Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 22, 2019 | Jun. 30, 2018 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | WIDEPOINT CORP | ||
Entity Central Index Key | 0001034760 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Trading Symbol | WYY | ||
Entity Common Stock, Shares Outstanding | 84,112,446 | ||
Entity Public Float | $ 42,717,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 2,431,892 | $ 5,272,457 |
Accounts receivable, net of allowance for doubtful accounts of $106,733 and $107,618 in 2018 and 2017, respectively. | 11,089,315 | 8,131,025 |
Unbilled accounts receivable | 9,566,170 | 8,131,448 |
Other current assets | 1,086,686 | 767,944 |
Total current assets | 24,174,063 | 22,302,874 |
NONCURRENT ASSETS | ||
Property and equipment, net | 1,012,684 | 1,318,420 |
Intangibles, net | 3,103,753 | 3,671,506 |
Goodwill | 18,555,578 | 18,555,578 |
Other long term assets | 209,099 | 44,553 |
Total assets | 47,055,177 | 45,892,931 |
CURRENT LIABILITIES | ||
Accounts payable | 7,363,621 | 7,266,212 |
Accrued expenses | 10,716,438 | 9,796,350 |
Deferred revenue | 2,072,344 | 2,348,578 |
Current portion of capital leases | 107,325 | 101,591 |
Current portion of other term obligations | 192,263 | 203,271 |
Total current liabilities | 20,451,991 | 19,716,002 |
NONCURRENT LIABILITIES | ||
Capital leases, net of current portion | 122,040 | 232,109 |
Other term obligations, net of current portion | 73,952 | 78,336 |
Deferred revenue | 466,714 | 264,189 |
Deferred tax liability | 1,523,510 | 392,229 |
Total liabilities | 22,638,207 | 20,682,865 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,045,714 shares issued and none outstanding | 0 | 0 |
Common stock, $0.001 par value, 110,000,000 shares authorized; 84,112,446 and 83,031,595 shares issued and outstanding, respectively | 84,113 | 83,032 |
Additional paid-in capital | 94,926,560 | 94,200,237 |
Accumulated other comprehensive loss | (186,485) | (122,461) |
Accumulated deficit | (70,407,218) | (68,950,742) |
Total stockholders' equity | 24,416,970 | 25,210,066 |
Total liabilities and stockholders' equity | $ 47,055,177 | $ 45,892,931 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 106,733 | $ 107,618 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 2,045,714 | 2,045,714 |
Preferred stock, shares outstanding | 2,045,714 | 2,045,714 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 110,000,000 | 110,000,000 |
Common stock, shares issued | 84,112,446 | 83,031,595 |
Common stock, shares outstanding | 84,112,446 | 83,031,595 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
REVENUES | $ 83,678,896 | $ 75,884,246 |
COST OF REVENUES (including amortization and depreciation of $892,314, and $1,154,901, respectively) | 68,409,219 | 62,194,187 |
GROSS PROFIT | 15,269,677 | 13,690,059 |
OPERATING EXPENSES | ||
Sales and marketing | 1,743,693 | 2,202,913 |
General and administrative expenses (including share-based compensation of $683,404, and $387,210, respectively) | 13,301,052 | 14,392,660 |
Product development | 0 | 219,141 |
Depreciation and amortization | 415,337 | 338,314 |
Total operating expenses | 15,460,082 | 17,153,028 |
LOSS FROM OPERATIONS | (190,405) | (3,462,969) |
OTHER (EXPENSE) INCOME | ||
Interest income | 6,797 | 15,352 |
Interest expense | (79,540) | (52,158) |
Other income | (2) | 3,805 |
Total other expense | (72,745) | (33,001) |
LOSS BEFORE INCOME TAX PROVISION | (263,150) | (3,495,970) |
INCOME TAX PROVISION | 1,193,326 | 37,967 |
NET LOSS | $ (1,456,476) | $ (3,533,937) |
BASIC EARNINGS PER SHARE | $ (0.02) | $ (0.04) |
BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING | 83,274,171 | 82,911,730 |
DILUTED EARNINGS PER SHARE | $ (0.02) | $ (0.04) |
DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING | 83,274,171 | 82,911,730 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Amortization and depreciation | $ 892,314 | $ 1,154,901 |
Share-based compensation expense | $ 683,404 | $ 387,210 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
NET LOSS | $ (1,456,476) | $ (3,533,937) |
Other comprehensive (loss) income: | ||
Foreign currency translation adjustments, net of tax | (64,024) | 186,908 |
Other comprehensive (loss) income | (64,024) | 186,908 |
COMPREHENSIVE LOSS | $ (1,520,500) | $ (3,347,029) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Common Stock [Member] | Warrant [Member] | Additional Paid-in Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Retained Earnings [Member] | Total |
Balance at Dec. 31, 2016 | $ 82,730,134 | $ 0 | $ 93,920,095 | $ (309,369) | $ (65,416,805) | $ 28,276,651 |
Balance (in shares) at Dec. 31, 2016 | 82,730 | |||||
Issuance of common stock options exercises | $ 30 | 17,070 | 17,100 | |||
Issuance of common stock options exercises (in shares) | 30,000 | |||||
Issuance of common stock restricted | $ 272 | (124,138) | (123,866) | |||
Issuance of common stock restricted (in shares) | 271,461 | |||||
Stock compensation expense restricted | 157,857 | 157,857 | ||||
Stock compensation expense non-qualified stock options | 229,353 | 229,353 | ||||
Foreign currency translation gain | 186,908 | 186,908 | ||||
Net loss | (3,533,937) | (3,533,937) | ||||
Balance at Dec. 31, 2017 | $ 83,032 | 0 | 94,200,237 | (122,461) | (68,950,742) | 25,210,066 |
Balance (in shares) at Dec. 31, 2017 | 83,031,595 | |||||
Issuance of common stock options exercises | $ 100 | 43,900 | 44,000 | |||
Issuance of common stock options exercises (in shares) | 100,000 | |||||
Issuance of common stock restricted | $ 981 | (981) | ||||
Issuance of common stock restricted (in shares) | 980,851 | |||||
Stock compensation expense restricted | 387,690 | 387,690 | ||||
Stock compensation expense non-qualified stock options | 295,714 | 295,714 | ||||
Foreign currency translation gain | (64,024) | (64,024) | ||||
Net loss | (1,456,476) | (1,456,476) | ||||
Balance at Dec. 31, 2018 | $ 84,113 | $ 0 | $ 94,926,560 | $ (186,485) | $ (70,407,218) | $ 24,416,970 |
Balance (in shares) at Dec. 31, 2018 | 84,112,446 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (1,456,476) | $ (3,533,937) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Deferred income tax expense (benefit) | 1,128,213 | (1,619) |
Depreciation expense | 551,305 | 414,637 |
Provision for doubtful accounts | 4,803 | 62,522 |
Amortization of intangibles | 756,346 | 1,078,578 |
Amortization of deferred financing costs | 17,304 | 19,304 |
Share-based compensation expense | 683,404 | 387,210 |
Gain on sale of assets held for sale | 0 | (66,683) |
Loss on disposal of fixed assets | 0 | 179,761 |
Changes in assets and liabilities: | ||
Accounts receivable and unbilled receivables | (4,502,811) | (2,766,467) |
Inventories | (26,986) | (33,060) |
Prepaid expenses and other current assets | (269,348) | (278,174) |
Other assets | (172,364) | 23,514 |
Accounts payable and accrued expenses | 1,190,046 | 151,732 |
Income tax payable | 10,179 | 43,176 |
Deferred revenue and other liabilities | (48,505) | 1,327,745 |
Net cash (used in) provided by operating activities | (2,134,890) | (2,991,761) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property and equipment | (261,505) | (695,622) |
Software development costs | (228,841) | (368,872) |
Proceeds from sale of assets held for sale | 0 | 236,451 |
Proceeds from the sale of property and equipment | 0 | 55,083 |
Net cash used in investing activities | (490,346) | (772,960) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Advances on bank line of credit | 14,048,741 | 20,339,250 |
Repayments of bank line of credit advances | (14,048,741) | (20,339,250) |
Principal repayments of long term debt | 0 | (82,440) |
Principal repayments under capital lease obligations | (101,698) | (79,737) |
Debt issuance costs | 0 | (31,273) |
Contingent consideration payment | (100,000) | 0 |
Restricted stock award tax liability payment | 0 | (122,336) |
Proceeds from exercise of stock options | 44,000 | 17,100 |
Net cash used in financing activities | (157,698) | (298,686) |
Net effect of exchange rate on cash and equivalents | (57,631) | 212,366 |
NET DECREASE IN CASH | (2,840,565) | (3,851,041) |
CASH, beginning of period | 5,272,457 | 9,123,498 |
CASH, end of period | 2,431,892 | 5,272,457 |
SUPPLEMENTAL CASH FLOW INFORMATION | ||
Cash paid for interest | 51,953 | 23,674 |
Cash paid for income taxes | 44,633 | 8,969 |
Cash received from income tax refund | 0 | 2,674 |
NONCASH INVESTING AND FINANCING ACTIVITIES | ||
Fair value of contingent consideration paid in connection with software asset purchase (Note 4) | 0 | 100,000 |
Insurance policies financed by short term notes payable (Note 13) | 195,246 | 191,438 |
Acquisition of assets under capital lease obligation (Note 8 and 13) | $ 0 | $ 391,105 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Organization WidePoint Corporation (“WidePoint” or the “Company”) was incorporated in Delaware on May 30, 1997 and conducts operations through its wholly-owned operating subsidiaries in the United States, Ireland, the Netherlands and the United Kingdom. The Company’s principal executive and administrative headquarters is located in Fairfax, Virginia. Nature of Operations The Company is a leading provider of trusted mobility management (TM2). The Company’s TM2 platform and service solutions enable its customers to efficiently secure, manage and analyze the entire lifecycle of their mobile communications assets through its federally compliant platform Intelligent Telecommunications Management System (ITMS™). The Company’s ITMS™ platform is SSAE 18 compliant and was granted an Authority to Operate by the U.S. Department of Homeland Security. Additionally, the Company was granted an Authority to Operate by the General Services Administration with regard to its identity credentialing component of its TM2 platform. The Company’s TM2 platform is internally hosted and accessible on-demand through a secure customer portal that is specially configured for each customer. The Company can deliver these solutions in a number of configurations ranging from utilizing the platform as a service to a full-service solution that includes full lifecycle support for all end users and the organization. A significant portion of the Company’s expenses, such as personnel and facilities costs, are fixed in the short term and may be not be easily modified to manage through changes in the Company’s market place that may create pressure on pricing and/or costs to deliver its services. The Company has periodic capital expense requirements to maintain and upgrade its internal technology infrastructure tied to its hosted solutions and other such costs may be significant when incurred in any given quarter. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Basis of Presentation The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the financial statement rules and regulations of the Securities and Exchange Commission. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and acquired entities since their respective dates of acquisition. All significant inter-company amounts were eliminated in consolidation. Reclassifications Certain reclassifications have been made to prior period consolidated balance sheet to conform to current period presentation. Such reclassifications had no effect on net income as previously reported. Accounting Standards Update Recently Adopted Accounting Standards Accounting Standards Codification 606 “Revenue from Contracts with Customers”. In May 2014, ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” was issued. This ASU requires the use of a five-step methodology to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the ASU requires enhanced disclosure regarding revenue recognition. The standard permits the use of either the retrospective or cumulative effect transition method (modified retrospective method). The Company adopted the ASU on a modified retrospective transition method on January 1, 2018 and will apply the guidance to the most current period presented in the financial statements issued subsequent to the adoption date. The Company did not record a cumulative adjustment to retained earnings as of January 1, 2018 since the Company was recognizing revenue consistent with the provisions of ASC 606 and any adjustment would have been deemed immaterial. In preparation for adoption of the standard, the Company has implemented internal controls to enable the preparation of financial information and have reached conclusions on key accounting assessments related to the standard, including that accounting for variable consideration is immaterial. The Company adopted the standard through the application of the portfolio approach and selected a sample of customer contracts to assess under the guidance of the new standard that are characteristically representative of each revenue stream. The Company has completed its review of the sample contracts, and there were no significant changes to the pattern or timing of revenue recognition as a result of adopting the new standard. The Company revised its revenue recognition policy as follows to incorporate the requirements of the new standard. Revenue from Contracts with Customers Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company reports products and services under the categories managed services and carrier services as described below: Managed Services. ● Managed Service Fees: o Revenue for fixed price services are generally completed and billed in the same accounting period and we charge a fixed fee for each performance obligation which may be tied to the number of units managed, percentage of supplier spend and/or savings, units delivered, certificates issued by the Company, certificate validation services installed in a customer’s environment, accessories sold and billable hours. Revenue from this service requires significant accounting estimates due to delays between completion of the service and the normal billing cycle. o Revenue for fixed price software licenses that are sold as a perpetual license with no significant customization are recognized when the software is delivered. Software sold as a term license is recognized ratably over the license term from the date the software is accepted by the customer. Implementation fees are recognized over the term of the license agreement once the software has been delivered. Maintenance services, if contracted, are recognized ratably over the term of the maintenance agreement, generally twelve months. Revenue from this service does not require significant accounting estimates. ● Billable Service Fees. ● Reselling and Other Service Fees. Carrier Services. Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services to a customer under a fixed rate or fixed fee arrangement. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Components of our managed service solution are generally distinct performance obligations that are not interdependent and can be completed within a month. The Company’s products are generally sold with a right of return and the Company may provide other event driven credits or disincentives for not meeting performance obligations which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Contract Balances A significant portion of contract balances represent revenues earned on federal government contracts. Timing of revenue recognition may differ materially from the timing of invoicing to customers due a long-standing practice of issuing a consolidated managed service invoice. A consolidated invoice usually requires data such as billable hours, units managed, credentials issued, accessories sold and usage data from telecommunications providers and other suppliers. As a result it could take between thirty (30) to sixty (60) days after all performance obligations have been met to deliver a complete customer invoice. As a result, the Company may have both accounts receivables (invoiced revenue) and unbilled receivables (revenue recognize but not yet invoiced) that could represent one or more months of revenue. Additionally, the Company may be required under contractual terms to bill for services in advance and deferred recognition of revenue until all performance obligations have been met. