INTELLINETICS, INC.
For the period ended Dec 31, 2025. Filed Mar 30, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 30, 2026
INLX$3.82-5.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-24.
0001641172-25-000274
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-30.
0001493152-26-013568
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 101 previous paragraphs and 101 current paragraphs.
57 unchanged; 28 reworded; 16 added; 16 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 15 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
2025 results reflected challenges on multiple, unrelated fronts. Our Document Services segment faced a temporary reduction in volume aligned with the renewal of our contract with our largest customer, which occurred June 1, 2025. We have since taken orders to refill our project backlog and have resumed operating at more historical levels. Additionally, our Software segment faced market headwinds in the two major vertical markets we are pursuing, construction/homebuilding and K-12 Education. The homebuilding industry had a poor year which in turn resulted in curtailed spending across the board, including our solutions. K-12 Education faced uncertainty in federal funding levels and budget challenges, resulting in a similar spending hiatus for our solutions. Our margins remained stable by revenue source and we generated positive operating cash flow in 2025.
Current report
Our total revenues in 2025 decreased by $1,434,927, or 8.0%, from 2024 revenues, primarily driven by our Document Services professional services, due to a reduction in volume from our largest customer, more than offsetting growth of 11.3% in software as a service.
Current report
Professional services revenues primarily consist of revenues from document scanning and conversion services, plus consulting, discovery, training, and advisory services to assist customers with document management needs. These revenues include arrangements that do not involve the sale of software. Of our total 2025 professional services revenues of $8,141,155, $7,742,507 was derived from our Document Services operations and $398,648 was derived from our Software operations. Our overall professional services revenues decreased by $1,876,819, or 18.7%, in 2025 compared to 2024. This decrease is the result of reduced scanning projects in our Document Services segment, due to timing of projects, which experienced an unusually low ebb in backlog that corresponded with the expiry of our prior contract with our largest customer, prior to the renewal on June 1, 2025. We have since taken orders to refill the backlog and have experienced the ramp up in production in Q4 2025, which was just 1.8% below Q4 2024.
Current report
Our overall gross profit increased to 66.0% in 2025 from 63.1% in 2024. The revenue mix between segments shifted favorably, with more relative revenue from SaaS and less from professional services in 2025 compared to 2024, driving the increase in total margin percent. Gross profit margins within each revenue line were stable, except for the increase in storage and retrieval from reduced destruction costs.
Current report
Interest expense, net was $84,326 during 2025 as compared with $372,710 during 2024, representing a decrease of $288,384 or 77.4%. The decrease resulted from reduced interest expense from principal repayments in March, June, and August 2024 and culminating in June 2025 with full repayment of notes payable.
Current report
In recent years we engaged in several actions that significantly improved our liquidity and cash flows, including (i) effective June 1, 2025 through May 31, 2030, securing a renewal contract with our largest customer, (ii) on May 28, 2025, commencing an at-the-market offering, discussed below, (iii) repaying all of our debt securities as of June 18, 2025, and (iv) effective February 16, 2026, securing a line of credit through JPMorgan Chase Bank, N.A. (“JPMorgan Chase”) in the amount of $1 million, as discussed in more detail below.
Current report
At-the-Market Offering
Current report
We maintain an effective registration statement covering up to $12.9 million of common stock, warrants, and units. The registration statement includes a prospectus covering the offer, issuance and sale of up to $10.0 million in our common stock from time to time in “at-the-market offerings” pursuant to an At the Market Agreement (the “ATM Program”) with Lucid Capital Markets, LLC as our sales agent. We have sold 145,938 shares of our common stock pursuant to the ATM Program during 2025, and received aggregate net proceeds totaling $1,621,325. As of the filing date of this Annual Report, approximately $8.2 million remained available under the ATM Program
Current report
As of December 31, 2025, we have no outstanding indebtedness. On June 18, 2025, we repaid the remaining outstanding principal and interest on our 2022 Notes. See Note 6 and Note 7 to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further information on the 2022 Notes.
Current report
On February 16, 2026, we entered into a $1 million secured term loan line of credit pursuant to a Credit Agreement (the “Credit Agreement”) and other related agreements with JPMorgan Chase. The line of credit will expire on December 31, 2026 unless renewed by mutual agreement of the Company and JPMorgan Chase. The Company expects the proceeds of any borrowings under the line of credit to be used for, among other things, working capital, capital expenditures, and general corporate purposes.
Current report
Cash Used in Financing Activities.
