Intellinetics Q3 2026 net loss narrows to $239K
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Intellinetics, Inc. (INLX) reported third-quarter 2026 revenue of $4,027,687, up 0.7% year over year, and a net loss of $239,163, narrower than $369,765 a year earlier. SaaS revenue increased 5.0% to $1,689,216. SaaS bookings grew 147.7% for the nine-month period compared with 2025; GAAP revenue from those orders will primarily begin to be recognized in fourth-quarter 2026 and beyond. Document Services continued to face lower volume and an unfavorable project and pricing mix.
For the first nine months, revenue fell 3.1% to $11,883,346 and net loss widened to $2,503,154 from $1,664,920; operating cash flow was $1,103,529 versus $1,463,711. At September 30, cash was $2,851,435, and the company reported a $1.3 million working-capital deficit, including $4.1 million of deferred revenue. The State of Michigan accounted for 34% of nine-month revenue. Intellinetics said its capital resources and expected operating cash generation would cover anticipated needs for at least 12 months. It had no outstanding debt and a $1 million secured credit line expiring December 31, 2026, unless renewed by mutual agreement.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter SaaS revenue reached $1,689,216, up 5.0% year over year.
- Moderate pointThird-quarter net loss narrowed to $239,163 from $369,765.
Negative
- Moderate pointNine-month net loss widened to $2,503,154 from $1,664,920.
- Moderate pointNine-month operating cash flow declined to $1,103,529 from $1,463,711.
Filing Explained
By September 30, restricted-share issuance was reflected in 4,494,994 outstanding shares; about $8.2 million of ATM capacity remained unsold at filing.
In this Form 10-Q, Intellinetics reports no shares sold under its ATM program during the first nine months of 2026, while about
Separately, common shares issued and outstanding rose from 4,479,123 at December 31, 2025, to 4,494,994 at September 30, 2026; the equity statement lists 15,871 restricted shares issued during the nine-month period. These disclosures describe different stages: the restricted shares were issued, while the ATM shares remained only available for sale.
Key Figures
Key Terms
remaining performance obligations financial
deferred revenue financial
at-the-market offerings financial
current expected credit loss financial
internal-use software technical
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were INLX’s third-quarter 2026 revenue and net loss?
What were INLX’s results for the first nine months of 2026?
When will Intellinetics recognize revenue from its SaaS bookings?
How much of Intellinetics’ revenue came from the State of Michigan?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended
| 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:
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name and former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As
of November 6, 2026, there were
INTELLINETICS, INC.
Form 10-Q
September 30, 2026
TABLE OF CONTENTS
Page No. | ||
| PART I | ||
| FINANCIAL INFORMATION | 5 | |
| ITEM 1. | Financial Statements. | 5 |
| Condensed Consolidated Balance Sheets as of September 30, 2026 (Unaudited) and December 31, 2025 | 5 | |
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2026 and 2025 (Unaudited) | 6 | |
| Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2026 and 2025 (Unaudited) | 7 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 (Unaudited) | 8 | |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 9 | |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 20 |
| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk. | 30 |
| ITEM 4. | Controls and Procedures. | 30 |
| PART II | ||
| OTHER INFORMATION | 31 | |
| ITEM 1. | Legal Proceedings. | 31 |
| ITEM 1A. | Risk Factors. | 31 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 31 |
| ITEM 3. | Defaults Upon Senior Securities. | 31 |
| ITEM 4. | Mine Safety Disclosures. | 31 |
| ITEM 5. | Other Information. | 31 |
| ITEM 6. | Exhibits. | 31 |
| SIGNATURES | 32 | |
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and the documents incorporated into this report by reference contain forward-looking statements. In addition, from time to time we may make additional forward-looking statements in presentations, at conferences, in press releases, in other reports and filings and otherwise. Forward-looking statements are all statements other than statements of historical facts, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements. Examples of forward-looking statements include, among other things, statements about the following:
| ● | the effects on our business, financial condition, and results of operations of current and future economic, business, market and regulatory conditions, including the current global inflation, economic downturn, and other economic and market conditions, and their effects on our customers and their capital spending and ability to finance purchases of our products, services, technologies and systems; | |
| ● | our prospects, including our future business, revenues, recurring revenues, expenses, net income, earnings per share, margins, profitability, cash flow, cash position, liquidity, financial condition and results of operations, backlog of orders and revenue, our targeted growth rate, our goals for future revenues and earnings, and our expectations about realizing the revenues in our backlog and in our sales pipeline; | |
| ● | our expectation that the shift from an offline to online world will continue to benefit our business; | |
| ● | our ability to continue to integrate our acquisitions and any future acquisitions, grow their businesses and obtain the expected financial and operational benefits from those businesses; | |
| ● | the effects of fluctuations in sales on our business, revenues, expenses, net income (loss), earnings per share, margins, profitability, cash flow, capital expenditures, liquidity, financial condition and results of operations; | |
| ● | our products, services, technologies and systems, including their quality and performance in absolute terms and as compared to competitive alternatives, their benefits to our customers and their ability to meet our customers’ requirements, and our ability to successfully develop and market new products, services, technologies and systems; |
| 3 |
| ● | our markets, including our market position and our market share; | |
| ● | our ability to successfully develop, operate, grow and diversify our operations and businesses; | |
| ● | our business plans, strategies, goals and objectives, and our ability to successfully achieve them; | |
| ● | the sufficiency of our capital resources, including our cash and cash equivalents, funds generated from operations, availability of credit and financing arrangements and other capital resources, to meet our future working capital, capital expenditure, lease and debt service and business growth needs; | |
| ● | the value of our assets and businesses, including the revenues, profits and cash flow they are capable of delivering in the future; | |
| ● | the amount and timing of revenue recognition from customer contracts with commitments for performance obligations, including our estimate of the remaining amount of commitments and when we expect to recognize revenues; | |
| ● | industry trends and customer preferences and the demand for our products, services, technologies and systems; and | |
| ● | the nature and intensity of our competition, and our ability to successfully compete in our markets. |
Any forward-looking statements we make are based on our current plans, intentions, objectives, strategies, projections and expectations, as well as assumptions made by and information currently available to management. Forward-looking statements are not guarantees of future performance or events, but are subject to and qualified by substantial risks, uncertainties and other factors, which are difficult to predict and are often beyond our control. Forward-looking statements will be affected by assumptions and expectations we might make that do not materialize or that prove to be incorrect and by known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed, anticipated or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, those described in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed on March 30, 2026, as well as other risks, uncertainties and factors discussed elsewhere in this Quarterly Report, in documents that we include as exhibits to or incorporate by reference in this report, and in other reports and documents we from time to time file with or furnish to the Securities and Exchange Commission (the “SEC”). In light of these risks and uncertainties, you are cautioned not to place undue reliance on any forward-looking statements that we make.
