, 2021 Accounts receivable, unbilled $ 523,522 $ - $ 3,281,320 $ (3,151,767 ) $ 653,075 Other contract assets $ 31,283 $ - $ 107,364 $ 68,235 $ 70,412 Nine months ended September 30, 2020 Accounts receivable, unbilled $ 23,371 $ 276,023 $ 602,692 $ (398,444 ) $ 503,642 Other contract assets $ 19,670 $ - $ 39,975 $ 28,695 $ 30,950 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 98 24,509 45,323 The following table presents changes in our contract liabilities during the nine months ended September 30, 2021 and 2020: Schedule of changes in contract deferred revenue Balance at Addition Billings Recognized Balance at Nine months ended September 30, 2021 Deferred revenue $ 996,131 $ - $ 2,954,212 $ (2,613,480 ) $ 1,336,863 Nine months ended September 30, 2020 Deferred revenue $ 754,073 $ 198,659 $ 2,215,742 $ (2,146,222 ) $ 1,022,252 |
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. We recorded an allowance of $ 24,000 15,000 |
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 seven years seven ten years |
Purchase Accounting Related Fair Value Measurements | Purchase Accounting Related Fair Value Measurements We allocate the purchase price, including contingent consideration, of our 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 earnout period, discounted for the period over which the initial contingent consideration is measured, and volatility rates. We finalize the purchase price allocation once certain initial accounting valuation estimates are finalized, and no later than 12 months following the acquisition date. |
Software Development Costs | Software Development Costs We design, develop, test, market, license, and support new software products and enhancements of current products. We continuously monitor our 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,” we expense 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 our 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,” we capitalize 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 completion of all substantial testing. We 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 three and nine months ended September 30, 2021 and 2020, our expensed software development costs were $ 97,157 294,726 60,085 228,834 |
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. No other Accounting Standards Updates that have been issued but are not yet effective are expected to have a material effect on the Company’s future condensed consolidated financial statements. |
Advertising | Advertising We expense the cost of advertising as incurred. Advertising expense for the three and nine months ended September 30, 2021 and 2020 amounted to $ 3,022 4,063 1,651 5,331 |
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 treasury 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 three and nine months ended September 30, 2021 reported net income, as did the three months ended September 30, 2020, while the nine months ended September 30, 2020 reported a net loss. |
Income Taxes | Income Taxes We file a consolidated federal income tax return with our subsidiaries. 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 We account for uncertainty in income taxes in our 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 us in our tax returns. |
Segment Information | Segment Information Operating segments are defined in the criteria established under the FASB ASC Topic 280 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 our chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. Our CODM assesses performance and allocates resources based on two The Document Management Segment provides cloud-based and premise-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: Schedule of Segment Information For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Revenues Document Management $ 792,548 $ 780,834 $ 2,319,370 $ 2,018,208 Document Conversion 2,378,814 1,730,448 6,396,857 3,539,378 Total revenues $ 3,171,362 $ 2,511,282 $ 8,716,227 $ 5,557,586 Gross profit Document Management $ 673,237 $ 605,451 $ 1,898,799 $ 1,526,283 Document Conversion 1,242,484 884,843 3,435,893 1,880,648 Total gross profit $ 1,915,721 $ 1,490,294 $ 5,334,692 $ 3,406,931 Capital additions, net Document Management $ 5,935 $ - $ 44,051 $ 7,911 Document Conversion 126,578 33,676 488,100 51,205 Total capital additions, net $ 132,513 $ 33,676 $ 532,151 $ 59,116 As of September 30, As of December 31, 2021 2020 Total assets Document Management $ 2,249,183 $ 2,295,165 Document Conversion 9,957,635 8,049,468 Total assets $ 12,206,818 $ 10,344,633 |
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 condensed consolidated financial statements have been reclassified to conform to current period presentation. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Contract Assets and Liabilities | The following table presents changes in our contract assets during the nine months ended September 30, 2021 and 2020: Schedule of Changes in Contract Assets and Liabilities Balance at Addition Revenue Billings Balance at Nine months ended September 30, 2021 Accounts receivable, unbilled $ 523,522 $ - $ 3,281,320 $ (3,151,767 ) $ 653,075 Other contract assets $ 31,283 $ - $ 107,364 $ 68,235 $ 70,412 Nine months ended September 30, 2020 Accounts receivable, unbilled $ 23,371 $ 276,023 $ 602,692 $ (398,444 ) $ 503,642 Other contract assets $ 19,670 $ - $ 39,975 $ 28,695 $ 30,950 |