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within thirty (30) to ninety (90) days. Payment terms and conditions for government and commercial customers are described below: ● Government contract billings are generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer. ● Commercial contracts are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in uncollected accounts receivable. Customer accounts receivable balances that remain uncollected for more than 45 days are reviewed for collectability and are considered past due after 90 days unless different contractual repayment terms were extended under a contract with a customer. The Company determines its allowance for doubtful accounts after considering factors that could affect collectability of past due accounts receivable and such factors regularly include the customers’ financial condition and credit worthiness, recent payment history, type of customer and the length of time accounts receivable are past due. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Customer accounts receivable balances that remain uncollected for more than 120 days and/or that have not been settled in accordance with contractual repayment terms and for which no firm payment commitments exist are placed with a third-party collection agency and a reserve is established for the entire uncollected balance. The Company writes off accounts receivable after 180 days or earlier when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. If the accounts receivable has been written off and no allowance for doubtful accounts exist subsequent payments received are credited to bad debt expense as a recovery. Costs to Obtain a Contract with a Customer The Company does not recognize assets from the costs to obtain a contract with a customer and generally expenses these costs as incurred. The Company primarily uses internal labor to manage and oversee the customer acquisition process and to finalize contract terms and conditions and commence customer start-up activities, if any. Internal labor costs would be incurred regardless of the outcome of a contract with a customer and as such those costs are not considered incremental to the cost to obtain a contract with a customer. The Company does not typically incur significant incremental costs to obtain a contract with a customer after such contract has been awarded. Incremental costs to obtain a contract with a customer may include payment of commissions to certain internal and/or external sales agents upon collection of invoiced sales from the customer. The Company does not typically prepay sales commissions in advance of being paid for services delivered. In March 2016, ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” was issued. This ASU provides for areas of simplification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this ASU in the three months ended March 31, 2017, and the Company did not recognize any adjustments due to the fact that the Company had a tax-effected full valuation allowance of approximately $9.3 million applied against its U.S. based deferred tax assets, of which approximately $352,200 was applied against unrealized stock option benefits. In the event the Company generates sufficient taxable income to utilize its deferred tax assets the Company may be required to recognize up to $352,200 in deferred tax assets relating to unrealized stock option benefits. The Company estimates forfeiture rates and adjusts such rates when appropriate. In August 2016, ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” was issued. This ASU provides guidance on eight specific cash flow issues with the objective of reducing the existing diversity in practice for those issues. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company early adopted this ASU during the year ended December 31, 2017. The adoption of this accounting standard did not have a material effect on the Company’s consolidated statements of cash flows presented herein. Accounting Standards under Evaluation In February 2016, the FASB issued new accounting guidance on leases. The guidance, which is effective January 1, 2019, with early adoption permitted, requires virtually all leases to be recognized on the Consolidated Balance Sheets. The Company currently anticipates adopting the standard effective January 1, 2019, using the modified retrospective approach, which requires recording existing operating leases on the Consolidated Balance Sheets upon adoption and in the comparative period. The Company estimates that the adoption of the guidance will result in the recognition of additional right-of-use assets and lease liabilities for operating leases of approximately $5.8 million to $6.0 million as of January 1, 2019. The Company does not believe the guidance will have a material impact on its consolidated statements of operations. In January 2017, ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment” was issued. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity should apply this ASU on a prospective basis and for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is continuing to evaluate the effect this guidance will have on the consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718); Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share-based awards to non-employees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to ASC 718 upon vesting, which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. We do not anticipate this update will have a material effect on our consolidated financial statements. Foreign Currency Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of each reporting period. The resulting translation adjustments, along with any related tax effects, are included in accumulated other comprehensive (loss) income, a component of stockholders’ equity. Translation adjustments are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other than the functional currency, including operations outside the U.S. where the functional currency is the U.S. dollar, are reported net in the Company’s Consolidated Statements of Operations, depending on the nature of the activity. See Note 18 for additional information. Segment Reporting Segments are defined by authoritative guidance as components of a company in which separate financial information is available and is evaluated by the chief operating decision maker (CODM), or a decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its chief executive officer. The Company’s customers view our market as a singular business and demand an integrated and scalable suite of enterprise-wide solutions. The Company’s TM2 offerings are substantially managed service driven solutions that use our proprietary technology platform to deliver our services. The amount of labor required to perform our contract obligations may vary significantly contract to contract depending on the customer’s specific requirements; however, the way in which we perform these services is consistent across the company and requires a connected group of internal subject matter experts and support personnel. In order to evaluate a managed service business model the Company’s CODM and the senior executive team measure financial performance based on our overall mixture of managed and carrier services and related margins. These financial metrics provide a stronger indication of how we are managing our key customer relationships; and it also determines our overall profitability. The Company presents a single segment for purposes of financial reporting and prepared its consolidated financial statements upon that basis. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring use of estimates and judgment relate to revenue recognition, accounts receivable valuation reserves, ability to realize intangible assets and goodwill, ability to realize deferred income tax assets, fair value of certain financial instruments and the evaluation of contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability. GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows: Level 1 Level 2 ■ Quoted prices for similar assets or liabilities in active markets ■ Quoted prices for identical or similar assets or liabilities in markets that are not active ■ Inputs other than quoted prices that are observable for the asset or liability ■ Inputs that are derived principally from or corroborated by observable market data by correlation or other means Level 3 The Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Company elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred. See Note 4 for financial assets and liabilities subject to fair value measurements. Going Concern Evaluation The Company has performed an annual assessment of its ability to continue as a going concern as required under ASU No. 2014-15, Presentation of Financial Statements – Going Concern (“ASU No. 2014-15”) and concluded no additional disclosures are required. Financial Instruments Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. Cash and Cash Equivalents The Company maintains interest-bearing cash deposits and short-term overnight investments with large financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents for purposes of these consolidated financial statements. Interest-bearing cash deposits maintained by financial institutions in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000. At December 31, 2018 and 2017, the Company had deposits in excess of FDIC limits of approximately $521,878 and $3,786,300, respectively. Allowances for Doubtful Accounts The Company determines its allowance for doubtful accounts by considering a number of factors, including the type of customer, credit worthiness, payment history, length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Customer account balances outstanding longer than the contractual payment terms are reviewed for collectability and after 90 days are considered past due unless arrangements were made at the time of the transaction that specified different payment terms. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Customer account balances outstanding longer than 120 days that have not been settled in accordance with contract terms and for which no firm payment commitments exist are placed with a third party collection agency and a reserve is established. The Company writes off accounts receivable after 180 days or earlier when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. If the accounts receivable has been written off and no allowance for doubtful accounts exist subsequent payments received are credited to bad debt expense as a recovery. Inventories Inventories consist of mobile devices and accessories and identity credential hardware components. Inventories are valued at the lower of cost, using first-in, first-out method, or net realizable value. Such amounts are recorded within other current assets in the consolidated balance sheet. The Company may record a write-down for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. If future demand or market conditions for our products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of inventory, we may be required to record additional write-downs, which would adversely affect our gross profit. For the years ended December 31, 2018 and 2017, there were no inventory write-downs. Property and Equipment Property and equipment (including assets acquired under capital lease arrangements) are stated at historical cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives based upon the classification of the property and/or equipment or lease period for assets acquired under capital lease arrangements. The estimated useful lives of the assets are as follows: Estimated Useful Life Computer hardware and software 3-5 years Furniture and fixtures 5 years Mobile equipment 3 years The Company assesses the recoverability of property and equipment by determining whether the depreciation of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of December 31, 2018 and 2017, the Company’s management has not identified any material impairment of its property and equipment. Goodwill and Other Intangible Assets The Company accounts for goodwill and other indefinite-lived intangible assets in accordance with ASC Topic 350 “ Intangibles The Company evaluates goodwill for impairment annually as of December 31st and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test or bypass the qualitative assessment for any reporting period and proceed to performing the first step of the two-step goodwill impairment test. Goodwill impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting unit can be supported by its fair value using widely accepted valuation techniques. The quantitative goodwill impairment test utilizes a two-step approach. The first step identifies whether there is potential impairment by comparing the fair value of a reporting unit to the carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying amount, the second step of the impairment test is required to measure the amount of any impairment loss. The Company uses a combination of the income approach (discounted cash flow method) and market approach (market multiples). When preparing discounted cash flow models under the income approach, the Company uses internal forecasts to estimate future cash flows expected to be generated by the reporting units. Our internal forecasts are developed using observable (Level 2) and unobservable (Level 3) inputs. Actual results may differ from forecasted results. When preparing the market approach the Company may adjust market multiples to reflect the Company’s risk profile and other factors deemed appropriate to properly apply the market approach. The Company uses the expected weighted average cost of capital, estimated using a capital asset pricing model, to discount future cash flows for each reporting unit. Our cost of equity estimate is developed using a combination of observable (Level 2) and unobservable (Level 3) inputs with appropriate adjustments that take into consideration our risk profile and other factors deemed appropriate. The Company believes the discount rates used appropriately reflect the risks and uncertainties in the financial markets generally and specifically in the Company’s internally developed forecasts. Further, to assess the reasonableness of the valuations derived from the discounted cash flow models, the Company also analyzes market-based multiples for similar industries of the reporting unit, where available. Product Development Product development expenses include payroll, employee benefits, and other employee related expenses associated with product development. Product development expenses also include third-party development and programming costs, subject matter experts, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Costs related to product development are expensed until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are commercially available for release. Once technological feasibility is reached, such costs are not normally material. To the extent costs are significant such costs are capitalized and amortized to cost of revenue over the estimated lives of the solution. For the years ended December 31, 2018 and 2017, the Company incurred product development costs of approximately $229,000, which was capitalized and $579,800, of which we capitalized approximately $360,700, respectively. See Note 9 to the consolidated financial statements for additional information about capitalization of product development costs. Income Taxes The Company accounts for income taxes in accordance with authoritative guidance which requires that deferred tax assets and liabilities be computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The guidance requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. The Company recognizes the impact of an uncertain tax position taken or expected to be taken on an income tax return in the financial statements at the amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained upon audit by the relevant taxing authority. Basic and Diluted Earnings Per Share (EPS) Basic EPS includes no dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common and restricted stock were exercised or converted into common and restricted stock. The number of incremental shares from assumed conversions of stock options and unvested restricted stock awards included in the calculation of diluted EPS was calculated using the treasury stock method. See Note 17 to the consolidated financial statements for computation of EPS. Employee Stock-Based Compensation The Company accounts for stock-based employee compensation arrangements under provisions of ASC 718-10. The Company recognizes the cost of employee stock awards granted in exchange for employee services based on the grant-date fair value of the award using a Black-Scholes option-pricing model, net of expected forfeitures. Those costs are recognized ratably over the vesting period. Each stock option has an exercise price equal to the market price of the Company’s common stock on the date of grant and a contractual term ranging from 3 to 10 years. See Note 16 to the consolidated financial statements for additional information about stock-based compensation programs. Non-Employee Stock-Based Compensation The Company accounts for stock-based non-employee compensation arrangements using the fair value recognition provisions of ASC 505-50, “Equity-Based Payments to Non-Employees” (formerly known as FASB Statement 123, Accounting for Stock-Based Compensation EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services). |