Current report
The Company’s impairment analyses for goodwill and indefinite-lived intangible assets involve significant judgments and estimates that can materially affect the amount and timing of impairment charges, if any, recognized in the consolidated financial statements. Goodwill is tested for impairment at the reporting unit level at least annually as of December 31, 2025, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount.
Current report
When the Company performs a quantitative goodwill impairment test, the estimated fair value of each reporting unit is determined using valuation techniques that may include a discounted cash flow (“DCF”) analysis, market multiples of comparable publicly traded companies, and/or recent transaction multiples. These valuation models require the Company to make assumptions about future revenues and margins, long-term growth rates, discount rates, working capital needs, and capital expenditure requirements. The discount rates used in the DCF analyses are intended to reflect the risk and uncertainty inherent in the projected cash flows of the reporting unit. Changes in any of these assumptions, individually or in combination, could materially affect the estimated fair value of the reporting units and the determination of whether goodwill is impaired.
Current report
Finite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, such as adverse changes in projected cash flows, loss of key customers, or significant negative industry or economic trends. Recoverability is assessed by comparing the carrying amount of the asset or asset group to the sum of the undiscounted cash flows expected to be generated by the asset or asset group. If the carrying amount is not recoverable on this basis, the impairment loss is measured as the excess of carrying amount over fair value, which is estimated using an income or market approach as appropriate.
Current report
Because these estimates and assumptions are inherently subjective and forward-looking, they are subject to a high degree of uncertainty. Actual results may differ from the Company’s estimates, and such differences could result in the recognition of material impairment charges in future periods if the fair values of reporting units or intangible assets decline below their carrying amounts
Current report
The Company has elected to account for forfeitures of share-based awards as they occur. As a result, the Company does not estimate expected forfeitures when determining the amount of share-based compensation expense to recognize. Instead, previously recognized compensation cost is reversed in the period in which an award is forfeited, and no additional expense is recognized for awards that do not vest.
Removed paragraphs (16)
Previous report
2024 results reflected our current strategy to grow our SaaS revenue. All comparison amounts of 2024 over 2023 represent organic growth. Our most recent acquisition was in 2022 and has no comparative impact on the periods reported. Our sales revenues in software as a service and in professional services, primarily document conversion, provided our revenue growth, more than offsetting expected weakness in storage and retrieval and sales of direct premise software. We generated strong cash flow in 2024, enabling us to pay down our notes payable by $1,625,000.
Previous report
Our total revenues in 2024 increased by $1,131,992, or 6.7%, over 2023 revenues, driven by software as a service and our document conversion professional services, more than offsetting expected weakness in storage and retrieval, expected inactivity in software maintenance services sales, and volatility in sales of direct premise software and document management professional services.
Previous report
Sale of Software Revenues
Previous report
Revenues from the sale of software principally consist of sales of additional or upgraded software licenses and applications to existing customers and resellers. Revenues from the sale of software, which are reported as part of our Document Management segment decreased by $67,314, or 67.1% during 2024 compared to 2023.
Previous report
These period over period changes are due to timing of direct sales projects compared to the same periods in 2023. We expect the volatility of this revenue line item to continue as the frequency of on-premise software solution sales decreases over time and project timing is unpredictable.
Previous report
Professional services revenues primarily consist of revenues from document scanning and conversion services, plus consulting, discovery, training, and advisory services to assist customers with document management needs. These revenues include arrangements that do not involve the sale of software. Of our professional services revenues during 2024, $9,593,423 was derived from our Document Conversion operations and $391,605 was derived from our Document Management operations. Our overall professional services revenues increased by $817,600, or 8.9%, in 2024 compared to 2023. This increase is the result of a significant project in our Document Conversion segment during the year, along with realized price increases in late 2023, more than offsetting fewer projects in our Document Management segment, which can be more volatile with its significantly smaller volumes. Our largest customer awards long-term professional services contracts through a competitive bidding process that is open as of the date of this Report. We believe we are well suited to continue to provide services to this client, but there can be no assurance that we will be awarded continuing contracts or that our work volumes with this customer will continue at their current levels and/or pricing. Any reduction in contract volume or pricing could have a significant adverse impact on our future professional services revenues as well as our overall revenues, margins, net income and cash flows next year.
Previous report
Our overall gross profit increased to approximately 64.0% in 2024 from 62.6% in 2023. The revenue mix between segments did not shift significantly, contributing to stability in margins. Price increases in the Document Conversion segment offset a less profitable project mix in professional services within that segment, and consolidated margins were further bolstered by continued strong performance in Document Management subscriptions services, driven by software as a service.
