Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2023 | Nov. 10, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2023 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2023 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-41495 | |
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, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash | $ 1,689,125 | $ 2,696,481 |
Accounts receivable, net | 1,324,225 | 1,121,083 |
Accounts receivable, unbilled | 1,277,800 | 596,410 |
Parts and supplies, net | 95,170 | 73,221 |
Contract assets | 138,062 | 80,378 |
Prepaid expenses and other current assets | 339,391 | 325,466 |
Total current assets | 4,863,773 | 4,893,039 |
Property and equipment, net | 961,504 | 1,068,706 |
Right of use assets, operating | 2,716,512 | 3,200,191 |
Right of use assets, finance | 233,711 | 154,282 |
Intangible assets, net | 4,036,915 | 4,419,646 |
Goodwill | 5,789,821 | 5,789,821 |
Other assets | 624,184 | 417,457 |
Total assets | 19,226,420 | 19,943,142 |
Current liabilities: | ||
Accounts payable | 249,359 | 370,300 |
Accrued compensation | 437,468 | 411,683 |
Accrued expenses | 223,309 | 114,902 |
Lease liabilities, operating - current | 713,638 | 692,074 |
Lease liabilities, finance - current | 48,802 | 22,493 |
Deferred revenues | 3,132,125 | 2,754,064 |
Earnout liabilities - current | 700,000 | |
Notes payable - current | 936,966 | |
Total current liabilities | 4,804,701 | 6,002,482 |
Long-term liabilities: | ||
Lease liabilities, operating - net of current portion | 2,126,449 | 2,624,608 |
Lease liabilities, finance - net of current portion | 188,854 | 133,131 |
Total long-term liabilities | 5,046,216 | 5,371,858 |
Total liabilities | 9,850,917 | 11,374,340 |
Stockholders’ equity: | ||
Common stock, $0.001 par value, 25,000,000 shares authorized; 4,073,757 shares issued and outstanding at September 30, 2023 and December 31, 2022 | 4,074 | 4,074 |
Additional paid-in capital | 30,528,090 | 30,179,017 |
Accumulated deficit | (21,156,661) | (21,614,289) |
Total stockholders’ equity | 9,375,503 | 8,568,802 |
Total liabilities and stockholders’ equity | 19,226,420 | 19,943,142 |
Nonrelated Party [Member] | ||
Long-term liabilities: | ||
Notes payable | 2,178,190 | 2,085,035 |
Related Party [Member] | ||
Long-term liabilities: | ||
Notes payable | $ 552,723 | $ 529,084 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2023 | Dec. 31, 2022 |
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 | 4,073,757 |
Common stock, shares outstanding | 4,073,757 | 4,073,757 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Revenues: | ||||
Total revenues | $ 4,248,429 | $ 3,859,627 | $ 12,693,692 | $ 9,978,782 |
Cost of revenues: | ||||
Total cost of revenues | 1,642,838 | 1,353,442 | 4,851,829 | 3,651,742 |
Gross profit | 2,605,591 | 2,506,185 | 7,841,863 | 6,327,040 |
Operating expenses: | ||||
General and administrative | 1,516,009 | 1,321,299 | 4,632,559 | 3,511,852 |
Change in fair value of earnout liabilities | 28,494 | 144,999 | ||
Transaction costs | 355,281 | |||
Sales and marketing | 496,289 | 492,540 | 1,568,103 | 1,374,059 |
Depreciation and amortization | 247,738 | 205,849 | 715,259 | 524,070 |
Total operating expenses | 2,260,036 | 2,048,182 | 6,915,921 | 5,910,261 |
Income from operations | 345,555 | 458,003 | 925,942 | 416,779 |
Interest expense | (136,224) | (240,467) | (468,314) | (593,536) |
Net income (loss) | $ 209,331 | $ 217,536 | $ 457,628 | $ (176,757) |
Basic net income (loss) per share: | $ 0.05 | $ 0.05 | $ 0.11 | $ (0.05) |
Diluted net income (loss) per share: | $ 0.05 | $ 0.05 | $ 0.10 | $ (0.05) |
Weighted average number of common shares outstanding - basic | 4,073,757 | 4,073,757 | 4,073,757 | 3,664,024 |
Weighted average number of common shares outstanding - diluted | 4,387,515 | 4,695,162 | 4,389,145 | 3,664,024 |
Sale of Software [Member] | ||||
Revenues: | ||||
Total revenues | $ 9,422 | $ 18,390 | $ 88,361 | $ 93,986 |
Cost of revenues: | ||||
Total cost of revenues | 5,889 | 10,647 | 21,414 | 44,232 |
Software As a Service [Member] | ||||
Revenues: | ||||
Total revenues | 1,293,745 | 1,211,407 | 3,810,095 | 2,801,084 |
Cost of revenues: | ||||
Total cost of revenues | 200,104 | 207,502 | 679,126 | 489,939 |
Software Maintenance Services [Member] | ||||
Revenues: | ||||
Total revenues | 353,010 | 352,892 | 1,051,691 | 1,033,375 |
Cost of revenues: | ||||
Total cost of revenues | 13,165 | 19,024 | 44,998 | 56,509 |
Professional Services [Member] | ||||
Revenues: | ||||
Total revenues | 2,333,090 | 2,007,613 | 6,930,695 | 5,221,326 |
Cost of revenues: | ||||
Total cost of revenues | 1,338,526 | 1,028,074 | 3,832,983 | 2,794,783 |
Storage and Retrieval Services [Member] | ||||
Revenues: | ||||
Total revenues | 259,162 | 269,325 | 812,850 | 829,011 |
Cost of revenues: | ||||
Total cost of revenues | $ 85,154 | $ 88,195 | $ 273,308 | $ 266,279 |
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, 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) | ||
Note Offer Warrants | 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 | |||
Beginning balance, value at Dec. 31, 2022 | $ 4,074 | 30,179,017 | (21,614,289) | 8,568,802 |
Beginning balance, shares at Dec. 31, 2022 | 4,073,757 | |||
Stock Option Compensation | 349,073 | 349,073 | ||
Net Income (Loss) | 457,628 | 457,628 | ||
Ending balance, value at Sep. 30, 2023 | $ 4,074 | 30,528,090 | (21,156,661) | 9,375,503 |
Ending balance, shares at Sep. 30, 2023 | 4,073,757 | |||
Beginning balance, value at Jun. 30, 2023 | $ 4,074 | 30,412,634 | (21,365,992) | 9,050,716 |
Beginning balance, shares at Jun. 30, 2023 | 4,073,757 | |||
Stock Option Compensation | 115,456 | 115,456 | ||
Net Income (Loss) | 209,331 | 209,331 | ||
Ending balance, value at Sep. 30, 2023 | $ 4,074 | $ 30,528,090 | $ (21,156,661) | $ 9,375,503 |
Ending balance, shares at Sep. 30, 2023 | 4,073,757 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 457,628 | $ (176,757) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization | 715,259 | 524,070 |
Bad debt expense | 59,485 | 22,370 |
Amortization of deferred financing costs | 138,234 | 155,667 |
Amortization of debt discount | 22,044 | 79,999 |
Amortization of right of use assets, financing | 28,181 | |
Stock issued for services | 57,500 | |
Stock option compensation | 349,073 | 244,951 |
Change in fair value of earnout liabilities | 144,999 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (262,627) | 368,139 |
Accounts receivable, unbilled | (681,390) | (47,164) |
Parts and supplies | (21,949) | 2,151 |
Prepaid expenses and other current assets | (71,609) | (168,815) |
Accounts payable and accrued expenses | 13,251 | 45,403 |
Operating lease assets and liabilities, net | 4,673 | 21,415 |
Deferred compensation | (80,662) | |
Deferred revenues | 378,061 | 731,468 |
Total adjustments | 670,686 | 2,101,491 |
Net cash provided by operating activities | 1,128,314 | 1,924,734 |
Cash flows from investing activities: | ||
Cash paid to acquire business, net | (6,383,269) | |
Capitalization of internal use software | (348,051) | (315,148) |
Purchases of property and equipment | (84,002) | (142,903) |
Net cash used in investing activities | (432,053) | (6,841,320) |
Cash flows from financing activities: | ||
Payment of earnout liabilities | (700,000) | (1,018,333) |
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 | |
Principal payments on financing lease liability | (23,167) | |
Repayment of notes payable | (980,450) | |
Net cash (used in) provided by financing activities | (1,703,617) | 6,940,583 |
Net (decrease) increase in cash | (1,007,356) | 2,023,997 |
Cash - beginning of period | 2,696,481 | 1,752,630 |
Cash - end of period | 1,689,125 | 3,776,627 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 329,855 | 357,870 |
Cash paid during the period for income taxes | 8,344 | 11,050 |
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 finance lease liability | 107,610 | |
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, 2023 | |
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 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2023 | |
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, 2023 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, 2022 filed with the SEC filed on March 27, 2023. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2023 | |