Contingent Consideration
Contingent Consideration | 12 Months Ended |
Dec. 31, 2018 | |
Contingent Consideration | |
Contingent Consideration | On April 30, 2017, the Company entered into an Asset Purchase Agreement with Probaris Technologies, Inc. (“Seller”) and paid approximately $304,300 to purchase certain commercial identity and authentication software assets (the “Software Assets”). Under the terms of the Asset Purchase Agreement, the Company agreed to pay contingent consideration of $100,000 to the Seller if the Seller’s sole government customer renewed its license agreement in 2018. The Company principally purchased the Software Assets to ensure that a key component in the delivery of the Company’s identify management solution offering was neither acquired by a competitor nor no longer made available to license. During the year ended December 31, 2018 the Company settled its contingent consideration and paid $100,000 to the Seller upon renewal of the customer’s annual contract in April 2018. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | The consolidated financial statements include financial instruments for which the fair market value may differ from amounts reflected on a historical basis. Financial Assets and Financial Liabilities Carried at Other Than Fair Value The Company’s financial instruments include cash equivalents, accounts receivable, short and long-term debt (except for contingent promissory notes) and other financial instruments associated with the issuance of the common stock. The carrying values of cash equivalents and accounts receivable approximate their fair value because of the short maturity of these instruments and past evidence indicates that these instruments settle for their carrying value. The carrying amounts of the Company’s bank borrowings under its credit facility approximate fair value because the interest rates reflect current market rates. |
Accounts Receivable and Signifi
Accounts Receivable and Significant Concentrations | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Accounts Receivable and Significant Concentrations | A significant portion of the Company’s revenue arrangements consist of firm fixed price contracts with agencies of the U.S. federal government and several large multinational publicly traded and private corporations. Accounts receivable consist of the following by customer type in the table below as of the periods presented: DECEMBER 31, 2018 2017 Government (1) $ 7,332,338 $ 6,055,397 Commercial (2) 3,863,710 2,183,246 Gross accounts receivable 11,196,048 8,238,643 Less: allowances for doubtful accounts (3) 106,733 107,618 Accounts receivable, net $ 11,089,315 $ 8,131,025 (1) Government contracts are generally firm fixed price not to exceed arrangements with a term of five (5) years, which consists of a base year and four (4) annual option year renewals. Government receivables are billed under a single consolidated monthly invoice and are billed approximately thirty (30) to sixty (60) days in arrears from the date of service and payment is generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer. (2) Commercial contracts are generally fixed price arrangements with contract terms ranging from two (2) to three (3) years. Commercial accounts receivables are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. Commercial receivables are stated at amounts due from customers net of an allowance for doubtful accounts if deemed necessary. (3) During the years ended December 31, 2018 and 2017, the Company recorded provisions for bad debt expense related to commercial customers totaling approximately $4,800, and $62,500, respectively. The Company has not historically maintained a bad debt reserve for its government customers as it has not experienced material or recurring bad debt charges and the nature and size of the contracts has not necessitated the Company’s establishment of such a bad debt reserve. Significant Concentrations Customers representing ten percent or more of consolidated accounts receivable are set forth in the table below as of the periods presented: DECEMBER 31, 2018 2017 As a % of As a % of Customer Name Receivables Receivables U.S. Customs Border Patrol 14 % 12 % U.S. Immigration and Customs Enforcement -- 13 % U.S. Federal Air Marshall Service 3 % 10 % Iron Bow Technologies 15 % -- Customers representing ten percent or more of consolidated revenues are set forth in the table below for each of the periods presented: YEARS ENDED DECEMBER 31, 2018 2017 As a % of As a % of Customer Name Revenues Revenues U.S. Immigration and Customs Enforcement 16 % 17 % U.S. Customs Border Patrol 11 % 11 % |
Unbilled Accounts Receivable an
Unbilled Accounts Receivable and Significant Concentrations | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Unbilled Accounts Receivable and Significant Concentrations | Unbilled accounts receivable represent revenues earned in connection with products and/or services delivered for which we are unable to issue a formal billing to the customer at the balance sheet due to either timing of invoice processing or delays due to fixed contractual billing schedules. A significant portion of our unbilled accounts receivable consist of carrier services and cybersecurity hardware and software products delivered but not invoiced at the end of the reporting period. Unbilled receivables consist of the following by customer type as of the periods presented below: DECEMBER 31, Customer Type 2018 2017 Government $ 9,253,586 $ 7,872,675 Commercial 312,584 258,773 Unbilled accounts receivable $ 9,566,170 $ 8,131,448 Significant Concentrations Customers representing ten percent or more of consolidated unbilled accounts receivable are set forth in the table below as of the periods presented: DECEMBER 31, 2018 2017 As a % of As a % of Customer Name Receivables Receivables U.S. Department of Homeland Security Headquarters 11 % 11 % U.S. Immigration and Customs Enforcement 37 % 27 % U.S. Coast Guard 11 % -- U.S. Transportation Safety Administration 10 % 12 % |
Other Current Assets
Other Current Assets | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Current Assets | Other current assets consisted of the following as of the periods presented below: DECEMBER 31, 2018 2017 Inventories $ 183,900 $ 157,058 Prepaid rent, insurance and other assets 902,786 610,886 Total other current assets $ 1,086,686 $ 767,944 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Major classes of property and equipment consisted of the following as of the periods presented below: DECEMBER 31, 2018 2017 Computer hardware and software $ 2,110,298 $ 1,943,180 Furniture and fixtures 333,539 296,316 Leasehold improvements 268,561 260,748 Automobiles 178,597 188,238 Gross property and equipment 2,890,995 2,688,482 Less: accumulated depreciation and amortization 1,878,311 1,370,062 Property and equipment, net $ 1,012,684 $ 1,318,420 During the year ended December 31, 2018 and 2017, the Company purchased for cash property and equipment totaling approximately $261,500 and $695,600, respectively. During the year ended December 31, 2017, the Company relocated from the Lewis Center Facility to a larger facility in Columbus and abandoned undepreciated building and leasehold improvements with a gross cost and accumulated depreciation of approximately $282,200 and $105,500, respectively. The Company recorded within general and administrative expenses a non-cash loss on disposal of approximately $176,700 as a result of the move. During the year ended December 31, 2018, there were disposals of fully depreciated owned property and equipment with related cost and accumulated depreciation of approximately $129,600. During the year ended December 31, 2017, there were disposals of fully depreciated owned property and equipment with related cost and accumulated depreciation of approximately $398,600 and building and leasehold improvements with a net book value of approximately $176,700. There were no changes in the estimated useful lives used to depreciate property and equipment during the years ended December 31, 2018 and 2017. Assets under capital lease included in the table above consisted of the following as of the periods presented below: DECEMBER 31, 2018 2017 Automobiles $ 95,600 $ 100,882 Computer hardware and software 290,223 290,223 Gross leased property and equipment $ 385,823 $ 391,105 Less: accumulated amortization 115,570 20,890 Capital lease assets, net $ 270,253 $ 370,215 During the years ended December 31, 2018, there were no new capital leases recorded. During the year ended December 31, 2017, the Company recorded capital lease assets and related obligations of approximately $391,100, of which approximately $93,300 relates to two automobiles under capital lease arrangements and the remainder relates to computer hardware and software for our internal customer facing infrastructure. During the year ended December 31, 2018, the Company did not sell or dispose of any assets under capital leases. During the year ended December 31, 2017 the Company disposed of two leased automobiles with a net book value of $47,800 and received gross proceeds of approximately $51,800. The Company recognized a net gain on disposal of approximately $4,100. Property and equipment depreciation expense (including amortization of capital lease property) was as follows for the periods presented below: YEARS ENDED DECEMBER 31, 2018 2017 Owned property and equipment depreciation $ 429,605 $ 400,837 Leased property and equipment amortization 121,700 13,800 Total property and equipment depreciation and amortization $ 551,305 $ 414,637 |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Intangible Assets | The Company’s intangible assets are comprised of purchased intangibles consisting of customer relationships, channel relationships, telecommunications software, trade names and trademarks and non-compete agreements. Intangible assets acquired in connection with a business combination are valued at fair value and amortized on a straight-line basis over the expected useful life which may range from three (3) to ten (10) years or more depending on the intangible asset characteristics. The Company’s intangible assets also include internally developed software used in the sales and delivery of its information technology service offerings. The Company capitalizes certain internal costs related to software development to deliver its information technology services including but not limited to its Intelligent Telecommunications Management System (ITMS™), Public Key Infrastructure (PKI) and Optimiser Telecom Data Intelligence (TDI™) applications. Significant development costs are capitalized from the point of demonstrated technological feasibility until the point in time that the product is available for general release to customers. Once the product is available for general release, capitalized costs are amortized based on units sold, or on a straight-line basis generally over the expected functional life which may range from two (2) to five (5) years. The following tables summarize purchased and internally developed intangible assets subject to amortization as of the periods presented below: DECEMBER 31, 2018 Weighted Average Gross Carrying Accumulated Net Book Amortization Amount Amortization Value Period Customer Relationships $ 1,980,000 $ (1,732,500 ) $ 247,500 8 Channel Relationships 2,628,080 (817,625 ) 1,810,455 5 Internally Developed Software 1,476,623 (630,927 ) 845,696 3 Trade Name and Trademarks 290,472 (90,370 ) 200,102 5 $ 6,375,175 $ (3,271,422 ) $ 3,103,753 DECEMBER 31, 2017 Weighted Average Gross Carrying Accumulated Net Book Amortization Amount Amortization Value Period Customer Relationships $ 1,980,000 $ (1,485,000 ) $ 495,000 8 Channel Relationships 2,628,080 (642,420 ) 1,985,660 5 Internally Developed Software 3,181,794 (2,246,650 ) 935,144 3 Cybersecurity Authority to Operate 444,662 (408,427 ) 36,235 3 Trade Name and Trademarks 290,472 (71,005 ) 219,467 5 $ 8,525,008 $ (4,853,502 ) $ 3,671,506 Purchased Intangibles For the years ended December 31, 2018 and 2017, the Company did not recognize any acquisition related intangible assets. For the year ended December 31, 2018, the Company disposed of fully amortized purchased intangible assets with a historical cost and accumulated amortization of approximately $2,374,700. For the year ended December 31, 2017, there were no disposals or sales of purchased intangible assets. Internally Developed For the year ended December 31, 2018, the Company recorded capitalized software costs related to our capitalized internally developed software costs of approximately $224,900 related to costs associated with our next generation TDI™ application. For the year ended December 31, 2017 the Company recorded capitalized software costs related to our capitalized internally developed software costs of approximately $385,000 related to costs associated with our next generation TDI™ application. The total weighted average remaining life of purchased and internally developed intangible assets is approximately 5.5 years and 1.5 years, respectively, at December 31, 2018. The following table summarizes the estimated future amortization by purchased intangible asset type for fiscal years ending December 31: Intangible Asset Type 2019 2020 2021 2022 2023 Thereafter Total Customer Relationships $ 247,500 $ - $ - $ - $ - $ - $ 247,500 Channel Relationships 175,205 175,205 175,205 175,205 175,205 934,430 1,810,455 Internally Developed Software 149,002 321,961 272,197 102,535 - - 845,696 Trade Name and Trademarks 19,365 19,365 19,365 19,365 19,365 103,278 200,102 $ 591,072 $ 516,531 $ 466,767 $ 297,105 $ 194,570 $ 1,037,708 $ 3,103,753 The aggregate amortization expense recorded was approximately $756,000 and $1,078,600 for the years ended December 31, 2018 and 2017, respectively. |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | There were no changes in goodwill during the years ended December 31, 2018 and 2017. As of December 31, 2018 and 2017, goodwill was not impaired and there were no accumulated impairment losses. |
Other Current Liabilities
Other Current Liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Other Current Liabilities | Accrued expenses consisted of the following as of the periods presented below: DECEMBER 31, 2018 2017 Carrier service costs $ 8,476,110 $ 7,339,150 Salaries and payroll taxes 1,308,726 1,259,331 Inventory purchases, consultants and other costs 913,038 762,770 Severance costs 1,634 328,109 U.S. income tax payable 8,550 8,850 Foreign income tax payable (receivable) 8,380 (1,860 ) Contingent consideration (Note 3) - 100,000 Total accrued expenses $ 10,716,438 $ 9,796,350 |
Line of Credit
Line of Credit | 12 Months Ended |
Dec. 31, 2018 | |
Line of Credit Facility [Abstract] | |