Previous report
Cost of Software Revenues
Previous report
Cost of software revenues consists primarily of labor costs of our software engineers and implementation consultants and third-party software licenses that are sold in connection with our core software applications. During 2024, cost of software revenues decreased by $17,250, or 67.0%, from 2023, decreasing at the same rate as the reduced revenues. Our gross margin for software revenues was consistent at approximately 74% in 2024 and 2023. Margins can vary in software revenues, driven by the level of complexity of third-party bundles or modular solutions that required more costs to deliver.
Previous report
Interest expense, net was $372,710 during 2024 as compared with $588,203 during 2023, representing a decrease of $215,493 or 36.6%. The decrease resulted from principal repayments as follows: the 2020 Notes principal payments of $263,000 on February 28, 2023 and $717,500 on August 31, 2023, and the 2022 Notes principal repayments of $500,000 on March 30, 2024, $325,000 on June 30, 2024 and $800,000 on August 30, 2024. The reduced interest on lower principal balances year over year was partially offset by accelerating amortization of debt issue costs corresponding with the prepaid notes principal. Interest expense, net, included interest income of $38,539 and $29,795 during 2024 and 2023, respectively.
Previous report
In 2024 and 2023, we engaged in several actions that significantly improved our liquidity and cash flows, including (i) effective October 1, 2023 through May 30, 2025, securing a renewal contract with our largest customer, containing an estimated net rate increase for all non-fixed pricing projects of approximately 21%, compared to the current rates in effect for the contract period commencing June 1, 2018, and (ii) on March 13, 2024, we agreed with the note holders to amend the Unrelated Notes and Related Notes to extend the maturity date to December 31, 2025, for the remaining $807,331 in 2022 Unrelated Notes and $532,169 of the 2022 Related Notes. However, we are currently engaged in a cyclical competitive bidding process with our largest customer, which process is open as of the date of this Report. Any reduction in contract volume or pricing could have a significant adverse impact on our future liquidity and cash flow. In the event we were to lose this contract, due to the necessary transition period to a new vendor, we anticipate that we would still receive approximately 70% of the anticipated revenue from this contract for fiscal year 2025. Additionally, at December 31, 2024 and 2023 we had approximately $1.3 million in unbilled accounts receivable. Due to certain image processing inefficiencies, combined with exacting customer terms regarding acceptance for certain projects, we have a number of projects where all of the document conversion work is completed, and the associated revenue has been recognized, but we are unable to invoice until the customer has received and approved the images. The balance is also affected by the timing of completion of major projects. We have initiatives in place to mitigate the bottlenecks and invoice more promptly.
Previous report
As of December 31, 2024, our outstanding long-term indebtedness consisted of the 2022 Notes issued to accredited investors on April 1, 2022, with an aggregate outstanding principal balance of $1,339,500 and accrued interest of $0.
Previous report
Cash Used in Provided by and Financing Activities.
Previous report
We have allocated the purchase price to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of acquisition. We estimate a fair value of any earnout which would be owed to the seller based on the terms of the earnout and record this liability at the acquisition date. Fair value was based on future projections of metrics such as revenue or profit over the earnout period and valuation techniques that utilize expected volatility, threshold probability, and discounting of future payments. Evaluating the fair value involves a high degree of assumptions used within the valuation models, in particular, forecasts of projected revenues or margins. Changes in these assumptions could have a significant impact on the fair value of the earnout liabilities.
Previous report
The carrying value of goodwill is not amortized, but it tested for impairment annually as of December 31, as well as on an interim basis whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may not be recoverable. An impairment charge is recognized for the amount by which the carrying amount exceeds the recorded fair value. All intangible assets have finite lives and are stated at cost, net of amortization. Amortization is computed over the useful life of the related assets on a straight-line method.
Previous report
For the twelve months ended December 31, 2023, we recorded a change in fair value of earnout liabilities for both Graphic Sciences and CEO Image. The assumptions were updated to reflect the improved performance of both acquisitions against their threshold targets, a reduction of pandemic-related uncertainty, and the decreasing impact of time value of money. In December 2022, an amendment to the Graphic Sciences stock purchase agreement was signed, which accelerated the timing of the final Graphic Sciences earnout payment and set the amount at $700,000. This amount was paid on January 3, 2023.
Reworded paragraphs (28)
Previous wording
Operating expenses for 2024 increased 23.7%, primarily driven by share-based compensation. In 2024, we recorded an incremental $805,955 expense related to our restricted stock awards to employees and an incremental $254,885 related to new stock option grants to employees and directors, bringing the grand total of share-based compensation to $1,496,774 in 2024 compared to $662,653 in 2023. The balance of our operating expenses (excluding cost of revenues) increased 14.0% year over year, primarily driven by intentional investments in sales and marketing to accelerate revenue growth and investments in general and administrative to build structure in order to better scale, as well as expanding our development team to bring product enhancements to market more swiftly.