Schedule of changes in contract deferred revenue | The following table presents changes in our contract liabilities during the nine months ended September 30, 2021 and 2020: Schedule of changes in contract deferred revenue Balance at Addition Billings Recognized Balance at Nine months ended September 30, 2021 Deferred revenue $ 996,131 $ - $ 2,954,212 $ (2,613,480 ) $ 1,336,863 Nine months ended September 30, 2020 Deferred revenue $ 754,073 $ 198,659 $ 2,215,742 $ (2,146,222 ) $ 1,022,252 |
Schedule of Segment Information | Information by operating segment is as follows: Schedule of Segment Information For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Revenues Document Management $ 792,548 $ 780,834 $ 2,319,370 $ 2,018,208 Document Conversion 2,378,814 1,730,448 6,396,857 3,539,378 Total revenues $ 3,171,362 $ 2,511,282 $ 8,716,227 $ 5,557,586 Gross profit Document Management $ 673,237 $ 605,451 $ 1,898,799 $ 1,526,283 Document Conversion 1,242,484 884,843 3,435,893 1,880,648 Total gross profit $ 1,915,721 $ 1,490,294 $ 5,334,692 $ 3,406,931 Capital additions, net Document Management $ 5,935 $ - $ 44,051 $ 7,911 Document Conversion 126,578 33,676 488,100 51,205 Total capital additions, net $ 132,513 $ 33,676 $ 532,151 $ 59,116 As of September 30, As of December 31, 2021 2020 Total assets Document Management $ 2,249,183 $ 2,295,165 Document Conversion 9,957,635 8,049,468 Total assets $ 12,206,818 $ 10,344,633 |
Business Acquisitions _ Earno_2
Business Acquisitions – Earnout Liability (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Pro Forma Information | The following unaudited pro forma information presents a summary of the condensed consolidated results of operations for the Company as if the acquisitions of Graphic Sciences and CEO Image had occurred on January 1, 2020. Schedule of Pro Forma Information For the nine months ended September 30, 2020 (unaudited) September 30, 2020 Total revenues $ 6,990,549 Net loss $ (566,082 ) Basic and diluted net loss per share $ (0.20 ) For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Graphic Sciences: Total revenues $ 2,257,038 $ 1,660,775 $ 6,129,057 $ 3,409,193 Net income 256,016 $ 239,555 $ 753,911 $ 380,881 For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 CEO Image: Total revenues $ 147,380 $ 155,414 $ 419,576 $ 219,934 Net income $ - (a) $ - (a) $ - (a) $ - (a) (a) Total earnings from the CEO Image acquisition are impracticable to disclose as they are not accounted for separately because its operations and financial reporting were merged with existing operations and financial reporting. |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | At September 30, 2021, intangible assets consisted of the following: Schedule of Intangible Assets Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 119,000 $ (18,842 ) $ 100,158 Customer contracts 5 8 1,242,000 (319,543 ) 922,457 $ 1,361,000 $ (338,385 ) $ 1,022,615 At December 31, 2020, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 119,000 $ (9,917 ) $ 109,083 Customer contracts 5 8 1,242,000 (166,112 ) 1,075,888 $ 1,361,000 $ (176,029 ) $ 1,184,971 |
Schedule of Amortization Expense for Intangible Assets | Schedule of Amortization Expense for Intangible Assets For the Twelve Months Ending September 30, Amount 2022 $ 216,475 2023 216,475 2024 216,475 2025 205,558 2026 98,108 Thereafter 69,524 Intangible assets $ 1,022,615 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
Summary of Changes in Fair Value of Earnout Liabilities | The following table provides a summary of the changes in fair value of the earnout liabilities for the three and nine months ended September 30, 2021: Summary of Changes in Fair Value of Earnout Liabilities Three months ended Fair value at June 30, 2021 $ 1,566,478 Payment - Change in fair value - Fair value at September 30, 2021 $ 1,566,478 Nine months ended Fair value at December 31, 2020 $ 2,444,000 Payment (954,733 ) Change in fair value 77,211 Fair value at September 30, 2021 $ 1,566,478 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment are comprised of the following: Schedule of Property and Equipment September 30, 2021 December 31, 2020 Computer hardware and purchased software $ 1,538,049 $ 1,019,259 Leasehold improvements 288,467 275,106 Furniture and fixtures 82,056 82,056 Property and equipment, gross 1,908,572 1,376,421 Less: accumulated depreciation (817,552 ) (677,669 ) Property and equipment, net $ 1,091,020 $ 698,752 |
Notes Payable _ Unrelated Par_2
Notes Payable – Unrelated Parties (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable to Unrelated Parties | The table below summarizes all notes payable at September 30, 2021 and December 31, 2020, respectively, with the exception of related party notes disclosed in Note 10 “Notes Payable - Related Parties.” Schedule of Notes Payable to Unrelated Parties September 30, 2021 December 31, 2020 PPP Note (a) $ - $ 838,700 2020 Notes 2,000,000 2,000,000 Total notes payable $ 2,000,000 $ 2,838,700 Less unamortized debt issuance costs (146,963 ) (224,767 ) Less unamortized debt discount (151,111 ) (231,111 ) Less current portion - (580,638 ) Long-term portion of notes payable $ 1,701,926 $ 1,802,184 (a) The full amount of the principal and interest on the PPP Note was forgiven in its entirety in January 2021. |