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 Concentrations of Credit Risk We maintain our cash with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit. We do not generally require collateral or other security to support customer receivables; however, we may require customers to provide retainers, up-front deposits or irrevocable letters-of-credit when considered necessary to mitigate credit risks. The Company recognizes current estimated credit losses (“CECL”) for accounts receivable and accounts receivable-unbilled. The CECL for trade receivables are estimated based on the trade receivable aging category, credit risk of specific customers, past collection history, and management’s evaluation of accounts receivable. Provisions for CECL are classified within selling, general and administrative costs. Upon the adoption of FASB ASU No. 2016-13 (CECL model) effective January 1, 2023, Intellinetics, Inc. has revised its methodology for estimating expected credit losses on financial instruments, specifically trade receivables. This new model requires the recognition of lifetime expected credit losses at each reporting date, considering past events, current conditions, and reasonable forecasts. In assessing the credit quality of our portfolio, management utilizes a provision matrix that classifies trade receivables by customer type and age of receivable. Government and education sector receivables carry a low risk, while a higher risk is attributed to the remaining receivables as their aging progresses. For receivables with questionable collectability, a specific reserve is assigned. The estimated credit losses are a reflection of these factors, with the matrix applying percentages to the receivables based on their risk profile, adjusted for current and expected future conditions. During the reporting period, the estimate of credit losses may change due to several factors including payment patterns of customers, changes in customer creditworthiness, and broader economic conditions. Such changes are captured in the financial statements to ensure they accurately reflect the company’s assessment of credit risk and expected losses at the end of each reporting period. Credit losses have been within management’s expectations. At September 30, 2023 and December 31, 2022, our allowance for credit losses was $ 114,235 and $ 88,331 , respectively. Changes in the allowance for credit losses for the period ended Sep 30, 2023 were as follows: Schedule of Allowance for Credit Losses Trade Receivables As of December 31, 2022 $ (88,331 ) (Provisions) Reductions charged to operating results $ (20,649 ) Accounts write-offs $ 1,640 As of March 31, 2023 $ (107,340 ) (Provisions) Reductions charged to operating results $ (6,878 ) Accounts write-offs $ 0 As of June 30, 2023 $ (114,219 ) (Provisions) Reductions charged to operating results $ (31,957 ) Accounts write-offs $ 31,941 As of September 30, 2023 $ (114,235 ) Contract balances The following table present changes in our contract assets during the nine months ended September 30, 2023 and 2022: Schedule of Changes in Contract Assets Addition Balance at from Balance at Beginning acquisition Recognized End of of Period (Note 4) Billings Revenue Period Nine months ended September 30, 2023 Accounts receivable $ 1,121,083 $ - - - - $ 12,405,093 $ (12,201,951 ) $ 1,324,225 Nine months ended September 30, 2022 Accounts receivable $ 1,176,059 $ 68,380 $ 10,715,024 $ (11,105,533 ) $ 853,930 Balance at Beginning of Period Revenue Recognized in Advance of Billings Billings Balance at End of Period Nine months ended September 30, 2023 Accounts receivable, unbilled $ 596,410 $ 3,892,301 $ (3,210,911 ) $ 1,277,800 Nine months ended September 30, 2022 Accounts receivable, unbilled $ 444,782 $ 2,573,944 $ (2,526,780 ) $ 491,946 Balance at Beginning Commissions Paid Commissions Recognized Balance at End of Period Nine months ended September 30, 2023 Other contract assets $ 80,378 $ 157,265 $ (99,581 ) $ 138,062 Nine months ended September 30, 2022 Other contract assets $ 78,556 $ 102,321 $ (58,123 ) $ 122,754 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 27,367 74,448 The following table presents changes in our contract liabilities during the nine months ended September 30, 2023 and 2022: Schedule of Contract Liability Addition Balance at from Balance at Beginning acquisition Recognized End of of Period (Note 4) Billings Revenue Period Nine months ended September 30, 2023 Contract liabilities: Deferred revenue $ 2,754,064 $ - $ 5,997,723 $ (5,619,662 ) $ 3,132,125 Nine months ended September 30, 2022 Contract liabilities: Deferred revenue $ 1,194,649 $ 860,456 $ 5,560,018 $ (4,616,476 ) $ 2,998,647 Leases We have made an accounting policy election to not record a right-of-use asset and lease liability for short-term leases, which are defined as leases with a lease term of 12 months or less. Instead, the lease payments are recognized as rent expense in the general and administrative expenses on the statement of operations. Software Development Costs We design, develop, test, market, license, and support new software products and enhancements of current products. We continuously monitor our software products and enhancements to remain compatible with standard platforms and file formats. In accordance with ASC 985-20 “Costs of Software to be Sold, Leased or Otherwise Marketed,” we expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization. Based on our software development process, technical feasibility is established upon completion of a working model. Technological feasibility is typically reached shortly before the release of such products. No such costs were capitalized during the nine-month period 2023. Such costs in the amounts of $ 0 43,771 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 $ 139,633 348,051 143,943 315,148 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, 2023 and December 31, 2022, our condensed consolidated balance sheets included $ 609,399 402,673 For the three and nine months ended September 30, 2023 and 2022, our expensed software development costs were $ 120,830 392,576 42,852 157,811 Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 “Credit Losses - Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts receivable and held-to-maturity marketable securities, by replacing today’s “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses. ASU No. 2016-13 became effective for us in the first quarter of 2023. The adoption of ASU No. 2016-13 resulted in an initial reduction in the allowance for doubtful accounts of $ 11,662 Advertising We expense the cost of advertising as incurred. Advertising expense for the three and nine months ended September 30, 2023 and 2022 amounted to $ 7,853 20,096 10,371 19,871 Earnings (Loss) Per Share Basic income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted income or loss per share is computed by dividing net income or loss by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive, including warrants or options which are out-of-the-money and for those periods with a net loss. 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 that 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% valuation allowance has been established on deferred tax assets at September 30, 2023 and December 31, 2022, due to the uncertainty of our ability to realize future taxable income. 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 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 operating segments: Document Management and Document Conversion. These segments contain individual business components that have been combined on the basis of common management, customers, solutions offered, service processes and other economic characteristics. We currently have immaterial intersegment sales. We evaluate the performance of our segments based on gross profits. 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 businesses 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 2023 2022 2023 2022 For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 Revenues Document Management $ 1,871,395 $ 1,693,128 $ 5,549,194 $ 4,180,931 Document Conversion 2,377,034 2,166,499 7,144,498 5,797,851 Total revenues $ 4,248,429 $ 3,859,627 $ 12,693,692 $ 9,978,782 Gross profit Document Management $ 1,590,314 $ 1,427,696 $ 4,639,866 $ 3,488,947 Document Conversion 1,015,277 1,078,489 3,201,997 2,838,093 Total gross profit $ 2,605,591 $ 2,506,185 $ 7,841,863 $ 6,327,040 Capital additions, net Document Management $ 140,952 $ 145,581 $ 353,202 $ 321,382 Document Conversion - 43,069 78,851 136,669 Total capital additions, net $ 140,952 $ 188,650 $ 432,053 $ 458,051 September 30, 2023 December 31, 2022 Goodwill Document Management $ 3,989,645 $ 3,989,645 Document Conversion 1,800,176 1,800,176 Total goodwill $ 5,789,821 $ 5,789,821 September 30, 2023 December 31, 2022 Total assets Document Management $ 10,254,349 $ 10,284,183 Document Conversion 8,972,071 9,658,959 Total assets $ 19,226,420 $ 19,943,142 Statement of Cash Flows For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks. Reclassifications Certain amounts reported in prior filings of the condensed consolidated financial statements have been reclassified to conform to current presentation. |
Business Combinations
Business Combinations | 9 Months Ended |
Sep. 30, 2023 | |