Current wording
Operating expenses for 2025 increased 10.2%, primarily driven by intentional investments in sales and marketing to accelerate revenue growth, plus investments in general and administrative to further improve security and compliance and to better scale, as well as expanding our development team to bring product enhancements to market more swiftly.
Previous wording
Our overall performance depends on economic conditions, and our continuing growth will be due in part to continued growth in the US economy and stability of state and local governmental spending in the US. We do not have direct risk exposure to federal spending levels, but we could face exposure indirectly if federal spending reductions have a corresponding effect on state and local budgets, particularly in the K-12 Education sector. Our performance will also continue to be affected by uncertainty with respect to wage inflation, as well as slowing-to-modest global growth rates.
Current wording
Our overall performance depends on economic conditions, and our continuing growth will be due in part to continued growth in the US economy and stability of state and local governmental spending in the US. We do not have direct risk exposure to federal spending levels, but we could face exposure indirectly if federal spending reductions have a corresponding effect on state and local budgets, particularly in the K-12 Education sector. Our performance will also continue to be affected by any increased wage inflation, as well as modest GDP growth rates.
Previous wording
Volatility from increased trade protectionism is likely to have a minimal direct impact on us because we consume relatively little in raw materials. However, we have customers in industries that are likely to be affected, such as homebuilding and construction. Any industry-specific or macroeconomic downturn could affect our customers’ and potential customers’ budgets for technology procurement and stall our growth plans. However, absent economic disruptions, and based on the current trend of our business operations and our continued focus on strategic initiatives to grow our customer base, we believe in the strength of our brand and our focus on our strategic priorities.
Current wording
Volatility from trade protectionism is likely to have a minimal direct impact on us because we consume relatively little in raw materials. However, we have customers in industries that are likely to be affected, such as homebuilding and construction. Any industry-specific or macroeconomic downturn could affect our customers’ and potential customers’ budgets for technology procurement and stall our growth plans. However, absent economic disruptions, and based on the current trend of our business operations and our continued focus on strategic initiatives to grow our customer base, we believe in the strength of our brand and our focus on our strategic priorities.
Previous wording
We have two reportable segments: Document Management and Document Conversion. These reportable segments are discussed above under “Item 1. Business.”
Current wording
We have two reportable segments: Software and Document Services. These reportable segments are discussed above under “Item 1. Business.” We have recently renamed our reportable segments, but we have not changed the revenue streams constituting each segment. Our Software segment was previously referred to as Document Management, and our Document Services segment was previously referred to as Document Conversion.
Previous wording
We provide access to our software solutions as a service, accessible through the internet. Our customers typically enter into our software as a service agreement for periods of one year or more. Under these agreements, we generally provide access to the applicable software, data storage and related customer assistance and support. Revenues from the sale of software as a service, which are reported as part of our Document Management segment increased by $555,721, or 10.8% in 2024 compared to 2023. This increase was primarily the result of new cloud-based solution sales, primarily our IntelliCloud Payables Automation Solution, as well as expanded data storage, user seats, and hosting fees for existing customers. Those growth areas were partially offset by weakness in our content management solutions, particularly YellowFolder in K-12, which was impacted by higher than normal churn rate in those customers.
Current wording
We provide access to our software solutions as a service, accessible through the internet. Our customers typically enter into our software as a service agreement for periods of one year or more. Under these agreements, we generally provide access to the applicable software, data storage and related customer assistance and support. Revenues from the sale of software as a service, which are reported as part of our Software segment increased by $642,231, or 11.3% in 2025 compared to 2024. This increase was primarily the result of new cloud-based solution sales, primarily our IntelliCloud Payables Automation Solutions. The payables automation growth was partially offset by weakness in our traditional content management solutions, including YellowFolder in K-12, which was relatively flat year over year.
Previous wording
Software maintenance services revenues consist of fees for post-contract customer support services provided to license (premise-based) holders through support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when and if available. A substantial portion of these revenues were generated from renewals of maintenance agreements, which typically run on a year-to-year basis. Revenues from the sale of software maintenance services, which are reported as part of our Document Management segment, increased by $3,323, or 0.2%, in 2024 compared to 2023. The small increase in these revenues in 2024 compared to 2023, consistent with previous years and expectation, was driven by expansion of services with existing customers and price increases being partially offset by normal attrition.