Schedule of Future Minimum Principal Payments of Notes Payable | Future minimum principal payments of the 2020 Notes are as follows: Schedule of Future Minimum Principal Payments of Notes Payable As of September 30, Amount 2023 $ 2,000,000 Total $ 2,000,000 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Rental Payments for Operating Leases | The following table sets forth the future minimum lease payments under these operating leases: Schedule of Future Rental Payments for Operating Leases For the period ending September 30, Amount 2022 $ 932,954 2023 932,995 2024 896,168 2025 876,675 2026 848,540 Thereafter 610,159 Future lease payments under operating lease $ 5,097,491 |
Schedule of Operating Lease Costs | Schedule of Operating Lease Costs For the Nine Months Ending September 30, 2021: Operating cash flows from operating leases $ 577,244 Weighted average remaining lease term – operating leases 5.6 Weighted average discount rate – operating leases 6.95 % |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
Schedule of Estimated Values of Warrants Valuation Assumptions | Schedule of Estimated Values of Warrants Valuation Assumptions Warrants Issued 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) | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | A summary of stock option activity during the nine months ended September 30, 2021 and 2020 is as follows: Schedule of Stock Option Activity Weighted- Weighted- Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life Value Outstanding at January 1, 2021 145,360 $ 5.61 9 $ 19,200 Granted 99,000 4.00 Outstanding at September 30, 2021 145,360 $ 5.61 8 $ 19,200 Exercisable at September 30, 2021 81,685 $ 6.71 8 $ 19,200 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 $ 19,200 Granted 99,000 4.00 Outstanding at September 30, 2020 145,860 $ 5.61 9 $ 19,200 Exercisable at September 30, 2020 38,785 $ 9.54 8 $ 19,200 |
Provision For Income Taxes (Tab
Provision For Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Summary of Income Tax Benefits | Income tax benefit consists of the following federal, deferred components for the nine months ended September 30, 2021 and 2020: Summary of Income Tax Benefits Nine months ended Nine months ended Benefit of net operating losses $ 81,186 $ (85,536 ) Other timing differences 61,809 (85,209 ) Change in valuation allowance, including $ 188,000 (142,995 ) 17,555 Tax benefit $ - $ (188,300 ) |
Summary of Reconciliation of Income Tax Expense | Summary of Reconciliation of Income Tax Expense Nine months ended Nine months ended U.S. statutory rate 21 % 21 % U.S. Federal income tax at statutory rate $ 275,448 $ (201,810 ) Increase (decrease) in income taxes due to: Non-taxable PPP loan and accrued interest recovery (177,467 ) - Non-deductible earnout expense 14,690 - Non-deductible goodwill amortization 29,968 22,890 Other differences 356 6,840 Benefit of acquisition-date purchased deferred tax liability - (188,300 ) Other change in valuation allowance (142,995 ) 171,780 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: Summary of Deferred Tax Assets and Liabilities September 30, 2021 December 31, 2020 Deferred tax assets Reserves and accruals not currently deductible for tax purposes $ 48,000 $ 51,000 Amortizable assets 67,000 72,000 Net operating loss carryforwards 3,939,000 4,020,000 Deferred tax assets 4,054,000 4,143,000 Deferred tax liabilities Property and equipment (198,000 ) (143,000 ) Net Deferred tax assets 3,856,000 4,000,000 Valuation allowance (3,856,000 ) (4,000,000 ) Deferred tax assets and liabilities $ - $ - |
Liquidity and Management_s Pl_2
Liquidity and Management’s Plans (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | 117 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | Sep. 30, 2021 | |
Short-term Debt [Line Items] | |||
Proceeds from Issuance of Long-term Debt and Capital Securities, Net | $ 18,600,000 | ||
Cash and Cash Equivalents, at Carrying Value | $ 1,907,882 | 1,829,247 | |
[custom:NetWorkingCapital-0] | 7,473 | ||
Retained Earnings (Accumulated Deficit) | 22,996,267 | $ 21,664,611 | |
[custom:IncreaseDecreaseInEarnoutLiabilities] | $ 954,733 | ||
Proceeds from private placement | 3,500,000 | ||
Debt instrument, coversion of debt | $ 6,000,000 | ||
Conversion price | $ 4 | ||
Proceeds from issuance promissory notes | $ 2,000,000 | ||
Interest rate | 12.00% | ||
Maturity date | Feb. 28, 2023 | ||
Reduced outstanding debt | $ 3,000,000 | ||
Paycheck Protection Program [Member] | |||
Short-term Debt [Line Items] | |||
Proceeds from loan | $ 838,700 |
Schedule of Changes in Contract
Schedule of Changes in Contract Assets and Liabilities (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Accounts Receivable [Member] | ||
Offsetting Assets [Line Items] | ||
Unbilled Accounts receivables, balance at beginning of period | $ 523,522 | $ 23,371 |
Unbilled Accounts receivables, Addition from acquisition | 276,023 | |
Unbilled Accounts receivables, revenue recognized in advance of billings | 3,281,320 | 602,692 |
Unbilled Accounts receivables, billings | (3,151,767) | (398,444) |
Unbilled Accounts receivables, balance at end of period | 653,075 | 503,642 |
Other Contract [Member] | ||
Offsetting Assets [Line Items] | ||
Unbilled Accounts receivables, balance at beginning of period | 31,283 | 19,670 |
Unbilled Accounts receivables, Addition from acquisition | ||
Unbilled Accounts receivables, revenue recognized in advance of billings | 107,364 | 39,975 |
Unbilled Accounts receivables, billings | 68,235 | 28,695 |
Unbilled Accounts receivables, balance at end of period | $ 70,412 | $ 30,950 |
Schedule of changes in contra_2
