UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________to _________________________ | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | C ...

Intellinetics, Inc. (NYSE:INLX) Q4 2022 Earnings Conference Call March 27, 2023 4:30 PM ET Company Participants Tom Baumann - IR Joe Spain - Chief Financial Officer Jim DeSocio - President and Chief Executive Officer Conference Call Participants Howard Halpern - Taglich Brothers Operator Hello and welcome to the Intellinetics Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. [Operator Instructions]. A question-and-answer session will follow the formal presentation. As a reminder, this ...

Client Dependence - The company's two largest clients accounted for approximately 38% and 6% of total revenues for the year ended December 31, 2022, and 47% and 9% for 2021, indicating a significant reliance on a limited number of customers [86]. - Government contracts represented approximately 77% and 72% of net revenues for the years ended December 31, 2022, and 2021, respectively, highlighting the importance of government business [86]. Revenue Recognition and Financial Impact - Revenue recognition from subscription agreements occurs ratably over typically one-year terms, meaning a decline in new or renewed subscriptions may not be immediately reflected in current revenue [87]. - The company faces risks related to early termination and audits of government contracts, which could materially affect revenues [88]. - Global economic conditions, including anticipated recession and inflation, are likely to adversely affect the company's operating results and financial markets [108]. - Market fluctuations and external financial developments may adversely affect the company's ability to raise capital and access credit [109]. Compliance and Regulatory Risks - Compliance with federal securities laws results in higher expenses compared to privately held companies, impacting resource allocation for growth [89]. - The company must comply with NYSE American listing requirements, and failure to do so could result in delisting, limiting trading and capital-raising opportunities [100]. - The company is subject to FINRA sales practice requirements, which may limit shareholders' ability to buy and sell its stock [105]. Operational Risks - Security breaches could lead to loss of confidential information and significant liabilities, affecting the company's reputation and business [91]. - The company is subject to increased scrutiny and potential liabilities related to data privacy and security, which could impact operations [92]. - The company is vulnerable to disruptions at third-party data centers, which could lead to service interruptions and harm its business reputation [110]. - The company expects to experience interruptions in service and availability from time to time due to reliance on third-party data centers [110]. Financial Management and Shareholder Impact - Future financing may dilute existing shareholders' ownership if additional securities are issued [97]. - The common stock is expected to experience significant price volatility, which may lead to losses for stockholders [104]. - The company does not anticipate paying any cash dividends in the foreseeable future, as it plans to retain earnings for operational expansion [107]. Human Resources and Talent Management - Recruitment and retention of key personnel are critical for the company's success, with intense competition for top talent in the current labor market [115]. Intellectual Property and Competitive Position - The company faces risks related to the protection of its intellectual property, which is essential for maintaining its competitive position [118]. Infrastructure and Product Reliability - The company relies on the stability of infrastructure software, and weaknesses in this area could negatively impact product effectiveness and reliability [116].

Financial Data and Key Metrics Changes - Total revenue for Q3 2022 increased by 22% to $3.9 million compared to $3.2 million in Q3 2021 [13] - Adjusted EBITDA for Q3 2022 was $790,000, up 48% from Q3 2021, marking the eleventh consecutive positive quarter [12][19] - Net income for Q3 2022 was $218,000, a decrease from $296,000 in the same period last year, primarily due to increased interest expenses [17][18] Business Line Data and Key Metrics Changes - SaaS revenue grew 244% year-over-year, with organic growth at 42% [5][14] - Recurring revenue, including SaaS and software maintenance services, increased by 127% to $1.5 million [14] - Professional services revenue decreased by 7% to $2 million, representing 52% of total revenue compared to 68% in Q3 2021 [15] Market Data and Key Metrics Changes - The K-12 operations now serve over 530 districts, significantly increasing SaaS revenue and doubling the company's presence in this vertical market since the Yellow Folder acquisition [8] - Yellow Folder contributed $710,000 to the revenue