Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 10, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q/A | |
Amendment Flag | true | |
Amendment Description | This Amendment No. 1 on Form 10-Q/A (this “Amendment”) amends our quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on November 14, 2022, and is being filed solely to amend Item 1 of Part I, in order to correct a typographical error in the “Sales and marketing” operating expense line appearing in the Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2022. The Sales and marketing expenses for the three months ended September 30, 2022 were $492,540. All other numbers in the Condensed Consolidated Statement of Operations, and in the remainder of the report, for all periods were accurately reported, including total operating expenses, and net income(loss). This Amendment contains the complete text of the original report with the corrected information appearing in Item I of Part I. | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2022 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
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 | |
Title of 12(b) Security | Common Stock, $0.001 par value | |
Trading Symbol | INLX | |
Security Exchange Name | NYSEAMER | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 4,073,757 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash | $ 3,776,627 | $ 1,752,630 |
Accounts receivable, net | 853,930 | 1,176,059 |
Accounts receivable, unbilled | 491,946 | 444,782 |
Parts and supplies, net | 74,540 | 76,691 |
Other contract assets | 122,754 | 78,556 |
Prepaid expenses and other current assets | 324,555 | 155,550 |
Total current assets | 5,644,352 | 3,684,268 |
Property and equipment, net | 1,070,724 | 1,091,780 |
Right of use assets | 3,365,575 | 3,841,612 |
Intangible assets, net | 4,547,223 | 968,496 |
Goodwill | 5,789,821 | 2,322,887 |
Other assets | 341,942 | 53,089 |
Total assets | 20,759,637 | 11,962,132 |
Current liabilities: | ||
Accounts payable | 263,427 | 181,521 |
Accrued compensation | 389,150 | 343,576 |
Accrued expenses, other | 116,231 | 161,862 |
Lease liabilities - current | 672,159 | 616,070 |
Deferred revenues | 2,998,647 | 1,194,649 |
Deferred compensation | 20,166 | 100,828 |
Earnout liabilities - current | 757,347 | 958,818 |
Notes payable - current | 1,912,331 | |
Total current liabilities | 7,129,458 | 3,557,324 |
Long-term liabilities: | ||
Notes payable - net of current portion | 2,053,984 | 1,754,527 |
Notes payable - related party - net of current portion | 521,205 | |
Lease liabilities - net of current portion | 2,805,971 | 3,316,682 |
Earnout liabilities - net of current portion | 671,863 | |
Total long-term liabilities | 5,381,160 | 5,743,072 |
Total liabilities | 12,510,618 | 9,300,396 |
Stockholders’ equity: | ||
Common stock, $0.001 par value, 25,000,000 shares authorized; 4,073,757 and 2,823,072 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 4,074 | 2,823 |
Additional paid-in capital | 30,060,018 | 24,297,229 |
Accumulated deficit | (21,815,073) | (21,638,316) |
Total stockholders’ equity | 8,249,019 | 2,661,736 |
Total liabilities and stockholders’ equity | $ 20,759,637 | $ 11,962,132 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2022 | Dec. 31, 2021 |
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 | 4,073,757 | 2,823,072 |
Common stock, shares outstanding | 4,073,757 | 2,823,072 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenues: | ||||
Total revenues | $ 3,859,627 | $ 3,171,362 | $ 9,978,782 | $ 8,716,227 |
Cost of revenues: | ||||
Total cost of revenues | 1,353,442 | 1,255,641 | 3,651,742 | 3,381,535 |
Gross profit | 2,506,185 | 1,915,721 | 6,327,040 | 5,334,692 |
Operating expenses: | ||||
General and administrative | 1,333,285 | 1,027,932 | 3,532,672 | 3,125,019 |
Change in fair value of earnout liabilities | 28,494 | 144,999 | 77,211 | |
Transaction costs | 355,281 | |||
Sales and marketing | 492,540 | 372,399 | 1,374,059 | 1,004,305 |
Depreciation and amortization | 193,863 | 105,923 | 503,250 | 302,239 |
Total operating expenses | 2,048,182 | 1,506,254 | 5,910,261 | 4,508,774 |
Income from operations | 458,003 | 409,467 | 416,779 | 825,918 |
Other income (expense) | ||||
Gain on extinguishment of debt | 845,083 | |||
Interest expense | (240,467) | (113,030) | (593,536) | (339,345) |
Total other (expense) income, net | (240,467) | (113,030) | (593,536) | 505,738 |
Income (loss) before income taxes | 217,536 | 296,437 | (176,757) | 1,331,656 |
Income tax benefit | ||||
Net income (loss) | $ 217,536 | $ 296,437 | $ (176,757) | $ 1,331,656 |
Basic net income (loss) per share: | $ 0.05 | $ 0.11 | $ (0.05) | $ 0.47 |
Diluted net income (loss) per share: | $ 0.05 | $ 0.10 | $ (0.05) | $ 0.43 |
Weighted average number of common shares outstanding - basic | 4,073,757 | 2,823,072 | 3,664,024 | 2,822,938 |
Weighted average number of common shares outstanding - diluted | 4,695,162 | 3,104,334 | 3,664,024 | 3,105,175 |
Sale of Software [Member] | ||||
Revenues: | ||||
Total revenues | $ 18,390 | $ 58,779 | $ 93,986 | $ 73,971 |
Cost of revenues: | ||||
Total cost of revenues | 10,647 | 3,691 | 44,232 | 10,050 |
Software as a Service [Member] | ||||
Revenues: | ||||
Total revenues | 1,211,407 | 352,192 | 2,801,084 | 1,052,072 |
Cost of revenues: | ||||
Total cost of revenues | 207,502 | 73,596 | 489,939 | 241,717 |
Software Maintenance Services [Member] | ||||
Revenues: | ||||
Total revenues | 352,892 | 336,732 | 1,033,375 | 1,012,251 |
Cost of revenues: | ||||
Total cost of revenues | 19,024 | 18,270 | 56,509 | 64,930 |
Professional Services [Member] | ||||
Revenues: | ||||
Total revenues | 2,007,613 | 2,165,030 | 5,221,326 | 5,715,273 |
Cost of revenues: | ||||
Total cost of revenues | 1,028,074 | 1,042,249 | 2,794,783 | 2,765,241 |
Storage and Retrieval Services [Member] | ||||
Revenues: | ||||
Total revenues | 269,325 | 258,629 | 829,011 | 862,660 |
Cost of revenues: | ||||
Total cost of revenues | $ 88,195 | $ 117,835 | $ 266,279 | $ 299,597 |
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, 2020 | $ 2,811 | $ 24,147,488 | $ (22,996,267) | $ 1,154,032 |
Beginning balance, shares at Dec. 31, 2020 | 2,810,865 | |||
Stock Option Compensation | 69,294 | 69,294 | ||
Net Income (Loss) | 1,331,656 | 1,331,656 | ||
Stock Issued to Directors | $ 12 | 57,488 | 57,500 | |
Stock Issued to Directors, shares | 12,207 | |||
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 | |||
Beginning balance, value at Dec. 31, 2021 | $ 2,823 | 24,297,229 | (21,638,316) | 2,661,736 |
Beginning balance, shares at Dec. 31, 2021 | 2,823,072 | |||
Stock Option Compensation | 244,951 | 244,951 | ||
Net Income (Loss) | (176,757) | (176,757) | ||
Stock Issued to Directors | $ 8 | 57,492 | 57,500 | |
Stock Issued to Directors, shares | 8,097 | |||
Stock Issued | $ 1,243 | 5,739,515 | 5,740,758 | |
Stock Issued, shares | 1,242,588 | |||
Equity Issuance Costs | (492,182) | (492,182) | ||
Warrants Issued and Extended | 213,013 | 213,013 | ||
Ending balance, value at Sep. 30, 2022 | $ 4,074 | 30,060,018 | (21,815,073) | 8,249,019 |
Ending balance, shares at Sep. 30, 2022 | 4,073,757 | |||
Beginning balance, value at Jun. 30, 2022 | $ 4,074 | 29,941,019 | (22,032,609) | 7,912,484 |
Beginning balance, shares at Jun. 30, 2022 | 4,073,757 | |||
Stock Option Compensation | 118,999 | 118,999 | ||
Net Income (Loss) | 217,536 | 217,536 | ||
Ending balance, value at Sep. 30, 2022 | $ 4,074 | $ 30,060,018 | $ (21,815,073) | $ 8,249,019 |
Ending balance, shares at Sep. 30, 2022 | 4,073,757 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (176,757) | $ 1,331,656 |
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||
Depreciation and amortization | 503,250 | 302,239 |
Bad debt expense (recovery) | 22,370 | (10,304) |
Parts and supplies reserve change | 9,000 | |
Amortization of deferred financing costs | 155,667 | 77,804 |
Amortization of debt discount | 79,999 | 80,000 |
Amortization of right of use asset | 476,037 | 472,402 |
Stock issued for services | 57,500 | 57,500 |
Stock option compensation | 244,951 | 69,294 |
Gain on extinguishment of debt | (845,083) | |
Change in fair value of earnout liabilities | 144,999 | 77,211 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 368,139 | (145,824) |
Accounts receivable, unbilled | (47,164) | (129,553) |
Parts and supplies | 2,151 | 12,357 |
Prepaid expenses and other current assets | (147,995) | (81,880) |
Accounts payable and accrued expenses | 45,403 | 254,784 |
Lease liabilities, current and long-term | (454,622) | (464,528) |
Deferred compensation | (80,662) | |
Accrued interest, current and long-term | 442 | |
Deferred revenues | 731,468 | 340,732 |
Total adjustments | 2,101,491 | 76,593 |
Net cash provided by operating activities | 1,924,734 | 1,408,249 |
Cash flows from investing activities: | ||
Cash paid to acquire business | (6,383,269) | |
Capitalized software | (315,148) | |
Purchases of property and equipment | (142,903) | (532,151) |
Net cash used in investing activities | (6,841,320) | (532,151) |
Cash flows from financing activities: | ||
Payment of earnout liabilities | (1,018,333) | (954,733) |
Proceeds from issuance of common stock | 5,740,758 | |
Offering costs paid on issuance of common stock and notes | (746,342) | |
Proceeds from notes payable | 2,364,500 | |
Proceeds from notes payable - related parties | 600,000 | |
Net cash provided by (used in) financing activities | 6,940,583 | (954,733) |
Net increase (decrease) in cash | 2,023,997 | (78,635) |
Cash - beginning of period | 1,752,630 | 1,907,882 |
Cash - end of period | 3,776,627 | 1,829,247 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 357,870 | 182,198 |
Cash paid during the period for income taxes | 11,050 | 2,106 |