Current wording
Software maintenance services revenues consist of fees for post-contract customer support services provided to license (premise-based) holders through support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when and if available. A substantial portion of these revenues were generated from renewals of maintenance agreements, which typically run on a year-to-year basis. Revenues from the sale of software maintenance services, which are reported as part of our Software segment, decreased by $127,055, or 9.0%, in 2025 compared to 2024. The decrease was driven by slightly increased attrition and some migrations to our SAAS solutions more than offsetting price increases.
Previous wording
We provide document storage and retrieval services to customers, primarily in Michigan. Revenues from storage and retrieval services, which are reported as part of our Document Conversion segment, decreased by $177,338, or 16.4%, during 2024 compared to 2023. This decrease was the result of a reduction in volume of work from our largest storage and retrieval customer, Rocket Mortgage, due to the continued impact of the slowdown in the home mortgage and refinancing industry.
Current wording
We provide document storage and retrieval services to customers, primarily in Michigan. Revenues from storage and retrieval services, which are reported as part of our Document Services segment, decreased by $73,284, or 8.1%, during 2025 compared to 2024. This decrease was the result of a reduction in volume of work from our largest storage and retrieval customer, Rocket Mortgage, due to reduced document destruction as well as the continued impact of the slowdown in the home mortgage and refinancing industry.
Previous wording
Our total cost of revenues during 2024 increased by $171,021 or 2.7%, over 2023. Our cost of revenues for our Document Management segment decreased by $186,872, or 16.0%, impacted by the reduced volume in sales of software and professional services in that segment, as well as some efficiencies from scale. Our cost of revenues for our Document Conversion segment increased by $357,893, or 6.9%, in 2024 compared to 2023, corresponding with the increase in revenues.
Current wording
Our total cost of revenues during 2025 decreased by $1,019,127 or 15.3%, from 2024. Our cost of revenues for our Software segment increased by $108,945, or 11.1%, impacted by the increased volume in sales of software and professional services in that segment. Our cost of revenues for our Document Services segment decreased by $1,128,072, or 19.9%, in 2025 compared to 2024, corresponding with the reduction in revenues.
Previous wording
Cost of software as a service, or SaaS, consists primarily of technical support personnel, hosting services, and related costs. Cost of software as a service decreased by $32,361, or 3.6%, from 2023. Cost of software as a service is impacted by increasing our implementations team and support desk, as well as periodic improvements to infrastructure, which occurred in 2024 but was more than offset by a reduction in support calls. As a result, in 2024, our gross margin increased to 84.9% from 82.7% in 2023.
Current wording
Cost of software as a service, or SaaS, consists primarily of technical support personnel, hosting services, and related costs. Cost of software as a service increased by $86,111, or 10.1%, from 2024. Cost of software as a service is impacted by increasing our implementations team and support desk, as well as periodic improvements to infrastructure, which occurred in 2024 and 2025 but was more than offset by a reduction in support calls. As a result, in 2025, our gross margin increased slightly to 85.1% from 84.9% in 2024.
Previous wording
Cost of software maintenance services consists primarily of technical support personnel and related costs. Cost of software maintenance services decreased by $1,706, or 2.9%, in 2024 from 2023, which is consistent with the relatively flat sales volume for this revenue line. As a result, our gross margin for software maintenance services was consistent at 95.9% in 2024 compared to 95.8% in 2023.
Current wording
Cost of software maintenance services consists primarily of technical support personnel and related costs. Cost of software maintenance services decreased by $2,829, or 4.9%, in 2025 from 2024, which is in line with the reduced sales volume for this revenue line. As a result, our gross margin for software maintenance services decreased slightly to 95.7% in 2025 compared to 95.9% in 2024.
Previous wording
Cost of professional services consists primarily of compensation for employees performing the document conversion services, compensation of our software engineers and implementation consultants and related third-party costs. Cost of professional services increased in 2024 by $229,691, or 4.6%, over 2023, slightly lagging the increase in revenues for the year. Consolidated, our gross margin for professional services increased to 47.7% during 2024 compared to 45.5% in 2023. In our Document Conversion segment, towards the end of the year, as inbound document conversion project volume dipped, we adjusted our workforce accordingly, reducing temporary workers first, wherever possible. Due to the manual nature of the prepping and scanning work required to convert documents from paper to digital, the business has staffed to the levels of the work available. As a result, our gross margin for professional services in our Document Conversion segment increased to 46.1% during 2024 compared to 43.6% in 2023. In our much smaller Document Management segment, our professional services cost of professional services decreased more significantly than the sales revenue, due to the nature of the projects completed, resulting in gross margin for professional services in our Document Management segment increasing to 85.9% during 2024 compared to 71.0% in 2023. Gross margins may vary in professional services, depending on the type of project, such as paper scanning, micrographics, or consulting services, as well as depending upon the nature of each project and the amount of labor required to complete that project.