increase, indicating strong performance in the K-12 sector [14] Company Strategy and Development Direction - The company is focused on cross-selling services and expanding into new markets, supported by investments in sales and marketing [7] - The acquisition of Yellow Folder is seen as a strategic move to enhance recurring SaaS revenue and EBITDA [9][12] - The company aims to broaden its product portfolio and addressable markets, particularly through the adoption of the new IPAS solution [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, highlighting a strong pipeline and successful integration of Yellow Folder [5][12] - The company expects to continue growing revenues and adjusted EBITDA on a year-over-year basis [22] - Management emphasized the shift towards a more predictable SaaS model as a key driver for sustainable profitability [25] Other Important Information - The company had cash of $3.8 million and total assets of $20.8 million as of September 30, 2022 [21] - Total liabilities were $12.5 million, including $5 million in debt principal [21] Q&A Session Summary Question: What is the visibility for internal growth in 2023? - Management did not provide specific forward-looking visibility but expressed bullish sentiments for continued growth in 2023 [27] Question: Can you provide more details on IPAS? - IPAS is an accounts payable automation solution that significantly reduces headcount requirements and improves processing efficiency, with successful collaborations with Constellation Software [29][30]

Part I [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements.) This section presents Intellinetics, Inc.'s unaudited condensed consolidated financial statements and accompanying notes for the periods ended September 30, 2022 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$20.76 million** by September 30, 2022, driven by the Yellow Folder acquisition, significantly impacting liabilities and equity Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $5,644,352 | $3,684,268 | | **Goodwill** | $5,789,821 | $2,322,887 | | **Intangible assets, net** | $4,547,223 | $968,496 | | **Total Assets** | **$20,759,637** | **$11,962,132** | | **Total Current Liabilities** | $7,129,458 | $3,557,324 | | **Total Liabilities** | **$12,510,618** | **$9,300,396** | | **Total Stockholders' Equity** | **$8,249,019** | **$2,661,736** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2022 revenues rose **22%** to **$3.86 million** with net income, while nine-month revenues grew **14%** to **$9.98 million**, resulting in a net loss Q3 2022 vs Q3 2021 Operating Results (Unaudited) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | **Total Revenues** | $3,859,627 | $3,171,362 | | **Gross Profit** | $2,506,185 | $1,915,721 | | **Income from Operations** | $458,003 | $409,467 | | **Net Income** | $217,536 | $296,437 | | **Diluted EPS** | $0.05 | $0.10 | Nine Months 2022 vs 2021 Operating Results (Unaudited) | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | **Total Revenues** | $9,978,782 | $8,716,227 | | **Gross Profit** | $6,327,040 | $5,334,692 | | **Income from Operations** | $416,779 | $825,918 | | **Net (Loss) Income** | ($176,757) | $1,331,656 | | **Diluted EPS** | ($0.05) | $0.43 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow provided **$1.92 million** for the nine months ended September 30, 2022, with significant cash used in investing for the Yellow Folder acquisition, offset by financing activities, increasing cash to **$3.78 million** Cash Flow Summary for the Nine Months Ended Sep 30 (Unaudited) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,924,734 | $1,408,249 | | **Net cash used in investing activities** | ($6,841,320) | ($532,151) | | **Net cash provided by (used in) financing activities** | $6,940,583 | ($954,733) | | **Net increase (decrease) in cash** | $2,023,997 | ($78,635) | | **Cash - end of period** | $3,776,627 | $1,829,247 | - The acquisition of Yellow Folder was a major cash event, with **$6.38 million** paid in cash for the business acquisition[23](index=23&type=chunk)[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, business segments, the Yellow Folder acquisition's impact, revenue recognition, debt, and customer concentration - The company operates through two reporting segments: Document Management and Document Conversion. The Document Management segment was significantly expanded through the acquisition of Yellow Folder in April 2022[27](index=27&type=chunk) - On April 1, 2022, the company acquired substantially all assets of Yellow Folder for a cash purchase price of **$6,383,269**. This resulted in the recognition of **$3,466,934** in goodwill and **$3,888,000** in intangible assets[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The company has significant customer concentration. For the nine months ended September 30, 2022, the State of Michigan accounted for **37%** of total revenues and Rocket Mortgage accounted