Schedule of changes in contract deferred revenue (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Accounting Policies [Abstract] | ||
Deferred revenue, balance at beginning of period | $ 996,131 | $ 754,073 |
Deferred revenue, Addition from acquisition | 198,659 | |
Deferred revenue, billings | 2,954,212 | 2,215,742 |
Deferred revenue, recognized revenue | (2,613,480) | (2,146,222) |
Deferred revenue, balance at end of period | $ 1,336,863 | $ 1,022,252 |
Schedule of Segment Information
Schedule of Segment Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Total revenues | $ 3,171,362 | $ 2,511,282 | $ 8,716,227 | $ 5,557,586 | |
Total gross profit | 1,915,721 | 1,490,294 | 5,334,692 | 3,406,931 | |
Total capital additions, net | 132,513 | 33,676 | 532,151 | 59,116 | |
Total assets | 12,206,818 | 12,206,818 | $ 10,344,633 | ||
Document Management [Member] | |||||
Total revenues | 792,548 | 780,834 | 2,319,370 | 2,018,208 | |
Total gross profit | 673,237 | 605,451 | 1,898,799 | 1,526,283 | |
Total capital additions, net | 5,935 | 44,051 | 7,911 | ||
Total assets | 2,249,183 | 2,249,183 | 2,295,165 | ||
Document Conversion [Member] | |||||
Total revenues | 2,378,814 | 1,730,448 | 6,396,857 | 3,539,378 | |
Total gross profit | 1,242,484 | 884,843 | 3,435,893 | 1,880,648 | |
Total capital additions, net | 126,578 | $ 33,676 | 488,100 | $ 51,205 | |
Total assets | $ 9,957,635 | $ 9,957,635 | $ 8,049,468 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($)Segment | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($) | |
Property, Plant and Equipment [Line Items] | |||||
Revenue, Remaining Performance Obligation, Percentage | 98.00% | 98.00% | |||
Revenue, Remaining Performance Obligation, Amount | $ 24,509 | $ 24,509 | $ 45,323 | ||
Inventory Adjustments | 24,000 | 24,000 | $ 15,000 | ||
Research and development expense | 97,157 | $ 60,085 | 294,726 | $ 228,834 | |
Advertising expense | $ 3,022 | $ 1,651 | $ 4,063 | $ 5,331 | |
Percentage of valuation allowance established on deferred tax assets | 100.00% | 100.00% | |||
Number of operating segments | Segment | 2 | ||||
Minimum [Member] | Furniture and Fixtures [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Minimum [Member] | Computer Hardware and Purchased Software [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, useful life | 3 years | ||||
Minimum [Member] | Leasehold Improvements [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, useful life | 7 years | ||||
Maximum [Member] | Furniture and Fixtures [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, useful life | 7 years | ||||
Maximum [Member] | Computer Hardware and Purchased Software [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, useful life | 7 years | ||||
Maximum [Member] | Leasehold Improvements [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, useful life | 10 years | ||||
Intellinetics Ohio and Graphic Sciences [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Percentage of voting rights outstanding | 50.00% | 50.00% |
Schedule of Pro Forma Informati
Schedule of Pro Forma Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | ||
Business Combination and Asset Acquisition [Abstract] | |||||
Total revenues | $ 6,990,549 | ||||
Net loss | $ (566,082) | ||||
Basic and diluted net loss per share | $ (0.20) | ||||
Business Acquisition [Line Items] | |||||
Total revenues | $ 6,990,549 | ||||
Net income (loss) | (566,082) | ||||
Graphic Sciences [Member] | |||||
Business Combination and Asset Acquisition [Abstract] | |||||
Total revenues | $ 2,257,038 | $ 1,660,775 | 6,129,057 | $ 3,409,193 | |
Net loss | 256,016 | 239,555 | 753,911 | 380,881 | |
Business Acquisition [Line Items] | |||||
Total revenues | 2,257,038 | 1,660,775 | 6,129,057 | 3,409,193 | |
Net income (loss) | 256,016 | 239,555 | 753,911 | 380,881 | |
CEO Image [Member] | |||||
Business Combination and Asset Acquisition [Abstract] | |||||
Total revenues | 147,380 | 155,414 | 419,576 | 219,934 | |
Net loss | [1] | ||||
Business Acquisition [Line Items] | |||||
Total revenues | 147,380 | 155,414 | 419,576 | 219,934 | |
Net income (loss) | [1] | ||||
[1] | Total earnings from the CEO Image acquisition are impracticable to disclose as they are not accounted for separately because its operations and financial reporting were merged with existing operations and financial reporting. |
Business Acquisitions _ Earno_3
Business Acquisitions – Earnout Liability (Details Narrative) - USD ($) | Jun. 10, 2021 | Jun. 08, 2021 | Apr. 21, 2020 | Mar. 02, 2020 | Sep. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Jun. 30, 2021 | Dec. 31, 2020 |
Earnout liability | $ 1,566,478 | $ 1,566,478 | $ 1,566,478 | $ 2,444,000 | |||||
Change in fair value of earnout liabilities | (77,211) | ||||||||
Graphic Sciences, Inc. [Member] | |||||||||
Business Combination, Consideration Transferred | $ 3,906,253 | ||||||||
Earnout liability | 686,200 | 1,410,217 | 1,410,217 | ||||||
Change in fair value of earnout liabilities | 0 | 77,211 | |||||||
Graphic Sciences, Inc. [Member] | Three Year Period [Member] | Seller [Member] | |||||||||
Earnout liability | 833,000 | ||||||||
Maximum payout | $ 2,500,000 | ||||||||
Graphic Sciences, Inc. [Member] | First Annual Period [Member] | |||||||||
Business Combination, Consideration Transferred | $ 769,733 | ||||||||
CEO Image Systems [Member[ | |||||||||
Business Combination, Consideration Transferred | $ 128,832 | ||||||||
Earnout liability | 203,000 | 156,261 | 156,261 | ||||||