Current wording
Cost of professional services consists primarily of compensation for employees performing the document conversion services, compensation of our software engineers and implementation consultants and related third-party costs. Cost of professional services decreased in 2025 by $1,031,479, or 19.1%, from 2024, slightly exceeding the decrease in revenues of 18.7% for the year. Consolidated, our gross margin for professional services increased to 46.5% during 2025 compared to 46.2% in 2024. In our Document Services segment, as inbound document conversion project volume dipped, we adjusted our workforce accordingly, reducing temporary workers first, wherever possible. Due to the manual nature of the prepping and scanning work required to convert documents from paper to digital, we have maintained staff to the levels of the work available. As a result of our ability to match costs with revenues, our gross profit margin percent for professional services remained stable despite the reduction in volume, at 44.9% compared to 44.5% in 2024. In our much smaller Software segment, our professional services cost of professional services increased more significantly than the sales revenue, due to the nature of the projects completed, resulting in gross profit margin percentages for professional services in our Software segment decreasing to 77.6% in 2025 compared to 85.0% during 2024. 2024 was a strong margin year, as 2023 was 71.0%. Gross margins may vary in professional services, depending on the type of project, such as paper scanning, micrographics, or consulting services, as well as depending upon the nature of each project and the amount of labor required to complete that project.
Previous wording
Cost of storage and retrieval services consists primarily of compensation for employees performing the document storage and retrieval services, including logistics, provided primarily by our Michigan operations and to a much lesser extent, our K-12 customers in Texas. Cost of storage and retrieval services were relatively flat, decreasing by $7,353, or 2.1%, during 2024 compared to 2023. The decrease was less than the revenue decrease due to an increase in document destruction, which carries a higher cost than other components of storage and retrieval. Gross margins for our storage and retrieval services, which exclude the cost of facilities rental, maintenance, and related overheads, decreased to 61.4% during 2024 compared to 67.0% in 2023.
Current wording
Cost of storage and retrieval services consists primarily of compensation for employees performing the document storage and retrieval services, including logistics, provided primarily by our Michigan operations and to a much lesser extent, our K-12 customers in Texas. Cost of storage and retrieval services decreased by $70,930, or 20.4%, during 2025 compared to 2024. The decrease was greater than the revenue decrease of 8.1% due to a significant decrease in document destruction, which carries a higher cost than other components of storage and retrieval. Document destruction was unusually high in 2024. Gross margins for our storage and retrieval services, which exclude the cost of facilities rental, maintenance, and related overheads, increased to 66.5% during 2025 compared to 61.4% in 2024.
Previous wording
General and administrative expenses increased in 2024 by 1,711,479, or 26.5%, over 2023. The primary driver of the increase is the share-based compensation expense of $1,496,774 in 2024 compared to $662,653 in 2023. The share-based compensation expense components for 2024 and 2023 are described in the following table:
Current wording
General and administrative expenses increased in 2025 by $680,590, or 8.5%, over 2024. Share-based compensation expense continues to be a significant portion of general and administrative expense, amounting to $1,287,242 in 2025 compared to $1,496,774 in 2024. The share-based compensation expense components for 2025 and 2024 are described in the following table:
Previous wording
Excluding the share-based compensation expense, total general and administrative expenses increased by $877,358, or 13.6% in 2024 over 2023, related to investments made in order to scale, such as development, finance, and our SOC2 process, as well as wage increases.
Current wording
Excluding the share-based compensation expense, total general and administrative expenses increased by $890,122, or 13.7% in 2025 over 2024, related to investments made in order to scale, including expanding our development and service delivery teams, enhancing our IT systems monitoring, and our SOC2 accreditation process, as well as wage increases.
Previous wording
Sales and marketing expenses increased by $376,380, or 18.6%, during 2024 over 2023. The increases were primarily driven by the expansion of our sales team as part of our investments intended to accelerate our sales. Additionally, we increased in our spending on lead generation, both internally and through an outsourced service, and on select campaigns and increased travel and trade show materials and attendance.
Current wording
Sales and marketing expenses increased by $401,647, or 16.7%, in 2025 over 2024. The increases were primarily driven by the expansion of our sales and marketing teams as part of our investments intended to accelerate our sales. Additionally, we increased our spending on lead generation, primarily through an outsourced service, on consolidating our customer relationship management tools, and on select campaigns and increased travel and trade show materials and attendance.