Any forward-looking statements contained in this report speak only as of the date of this report, and any other forward-looking statements we make from time to time in the future speak only as of the date they are made. We undertake no duty or obligation to update or revise any forward-looking statement or to publicly disclose any update or revision for any reason, whether as a result of changes in our expectations or the underlying assumptions, the receipt of new information, the occurrence of future or unanticipated events, circumstances or conditions or otherwise.
As used in this Quarterly Report, unless the context indicates otherwise:
| ● | the terms “Intellinetics,” “Company,” “the company,” “us,” “we,” “our,” and similar terms refer to Intellinetics, Inc., a Nevada corporation, and its subsidiaries; | |
| ● | “Intellinetics Ohio” refers to Intellinetics, Inc., an Ohio corporation and a wholly-owned subsidiary of Intellinetics; | |
| ● | “Graphic Sciences” refers to Graphic Sciences, Inc., a Michigan corporation and a wholly-owned subsidiary of Intellinetics; | |
| ● | “Yellow Folder” refers to Yellow Folder, LLC, a Texas limited liability company, the assets of which were acquired by Intellinetics; and | |
| ● | “CEO Image” refers to CEO Imaging Systems, Inc., a Michigan corporation, the assets of which were acquired by Intellinetics. |
| 4 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INTELLINETICS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets
| (unaudited) | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, unbilled | ||||||||
| Parts and supplies, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets, operating | ||||||||
| Right of use assets, finance | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued compensation | ||||||||
| Accrued expenses | ||||||||
| Lease liabilities, operating – current | ||||||||
| Lease liabilities, finance – current | ||||||||
| Deferred revenues | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Lease liabilities, operating - net of current portion | ||||||||
| Lease liabilities, finance - net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See Notes to these Condensed Consolidated Financial Statements
| 5 |
INTELLINETICS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues: | ||||||||||||||||
| Software as a service | $ | $ | $ | $ | ||||||||||||
| Software maintenance services | ||||||||||||||||
| Professional services | ||||||||||||||||
| Storage and retrieval services | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues: | ||||||||||||||||
| Software as a service | ||||||||||||||||
| Software maintenance services | ||||||||||||||||
| Professional services | ||||||||||||||||
| Storage and retrieval services | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income (expense), net | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic net loss per share: | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted net loss per share: | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - basic | ||||||||||||||||
| Weighted average number of common shares outstanding - diluted | ||||||||||||||||
See Notes to these Condensed Consolidated Financial Statements
| 6 |
INTELLINETICS, INC. and SUBSIDIARIES
Condensed Consolidated Statement of Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2026 and 2025
(Unaudited)
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation - stock options | - | - | - | |||||||||||||||||
| Stock compensation - restricted shares | - | - | - | |||||||||||||||||
| Equity issue, net of issuance costs of $ | - | |||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation - stock options | - | - | - | |||||||||||||||||
| Stock compensation - restricted shares | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation - stock options | - | - | - | |||||||||||||||||
| Stock option exercise | ( | ) | - | ( | ) | |||||||||||||||
| Stock compensation - restricted shares | - | |||||||||||||||||||
| Warrant exercise | ( | ) | - | ( | ) | |||||||||||||||
| Equity issue, net of issuance costs of $ | - | |||||||||||||||||||
| Equity issue, net of issuance costs | - | |||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation - stock options | - | - | - | |||||||||||||||||
| Stock compensation - restricted shares | - | |||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See Notes to these Condensed Consolidated Financial Statements
| 7 |
INTELLINETICS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| 2026 | 2025 | |||||||
| For the Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Bad debt expense | ||||||||
| Loss on disposal of fixed assets | - | |||||||
| Amortization of deferred financing costs | - | |||||||
| Amortization of right of use assets, financing | ||||||||
| Share-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Accounts receivable, unbilled | ||||||||
| Parts and supplies | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Operating lease assets and liabilities, net | ( | ) | ( | ) | ||||
| Deferred revenues | ||||||||
| Total adjustments | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Capitalization of internal use software | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | - | |||||||
| Offering costs paid on issuance of common stock | - | ( | ) | |||||
| Principal payments on financing lease liability | ( | ) | ( | ) | ||||
| Payments to taxing authorities in connection with shares directly withheld from employees | ( | ) | ( | ) | ||||
| Exercise of stock warrants | - | ( | ) | |||||
| Repayment of notes payable | - | ( | ) | |||||
| Repayment of notes payable - related parties | - | ( | ) | |||||
| Net cash (used in) financing activities | ( | ) | ( | ) | ||||
| Net increase in cash | ||||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | - | $ | |||||
| Cash paid during the period for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Right-of-use asset obtained in exchange for operating lease liability | $ | $ | ||||||
See Notes to these Condensed Consolidated Financial Statements
| 8 |
INTELLINETICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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 Ohio” and 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
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the SEC, including Article 8 of Regulation S-X.
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, 2026 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, 2025 filed with the SEC on March 30, 2026.
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% of the outstanding voting stock of an investee, except when control is not held by the majority owner. We have two subsidiaries: Intellinetics Ohio and Graphic Sciences. We consider the criteria established under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810, “Consolidation” in the consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation.
| 9 |
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 estimates a current expected credit loss (“CECL”) for accounts receivable and accounts receivable-unbilled. The CECL for receivables is estimated based on the receivable aging category, credit risk of specific customers, past collection history, and management’s evaluation of collectability. Provisions for CECL are classified within general and administrative costs.