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 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, 2022. Schedule of Pro Forma Information September 30, 2023 September 30, 2022 For the three months ended (unaudited) (unaudited) September 30, 2023 September 30, 2022 Total revenues $ 4,248,429 $ 3,859,627 Net income $ 209,331 $ 217,536 Basic net income per share $ 0.05 $ 0.05 Diluted net income per share $ 0.05 $ 0.05 September 30, 2023 September 30, 2022 For the nine months ended (unaudited) (unaudited) September 30, 2023 September 30, 2022 Total revenues $ 12,693,692 $ 10,756,634 Net (loss) income $ 457,628 $ (142,241 ) Basic net income (loss) per share $ 0.11 $ (0.03 ) Diluted net income (loss) per share $ 0.10 (0.03 ) The unaudited pro forma condensed 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, 2022. 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 periods. For the For the three months ended nine months ended September 30, 2023 September 30, 2023 Yellow Folder: Total revenues $ 968,870 $ 2,707,764 Net income $ 181,332 $ 452,443 For the For the Yellow Folder: Total revenues $ 829,856 $ 1,620,224 Net income $ 178,973 $ 375,531 |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | 5. Intangible Assets At September 30, 2023, intangible assets consisted of the following: Schedule of Intangible Assets Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 297,000 $ (69,343 ) $ 227,657 Proprietary technology 10 861,000 (129,150 ) 731,850 Customer relationships 5 15 4,091,000 (1,013,592 ) 3,077,408 $ 5,249,000 $ (1,212,085 ) $ 4,036,915 At December 31, 2022, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 297,000 $ (47,067 ) $ 249,933 Proprietary technology 10 861,000 (64,575 ) 796,425 Customer relationships 5 15 4,091,000 (717,712 ) 3,373,288 $ 5,249,000 $ (829,354 ) $ 4,419,646 Amortization expense for the three and nine months ended September 30, 2023 and September 30, 2022, amounted to $ 127,577 382,731 127,577 309,273 Schedule of Amortization Expense for Intangible Assets For the Twelve Months Ending September 30, Amount 2024 $ 510,308 2025 499,391 2026 391,941 2027 326,108 2028 314,223 Thereafter 1,994,944 Intangible assets $ 4,036,915 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 6. Fair Value Measurements We paid our final earnout liability in January 2023 and as of September 30, 2023, we have no earnout liabilities remaining. As of December 31, 2022 we had earnout liabilities related to one of our two 2020 acquisitions which were 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 were considered to be Level 3 inputs due to the lack of relevant market activity and significant management judgment. Key unobservable inputs included revenue growth rates, which ranged from 0% to 7%, and volatility rates, which were 20% for gross profits. The following table provides a summary of the changes in fair value of the earnout liabilities for the nine months ended September 30, 2023 and 2022: Summary of Changes in Fair value of Earnout Liabilities Nine months ended September 30, 2023 Fair value at December 31, 2022 $ 700,000 Fair value. beginning balance $ 700,000 Payments (700,000 ) Change in fair value Fair value at September 30, 2023 $ - Fair value , ending balance $ - Nine months ended September 30, 2022 Fair value at December 31, 2021 $ 1,630,681 Fair value, beginning balance $ 1,630,681 Payment (1,018,333 ) Change in fair value 144,999 Fair value at September 30, 2022 $ 757,347 Fair value , ending balance $ 757,347 The fair values of earnout liabilities amounts owed were recorded in current liabilities in our condensed consolidated balance sheet as of December 31, 2022. 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, 2023 | |
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, 2023 December 31, 2022 Computer hardware and purchased software $ 1,662,756 $ 1,595,652 Leasehold improvements 395,919 395,918 Furniture and fixtures 71,325 71,325 Property and equipment, gross 2,130,000 2,062,895 Less: accumulated depreciation (1,168,496 ) (994,189 ) Property and equipment, net $ 961,504 $ 1,068,706 Total depreciation expense on our property and equipment for the three and nine months ended September 30, 2023 and 2022 amounted to $ 64,590 191,204 66,286 193,977 |
Notes Payable _ Unrelated Parti
Notes Payable – Unrelated Parties | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Notes Payable – Unrelated Parties | 8. Notes Payable – Unrelated Parties Summary of Notes Payable to Unrelated Parties The tables below summarize all notes payable at September 30, 2023 and December 31, 2022, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.” Schedule of Notes Payable September 30, 2023 December 31, 2022 2022 Unrelated Notes $ 2,364,500 $ 2,364,500 2020 Notes - 980,450 Total notes payable $ 2,364,500 $ 3,344,950 Less unamortized debt issuance costs (186,310 ) (300,904 ) Less unamortized debt discount - (22,045 ) Less current portion - (936,966 ) Long-term portion of notes payable $ 2,178,190 $ 2,085,035 Subordinated Notes Payable Issue Date Interest Rate Interest Due Principal Due 2022 Unrelated Notes April 1, 2022 12 % Quarterly March 30, 2025 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 2025 $ 2,364,500 Total $ 2,364,500 As of September 30, 2023 and December 31, 2022, 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, 2023 and 2022 was $ 124,753 412,494 214,587 541,777 We recognized a debt discount of $ 320,000 80,000 4,267 22,044 26,667 79,999 |
Notes Payable - Related Parties
Notes Payable - Related Parties | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transaction [Line Items] | |
Notes Payable - Related Parties | 8. Notes Payable – Unrelated Parties Summary of Notes Payable to Unrelated Parties The tables below summarize all notes payable at September 30, 2023 and December 31, 2022, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.” Schedule of Notes Payable September 30, 2023 December 31, 2022 2022 Unrelated Notes $ 2,364,500 $ 2,364,500 2020 Notes - 980,450 Total notes payable $ 2,364,500 $ 3,344,950 Less unamortized debt issuance costs (186,310 ) (300,904 ) Less unamortized debt discount - (22,045 ) Less current portion - (936,966 ) Long-term portion of notes payable $ 2,178,190 $ 2,085,035 Subordinated Notes Payable Issue Date Interest Rate Interest Due Principal Due 2022 Unrelated Notes April 1, 2022 12 % Quarterly March 30, 2025 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 2025 $ 2,364,500 Total $ 2,364,500 As of September 30, 2023 and December 31, 2022, 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, 2023 and 2022 was $ 124,753 412,494 214,587 541,777 We recognized a debt discount of $ 320,000 80,000 4,267 22,044 26,667 79,999 |
Related Party [Member] | |
Related Party Transaction [Line Items] | |
Notes Payable - Related Parties | 9. Notes Payable - Related Parties Summary of Notes Payable to Related Parties The tables below summarize all notes payable to related parties at September 30, 2023 and December 31, 2022: Schedule of Notes Payable September 30, 2023 December 31, 2022 Notes payable – “2022 Related Note” $ 600,000 $ 600,000 Less unamortized debt issuance costs (47,277 ) (70,916 ) Long-term portion of notes payable $ 552,723 $ 529,084 Subordinated Notes Payable Issue Date Interest Rate Interest Due Principal Due 2022 Related Note April 1, 2022 12 % Quarterly March 30, 2025 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, 2023 and December 31, 2022, 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, 2023 and 2022 was $ 25,879 77,638 25,880 51,759 |
Deferred Compensation
Deferred Compensation | 9 Months Ended |
Sep. 30, 2023 | |
Compensation Related Costs [Abstract] | |
Deferred Compensation | 10. Deferred Compensation Pursuant to an employment agreement, we had accrued incentive cash compensation for one of our founders which was fully paid as of December 31, 2022. During the three and nine months ended September 30, 2022, we paid $ 30,248 80,662 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2023 | |
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. Operating Leases For each of the below listed leases, management has determined it will utilize the base rental period and have not considered any renewal periods. Schedule of Operating Lease Location Square Feet Monthly Rent Lease Expiry Columbus, OH 6,000 $ 5,100 December 31, 2028 Madison Heights, MI 36,000 $ 43,185 August 31, 2026 Sterling Heights, MI 37,000 $ 21,072 April 30, 2028 Traverse City, MI 5,200 $ 4,500 January 31, 2024 Temporary space Madison Heights, MI 3,200 $ 1,605 month to month Vehicles various n/a $ 2,708 September 30, 2028 The following table sets forth the future minimum lease payments under our leases: Schedule of Future Rental Payment for Operating Lease For the twelve months ending September 30, Finance Leases Operating Leases 2024 $ 67,358 $ 916,353 2025 67,358 892,047 2026 63,306 855,585 2027 49,500 353,662 2028 37,228 238,947 Thereafter - 17,550 Less Imputed Interest (47,094 ) (429,243 ) Less Short-term lease payments - (4,814 ) Total $ 237,656 $ 2,840,087 The following table summarizes the components of lease expense: Summary of Components of Lease Expense For the three months ending September 30, 2023 2022 Finance lease expense: Amortization of ROU asset $ 13,221 $ - Interest on lease liabilities 5,036 - Operating lease expense 238,864 243,301 Short-term lease expense 4,814 4,814 For the nine months ending September 30, 2023 2022 Finance lease expense: Amortization of ROU asset $ 28,181 $ - Interest on lease liabilities 11,462 - Operating lease expense 715,176 729,902 Short-term lease expense 14,441 14,441 The following tables set forth additional information pertaining to our leases: Schedule of Additional Information Pertaining to Leases For the nine months ending September 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases (interest) $ 11,462 $ - Financing cash flows from finance leases (principal) 23,167 - Operating cash flows from operating leases 531,567 318,030 Weighted average remaining lease term – finance leases 4.4 - Weighted average remaining lease term – operating leases 3.8 4.7 Weighted average discount rate – finance leases 8.88 % - Weighted average discount rate – operating leases 6.93 % 6.99 % Schedule of Operating and Finance Leases September 30, 2023 December 31, 2022 Operating leases: Right-of-use assets, operating $ 2,716,512 $ 3,200,191 Lease liabilities, operating – current 713,638 692,074 Lease liabilities, operating – net of current 2,126,449 2,624,608 Total operating lease liabilities $ 2,840,087 $ 3,316,682 Finance leases: Right-of-use asset, finance $ 261,892 $ 160,990 Accumulated amortization (28,181 ) (6,708 ) Right-of-use asset, finance, net $ 233,711 $ 154,282 Lease liabilities, finance – current $ 48,802 $ 22,493 Lease liabilities, finance – net of current 188,854 133,131 Total finance lease liability $ 237,656 $ 155,624 |