for **7%**[121](index=121&type=chunk) - To finance the Yellow Folder acquisition and for other corporate purposes, the company raised **$8.7 million** in a private placement on April 1, 2022, through the sale of common stock (**$5.74 million**) and 12% Subordinated Notes (**$2.96 million**)[109](index=109&type=chunk) [Management's Discussion and Analysis (MD&A)](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes Q3 2022 revenue growth to the Yellow Folder acquisition, boosting SaaS revenue, while facing challenges in Document Conversion and increased operating expenses - The acquisition of Yellow Folder on April 1, 2022, was the most significant factor impacting financial results, contributing to revenue growth but also increasing operating and transaction costs[129](index=129&type=chunk)[139](index=139&type=chunk) - The company faces headwinds from wage inflation and hiring challenges, which particularly affect the labor-intensive Document Conversion segment and its ability to generate revenue[136](index=136&type=chunk)[139](index=139&type=chunk) - Excluding the Yellow Folder acquisition, underlying SaaS revenue grew **42%** year-over-year for the nine-month period, demonstrating strong organic growth in this key strategic area[139](index=139&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q3 2022 revenues rose **22%** to **$3.86 million**, driven by SaaS growth, improving gross profit margin to **65%**, despite increased operating expenses Revenue by Source (Q3 2022 vs Q3 2021) | Revenue Source | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Sale of software | $18,390 | $58,779 | -69% | | Software as a service | $1,211,407 | $352,192 | +244% | | Software maintenance services | $352,892 | $336,732 | +5% | | Professional services | $2,007,613 | $2,165,030 | -7% | | Storage and retrieval services | $269,325 | $258,629 | +4% | | **Total revenues** | **$3,859,627** | **$3,171,362** | **+22%** | - The increase in gross profit margin from **60% to 65%** YoY in Q3 was principally driven by the increased mix of high-margin SaaS revenue from the Yellow Folder acquisition and strong overall margins in the Document Management segment[151](index=151&type=chunk) - Operating expenses for Q3 2022 increased by **36%** YoY, primarily due to the addition of Yellow Folder's expenses, higher sales & marketing costs, and increased depreciation and amortization from acquired assets[140](index=140&type=chunk)[159](index=159&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2022, the company had **$3.8 million** in cash, with management confident in sufficient liquidity for the next 12 months despite upcoming debt maturities - The company had approximately **$3.8 million** in cash and a working capital deficit of **$1.5 million** as of September 30, 2022[167](index=167&type=chunk) - A significant debt obligation of **$2 million** is due on February 28, 2023. Management believes it can refinance or otherwise modify these notes on acceptable terms[94](index=94&type=chunk)[168](index=168&type=chunk) - Management believes that current capital resources, expected cash from operations, and potential financing options will be sufficient to meet anticipated cash needs for at least the next 12 months[170](index=170&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management deemed disclosure controls effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - As of September 30, 2022, the company's disclosure controls and procedures were deemed effective by management[182](index=182&type=chunk) - No material changes to the internal control over financial reporting occurred during the third quarter of 2022[184](index=184&type=chunk) Part II [Other Information](index=44&type=section&id=Item%201.%20Legal%20Proceedings.) This section discloses no legal proceedings, unregistered equity sales, senior security defaults, or material changes to risk factors - The company reported no legal proceedings[187](index=187&type=chunk) - There were no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021[188](index=188&type=chunk) - There were no unregistered sales of equity securities or defaults upon senior securities during the reported period[189](index=189&type=chunk)[190](index=190&type=chunk)

Intellinetics, Inc. (NYSE:INLX) Q2 2022 Earnings Conference Call August 15, 2022 4:30 PM ET Company Participants Joe Spain - Chief Financial Officer Jim DeSocio - President and Chief Executive Officer Conference Call Participants Howard Halpern - Taglich Brothers Joe Spain Thank you and good afternoon everyone. My name is Joe Spain and I am the Chief Financial Officer for Intellinetics, Inc. I am pleased to welcome you to our 2022 Second Quarter Conference Call. Before we begin, I would like to remind liste ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________to _________________________ Commission file number: 000-31671 INTELLINETICS, INC. (Exact name of registrant as specified in its charter) Nev ...