The CECL 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, 2026 and December 31, 2025, our allowance
for credit losses was $
Changes in the allowance for credit losses for the periods ended September 30, 2026 and 2025 were as follows:
Schedule of Changes in Allowance for Credit Losses
| As of December 31, 2025 | $ | ( | ) | |
| (Provisions) Reductions charged to operating results | ( | ) | ||
| Account write-offs | ||||
| As of March 31, 2026 | $ | ( | ) | |
| (Provisions) Reductions charged to operating results | ||||
| Account write-off recovery | ( | ) | ||
| As of June 30, 2026 | $ | ( | ) | |
| (Provisions) Reductions charged to operating results | ( | ) | ||
| As of September 30, 2026 | $ | ( | ) |
| As of December 31, 2024 | $ | ( | ) | |
| (Provisions) Reductions charged to operating results | ( | ) | ||
| Account write-offs | ||||
| As of March 31, 2025 | $ | ( | ) | |
| (Provisions) Reductions charged to operating results | ||||
| Account write-offs | ||||
| As of June 30, 2025 | $ | ( | ) | |
| (Provisions) Reductions charged to operating results | ( | ) | ||
| Account write-offs | ||||
| As of September 30, 2025 | $ | ( | ) |
| 10 |
Revenue Recognition
We categorize revenue as software as a service, software maintenance services, professional services, and storage and retrieval services. We earn the largest portion of our revenue from the sale of professional services, followed by the sale of software as a service. We apply our revenue recognition policies as required in accordance with ASC 606 based on the facts and circumstances of each category of revenue. More detail regarding each category of revenue is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 30, 2026.
Contract balances
The following tables present changes in our accounts receivable and contract assets during the nine months ended September 30, 2026 and 2025:
Schedule of Changes in Contract Assets and Liabilities
| Balance at Beginning of Period | Billings | Payments Received | Balance at End of Period | |||||||||||||
| Nine months ended September 30, 2026 | ||||||||||||||||
| Accounts receivable | $ | $ | $ | ( | ) | $ | ||||||||||
| Nine months ended September 30, 2025 | ||||||||||||||||
| Accounts receivable | $ | $ | $ | ( | ) | $ | ||||||||||
| Balance at Beginning of Period | Revenue Recognized in Advance of Billings | Billings | Balance at End of Period | |||||||||||||
| Nine months ended September 30, 2026 | ||||||||||||||||
| Accounts receivable, unbilled | $ | $ | $ | ( | ) | $ | ||||||||||
| Nine months ended September 30, 2025 | ||||||||||||||||
| Accounts receivable, unbilled | $ | $ | $ | ( | ) | $ | ||||||||||
Deferred contract costs
Sales
commissions earned by our sales force on new business are considered an incremental cost of obtaining a contract with a customer. Sales
commissions for new contracts and incremental sales to existing customers are deferred and then amortized on a straight-line basis over
an estimated period of benefit of two years. This period of benefit was determined by taking into consideration term lengths of customer
contracts, renewals, changes and enhancements in core offerings, and other factors. As of September 30, 2026 and December 31, 2025, deferred
contract costs were $
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.
| 11 |
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
The following table presents changes in our contract liabilities during the nine months ended September 30, 2026 and 2025:
| Balance at | Balance at | |||||||||||||||
| Beginning | Recognized | End of | ||||||||||||||
| of Period | Billings | Revenue | Period | |||||||||||||
| Nine months ended September 30, 2026 | ||||||||||||||||
| Contract liabilities: Deferred revenue | $ | $ | $ | ( | ) | $ | ||||||||||
| Nine months ended September 30, 2025 | ||||||||||||||||
| Contract liabilities: Deferred revenue | $ | $ | $ | ( | ) | $ | ||||||||||
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, technological 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 periods presented in this report.
In
accordance with ASC 350-40, “Internal-Use Software,” we capitalize purchase and implementation costs of internal use
software. Once an application has reached the application 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 $
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, 2026 and December 31, 2025, our condensed consolidated
balance sheets included $
For
the three and nine months ended September 30, 2026 and 2025, our expensed software development costs were $
| 12 |
Recently Issued Accounting Pronouncements Not Yet Effective
In September 2025, the FASB issued Accounting Standards Update (ASU) 2025-06, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40), which updates its internal-use software guidance. The ASU is intended to introduce targeted improvements to enhance clarity, reduce compliance burdens, and align financial reporting with modern software development practices. The guidance does not apply to software developed for sale, lease, or external marketing. ASU 2025-06 is effective for us for the period ending March 31, 2028. We are currently evaluating the impact of this ASU but do not expect a material impact upon adoption.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes of specified information about certain costs and expenses included in relevant expense captions on the face of the income statement. In January 2025, the FASB issued ASU 2025-01, which clarified the effective date. ASU 2024-03 is effective for us for the annual period ending December 31, 2027 and for interim periods beginning January 1, 2028, and may be applied prospectively or retrospectively, with early adoption permitted. We are currently evaluating the impact of this ASU on our disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the form, content and disclosure requirements for interim financial statements, including a principle requiring disclosure of events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for us for interim periods beginning January 1, 2028, may be applied prospectively or retrospectively, and early adoption is permitted. We are currently evaluating the impact of this ASU on our interim disclosures.
There are no other accounting standards that have been issued but not yet adopted that we believe could have a material impact on our condensed consolidated financial statements.
Advertising
We
expense the cost of advertising as incurred. Advertising expense for the three and nine months ended September 30, 2026 and 2025 amounted
to $
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 dilutive potential shares if their effect is anti-dilutive, including unvested restricted stock awards, warrants or options which are out-of-the-money, and for those periods with a net loss.
The three and nine months ended September 30, 2026 and 2025 reported a net loss, therefore, the numerator and the denominator used in computing both basic and diluted net loss per share are the same.
The following potentially dilutive securities were
excluded from the computation of diluted net loss per share for the three and nine months ended September 30, 2026 and 2025 because their
effect would have been anti-dilutive: stock options to purchase
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.
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.
Deferred
income taxes are recognized for the tax consequences or benefits 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
As
of September 30, 2026 and December 31, 2025, we had federal net operating loss carry forwards, which can be utilized to offset
future federal taxable income of approximately $
| 13 |
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, the President and Chief Executive Officer, assesses performance and allocates resources based on
The Software Segment provides cloud-based and premise-based content services software, including document management and payables automation. 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 K-12 education, public safety, other public sector, healthcare, risk management, financial services, and others. Solutions are sold both directly to end-users and through resellers.
The Document Services 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 state, county, and municipal governments. Solutions are sold both directly to end-users and through resellers.
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, as well as how our CODM reviews our operating results in assessing performance and allocating resources. We currently have immaterial intersegment sales. Our CODM evaluates the performance of our segments based on revenues and gross profits. Historically, our general and administrative expenses have been relatively stable and predictable, and further, our CODM primarily considers such expenses in consolidation. Accordingly, our CODM has focused on growing the business while preserving or growing our gross margins, with revenues and gross profits evaluated by segment against targets set by management and the board of directors.