Previous wording
Depreciation and amortization increased by $154,086, or 15.8%, in 2024 over 2023, driven by both increased amortization on capitalizable software, which has increased in recent quarters as we bring new functionality to our payables automation solution, and by purchases of server hardware in 2024 to update our infrastructure.
Current wording
Depreciation and amortization increased by $117,027, or 10.4%, in 2025 over 2024, driven by both increased amortization on capitalizable software, which has increased in recent quarters as we bring new functionality to our payables automation solution, and by purchases of server hardware in 2025 and 2024 to update our infrastructure.
Previous wording
We have financed our operations primarily through a combination of cash on hand, cash generated from operations, borrowings from third parties and related parties, and proceeds from private sales of equity. Since 2012, we have raised a net total of approximately $21.6 million in cash through issuances of equity securities and a further $5.0 million in cash through issuances of debt securities, of which all but approximately $1.3 million has been repaid.
Current wording
We have financed our operations primarily through a combination of cash on hand, cash generated from operations, borrowings from third parties and related parties, and proceeds from private sales of equity. Since 2012, we have raised a net total of approximately $23.1 million in cash through issuances of equity securities and a further $5.0 million in cash through issuances of debt securities, of which all have been repaid as of June 18, 2025.
Previous wording
At December 31, 2024, we had $2.5 million in cash and cash equivalents, working capital deficit of $1.1 million, of which the largest liabilities include $3.4 million in deferred revenues and short-term debt relating to our notes payable of approximately $1.3 million due December 31, 2025. Based on our current plans and assumptions, we believe our capital resources, including our cash and cash equivalents, along with funds expected to be generated from our operations and potential financing options, will be sufficient to meet our anticipated cash flow needs for at least the next 12 months, including to satisfy our expected working capital needs and our capital and debt service commitments over that period.
Current wording
At December 31, 2025, we had $2.5 million in cash and cash equivalents, net working capital of $0.2 million, which includes $3.4 million in deferred revenues. Based on our current plans and assumptions, we believe our capital resources, including our cash and cash equivalents, along with funds expected to be generated from our operations and potential financing options, will be sufficient to meet our anticipated cash flow needs for at least the next 12 months, including to satisfy our expected working capital needs and our capital and debt service commitments over that period.
Previous wording
Our future cash resources and capital requirements may vary materially from those now planned. For example, from time to time we evaluate opportunities to expand our current offerings or to develop new products and services and technology or to acquire or invest in complementary businesses, which could increase our capital needs. Our ability to meet our capital needs in the short term will depend on many factors, including maintaining and enhancing our operating cash flow and successfully retaining and growing our client base in the midst of continuing uncertainty regarding inflation and economic growth, the impact of contract renegotiations with our largest customer, the timing of sales, the success of our new business partners expanding our product and service lines, the mix of products and services, unanticipated events over which we have no control increasing our operating costs or reducing our revenues beyond our current expectations, and other factors discussed in this Annual Report.
Current wording
Our future cash resources and capital requirements may vary materially from those now planned. For example, from time to time we evaluate opportunities to expand our current offerings or to develop new products and services and technology or to acquire or invest in complementary businesses, which could increase our capital needs. Our ability to meet our capital needs in the short term will depend on many factors, including maintaining and enhancing our operating cash flow and successfully retaining and growing our client base in the midst of continuing uncertainty regarding inflation and economic growth, the impact of AI disruption in our markets, the timing of sales, the success of our new business partners expanding our product and service lines, the mix of products and services, unanticipated events over which we have no control increasing our operating costs or reducing our revenues beyond our current expectations, and other factors discussed in this Annual Report.
Previous wording
We believe we could seek additional debt or equity financing on acceptable terms. While we are confident in our ability to satisfy our current debt requirements, we also believe that our capital resources, business operations and financial results would allow us to seek a full or partial refinancing or other appropriate modification of the current notes payable, such as an extension or conversion to equity, if we deem necessary or desirable. However, our ability to obtain additional capital, or to modify our existing debt arrangements, when needed or desired, will depend on many factors, including general economic and market conditions, our operating performance and investor and lender sentiment, and thus cannot be assured.
Current wording
We believe we could seek additional debt or equity financing on acceptable terms. However, our ability to obtain additional capital, or to modify our existing debt arrangements, when needed or desired, will depend on many factors, including general economic and market conditions, our operating performance and investor and lender sentiment, and thus cannot be assured.