Supplemental disclosure of non-cash financing activities: | ||
Discount on notes payable for warrants | 169,900 | |
Discount on notes payable - related parties for warrants | 43,113 | |
Warrants issued and extended for common stock issuance costs | 412,500 | |
Right-of-use asset obtained in exchange for operating lease liability | 1,837,106 | |
Supplemental disclosure of non-cash investing activities relating to business acquisitions: | ||
Accounts receivable | 68,380 | |
Prepaid expenses | 38,913 | |
Property and equipment | 30,018 | |
Intangible assets | 3,888,000 | |
Goodwill | 3,466,934 | |
Accounts payable | (36,446) | |
Deferred revenues | (1,072,530) | |
Net assets acquired in acquisition | 6,383,269 | |
Cash used in business acquisition | $ 6,383,269 |
Business Organization and Natur
Business Organization and Nature of Operations | 9 Months Ended |
Sep. 30, 2022 | |
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., is a Nevada corporation incorporated in 1997, with two wholly-owned subsidiaries: Intellinetics, Inc., an Ohio corporation (“Intellinetics Ohio”), and Graphic Sciences, Inc., a Michigan corporation (“Graphic Sciences”). Intellinetics Ohio was incorporated in 1996, and on February 10, 2012, Intellinetics Ohio became our sole operating subsidiary as a result of a reverse merger and recapitalization. On March 2, 2020, we purchased all the outstanding capital stock of Graphic Sciences. Our digital transformation products and services are provided through two reporting segments: Document Management and Document Conversion. Our Document Management segment, which includes the Yellow Folder, LLC (“Yellow Folder”) asset acquisition in April 2022 and 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, 2022 | |
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, 2022 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, 2021 filed with the SEC filed on March 24, 2022. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 3. 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 inflation and 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, 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 the realizable 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, including applying these policies to our revenues from Yellow Folder. More detail regarding each category of revenue is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC filed on March 24, 2022. 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 present changes in our contract assets during the nine months ended September 30, 2022 and 2021: Schedule of Changes in Contract Assets and Liabilities Balance at Beginning of Period Revenue Recognized in Advance of Billings Billings Balance at End of Period Nine months ended September 30, 2022 Accounts receivable, unbilled $ 444,782 $ 2,573,944 $ (2,526,780 ) $ 491,946 Nine months ended September 30, 2021 Accounts receivable, unbilled $ 523,522 $ 3,281,320 $ (3,151,767 ) $ 653,075 Balance at Commissions Commissions Balance at Nine months ended September 30, 2022 Other contract assets $ 78,556 $ 102,321 $ (58,123 ) $ 122,754 Nine months ended September 30, 2021 Other contract assets $ 31,283 $ 107,364 $ (68,235 ) $ 70,412 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 been 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 99 26,765 16,835 The following table presents changes in our contract liabilities during the nine months ended September 30, 2022 and 2021: Balance at Addition Billings Recognized Balance at Nine months ended September 30, 2022 Contract liabilities: Deferred revenue $ 1,194,649 $ 860,456 $ 5,560,018 $ (4,616,476 ) $ 2,998,647 Nine months ended September 30, 2021 Contract liabilities: Deferred revenue $ 996,131 $ - $ 2,954,212 $ (2,613,480 ) $ 1,336,863 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 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 Intangible Assets All intangible assets have finite lives and are stated at cost, net of amortization. Amortization is computed over the useful life of the related assets on a straight-line method. Goodwill The carrying value of goodwill is not amortized, but is tested for impairment annually as of December 31, as well as on an interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unity may not be recoverable. An impairment charge is recognized for the amount by which the carrying amount exceeds the recorded fair value. Impairment of Long-Lived Assets We account for the impairment and disposition of long-lived assets in accordance with ASC 360, “Property, Plant, and Equipment.” We test long-lived assets or asset groups, such as property and equipment, for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed of before the end of its estimated useful life. Recoverability is assessed based on comparing the carrying amount of the asset to the aggregate pre-tax undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group. Impairment is recognized when the carrying amount is not recoverable and exceeds the fair value of the asset or asset group. The impairment loss, if any, is measured as the amount by which the carrying amount exceeds fair value, which for this purpose is based upon the discounted projected future cash flows of the asset or asset group. There was no 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, with the exception of acquired contract assets and contract liabilities, which are measured under ASC 606. Such fair market value assessments are primarily based on third-party valuations using assumptions developed by management that require significant judgments and estimates that can change materially as additional information becomes available. The purchase price allocated to intangibles is based on unobservable factors, including but not limited to, projected revenues, expenses, customer attrition rates, a weighted average cost of capital, among others. The weighted average cost of capital uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows. The approach to valuing the initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected revenues and expenses over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured, and volatility rates. We finalize the purchase price allocation once certain initial accounting valuation estimates are finalized, and no later than 12 months following the acquisition date. Leases We determine if an arrangement is a lease at inception. Operating leases in which we are the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the condensed consolidated balance sheets. We do not have any finance leases, as a lessee, and no long-term leases for which we are the lessor. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the reasonably certain lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and reduced by lease incentives, such as tenant improvement allowances. Our lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Stock-Based Compensation We account for stock-based payments in accordance with ASC 718, “Compensation - Stock Compensation,” which requires that such equity instruments be measured at their fair values on the grant date. Stock-based payments to employees include grants of stock that are recognized in the condensed consolidated statement of operations based on their fair values at the date of grant. The grant date fair value of stock option awards is recognized in earnings as stock-based compensation cost over the requisite service period of the award using the straight-line attribution method. We estimate the fair value of the stock option awards using the Black-Scholes-Merton option pricing model. The exercise price of options is specified in the stock option agreements. The expected volatility is based on the historical volatility of our stock for the previous period equal to the expected term of the options. The expected term of options granted is based on the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected term of the options. The expected dividend yield is based upon the yield expected on date of grant to occur over the term of the option. Software Development Costs 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. Such costs in the amount of $ 0 43,771 No 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. Such costs in the amount of $ 143,943 271,377 No Capitalized costs are stated at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the related assets on a straight-line basis, which is three years. At September 30, 2022 and December 31, 2021, our condensed consolidated balance sheets included $ 327,159 38,305 For the three and nine months ended September 30, 2022 and 2021, our expensed software development costs were $ 42,852 157,811 97,157 294,726 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) In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASU should be applied prospectively. The Company elected to early adopt ASU 2021-08 on a prospective basis during the second quarter of 2022 in connection with the purchase price allocation for the Yellow Folder acquisition (see Note 4). No other Accounting Standards Updates that have been issued but are not yet effective are expected to have a material effect on our 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, 2022 and 2021 amounted to $ 10,371 19,871 3,022 4,063 (Loss) Earnings 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, 2022 reported net losses, while the three and nine months ended September 30, 2021 reported net income. We have outstanding warrants and stock options which have not been included in the calculation of diluted net loss per share for the nine months ended September 30, 2022 because to do so would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for each period are the same. 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 Operating segments are defined in the criteria established under the ASC 280, “Segment Reporting,” as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by 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, 2022 2021 2022 2021 Revenues Document Management $ 1,693,128 $ 792,548 $ 4,180,931 $ 2,319,370 Document Conversion 2,166,499 2,378,814 5,797,851 6,396,857 Total revenues $ 3,859,627 $ 3,171,362 $ 9,978,782 $ 8,716,227 Gross profit Document Management $ 1,427,696 $ 673,237 $ 3,488,947 $ 1,898,799 Document Conversion 1,078,489 1,242,484 2,838,093 3,435,893 Total gross profit $ 2,506,185 $ 1,915,721 $ 6,327,040 $ 5,334,692 Capital additions, net Document Management $ 145,581 $ 5,935 $ 321,382 $ 44,051 Document Conversion 43,069 126,578 136,669 488,100 Total capital additions, net $ 188,650 $ 132,513 $ 458,051 $ 532,151 September 30, 2022 December 31, 2021 Goodwill Document Management $ 3,989,645 $ 522,711 Document Conversion 1,800,176 1,800,176 Total goodwill $ 5,789,821 $ 2,322,887 September 30, 2022 December 31, 2021 Total assets Document Management $ 11,210,697 $ 2,233,419 Document Conversion 9,548,940 9,728,713 Total assets $ 20,759,637 $ 11,962,132 Statement of Cash Flows For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks. |