Information by operating segment is as follows:
Schedule of Information by Operating Segment
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Software | $ | $ | $ | $ | ||||||||||||
| Document Services | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Software | $ | $ | $ | $ | ||||||||||||
| Document Services | ||||||||||||||||
| Total cost of revenues | $ | $ | $ | $ | ||||||||||||
| Gross profit | ||||||||||||||||
| Software | $ | $ | $ | $ | ||||||||||||
| Document Services | ||||||||||||||||
| Total gross profit | $ | $ | $ | $ | ||||||||||||
| Capital additions, net | ||||||||||||||||
| Software | $ | $ | $ | $ | ||||||||||||
| Document Services | ||||||||||||||||
| Total capital additions, net | $ | $ | $ | $ | ||||||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Goodwill | ||||||||
| Software | $ | $ | ||||||
| Document Services | ||||||||
| Total goodwill | $ | $ | ||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Total assets | ||||||||
| Software | $ | $ | ||||||
| Document Services | ||||||||
| Total assets | $ | $ | ||||||
Statement of Cash Flows
For purposes of reporting cash flows, cash includes cash on hand and demand deposits held by banks.
| 14 |
Reclassifications
Certain amounts reported in prior filings of the condensed consolidated financial statements have been reclassified to conform to current presentation.
4. Intangible Assets, Net
At September 30, 2026, intangible assets consisted of the following:
Schedule of Intangible Assets
| Estimated | Accumulated | |||||||||||||
| Useful Life | Costs | Amortization | Net | |||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Proprietary technology | ( | ) | ||||||||||||
| Customer relationships | ( | ) | ||||||||||||
| $ | $ | ( | ) | $ | ||||||||||
At December 31, 2025, intangible assets consisted of the following:
| Estimated | Accumulated | |||||||||||||
| Useful Life | Costs | Amortization | Net | |||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Proprietary technology | ( | ) | ||||||||||||
| Customer relationships | ( | ) | ||||||||||||
| $ | $ | ( | ) | $ | ||||||||||
Amortization
expense for the three and nine months ended September 30, 2026 and 2025, amounted to $
Schedule of Amortization Expense for Intangible Assets
| For the Twelve Months Ending September 30, | Amount | |||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| Thereafter | ||||
| Intangible assets | $ | |||
| 15 |
5. Property and Equipment
Property and equipment are comprised of the following:
Schedule of Property and Equipment
| September 30, 2026 | December 31, 2025 | |||||||
| Computer hardware and purchased software | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Furniture and fixtures | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Total
depreciation expense on our property and equipment for the three and nine months ended September 30, 2026 and 2025 amounted to $
6. Notes Payable – Unrelated Parties
As
of September 30, 2026, we have
On
February 16, 2026, we entered into a $
The
entire outstanding balance of the Notes Payable to Unrelated Parties was prepaid in full on June 18, 2025. With respect to all notes
outstanding (other than the notes to related parties), interest expense, including the amortization of debt issuance costs, for the three
and nine months ended September 30, 2026 was $
7. Notes Payable - Related Parties
The
entire outstanding balance of the Notes Payable to Related Parties was prepaid in full on June 18, 2025. 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, 2026 was $
| 16 |
8. Commitments and Contingencies
On
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.
9. Stockholders’ Equity
Common Stock
As
of September 30, 2026,
The following table describes the shares and warrants issued as part of our 2022 private placement:
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 | $ | $ | $ | |||||||||||||||||||
Amortization
of the debt issuance costs for the Private Placement 2022 offering was recorded at $
Warrants
The following sets forth the warrants to purchase our common stock that were outstanding as of September 30, 2026:
Schedule of Warrants to Purchase Common Stock
| Warrants Outstanding | Warrant Exercise Price | Warrant Expiry | ||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| (1) | |
| (2) |
A summary of warrant activity during the nine months ended September 30, 2026 and 2025 is as follows:
Schedule of Warrant Activity
| Warrants | ||||
| Outstanding at January 1, 2026 | ||||
| Exercised | - | |||
| Outstanding and Exercisable at September 30, 2026 | ||||
| Warrants | ||||
| Outstanding at January 1, 2025 | ||||
| Exercised | ( | ) | ||
| Outstanding and Exercisable at September 30, 2025 | ||||
| 17 |
10. 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
April 1, 2026, we granted
On
March 28, 2025, we granted
On
March 19, 2024, we granted
Stock
compensation is being recognized over the vesting periods. For the three and nine months ended September 30, 2026, $
As of September 30, 2026, there was approximately
$
Stock Options
On
June 26, 2026, we granted non-employee directors stock options to purchase
The
weighted-average grant date fair value of options granted during the nine months ended September 30, 2026 was $
Schedule of Estimated Values of Stock Option Grants Valuation Assumptions
| Grant Date June 26, 2026 | ||||
| Risk-free interest rate | % | |||
| Expected term | ||||
| Expected volatility | % | |||
| Expected dividend yield | % | |||
On
June 21, 2025, we granted non-employee directors stock options to purchase
The
weighted-average grant date fair value of options granted during the nine months ended September 30, 2025 was $
| Grant Date June 21, 2025 | ||||
| Risk-free interest rate | % | |||
| Expected term | ||||
| Expected volatility | % | |||
| Expected dividend yield | % | |||
| 18 |
During
the nine-months ended September 30, 2026, the Company extended the contractual expiration date of
All of the options subject to the modification were fully vested at the time of the modification. In accordance with ASC 718, the Company measured the incremental fair value of the modified awards as the excess of the fair value of the modified options over the fair value of the original options immediately before modification, both measured using the Black-Scholes option-pricing model.