Change in fair value of earnout liabilities | $ 0 | $ 7,261 | |||||||
Installment payments | 170,000 | ||||||||
CEO Image Systems [Member[ | First Annual Period [Member] | |||||||||
Business Combination, Consideration Transferred | $ 185,000 | ||||||||
CEO Image Systems [Member[ | Two Year Period [Member] | Seller [Member] | |||||||||
Earnout liability | 185,000 | ||||||||
Maximum payout | $ 370,000 |
Schedule of Intangible Assets (
Schedule of Intangible Assets (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, cost | $ 1,361,000 | $ 1,361,000 |
intangible assets, accumulated amortization | (338,385) | (176,029) |
Intangible assets, net | $ 1,022,615 | $ 1,184,971 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, Estimated Useful Life | 10 years | 10 years |
Intangible assets, cost | $ 119,000 | $ 119,000 |
intangible assets, accumulated amortization | (18,842) | (9,917) |
Intangible assets, net | 100,158 | 109,083 |
Customer Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, cost | 1,242,000 | 1,242,000 |
intangible assets, accumulated amortization | (319,543) | (166,112) |
Intangible assets, net | $ 922,457 | $ 1,075,888 |
Customer Contracts [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, Estimated Useful Life | 5 years | 5 years |
Customer Contracts [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, Estimated Useful Life | 8 years | 8 years |
Schedule of Amortization Expens
Schedule of Amortization Expense for Intangible Assets (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2022 | $ 216,475 | |
2023 | 216,475 | |
2024 | 216,475 | |
2025 | 205,558 | |
2026 | 98,108 | |
Thereafter | 69,524 | |
Intangible assets | $ 1,022,615 | $ 1,184,971 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 54,119 | $ 54,119 | $ 162,356 | $ 121,910 |
Summary of Changes in Fair Valu
Summary of Changes in Fair Value of Earnout Liabilities (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | ||||
Fair value at December 31, 2020 | $ 1,566,478 | $ 2,444,000 | ||
Payment | (954,733) | |||
Change in fair value | 77,211 | |||
Fair value at September 30, 2021 | $ 1,566,478 | $ 1,566,478 |
Fair Value Measurements (Detail
Fair Value Measurements (Details Narrative) | 9 Months Ended |
Sep. 30, 2021 | |
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 |
Schedule of Property and Equipm
Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Property, Plant and Equipment [Abstract] | ||
Computer hardware and purchased software | $ 1,538,049 | $ 1,019,259 |
Leasehold improvements | 288,467 | 275,106 |
Furniture and fixtures | 82,056 | 82,056 |
Property and equipment, gross | 1,908,572 | 1,376,421 |
Less: accumulated depreciation | (817,552) | (677,669) |
Property and equipment, net | $ 1,091,020 | $ 698,752 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 51,804 | $ 35,357 | $ 139,883 | $ 82,407 |
Schedule of Notes Payable to Un
Schedule of Notes Payable to Unrelated Parties (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | |
Debt Instrument [Line Items] | |||
Total notes payable | $ 2,000,000 | $ 2,838,700 | |
Less unamortized debt issuance costs | (146,963) | (224,767) | |
Less unamortized debt discount | (151,111) | (231,111) | |
Less current portion | (580,638) | ||
Long-term portion of notes payable | 1,701,926 | 1,802,184 | |
PPP Note Payable [Member] | |||
Debt Instrument [Line Items] | |||
Total notes payable | [1] | 838,700 | |
2020 Notes [Member] | |||
Debt Instrument [Line Items] | |||
Total notes payable | $ 2,000,000 | $ 2,000,000 | |
[1] | The full amount of the principal and interest on the PPP Note was forgiven in its entirety in January 2021. |
Schedule of Future Minimum Prin
Schedule of Future Minimum Principal Payments of Notes Payable (Details) | Sep. 30, 2021USD ($) |
Debt Disclosure [Abstract] | |
2023 | $ 2,000,000 |
Total | $ 2,000,000 |
Notes Payable _ Unrelated Par_3
Notes Payable – Unrelated Parties (Details Narrative) - USD ($) | Mar. 02, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Apr. 15, 2020 |
Short-term Debt [Line Items] | |||||||
Accrued interest | $ 0 | $ 0 | $ 5,941 | ||||
Interest Expense, Debt | 113,030 | $ 115,498 | 339,345 | $ 433,783 | |||
Proceeds from Issuance of Debt | $ 2,000,000 | ||||||
Debt instrument, maturity date | Feb. 28, 2023 | ||||||
Debt discount | 18,296 | ||||||
Notes payable | 2,000,000 | 2,000,000 | $ 2,838,700 | ||||
Gain (Loss) on Extinguishment of Debt | 845,083 | 287,426 | |||||
Accredited Investors [Member] | Securities Purchase Agreement [Member] | |||||||
Short-term Debt [Line Items] | |||||||
Debt instrument, interest percentage | 12.00% | ||||||
Default penalty percentage | 20.00% | ||||||
Debt instrument interest rate, effective percentage | 14.00% | ||||||
Debt discount | $ 320,000 | 26,667 | $ 26,667 | 80,000 | $ 62,222 | ||
Number of stock issued during period, shares | 80,000 | ||||||
PNC Bank [Member] | Paycheck Protection Program [Member] | |||||||
Short-term Debt [Line Items] | |||||||
Debt instrument, interest percentage | 1.00% | ||||||
Notes payable | $ 838,700 | ||||||
Convertible Promissory Notes [Member] | Taglich Brothers, Inc.[Member] | |||||||
Short-term Debt [Line Items] | |||||||
Sale of stock price per share | $ 4 | ||||||
Number of common stock share earned fees | 35,250 | ||||||
12% Subordinated Notes [Member] | Accredited Investors [Member] | Securities Purchase Agreement [Member] | |||||||
Short-term Debt [Line Items] | |||||||
Sale of stock price per share | $ 1,000 | ||||||