Line of Credit | Commercial Loan Agreement Facility On June 15, 2017, the Company entered into a Loan and Security Agreement with Access National Bank (the “Loan Agreement”). The Loan Agreement provides for a $5.0 million working capital revolving line of credit. Effective April 30, 2018, the Company entered into a second modification agreement (“Modification Agreement”) with Access National Bank to amend the existing Loan Agreement. The Modification Agreement extended the maturity date of the facility through April 30, 2019 and added an additional financial covenant requiring the Company to maintain consolidated minimum adjusted earnings before interest, taxes, depreciation and amortization, plus share-based compensation, plus non-cash charges (EBITDA) (as defined in the Modification Agreement) of at least two times interest expense to be measured as of the last day of each quarterly period. As of December 31, 2018, the Company was in compliance with all covenants. The available amount under the working capital line of credit is subject to a borrowing base, which is equal to the lesser of (i) $5.0 million or (ii) 70% of the net unpaid balance of the Company’s eligible accounts receivable. The interest rate for the working capital line of credit is the Wall Street Journal prime rate plus 1.0%. The facility is secured by a first lien security interest on all of the Company’s personal property, including its accounts receivable, general intangibles, inventory and equipment maintained in the United States. The Loan Agreement requires that the Company (i) maintain a minimum adjusted tangible net worth of at least $2.0 million for each quarter and (ii) maintain a current ratio of 1.10:1 tested quarterly. Under the current credit facility with Access National Bank the Company was advanced and repaid approximately $14.0 million during the year ended December 31, 2018. As of December 31, 2018, the Company was eligible to borrow up to $4.9 million under the borrowing base formula. |
Long Term Debt and Other Term O
Long Term Debt and Other Term Obligations | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long Term Debt and Other Term Obligations | Long term debt and other obligations consisted of the following as of the periods presented below: DECEMBER 31, 2018 DECEMBER 31, 2017 Current Non-Current Current Non-Current Portion Portion Total Portion Portion Total Capital Lease Obligations (1) $ 107,325 $ 122,040 $ 229,365 $ 101,591 $ 232,109 $ 333,700 Deferred Rent Liability (2) 46,332 73,952 120,284 70,021 78,336 148,357 Short term installment borrowings (3) 145,931 - 145,931 133,250 - 133,250 Total Other Term Obligations $ 192,263 $ 73,952 $ 266,215 $ 203,271 $ 78,336 $ 281,607 Total Capital Leases and Other Term Obligations $ 299,588 $ 195,992 $ 304,862 $ 310,445 (1) As more fully described in Note 8, the Company entered into capital leases to acquire computer hardware and software for its customer facing infrastructure and two new automobiles that expire between 2020 and 2021. (2) The Company has two significant long term building lease obligations that contain fixed rent escalations and rent abatements. The Company has recognized a deferred rent liability related to the difference between actual cash rent paid and rent recognized for financial reporting purposes. (3) The Company annually finances the cost of its commercial liability insurance premiums for a period of less than 12 months. During the years ended December 31, 2018 and 2017, the Company financed approximately $195,200 and $191,400, respectively. Future repayments on long-term and other obligations are as follows for fiscal years ending December 31: Capital Other Term Leases Obligations Total 2019 $ 107,325 $ 192,263 $ 299,588 2020 116,208 10,224 126,432 2021 5,832 1,251 7,083 2022 - 5,566 5,566 2023 - 9,880 9,880 Thereafter - 47,031 47,031 $ 229,365 $ 266,215 $ 495,580 The following sets forth the Company’s future minimum payment obligations under capital lease agreements for fiscal years ending December 31: 2019 $ 121,421 2020 121,421 2021 6,042 Total principal and interest payments 248,884 Less: portion representing interest 19,519 Present value of minimum lease payments under capital leases 229,365 Less: current portion 107,325 Capital leases, net of current portion $ 122,040 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | During the fourth quarter ended December 31, 2018, the Company recorded an adjustment of $1.2 million to deferred tax liabilities related to amortization of goodwill that erroneously had not been established in prior periods. This adjustment was a non-cash expense and increased tax expense and net loss by $1.2 million for the fourth quarter and year ended December 31, 2018. The Company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim periods. Income tax provision (benefit) is as follows for the years ended: DECEMBER 31, 2018 2017 Current provision State $ 10,000 $ 10,000 Foreign 55,113 29,586 Total 65,113 39,586 Deferred provision (benefit) Federal 633,073 State 514,220 - Foreign (19,080 ) (1,619 ) Total 1,128,213 (1,619 ) Income tax provision $ 1,193,326 $ 37,967 Income tax provision (benefit) effective rates, which differs from the federal and state statutory rate as follows for the years ended: DECEMBER 31, 2018 2017 Statutory federal income tax rate 21.0 % 34.0 % State, net of federal benefit -2.1 % -0.3 % Non-deductible expenses 5.4 % -5.4 % Change in valuation allowance -200.1 % 6.9 % Foreign rate differential 3.1 % 0.9 % Return to accrual difference true-ups 0.6 % -0.6 % Other 6.9 % 3.8 % Deferred tax adjustment and true-up -84.1 % 69.2 % Change in federal statutory rate 0.0 % -109.5 % Combined effective tax rate -249.4 % -1.0 % The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets (liabilities) consisted of the following: DECEMBER 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 10,513,224 $ 10,526,231 Alternative minimum tax credit 45,650 45,650 Share-based compensation 536,223 358,360 Intangible amortization 565,013 740,685 Other assets 423,394 233,447 Total deferred tax assets 12,083,504 11,904,373 Less: valuation allowance (10,507,891 ) (9,550,279 ) Total deferred tax assets, net 1,575,613 2,354,094 Deferred tax liabilities: Goodwill amortization 2,293,533 2,203,154 Depreciation 345,136 86,506 Foreign intangible amortization 447,811 447,811 Other liabilities 12,643 8,852 Total deferred tax liabilities 3,099,123 2,746,323 Net deferred tax liability $ (1,523,510 ) $ (392,229 ) As of December 31, 2018, the Company had approximately $38.5 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes, net of the potential Section 382 limitations. These federal NOL carry forwards expire between 2020 and 2036. Included in the recorded deferred tax asset, the Company had a benefit of approximately $39.8 million available to offset future taxable income for state income tax purposes. These state NOL carry forwards expire between 2024 and 2036. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic NOL may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities. Changes in the valuation allowance for the years ended were as follows: DECEMBER 31, 2018 2017 Beginning balance $ (9,550,279 ) $ (9,791,680 ) (Increases) decreases (957,612 ) 241,401 Ending balance $ (10,507,891 ) $ (9,550,279 ) The Company’s valuation allowance predominantly consisted of domestic net operating loss carryforwards and certain state net operating loss carryforwards. A significant piece of objective negative evidence considered in management’s evaluation of the realizability of its deferred tax assets was the existence of cumulative losses over the latest three-year period. Management forecast future taxable income, but concluded that there may not be enough of a recovery before the end of the fiscal year to overcome the negative objective evidence of three years of cumulative losses. On the basis of this evaluation, management recorded a valuation allowance against all deferred tax assets. If management’s assumptions change and we determine we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction of income tax expense. The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states and certain foreign countries. The Company may be subject to examination by the IRS for tax years 2003 and forward. The Company may be subject to examinations by various state taxing jurisdictions for tax years 2003 and forward. The Company may be subject to examination by various foreign countries for tax years 2014 forward. As of December 31, 2018, the Company is currently not under examination by the IRS, any state or foreign tax jurisdiction. The Company did not have any unrecognized tax benefits at either December 31, 2018 or 2017. In the future, any interest and penalties related to uncertain tax positions will be recognized in income tax expense. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Preferred Stock The Company’s Certificate of Incorporation authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.001 par value per share. Under the terms of the Company’s Certificate of Incorporation, the board of directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue such shares of preferred stock in one or more series. Each such series of preferred stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the board of directors. In November 2004, the Company filed a certificate of designation designating 2,045,714 shares of the Company’s preferred stock as shares of Series A Convertible Preferred Stock, which shares were later issued. All of the shares of Series A Convertible Preferred Stock that were issued was converted into common stock and may not be reissued. Accordingly, as of December 31, 2018, there were 7,954,286 undesignated shares of preferred stock remaining available for issuance. There were no issuances of preferred stock during the year ended December 31, 2018. Common Stock The Company is authorized to issue 110,000,000 shares of common stock, $.001 par value per share. As of December 31, 2018, there were 84,112,446 shares issued and outstanding (including 300,000 restricted shares not vested). Common Stock Issuances - Employee Stock Option Exercises Shares of common stock issued as a result of stock option exercises and realized gross proceeds for the year ended December 31, 2018 were 100,000 and $43,900, respectively. See Note 16 for additional information regarding stock option plans. |
Stock Options and Award Program
Stock Options and Award Programs | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options and Award Programs | The Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, non-qualified stock options (NQSO), restricted stock awards (RSA), stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below. Valuation of Stock Awards The Company estimates the fair value of nonqualified stock awards using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock award is estimated on the date of grant using a Black-Scholes option pricing model (“Black-Scholes model”), which requires an assumption of dividend yield, risk free interest rates, volatility, forfeiture rates and expected option life. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatilities are based on the historical volatility of our common stock over the expected option term. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. Restricted Stock Awards A summary of RSA activity as of December 31, 2018 and 2017, and changes for the years then ended are set forth below: 2018 2017 NON-VESTED AWARDS Non-vested awards outstanding, January 1, - 250,000 Granted (+) 980,851 (1 300,000 (2 Cancelled (-) - 150,000 (3 Vested (-) 680,851 (1 400,000 (3 Non-vested awards outstanding, December 31, 300,000 - Weighted-average remaining contractual life (in years) 2.01 - Unamortized RSA compensation expense $ 136,310 $ - Aggregate intrinsic value of RSAs non-vested, December 31 $ 126,000 $ - Aggregate intrinsic value of RSAs vested, December 31 $ 320,000 $ 244,000 (1) During the year ended December 31, 2018, the Company granted 980,851 RSAs, of which i) 300,000 of RSAs were awarded as part of additional compensation plan to align key employees with the Company’s long term financial goals, and ii) 680,851 were awarded to members of the Company’s board of directors as part of their annual board retainer fee and vested during the period. (2) During the year ended December 31, 2017, the Company granted 300,000 RSAs to its former Chief Executive Officer that had a grant date fair value of approximately $246,000. The vesting of these RSAs were tied to attainment of certain financial goals as outlined by the Company’s Compensation Committee of the Board of Directors. (3) In connection with the resignation of Jeff Nyweide (former Chief Executive Officer) on June 30, 2017, 150,000 shares immediately vested and the remaining 150,000 were cancelled. As a result of share withholdings to satisfy tax liabilities, the Company issued 102,525 shares of the Company’s common stock to Mr. Nyweide and recognized a non-cash stock based compensation expense of approximately $94,400 in conjunction with this acceleration event. The Company's payment of the tax liability associated with this accelerated vesting was recorded as a cash flow from financing activity on the consolidated statements of cash flows. (4) During the year ended December 31, 2017, 125,000 RSAs vested upon expiration of the employment agreement between Steve L. Komar (the former Chief Executive Officer) and the Company on January 3, 2017. On January 3, 2017, the Company issued 84,188 shares of the Company’s common stock. Mr. Komar received less than 125,000 shares vested because he elected to have 40,812 of such shares withheld in satisfaction of the corresponding tax liability of approximately $46,000. The Company's payment of this tax liability was recorded as a cash flow from financing activity on the consolidated statements of cash flows. (5) In connection with the resignation of James McCubbin (former Chief Financial Officer) on October 31, 2017, 125,000 shares immediately vested. As a result of share withholdings to satisfy tax liabilities, the Company issued 84,750 shares of the Company’s common stock to Mr. McCubbin and recognized a non-cash stock based compensation expense of approximately $1,100 in conjunction with this acceleration event. The Company's payment of the tax liability associated with this accelerated vesting was recorded as a cash flow from financing activity on the consolidated statements of cash flows. Non-Qualified Stock Option Awards Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for the years then ended as set forth below: YEAR ENDED DECEMBER 31, 2018 YEAR ENDED DECEMBER 31, 2017 Non-Qualified Stock Option Awards Non-Qualified Stock Option Awards Employees Directors Non-Employees Total Employees Directors Non-Employees Total Stock options granted 100,000 -- 50,000 150,000 3,090,000 350,000 75,000 3,515,000 Expected dividend yield 0% -- 0% 0% 0% 0% 0% 0% Expected volatility 65.2%-66.7% -- 69.5% 65.2%-6.95% 68.2%-74.2% 69.6% - 70.1% 72.5% 68.2%-72.5% Risk-free interest rate 2.72% - 2.73% -- 1.0% 1.0%-2.73% 1.8% - 2.1% 1.7% - 2.0% 1.7% 1.7%-2.1% Forfeiture rate 4.43% - 4.81% -- 10.3% 4.43%-10.3% 4.6% - 6.8% 4.2% - 5.9% 6.6% 4.2%-6.8% Expected life 5 years -- 3 years 3-5 years 5 years 7 years 3 years 3-7 years A summary of NQSO activity as of December 31, 2018 and 2017, and changes during the years then ended are set forth below: 2018 2017 Weighted Weighted Average Average Grant Date Grant Date NON-VESTED AWARDS Shares Fair Value Shares Fair Value Non-vested balances, January 1, 2,685,004 $ 0.35 920,000 $ 0.59 Granted (+) 150,000 (1 ) $ 0.25 3,515,000 (2 ) $ 0.36 Cancelled (-) 50,000 (3 ) $ 0.32 860,000 (3 ) $ 0.68 Vested/Excercised (-) 717,501 $ 0.30 889,996 $ 0.36 Non-vested balances, December 31, 2,067,503 $ 0.36 2,685,004 $ 0.35 2018 2017 Weighted Weighted Average Average OUTSTANDING AND EXERCISABLE AWARDS Shares Exercise Price Shares Exercise Price Awards outstanding, January 1, 4,173,334 $ 0.60 2,090,668 $ 0.86 Granted (+) 150,000 (1 ) $ 0.50 3,515,000 (2 ) $ 0.59 Cancelled (-) 210,000 (3 ) $ 0.83 1,402,334 (3 ) $ 0.97 Exercised (-) 100,000 (4 ) $ 0.44 30,000 (4 ) $ 0.57 Awards outstanding, December 31, 4,013,334 $ 0.58 4,173,334 $ 0.60 Awards vested and expected to vest, December 31, 3,422,491 $ 0.58 3,577,089 $ 0.60 Awards outstanding and exercisable, December 31, 1,945,831 $ 0.56 1,488,330 $ 0.61 (1) During the year ended December 31, 2018, there were non-qualified stock option grants of 150,000, as further described below: ● Employees. ● Non-Employees (2) During the year ended December 31, 2017, there were non-qualified stock option grants of 3,515,000, as further described below: ● Director Grants ● Non-Director Grants (3) During the year ended December 31, 2018, there were 210,000 non-qualified stock options that were cancelled, of which 50,000 were cancelled to due to termination of employment and the reminder expired unexercised at the end of the option term. During the year ended December 31, 2018, there were 417,000 that were cancelled, of which 230,000 were cancelled due to termination of employment and the remainder expired unexercised at the end of the option term. (4) The total intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was approximately $10,000 and $9,000, respectively There was no intrinsic value associated with options outstanding, exercisable and expected to vest as of December 31, 2018 as the stock price was below the lowest option exercise price. Aggregate intrinsic value represents total pretax intrinsic value (the difference between WidePoint’s closing stock price on December 31, 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2018. The intrinsic value will change based on the fair market value of WidePoint’s stock. The weighted-average remaining contractual life of the non-qualified stock options outstanding, exercisable, and vested and expected to vest was 4.1 years, 3.9 years and 3.9 years, respectively, as of December 31, 2018. Stock Compensation Expense Share-based compensation recognized under ASC 718-10 (including restricted stock awards) represents both stock options based expense and stock grant expense. The Company recognized share-based compensation expense for the years then ended December 31 as set forth below: YEAR ENDED DECEMBER 31, 2018 YEAR ENDED DECEMBER 31, 2017 Shared-Based Compensation Expense Shared-Based Compensation Expense Employees Directors Non-Employees Total Employees Directors Non-Employees Total Restricted stock compensation expense $ 67,690 $ 320,000 $ - $ 387,690 $ 157,857 $ - $ - $ 157,857 Non-qualified option stock compensation expense 291,625 - 4,089 295,714 118,964 103,335 7,054 229,353 Total share-based compensation before taxes $ 359,315 $ 320,000 $ 4,089 $ 683,404 $ 276,821 $ 103,335 $ 7,054 $ 387,210 At December 31, 2018, the Company had approximately $613,800 of total unamortized compensation expense, net of estimated forfeitures, related to NQSOs that will be recognized over the weighted average period of 2.2 years. |