Business Combinations
Business Combinations | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Business Combinations | 4. Business Combinations On April 1, 2022, we entered into an asset purchase agreement to acquire substantially all of the assets of Yellow Folder. The acquisition was accounted for in accordance with GAAP and was made to expand our market share in the digital transformation industry and due to synergies of product lines and services between the Companies. The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of acquisitions as follows: Schedule of Fair Value of Assets Acquired and Liabilities Assumed Assets acquired: Accounts receivable $ 68,380 Prepaid expenses 38,913 Property and equipment 30,018 Intangible assets (see Note 5) 3,888,000 Assets 4,025,311 Liabilities assumed: Accounts payable 36,446 Deferred revenue 1,072,530 Liabilities 1,108,976 Total identifiable net assets 2,916,335 Purchase price 6,383,269 Goodwill - Excess of purchase price over fair value of net assets acquired $ 3,466,934 The purchase price of $ 6,383,269 3,466,934 Acquisition costs which include legal and other professional fees of $ 0 355,281 As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded. The finalization of the purchase accounting assessment may result in changes in the valuation of assets acquired and liabilities assumed and may have an impact on the Company’s results of operations and financial position. The following unaudited pro forma information presents a summary of the condensed consolidated results of operations for the Company as if the acquisition of Yellow Folder had occurred on January 1, 2021. Schedule of Pro Forma Information For the Three months ended (unaudited) (unaudited) September 30, 2022 September 30, 2021 Total revenues $ 3,859,627 $ 3,880,298 Net income $ 217,536 $ 289,676 Basic net income per share $ 0.05 $ 0.07 Diluted net income per share $ 0.05 $ 0.06 For the Nine months ended (unaudited) (unaudited) September 30, 2022 September 30, 2021 Total revenues $ 10,756,634 $ 10,762,099 Net (loss) income $ (142,241 ) $ 963,866 Basic net (loss) income per share $ (0.03 ) $ 0.24 Diluted net (loss) income per share $ (0.03 ) $ 0.22 The unaudited pro forma consolidated results are based on our historical financial statements and those of Yellow Folder 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, 2021. The following tables present the amounts of revenue and earnings of Yellow Folder since the acquisition date included in the condensed consolidated income statement for the reporting period. For the For the 2022 2022 Yellow Folder: Total revenues $ 829,856 $ 1,620,224 Net income $ 178,973 $ 375,531 |
Intangible Assets, Net
Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, Net | 5. Intangible Assets, Net At September 30, 2022, intangible assets consisted of the following: Schedule of Intangible Assets Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 297,000 $ (39,642 ) $ 257,358 Proprietary technology 10 861,000 (43,050 ) 817,950 Customer relationships 5 15 4,091,000 (619,085 ) 3,471,915 $ 5,249,000 $ (701,777 ) $ 4,547,223 At December 31, 2021, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 119,000 $ (21,817 ) $ 97,183 Customer relationships 5 8 1,242,000 (370,687 ) 871,313 $ 1,361,000 $ (392,504 ) $ 968,496 Amortization expense for the three and nine months ended September 30, 2022 and 2021, amounted to $ 127,577 309,273 54,119 162,356 Schedule of Amortization Expense for Intangible Assets For the Twelve Months Ending September 30, Amount 2023 $ 510,308 2024 510,308 2025 499,391 2026 391,941 2027 326,108 Thereafter 2,309,167 Intangible assets $ 4,547,223 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 6. 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, and accrued expenses approximate fair value because of its short maturity. Management believes that the carrying value of the 2020 Notes and 2022 Notes approximate fair value given that, while there has been change in the overall economic environment, there has not been significant net 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, 2022: Summary of Changes in Fair Value of Earnout Liabilities Three months ended Fair value at July 31, 2022 $ 728,853 Payment - Change in fair value 28,494 Fair value at September 30, 2022 $ 757,347 Nine months ended Fair value at December 31, 2021 $ 1,630,681 Payment (1,018,333 ) Change in fair value 144,999 Fair value at September 30, 2022 $ 757,347 Three months ended Fair value at July 31, 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 Fair value, Beginning balance $ 2,444,000 Payment (954,733 ) Change in fair value 77,211 Fair value at September 30, 2021 $ 1,566,478 Fair value, Ending balance $ 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, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 7. Property and Equipment Property and equipment are comprised of the following: Schedule of Property and Equipment September 30, 2022 December 31, 2021 Computer hardware and purchased software $ 1,593,208 $ 1,494,918 Leasehold improvements 369,861 295,230 Furniture and fixtures 71,325 71,325 Property and equipment, gross 2,034,394 1,861,473 Less: accumulated depreciation (963,670 ) (769,693 ) Property and equipment, net $ 1,070,724 $ 1,091,780 Total depreciation expense on our property and equipment for the three and nine months ended September 30, 2022 and 2021 amounted to $ 66,286 193,977 51,804 139,883 |
Notes Payable _ Unrelated Parti
Notes Payable – Unrelated Parties | 9 Months Ended |
Sep. 30, 2022 | |
Unrelated Party [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Notes Payable – Unrelated Parties | 8. Notes Payable – Unrelated Parties Summary of Notes Payable to Unrelated Parties The table below summarizes all notes payable At September 30, 2022 and December 31, 2021, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.” Schedule of Notes Payable to Unrelated Parties September 30, 2022 December 31, 2021 2022 Unrelated Notes $ 2,364,500 $ - 2020 Notes 2,000,000 2,000,000 Total notes payable $ 4,364,500 $ 2,000,000 Less unamortized debt issuance costs (353,741 ) (121,029 ) Less unamortized debt discount (44,444 ) (124,444 ) Less current portion, net (1,912,331 ) - Long-term portion of notes payable $ 2,053,984 $ 1,754,527 Future minimum principal payments of the Notes Payable to Unrelated Parties are as follows: Schedule of Future Minimum Principal Payments of Notes Payable As of September 30, Amount 2023 $ 2,000,000 2025 2,364,500 Total $ 4,364,500 As of September 30, 2022 and December 31, 2021, accrued interest for these notes payable with the exception of the related party notes in Note 9, “Notes Payable - Related Parties,” was $ 0 With respect to all notes outstanding (other than the notes to related parties), interest expense, including the amortization of debt issuance costs and debt discount, for the three and nine months ended September 30, 2022 and 2021 was $ 214,587 541,777 113,030 339,345 2022 Unrelated Notes On April 1, 2022, we sold $ 2,364,500 12 . March 30, 2025 12 14.0 20 14 2020 Notes On March 2, 2020, we sold 2,000 1,000 1,000 40 2,000,000 . February 28, 2023 12 14.0 20 14 320,000 80,000 26,667 79,999 PPP Note On April 15, 2020, we were issued an unsecured promissory note (“PPP Note”) under the Paycheck Protection Program through PNC Bank with a principal amount of $ 838,700 1.0 0 845,083 |
Notes Payable - Related Parties
Notes Payable - Related Parties | 9 Months Ended |
Sep. 30, 2022 | |
Related Party [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Notes Payable - Related Parties | 9. Notes Payable - Related Parties Summary of Notes Payable to Related Parties The table below summarizes all notes payable to related parties at September 30, 2022 and December 31, 2021: Schedule of Notes Payable to Unrelated Parties September 30, 2022 December 31, 2021 Notes payable – “2022 Related Notes” $ 600,000 $ - Less unamortized debt issuance costs (78,795 ) - Less current portion - - Long-term portion of notes payable $ 521,205 $ - Future minimum principal payments of the 2022 Notes to related parties are as follows: Schedule of Future Minimum Principal Payments of Notes Payable As of September 30, Amount 2025 $ 600,000 Total $ 600,000 As of September 30, 2022 and December 31, 2021, accrued interest for these notes payable – related parties was $ 0 With respect to all notes payable – related parties outstanding, interest expense, including the amortization of debt issuance costs, for the three and nine months ended September 30, 2022 was $ 25,880 51,759 no 2022 Related Notes On April 1, 2022, we issued 12% Subordinated Notes in an aggregate principal amount of $ 600,000 12 14.0 20 14 |
