Revenue Sources - The company's two largest clients accounted for approximately 47% and 8% of total revenues for the twelve months ending December 31, 2020[89]. - Government contracts represented approximately 64% of net revenues for the twelve months ended December 31, 2020, compared to 41% in 2019[89]. - A significant portion of revenue is recognized ratably over the terms of subscription agreements, typically one year, which may delay the impact of downturns in business[90]. Risks and Compliance - The company faces risks related to early termination and audits of government contracts, which could materially affect business operations[91]. - Compliance with federal securities laws results in higher expenses compared to similarly-sized private companies, impacting growth potential[92]. - Security breaches could lead to loss of confidential information and significant liabilities, affecting reputation and business[94]. - The company may face increased costs and operational disruptions due to potential intellectual property infringement claims[100]. Stock and Market Conditions - The common stock is quoted on the OTCQB, leading to limited trading and higher volatility compared to national exchanges[104]. - The market price of common stock may adversely affect the company's ability to attract and retain high-quality employees[105]. - Substantial sales of common stock by stockholders may negatively impact the market price of the company's shares[107]. - The company's common stock is currently subject to "penny stock" rules, making transactions more cumbersome and potentially reducing liquidity[111]. - The company does not expect to pay any dividends for the foreseeable future, as it plans to retain earnings to maintain and expand operations[114]. - Market fluctuations could lead to extreme volatility in the stock price, potentially resulting in securities litigation against the company[110]. - The company may experience difficulties in raising capital due to stock price volatility and credit market conditions[116]. - FINRA sales practice requirements may limit the ability of shareholders to buy and sell the company's stock, adversely affecting market conditions[112]. Operational Challenges - Global economic conditions, particularly due to COVID-19, are expected to adversely impact the business, leading to potential delays in technology purchases and increased price competition[115]. - The company is vulnerable to disruptions at third-party data centers, which could harm service availability and customer satisfaction[117]. - There is a risk of not being able to attract and retain top employees, which is critical for the company's competitive position[122]. - The company relies on the stability of infrastructure software, and weaknesses in this area could negatively impact product effectiveness and reliability[123]. - The company faces challenges in protecting its intellectual property, which is essential for maintaining its competitive edge[125].
Intellinetics(INLX) - 2020 Q4 - Annual Report