Earnings Per Common Share (EPS)
Earnings Per Common Share (EPS) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share (EPS) | The computations of basic and diluted EPS for the years ended were as follows: YEARS ENDED DECEMBER 31, 2018 2017 Basic Loss Per Share Computation: Net loss $ (1,456,476) $ (3,533,937) Weighted average number of common shares 83,274,171 82,911,730 Basic Loss Per Share $ (0.02) $ (0.04) Diluted Loss Per Share Computation: Net loss $ (1,456,476) $ (3,533,937) Weighted average number of common shares 83,274,171 82,911,730 Incremental shares from assumed conversions of stock options - - Adjusted weighted average number of common shares 83,274,171 82,911,730 Diluted Loss Per Share $ (0.02) $ (0.04) The dilutive effect of unexercised stock options and unvested restricted stock awards outstanding under the Company's stock plan excludes 4,313,334 and 4,173,334 of options from the computation of EPS for the years ended December 31, 2018 and 2017, respectively. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 12 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Changes in the Company’s cumulative foreign currency translation adjustments due to translation of its foreign subsidiaries’ Euro currency financial statements into the Company’s reporting currency were as and for the periods presented below: YEARS ENDED DECEMBER 31, 2018 2017 Balances, January 1 $ (122,461 ) $ (309,369 ) Net foreign currency translation (loss) gain (64,024 ) 186,908 Balances, December 31 $ (186,485 ) $ (122,461 ) |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Operating Lease Commitments The Company entered into property and equipment leasing arrangements that expire at various times between August 2019 and March 2029, with optional renewal periods. Minimum lease payments range from $1,000 to $28,000 per month and may require additional rent to cover a proportionate share of taxes, maintenance, insurance and other shared expenses. Rents are generally increased annually by fixed amounts, subject to certain maximum amounts defined within individual agreements. Base rent expense under these operating leases for the years ended December 31, 2018 and 2017 were approximately $909,200 and $877,900, respectively. Future minimum payments by year (excluding related party leases) required under remaining lease obligations consist of the following for fiscal years ending December 31 by geographic region: North America Europe Total 2019 $ 630,000 $ 186,000 $ 816,000 2020 495,000 186,000 681,000 2021 514,000 186,000 700,000 2022 533,000 186,000 719,000 2023 553,000 46,000 599,000 Thereafter 2,385,000 - 2,385,000 Total $ 5,110,000 $ 790,000 $ 5,900,000 Employment Agreements The Company has employment agreements with certain executives that set forth compensation levels and provide for severance payments in certain instances. Litigation The Company is not involved in any material legal proceedings. |
Revenue by Service Type, Custom
Revenue by Service Type, Customer Type and by Geographic Region | 12 Months Ended |
Dec. 31, 2018 | |
Revenues [Abstract] | |
Revenue by Service Type, Customer Type and by Geographic Region | The Company recognized revenues by the following broad service types: YEARS ENDED DECEMBER 31, 2018 2017 Carrier Services $ 50,050,000 $ 45,003,335 Managed Services: Managed Service Fees 25,232,019 22,810,476 Billable Service Fees 1,838,018 3,257,840 Reselling and Other Services 6,558,859 4,812,595 $ 83,678,896 $ 75,884,246 The Company recognized revenues for the following customer types as set forth below: YEARS ENDED DECEMBER 31, 2018 2017 U.S. Federal Government $ 66,346,922 $ 58,625,389 U.S. State and Local Governments 445,855 394,704 Foreign Governments 148,155 193,565 Commercial Enterprises 16,737,964 16,670,588 $ 83,678,896 $ 75,884,246 The Company recognized revenues from customers in the following geographic regions: YEARS ENDED DECEMBER 31, 2018 2017 North America $ 78,702,974 $ 71,357,018 Europe 4,975,922 4,527,228 $ 83,678,896 $ 75,884,246 |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the financial statement rules and regulations of the Securities and Exchange Commission. |
Principles of Consolidation | The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and acquired entities since their respective dates of acquisition. All significant inter-company amounts were eliminated in consolidation. |
Reclassifications | Certain reclassifications have been made to prior period consolidated balance sheet to conform to current period presentation. Such reclassifications had no effect on net income as previously reported. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards Accounting Standards Codification 606 “Revenue from Contracts with Customers”. In May 2014, ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” was issued. This ASU requires the use of a five-step methodology to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the ASU requires enhanced disclosure regarding revenue recognition. The standard permits the use of either the retrospective or cumulative effect transition method (modified retrospective method). The Company adopted the ASU on a modified retrospective transition method on January 1, 2018 and will apply the guidance to the most current period presented in the financial statements issued subsequent to the adoption date. The Company did not record a cumulative adjustment to retained earnings as of January 1, 2018 since the Company was recognizing revenue consistent with the provisions of ASC 606 and any adjustment would have been deemed immaterial. In preparation for adoption of the standard, the Company has implemented internal controls to enable the preparation of financial information and have reached conclusions on key accounting assessments related to the standard, including that accounting for variable consideration is immaterial. The Company adopted the standard through the application of the portfolio approach and selected a sample of customer contracts to assess under the guidance of the new standard that are characteristically representative of each revenue stream. The Company has completed its review of the sample contracts, and there were no significant changes to the pattern or timing of revenue recognition as a result of adopting the new standard. The Company revised its revenue recognition policy as follows to incorporate the requirements of the new standard. Revenue from Contracts with Customers Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company reports products and services under the categories managed services and carrier services as described below: Managed Services. ● Managed Service Fees: o Revenue for fixed price services are generally completed and billed in the same accounting period and we charge a fixed fee for each performance obligation which may be tied to the number of units managed, percentage of supplier spend and/or savings, units delivered, certificates issued by the Company, certificate validation services installed in a customer’s environment, accessories sold and billable hours. Revenue from this service requires significant accounting estimates due to delays between completion of the service and the normal billing cycle. o Revenue for fixed price software licenses that are sold as a perpetual license with no significant customization are recognized when the software is delivered. Software sold as a term license is recognized ratably over the license term from the date the software is accepted by the customer. Implementation fees are recognized over the term of the license agreement once the software has been delivered. Maintenance services, if contracted, are recognized ratably over the term of the maintenance agreement, generally twelve months. Revenue from this service does not require significant accounting estimates. ● Billable Service Fees. ● Reselling and Other Service Fees. Carrier Services. Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services to a customer under a fixed rate or fixed fee arrangement. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Components of our managed service solution are generally distinct performance obligations that are not interdependent and can be completed within a month. The Company’s products are generally sold with a right of return and the Company may provide other event driven credits or disincentives for not meeting performance obligations which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Contract Balances A significant portion of contract balances represent revenues earned on federal government contracts. Timing of revenue recognition may differ materially from the timing of invoicing to customers due a long-standing practice of issuing a consolidated managed service invoice. A consolidated invoice usually requires data such as billable hours, units managed, credentials issued, accessories sold and usage data from telecommunications providers and other suppliers. As a result it could take between thirty (30) to sixty (60) days after all performance obligations have been met to deliver a complete customer invoice. As a result, the Company may have both accounts receivables (invoiced revenue) and unbilled receivables (revenue recognize but not yet invoiced) that could represent one or more months of revenue. Additionally, the Company may be required under contractual terms to bill for services in advance and deferred recognition of revenue until all performance obligations have been met. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within thirty (30) to ninety (90) days. Payment terms and conditions for government and commercial customers are described below: ● Government contract billings are generally due within thirty (30) days of the invoice date. Government accounts receivable payments could be delayed due to administrative processing delays by the government agency, continuing budget resolutions that may delay availability of contract funding, and/or administrative only invoice correction requests by contracting officers that may delay payment processing by our government customer. ● Commercial contracts are billed based on the underlying contract terms and conditions which generally have repayment terms that range from thirty (30) to ninety (90) days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in uncollected accounts receivable. Customer accounts receivable balances that remain uncollected for more than 45 days are reviewed for collectability and are considered past due after 90 days unless different contractual repayment terms were extended under a contract with a customer. The Company determines its allowance for doubtful accounts after considering factors that could affect collectability of past due accounts receivable and such factors regularly include the customers’ financial condition and credit worthiness, recent payment history, type of customer and the length of time accounts receivable are past due. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Customer accounts receivable balances that remain uncollected for more than 120 days and/or that have not been settled in accordance with contractual repayment terms and for which no firm payment commitments exist are placed with a third-party collection agency and a reserve is established for the entire uncollected balance. The Company writes off accounts receivable after 180 days or earlier when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. If the accounts receivable has been written off and no allowance for doubtful accounts exist subsequent payments received are credited to bad debt expense as a recovery. Costs to Obtain a Contract with a Customer The Company does not recognize assets from the costs to obtain a contract with a customer and generally expenses these costs as incurred. The Company primarily uses internal labor to manage and oversee the customer acquisition process and to finalize contract terms and conditions and commence customer start-up activities, if any. Internal labor costs would be incurred regardless of the outcome of a contract with a customer and as such those costs are not considered incremental to the cost to obtain a contract with a customer. The Company does not typically incur significant incremental costs to obtain a contract with a customer after such contract has been awarded. Incremental costs to obtain a contract with a customer may include payment of commissions to certain internal and/or external sales agents upon collection of invoiced sales from the customer. The Company does not typically prepay sales commissions in advance of being paid for services delivered. In March 2016, ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting” was issued. This ASU provides for areas of simplification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this ASU in the three months ended March 31, 2017, and the Company did not recognize any adjustments due to the fact that the Company had a tax-effected full valuation allowance of approximately $9.3 million applied against its U.S. based deferred tax assets, of which approximately $352,200 was applied against unrealized stock option benefits. In the event the Company generates sufficient taxable income to utilize its deferred tax assets the Company may be required to recognize up to $352,200 in deferred tax assets relating to unrealized stock option benefits. The Company estimates forfeiture rates and adjusts such rates when appropriate. In August 2016, ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” was issued. This ASU provides guidance on eight specific cash flow issues with the objective of reducing the existing diversity in practice for those issues. The amendments in this ASU are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company early adopted this ASU during the year ended December 31, 2017. The adoption of this accounting standard did not have a material effect on the Company’s consolidated statements of cash flows presented herein. Accounting Standards under Evaluation In February 2016, the FASB issued new accounting guidance on leases. The guidance, which is effective January 1, 2019, with early adoption permitted, requires virtually all leases to be recognized on the Consolidated Balance Sheets. The Company currently anticipates adopting the standard effective January 1, 2019, using the modified retrospective approach, which requires recording existing operating leases on the Consolidated Balance Sheets upon adoption and in the comparative period. The Company estimates that the adoption of the guidance will result in the recognition of additional right-of-use assets and lease liabilities for operating leases of approximately $5.8 million to $6.0 million as of January 1, 2019. The Company does not believe the guidance will have a material impact on its consolidated statements of operations. In January 2017, ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment” was issued. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The ASU also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity should apply this ASU on a prospective basis and for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is continuing to evaluate the effect this guidance will have on the consolidated financial statements and related disclosures. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718); Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share-based awards to non-employees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to ASC 718 upon vesting, which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. We do not anticipate this update will have a material effect on our consolidated financial statements. |