Financial Data and Key Metrics Changes - Revenue for Q1 2022 increased by 3% to $2.7 million compared to $2.6 million in Q1 2021 [11] - Adjusted EBITDA for Q1 2022 was $421,000, up 18% from $356,000 in Q1 2021, marking the ninth consecutive positive quarter [9][18] - Net loss for Q1 2022 was $20,000, a significant improvement from a net income of $843,000 in the same period last year [17] Business Line Data and Key Metrics Changes - SaaS revenue grew by 33% year-over-year, contributing to a total of 29% of total revenues after the acquisition of Yellow Folder [4][7] - Recurring revenue, including SaaS, increased by 16% to $768,000, while professional services revenue decreased by 4% to $1.6 million [12][13] - Software revenue increased by 572% to $64,000, reflecting the industry's shift towards cloud solutions [11] Market Data and Key Metrics Changes - The company closed 154 contracts year-to-date in 2022, an 18% increase from 131 contracts in the same period last year, with an estimated total contract value of $3.9 million, up 150% [5] - The acquisition of Yellow Folder added 240 K-12 customers, increasing the total customer base in this market to 500 [6] Company Strategy and Development Direction - The company is focused on expanding its marketing efforts and sales team, which has resulted in increased leads and a stronger sales pipeline [4][10] - The integration of Yellow Folder is seen as a positive move, with expectations for cross-selling opportunities and enhanced EBITDA from high-margin business [7][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that Q1 2022 would be the low point for the year, with signs of improvement in the operating environment [22] - The company remains bullish on future growth, citing strong sales activity and lead generation as indicators of positive momentum [10][27] Other Important Information - Operating expenses increased to $1.54 million, primarily due to transaction costs related to the acquisition of Yellow Folder [15] - The company has maintained control over salary pressures for new hires despite a tight labor market [24] Q&A Session Summary Question: Are there signs that the headwinds from Michigan are starting to abate? - Management confirmed that the first quarter is expected to be the lowest point for the year and noted improvements in the operating environment [22] Question: How is the integration of Yellow Folder going? - Management reported no surprises in the integration process and highlighted the start of building a joint pipeline and campaigns into the Yellow Folder customer base [23] Question: Are there salary pressures for new hires? - Management indicated that they have been able to keep salary pressures under control, although hiring has been slower [24]

[PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) Presents Intellinetics' unaudited condensed consolidated financial statements and accompanying notes for Q1 2022 and 2021 [Financial Statements](index=6&type=section&id=ITEM%201%2E%20Financial%20Statements%2E) Presents Intellinetics' Q1 2022 and 2021 unaudited consolidated financial statements, covering balance sheets, operations, cash flows, and equity [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The March 31, 2022 balance sheet shows slight asset growth and reclassification of notes payable to current liabilities Condensed Consolidated Balance Sheet Highlights (in USD) | Balance Sheet Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $3,908,546 | $3,684,268 | | **Total Assets** | **$12,000,042** | **$11,962,132** | | **Total Current Liabilities** | $5,426,504 | $3,557,324 | | **Total Liabilities** | **$9,277,972** | **$9,300,396** | | **Total Stockholders' Equity** | $2,722,070 | $2,661,736 | - Notes payable of approximately **$1.8 million** were reclassified from long-term to current liabilities, reflecting the upcoming maturity of the 2020 Notes[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2022 net loss of $20,126 contrasts with Q1 2021 net income, primarily due to a prior-year debt extinguishment gain Statement of Operations Summary (in USD) | Metric | Q1 2022 | Q1 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenues | $2,703,512 | $2,635,219 | +2.6% | | Gross Profit | $1,631,837 | $1,604,904 | +1.7% | | Income from Operations | $92,475 | $110,733 | -16.5% | | Gain on Extinguishment of Debt | $0 | $845,083 | N/A | | **Net (Loss) Income** | **($20,126)** | **$842,772** | **-102.4%** | | Diluted EPS | ($0.01) | $0.27 | N/A | - The significant drop in net income year-over-year is primarily due to the **$845,083 gain on PPP loan forgiveness** recorded in Q1 2021, which was not present in Q1 2022[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Shows increased net cash from operating activities in Q1 2022, improved cash position, and no financing activities Cash Flow Summary (in USD) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $476,171 | $326,869 | | Net Cash from Investing Activities | ($56,043) | ($231,699) | | Net Cash from Financing Activities | $0 | $0 | | **Net Increase in Cash** | **$420,128** | **$95,170** | | **Cash - End of Period** | **$2,172,758** | **$2,003,052** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Discloses business segments, accounting policies, debt, customer concentration, and post-period acquisitions and offerings - The company operates through two reporting segments: Document Management (software platform solutions) and Document Conversion (paper-to-digital conversion and storage services)[27](index=27&type=chunk) Segment Performance for Three Months Ended March 31 (in USD) | Segment | Revenues 2022 | Revenues 2021 | Gross Profit 2022 | Gross Profit 2021 | | :--- | :--- | :--- | :--- | :--- | | Document Management | $914,950 | $735,818 | $734,906 | $587,500 | | Document Conversion | $1,788,562 | $1,899,401 | $896,931 | $1,017,404 | | **Total** | **$2,703,512** | **$2,635,219** | **$1,631,837** | **$1,604,904** | - The company has a significant revenue concentration, with its two largest customers, the State of Michigan and Rocket Mortgage, accounting for **40% and 10% of total revenues**, respectively, in Q1 2022[104](index=104&type=chunk) - Subsequent to the quarter end, on April 1, 2022, the company acquired Yellow Folder, LLC for approximately **$6.5 million in cash** and completed a private placement offering, raising aggregate gross proceeds of **$8.7 million** through the sale of common stock and subordinated notes[112](index=112&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=ITEM%202%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%2E) Management discusses Q1 2022 financial performance, revenue, segment challenges, liquidity, and post-period capital events Key Financial Results Q1 2022 | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Revenues | $2,703,512 | +3% | | Income from Operations | $92,475 | -16% | | Net Loss | ($20,126) | N/A (vs. $842,772 income) | | Operating Cash Flow | $476,171 | +45.7% | - The COVID-19 Omicron variant outbreak in Q4 2021 and Q1 2022 caused workflow slowdowns and reduced revenues in the Document Conversion segment, particularly as the State of Michigan, a major customer, had not fully returned to on-site work[130](index=130&type=chunk) - On April 1, 2022, the company acquired Yellow Folder, a document solutions company specializing in the K-12 education market, for approximately **$6.5 million in cash**[125](index=125&type=chunk) - To fund the Yellow Folder acquisition and for general corporate purposes, the company raised **$8.7 million in gross proceeds** on April 1, 2022, through a private offering of common stock and 12% subordinated notes[126](index=126&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Analyzes Q1 2022 operational results, showing 3% revenue growth from Document Management and SaaS, despite a slight gross margin decline Revenues by Source (in USD) | Revenue Source | Q1 2022 | Q1 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Sale of software | $64,491 | $9,594 | +572% | | Software as a service | $431,221 | $323,726 | +33% | | Software maintenance services | $336,602 | $340,446 | -1% | | Professional services | $1,587,948 | $1,652,463 | -4% | | Storage and retrieval services | $283,250 | $308,990 | -8% | | **Total revenues** | **$2,703,512** | **$2,635,219** | **+3%** | - The **33% increase in Software as a Service (SaaS) revenue** was a primary growth driver, resulting from new customers choosing cloud solutions and existing customers expanding their services[138](index=138&type=chunk) - Professional services revenue, the largest component, decreased by **4%** due to the impact of the COVID-19 Omicron variant on Michigan-based operations[140](index=140&type=chunk) - Overall gross margin decreased from **61% to 60%** year-over-year, primarily due to unfavorable margin projects and inflationary pressures on labor costs within the Document Conversion segment[143](index=143&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Details March 31, 2022 liquidity, including a working capital deficit and subsequent capital raise improving financial flexibility - The company had a net working capital deficit of **$1,517,958** as of March 31, 2022, driven by the current portion of notes payable amounting to **$1,807,128**[158](index=158&type=chunk) - Liquidity and cash flows were significantly improved subsequent to the quarter-end through the acquisition of cash-flow positive Yellow Folder and raising approximately **$8.7 million in gross proceeds** from a private placement of stock and notes[159](index=159&type=chunk)[164](index=164&type=chunk) - Management believes that current capital resources, funds from operations, and potential financing options will be sufficient to meet anticipated cash needs for at least the next 12 months[161](index=161&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk%2E) This disclosure is not applicable as the company qualifies as a smaller reporting company - Not applicable to smaller reporting companies[170](index=170&type=chunk) [Controls and