Deferred Compensation
Deferred Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Compensation Related Costs [Abstract] | |
Deferred Compensation | 10. Deferred Compensation Pursuant to an employment agreement, we have accrued incentive cash compensation for one of our founders totaling $ 20,166 100,828 30,248 80,662 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 11. 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, 2022. Operating Leases On January 1, 2010, we entered into an agreement to lease 6,000 January 1, 2010 September 18, 2021 4,950 5,850 Our subsidiary, Graphic Sciences, uses 36,000 41,508 45,828 August 31, 2026 Graphic Sciences also leases and uses a separate 37,000 20,452 24,171 April 30, 2028 4,500 January 31, 2024 2,618 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 nine months ending September 30, Amount 2023 $ 937,809 2024 896,168 2025 876,675 2026 848,540 2027 353,662 Thereafter 256,496 Total $ 4,169,350 Lease costs charged to operations for the three months ended September 30, 2022 and 2021 amounted to $ 243,301 293,953 729,902 794,317 4,814 14,441 Schedule of Operating Lease Costs For the nine months ending September 30, 2022: Operating cash flows from operating leases $ 318,030 Weighted average remaining lease term – operating leases 4.7 Weighted average discount rate – operating leases 6.99 % 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, 2022 | |
Equity [Abstract] | |
Stockholders’ Equity | 12. Stockholders’ Equity Common Stock As of September 30, 2022, 4,073,757 255,958 497,330 Private Placement 2022 On April 1, 2022, we entered into a Securities Purchase Agreement with certain accredited investors, pursuant to which we issued and sold (i) 1,242,588 4.62 5,740,756 $ 2,964,500 8,705,256 . We retained Taglich Brothers, Inc. as the exclusive placement agent for the private placement. In compensation, we paid the placement agent a cash payment of 8 696,420 124,258 4.62 165,406 3.91 47,607 3.30 3.97 492,181 254,160 38,931 77,862 Private Placement 2020 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 Warrants The following sets forth the warrants to purchase our common stock that were outstanding as of September 30, 2022: ● Warrants to purchase 3,000 15.00 March 30, 2027 ● Warrants to purchase 17,200 12.50 March 30, 2027 ● Warrants to purchase 16,000 9.00 March 30, 2027 ● Warrants to purchase 95,500 4.00 March 30, 2027 ● Warrants to purchase 124,258 4.62 March 30, 2027 Warrants to purchase 124,258 3.91 No Schedule of Estimated Values of Warrants Valuation Assumptions Warrants Issued Risk-free interest rate 2.55 % Weighted average expected term 5 Expected volatility 116.32 % Expected dividend yield 0.00 % |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 13. 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 January 6, 2022 and February 15, 2021, we issued 8,097 12,207 57,500 Stock Options On April 14, 2022, we granted employees stock options to purchase 220,587 6.08 1,152,470 The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 was $ 5.22 Schedule of Estimated Values of Stock Option Grants Valuation Assumptions Grant Date Risk-free interest rate 2.82 % Weighted average expected term 6 Expected volatility 116.60 % Expected dividend yield 0.00 % A summary of stock option activity during the nine months ended September 30, 2022 and 2021 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, 2022 144,860 $ 5.61 8 $ 19,200 Granted 220,587 6.08 Outstanding at September 30, 2022 365,447 $ 5.89 9 $ 19,200 Exercisable at September 30, 2022 93,085 $ 6.44 7 $ 19,200 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 Outstanding at September 30, 2021 145,360 $ 5.61 8 $ 19,200 Exercisable at September 30, 2021 81,685 $ 6.71 8 $ 19,200 During the three and nine months ended September 30, 2022 and 2021, stock-based compensation for options was $ 118,999 244,951 23,098 69,293 As of September 30, 2022 and December 31, 2021, there was $ 1,138,139 230,620 two years 91,913 92,475 |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2022 | |
Risks and Uncertainties [Abstract] | |
Concentrations | 14. 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, 2022 and 2021, our largest customer, the State of Michigan, accounted for 37% 38% 5% 7% 37% 44% 7% 9% For the three months ended September 30, 2022 and 2021, government contracts represented approximately 49% 52% 52% 60% As of September 30, 2022, accounts receivable concentrations from our two largest customers were 30% 10% 65% 7% |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Certain Relationships and Related Transactions | 15. Certain Relationships and Related Transactions We retained Taglich Brothers, Inc. as the exclusive placement agent for the private placement offering discussed in Note 8 and Note 12. In compensation, the Company paid the placement agent a cash payment of 8% 696,420 124,258 4.62 We retained Taglich Brothers, Inc. on an exclusive basis to render financial advisory and investment banking services to us in connection with our acquisition of Yellow Folder. Pursuant to an Engagement Agreement, dated May 1, 2020, we paid Taglich Brothers, Inc. a success fee of $ 200,000 We did not participate in any related person transactions during the three and nine months ended September 30, 2021. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
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 inflation and 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, 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 the realizable 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, including applying these policies to our revenues from Yellow Folder. More detail regarding each category of revenue is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC filed on March 24, 2022. 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 present changes in our contract assets during the nine months ended September 30, 2022 and 2021: Schedule of Changes in Contract Assets and Liabilities Balance at Beginning of Period Revenue Recognized in Advance of Billings Billings Balance at End of Period Nine months ended September 30, 2022 Accounts receivable, unbilled $ 444,782 $ 2,573,944 $ (2,526,780 ) $ 491,946 Nine months ended September 30, 2021 Accounts receivable, unbilled $ 523,522 $ 3,281,320 $ (3,151,767 ) $ 653,075 Balance at Commissions Commissions Balance at Nine months ended September 30, 2022 Other contract assets $ 78,556 $ 102,321 $ (58,123 ) $ 122,754 Nine months ended September 30, 2021 Other contract assets $ 31,283 $ 107,364 $ (68,235 ) $ 70,412 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 been 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 99 26,765 16,835 The following table presents changes in our contract liabilities during the nine months ended September 30, 2022 and 2021: Balance at Addition Billings Recognized Balance at Nine months ended September 30, 2022 Contract liabilities: Deferred revenue $ 1,194,649 $ 860,456 $ 5,560,018 $ (4,616,476 ) $ 2,998,647 Nine months ended September 30, 2021 Contract liabilities: Deferred revenue $ 996,131 $ - $ 2,954,212 $ (2,613,480 ) $ 1,336,863 |
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 |
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 |
Intangible Assets | Intangible Assets All intangible assets have finite lives and are stated at cost, net of amortization. Amortization is computed over the useful life of the related assets on a straight-line method. |
Goodwill | Goodwill The carrying value of goodwill is not amortized, but is tested for impairment annually as of December 31, as well as on an interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unity may not be recoverable. An impairment charge is recognized for the amount by which the carrying amount exceeds the recorded fair value. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets We account for the impairment and disposition of long-lived assets in accordance with ASC 360, “Property, Plant, and Equipment.” We test long-lived assets or asset groups, such as property and equipment, for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant adverse changes in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed of before the end of its estimated useful life. Recoverability is assessed based on comparing the carrying amount of the asset to the aggregate pre-tax undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group. Impairment is recognized when the carrying amount is not recoverable and exceeds the fair value of the asset or asset group. The impairment loss, if any, is measured as the amount by which the carrying amount exceeds fair value, which for this purpose is based upon the discounted projected future cash flows of the asset or asset group. There was no |
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, with the exception of acquired contract assets and contract liabilities, which are measured under ASC 606. Such fair market value assessments are primarily based on third-party valuations using assumptions developed by management that require significant judgments and estimates that can change materially as additional information becomes available. The purchase price allocated to intangibles is based on unobservable factors, including but not limited to, projected revenues, expenses, customer attrition rates, a weighted average cost of capital, among others. The weighted average cost of capital uses a market participant’s cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows. The approach to valuing the initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected revenues and expenses over the term of the contingent earn-out period, discounted for the period over which the initial contingent consideration is measured, and volatility rates. We finalize the purchase price allocation once certain initial accounting valuation estimates are finalized, and no later than 12 months following the acquisition date. |