Sale of Stock, Number of Shares Issued in Transaction | 2,000 | ||||||
Stock Issued During Period, Shares, Conversion of Units | 40 | ||||||
Proceeds from Issuance of Debt | $ 2,000,000 | ||||||
Debt instrument, maturity date | Feb. 28, 2023 | ||||||
Two Thousand Sixteen To Two Thousand Eighteen [Member] | Convertible Promissory Notes [Member] | |||||||
Short-term Debt [Line Items] | |||||||
Principal amount | $ 3,535,000 | $ 3,535,000 | |||||
Common stock at a conversion price | 1,433,689 | ||||||
Sale of stock price per share | $ 4 |
Notes Payable - Related Parti_2
Notes Payable - Related Parties (Details Narrative) - USD ($) | Mar. 02, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | May 15, 2020 |
Short-term Debt [Line Items] | ||||||
Interest Expense, Debt | $ 113,030 | $ 115,498 | $ 339,345 | $ 433,783 | ||
Convertible Promissory Notes [Member] | 2019 Related Notes [Member] | ||||||
Short-term Debt [Line Items] | ||||||
Number of convertible units, value | $ 350,000 | |||||
Convertible promissory notes | $ 47,728 | |||||
2016-2019 [Member] | Convertible Promissory Notes [Member] | Related Party [Member] | ||||||
Short-term Debt [Line Items] | ||||||
Debt beneficial interest rate | 5.00% | |||||
Principal amount | 1,562,728 | $ 1,562,728 | ||||
Common stock at a conversion price | 1,433,689 | |||||
Sale of stock price per share | $ 4 | |||||
Two Thousand Sixteen To Two Thousand Eighteen [Member] | Convertible Promissory Notes [Member] | ||||||
Short-term Debt [Line Items] | ||||||
Principal amount | 3,535,000 | 3,535,000 | ||||
Common stock at a conversion price | 1,433,689 | |||||
Sale of stock price per share | $ 4 | |||||
Notes Payable - Related Parties [Member] | ||||||
Short-term Debt [Line Items] | ||||||
Interest Expense, Debt | $ 0 | $ 0 | $ 0 | $ 88,941 |
Deferred Compensation (Details
Deferred Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2021 | Dec. 31, 2020 | |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | ||||
Deferred compensation liability | $ 100,828 | $ 100,828 | ||
Deferred compensation expense | $ 0 | $ 16,338 | ||
Employment Agreements [Member] | Founders [Member] | ||||
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | ||||
Deferred compensation liability | $ 100,828 | $ 100,828 |
Schedule of Future Rental Payme
Schedule of Future Rental Payments for Operating Leases (Details) | Sep. 30, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 932,954 |
2023 | 932,995 |
2024 | 896,168 |
2025 | 876,675 |
2026 | 848,540 |
Thereafter | 610,159 |
Future lease payments under operating lease | $ 5,097,491 |
Schedule of Operating Lease Cos
Schedule of Operating Lease Costs (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating cash flows from operating leases | $ 577,244 |
Weighted average remaining lease term - operating leases | 5 years 7 months 6 days |
Weighted average discount rate - operating leases | 6.95% |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) | Jan. 02, 2021USD ($) | Jan. 02, 2020USD ($)ft² | May 31, 2021USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Jan. 01, 2010ft² |
Loss Contingencies [Line Items] | ||||||||
[custom:LeaseCommencedDate] | Jan. 1, 2010 | |||||||
Area of Land | ft² | 6,000 | |||||||
[custom:LeaseExtensionDate] | Sep. 18, 2021 | |||||||
Lease Expiration Date | Dec. 31, 2028 | |||||||
Monthly rental payment | $ 4,638 | |||||||
Operating lease costs | $ 293,953 | $ 216,561 | 794,317 | $ 505,072 | ||||
Short term lease costs | $ 29,430 | $ 85,848 | ||||||
Sterling Heights, Michigan [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Area of Land | ft² | 37,000 | |||||||
Lease Expiration Date | Apr. 30, 2028 | |||||||
Monthly rental payment | $ 24,171 | |||||||
Travers City [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Area of Land | ft² | 5,000 | |||||||
Graphic Sciences, Inc. [Member] | Vehicles [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
[custom:LeaseExtensionDate] | Oct. 31, 2024 | |||||||
Monthly rental payment | $ 2,618 | |||||||
Graphic Sciences, Inc. [Member] | Traverse City [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
[custom:LeaseExtensionDate] | Jan. 31, 2024 | |||||||
Monthly rental payment | $ 4,500 | |||||||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Monthly rental payment | $ 1,605 | |||||||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
[custom:LeaseExtensionDate] | Aug. 31, 2026 | |||||||
Monthly rental payment | $ 41,508 | |||||||
Lessor, Operating Lease, Description | Our subsidiary, Graphic Sciences, uses 36,000 square feet of leased space in Madison Heights, Michigan 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. | |||||||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | Maximum [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Monthly rental payment | $ 45,828 | |||||||
Graphic Sciences, Inc. [Member] | Highland Park, MI, and a Satellite Office [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Monthly rental payment | $ 20,452 | |||||||
Lessor, Operating Lease, Description | Graphic Sciences also leases and uses a separate 37,000 square foot building in Sterling Heights, Michigan for document storage, except approximately 5,000 square feet for production, and a satellite office in Traverse City, Michigan for production. | |||||||
Lease Agreements [Member] | ||||||||
Loss Contingencies [Line Items] | ||||||||
Monthly rental payment | $ 5,850 |
Schedule of Estimated Values of