Stockholders_ Equity
Stockholders’ Equity | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Stockholders’ Equity | 12. Stockholders’ Equity Common Stock As of September 30, 2023, 4,073,757 255,958 497,330 The following table describes the shares and warrants issued as part of our 2022 and 2020 private placements: Schedule of Shares and Warrants Issued Issuance of Common Stock Issue Date Shares Issued Price per share Warrants Issued Warrant Exercise Price Warrant Fair Value Private Placement 2022 April 1, 2022 1,242,588 $ 4.62 124,258 $ 4.62 $ 3.91 Private Placement 2020 March 2, 2020 955,000 $ 4.00 95,500 $ 4.00 $ 3.90 Amortization of the debt issuance costs for the Private Placement 2020 offering was recorded at $ 4,150 21,439 25,935 77,804 Warrants The following sets forth the warrants to purchase our common stock that were outstanding as of September 30, 2023: Schedule of Warrants to Purchase Common Stock Warrants Outstanding Warrant Warranty Expiry 124,258 $ 4.62 March 30, 2027 95,500 $ 4.00 March 30, 2027 16,000 $ 9.00 March 30, 2027 17,200 $ 12.50 March 30, 2027 3,000 $ 15.00 March 30, 2027 The estimated value of the warrants issued during the nine months ended September 30, 2022, as well as the assumptions that were used in calculating such values, were based on estimates at the issuance date in the table below. Schedule of Estimated Values of Warrants Valuation Assumptions Warrants Issued April 1, 2022 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, 2023 | |
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, we issued 8,097 57,500 Stock Options We did not make any stock option grants during the nine months ended September 30, 2023. 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 three and nine months ended September 30, 2022 was $5.22. The weighted average assumptions that were used in calculating such values during the nine months ended September 30, 2022, as well as the assumptions that were used in calculating such values, were based on estimates at the grant date in the table as follows: Schedule of Estimated Values of Stock Option Grants Valuation Assumptions Grant Date April 1, 2022 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, 2023 and 2022 is as follows: Schedule of Stock Option Activity Weighted- Weighted- Average Average Remaining Aggregate Shares Exercise Contractual Intrinsic Under Option Price Life Value Outstanding at January 1, 2023 365,447 $ 5.89 8 $ 19,200 Granted 220,587 6.08 Forfeited (7,560 ) 15.34 (19,200 ) Outstanding at September 30, 2023 357,887 $ 5.69 8 $ - Exercisable at September 30, 2023 186,594 $ 5.60 7 $ - Weighted- Weighted- Average Average Remaining Aggregate Shares Exercise Contractual Intrinsic Under 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 During the three and nine months ended September 30, 2023 and 2022, stock-based compensation for options was $ 115,456 349,073 118,999 244,951 As of September 30, 2023 and December 31, 2022, there were $ 663,437 1,019,140 two years 467,771 91,913 |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2023 | |
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, 2023 and 2022, our largest customer, the State of Michigan, accounted for 31 37 5 34 37 5 7 For the three months ended September 30, 2023 and 2022, government contracts, including K-12 education, represented approximately 82 78 79 77 As of September 30, 2023, accounts receivable concentrations from our two largest customers were 29 4 44 7 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2023 | |
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 |
Concentrations of Credit Risk | Concentrations of Credit Risk We maintain our cash with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit. We do not generally require collateral or other security to support customer receivables; however, we may require customers to provide retainers, up-front deposits or irrevocable letters-of-credit when considered necessary to mitigate credit risks. The Company recognizes current estimated credit losses (“CECL”) for accounts receivable and accounts receivable-unbilled. The CECL for trade receivables are estimated based on the trade receivable aging category, credit risk of specific customers, past collection history, and management’s evaluation of accounts receivable. Provisions for CECL are classified within selling, general and administrative costs. Upon the adoption of FASB ASU No. 2016-13 (CECL model) effective January 1, 2023, Intellinetics, Inc. has revised its methodology for estimating expected credit losses on financial instruments, specifically trade receivables. This new model requires the recognition of lifetime expected credit losses at each reporting date, considering past events, current conditions, and reasonable forecasts. In assessing the credit quality of our portfolio, management utilizes a provision matrix that classifies trade receivables by customer type and age of receivable. Government and education sector receivables carry a low risk, while a higher risk is attributed to the remaining receivables as their aging progresses. For receivables with questionable collectability, a specific reserve is assigned. The estimated credit losses are a reflection of these factors, with the matrix applying percentages to the receivables based on their risk profile, adjusted for current and expected future conditions. During the reporting period, the estimate of credit losses may change due to several factors including payment patterns of customers, changes in customer creditworthiness, and broader economic conditions. Such changes are captured in the financial statements to ensure they accurately reflect the company’s assessment of credit risk and expected losses at the end of each reporting period. Credit losses have been within management’s expectations. At September 30, 2023 and December 31, 2022, our allowance for credit losses was $ 114,235 and $ 88,331 , respectively. Changes in the allowance for credit losses for the period ended Sep 30, 2023 were as follows: Schedule of Allowance for Credit Losses Trade Receivables As of December 31, 2022 $ (88,331 ) (Provisions) Reductions charged to operating results $ (20,649 ) Accounts write-offs $ 1,640 As of March 31, 2023 $ (107,340 ) (Provisions) Reductions charged to operating results $ (6,878 ) Accounts write-offs $ 0 As of June 30, 2023 $ (114,219 ) (Provisions) Reductions charged to operating results $ (31,957 ) Accounts write-offs $ 31,941 As of September 30, 2023 $ (114,235 ) |
Contract balances | Contract balances The following table present changes in our contract assets during the nine months ended September 30, 2023 and 2022: Schedule of Changes in Contract Assets Addition Balance at from Balance at Beginning acquisition Recognized End of of Period (Note 4) Billings Revenue Period Nine months ended September 30, 2023 Accounts receivable $ 1,121,083 $ - - - - $ 12,405,093 $ (12,201,951 ) $ 1,324,225 Nine months ended September 30, 2022 Accounts receivable $ 1,176,059 $ 68,380 $ 10,715,024 $ (11,105,533 ) $ 853,930 Balance at Beginning of Period Revenue Recognized in Advance of Billings Billings Balance at End of Period Nine months ended September 30, 2023 Accounts receivable, unbilled $ 596,410 $ 3,892,301 $ (3,210,911 ) $ 1,277,800 Nine months ended September 30, 2022 Accounts receivable, unbilled $ 444,782 $ 2,573,944 $ (2,526,780 ) $ 491,946 Balance at Beginning Commissions Paid Commissions Recognized Balance at End of Period Nine months ended September 30, 2023 Other contract assets $ 80,378 $ 157,265 $ (99,581 ) $ 138,062 Nine months ended September 30, 2022 Other contract assets $ 78,556 $ 102,321 $ (58,123 ) $ 122,754 |
Deferred revenue | 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 27,367 74,448 The following table presents changes in our contract liabilities during the nine months ended September 30, 2023 and 2022: Schedule of Contract Liability Addition Balance at from Balance at Beginning acquisition Recognized End of of Period (Note 4) Billings Revenue Period Nine months ended September 30, 2023 Contract liabilities: Deferred revenue $ 2,754,064 $ - $ 5,997,723 $ (5,619,662 ) $ 3,132,125 Nine months ended September 30, 2022 Contract liabilities: Deferred revenue $ 1,194,649 $ 860,456 $ 5,560,018 $ (4,616,476 ) $ 2,998,647 |
Leases | Leases We have made an accounting policy election to not record a right-of-use asset and lease liability for short-term leases, which are defined as leases with a lease term of 12 months or less. Instead, the lease payments are recognized as rent expense in the general and administrative expenses on the statement of operations. |