Leases | Leases We determine if an arrangement is a lease at inception. Operating leases in which we are the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the condensed consolidated balance sheets. We do not have any finance leases, as a lessee, and no long-term leases for which we are the lessor. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the reasonably certain lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and reduced by lease incentives, such as tenant improvement allowances. Our lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. |
Stock-Based Compensation | Stock-Based Compensation We account for stock-based payments in accordance with ASC 718, “Compensation - Stock Compensation,” which requires that such equity instruments be measured at their fair values on the grant date. Stock-based payments to employees include grants of stock that are recognized in the condensed consolidated statement of operations based on their fair values at the date of grant. The grant date fair value of stock option awards is recognized in earnings as stock-based compensation cost over the requisite service period of the award using the straight-line attribution method. We estimate the fair value of the stock option awards using the Black-Scholes-Merton option pricing model. The exercise price of options is specified in the stock option agreements. The expected volatility is based on the historical volatility of our stock for the previous period equal to the expected term of the options. The expected term of options granted is based on the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected term of the options. The expected dividend yield is based upon the yield expected on date of grant to occur over the term of the option. |
Software Development Costs | Software Development Costs 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. Such costs in the amount of $ 0 43,771 No 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. Such costs in the amount of $ 143,943 271,377 No Capitalized costs are stated at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the related assets on a straight-line basis, which is three years. At September 30, 2022 and December 31, 2021, our condensed consolidated balance sheets included $ 327,159 38,305 For the three and nine months ended September 30, 2022 and 2021, our expensed software development costs were $ 42,852 157,811 97,157 294,726 |
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) In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASU should be applied prospectively. The Company elected to early adopt ASU 2021-08 on a prospective basis during the second quarter of 2022 in connection with the purchase price allocation for the Yellow Folder acquisition (see Note 4). No other Accounting Standards Updates that have been issued but are not yet effective are expected to have a material effect on our 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, 2022 and 2021 amounted to $ 10,371 19,871 3,022 4,063 |
(Loss) Earnings Per Share | (Loss) Earnings 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, 2022 reported net losses, while the three and nine months ended September 30, 2021 reported net income. We have outstanding warrants and stock options which have not been included in the calculation of diluted net loss per share for the nine months ended September 30, 2022 because to do so would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for each period are the same. |
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 Operating segments are defined in the criteria established under the ASC 280, “Segment Reporting,” as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by 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, 2022 2021 2022 2021 Revenues Document Management $ 1,693,128 $ 792,548 $ 4,180,931 $ 2,319,370 Document Conversion 2,166,499 2,378,814 5,797,851 6,396,857 Total revenues $ 3,859,627 $ 3,171,362 $ 9,978,782 $ 8,716,227 Gross profit Document Management $ 1,427,696 $ 673,237 $ 3,488,947 $ 1,898,799 Document Conversion 1,078,489 1,242,484 2,838,093 3,435,893 Total gross profit $ 2,506,185 $ 1,915,721 $ 6,327,040 $ 5,334,692 Capital additions, net Document Management $ 145,581 $ 5,935 $ 321,382 $ 44,051 Document Conversion 43,069 126,578 136,669 488,100 Total capital additions, net $ 188,650 $ 132,513 $ 458,051 $ 532,151 September 30, 2022 December 31, 2021 Goodwill Document Management $ 3,989,645 $ 522,711 Document Conversion 1,800,176 1,800,176 Total goodwill $ 5,789,821 $ 2,322,887 September 30, 2022 December 31, 2021 Total assets Document Management $ 11,210,697 $ 2,233,419 Document Conversion 9,548,940 9,728,713 Total assets $ 20,759,637 $ 11,962,132 |
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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Contract Assets and Liabilities | The following table present changes in our contract assets during the nine months ended September 30, 2022 and 2021: Schedule of Changes in Contract Assets and Liabilities Balance at Beginning of Period Revenue Recognized in Advance of Billings Billings Balance at End of Period Nine months ended September 30, 2022 Accounts receivable, unbilled $ 444,782 $ 2,573,944 $ (2,526,780 ) $ 491,946 Nine months ended September 30, 2021 Accounts receivable, unbilled $ 523,522 $ 3,281,320 $ (3,151,767 ) $ 653,075 Balance at Commissions Commissions Balance at Nine months ended September 30, 2022 Other contract assets $ 78,556 $ 102,321 $ (58,123 ) $ 122,754 Nine months ended September 30, 2021 Other contract assets $ 31,283 $ 107,364 $ (68,235 ) $ 70,412 The following table presents changes in our contract liabilities during the nine months ended September 30, 2022 and 2021: Balance at Addition Billings Recognized Balance at Nine months ended September 30, 2022 Contract liabilities: Deferred revenue $ 1,194,649 $ 860,456 $ 5,560,018 $ (4,616,476 ) $ 2,998,647 Nine months ended September 30, 2021 Contract liabilities: Deferred revenue $ 996,131 $ - $ 2,954,212 $ (2,613,480 ) $ 1,336,863 |
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, 2022 2021 2022 2021 Revenues Document Management $ 1,693,128 $ 792,548 $ 4,180,931 $ 2,319,370 Document Conversion 2,166,499 2,378,814 5,797,851 6,396,857 Total revenues $ 3,859,627 $ 3,171,362 $ 9,978,782 $ 8,716,227 Gross profit Document Management $ 1,427,696 $ 673,237 $ 3,488,947 $ 1,898,799 Document Conversion 1,078,489 1,242,484 2,838,093 3,435,893 Total gross profit $ 2,506,185 $ 1,915,721 $ 6,327,040 $ 5,334,692 Capital additions, net Document Management $ 145,581 $ 5,935 $ 321,382 $ 44,051 Document Conversion 43,069 126,578 136,669 488,100 Total capital additions, net $ 188,650 $ 132,513 $ 458,051 $ 532,151 September 30, 2022 December 31, 2021 Goodwill Document Management $ 3,989,645 $ 522,711 Document Conversion 1,800,176 1,800,176 Total goodwill $ 5,789,821 $ 2,322,887 September 30, 2022 December 31, 2021 Total assets Document Management $ 11,210,697 $ 2,233,419 Document Conversion 9,548,940 9,728,713 Total assets $ 20,759,637 $ 11,962,132 |
Business Combinations (Tables)
Business Combinations (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Fair Value of Assets Acquired and Liabilities Assumed | The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of acquisitions as follows: Schedule of Fair Value of Assets Acquired and Liabilities Assumed Assets acquired: Accounts receivable $ 68,380 Prepaid expenses 38,913 Property and equipment 30,018 Intangible assets (see Note 5) 3,888,000 Assets 4,025,311 Liabilities assumed: Accounts payable 36,446 Deferred revenue 1,072,530 Liabilities 1,108,976 Total identifiable net assets 2,916,335 Purchase price 6,383,269 Goodwill - Excess of purchase price over fair value of net assets acquired $ 3,466,934 |
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 acquisition of Yellow Folder had occurred on January 1, 2021. Schedule of Pro Forma Information For the Three months ended (unaudited) (unaudited) September 30, 2022 September 30, 2021 Total revenues $ 3,859,627 $ 3,880,298 Net income $ 217,536 $ 289,676 Basic net income per share $ 0.05 $ 0.07 Diluted net income per share $ 0.05 $ 0.06 For the Nine months ended (unaudited) (unaudited) September 30, 2022 September 30, 2021 Total revenues $ 10,756,634 $ 10,762,099 Net (loss) income $ (142,241 ) $ 963,866 Basic net (loss) income per share $ (0.03 ) $ 0.24 Diluted net (loss) income per share $ (0.03 ) $ 0.22 The following tables present the amounts of revenue and earnings of Yellow Folder since the acquisition date included in the condensed consolidated income statement for the reporting period. For the For the 2022 2022 Yellow Folder: Total revenues $ 829,856 $ 1,620,224 Net income $ 178,973 $ 375,531 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | At September 30, 2022, intangible assets consisted of the following: Schedule of Intangible Assets Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 297,000 $ (39,642 ) $ 257,358 Proprietary technology 10 861,000 (43,050 ) 817,950 Customer relationships 5 15 4,091,000 (619,085 ) 3,471,915 $ 5,249,000 $ (701,777 ) $ 4,547,223 At December 31, 2021, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 119,000 $ (21,817 ) $ 97,183 Customer relationships 5 8 1,242,000 (370,687 ) 871,313 $ 1,361,000 $ (392,504 ) $ 968,496 |