As
a result of this modification, the Company recognized incremental stock-based compensation expense of $
A summary of stock option activity during the nine months ended September 30, 2026 and 2025 is as follows:
Schedule of Stock Options Activity
| Weighted- | ||||||||||||
| Weighted- | Average | |||||||||||
| Shares | Average | Remaining | ||||||||||
| Under | Exercise | Contractual | ||||||||||
| Option | Price | Life | ||||||||||
| Outstanding at January 1, 2026 | $ | |||||||||||
| Exercised | ( | ) | ||||||||||
| Granted | ||||||||||||
| Outstanding at September 30, 2026 | $ | |||||||||||
| Exercisable at September 30, 2026 | $ | |||||||||||
| Weighted- | ||||||||||||
| Weighted- | Average | |||||||||||
| Shares | Average | Remaining | ||||||||||
| Under | Exercise | Contractual | ||||||||||
| Option | Price | Life | ||||||||||
| Outstanding at January 1, 2025 | $ | |||||||||||
| Exercised | ( | ) | ||||||||||
| Granted | ||||||||||||
| Outstanding at September 30, 2025 | $ | |||||||||||
| Exercisable at September 30, 2025 | $ | |||||||||||
During
the three and nine months ended September 30, 2026 and 2025, stock-based compensation for options was $
As
of September 30, 2026 and December 31, 2025, there were $
11. 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, 2026 and 2025, our largest customer, the State of Michigan, which is reported in our Document Services segment,
accounted for
For
the three months ended September 30, 2026 and 2025, government contracts, including K-12 education, represented approximately
As
of September 30, 2026, accounts receivable concentrations from our two largest customers were
| 19 |
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and notes thereto included in Part I, Item 1, “Financial Statements,” of this Quarterly Report on Form 10-Q, and with the condensed consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods. Any forward-looking statements in this discussion and analysis should be read in conjunction with the information set forth in “Cautionary Note Regarding Forward-Looking Statements” elsewhere herein. In this Quarterly Report, we sometimes refer to the three and nine-month periods ended September 30, 2026 as the third quarter 2026 and the nine-month period 2026 respectively, and to the three and nine-month periods ended September 30, 2025 as the third quarter 2025 and the nine-month period 2025.
Company Overview
We are a document services and software solutions company serving both the small-to-medium business and governmental sectors with their digital transformation and process automation initiatives. Our digital transformation products and services are provided through two reporting segments: Software and Document Services. Our Software segment consists primarily of solutions involving our software platform, allowing customers to capture and manage their documents across operations such as scanned hard-copy documents and digital documents including those from Microsoft Office 365, digital images, audio, video and emails. Our Document Services segment provides assistance to customers as a part of their overall document strategy to convert documents from one medium to another, predominantly paper to digital, including migration to our software solutions, as well as micrographics conversions and long-term storage and retrieval services. Our solutions create value for customers by making it easy to connect business-critical documents to the people who need them by making those documents easy to find and access, while also being secure and compliant with the customers’ audit requirements. Solutions are sold both directly to end-users and through channel partners.
Our customers use our software by one of two methods: purchasing our software and installing it onto their own equipment, which we refer to as an “on-premise” model, or licensing and accessing our platform via the Internet, which we refer to as a “software as a service” or “SaaS” model and also as a “cloud-based” model. We believe our SaaS model is an important part of our revenue growth strategy. Our SaaS products are hosted with third-party cloud infrastructure providers, including Amazon Web Services and other U.S.-based data center providers, delivering reliable hosting services consistent with industry best practices in data security and performance.
We operate a U.S.-based business with concentrated sales to the State of Michigan for our Document Services segment, complemented by our diverse set of document management software solutions and services. We hold or compete for leading positions regionally in select markets and attribute this leadership to several factors including the strength of our brand name and reputation, our comprehensive offering of innovative solutions, and the quality of our service support. Net growth in sales of software as a service in recent years reflects market demand for these solutions over traditional sales of on-premise software. We expect to continue to benefit from our select niche leadership market positions, innovative product offerings, growing customer base, and the impact of our increased spending in sales and marketing programs. Examples of these programs include identifying and investing in growth and expanded market penetration opportunities, more effective products and services pricing strategies, demonstrating superior value to customers, increasing our sales force effectiveness through improved guidance and measurement, and continuing to optimize our lead generation and lead nurturing processes.
For further information about our consolidated revenue and earnings, please see our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
| 20 |
How We Evaluate our Business Performance and Opportunities
There has been no material change during the nine-month period 2026 to the major qualitative and quantitative factors we consider in the evaluation of our operating results as set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — How We Evaluate our Business Performance and Opportunities” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Executive Overview of Results
Our 2026 results reflected continuing challenges in our Document Services segment, which faced a continued reduction in volume in the first half of the year, plus an unfavorable project and pricing mix shift from 2025. Our Software segment grew modestly in third quarter 2026 and for the nine-month period 2026 over 2025. Our SaaS revenues grew 5.0% in the quarter, maintained strong margins, and we experienced bookings growth of 147.7% relative to the nine-month period 2025. However, GAAP revenue from these orders will primarily begin to be recognized in fourth quarter of 2026 and beyond. Our margins increased overall, driven by improved Professional Services margins in our Document Services segment.
Below are our key financial results for the third quarter 2026 (consolidated unless otherwise noted):
| ● | Revenues were $4,027,687, representing an increase in revenue of 0.7% year over year. | |
| ● | SaaS revenues were $1,689,216, representing revenue growth of 5.0% year over year. | |
| ● | Cost of revenues was $1,324,294, a decrease of 7.6% year over year. | |
| ● | Operating expenses (excluding cost of revenues) were $2,948,877, an increase of 0.1% year over year. This amount includes share-based compensation expense of $105,903, which is a decrease of $60,517 compared to the third quarter 2025. | |
| ● | Loss from operations was $245,484, compared to loss from operations of $379,224 in third quarter 2025. | |
| ● | Net loss was $239,163 with basic and diluted net loss per share of $0.05, compared to net loss of $369,765 with basic and diluted net loss per share of $0.08 in the third quarter 2025. |
| ● | Operating cash generated was $1,289,623, compared to operating cash generated of $1,351,190 in third quarter 2025. | |
| ● | Investing activities, including both capitalization of internal use software and purchases of property and equipment, were $136,651, compared to $205,964 in third quarter 2025. |
Below are our key financial results for the nine-month period 2026 (consolidated unless otherwise noted):
| ● | Revenues were $11,883,346, representing revenue reduction of 3.1% year over year. | |
| ● | SaaS revenues were $4,876,479, representing revenue growth of 3.2% year over year. | |
| ● | Cost of revenues was $4,078,907, a decrease of 3.5% year over year. | |
| ● | Operating expenses (excluding cost of revenues) were $10,322,534, an increase of 7.5% year over year. |
| 21 |
| ● | Loss from operations was $2,518,095, compared to loss from operations of $1,572,261 for the nine-month period 2025. | |
| ● | Net loss was $2,503,154 with basic and diluted net loss per share of $0.56, compared to net loss of $1,664,920 with basic and diluted net loss per share of $0.39 for the nine-month period 2025. |
| ● | Net cash provided by operating activities was $1,103,529, compared to net cash provided by operating activities of $1,463,711 for the nine-month period 2025. | |
| ● | Investing activities, including both capitalization of internal use software and purchases of property and equipment, were $489,576, compared to $677,868 for the nine-month period 2025. | |
| ● | As of September 30, 2026, we had 131 employees, including 9 part-time employees, compared to 162 employees, including 21 part-time employees, as of September 30, 2025. |
Financial Impact of Current Economic Conditions
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.