Software Development Costs | Software Development Costs We design, develop, test, market, license, and support new software products and enhancements of current products. We continuously monitor our software products and enhancements to remain compatible with standard platforms and file formats. In accordance with ASC 985-20 “Costs of Software to be Sold, Leased or Otherwise Marketed,” we expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization. Based on our software development process, technical feasibility is established upon completion of a working model. Technological feasibility is typically reached shortly before the release of such products. No such costs were capitalized during the nine-month period 2023. Such costs in the amounts of $ 0 43,771 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 $ 139,633 348,051 143,943 315,148 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, 2023 and December 31, 2022, our condensed consolidated balance sheets included $ 609,399 402,673 For the three and nine months ended September 30, 2023 and 2022, our expensed software development costs were $ 120,830 392,576 42,852 157,811 |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 “Credit Losses - Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts receivable and held-to-maturity marketable securities, by replacing today’s “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses. ASU No. 2016-13 became effective for us in the first quarter of 2023. The adoption of ASU No. 2016-13 resulted in an initial reduction in the allowance for doubtful accounts of $ 11,662 |
Advertising | Advertising We expense the cost of advertising as incurred. Advertising expense for the three and nine months ended September 30, 2023 and 2022 amounted to $ 7,853 20,096 10,371 19,871 |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic income or loss per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Diluted income or loss per share is computed by dividing net income or loss by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive, including warrants or options which are out-of-the-money and for those periods with a net loss. 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 that 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% valuation allowance has been established on deferred tax assets at September 30, 2023 and December 31, 2022, due to the uncertainty of our ability to realize future taxable income. 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 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 operating segments: Document Management and Document Conversion. These segments contain individual business components that have been combined on the basis of common management, customers, solutions offered, service processes and other economic characteristics. We currently have immaterial intersegment sales. We evaluate the performance of our segments based on gross profits. 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 businesses 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 2023 2022 2023 2022 For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 Revenues Document Management $ 1,871,395 $ 1,693,128 $ 5,549,194 $ 4,180,931 Document Conversion 2,377,034 2,166,499 7,144,498 5,797,851 Total revenues $ 4,248,429 $ 3,859,627 $ 12,693,692 $ 9,978,782 Gross profit Document Management $ 1,590,314 $ 1,427,696 $ 4,639,866 $ 3,488,947 Document Conversion 1,015,277 1,078,489 3,201,997 2,838,093 Total gross profit $ 2,605,591 $ 2,506,185 $ 7,841,863 $ 6,327,040 Capital additions, net Document Management $ 140,952 $ 145,581 $ 353,202 $ 321,382 Document Conversion - 43,069 78,851 136,669 Total capital additions, net $ 140,952 $ 188,650 $ 432,053 $ 458,051 September 30, 2023 December 31, 2022 Goodwill Document Management $ 3,989,645 $ 3,989,645 Document Conversion 1,800,176 1,800,176 Total goodwill $ 5,789,821 $ 5,789,821 September 30, 2023 December 31, 2022 Total assets Document Management $ 10,254,349 $ 10,284,183 Document Conversion 8,972,071 9,658,959 Total assets $ 19,226,420 $ 19,943,142 |
Statement of Cash Flows | Statement of Cash Flows For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks. |
Reclassifications | Reclassifications Certain amounts reported in prior filings of the condensed consolidated financial statements have been reclassified to conform to current presentation. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Allowance for Credit Losses | Changes in the allowance for credit losses for the period ended Sep 30, 2023 were as follows: Schedule of Allowance for Credit Losses Trade Receivables As of December 31, 2022 $ (88,331 ) (Provisions) Reductions charged to operating results $ (20,649 ) Accounts write-offs $ 1,640 As of March 31, 2023 $ (107,340 ) (Provisions) Reductions charged to operating results $ (6,878 ) Accounts write-offs $ 0 As of June 30, 2023 $ (114,219 ) (Provisions) Reductions charged to operating results $ (31,957 ) Accounts write-offs $ 31,941 As of September 30, 2023 $ (114,235 ) |
Schedule of Changes in Contract Assets | Schedule of Changes in Contract Assets Addition Balance at from Balance at Beginning acquisition Recognized End of of Period (Note 4) Billings Revenue Period Nine months ended September 30, 2023 Accounts receivable $ 1,121,083 $ - - - - $ 12,405,093 $ (12,201,951 ) $ 1,324,225 Nine months ended September 30, 2022 Accounts receivable $ 1,176,059 $ 68,380 $ 10,715,024 $ (11,105,533 ) $ 853,930 Balance at Beginning of Period Revenue Recognized in Advance of Billings Billings Balance at End of Period Nine months ended September 30, 2023 Accounts receivable, unbilled $ 596,410 $ 3,892,301 $ (3,210,911 ) $ 1,277,800 Nine months ended September 30, 2022 Accounts receivable, unbilled $ 444,782 $ 2,573,944 $ (2,526,780 ) $ 491,946 Balance at Beginning Commissions Paid Commissions Recognized Balance at End of Period Nine months ended September 30, 2023 Other contract assets $ 80,378 $ 157,265 $ (99,581 ) $ 138,062 Nine months ended September 30, 2022 Other contract assets $ 78,556 $ 102,321 $ (58,123 ) $ 122,754 |
Schedule of Contract Liability | The following table presents changes in our contract liabilities during the nine months ended September 30, 2023 and 2022: Schedule of Contract Liability Addition Balance at from Balance at Beginning acquisition Recognized End of of Period (Note 4) Billings Revenue Period Nine months ended September 30, 2023 Contract liabilities: Deferred revenue $ 2,754,064 $ - $ 5,997,723 $ (5,619,662 ) $ 3,132,125 Nine months ended September 30, 2022 Contract liabilities: Deferred revenue $ 1,194,649 $ 860,456 $ 5,560,018 $ (4,616,476 ) $ 2,998,647 |
Schedule of Segment Information | Information by operating segment is as follows: Schedule of Segment Information 2023 2022 2023 2022 For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 Revenues Document Management $ 1,871,395 $ 1,693,128 $ 5,549,194 $ 4,180,931 Document Conversion 2,377,034 2,166,499 7,144,498 5,797,851 Total revenues $ 4,248,429 $ 3,859,627 $ 12,693,692 $ 9,978,782 Gross profit Document Management $ 1,590,314 $ 1,427,696 $ 4,639,866 $ 3,488,947 Document Conversion 1,015,277 1,078,489 3,201,997 2,838,093 Total gross profit $ 2,605,591 $ 2,506,185 $ 7,841,863 $ 6,327,040 Capital additions, net Document Management $ 140,952 $ 145,581 $ 353,202 $ 321,382 Document Conversion - 43,069 78,851 136,669 Total capital additions, net $ 140,952 $ 188,650 $ 432,053 $ 458,051 September 30, 2023 December 31, 2022 Goodwill Document Management $ 3,989,645 $ 3,989,645 Document Conversion 1,800,176 1,800,176 Total goodwill $ 5,789,821 $ 5,789,821 September 30, 2023 December 31, 2022 Total assets Document Management $ 10,254,349 $ 10,284,183 Document Conversion 8,972,071 9,658,959 Total assets $ 19,226,420 $ 19,943,142 |
Business Combinations (Tables)
Business Combinations (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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, 2022. Schedule of Pro Forma Information September 30, 2023 September 30, 2022 For the three months ended (unaudited) (unaudited) September 30, 2023 September 30, 2022 Total revenues $ 4,248,429 $ 3,859,627 Net income $ 209,331 $ 217,536 Basic net income per share $ 0.05 $ 0.05 Diluted net income per share $ 0.05 $ 0.05 September 30, 2023 September 30, 2022 For the nine months ended (unaudited) (unaudited) September 30, 2023 September 30, 2022 Total revenues $ 12,693,692 $ 10,756,634 Net (loss) income $ 457,628 $ (142,241 ) Basic net income (loss) per share $ 0.11 $ (0.03 ) Diluted net income (loss) per share $ 0.10 (0.03 ) 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 periods. For the For the three months ended nine months ended September 30, 2023 September 30, 2023 Yellow Folder: Total revenues $ 968,870 $ 2,707,764 Net income $ 181,332 $ 452,443 For the For the Yellow Folder: Total revenues $ 829,856 $ 1,620,224 Net income $ 178,973 $ 375,531 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | At September 30, 2023, intangible assets consisted of the following: Schedule of Intangible Assets Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 297,000 $ (69,343 ) $ 227,657 Proprietary technology 10 861,000 (129,150 ) 731,850 Customer relationships 5 15 4,091,000 (1,013,592 ) 3,077,408 $ 5,249,000 $ (1,212,085 ) $ 4,036,915 At December 31, 2022, intangible assets consisted of the following: Estimated Accumulated Useful Life Costs Amortization Net Trade names 10 $ 297,000 $ (47,067 ) $ 249,933 Proprietary technology 10 861,000 (64,575 ) 796,425 Customer relationships 5 15 4,091,000 (717,712 ) 3,373,288 $ 5,249,000 $ (829,354 ) $ 4,419,646 |