Schedule of Amortization Expense for Intangible Assets | Schedule of Amortization Expense for Intangible Assets For the Twelve Months Ending September 30, Amount 2023 $ 510,308 2024 510,308 2025 499,391 2026 391,941 2027 326,108 Thereafter 2,309,167 Intangible assets $ 4,547,223 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
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, 2022: Summary of Changes in Fair Value of Earnout Liabilities Three months ended Fair value at July 31, 2022 $ 728,853 Payment - Change in fair value 28,494 Fair value at September 30, 2022 $ 757,347 Nine months ended Fair value at December 31, 2021 $ 1,630,681 Payment (1,018,333 ) Change in fair value 144,999 Fair value at September 30, 2022 $ 757,347 Three months ended Fair value at July 31, 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 Fair value, Beginning balance $ 2,444,000 Payment (954,733 ) Change in fair value 77,211 Fair value at September 30, 2021 $ 1,566,478 Fair value, Ending balance $ 1,566,478 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
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, 2022 December 31, 2021 Computer hardware and purchased software $ 1,593,208 $ 1,494,918 Leasehold improvements 369,861 295,230 Furniture and fixtures 71,325 71,325 Property and equipment, gross 2,034,394 1,861,473 Less: accumulated depreciation (963,670 ) (769,693 ) Property and equipment, net $ 1,070,724 $ 1,091,780 |
Notes Payable _ Unrelated Par_2
Notes Payable – Unrelated Parties (Tables) - Unrelated Party [Member] | 9 Months Ended |
Sep. 30, 2022 | |
Defined Benefit Plan Disclosure [Line Items] | |
Schedule of Notes Payable to Unrelated Parties | The table below summarizes all notes payable At September 30, 2022 and December 31, 2021, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.” Schedule of Notes Payable to Unrelated Parties September 30, 2022 December 31, 2021 2022 Unrelated Notes $ 2,364,500 $ - 2020 Notes 2,000,000 2,000,000 Total notes payable $ 4,364,500 $ 2,000,000 Less unamortized debt issuance costs (353,741 ) (121,029 ) Less unamortized debt discount (44,444 ) (124,444 ) Less current portion, net (1,912,331 ) - Long-term portion of notes payable $ 2,053,984 $ 1,754,527 |
Schedule of Future Minimum Principal Payments of Notes Payable | Future minimum principal payments of the Notes Payable to Unrelated Parties are as follows: Schedule of Future Minimum Principal Payments of Notes Payable As of September 30, Amount 2023 $ 2,000,000 2025 2,364,500 Total $ 4,364,500 |
Notes Payable - Related Parti_2
Notes Payable - Related Parties (Tables) - Related Party [Member] | 9 Months Ended |
Sep. 30, 2022 | |
Defined Benefit Plan Disclosure [Line Items] | |
Schedule of Notes Payable to Unrelated Parties | The table below summarizes all notes payable to related parties at September 30, 2022 and December 31, 2021: Schedule of Notes Payable to Unrelated Parties September 30, 2022 December 31, 2021 Notes payable – “2022 Related Notes” $ 600,000 $ - Less unamortized debt issuance costs (78,795 ) - Less current portion - - Long-term portion of notes payable $ 521,205 $ - |
Schedule of Future Minimum Principal Payments of Notes Payable | Future minimum principal payments of the 2022 Notes to related parties are as follows: Schedule of Future Minimum Principal Payments of Notes Payable As of September 30, Amount 2025 $ 600,000 Total $ 600,000 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
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 nine months ending September 30, Amount 2023 $ 937,809 2024 896,168 2025 876,675 2026 848,540 2027 353,662 Thereafter 256,496 Total $ 4,169,350 |
Schedule of Operating Lease Costs | Schedule of Operating Lease Costs For the nine months ending September 30, 2022: Operating cash flows from operating leases $ 318,030 Weighted average remaining lease term – operating leases 4.7 Weighted average discount rate – operating leases 6.99 % |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
Schedule of Estimated Values of Warrants Valuation Assumptions | Schedule of Estimated Values of Warrants Valuation Assumptions Warrants Issued Risk-free interest rate 2.55 % Weighted average expected term 5 Expected volatility 116.32 % Expected dividend yield 0.00 % |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Estimated Values of Stock Option Grants Valuation Assumptions | Schedule of Estimated Values of Stock Option Grants Valuation Assumptions Grant Date Risk-free interest rate 2.82 % Weighted average expected term 6 Expected volatility 116.60 % Expected dividend yield 0.00 % |
Schedule of Stock Option Activity | A summary of stock option activity during the nine months ended September 30, 2022 and 2021 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, 2022 144,860 $ 5.61 8 $ 19,200 Granted 220,587 6.08 Outstanding at September 30, 2022 365,447 $ 5.89 9 $ 19,200 Exercisable at September 30, 2022 93,085 $ 6.44 7 $ 19,200 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 Outstanding at September 30, 2021 145,360 $ 5.61 8 $ 19,200 Exercisable at September 30, 2021 81,685 $ 6.71 8 $ 19,200 |
Schedule of Changes in Contract
Schedule of Changes in Contract Assets and Liabilities (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Offsetting Assets [Line Items] | ||
Deferred revenue, balance at beginning of period | $ 1,194,649 | $ 996,131 |
Deferred revenue, Addition from acquisition | 860,456 | |
Deferred revenue, billings | 5,560,018 | 2,954,212 |
Deferred revenue, recognized revenue | (4,616,476) | (2,613,480) |
Deferred revenue, balance at end of period | 2,998,647 | 1,336,863 |
Accounts Receivable [Member] | ||
Offsetting Assets [Line Items] | ||
Unbilled Accounts receivables, balance at beginning of period | 444,782 | 523,522 |
Unbilled Accounts receivables, revenue recognized in advance of billings | 2,573,944 | 3,281,320 |
Unbilled Accounts receivables, billings | (2,526,780) | (3,151,767) |
Unbilled Accounts receivables, balance at end of period | 491,946 | 653,075 |
Other Contract [Member] | ||
Offsetting Assets [Line Items] | ||
Unbilled Accounts receivables, balance at beginning of period | 78,556 | 31,283 |
Unbilled Accounts receivables, revenue recognized in advance of billings | 102,321 | 107,364 |
Unbilled Accounts receivables, billings | (58,123) | (68,235) |
Unbilled Accounts receivables, balance at end of period | $ 122,754 | $ 70,412 |
Schedule of Segment Information
Schedule of Segment Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Total revenues | $ 3,859,627 | $ 3,171,362 | $ 9,978,782 | $ 8,716,227 | |
Total gross profit | 2,506,185 | 1,915,721 | 6,327,040 | 5,334,692 | |
Total capital additions, net | 188,650 | 132,513 | 458,051 | 532,151 | |
Total goodwill | 5,789,821 | 5,789,821 | $ 2,322,887 | ||
Total assets | 20,759,637 | 20,759,637 | 11,962,132 | ||
Document Management [Member] | |||||
Total revenues | 1,693,128 | 792,548 | 4,180,931 | 2,319,370 | |
Total gross profit | 1,427,696 | 673,237 | 3,488,947 | 1,898,799 | |
Total capital additions, net | 145,581 | 5,935 | 321,382 | 44,051 | |
Total goodwill | 3,989,645 | 3,989,645 | 522,711 | ||
Total assets | 11,210,697 | 11,210,697 | 2,233,419 | ||
Document Conversion [Member] | |||||
Total revenues | 2,166,499 | 2,378,814 | 5,797,851 | 6,396,857 | |
Total gross profit | 1,078,489 | 1,242,484 | 2,838,093 | 3,435,893 | |
Total capital additions, net | 43,069 | $ 126,578 | 136,669 | $ 488,100 | |
Total goodwill | 1,800,176 | 1,800,176 | 1,800,176 | ||
Total assets | $ 9,548,940 | $ 9,548,940 | $ 9,728,713 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) Segment | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Property, Plant and Equipment [Line Items] | |||||
Revenue performance obligations percentage | 99% | 99% | |||
Revenue remaining performance obligation amount | $ 26,765 | $ 26,765 | $ 16,835 | ||
Inventory allowances | 24,000 | 24,000 | 24,000 | ||
Impairment of long lived asset | 0 | $ 0 | 0 | $ 0 | |
Other long-term assets | 327,159 | 327,159 | $ 38,305 | ||
Advertising expense | 10,371 | 3,022 | $ 19,871 | 4,063 | |
Effective income tax rate reconciliation, change in deferred tax assets valuation allowance, percent | 100% | ||||
Number of operating segments | Segment | 2 | ||||
Furniture and Fixtures, Computer Hardware and Purchased Software [Member] | Minimum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, estimated useful lives | 3 years | ||||
Furniture and Fixtures, Computer Hardware and Purchased Software [Member] | Maximum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, estimated useful lives | 7 years | ||||
Leasehold Improvements [Member] | Minimum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, estimated useful lives | 7 years | ||||
Leasehold Improvements [Member] | Maximum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, estimated useful lives | 10 years | ||||
Software Development [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Software development cost capiatlized | 0 | $ 43,771 | 0 | ||
Capitalized cost | 143,943 | 271,377 | 0 | ||
Research and development expense | $ 42,852 | $ 97,157 | $ 157,811 | $ 294,726 | |
Intellinetics Ohio and Graphic Sciences [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Percentage of voting rights outstanding | 50% | 50% |
Schedule of Fair Value of Asset
Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) | Apr. 02, 2022 USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
Accounts receivable | $ 68,380 |
Prepaid expenses | 38,913 |
Property and equipment | 30,018 |
Intangible assets (see Note 5) | 3,888,000 |
Assets | 4,025,311 |
Accounts payable | 36,446 |