Volatility from international conflicts and 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.
Uncertainties, Trends, and Risks that can cause Fluctuations in our Operating Results
Our operating results have fluctuated significantly in the past and are expected to continue to fluctuate in the future due to a variety of factors, in addition to economic conditions, that are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Uncertainties, Trends, and Risks that can cause Fluctuations in our Operating Results” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Due to all these factors and the other risks discussed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, our past results of operations should not be relied upon as an indication of our future performance. Comparisons of our operating results with prior periods are not necessarily meaningful or indicative of future performance.
Reportable Segments
We have two reportable segments: Software and Document Services. These reportable segments are discussed above under “Company Overview.”
| 22 |
Results of Operations
Revenues
The following table sets forth our revenues by reportable segment for the periods indicated:
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues by segment | ||||||||||||||||
| Software | $ | 2,034,499 | $ | 2,017,087 | $ | 5,988,765 | $ | 5,978,925 | ||||||||
| Document Services | 1,993,188 | 1,984,358 | 5,894,581 | 6,280,678 | ||||||||||||
| Total revenues | $ | 4,027,687 | $ | 4,001,445 | $ | 11,883,346 | $ | 12,259,603 | ||||||||
The following table sets forth our revenues by revenue source for the periods indicated:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues: | ||||||||||||||||
| Software as a service | $ | 1,689,216 | $ | 1,608,253 | $ | 4,876,479 | $ | 4,727,526 | ||||||||
| Software maintenance services | 289,548 | 310,144 | 877,708 | 975,794 | ||||||||||||
| Professional services | 1,835,423 | 1,881,975 | 5,475,354 | 5,939,909 | ||||||||||||
| Storage and retrieval services | 213,500 | 201,073 | 653,805 | 616,374 | ||||||||||||
| Total revenues | $ | 4,027,687 | $ | 4,001,445 | $ | 11,883,346 | $ | 12,259,603 | ||||||||
The following table sets forth our revenues by revenue source and segment for the periods indicated:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Software segment revenues: | ||||||||||||||||
| Software as a service | $ | 1,689,216 | $ | 1,608,253 | $ | 4,876,479 | $ | 4,727,526 | ||||||||
| Software maintenance services | 289,548 | 310,144 | 877,708 | 975,794 | ||||||||||||
| Professional services | 55,735 | 98,690 | 234,578 | 275,605 | ||||||||||||
| Total software segment revenues | $ | 2,034,499 | $ | 2,017,087 | $ | 5,988,765 | $ | 5,978,925 | ||||||||
| 23 |
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Document services segment revenues: | ||||||||||||||||
| Professional services | $ | 1,779,688 | $ | 1,783,285 | $ | 5,240,776 | $ | 5,664,304 | ||||||||
| Storage and retrieval services | 213,500 | 201,073 | 653,805 | 616,374 | ||||||||||||
| Total document services segment revenues | $ | 1,993,188 | $ | 1,984,358 | $ | 5,894,581 | $ | 6,280,678 | ||||||||
Revenues were up by $26,242, or 0.7%, and down by $376,257, or 3.1%, for the third quarter and nine-month period 2026, respectively, primarily driven by software as a service revenue growth of 5.0% and storage and retrieval growth of 6.2% in the third quarter 2026, and a reduction in professional services in our document services segment and erosion in revenues for software maintenance services of 10.1% in the nine-month period 2026. Professional services were negatively impacted by project timing, particularly in the first half of 2026.
Software as a Service Revenues
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 $80,963, or 5.0%, in the third quarter 2026 compared to the third quarter 2025 and increased by $148,953, or 3.2%, in the nine-month period 2026 compared to the nine-month period 2025. This increase was the result of new payables automation and budget tool customers, as well as price increases.
Professional Services Revenues
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 the third quarter 2026 and nine-month period 2026, $1,779,688 and $5,240,776, respectively, were derived from our Document Services operations and $55,735 and $234,578, respectively, were derived from our Software operations. Our overall professional services revenues decreased by $46,552, or 2.5%, in the third quarter 2026 compared to the third quarter 2025 and decreased by $464,555, or 7.8%, in the nine-month period 2026 compared to the nine-month period 2025. This decrease was primarily attributable to reduced scanning project activity in our Document Services segment, particularly in the first half of 2026, reflecting the timing of customer projects and a lower backlog during the period. We have since taken orders to refill our project backlog.
| 24 |
Costs of Revenues and Gross Profits
The following table sets forth our cost of revenues by reportable segment for the periods indicated:
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Cost of revenues by segment | ||||||||||||||||
| Software | $ | 327,527 | $ | 271,576 | $ | 922,942 | $ | 818,670 | ||||||||
| Document Services | 996,767 | 1,161,965 | 3,155,965 | 3,410,131 | ||||||||||||
| Total cost of revenues | $ | 1,324,294 | $ | 1,433,541 | $ | 4,078,907 | $ | 4,228,801 | ||||||||
The following table sets forth our cost of revenues, by revenue source, for the periods indicated:
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Cost of revenues: | ||||||||||||||||
| Software as a service | $ | 299,411 | $ | 242,409 | $ | 833,981 | $ | 704,589 | ||||||||
| Software maintenance services | 16,703 | 13,504 | 43,550 | 42,847 | ||||||||||||
| Professional services | 953,211 | 1,119,255 | 3,040,021 | 3,256,568 | ||||||||||||
| Storage and retrieval services | 54,969 | 58,373 | 161,355 | 224,797 | ||||||||||||
| Total cost of revenues | $ | 1,324,294 | $ | 1,433,541 | $ | 4,078,907 | $ | 4,228,801 | ||||||||
The following table sets forth our cost of revenues, by revenue source and segment, for the periods indicated:
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Software segment cost of revenues: | ||||||||||||||||
| Software as a service | $ | 299,411 | $ | 242,409 | $ | 833,981 | $ | 704,589 | ||||||||
| Software maintenance services | 16,703 | 13,504 | 43,550 | 42,847 | ||||||||||||
| Professional services | 11,413 | 15,663 | 45,411 | 71,234 | ||||||||||||
| Total software segment cost of revenues | $ | 327,527 | $ | 271,576 | $ | 922,942 | $ | 818,670 | ||||||||
| 25 |
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Document services segment cost of revenues: | ||||||||||||||||
| Professional services | $ | 941,798 | $ | 1,103,592 | $ | 2,994,610 | $ | 3,185,334 | ||||||||
| Storage and retrieval services | 54,969 | 58,373 | 161,355 | 224,797 | ||||||||||||
| Total document services segment cost of revenues | $ | 996,767 | $ | 1,161,965 | $ | 3,155,965 | $ | 3,410,131 | ||||||||
Our total cost of revenues during the third quarter 2026 decreased by $109,247, or 7.6%, from third quarter 2025 and decreased by $149,894, or 3.5%, during the nine-month period 2026 from the nine-month period 2025. Our cost of revenues for our Software segment increased by $55,951, or 20.6%, in the third quarter 2026 compared to the third quarter 2025 and increased $104,272, or 12.7%, in the nine-month period 2026 compared to the nine-month period 2025, primarily due to timing of project and support costs in third quarter and for the nine-month period, due to expanded payables automation efforts, as well as increased hosting costs. Our cost of revenues for our Document Services segment decreased by $165,198, or 14.2%, in the third quarter 2026 compared to the third quarter 2025 and decreased by $254,166, or 7.5%, during the nine-month period 2026 compared to the nine-month period 2025, due to a combination of decreased work volume and the nature of the different projects in the different reporting periods.