Schedule of Amortization Expense for Intangible Assets | Schedule of Amortization Expense for Intangible Assets For the Twelve Months Ending September 30, Amount 2024 $ 510,308 2025 499,391 2026 391,941 2027 326,108 2028 314,223 Thereafter 1,994,944 Intangible assets $ 4,036,915 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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 nine months ended September 30, 2023 and 2022: Summary of Changes in Fair value of Earnout Liabilities Nine months ended September 30, 2023 Fair value at December 31, 2022 $ 700,000 Fair value. beginning balance $ 700,000 Payments (700,000 ) Change in fair value Fair value at September 30, 2023 $ - Fair value , ending balance $ - Nine months ended September 30, 2022 Fair value at December 31, 2021 $ 1,630,681 Fair value, beginning balance $ 1,630,681 Payment (1,018,333 ) Change in fair value 144,999 Fair value at September 30, 2022 $ 757,347 Fair value , ending balance $ 757,347 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
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, 2023 December 31, 2022 Computer hardware and purchased software $ 1,662,756 $ 1,595,652 Leasehold improvements 395,919 395,918 Furniture and fixtures 71,325 71,325 Property and equipment, gross 2,130,000 2,062,895 Less: accumulated depreciation (1,168,496 ) (994,189 ) Property and equipment, net $ 961,504 $ 1,068,706 |
Notes Payable _ Unrelated Par_2
Notes Payable – Unrelated Parties (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | The tables below summarize all notes payable at September 30, 2023 and December 31, 2022, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.” Schedule of Notes Payable September 30, 2023 December 31, 2022 2022 Unrelated Notes $ 2,364,500 $ 2,364,500 2020 Notes - 980,450 Total notes payable $ 2,364,500 $ 3,344,950 Less unamortized debt issuance costs (186,310 ) (300,904 ) Less unamortized debt discount - (22,045 ) Less current portion - (936,966 ) Long-term portion of notes payable $ 2,178,190 $ 2,085,035 Subordinated Notes Payable Issue Date Interest Rate Interest Due Principal Due 2022 Unrelated Notes April 1, 2022 12 % Quarterly March 30, 2025 |
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 2025 $ 2,364,500 Total $ 2,364,500 |
Notes Payable - Related Parti_2
Notes Payable - Related Parties (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Related Party Transaction [Line Items] | |
Schedule of Notes Payable | The tables below summarize all notes payable at September 30, 2023 and December 31, 2022, respectively, with the exception of related party notes disclosed in Note 9 “Notes Payable - Related Parties.” Schedule of Notes Payable September 30, 2023 December 31, 2022 2022 Unrelated Notes $ 2,364,500 $ 2,364,500 2020 Notes - 980,450 Total notes payable $ 2,364,500 $ 3,344,950 Less unamortized debt issuance costs (186,310 ) (300,904 ) Less unamortized debt discount - (22,045 ) Less current portion - (936,966 ) Long-term portion of notes payable $ 2,178,190 $ 2,085,035 Subordinated Notes Payable Issue Date Interest Rate Interest Due Principal Due 2022 Unrelated Notes April 1, 2022 12 % Quarterly March 30, 2025 |
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 2025 $ 2,364,500 Total $ 2,364,500 |
Related Party [Member] | |
Related Party Transaction [Line Items] | |
Schedule of Notes Payable | The tables below summarize all notes payable to related parties at September 30, 2023 and December 31, 2022: Schedule of Notes Payable September 30, 2023 December 31, 2022 Notes payable – “2022 Related Note” $ 600,000 $ 600,000 Less unamortized debt issuance costs (47,277 ) (70,916 ) Long-term portion of notes payable $ 552,723 $ 529,084 Subordinated Notes Payable Issue Date Interest Rate Interest Due Principal Due 2022 Related Note April 1, 2022 12 % Quarterly March 30, 2025 |
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, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Operating Lease | For each of the below listed leases, management has determined it will utilize the base rental period and have not considered any renewal periods. Schedule of Operating Lease Location Square Feet Monthly Rent Lease Expiry Columbus, OH 6,000 $ 5,100 December 31, 2028 Madison Heights, MI 36,000 $ 43,185 August 31, 2026 Sterling Heights, MI 37,000 $ 21,072 April 30, 2028 Traverse City, MI 5,200 $ 4,500 January 31, 2024 Temporary space Madison Heights, MI 3,200 $ 1,605 month to month Vehicles various n/a $ 2,708 September 30, 2028 |
Schedule of Future Rental Payment for Operating Lease | The following table sets forth the future minimum lease payments under our leases: Schedule of Future Rental Payment for Operating Lease For the twelve months ending September 30, Finance Leases Operating Leases 2024 $ 67,358 $ 916,353 2025 67,358 892,047 2026 63,306 855,585 2027 49,500 353,662 2028 37,228 238,947 Thereafter - 17,550 Less Imputed Interest (47,094 ) (429,243 ) Less Short-term lease payments - (4,814 ) Total $ 237,656 $ 2,840,087 |
Summary of Components of Lease Expense | The following table summarizes the components of lease expense: Summary of Components of Lease Expense For the three months ending September 30, 2023 2022 Finance lease expense: Amortization of ROU asset $ 13,221 $ - Interest on lease liabilities 5,036 - Operating lease expense 238,864 243,301 Short-term lease expense 4,814 4,814 For the nine months ending September 30, 2023 2022 Finance lease expense: Amortization of ROU asset $ 28,181 $ - Interest on lease liabilities 11,462 - Operating lease expense 715,176 729,902 Short-term lease expense 14,441 14,441 |
Schedule of Additional Information Pertaining to Leases | The following tables set forth additional information pertaining to our leases: Schedule of Additional Information Pertaining to Leases For the nine months ending September 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases (interest) $ 11,462 $ - Financing cash flows from finance leases (principal) 23,167 - Operating cash flows from operating leases 531,567 318,030 Weighted average remaining lease term – finance leases 4.4 - Weighted average remaining lease term – operating leases 3.8 4.7 Weighted average discount rate – finance leases 8.88 % - Weighted average discount rate – operating leases 6.93 % 6.99 % |
Schedule of Operating and Finance Leases | Schedule of Operating and Finance Leases September 30, 2023 December 31, 2022 Operating leases: Right-of-use assets, operating $ 2,716,512 $ 3,200,191 Lease liabilities, operating – current 713,638 692,074 Lease liabilities, operating – net of current 2,126,449 2,624,608 Total operating lease liabilities $ 2,840,087 $ 3,316,682 Finance leases: Right-of-use asset, finance $ 261,892 $ 160,990 Accumulated amortization (28,181 ) (6,708 ) Right-of-use asset, finance, net $ 233,711 $ 154,282 Lease liabilities, finance – current $ 48,802 $ 22,493 Lease liabilities, finance – net of current 188,854 133,131 Total finance lease liability $ 237,656 $ 155,624 |
Stockholders_ Equity (Tables)
Stockholders’ Equity (Tables) | 9 Months Ended |
Sep. 30, 2023 | |
Equity [Abstract] | |
Schedule of Shares and Warrants Issued | The following table describes the shares and warrants issued as part of our 2022 and 2020 private placements: Schedule of Shares and Warrants Issued Issuance of Common Stock Issue Date Shares Issued Price per share Warrants Issued Warrant Exercise Price Warrant Fair Value Private Placement 2022 April 1, 2022 1,242,588 $ 4.62 124,258 $ 4.62 $ 3.91 Private Placement 2020 March 2, 2020 955,000 $ 4.00 95,500 $ 4.00 $ 3.90 |
Schedule of Warrants to Purchase Common Stock | The following sets forth the warrants to purchase our common stock that were outstanding as of September 30, 2023: Schedule of Warrants to Purchase Common Stock Warrants Outstanding Warrant Warranty Expiry 124,258 $ 4.62 March 30, 2027 95,500 $ 4.00 March 30, 2027 16,000 $ 9.00 March 30, 2027 17,200 $ 12.50 March 30, 2027 3,000 $ 15.00 March 30, 2027 |
Schedule of Estimated Values of Warrants Valuation Assumptions | The estimated value of the warrants issued during the nine months ended September 30, 2022, as well as the assumptions that were used in calculating such values, were based on estimates at the issuance date in the table below. Schedule of Estimated Values of Warrants Valuation Assumptions Warrants Issued April 1, 2022 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, 2023 | |
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 April 1, 2022 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, 2023 and 2022 is as follows: Schedule of Stock Option Activity Weighted- Weighted- Average Average Remaining Aggregate Shares Exercise Contractual Intrinsic Under Option Price Life Value Outstanding at January 1, 2023 365,447 $ 5.89 8 $ 19,200 Granted 220,587 6.08 Forfeited (7,560 ) 15.34 (19,200 ) Outstanding at September 30, 2023 357,887 $ 5.69 8 $ - Exercisable at September 30, 2023 186,594 $ 5.60 7 $ - Weighted- Weighted- Average Average Remaining Aggregate Shares Exercise Contractual Intrinsic Under 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 |
Business Organization and Nat_2
Business Organization and Nature of Operations (Details Narrative) | 9 Months Ended |
Sep. 30, 2023 Segments | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 2 |
Schedule of Allowance for Credi
Schedule of Allowance for Credit Losses (Details) - USD ($) | 3 Months Ended | ||
Sep. 30, 2023 | Jun. 30, 2023 | Mar. 31, 2023 | |
Accounting Policies [Abstract] | |||
Balance | $ (114,219) | $ (107,340) | $ (88,331) |
Provisions reductions charged to operating results | (31,957) | (6,878) | (20,649) |
Accounts write-offs | 31,941 | 0 | 1,640 |
Balance | $ (114,235) | $ (114,219) | $ (107,340) |
Schedule of Changes in Contract
Schedule of Changes in Contract Assets (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Offsetting Assets [Line Items] | ||
Balance at Beginning of Period | $ 80,378 | |