Foreign Currency | Assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon exchange rates prevailing at the end of each reporting period. The resulting translation adjustments, along with any related tax effects, are included in accumulated other comprehensive (loss) income, a component of stockholders’ equity. Translation adjustments are reclassified to earnings upon the sale or substantial liquidation of investments in foreign operations. Revenues and expenses are translated at the average month-end exchange rates during the year. Gains and losses related to transactions in a currency other than the functional currency, including operations outside the U.S. where the functional currency is the U.S. dollar, are reported net in the Company’s Consolidated Statements of Operations, depending on the nature of the activity. See Note 18 for additional information. |
Segment Reporting | Segments are defined by authoritative guidance as components of a company in which separate financial information is available and is evaluated by the chief operating decision maker (CODM), or a decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its chief executive officer. The Company’s customers view our market as a singular business and demand an integrated and scalable suite of enterprise-wide solutions. The Company’s TM2 offerings are substantially managed service driven solutions that use our proprietary technology platform to deliver our services. The amount of labor required to perform our contract obligations may vary significantly contract to contract depending on the customer’s specific requirements; however, the way in which we perform these services is consistent across the company and requires a connected group of internal subject matter experts and support personnel. In order to evaluate a managed service business model the Company’s CODM and the senior executive team measure financial performance based on our overall mixture of managed and carrier services and related margins. These financial metrics provide a stronger indication of how we are managing our key customer relationships; and it also determines our overall profitability. The Company presents a single segment for purposes of financial reporting and prepared its consolidated financial statements upon that basis. |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring use of estimates and judgment relate to revenue recognition, accounts receivable valuation reserves, ability to realize intangible assets and goodwill, ability to realize deferred income tax assets, fair value of certain financial instruments and the evaluation of contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. |
Fair Value Measurements | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in the absence of a principal, most advantageous market for the specific asset or liability. GAAP provides for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows: Level 1 Level 2 ■ Quoted prices for similar assets or liabilities in active markets ■ Quoted prices for identical or similar assets or liabilities in markets that are not active ■ Inputs other than quoted prices that are observable for the asset or liability ■ Inputs that are derived principally from or corroborated by observable market data by correlation or other means Level 3 The Company monitors the market conditions and evaluates the fair value hierarchy levels at least quarterly. For any transfers in and out of the levels of the fair value hierarchy, the Company elects to disclose the fair value measurement at the beginning of the reporting period during which the transfer occurred. See Note 4 for financial assets and liabilities subject to fair value measurements. |
Going Concern Evaluation | The Company has performed an annual assessment of its ability to continue as a going concern as required under ASU No. 2014-15, Presentation of Financial Statements – Going Concern (“ASU No. 2014-15”) and concluded no additional disclosures are required. |
Financial Instruments | Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. |
Cash and Cash Equivalents | The Company maintains interest-bearing cash deposits and short-term overnight investments with large financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents for purposes of these consolidated financial statements. Interest-bearing cash deposits maintained by financial institutions in the United States of America are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to a maximum of $250,000. At December 31, 2018 and 2017, the Company had deposits in excess of FDIC limits of approximately $521,878 and $3,786,300, respectively. |
Allowances for Doubtful Accounts | The Company determines its allowance for doubtful accounts by considering a number of factors, including the type of customer, credit worthiness, payment history, length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Customer account balances outstanding longer than the contractual payment terms are reviewed for collectability and after 90 days are considered past due unless arrangements were made at the time of the transaction that specified different payment terms. Upon specific review and its determination that a bad debt reserve may be required, the Company will reserve such amount if it views the account as potentially uncollectable. Customer account balances outstanding longer than 120 days that have not been settled in accordance with contract terms and for which no firm payment commitments exist are placed with a third party collection agency and a reserve is established. The Company writes off accounts receivable after 180 days or earlier when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts. If the accounts receivable has been written off and no allowance for doubtful accounts exist subsequent payments received are credited to bad debt expense as a recovery. |
Inventories | Inventories consist of mobile devices and accessories and identity credential hardware components. Inventories are valued at the lower of cost, using first-in, first-out method, or net realizable value. Such amounts are recorded within other current assets in the consolidated balance sheet. The Company may record a write-down for inventories which have become obsolete or are in excess of anticipated demand or net realizable value. If future demand or market conditions for our products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of inventory, we may be required to record additional write-downs, which would adversely affect our gross profit. For the years ended December 31, 2018 and 2017, there were no inventory write-downs. |
Property and Equipment | Property and equipment (including assets acquired under capital lease arrangements) are stated at historical cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives based upon the classification of the property and/or equipment or lease period for assets acquired under capital lease arrangements. The estimated useful lives of the assets are as follows: Estimated Useful Life Computer hardware and software 3-5 years Furniture and fixtures 5 years Mobile equipment 3 years The Company assesses the recoverability of property and equipment by determining whether the depreciation of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of December 31, 2018 and 2017, the Company’s management has not identified any material impairment of its property and equipment. |
Goodwill and Other Intangible Assets | The Company accounts for goodwill and other indefinite-lived intangible assets in accordance with ASC Topic 350 “ Intangibles The Company evaluates goodwill for impairment annually as of December 31st and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test or bypass the qualitative assessment for any reporting period and proceed to performing the first step of the two-step goodwill impairment test. Goodwill impairment testing involves management judgment, requiring an assessment of whether the carrying value of the reporting unit can be supported by its fair value using widely accepted valuation techniques. The quantitative goodwill impairment test utilizes a two-step approach. The first step identifies whether there is potential impairment by comparing the fair value of a reporting unit to the carrying amount, including goodwill. If the fair value of a reporting unit is less than its carrying amount, the second step of the impairment test is required to measure the amount of any impairment loss. The Company uses a combination of the income approach (discounted cash flow method) and market approach (market multiples). When preparing discounted cash flow models under the income approach, the Company uses internal forecasts to estimate future cash flows expected to be generated by the reporting units. Our internal forecasts are developed using observable (Level 2) and unobservable (Level 3) inputs. Actual results may differ from forecasted results. When preparing the market approach the Company may adjust market multiples to reflect the Company’s risk profile and other factors deemed appropriate to properly apply the market approach. The Company uses the expected weighted average cost of capital, estimated using a capital asset pricing model, to discount future cash flows for each reporting unit. Our cost of equity estimate is developed using a combination of observable (Level 2) and unobservable (Level 3) inputs with appropriate adjustments that take into consideration our risk profile and other factors deemed appropriate. The Company believes the discount rates used appropriately reflect the risks and uncertainties in the financial markets generally and specifically in the Company’s internally developed forecasts. Further, to assess the reasonableness of the valuations derived from the discounted cash flow models, the Company also analyzes market-based multiples for similar industries of the reporting unit, where available. |
Product Development | Product development expenses include payroll, employee benefits, and other employee related expenses associated with product development. Product development expenses also include third-party development and programming costs, subject matter experts, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Costs related to product development are expensed until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are commercially available for release. Once technological feasibility is reached, such costs are not normally material. To the extent costs are significant such costs are capitalized and amortized to cost of revenue over the estimated lives of the solution. For the years ended December 31, 2018 and 2017, the Company incurred product development costs of approximately $229,000, which was capitalized and $579,800, of which we capitalized approximately $360,700, respectively. See Note 9 to the consolidated financial statements for additional information about capitalization of product development costs. |
Income Taxes | The Company accounts for income taxes in accordance with authoritative guidance which requires that deferred tax assets and liabilities be computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. The guidance requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. The Company recognizes the impact of an uncertain tax position taken or expected to be taken on an income tax return in the financial statements at the amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained upon audit by the relevant taxing authority. |
Basic and Diluted Earnings Per Share (EPS) | Basic EPS includes no dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common and restricted stock were exercised or converted into common and restricted stock. The number of incremental shares from assumed conversions of stock options and unvested restricted stock awards included in the calculation of diluted EPS was calculated using the treasury stock method. See Note 17 to the consolidated financial statements for computation of EPS. |
Employee Stock-Based Compensation | The Company accounts for stock-based employee compensation arrangements under provisions of ASC 718-10. The Company recognizes the cost of employee stock awards granted in exchange for employee services based on the grant-date fair value of the award using a Black-Scholes option-pricing model, net of expected forfeitures. Those costs are recognized ratably over the vesting period. Each stock option has an exercise price equal to the market price of the Company’s common stock on the date of grant and a contractual term ranging from 3 to 10 years. See Note 16 to the consolidated financial statements for additional information about stock-based compensation programs. |
Non-Employee Stock-Based Compensation | The Company accounts for stock-based non-employee compensation arrangements using the fair value recognition provisions of ASC 505-50, “Equity-Based Payments to Non-Employees” (formerly known as FASB Statement 123, Accounting for Stock-Based Compensation EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services). |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of property plant and equipment estimated useful lives | Estimated Useful Life Computer hardware and software 3-5 years Furniture and fixtures 5 years Mobile equipment 3 years |
Accounts Receivable and Signi_2
Accounts Receivable and Significant Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Schedule of accounts receivable | DECEMBER 31, 2018 2017 Government (1) $ 7,332,338 $ 6,055,397 Commercial (2) 3,863,710 2,183,246 Gross accounts receivable 11,196,048 8,238,643 Less: allowances for doubtful accounts (3) 106,733 107,618 Accounts receivable, net $ 11,089,315 $ 8,131,025 |
Schedule of concentration of risk | DECEMBER 31, 2018 2017 As a % of As a % of Customer Name Receivables Receivables U.S. Customs Border Patrol 14 % 12 % U.S. Immigration and Customs Enforcement -- 13 % U.S. Federal Air Marshall Service 3 % 10 % Iron Bow Technologies 15 % -- YEARS ENDED DECEMBER 31, 2018 2017 As a % of As a % of Customer Name Revenues Revenues U.S. Immigration and Customs Enforcement 16 % 17 % U.S. Customs Border Patrol 11 % 11 % 6. Unbilled Accounts Receivable and Significant Concentrations |
Unbilled Accounts Receivable _2
Unbilled Accounts Receivable and Significant Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Schedule of unbilled accounts receivable | DECEMBER 31, Customer Type 2018 2017 Government $ 9,253,586 $ 7,872,675 Commercial 312,584 258,773 Unbilled accounts receivable $ 9,566,170 $ 8,131,448 |
Schedule of concentration of risk | DECEMBER 31, 2018 2017 As a % of As a % of Customer Name Receivables Receivables U.S. Department of Homeland Security Headquarters 11 % 11 % U.S. Immigration and Customs Enforcement 37 % 27 % U.S. Coast Guard 11 % -- U.S. Transportation Safety Administration 10 % 12 % |
Other Current Assets (Tables)
Other Current Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of other current assets | DECEMBER 31, 2018 2017 Inventories $ 183,900 $ 157,058 Prepaid rent, insurance and other assets 902,786 610,886 Total other current assets $ 1,086,686 $ 767,944 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, plant and equipment | DECEMBER 31, 2018 2017 Computer hardware and software $ 2,110,298 $ 1,943,180 Furniture and fixtures 333,539 296,316 Leasehold improvements 268,561 260,748 Automobiles 178,597 188,238 Gross property and equipment 2,890,995 2,688,482 Less: accumulated depreciation and amortization 1,878,311 1,370,062 Property and equipment, net $ 1,012,684 $ 1,318,420 |