Previous wording
We anticipate capital expenditures in the range of $350,000 to $450,000 for 2025, although there were no material commitments for capital expenditures at December 31, 2024. This is slightly higher than recent years as we continue to enhance our security environment.
Current wording
We anticipate capital expenditures in the range of $750,000 to $1 million for 2026, although there were no material commitments for capital expenditures at December 31, 2025. This is higher than recent years as we continue to refresh aging servers and evaluate a project to expand our storage and retrieval offering.
Previous wording
Net cash provided by operating activities during 2024 was $3,858,160, primarily attributable to the net loss adjusted for non-cash expenses of $2,840,747, a decrease in operating assets of $812,924 and an increase in operating liabilities of $750,704. Net cash provided by operating activities during 2023 was $784,659, primarily attributable to the net income adjusted for non-cash expenses of $1,955,715, an increase in operating assets of $1,669,780 and a decrease in operating liabilities of $20,542.
Current wording
Net cash provided by operating activities during 2025 was $933,871, primarily attributable to the net loss adjusted for non-cash expenses of $2,758,386, a decrease in operating assets of 203,257 and a decrease in operating liabilities of $154,877. Net cash provided by operating activities during 2024 was $3,858,160, primarily attributable to the net loss adjusted for non-cash expenses of $2,840,747, a decrease in operating assets of $812,924 and an increase in operating liabilities of $750,704.
Previous wording
Net cash used in investing activities in 2024 was $827,773, including purchases of property and equipment of $439,203, which included server upgrades, and $388,570 in capitalized internal use software. Net cash used in investing activities in 2023 was $548,077, primarily $436,837 in capitalized internal use software.
Current wording
Net cash used in investing activities in 2025 was $823,980, including purchases of property and equipment of $354,378, which included server and laptop upgrades, and $469,602 in capitalized internal use software. Net cash used in investing activities in 2024 was $827,773, including purchases of property and equipment of $439,203, which included server upgrades, and $388,570 in capitalized internal use software.
Previous wording
Net cash used in financing activities during 2024 amounted to $1,625,000 in repayment of notes payable and $61,874 in payments for the principal portion of finance lease liabilities, as well as $69,525 in payments to taxing authorities in connection with shares directly withheld from employees. Net cash used in financing activities during 2023 amounted to $700,000 in earnout liability payments, $980,450 in repayment of notes payable, $34,954 in payments for the principal portion of finance lease liabilities, and $2,411 in other net changes in finance lease assets and liabilities.
Current wording
Net cash used by financing activities during 2025 amounted to $70,846, including $1,797,106 in gross proceeds from the issuance of common stock, offset by $175,781 in costs paid for issuance of common stock, $69,260 in the principal portion of payments on the finance lease liabilities, $1,339,500 in repayment of notes payable, and $283,411 related to share-based compensation and warrants, primarily withholdings on vesting of restricted stock awards. Net cash used in financing activities during 2024 amounted to $1,625,000 in repayment of notes payable and $61,874 in payments for the principal portion of finance lease liabilities, as well as $69,525 in payments to taxing authorities in connection with shares directly withheld from employees.
Previous wording
The preparation of our consolidated financial statements in accordance GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. The actual results experienced by us may differ materially from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.
Current wording
The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. The actual results experienced by us may differ materially from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.
Previous wording
Business Acquisition, Goodwill and Intangibles Assets, including Contingent Liability—Earnout
Current wording
Business Acquisition, Goodwill and Intangibles Assets
Previous wording
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 $388,570 were capitalized during 2024. Such costs in the amount of $436,837 were capitalized during 2023.
Current wording
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 $469,602 were capitalized during 2025. Such costs in the amount $388,570 were capitalized during 2024.
Previous wording
We maintain three stock-based compensation plans. We account for stock-based payments to employees and directors in accordance with ASC 718, “Compensation - Stock Compensation.” Stock-based payments to employees include grants of stock that are recognized in the consolidated statements of income based on their fair values at the date of grant. We account for stock-based payments to non-employees in accordance with ASC 718, “Compensation - Stock Compensation,” which requires that such equity instruments are recorded at their fair value on the grant date.
Current wording
We maintain three stock-based compensation plans. We account for stock-based payments to employees and directors in accordance with ASC 718, “Compensation - Stock Compensation.” Stock-based payments to employees include grants of stock that are recognized in the consolidated statements of income based on their fair values at the date of grant. We account for stock-based payments to non-employees in accordance with ASC 718, “Compensation - Stock Compensation,” which requires that such equity instruments are recorded at their fair value on the grant date. The Company issues common stock under its share-based payment plans from authorized and unissued shares.