Revenue Recognized in Advance of Billings | ||
Commissions Paid | ||
Commissions Recognized | ||
Balance at End of Period | 138,062 | |
Accounts Receivable [Member] | ||
Offsetting Assets [Line Items] | ||
Balance at Beginning of Period | 1,121,083 | $ 1,176,059 |
Addition from acquisition | 68,380 | |
Accounts receivables, billings | 12,405,093 | 10,715,024 |
Recognized Revenue | (12,201,951) | (11,105,533) |
Balance at End of Period | 1,324,225 | 853,930 |
Accounts Receivable Unbilled [Member] | ||
Offsetting Assets [Line Items] | ||
Balance at Beginning of Period | 596,410 | 444,782 |
Revenue Recognized in Advance of Billings | 3,892,301 | 2,573,944 |
Accounts receivables, billings | (3,210,911) | (2,526,780) |
Balance at End of Period | 1,277,800 | 491,946 |
Contract Assests [Member] | ||
Offsetting Assets [Line Items] | ||
Balance at Beginning of Period | 80,378 | 78,556 |
Commissions Paid | 157,265 | 102,321 |
Commissions Recognized | (99,581) | (58,123) |
Balance at End of Period | $ 138,062 | $ 122,754 |
Schedule of Contract Liability
Schedule of Contract Liability (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Accounting Policies [Abstract] | ||
Deferred revenue, balance at beginning of period | $ 2,754,064 | $ 1,194,649 |
Deferred revenue, addition from acquisition | 860,456 | |
Deferred revenue, billings | 5,997,723 | 5,560,018 |
Deferred revenue, recognized revenue | (5,619,662) | (4,616,476) |
Deferred revenue, balance at end of period | $ 3,132,125 | $ 2,998,647 |
Schedule of Segment Information
Schedule of Segment Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Total revenues | $ 4,248,429 | $ 3,859,627 | $ 12,693,692 | $ 9,978,782 | |
Total gross profit | 2,605,591 | 2,506,185 | 7,841,863 | 6,327,040 | |
Total capital additions, net | 140,952 | 188,650 | 432,053 | 458,051 | |
Total goodwill | 5,789,821 | 5,789,821 | $ 5,789,821 | ||
Total assets | 19,226,420 | 19,226,420 | 19,943,142 | ||
Document Management [Member] | |||||
Total revenues | 1,871,395 | 1,693,128 | 5,549,194 | 4,180,931 | |
Total gross profit | 1,590,314 | 1,427,696 | 4,639,866 | 3,488,947 | |
Total capital additions, net | 140,952 | 145,581 | 353,202 | 321,382 | |
Total goodwill | 3,989,645 | 3,989,645 | 3,989,645 | ||
Total assets | 10,254,349 | 10,254,349 | 10,284,183 | ||
Document Conversion [Member] | |||||
Total revenues | 2,377,034 | 2,166,499 | 7,144,498 | 5,797,851 | |
Total gross profit | 1,015,277 | 1,078,489 | 3,201,997 | 2,838,093 | |
Total capital additions, net | $ 43,069 | 78,851 | $ 136,669 | ||
Total goodwill | 1,800,176 | 1,800,176 | 1,800,176 | ||
Total assets | $ 8,972,071 | $ 8,972,071 | $ 9,658,959 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | |
Property, Plant and Equipment [Line Items] | |||||||
Allowance for doubtful accounts | $ 114,235 | $ 114,235 | $ 114,219 | $ 107,340 | $ 88,331 | ||
Revenue performance obligations percentage | 99% | ||||||
Revenue, remaining performance obligation, amount | 27,367 | 27,367 | $ 74,448 | ||||
Other long-term assets | 609,399 | 609,399 | $ 402,673 | ||||
Advertising expense | 7,853 | $ 10,371 | 20,096 | $ 19,871 | |||
Accounting Standards Update 2016-13 [Member] | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Allowance for doubtful accounts | 11,662 | 11,662 | |||||
Software Development [Member] | |||||||
Property, Plant and Equipment [Line Items] | |||||||
Software development cost capiatlized | 0 | 43,771 | |||||
Capitalized cost | 139,633 | 143,943 | 348,051 | 315,148 | |||
Research and development expense | $ 120,830 | $ 42,852 | $ 392,576 | $ 157,811 | |||
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. 01, 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, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Business Acquisition [Line Items] | ||||
Total revenues | $ 4,248,429 | $ 3,859,627 | $ 12,693,692 | $ 10,756,634 |
Net income | $ 209,331 | $ 217,536 | $ 457,628 | $ (142,241) |
Basic net income (loss) per share | $ 0.05 | $ 0.05 | $ 0.11 | $ (0.03) |
Diluted net income (loss) per share | $ 0.05 | $ 0.05 | $ 0.10 | $ (0.03) |
Yellow Folder [Member] | ||||
Business Acquisition [Line Items] | ||||
Total revenues | $ 968,870 | $ 829,856 | $ 2,707,764 | $ 1,620,224 |
Net income | $ 181,332 | $ 178,973 | $ 452,443 | $ 375,531 |
Business Combinations (Details
Business Combinations (Details Narrative) | Apr. 01, 2022 USD ($) |
Business Combination and Asset Acquisition [Abstract] | |
Purchase price | $ 6,383,269 |
Goodwill | $ 3,466,934 |
Schedule of Intangible Assets (
Schedule of Intangible Assets (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, cost | $ 5,249,000 | $ 5,249,000 |
Intangible assets, accumulated amortization | (1,212,085) | (829,354) |
Intangible assets, net | $ 4,036,915 | $ 4,419,646 |
Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 10 years | 10 years |
Intangible assets, cost | $ 297,000 | $ 297,000 |
Intangible assets, accumulated amortization | (69,343) | (47,067) |
Intangible assets, net | $ 227,657 | $ 249,933 |
Proprietary Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 10 years | 10 years |
Intangible assets, cost | $ 861,000 | $ 861,000 |
Intangible assets, accumulated amortization | (129,150) | (64,575) |
Intangible assets, net | 731,850 | 796,425 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, cost | 4,091,000 | 4,091,000 |
Intangible assets, accumulated amortization | (1,013,592) | (717,712) |
Intangible assets, net | $ 3,077,408 | $ 3,373,288 |
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 | 15 years |
Schedule of Amortization Expens
Schedule of Amortization Expense for Intangible Assets (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2024 | $ 510,308 | |
2025 | 499,391 | |
2026 | 391,941 | |
2027 | 326,108 | |
2028 | 314,223 | |
Thereafter | 1,994,944 | |
Intangible assets | $ 4,036,915 | $ 4,419,646 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 127,577 | $ 127,577 | $ 382,731 | $ 309,273 |
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, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | ||||
Fair value, beginning balance | $ 700,000 | $ 1,630,681 | ||
Payment | (700,000) | (1,018,333) | ||
Change in fair value | $ 28,494 | 144,999 | ||
Fair value , ending balance | $ 757,347 | $ 757,347 |
Fair Value Measurements (Detail
Fair Value Measurements (Details Narrative) | 9 Months Ended |
Sep. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair value measurement, valuation description | Key unobservable inputs included revenue growth rates, which ranged from 0% to 7%, and volatility rates, which were 20% for gross profits. |
Schedule of Property and Equipm
Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Abstract] | ||
Computer hardware and purchased software | $ 1,662,756 | $ 1,595,652 |
Leasehold improvements | 395,919 | 395,918 |
Furniture and fixtures | 71,325 | 71,325 |
Property and equipment, gross | 2,130,000 | 2,062,895 |
Less: accumulated depreciation | (1,168,496) | (994,189) |
Property and equipment, net | $ 961,504 | $ 1,068,706 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 64,590 | $ 66,286 | $ 191,204 | $ 193,977 |
Schedule of Notes Payable (Deta
Schedule of Notes Payable (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Dec. 31, 2022 | |
Debt Instrument [Line Items] | ||
Notes payable – “2022 Related Note” | $ 2,364,500 | $ 3,344,950 |
Less unamortized debt issuance costs | (186,310) | (300,904) |
Less unamortized debt discount | (22,045) | |
Less current portion | (936,966) | |
2022 Unrelated Notes [Member] | ||
Debt Instrument [Line Items] | ||
Issue Date | Apr. 01, 2022 | |
Interest Date | 12% | |
Interest Due | Quarterly | |
Principal Due | Mar. 30, 2025 | |
Nonrelated Party [Member] | ||
Debt Instrument [Line Items] | ||
Long-term portion of notes payable | $ 2,178,190 | 2,085,035 |
Related Party [Member] | ||
Debt Instrument [Line Items] | ||
Less unamortized debt issuance costs | (47,277) | (70,916) |
Long-term portion of notes payable | 552,723 | 529,084 |
Related Party [Member] | Two Thousand Twenty Two Related Notes [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable – “2022 Related Note” | 600,000 | 600,000 |
2022 Unrelated Notes [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable – “2022 Related Note” | 2,364,500 | 2,364,500 |
2020 Notes [Member] | ||
Debt Instrument [Line Items] | ||
Notes payable – “2022 Related Note” | $ 980,450 |
Schedule of Future Minimum Prin
Schedule of Future Minimum Principal Payments of Notes payable (Details) - Nonrelated Party [Member] | Sep. 30, 2023 USD ($) |
Defined Benefit Plan Disclosure [Line Items] | |
2025 | $ 2,364,500 |
Total | $ 2,364,500 |
Schedule of Future Minimum Pr_2
Schedule of Future Minimum Principal Payments of Notes Payable (Details) - Related Party [Member] | Sep. 30, 2023 USD ($) |
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 | ||||
Mar. 02, 2020 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Short-Term Debt [Line Items] | ||||||
Accrued interest | $ 0 | $ 0 | $ 0 | |||
Interest expense debt | 124,753 | $ 214,587 | 412,494 | $ 541,777 | ||
Amortization of debt discount | 22,044 | 79,999 | ||||
Accredited Investors [Member] | 12% Subordinated Notes [Member] | ||||||
Short-Term Debt [Line Items] | ||||||
Interest expense debt | $ 4,267 | $ 26,667 | $ 22,044 | $ 79,999 | ||
Amortization of debt discount | $ 320,000 | |||||
New issues, shares | 80,000 |
Notes Payable - Related Parti_3