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Gross profit by segment | ||||||||||||||||
| Software | $ | 1,706,972 | $ | 1,745,511 | $ | 5,065,823 | $ | 5,160,255 | ||||||||
| Document Services | 996,421 | 822,393 | 2,738,616 | 2,870,547 | ||||||||||||
| Total gross profit | $ | 2,703,393 | $ | 2,567,904 | $ | 7,804,439 | $ | 8,030,802 | ||||||||
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Gross profit: | ||||||||||||||||
| Software as a service | $ | 1,389,805 | $ | 1,365,844 | $ | 4,042,498 | $ | 4,022,937 | ||||||||
| Software maintenance services | 272,845 | 296,640 | 834,158 | 932,947 | ||||||||||||
| Professional services | 882,212 | 762,720 | 2,435,333 | 2,683,341 | ||||||||||||
| Storage and retrieval services | 158,531 | 142,700 | 492,450 | 391,577 | ||||||||||||
| Total gross profit | $ | 2,703,393 | $ | 2,567,904 | $ | 7,804,439 | $ | 8,030,802 | ||||||||
| Gross profit percentage: | ||||||||||||||||
| Software as a service | 82.3 | % | 84.9 | % | 82.9 | % | 85.1 | % | ||||||||
| Software maintenance services | 94.2 | % | 95.6 | % | 95.0 | % | 95.6 | % | ||||||||
| Professional services | 48.1 | % | 40.5 | % | 44.5 | % | 45.2 | % | ||||||||
| Storage and retrieval services | 74.3 | % | 71.0 | % | 75.3 | % | 63.5 | % | ||||||||
| Total gross profit percentage | 67.1 | % | 64.2 | % | 65.7 | % | 65.5 | % | ||||||||
| 26 |
Our overall gross profit percentage increased to 67.1% in the third quarter 2026 from 64.2% in the third quarter 2025 and increased to 65.7% during the nine-month period 2026 from 65.5% for the nine-month period 2025. The increase in storage and retrieval gross profit percentage, particularly in the nine-month period 2026, was driven by reduced low-margin destruction work. Professional Services margins in third quarter 2026 favorably compare to third quarter 2025 due to more profitable projects in third quarter 2026, and are relatively flat for the nine-month period 2026 over 2025.
Cost of Software as a Service
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 during the third quarter 2026 increased by $57,002, or 23.5%, from the third quarter 2025 and increased by $129,392, or 18.4%, during the nine-month period 2026 from the nine-month period 2025. Cost of software as a service is impacted by increasing our implementations team and support desk staff, hosting costs, the volume of support calls, and periodic improvements to infrastructure, of which, the implementation costs and hosting costs increased in the first nine months 2026 over 2025. Gross profit percentage for software as a service in the third quarter 2026 decreased to 82.3% compared to 84.9% in the third quarter 2025 and decreased to 82.9% during the nine-month period 2026 compared to 85.1% during the nine-month period 2025.
Cost of Professional Services
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 during the third quarter 2026 decreased by $166,044, or 14.8%, from the third quarter 2025 and decreased in the nine-month period 2026 by $216,547, or 6.6%, from the nine-month period 2025. The decrease in cost of sales in third quarter 2026 was primarily driven by our Document Services segment where higher margin projects in the third quarter 2026 replaced lower margin projects in the third quarter 2025. Gross margins related to consulting services in Software and digital transformation services in Document Services may vary widely, depending upon the nature of the project and the amount of labor required to complete a project, and increased in the third quarter 2026 and declined in the nine-month period 2026. Our gross margins in professional services increased to 48.1% in the third quarter 2026 compared to 40.5% in the third quarter 2025 and decreased to 44.5% during the nine-month period 2026 compared to 45.2% in the nine-month period 2025.
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Operating Expenses
The following table sets forth our operating expenses for the periods indicated:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | $ | 2,257,935 | $ | 2,170,762 | $ | 8,061,150 | $ | 7,067,179 | ||||||||
| Sales and marketing | 406,540 | 460,920 | 1,393,345 | 1,605,311 | ||||||||||||
| Depreciation and amortization | 284,402 | 315,446 | 868,039 | 930,573 | ||||||||||||
| Total operating expenses | $ | 2,948,877 | $ | 2,947,128 | $ | 10,322,534 | $ | 9,603,063 | ||||||||
General and Administrative Expenses
General and administrative expenses during the third quarter 2026 increased by $87,173, or 4.0%, over the third quarter 2025, and increased in the nine-month period 2026 by $993,971, or 14.1%, over the nine-month period 2025, due to Q1 severance expense to our outgoing CEO and overlap wages with our new CEO, as well as recruiting fees related to our CEO search totaling approximately $430,130 in the nine-month period 2026, including $99,753 of share-based compensation expense for acceleration of vesting of stock awards and incremental stock-based compensation expense from the modification of stock options held by our former Chief Executive Officer.
Additionally, share-based compensation expense in total continues to be a significant portion of general and administrative expenses, amounting to $1,026,698 in the nine-month period 2026 and $1,131,891 in the nine-month period 2025. A portion of share-based compensation expense pertains to payments to taxing authorities in connection with shares directly withheld from employees, and is reported in our condensed consolidated statements of cash flows under cash flows from financing activities.