Deferred revenue | 1,072,530 |
Liabilities | 1,108,976 |
Total identifiable net assets | 2,916,335 |
Purchase price | 6,383,269 |
Goodwill - Excess of purchase price over fair value of net assets acquired | $ 3,466,934 |
Schedule of Pro Forma Informati
Schedule of Pro Forma Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Business Acquisition [Line Items] | ||||
Total revenues | $ 3,859,627 | $ 3,880,298 | $ 10,756,634 | $ 10,762,099 |
Net income | $ 217,536 | $ 289,676 | $ (142,241) | $ 963,866 |
Basic net (loss) income per share | $ 0.05 | $ 0.07 | $ (0.03) | $ 0.24 |
Diluted net (loss) income per share | $ 0.05 | $ 0.06 | $ (0.03) | $ 0.22 |
Yellow Folder [Member] | ||||
Business Acquisition [Line Items] | ||||
Total revenues | $ 829,856 | $ 1,620,224 | ||
Net income | $ 178,973 | $ 375,531 |
Business Combinations (Details
Business Combinations (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Apr. 02, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |||
Purchase price | $ 6,383,269 | ||
Goodwill | $ 3,466,934 | ||
Acquisition costs | $ 0 | $ 355,281 |
Schedule of Intangible Assets (
Schedule of Intangible Assets (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, cost | $ 5,249,000 | $ 1,361,000 |
Intangible assets, accumulated amortization | (701,777) | (392,504) |
Intangible assets, net | $ 4,547,223 | $ 968,496 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 10 years | 10 years |
Intangible assets, cost | $ 297,000 | $ 119,000 |
Intangible assets, accumulated amortization | (39,642) | (21,817) |
Intangible assets, net | $ 257,358 | 97,183 |
Proprietary technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 10 years | |
Intangible assets, cost | $ 861,000 | |
Intangible assets, accumulated amortization | (43,050) | |
Intangible assets, net | 817,950 | |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, cost | 4,091,000 | 1,242,000 |
Intangible assets, accumulated amortization | (619,085) | (370,687) |
Intangible assets, net | $ 3,471,915 | $ 871,313 |
Customer Relationships [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 5 years | 5 years |
Customer Relationships [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 15 years | 8 years |
Schedule of Amortization Expens
Schedule of Amortization Expense for Intangible Assets (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2023 | $ 510,308 | |
2024 | 510,308 | |
2025 | 499,391 | |
2026 | 391,941 | |
2027 | 326,108 | |
Thereafter | 2,309,167 | |
Intangible assets | $ 4,547,223 | $ 968,496 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 127,577 | $ 54,119 | $ 309,273 | $ 162,356 |
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, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Fair Value Disclosures [Abstract] | ||||
Fair value, Beginning balance | $ 728,853 | $ 1,566,478 | $ 1,630,681 | $ 2,444,000 |
Payment | (1,018,333) | (954,733) | ||
Change in fair value | 28,494 | 144,999 | 77,211 | |
Fair value, Ending balance | $ 757,347 | $ 1,566,478 | $ 757,347 | $ 1,566,478 |
Fair Value Measurements (Detail
Fair Value Measurements (Details Narrative) | 9 Months Ended |
Sep. 30, 2022 | |
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, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Abstract] | ||
Computer hardware and purchased software | $ 1,593,208 | $ 1,494,918 |
Leasehold improvements | 369,861 | 295,230 |
Furniture and fixtures | 71,325 | 71,325 |
Property and equipment, gross | 2,034,394 | 1,861,473 |
Less: accumulated depreciation | (963,670) | (769,693) |
Property and equipment, net | $ 1,070,724 | $ 1,091,780 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 66,286 | $ 51,804 | $ 193,977 | $ 139,883 |
Schedule of Notes Payable to Un
Schedule of Notes Payable to Unrelated Parties (Details) - USD ($) | Sep. 30, 2022 | Apr. 01, 2022 | Dec. 31, 2021 |
Short-Term Debt [Line Items] | |||
Less current portion | $ (1,912,331) | ||
Long-term portion of notes payable | 2,053,984 | 1,754,527 | |
Unrelated Party [Member] | |||
Short-Term Debt [Line Items] | |||
Notes payable – “2022 Related Notes” | 4,364,500 | 2,000,000 | |
Less unamortized debt issuance costs | (353,741) | (121,029) | |
Less unamortized debt discount | (44,444) | (124,444) | |
Less current portion | (1,912,331) | ||
Long-term portion of notes payable | 2,053,984 | 1,754,527 | |
Unrelated Party [Member] | 2022 Unrelated Party [Member] | |||
Short-Term Debt [Line Items] | |||
Notes payable – “2022 Related Notes” | 2,364,500 | $ 2,364,500 | |
Unrelated Party [Member] | 2020 Notes [Member] | |||
Short-Term Debt [Line Items] | |||
Notes payable – “2022 Related Notes” | 2,000,000 | 2,000,000 | |
Related Party [Member] | |||
Short-Term Debt [Line Items] | |||
Less unamortized debt issuance costs | (78,795) | ||
Less current portion | |||
Long-term portion of notes payable | 521,205 | ||
Related Party [Member] | 2022 Related Party [Member] | |||
Short-Term Debt [Line Items] | |||
Notes payable – “2022 Related Notes” | $ 600,000 |
Schedule of Future Minimum Prin
Schedule of Future Minimum Principal Payments of Notes Payable (Details) | Sep. 30, 2022 USD ($) |
Unrelated Party [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
2023 | $ 2,000,000 |
2025 | 2,364,500 |
Total | 4,364,500 |
Related Party [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
2025 | 600,000 |
Total | $ 600,000 |
Notes Payable _ Unrelated Par_3
Notes Payable – Unrelated Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Apr. 01, 2022 | Mar. 02, 2020 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Apr. 15, 2020 | |
Short-Term Debt [Line Items] | ||||||||
Interest expense debt | $ 214,587 | $ 113,030 | $ 541,777 | $ 339,345 | ||||
Amortization of debt discount | 79,999 | 80,000 | ||||||
Gain loss on extinguishment of debt | 845,083 | |||||||
12% Subordinated Notes [Member] | Accredited Investors [Member] | ||||||||
Short-Term Debt [Line Items] | ||||||||
Debt instrument, interest rate | 12% | |||||||
Debt instrument, maturity date | Feb. 28, 2023 | |||||||
Number of shares sold | 2,000 | |||||||
Sale of stock price per share | $ 1,000 | |||||||
Value of stock sold | $ 1,000 | |||||||
Stock issued during conversion | 40 | |||||||
Conversion of units | $ 2,000,000 | |||||||
Effective percentage | 14% | |||||||
Default penalty percentage | 20% | |||||||
Amortization of debt discount | $ 320,000 | 26,667 | 26,667 | 79,999 | 79,999 | |||
New issues, shares | 80,000 | |||||||
Paycheck Protection Program Note [Member] | PNC Bank [Member] | ||||||||
Short-Term Debt [Line Items] | ||||||||
Notes payable | $ 838,700 | |||||||
Debt instrument, interest rate | 1% | |||||||
Gain loss on extinguishment of debt | $ 0 | $ 845,083 | ||||||
Unrelated Party [Member] | ||||||||
Short-Term Debt [Line Items] | ||||||||
Accrued interest | 0 | 0 | $ 0 | |||||
Notes payable | 4,364,500 | 4,364,500 | 2,000,000 | |||||
Unrelated Party [Member] | 2022 Unrelated Party [Member] | ||||||||
Short-Term Debt [Line Items] | ||||||||
Notes payable | $ 2,364,500 | $ 2,364,500 | $ 2,364,500 | |||||
Debt instrument, interest rate | 14% | 12% | 12% | |||||
Debt instrument, maturity date | Mar. 30, 2025 | |||||||
Principal amount percentage | 20% |
Notes Payable - Related Parti_3
Notes Payable - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Apr. 01, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Short-Term Debt [Line Items] | ||||||
Interest expense debt | $ 214,587 | $ 113,030 | $ 541,777 | $ 339,345 | ||
Related Party [Member] | ||||||
Short-Term Debt [Line Items] | ||||||
Accrued interest | 0 | 0 | $ 0 | |||
Interest expense debt | $ 25,880 | $ 0 | $ 51,759 | $ 0 | ||
Related Party [Member] | 2022 Related Party [Member] | ||||||
Short-Term Debt [Line Items] | ||||||
Principal amount | $ 600,000 | |||||
Debt instrument interest rate stated percentage | 14% | 12% | 12% | |||
Principal amount percentage | 20% |
Deferred Compensation (Details
Deferred Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Compensation Related Costs [Abstract] | ||||
Deferred compensation | $ 20,166 | $ 20,166 | $ 100,828 | |
Deferred incentive compensation | $ 30,248 | $ 80,662 |
Schedule of Future Rental Payme
Schedule of Future Rental Payments for Operating Leases (Details) | Sep. 30, 2022 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2023 | $ 937,809 |
2024 | 896,168 |
2025 | 876,675 |
2026 | 848,540 |
2027 | 353,662 |
Thereafter | 256,496 |
Total | $ 4,169,350 |
Schedule of Operating Lease Cos
Schedule of Operating Lease Costs (Details) | 9 Months Ended |
Sep. 30, 2022 USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating cash flows from operating leases | $ 318,030 |
Weighted average remaining lease term - operating leases | 4 years 8 months 12 days |
Weighted average discount rate - operating leases | 6.99% |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) | 3 Months Ended | 9 Months Ended | |||
Jan. 01, 2010 USD ($) ft² | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | |
Loss Contingencies [Line Items] | |||||
Area of land | ft² | 6,000 | ||||
Lease commenced | Jan. 01, 2010 | ||||
Lease extension date | Sep. 18, 2021 | ||||
Rental payment | $ 4,950 | ||||
Operating lease cost | $ 243,301 | $ 293,953 | $ 729,902 | $ 794,317 | |
Short term lease cost | $ 4,814 | $ 14,441 | |||
Graphic Sciences, Inc. [Member] | Vehicles [Member] | |||||
Loss Contingencies [Line Items] | |||||
Lease extension date | Oct. 31, 2024 | ||||
Rental payment | $ 2,618 | ||||
Graphic Sciences, Inc. [Member] | Traverse City [Member] | |||||
Loss Contingencies [Line Items] | |||||
Lease extension date | Jan. 31, 2024 | ||||
Rental payment | $ 4,500 | ||||
Graphic Sciences, Inc. [Member] | Madison Heights [Member] | |||||
Loss Contingencies [Line Items] | |||||
Area of land | ft² | 36,000 | ||||