Notes Payable - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Related Party Transaction [Line Items] | |||||
Accrued interest | $ 0 | $ 0 | $ 0 | ||
Interest expense | 124,753 | $ 214,587 | 412,494 | $ 541,777 | |
Related Party [Member] | |||||
Related Party Transaction [Line Items] | |||||
Accrued interest | 0 | 0 | $ 0 | ||
Interest expense | $ 25,879 | $ 25,880 | $ 77,638 | $ 51,759 |
Deferred Compensation (Details
Deferred Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Compensation Related Costs [Abstract] | |||
Deferred incentive compensation | $ 30,248 | $ 80,662 |
Schedule of Operating Lease (De
Schedule of Operating Lease (Details) | 9 Months Ended |
Sep. 30, 2023 USD ($) ft² | |
Product Liability Contingency [Line Items] | |
Vehichle rent expense | $ 2,708 |
Lease Expiry | September 30, 2028 |
Columbus O H [Member] | |
Product Liability Contingency [Line Items] | |
Land | ft² | 6,000 |
Vehichle rent expense | $ 5,100 |
Lease Expiry | December 31, 2028 |
Madison Heights M I [Member] | |
Product Liability Contingency [Line Items] | |
Land | ft² | 36,000 |
Vehichle rent expense | $ 43,185 |
Lease Expiry | August 31, 2026 |
Sterling Heights M I [Member] | |
Product Liability Contingency [Line Items] | |
Land | ft² | 37,000 |
Vehichle rent expense | $ 21,072 |
Lease Expiry | April 30, 2028 |
Traverse City M I [Member] | |
Product Liability Contingency [Line Items] | |
Land | ft² | 5,200 |
Vehichle rent expense | $ 4,500 |
Lease Expiry | January 31, 2024 |
Madison Heights M I Temporary Space [Member] | |
Product Liability Contingency [Line Items] | |
Land | ft² | 3,200 |
Vehichle rent expense | $ 1,605 |
Lease Expiry | month to month |
Schedule of Future Rental Payme
Schedule of Future Rental Payment for Operating Lease (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Commitments and Contingencies Disclosure [Abstract] | ||
Finance lease, 2024 | $ 67,358 | |
Operating Leases, 2024 | 916,353 | |
Finance lease, 2025 | 67,358 | |
Operating Leases, 2025 | 892,047 | |
Finance lease, 2026 | 63,306 | |
Operating Leases, 2026 | 855,585 | |
Finance lease, 2027 | 49,500 | |
Operating Leases, 2027 | 353,662 | |
Finance lease, 2028 | 37,228 | |
Operating Leases, 2028 | 238,947 | |
Thereafter | ||
Thereafter | 17,550 | |
Less Imputed interest | (47,094) | |
Less Imputed interest | (429,243) | |
Less Short-term lease payments | (4,814) | |
Finance Lease | 237,656 | $ 155,624 |
Operating Leases | $ 2,840,087 | $ 3,316,682 |
Summary of Components of Lease
Summary of Components of Lease Expense (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | |
Finance lease expense: | ||||
Amortization of ROU asset | $ 13,221 | $ 28,181 | ||
Interest on lease liabilities | 5,036 | 11,462 | ||
Operating lease expense | 238,864 | 243,301 | 715,176 | 729,902 |
Short-term lease expense | $ 4,814 | $ 4,814 | $ 14,441 | $ 14,441 |
Schedule of Additional Informat
Schedule of Additional Information Pertaining to Leases (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Financing cash flows from finance leases (interest) | $ 11,462 | |
Financing cash flows from finance leases (prinicipal) | 23,167 | |
Operating cash flows from operating leases | $ 531,567 | $ 318,030 |
Weighted average remaining lease term - finance leases | 4 years 4 months 24 days | |
Weighted average remaining lease term - operating leases | 3 years 9 months 18 days | 4 years 8 months 12 days |
Weighted average discount rate - finance leases | 8.88% | |
Weighted average discount rate - operating leases | 6.93% | 6.99% |
Schedule of Operating and Finan
Schedule of Operating and Finance Leases (Details) - USD ($) | Sep. 30, 2023 | Dec. 31, 2022 |
Commitments and Contingencies Disclosure [Abstract] | ||
Right-of-use assets, operating | $ 2,716,512 | $ 3,200,191 |
Lease liabilities, operating – current | 713,638 | 692,074 |
Lease liabilities, operating – net of current | 2,126,449 | 2,624,608 |
Total operating lease liabilities | 2,840,087 | 3,316,682 |
Right-of-use asset, finance | 261,892 | 160,990 |
Accumulated amortization | (28,181) | (6,708) |
Right-of-use asset, finance, net | 233,711 | 154,282 |
Lease liabilities, finance – current | 48,802 | 22,493 |
Lease liabilities, finance – net of current | 188,854 | 133,131 |
Total finance lease liability | $ 237,656 | $ 155,624 |
Schedule of Shares and Warrants
Schedule of Shares and Warrants Issued (Details) | 9 Months Ended |
Sep. 30, 2023 $ / shares shares | |
Private Placement 2022 [Member] | |
Subsidiary, Sale of Stock [Line Items] | |
Issue Date | Apr. 01, 2022 |
Shares issued | shares | 1,242,588 |
Share price | $ 4.62 |
Warrants issued | shares | 124,258 |
Warrants exercise price | $ 4.62 |
Warrants Fair value | $ 3.91 |
Private Placement 2020 [Member] | |
Subsidiary, Sale of Stock [Line Items] | |
Issue Date | Mar. 02, 2020 |
Shares issued | shares | 955,000 |
Share price | $ 4 |
Warrants issued | shares | 95,500 |
Warrants exercise price | $ 4 |
Warrants Fair value | $ 3.90 |
Schedule of Warrants to Purchas
Schedule of Warrants to Purchase Common Stock (Details) | 9 Months Ended |
Sep. 30, 2023 $ / shares shares | |
Warrant Exercise Price One [Member] | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Warrants outstanding | shares | 124,258 |
Warrants Exercise Price | $ / shares | $ 4.62 |
Warrants Expiry | Mar. 30, 2027 |
Warrant Exercise Price Two [Member] | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Warrants outstanding | shares | 95,500 |
Warrants Exercise Price | $ / shares | $ 4 |
Warrants Expiry | Mar. 30, 2027 |
Warrant Exercise Price Three [Member] | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Warrants outstanding | shares | 16,000 |
Warrants Exercise Price | $ / shares | $ 9 |
Warrants Expiry | Mar. 30, 2027 |
Warrant Exercise Price Four [Member] | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Warrants outstanding | shares | 17,200 |
Warrants Exercise Price | $ / shares | $ 12.50 |
Warrants Expiry | Mar. 30, 2027 |
Warrant Exercise Price Five [Member] | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Warrants outstanding | shares | 3,000 |
Warrants Exercise Price | $ / shares | $ 15 |
Warrants Expiry | Mar. 30, 2027 |
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 | |||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Common stock, shares outstanding | 4,073,757 | 4,073,757 | 4,073,757 | ||
Amortization of debt issuance costs | $ 138,234 | $ 155,667 | |||
Private Placement [Member] | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Amortization of debt issuance costs | $ 4,150 | $ 25,935 | $ 21,439 | $ 77,804 | |
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 |
Schedule of Estimated Values _2
Schedule of Estimated Values of Stock Option Grants Valuation Assumptions (Details) - April 14, 2022 Grant [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 | 12 Months Ended | |
Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Shares Under Option, Outstanding beginning balance | 365,447 | 144,860 | 144,860 |
Weighted- Average Exercise Price, Outstanding beginning balance | $ 5.89 | $ 5.61 | $ 5.61 |
Weighted Average Remaining Contractual Life Outstanding, beginning | 8 years | 8 years | 8 years |
Aggregate Intrinsic Value, Outstanding, beginning balance | $ 19,200 | $ 19,200 | $ 19,200 |
Shares Under Option, Granted | 220,587 | ||
Weighted- Average Exercise Price, Granted | $ 6.08 | ||
Shares Under Option, Forfeited and expired | (7,560) | ||
Weighted- Average Exercise Price, Forfeited and expired | $ 15.34 | ||
Weighted- Average Exercise Price, Forfeited and expired | $ (19,200) | ||
Shares Under Option, Outstanding ending balance | 357,887 | 365,447 | 365,447 |
Weighted- Average Exercise Price, Outstanding ending balance | $ 5.69 | $ 5.89 | $ 5.89 |
Aggregate Intrinsic Value, Outstanding ending balance | $ 19,200 | $ 19,200 | |
Shares Under Option, Exercisable ending balance | 186,594 | 93,085 | |
Weighted- Average Exercise Price, Exercisable ending balance | $ 5.60 | $ 6.44 | |
Weighted Average Remaining Contractual Life Outstanding, beginning | 7 years | 7 years | |
Aggregate Intrinsic Value, Exercisable ending balance | $ 19,200 | ||
Weighted Average Remaining Contractual Life Outstanding, beginning | 9 years |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Apr. 14, 2022 | Jan. 06, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||
Allocated share based compensation expense | $ 115,456 | $ 118,999 | $ 349,073 | $ 244,951 | |||
Fair value of stock options | 467,771 | 91,913 | |||||
Unrecognized compensation costs | $ 663,437 | $ 663,437 | $ 1,019,140 | ||||
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 | ||||||
Allocated share based compensation expense | $ 57,500 |
Concentrations (Details Narrati
Concentrations (Details Narrative) - Customer Concentration Risk [Member] | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2023 | Sep. 30, 2022 | Sep. 30, 2023 | Sep. 30, 2022 | Dec. 31, 2022 | |
State of Michigan [Member] | Revenue Benchmark [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 31% | 37% | 34% | 37% | |
Rocket Mortgage [Member] | Revenue Benchmark [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 5% | 5% | 7% | ||
Government Contracts [Member] | Revenue Benchmark [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 82% | 78% | 79% | 77% | |
Customer One [Member] | Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 29% | 44% | |||
Customer Two [Member] | Accounts Receivable [Member] | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 4% | 7% |