Schedule of Estimated Values of Warrants Valuation Assumptions (Details) - Placement Agent [Member] | Mar. 02, 2020 |
Measurement Input, Risk Free Interest Rate [Member] | |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |
Warrants, measurement input percentage | 0.88 |
Measurement Input, Expected Term [Member] | |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |
Warrants, term | 5 years |
Measurement Input, Price Volatility [Member] | |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |
Warrants, measurement input percentage | 130.12 |
Measurement Input, Expected Dividend Rate [Member] | |
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items] | |
Warrants, measurement input percentage | 0 |
Stockholders_ Equity (Details N
Stockholders’ Equity (Details Narrative) - USD ($) | Mar. 02, 2020 | Feb. 29, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Mar. 20, 2020 |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Common stock, shares issued | 2,823,072 | 2,823,072 | 2,810,865 | |||||
Common stock, shares outstanding | 2,823,072 | 2,823,072 | 2,810,865 | |||||
Proceeds from private placement | $ 3,500,000 | |||||||
Warrant to purchase of shares of common stock | 95,500 | 95,500 | ||||||
Fair value of warrants issued price per share | $ 3.90 | $ 3.90 | ||||||
Interest Expense, Debt | $ 113,030 | $ 115,498 | $ 339,345 | $ 433,783 | ||||
Common stock, shares authorized | 25,000,000 | 25,000,000 | 25,000,000 | |||||
Private Placement [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Interest Expense, Debt | $ 25,935 | $ 25,935 | $ 77,804 | $ 60,514 | ||||
Placement Agent [Member] | Private Placement [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Payment to placement agent on private placement offering | $ 440,000 | |||||||
Percentage of gross proceeds paid to private placement agent | 8.00% | |||||||
Warrant to purchase of shares of common stock | 95,500 | |||||||
Class of warrant or right, exercise price of warrants or rights | $ 4 | |||||||
Warrants and Rights Outstanding, Term | 5 years | |||||||
Board of Directors [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Reverse stock split, description | effectuate a reverse split of our issued and outstanding shares of common stock at a ratio of one-for-fifty (1-for-50) (the “Reverse Split”), and reduce the number of authorized shares of our common stock to 25,000,000 shares (the “25,000,000 Share Amendment”). | |||||||
Common stock, shares authorized | 160,000,000 | 25,000,000 | 25,000,000 | |||||
Board of Directors [Member] | Maximum [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Common stock, shares authorized | 75,000,000 | |||||||
Board of Directors [Member] | Post-split Basis [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Common stock, shares authorized | 1,500,000 | 3,200,000 | ||||||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Number of stock issued during period, shares | 80,000 | |||||||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | 12% Subordinated Notes [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Number of sale of stock transaction | 2,000 | |||||||
Sale of stock price per share | $ 1,000 | |||||||
Proceeds from private placement | $ 2,000,000 | |||||||
Number of convertible units, value | $ 1,000 | |||||||
Number of convertible units, shares | 40 | |||||||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | Private Placement [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Number of sale of stock transaction | 955,000 | |||||||
Number of stock issued during period, shares | 875,000 | |||||||
Sale of stock price per share | $ 4 | |||||||
Proceeds from private placement | $ 3,500,000 | |||||||
2015 Plan [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Common stock, capital shares reserved for future issuance | 497,330 | 497,330 | ||||||
Exercise of Outstanding Warrants [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Common stock, capital shares reserved for future issuance | 135,902 | 135,902 | ||||||
Warrants [Member] | Private Placement [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Underwriting expenses | 236,761 | |||||||
Debt Issuance Costs, Net | $ 135,291 | |||||||
Fair value of warrants issued price per share | $ 3.90 | |||||||
Warrants [Member] | Placement Agent [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Underwriting expenses | $ 307,867 | |||||||
Debt Issuance Costs, Net | $ 175,924 | |||||||
Warrant One [Member] | Placement Agent [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Warrant to purchase of shares of common stock | 3,077 | 3,077 | ||||||
Class of warrant or right, exercise price of warrants or rights | $ 37.50 | $ 37.50 | ||||||
Warrant Two [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Warrant to purchase of shares of common stock | 3,000 | 3,000 | ||||||
Class of warrant or right, exercise price of warrants or rights | $ 15 | $ 15 | ||||||
Warrant Three [Member] | Placement Agent [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Warrant to purchase of shares of common stock | 17,200 | 17,200 | ||||||
Class of warrant or right, exercise price of warrants or rights | $ 12.50 | $ 12.50 | ||||||
Warrant Four [Member] | Placement Agent [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Warrant to purchase of shares of common stock | 15,999 | 15,999 | ||||||
Class of warrant or right, exercise price of warrants or rights | $ 9 | $ 9 | ||||||
Warrant Five [Member] | Placement Agent [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Warrant to purchase of shares of common stock | 95,500 | 95,500 | ||||||