Schedule of capital leased assets | DECEMBER 31, 2018 2017 Automobiles $ 95,600 $ 100,882 Computer hardware and software 290,223 290,223 Gross leased property and equipment $ 385,823 $ 391,105 Less: accumulated amortization 115,570 20,890 Capital lease assets, net $ 270,253 $ 370,215 |
Schedule of property and equipment depreciation expenses including amortization of capital lease | YEARS ENDED DECEMBER 31, 2018 2017 Owned property and equipment depreciation $ 429,605 $ 400,837 Leased property and equipment amortization 121,700 13,800 Total property and equipment depreciation and amortization $ 551,305 $ 414,637 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Schedule of finite-lived intangible assets | DECEMBER 31, 2018 Weighted Average Gross Carrying Accumulated Net Book Amortization Amount Amortization Value Period Customer Relationships $ 1,980,000 $ (1,732,500 ) $ 247,500 8 Channel Relationships 2,628,080 (817,625 ) 1,810,455 5 Internally Developed Software 1,476,623 (630,927 ) 845,696 3 Trade Name and Trademarks 290,472 (90,370 ) 200,102 5 $ 6,375,175 $ (3,271,422 ) $ 3,103,753 DECEMBER 31, 2017 Weighted Average Gross Carrying Accumulated Net Book Amortization Amount Amortization Value Period Customer Relationships $ 1,980,000 $ (1,485,000 ) $ 495,000 8 Channel Relationships 2,628,080 (642,420 ) 1,985,660 5 Internally Developed Software 3,181,794 (2,246,650 ) 935,144 3 Cybersecurity Authority to Operate 444,662 (408,427 ) 36,235 3 Trade Name and Trademarks 290,472 (71,005 ) 219,467 5 $ 8,525,008 $ (4,853,502 ) $ 3,671,506 |
Schedule of finite-lived intangible assets, future amortization expense | Intangible Asset Type 2019 2020 2021 2022 2023 Thereafter Total Customer Relationships $ 247,500 $ - $ - $ - $ - $ - $ 247,500 Channel Relationships 175,205 175,205 175,205 175,205 175,205 934,430 1,810,455 Internally Developed Software 149,002 321,961 272,197 102,535 - - 845,696 Trade Name and Trademarks 19,365 19,365 19,365 19,365 19,365 103,278 200,102 $ 591,072 $ 516,531 $ 466,767 $ 297,105 $ 194,570 $ 1,037,708 $ 3,103,753 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of accrued liabilities | DECEMBER 31, 2018 2017 Carrier service costs $ 8,476,110 $ 7,339,150 Salaries and payroll taxes 1,308,726 1,259,331 Inventory purchases, consultants and other costs 913,038 762,770 Severance costs 1,634 328,109 U.S. income tax payable 8,550 8,850 Foreign income tax payable (receivable) 8,380 (1,860 ) Contingent consideration (Note 3) - 100,000 Total accrued expenses $ 10,716,438 $ 9,796,350 |
Long Term Debt and Other Term_2
Long Term Debt and Other Term Obligations (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | DECEMBER 31, 2018 DECEMBER 31, 2017 Current Non-Current Current Non-Current Portion Portion Total Portion Portion Total Capital Lease Obligations (1) $ 107,325 $ 122,040 $ 229,365 $ 101,591 $ 232,109 $ 333,700 Deferred Rent Liability (2) 46,332 73,952 120,284 70,021 78,336 148,357 Short term installment borrowings (3) 145,931 - 145,931 133,250 - 133,250 Total Other Term Obligations $ 192,263 $ 73,952 $ 266,215 $ 203,271 $ 78,336 $ 281,607 Total Capital Leases and Other Term Obligations $ 299,588 $ 195,992 $ 304,862 $ 310,445 |
Schedule of maturities of long-term debt | Capital Other Term Leases Obligations Total 2019 $ 107,325 $ 192,263 $ 299,588 2020 116,208 10,224 126,432 2021 5,832 1,251 7,083 2022 - 5,566 5,566 2023 - 9,880 9,880 Thereafter - 47,031 47,031 $ 229,365 $ 266,215 $ 495,580 |
Schedule of future minimum lease payments for capital leases | 2019 $ 121,421 2020 121,421 2021 6,042 Total principal and interest payments 248,884 Less: portion representing interest 19,519 Present value of minimum lease payments under capital leases 229,365 Less: current portion 107,325 Capital leases, net of current portion $ 122,040 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of components of income tax expense (benefit) | DECEMBER 31, 2018 2017 Current provision State $ 10,000 $ 10,000 Foreign 55,113 29,586 Total 65,113 39,586 Deferred provision (benefit) Federal 633,073 State 514,220 - Foreign (19,080 ) (1,619 ) Total 1,128,213 (1,619 ) Income tax provision $ 1,193,326 $ 37,967 |
Schedule of effective income tax rate reconciliation | DECEMBER 31, 2018 2017 Statutory federal income tax rate 21.0 % 34.0 % State, net of federal benefit -2.1 % -0.3 % Non-deductible expenses 5.4 % -5.4 % Change in valuation allowance -200.1 % 6.9 % Foreign rate differential 3.1 % 0.9 % Return to accrual difference true-ups 0.6 % -0.6 % Other 6.9 % 3.8 % Deferred tax adjustment and true-up -84.1 % 69.2 % Change in federal statutory rate 0.0 % -109.5 % Combined effective tax rate -249.4 % -1.0 % |
Schedule of deferred tax assets and liabilities | DECEMBER 31, 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 10,513,224 $ 10,526,231 Alternative minimum tax credit 45,650 45,650 Share-based compensation 536,223 358,360 Intangible amortization 565,013 740,685 Other assets 423,394 233,447 Total deferred tax assets 12,083,504 11,904,373 Less: valuation allowance (10,507,891 ) (9,550,279 ) Total deferred tax assets, net 1,575,613 2,354,094 Deferred tax liabilities: Goodwill amortization 2,293,533 2,203,154 Depreciation 345,136 86,506 Foreign intangible amortization 447,811 447,811 Other liabilities 12,643 8,852 Total deferred tax liabilities 3,099,123 2,746,323 Net deferred tax liability $ (1,523,510 ) $ (392,229 ) |
Summary of valuation allowance | DECEMBER 31, 2018 2017 Beginning balance $ (9,550,279 ) $ (9,791,680 ) (Increases) decreases (957,612 ) 241,401 Ending balance $ (10,507,891 ) $ (9,550,279 ) |
Stock Options and Award Progr_2
Stock Options and Award Programs (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Nonvested restricted stock shares activity | 2018 2017 NON-VESTED AWARDS Non-vested awards outstanding, January 1, - 250,000 Granted (+) 980,851 (1 300,000 (2 Cancelled (-) - 150,000 (3 Vested (-) 680,851 (1 400,000 (3 Non-vested awards outstanding, December 31, 300,000 - Weighted-average remaining contractual life (in years) 2.01 - Unamortized RSA compensation expense $ 136,310 $ - Aggregate intrinsic value of RSAs non-vested, December 31 $ 126,000 $ - Aggregate intrinsic value of RSAs vested, December 31 $ 320,000 $ 244,000 |
Schedule of valuation assumptions | YEAR ENDED DECEMBER 31, 2018 YEAR ENDED DECEMBER 31, 2017 Non-Qualified Stock Option Awards Non-Qualified Stock Option Awards Employees Directors Non-Employees Total Employees Directors Non-Employees Total Stock options granted 100,000 -- 50,000 150,000 3,090,000 350,000 75,000 3,515,000 Expected dividend yield 0% -- 0% 0% 0% 0% 0% 0% Expected volatility 65.2%-66.7% -- 69.5% 65.2%-6.95% 68.2%-74.2% 69.6% - 70.1% 72.5% 68.2%-72.5% Risk-free interest rate 2.72% - 2.73% -- 1.0% 1.0%-2.73% 1.8% - 2.1% 1.7% - 2.0% 1.7% 1.7%-2.1% Forfeiture rate 4.43% - 4.81% -- 10.3% 4.43%-10.3% 4.6% - 6.8% 4.2% - 5.9% 6.6% 4.2%-6.8% Expected life 5 years -- 3 years 3-5 years 5 years 7 years 3 years 3-7 years |
Schedule of nonvested share activity | 2018 2017 Weighted Weighted Average Average Grant Date Grant Date NON-VESTED AWARDS Shares Fair Value Shares Fair Value Non-vested balances, January 1, 2,685,004 $ 0.35 920,000 $ 0.59 Granted (+) 150,000 (1 ) $ 0.25 3,515,000 (2 ) $ 0.36 Cancelled (-) 50,000 (3 ) $ 0.32 860,000 (3 ) $ 0.68 Vested/Excercised (-) 717,501 $ 0.30 889,996 $ 0.36 Non-vested balances, December 31, 2,067,503 $ 0.36 2,685,004 $ 0.35 |
Schedule of stock option activity | 2018 2017 Weighted Weighted Average Average OUTSTANDING AND EXERCISABLE AWARDS Shares Exercise Price Shares Exercise Price Awards outstanding, January 1, 4,173,334 $ 0.60 2,090,668 $ 0.86 Granted (+) 150,000 (1 ) $ 0.50 3,515,000 (2 ) $ 0.59 Cancelled (-) 210,000 (3 ) $ 0.83 1,402,334 (3 ) $ 0.97 Exercised (-) 100,000 (4 ) $ 0.44 30,000 (4 ) $ 0.57 Awards outstanding, December 31, 4,013,334 $ 0.58 4,173,334 $ 0.60 Awards vested and expected to vest, December 31, 3,422,491 $ 0.58 3,577,089 $ 0.60 Awards outstanding and exercisable, December 31, 1,945,831 $ 0.56 1,488,330 $ 0.61 |
Schedule of employee service share-based compensation | YEAR ENDED DECEMBER 31, 2018 YEAR ENDED DECEMBER 31, 2017 Shared-Based Compensation Expense Shared-Based Compensation Expense Employees Directors Non-Employees Total Employees Directors Non-Employees Total Restricted stock compensation expense $ 67,690 $ 320,000 $ - $ 387,690 $ 157,857 $ - $ - $ 157,857 Non-qualified option stock compensation expense 291,625 - 4,089 295,714 118,964 103,335 7,054 229,353 Total share-based compensation before taxes $ 359,315 $ 320,000 $ 4,089 $ 683,404 $ 276,821 $ 103,335 $ 7,054 $ 387,210 |
Earnings Per Common Share (EP_2
Earnings Per Common Share (EPS) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share, basic and diluted | YEARS ENDED DECEMBER 31, 2018 2017 Basic Loss Per Share Computation: Net loss $ (1,456,476) $ (3,533,937) Weighted average number of common shares 83,274,171 82,911,730 Basic Loss Per Share $ (0.02) $ (0.04) Diluted Loss Per Share Computation: Net loss $ (1,456,476) $ (3,533,937) Weighted average number of common shares 83,274,171 82,911,730 Incremental shares from assumed conversions of stock options - - Adjusted weighted average number of common shares 83,274,171 82,911,730 Diluted Loss Per Share $ (0.02) $ (0.04) |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of accumulated other comprehensive income (loss) | YEARS ENDED DECEMBER 31, 2018 2017 Balances, January 1 $ (122,461 ) $ (309,369 ) Net foreign currency translation (loss) gain (64,024 ) 186,908 Balances, December 31 $ (186,485 ) $ (122,461 ) |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum rental payments for operating leases | North America Europe Total 2019 $ 630,000 $ 186,000 $ 816,000 2020 495,000 186,000 681,000 2021 514,000 186,000 700,000 2022 533,000 186,000 719,000 2023 553,000 46,000 599,000 Thereafter 2,385,000 - 2,385,000 Total $ 5,110,000 $ 790,000 $ 5,900,000 |
Revenue by Service Type, Cust_2
Revenue by Service Type, Customer Type and by Geographic Region (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Revenues [Abstract] | |
Schedule of consolidated revenues | YEARS ENDED DECEMBER 31, 2018 2017 Carrier Services $ 50,050,000 $ 45,003,335 Managed Services: Managed Service Fees 25,232,019 22,810,476 Billable Service Fees 1,838,018 3,257,840 Reselling and Other Services 6,558,859 4,812,595 $ 83,678,896 $ 75,884,246 |
Revenue from external customers by customers type | YEARS ENDED DECEMBER 31, 2018 2017 U.S. Federal Government $ 66,346,922 $ 58,625,389 U.S. State and Local Governments 445,855 394,704 Foreign Governments 148,155 193,565 Commercial Enterprises 16,737,964 16,670,588 $ 83,678,896 $ 75,884,246 |
Revenue from external customers by geographic areas | YEARS ENDED DECEMBER 31, 2018 2017 North America $ 78,702,974 $ 71,357,018 Europe 4,975,922 4,527,228 $ 83,678,896 $ 75,884,246 |
Significant Accounting Polici_4
Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Computer Equipment [Member] | Minimum [Member] | |
Estimated Useful Life | 3 years |
Computer Equipment [Member] | Maximum [Member] | |
Estimated Useful Life | 5 years |
Furniture and Fixtures [Member] | |
Estimated Useful Life | 5 years |
Mobile equipment [Member] | |
Estimated Useful Life | 3 years |
Significant Accounting Polici_5
Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash, uninsured amount | $ 521,878 | $ 3,786,300 |
Product development costs | 229,000 | 579,800 |
Foreign | ||
Cash, uninsured amount | $ 1,021,800 | $ 956,500 |
Accounts Receivable and Signi_3
Accounts Receivable and Significant Concentrations (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Gross accounts receivable | $ 11,196,048 | $ 8,238,643 |
Less: allowances for doubtful accounts | (106,733) | (107,618) |
Accounts receivable, net | 11,089,315 | 8,131,025 |
Government [Member] | ||
Gross accounts receivable | 7,332,338 | 6,055,397 |
Commercial [Member] | ||
Gross accounts receivable | $ 3,863,710 | $ 2,183,246 |
Accounts Receivable and Signi_4
Accounts Receivable and Significant Concentrations (Details 1) - Accounts Receivable [Member] | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
U.S. Customs Boarder Patrol [Member] | ||
As a % of receivables | 14.00% | 12.00% |
U.S. Immigration and Customs Enforcement [Member] | ||
As a % of receivables | 0.00% | 13.00% |
U.S. Federal Air Marshall Service [Member] | ||
As a % of receivables | 3.00% | 10.00% |
Iron Bow Technologies [Member] | ||
As a % of receivables | 15.00% | 0.00% |
Accounts Receivable and Signi_5
Accounts Receivable and Significant Concentrations (Details 2) - Sales Revenue, Net [Member] | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
U.S. Immigration and Customs Enforcement [Member] | ||
As a % of revenues | 16.00% | 17.00% |
U.S. Customs Boarder Patrol [Member] | ||
As a % of revenues | 11.00% | 11.00% |
Unbilled Accounts Receivable _3
Unbilled Accounts Receivable and Significant Concentrations (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Unbilled accounts receivable | $ 9,566,170 | $ 8,131,448 |
Government [Member] | ||
Unbilled accounts receivable | 9,253,586 | 7,872,675 |
Commercial [Member] | ||
Unbilled accounts receivable | $ 312,584 | $ 258,773 |
Unbilled Accounts Receivable _4
Unbilled Accounts Receivable and Significant Concentrations (Details 1) - Unbilled receivables [Member] | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
U.S. Department of Homeland Security HQ [Member] | ||
As a % of receivables | 11.00% | 11.00% |
U.S. Immigration and Customs Enforcement [Member] | ||
As a % of receivables | 37.00% | 27.00% |
U.S. Coast Guard [Member] | ||
As a % of receivables | 11.00% | 0.00% |
U.S. Transportation Safety Administration [Member] | ||
As a % of receivables | 10.00% | 12.00% |
Other Current Assets (Details)
Other Current Assets (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Inventories | $ 183,900 | $ 157,058 |
Prepaid rent, insurance and other assets | 902,786 | 610,886 |
Other current assets | $ 1,086,686 | $ 767,944 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Gross property and equipment | $ 2,890,995 | $ 2,688,482 |
Less: accumulated depreciation and amortization | 1,878,311 | 1,370,062 |
Property and equipment, net | 1,012,684 | 1,318,420 |
Computer Hardware Software [Member] | ||
Gross property and equipment | 2,110,298 | 1,943,180 |
Furniture and Fixtures [Member] | ||
Gross property and equipment | 333,539 | 296,316 |
Leaseholds and Leasehold Improvements [Member] | ||
Gross property and equipment | 268,561 | 260,748 |
Automobiles [Member] | ||
Gross property and equipment | $ 178,597 | $ 188,238 |
Property and Equipment (Detai_2
Property and Equipment (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Capital leased assets, gross | $ 385,823 | $ 391,105 |
Less: accumulated amortization | 115,570 | 20,890 |
Capital leased assets, net | 270,253 | 370,215 |
Automobiles [Member] | ||
Capital leased assets, gross | 95,600 | 100,882 |
Computer Hardware Software [Member] | ||
Capital leased assets, gross | $ 290,223 | $ 290,223 |
Property and Equipment (Detai_3
Property and Equipment (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Owned property and equipment depreciation | $ 429,605 | $ 400,837 |
Leased property and equipment amortization | 121,700 | 13,800 |
Property and equipment depreciation expense | $ 551,305 | $ 414,637 |
Property and Equipment (Detai_4
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property and equipment, gross | $ 2,890,995 | $ 2,688,482 |
Accumulated depreciation | 1,878,311 | 1,370,062 |
Property and equipment, net | 1,012,684 | 1,318,420 |
Gain (loss) on disposition of property and equipment | 0 | (179,761) |
Automobiles [Member] | ||
Property and equipment, gross | $ 178,597 | $ 188,238 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Gross Carrying Amount | $ 6,375,175 | $ 8,525,008 |
Accumulated Amortization | (3,271,422) | (4,853,502) |
Net Book Value | 3,103,753 | 3,671,506 |
Trademarks and Trade Names [Member] | ||
Gross Carrying Amount | 290,472 | 290,472 |
Accumulated Amortization | (90,370) | (71,005) |
Net Book Value | $ 200,102 | $ 219,467 |
Weighted Average Amortization Period | 5 years | 5 years |
Customer Relationships [Member] | ||
Gross Carrying Amount | $ 1,980,000 | $ 1,980,000 |
Accumulated Amortization | (1,732,500) | (1,485,000) |
Net Book Value | $ 247,500 | $ 495,000 |
Weighted Average Amortization Period | 8 years | 8 years |
Channel Relationships [Member] | ||
Gross Carrying Amount | $ 2,628,080 | $ 2,628,080 |
Accumulated Amortization | (817,625) | (642,420) |
Net Book Value | $ 1,810,455 | $ 1,985,660 |