The following table sets forth a summary of the amounts described above, as well as severance costs taken during the third quarter 2026 as part of our ongoing business transformation:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| General and administrative expenses, as reported: | $ | 2,257,935 | $ | 2,170,762 | $ | 8,061,150 | $ | 7,067,179 | ||||||||
| Notable expense components: | ||||||||||||||||
| Share-based compensation, all | 105,903 | 166,420 | 1,026,698 | 1,131,891 | ||||||||||||
| CEO transition expenses, excluding share-based compensation | - | - | 330,377 | - | ||||||||||||
| Severance | 105,228 | - | 105,228 | - | ||||||||||||
| General and administrative expenses, net of notable expense components | $ | 2,046,804 | $ | 2,004,342 | $ | 6,598,847 | $ | 5,935,288 | ||||||||
In total, our general and administrative expenses in our Software segment increased to $1,240,515 in the third quarter 2026 compared to $1,148,634 in the third quarter 2025, and increased to $4,772,527 in the nine-month period 2026 compared to $3,947,420 in the nine-month period 2025. In our Document Services segment, our general and administrative expenses decreased to $1,017,420 in the third quarter 2026 compared to $1,022,128 in the third quarter 2025, and increased to $3,288,623 in the nine-month period 2026 compared to $3,119,759 in the nine-month period 2025.
Sales and Marketing Expenses
Sales and marketing expenses during the third quarter 2026 decreased by $54,380, or 11.8%, from the third quarter 2025 and decreased by $211,966, or 13.2%, during the nine-month period 2026 from the nine-month period 2025. The decreases are driven by timing of variable expenses and trade show participation, as well as open positions.
Depreciation and Amortization
Depreciation and amortization during the third quarter 2026 decreased by $31,044, or 9.8%, from the third quarter 2025 and decreased by $62,534, or 6.7%, during the nine-month period 2026 from the nine-month period 2025, primarily driven by reduced amortization of intangible costs from prior acquisitions as certain amounts became fully amortized.
Other Items of Income and Expense
Interest Income (Expense), Net
Interest income was $6,321 and $14,941 during the third quarter and nine-month period 2026, respectively, as compared with interest income of $9,459 and interest expense, net, of $92,659 during the third quarter and nine-month period 2025, respectively. The reduced interest expense resulted from early principal repayments of the 2022 Notes on June 18, 2025.
| 28 |
Liquidity and Capital Resources
We have historically 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 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, which have been repaid as of June 18, 2025.
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) on 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.
At September 30, 2026, we had $2.9 million in cash and cash equivalents, net working capital deficit of $1.3 million, which includes $4.1 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.
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 Quarterly Report.
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.
At-the-Market Offering
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 sold no shares during the nine-month period 2026 and 145,938 shares during the nine-month period 2025. We sold 145,938 shares of our common stock pursuant to the ATM Program during the full year 2025, and received aggregate net proceeds totaling $1,621,325. As of the filing date of this Quarterly Report, approximately $8.2 million remained available under the ATM Program.
Indebtedness
As of September 30, 2026, we have no outstanding indebtedness.
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.
Capital Expenditures
There were no material commitments for capital expenditures at September 30, 2026.
Cash Provided by Operating Activities
Net cash provided by operating activities during the nine-month period 2026 was $1,103,529, primarily attributable to the net loss of $2,503,154 adjusted for non-cash expenses of $1,955,884, a decrease in operating assets of $287,263 and an increase in operating liabilities of $1,363,536. Net cash provided by operating activities during the nine-month period 2025 was $1,463,711, primarily attributable to the net loss of $1,664,920 adjusted for non-cash expenses of $2,244,252, a decrease in operating assets of $632,543 and an increase in operating liabilities of $251,836.
Cash Used in Investing Activities
Net cash used in investing activities in the nine-month period 2026 was $489,576, including $350,483 in capitalized software. Net cash used in investing activities in the nine-month period 2025 was $677,868, including $344,075 in capitalized software.
| 29 |
Cash Used in Financing Activities
Net cash used in financing activities during the nine-month period 2026 amounted to $290,799, including $238,402 in payments to taxing authorities in connection with shares directly withheld from employees, and $52,397 in the principal portion of payments on the finance lease liabilities. Net cash used in financing activities during the nine-month period 2025 amounted to $52,900, 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, $1,339,500 in repayment of notes payable, $283,411 related to the exercise of share-based compensation and warrants, and $51,314 in the principal portion of payments on the finance lease liabilities.
Critical Accounting Policies and Estimates
The preparation of our condensed 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.
Our critical accounting policies and estimates are set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There were no material changes to our critical accounting policies and estimates during the third quarter 2026.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) at the end of the period covered by this Quarterly Report.
Based on this evaluation, we concluded that, as of September 30, 2026, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls system, no matter how well designed and operated, can provide only reasonable assurance of achieving its desired objectives. In addition, the design of disclosure controls and procedures must reflect resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
We regularly review our internal control over financial reporting and, from time to time, we have made changes as we deemed appropriate to maintain and enhance the effectiveness of our internal controls over financial reporting, although these changes do not have a material effect on our overall internal control.
| 30 |
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Our business and operating results are subject to many risks, uncertainties and other factors. If any of these risks were to occur, our business, affairs, assets, financial condition, results of operations, cash flows and prospects could be materially and adversely affected. There have been no material changes to the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
During
the third fiscal quarter ended September 30, 2026, no Section 16 director or officer
There
were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K)
ITEM 6. EXHIBITS.
The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.
| Incorporation by reference | ||||||||
| Exhibit No. | Description of Exhibit | Form | Date | Exhibit | ||||
| 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. | |||||||
| 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. | |||||||
| 32.1* | Certification of Principal Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. | |||||||
| 32.2* | Certification of Principal Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. | |||||||
| 101.INS* | Inline XBRL Instance Document (The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.). | |||||||
| 101.SCH* | Inline XBRL Taxonomy Schema. | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase. | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase. | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase. | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
* Filed herewith.
| 31 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INTELLINETICS, INC. | ||
| Dated: | November 12, 2026 | |
| By: | /s/ Alison G. Forsythe | |
| Alison G. Forsythe | ||
| President and Chief Executive Officer | ||
| Dated: | November 12, 2026 | |
| By: | /s/ Joseph D. Spain | |
| Joseph D. Spain | ||
| Chief Financial Officer | ||
| 32 |