Class of warrant or right, exercise price of warrants or rights | $ 4 | $ 4 |
Schedule of Stock Option Activi
Schedule of Stock Option Activity (Details) - Equity Option [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares Under Option, Outstanding beginning balance | 145,360 | 46,860 |
Weighted- Average Exercise Price, Outstanding beginning balance | $ 5.61 | $ 9.02 |
Weighted Average Remaining Contractual Life Outstanding, beginning | 9 years | 9 years |
Aggregate Intrinsic Value, Outstanding, beginning balance | $ 19,200 | $ 19,200 |
Shares Under Option, Granted | 99,000 | 99,000 |
Weighted- Average Exercise Price, Granted | $ 4 | $ 4 |
Shares Under Option, Outstanding ending balance | 145,360 | 145,860 |
Weighted- Average Exercise Price, Outstanding ending balance | $ 5.61 | $ 5.61 |
Weighted Average Remaining Contractual Life Outstanding, ending | 8 years | 9 years |
Aggregate Intrinsic Value, Outstanding ending balance | $ 19,200 | $ 19,200 |
Shares Under Option, Exercisable ending balance | 81,685 | 38,785 |
Weighted- Average Exercise Price, Exercisable ending balance | $ 6.71 | $ 9.54 |
Weighted Average Remaining Contractual Life, Exercisable, ending | 8 years | 8 years |
Aggregate Intrinsic Value, Exercisable ending balance | $ 19,200 | $ 19,200 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | Feb. 15, 2021 | Jan. 02, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share-based compensation, options, grants in period, weighted average grant date fair value | $ 3.30 | ||||||
Employee service share-based compensation, unrecognized, stock options | $ 253,580 | $ 253,580 | $ 322,874 | ||||
Employee service share-based compensation, unrecognized compensation not yet recognized, period | 3 years | ||||||
Share-based compensation options, fair value | 92,475 | $ 14,963 | $ 92,475 | $ 14,963 | |||
Restricted Stock [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Restricted stock issued during period shares | 12,207 | 16,429 | |||||
Stock compensation expenses | 57,500 | $ 57,500 | |||||
Stock Options [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock compensation expenses | $ 23,098 | $ 13,969 | $ 69,293 | $ 32,652 |
Concentrations (Details Narrati
Concentrations (Details Narrative) - Customer Concentration Risk [Member] | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Revenue Benchmark [Member] | The State of Michigan [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 38.00% | 47.00% | 44.00% | 43.00% | |
Revenue Benchmark [Member] | Rocket Mortage [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 7.00% | 8.00% | 9.00% | 8.00% | |
Revenue Benchmark [Member] | Government Contracts [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 52.00% | 65.00% | 60.00% | 61.00% | |
Accounts Receivable [Member] | Customer One [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 42.00% | 54.00% | |||
Accounts Receivable [Member] | Customer Two [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 22.00% | 12.00% |
Summary of Income Tax Benefits
Summary of Income Tax Benefits (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | ||||
Benefit of net operating losses | $ 81,186 | $ (85,536) | ||
Other timing differences | 61,809 | (85,209) | ||
Change in valuation allowance, including $188,000 reduction in valuation allowance due to purchased deferred tax liability | (142,995) | 17,555 | ||
Income tax benefit | $ (188,300) |
Summary of Income Tax Benefit_2
Summary of Income Tax Benefits (Details) (Parenthetical) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | ||
Reduction in valuation allowance | $ 188,000 | $ 188,000 |
Summary of Reconciliation of In
Summary of Reconciliation of Income Tax Expense (Details) (Parenthetical) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | ||
U.S. statutory rate | 21.00% | 21.00% |
Summary of Reconciliation of _2
Summary of Reconciliation of Income Tax Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | ||||
U.S. statutory rate | 21.00% | 21.00% | ||
U.S. Federal income tax at statutory rate | $ 275,448 | $ (201,810) | ||
Non-taxable PPP loan and accrued interest recovery | (177,467) | |||
Non-deductible earnout expense | 14,690 | |||
Non-deductible goodwill amortization | 29,968 | 22,890 | ||
Other differences | 356 | 6,840 | ||
Benefit of acquisition-date purchased deferred tax liability | (188,300) | |||
Other change in valuation allowance | (142,995) | 171,780 | ||
Income tax benefit | $ (188,300) |
Summary of Deferred Tax Assets
Summary of Deferred Tax Assets and Liabilities (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Income Tax Disclosure [Abstract] | ||
Reserves and accruals not currently deductible for tax purposes | $ 48,000 | $ 51,000 |
Amortizable assets | 67,000 | 72,000 |
Net operating loss carryforwards | 3,939,000 | 4,020,000 |
Deferred tax assets | 4,054,000 | 4,143,000 |
Property and equipment | (198,000) | (143,000) |
Net Deferred tax assets | 3,856,000 | 4,000,000 |
Valuation allowance | (3,856,000) | (4,000,000) |
Deferred tax assets and liabilities |
Provision For Income Taxes (Det
Provision For Income Taxes (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Operating Loss Carryforwards [Line Items] | ||
[custom:OperatingLossCarryForwardsExpirationPeriod] | 2039 | |
Domestic Tax Authority [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating Loss Carryforwards | $ 18,742,533 | $ 19,196,000 |