Weighted Average Amortization Period | 5 years | 5 years |
Internally Developed Software [Member] | ||
Gross Carrying Amount | $ 1,476,623 | $ 3,181,794 |
Accumulated Amortization | (630,927) | (2,246,650) |
Net Book Value | $ 845,696 | $ 935,144 |
Weighted Average Amortization Period | 3 years | 3 years |
Cybersecurity Software [Member] | ||
Gross Carrying Amount | $ 444,662 | |
Accumulated Amortization | (408,427) | |
Net Book Value | $ 36,235 | |
Weighted Average Amortization Period | 3 years |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
2019 | $ 591,072 | |
2020 | 516,531 | |
2021 | 466,767 | |
2022 | 297,105 | |
2023 | 194,570 | |
Thereafter | 1,037,708 | |
Total | 3,103,753 | $ 3,671,506 |
Trademarks and Trade Names [Member] | ||
2019 | 19,365 | |
2020 | 19,365 | |
2021 | 19,365 | |
2022 | 19,365 | |
2023 | 19,365 | |
Thereafter | 103,278 | |
Total | 200,102 | 219,467 |
Customer Relationships [Member] | ||
2019 | 247,500 | |
2020 | 0 | |
2021 | 0 | |
2022 | 0 | |
2023 | 0 | |
Thereafter | 0 | |
Total | 247,500 | 495,000 |
Channel Relationships [Member] | ||
2019 | 175,205 | |
2020 | 175,205 | |
2021 | 175,205 | |
2022 | 175,205 | |
2023 | 175,205 | |
Thereafter | 934,430 | |
Total | 1,810,455 | 1,985,660 |
Internally Developed Software [Member] | ||
2019 | 149,002 | |
2020 | 321,961 | |
2021 | 272,197 | |
2022 | 102,535 | |
2023 | 0 | |
Thereafter | 0 | |
Total | $ 845,696 | $ 935,144 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Capitalized software cost | $ 224,900 | $ 385,000 |
Aggregate amortization expense | $ 756,346 | $ 1,078,578 |
Internally development [Member] | ||
Weighted average remaining life | 5 years 6 months | |
Purchased intangibles [Member] | ||
Weighted average remaining life | 1 year 6 months |
Other Current Liabilities (Deta
Other Current Liabilities (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Other Liabilities Disclosure [Abstract] | ||
Carrier service costs | $ 8,476,110 | $ 7,339,150 |
Salaries and payroll taxes | 1,308,726 | 1,259,331 |
Inventory purchases, consultants and other costs | 913,038 | 762,770 |
Severance costs | 1,634 | 328,109 |
U.S. income tax payable | 8,550 | 8,850 |
Foreign income tax payable (receivable) | 8,380 | (1,860) |
Contingent consideration (Note 4) | 0 | 100,000 |
Total accrued expenses | $ 10,716,438 | $ 9,796,350 |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) | Dec. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
Line of credit borrowing capacity | $ 4,900,000 |
Long Term Debt and Other Term_3
Long Term Debt and Other Term Obligations (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Capital lease obligations | $ 229,365 | $ 333,700 |
Deferred rent liability | 120,284 | 148,357 |
Short term installment borrowings | 145,931 | 133,250 |
Total other term obligations | 495,580 | 281,607 |
Other Current Liabilities [Member] | ||
Capital lease obligations | 107,325 | 101,591 |
Deferred rent liability | 46,332 | 70,021 |
Short term installment borrowings | 145,931 | 133,250 |
Total other term obligations | 192,263 | 203,271 |
Total capital leases and other term obligations | 299,588 | 304,862 |
Other Noncurrent Liabilities [Member] | ||
Capital lease obligations | 122,040 | 232,109 |
Deferred rent liability | 73,952 | 78,336 |
Short term installment borrowings | 0 | 0 |
Total other term obligations | 73,952 | 78,336 |
Total capital leases and other term obligations | $ 195,992 | $ 310,445 |
Long Term Debt and Other Term_4
Long Term Debt and Other Term Obligations (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Future estimated remaining repayments on long-term debt for the fiscal years ending December 31: | ||
2019 | $ 299,588 | |
2020 | 126,432 | |
2021 | 7,083 | |
2022 | 5,566 | |
2023 | 9,880 | |
Thereafter | 47,031 | |
Total | 495,580 | $ 281,607 |
Long-Term Debt Related to Assets Held for Sale [Member] | ||
Future estimated remaining repayments on long-term debt for the fiscal years ending December 31: | ||
2019 | 107,325 | |
2020 | 116,208 | |
2021 | 5,832 | |
2022 | 0 | |
2023 | 0 | |
Thereafter | 0 | |
Total | 229,365 | |
Other Long Term Debt [Member] | ||
Future estimated remaining repayments on long-term debt for the fiscal years ending December 31: | ||
2019 | 192,263 | |
2020 | 10,224 | |
2021 | 1,251 | |
2022 | 5,566 | |
2023 | 9,880 | |
Thereafter | 47,031 | |
Total | $ 266,215 |
Long Term Debt and Other Term_5
Long Term Debt and Other Term Obligations (Details 2) | Dec. 31, 2018USD ($) |
Future minimum payments remaining under lease agreements for fiscal years ending December 31: | |
2019 | $ 121,421 |
2020 | 121,421 |
2021 | 6,042 |
Total principal and interest payments | 248,884 |
Less: portion representing interest | 19,519 |
Present value of minimum lease payments under capital lease agreements | 229,365 |
Less: current portion | 107,325 |
Capital lease obligations, net of current portion | $ 122,040 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current provision (benefit) | ||
State | $ 10,000 | $ 10,000 |
Foreign | 55,113 | 29,586 |
Total | 65,113 | 39,586 |
Deferred provision (benefit) | ||
Federal | 633,073 | 0 |
State | 514,220 | 0 |
Foreign | (19,080) | (1,619) |
Total | 1,128,213 | (1,619) |
Income tax benefit | $ 1,193,326 | $ 37,967 |
Income Taxes (Details 1)
Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Statutory federal income tax rate | 21.00% | 34.00% |
State, net of federal benefit | (2.10%) | (0.30%) |
Non-deductible expenses | 5.40% | (5.40%) |
Change in valuation allowance | (200.10%) | 6.90% |
Foreign rate differential | 3.10% | 0.90% |
Return to accrual difference true-ups | 6.90% | 3.80% |
Deferred tax adjustment and true-up | (84.10%) | 69.20% |
Change in federal statutory rate | 0.00% | (109.50%) |
Combined effective tax rate | (249.40%) | (1.00%) |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 10,513,224 | $ 10,526,231 |
Alternative minimum tax credit | 45,650 | 45,650 |
Share-based compensation | 536,223 | 358,360 |
Intangible amortization | 565,013 | 740,685 |
Other assets | 423,394 | 233,447 |
Total deferred tax assets | 12,083,504 | 11,904,373 |
Less: valuation allowance | (10,507,891) | (9,550,279) |
Total deferred tax assets, net | 1,575,613 | 2,354,094 |
Deferred tax liabilities: | ||
Goodwill amortization | 2,293,533 | 2,203,154 |
Depreciation | 345,136 | 86,506 |
Foreign intangible amortization | 447,811 | 447,811 |
Other liabilities | 12,643 | 8,852 |
Total deferred tax liabilities | 3,099,123 | 2,746,323 |
Net deferred tax liability | $ (1,523,510) | $ (392,229) |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Beginning balance | $ (9,550,279) | $ (9,791,680) |
(Increases) decreases | (957,612) | 241,401 |
Ending balance | $ (10,507,891) | $ (9,550,279) |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 38,500,000 | |
Effective federal statutory income tax rate | 21.00% | 34.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stockholders' Equity Note [Abstract] | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 110,000,000 | 110,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares outstanding | 84,112,446 | 83,031,595 |
Gross proceeds for issuance of common stock for stock option exercises | $ 100,000 | $ 43,900 |
Stock Options and Award Progr_3
Stock Options and Award Programs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Granted | 150,000 | 3,515,000 |
Unamortized RSA compensation expense | $ (123,866) | |
Restricted Stock [Member] | ||
Non-vested awards outstanding | 0 | 250,000 |
Granted | 980,851 | 300,000 |
Cancelled | 0 | 150,000 |
Vested/Excercised | 680,851 | 400,000 |
Non-vested awards outstanding | 300,000 | 0 |
Weighted-average remaining contractual life (in years) | 2 years 4 days | 0 years |
Unamortized RSA compensation expense | $ 136,310 | $ 0 |
Aggregate intrinsic value of RSAs non-vested | 126,000 | 0 |
Aggregate intrinsic value of RSAs vested | $ 320,000 | $ 244,000 |
Employee Stock Option [Member] | ||
Non-vested awards outstanding | 2,685,004 | 920,000 |
Granted | 150,000 | 3,515,000 |
Cancelled | 50,000 | 860,000 |
Vested/Excercised | 717,501 | 889,996 |
Non-vested awards outstanding | 2,067,503 | 2,685,004 |
Weighted average grant date fair value per share, non-vested beginning balance | $ 0.35 | $ 0.59 |
Weighted average grant date fair value per share, granted | 0.25 | 0.36 |
Weighted average grant date fair value per share, cancelled | 0.32 | 0.68 |
Weighted average grant date fair value per share, vested/excercised | 0.30 | 0.36 |
Weighted average grant date fair value per share, non-vested ending balance | $ 0.36 | $ 0.35 |
Stock Options and Award Progr_4
Stock Options and Award Programs (Details 1) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Stock options granted | 150,000 | 3,515,000 |
Expected dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected volatility | 65.20% | 68.20% |
Risk-free interest rate | 1.00% | 1.70% |
Forfeiture rate | 4.43% | 4.20% |
Expected life | 2 years | 3 years |
Maximum [Member] | ||
Expected volatility | 6.95% | 72.50% |
Risk-free interest rate | 2.73% | 2.10% |
Forfeiture rate | 10.30% | 6.80% |
Expected life | 5 years | 7 years |
Employee Stock Option [Member] | ||
Stock options granted | 150,000 | 3,515,000 |
Expected dividend yield | 0.00% | 0.00% |
Expected life | 5 years | 5 years |
Employee Stock Option [Member] | Minimum [Member] | ||
Expected volatility | 65.20% | 68.20% |
Risk-free interest rate | 2.72% | 1.80% |
Forfeiture rate | 4.43% | 4.60% |
Employee Stock Option [Member] | Maximum [Member] | ||
Expected volatility | 66.70% | 74.20% |
Risk-free interest rate | 2.73% | 2.10% |
Forfeiture rate | 4.81% | 6.80% |
Board of Directors Option [Member] | ||
Stock options granted | 350,000 | |
Expected dividend yield | 0.00% | |
Expected life | 7 years | |
Board of Directors Option [Member] | Minimum [Member] | ||
Expected volatility | 69.60% | |
Risk-free interest rate | 1.70% | |
Forfeiture rate | 4.20% | |
Board of Directors Option [Member] | Maximum [Member] | ||
Expected volatility | 70.10% | |
Risk-free interest rate | 2.00% | |
Forfeiture rate | 5.90% | |
Non Employee Stock Option [Member] | ||
Stock options granted | 50,000 | 75,000 |
Expected dividend yield | 0.00% | 0.00% |
Expected volatility | 69.50% | 72.50% |
Risk-free interest rate | 1.00% | 1.70% |
Forfeiture rate | 10.30% | 6.60% |
Expected life | 3 years | 3 years |
Stock Options and Award Progr_5
Stock Options and Award Programs (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of shares, granted | 150,000 | 3,515,000 |
Employee Stock Option [Member] | ||
Number of shares, outstanding and exercisable, options outstanding, beginning balance | 4,173,334 | 2,090,668 |
Number of shares, granted | 150,000 | 3,515,000 |
Number of shares, cancelled | 210,000 | 1,402,334 |
Number of shares, exercised | 100,000 | 30,000 |
Number of shares, outstanding and exercisable, options outstanding, ending balance | 4,013,334 | 4,173,334 |
Number of shares, options vested and expected to vest, ending balance | 3,422,491 | 3,577,089 |
Number of shares, options outstanding and exercisable, ending balance | 1,945,831 | 1,488,330 |
Weighted average exercise price per share, outstanding and exercisable, options outstanding, beginning balance | $ 0.60 | $ 0.86 |
Weighted average exercise price per share, granted | 0.50 | 0.59 |
Weighted average exercise price per share, cancelled | 0.83 | 0.97 |
Weighted average exercise price per share, exercised | 0.44 | 0.57 |
Weighted average exercise price per share, outstanding and exercisable, options outstanding, ending balance | 0.58 | 0.60 |
Number of shares, vested and expected to vest, outstanding, weighted average exercise price, ending balance | 0.58 | 0.60 |
Weighted average exercise price per share, options outstanding and exercisable, ending balance | $ 0.56 | $ 0.61 |
Stock Options and Award Progr_6
Stock Options and Award Programs (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Restricted stock compensation expense | $ 387,690 | $ 157,857 |
Non-qualified stock compensation expense | 295,714 | 229,353 |
Total share-based compensation before taxes | 683,404 | 387,210 |
Employee Stock Option [Member] | ||
Restricted stock compensation expense | 67,690 | 157,857 |
Non-qualified stock compensation expense | 291,625 | 118,964 |
Total share-based compensation before taxes | 359,315 | 276,821 |
Board of Directors Option [Member] | ||
Restricted stock compensation expense | 320,000 | 0 |
Non-qualified stock compensation expense | 0 | 103,335 |
Total share-based compensation before taxes | 320,000 | 103,335 |
Non Employee Stock Option [Member] | ||
Restricted stock compensation expense | 0 | 0 |
Non-qualified stock compensation expense | 4,089 | 7,054 |
Total share-based compensation before taxes | $ 4,089 | $ 7,054 |
Stock Options and Award Progr_7
Stock Options and Award Programs (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Intrinsic value of stock options exercised | $ 10,000 | $ 9,000 |
Weighted-average remaining contractual life options, outstanding | 4 years 1 month 6 days | |
Weighted-average remaining contractual life options, exercisable | 3 years 10 months 24 days | |
Weighted-average remaining contractual life options, vested and expected to vest | 3 years 10 months 24 days | |
Unamortized share-based compensation expense | $ 613,800 | |
Unamortized share-based compensation expense, recognition period | 2 years 2 months 1 day |
Earnings Per Common Share (EP_3
Earnings Per Common Share (EPS) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Basic EPS Computation: | ||
Net loss | $ (1,456,476) | $ (3,533,937) |
Weighted average number of common shares | 83,274,171 | 82,911,730 |
Basic EPS | $ (0.02) | $ (0.04) |
Diluted EPS Computation: | ||
Net loss | $ (1,456,476) | $ (3,533,937) |
Weighted average number of common shares | 83,274,171 | 82,911,730 |
Incremental shares from assumed conversions of stock options | 0 | 0 |
Adjusted weighted average number of common shares | 83,274,171 | 82,911,730 |
Diluted EPS | $ (0.02) | $ (0.04) |
Earnings Per Common Share (EP_4
Earnings Per Common Share (EPS) (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Antidilutive securities excluded from computation of earnings per share | 4,313,334 | 4,173,334 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Balances beginning of the period | $ (122,461) | $ (309,369) |
Net foreign currency translation gain (loss) | (64,024) | 186,908 |
Balances ending of the period | $ (186,485) | $ (122,461) |
Commitments and Contingencies_2
Commitments and Contingencies (Details) | Dec. 31, 2018USD ($) |
2019 | $ 809,000 |
2020 | 667,000 |
2021 | 685,000 |
2022 | 713,000 |
2023 | 517,000 |
Thereafter | 2,660,000 |
Total | 6,051,000 |
North America [Member] | |
2019 | 623,000 |
2020 | 481,000 |
2021 | 499,000 |
2022 | 527,000 |
2023 | 471,000 |
Thereafter | 2,660,000 |
Total | 5,261,000 |
Europe [Member] | |
2019 | 186,000 |
2020 | 186,000 |
2021 | 186,000 |
2022 | 186,000 |
2023 | 46,000 |
Thereafter | 0 |
Total | $ 790,000 |
Commitments and Contingencies_3
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 909,200 | $ 877,900 |
Revenue by Service Type, Cust_3
Revenue by Service Type, Customer Type and by Geographic Region (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues, net | $ 83,678,896 | $ 75,884,246 |
Carrier Services [Member] | ||
Revenues, net | 50,050,000 | 45,003,335 |
Management Services [Member] | Managed Service Fees [Member] | ||
Revenues, net | 25,232,019 | 22,810,476 |
Management Services [Member] | Billable Service Fees [Member] | ||
Revenues, net | 1,838,018 | 3,257,840 |
Management Services [Member] | Reselling and Other Services [Member] | ||
Revenues, net | $ 6,558,859 | $ 4,812,595 |
Revenue by Service Type, Cust_4
Revenue by Service Type, Customer Type and by Geographic Region (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue, net | $ 83,678,896 | $ 75,884,246 |
U.S. Federal Government [Member] | ||
Revenue, net | 66,346,922 | 58,625,389 |
U.S. State and Local Governments [Member] | ||
Revenue, net | 445,855 | 394,704 |
Foreign Governments [Member] | ||
Revenue, net | 148,155 | 193,565 |
Commercial Enterprises [Member] | ||
Revenue, net | $ 16,737,964 | $ 16,670,588 |
Revenue by Service Type, Cust_5
Revenue by Service Type, Customer Type and by Geographic Region (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue, net | $ 83,678,896 | $ 75,884,246 |
North America [Member] | ||
Revenue, net | 78,702,974 | 71,357,018 |
Europe [Member] | ||
Revenue, net | $ 4,975,922 | $ 4,527,228 |