Lease extension date | Aug. 31, 2026 | ||||
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] | Temporary Storage Space [Member] | |||||
Loss Contingencies [Line Items] | |||||
Rental payment | $ 1,605 | ||||
Graphic Sciences, Inc. [Member] | Sterling Heights [Member] | |||||
Loss Contingencies [Line Items] | |||||
Area of land | ft² | 37,000 | ||||
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 expiration date | Apr. 30, 2028 | ||||
Maximum [Member] | Graphic Sciences, Inc. [Member] | Madison Heights [Member] | |||||
Loss Contingencies [Line Items] | |||||
Rental payment | $ 45,828 | ||||
Maximum [Member] | Graphic Sciences, Inc. [Member] | Sterling Heights [Member] | |||||
Loss Contingencies [Line Items] | |||||
Rental payment | 24,171 | ||||
Lease Agreements [Member] | Maximum [Member] | |||||
Loss Contingencies [Line Items] | |||||
Rental payment | $ 5,850 |
Schedule of Estimated Values of
Schedule of Estimated Values of Warrants Valuation Assumptions (Details) - Placement Agent [Member] | Apr. 01, 2022 |
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 | 2.55 |
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 | 116.32 |
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 ($) | 3 Months Ended | 9 Months Ended | |||||
Apr. 01, 2022 | Mar. 02, 2020 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Common stock, shares issued | 4,073,757 | 4,073,757 | 2,823,072 | ||||
Common stock, shares outstanding | 4,073,757 | 4,073,757 | 2,823,072 | ||||
Stock issued during period shares new issues | $ 5,740,758 | ||||||
Warrant to purchase of shares of common stock | 124,258 | 0 | 124,258 | 0 | |||
Fair value of warrants issued price per share | $ 3.91 | $ 3.91 | |||||
Amortization of deferred financing costs | $ 155,667 | $ 77,804 | |||||
Private Placement [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Private placement agent | 8% | 8% | |||||
Debt issuance costs | $ 175,924 | ||||||
Underwriting expense | 307,867 | ||||||
Amortization of deferred financing costs | $ 25,935 | $ 25,935 | 77,804 | $ 77,804 | |||
Private placement offering | $ 440,000 | ||||||
Accredited Investors [Member] | 12% Subordinated Notes [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Number of stock issued during period, shares | 80,000 | ||||||
Number of shares sold | 2,000 | ||||||
Sale of stock price per share | $ 1,000 | ||||||
Value of stock sold | $ 1,000 | ||||||
Conversion of units, shares | 40 | ||||||
Conversion of units | $ 2,000,000 | ||||||
Accredited Investors [Member] | Private Placement [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Number of stock issued during period, shares | 875,000 | ||||||
Price per share | $ 4 | ||||||
Number of shares sold | 955,000 | ||||||
Proceeds from private placement | $ 3,500,000 | ||||||
Securities Purchase Agreement [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Placement agent cash | 254,160 | 254,160 | |||||
Underwriting expense | 492,181 | ||||||
Securities Purchase Agreement [Member] | Taglich Brothers Inc [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Placement agent cash | $ 696,420 | ||||||
Warrant to purchase of shares of common stock | 124,258 | ||||||
Class of warrant or right, exercise price of warrants or rights | $ 4.62 | ||||||
Debt issuance costs | $ 165,406 | $ 47,607 | $ 47,607 | ||||
Fair value of warrants issued price per share | $ 3.91 | $ 3.91 | |||||
Amortization of deferred financing costs | $ 38,931 | $ 77,862 | |||||
Securities Purchase Agreement [Member] | Taglich Brothers Inc [Member] | Minimum [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Class of warrant or right, exercise price of warrants or rights | $ 3.30 | ||||||
Securities Purchase Agreement [Member] | Taglich Brothers Inc [Member] | Maximum [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Class of warrant or right, exercise price of warrants or rights | $ 3.97 | ||||||
Securities Purchase Agreement [Member] | Private Placement [Member] | 12% Subordinated Notes [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Number of stock issued during period, shares | 2,964,500 | ||||||
Stock issued during period shares new issues | $ 8,705,256 | ||||||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Number of stock issued during period, shares | 1,242,588 | ||||||
Price per share | $ 4.62 | ||||||
Stock issued during period shares new issues | $ 5,740,756 | ||||||
2015 Equity Incentive 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 | 255,958 | 255,958 | |||||
Warrant [Member] | Private Placement [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Warrant to purchase of shares of common stock | 95,500 | 95,500 | 95,500 | ||||
Class of warrant or right, exercise price of warrants or rights | $ 4 | $ 4 | $ 4 | ||||
Debt issuance costs | $ 135,291 | ||||||
Fair value of warrants issued price per share | $ 3.90 | ||||||
Underwriting expense | $ 236,761 | ||||||
Warrants term | 5 years | ||||||
Warrant exercisable date | Mar. 30, 2027 | ||||||
Warrant One [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 exercisable date | Mar. 30, 2027 | ||||||
Warrant Two [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 exercisable date | Mar. 30, 2027 | ||||||
Warrant Three [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Warrant to purchase of shares of common stock | 16,000 | 16,000 | |||||
Class of warrant or right, exercise price of warrants or rights | $ 9 | $ 9 | |||||
Warrant exercisable date | Mar. 30, 2027 | ||||||
Warrant Member One [Member] | Private Placement [Member] | |||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Warrant to purchase of shares of common stock | 124,258 | 124,258 | |||||
Class of warrant or right, exercise price of warrants or rights | $ 4.62 | $ 4.62 | |||||
Warrant exercisable date | Mar. 30, 2027 |
Schedule of Estimated Values _2
Schedule of Estimated Values of Stock Option Grants Valuation Assumptions (Details) - Grant Date April 1, 2022 [Member] | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Risk-free interest rate | 2.82% |
Weighted average expected term | 6 years |
Expected volatility | 116.60% |
Expected dividend yield | 0% |
Schedule of Stock Option Activi
Schedule of Stock Option Activity (Details) - Equity Option [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Shares Under Option, Outstanding beginning balance | 144,860 | 145,360 |
Weighted- Average Exercise Price, Outstanding beginning balance | $ 5.61 | $ 5.61 |
Weighted Average Remaining Contractual Life Outstanding, beginning | 8 years | 9 years |
Aggregate Intrinsic Value, Outstanding, beginning balance | $ 19,200 | $ 19,200 |
Shares Under Option, Granted | 220,587 | |
Weighted- Average Exercise Price, Granted | $ 6.08 | |
Shares Under Option, Outstanding ending balance | 365,447 | 145,360 |
Weighted- Average Exercise Price, Outstanding ending balance | $ 5.89 | $ 5.61 |
Weighted Average Remaining Contractual Life Outstanding, beginning | 9 years | 8 years |
Aggregate Intrinsic Value, Outstanding ending balance | $ 19,200 | $ 19,200 |
Shares Under Option, Exercisable ending balance | 93,085 | 81,685 |
Weighted- Average Exercise Price, Exercisable ending balance | $ 6.44 | $ 6.71 |
Weighted Average Remaining Contractual Life Outstanding, beginning | 7 years | 8 years |
Aggregate Intrinsic Value, Exercisable ending balance | $ 19,200 | $ 19,200 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Apr. 14, 2022 | Jan. 06, 2022 | Feb. 15, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Allocated share based compensation expense | $ 118,999 | $ 23,098 | $ 244,951 | $ 69,293 | ||||
Fair value of stock options | $ 91,913 | 92,475 | ||||||
Weighted-average grant date fair value of options granted | $ 5.22 | |||||||
Unrecognized compensation costs | $ 1,138,139 | $ 1,138,139 | $ 230,620 | |||||
Weighted-average period | 2 years | |||||||
Employee [Member] | ||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Stock option granted | 220,587 | |||||||
Stock option exercise price | $ 6.08 | |||||||
Fair value of stock options | $ 1,152,470 | |||||||
Restricted Stock [Member] | ||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Stock issued during period, shares, restricted stock award | 8,097 | 12,207 | ||||||
Allocated share based compensation expense | $ 57,500 | $ 57,500 |
Concentrations (Details Narrati
Concentrations (Details Narrative) - Customer Concentration Risk [Member] | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
State of Michigan [Member] | Revenue Benchmark [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 37% | 38% | 37% | 44% | |
Rocket Mortage [Member] | Revenue Benchmark [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 5% | 7% | 7% | 9% | |
Government Contracts [Member] | Revenue Benchmark [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 49% | 52% | 52% | 60% | |
Customer One [Member] | Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 30% | 65% | |||
Customer Two [Member] | Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 10% | 7% |
Certain Relationships and Rel_2
Certain Relationships and Related Transactions (Details Narrative) - USD ($) | Apr. 01, 2022 | Sep. 30, 2022 | Sep. 30, 2021 |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Class of warrant to purchase price | 124,258 | 0 | |
Success fee | $ 200,000 | ||
Securities Purchase Agreement [Member] | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Cash | $ 254,160 | ||
Securities Purchase Agreement [Member] | Taglich Brothers Inc [Member] | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Proceeds from issuance of private placement percentage | 8% | ||
Cash | $ 696,420 | ||
Class of warrant to purchase price | 124,258 | ||
Class of warrant to exercise price | $ 4.62 |