Procedures](index=38&type=section&id=ITEM%204%2E%20Controls%20and%20Procedures%2E) Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material internal control changes - Management concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level[172](index=172&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[174](index=174&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20OTHER%20INFORMATION) Presents other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Legal Proceedings](index=39&type=section&id=ITEM%201%2E%20Legal%20Proceedings%2E) The company reported no legal proceedings during the period - None[177](index=177&type=chunk) [Risk Factors](index=39&type=section&id=ITEM%201A%2E%20Risk%20Factors%2E) No material changes to risk factors from the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - No material changes to the risk factors from the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[178](index=178&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=ITEM%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%2E) Details the issuance of 8,097 restricted common shares to non-employee directors as part of their annual compensation - On January 6, 2022, the Company issued **8,097 shares of restricted common stock** to non-employee directors as part of their annual compensation[180](index=180&type=chunk) [Defaults Upon Senior Securities](index=39&type=section&id=ITEM%203%2E%20Defaults%20Upon%20Senior%20Securities%2E) The company reported no defaults upon senior securities - None[181](index=181&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=ITEM%204%2E%20Mine%20Safety%20Disclosures%2E) This item is not applicable to the company - Not Applicable[182](index=182&type=chunk) [Other Information](index=39&type=section&id=ITEM%205%2E%20Other%20Information%2E) The company reported no other information - None[183](index=183&type=chunk) [Exhibits](index=39&type=section&id=ITEM%206%2E%20Exhibits%2E) Lists exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and Inline XBRL documents

Revenue Sources and Risks - The company's two largest clients accounted for approximately 47% and 9% of total revenues for the year ending December 31, 2021, with government contracts representing about 62% of net revenues[87]. - A significant portion of revenues comes from government contracts, which are subject to early termination and funding authorizations, posing risks to financial stability[89]. - Revenue recognition from subscription agreements is ratable over typically one-year terms, meaning a decline in new subscriptions may not be immediately reflected in current revenue[88]. - The company anticipates that adverse economic conditions may lead to delayed or reduced technology purchases by customers[111]. - Any disruptions in service at data centers could lead to revenue reductions and potential customer terminations[117]. Legal and Compliance Risks - Compliance with federal securities laws results in higher expenses compared to privately held companies, impacting resource allocation for growth[90]. - The company may face substantial expenditures due to indemnification obligations for directors and officers, potentially discouraging legal actions against them[91]. - The company is subject to increased litigation risks, which could materially adversely affect its financial condition and operating results[97]. - Claims of intellectual property infringement could lead to increased costs and harm future revenue generation capabilities[98]. Operational Risks - Security breaches could lead to loss of confidential information and significant liabilities, affecting the company's reputation and business operations[92]. - The company is vulnerable to disruptions at third-party data centers, which could harm its business and affect service availability[113]. - The company may incur significant costs and service interruptions if it cannot renew agreements with data center owners on commercially reasonable terms[115]. - The company faces risks related to the recruitment and retention of key personnel, which is critical for its competitive position[118]. - The company relies on the stability of infrastructure software, and weaknesses in this area could negatively impact its products and reputation[119]. Financial Position and Shareholder Impact - The company does not expect to pay any dividends on its common stock for the foreseeable future, as it plans to retain earnings to maintain and expand operations[110]. - The company may need to issue additional securities, which could dilute existing shareholders' ownership and affect stock value[99]. - The common stock is quoted on the OTCQB, leading to limited trading and higher volatility, which may not reflect the actual value of the stock[102]. - The company is subject to loan covenants that may restrict its ability to pay dividends until certain loans are repaid[110]. Economic Conditions - Global economic conditions, including uncertainty and inflation, are likely to adversely affect the company's operating results and financing[111].