Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of financial conditions and results of operations for the fiscal years ended December 31, 2025 and 2024, should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report on Form 10-K. In this Annual Report, we sometimes refer to the twelve-month period ended December 31, 2025 as 2025, and to the twelve-month period ended December 31, 2024 as 2024.

We caution you that any forward-looking statements included in this section are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risk factors that are included in Part I, Item 1A of this report.

How We Evaluate our Business Performance and Opportunities

The major qualitative and quantitative factors we consider in the evaluation of our operating results include the following:

	●	With respect to our Software segment, our current strategy is to focus on cloud-based delivery of our software products. Our observation of industry trends leads us to anticipate that cloud-based delivery will continue to be our principal software business and a primary source of revenues for us, and we are seeing our customers migrate to cloud-based services. When we evaluate our results, we assess whether our cloud-based software revenues are increasing, relative to prior periods and relative to other sources of revenue.
	●	With respect to our Document Services segment, our strategy is to maintain and grow our core document conversion business, while simultaneously leveraging our software products and services to provide more attractive total digital transformation solutions for the customers of our Document Services segment. Accordingly, when we evaluate our results for Document Services, we will assess whether our revenues increase with respect to the segment's services, relative to prior periods, but we will also be assessing whether Document Services customers begin to make purchases of other products or services.
	●	We are focused upon sales of our document services and software solutions through resellers and directly to our customers, with a further focus on select vertical markets. We assess whether our sales resulting from relationships with resellers are increasing, relative to prior periods and relative to direct sales to customers, and whether reseller or direct efforts offer the best opportunities for growth in our targeted vertical markets.
	●	Our software sales cycle averages 1-3 months; however, large projects can be longer, lasting 4-6 months. When a software project begins, we generally perform pre-installation assessment, project scoping, and implementation consulting. Our document services have an even wider variance in sales cycles, from near-immediate to multi-year. We seek to manage the flow of work by maintaining a backlog of work orders not yet processed. Therefore, when we plan our business and evaluate our results, we consider the revenue we expect to recognize from projects in our late-stage software pipeline and in our document services backlog queue.
	●	We monitor our costs and capital needs to ensure efficiency as well as an adequate level of support for our business plan.
	●	While we are constantly focused on organic growth, we also continually monitor potential acquisitions of complementary solutions and expertise that are consistent with our core business. We look for acquisitions that can add value for our customers and are expected to be accretive to our financial performance.

Executive Overview of Results

2025 results reflected challenges on multiple, unrelated fronts. Our Document Services segment faced a temporary reduction in volume aligned with the renewal of our contract with our largest customer, which occurred June 1, 2025. We have since taken orders to refill our project backlog and have resumed operating at more historical levels. Additionally, our Software segment faced market headwinds in the two major vertical markets we are pursuing, construction/homebuilding and K-12 Education. The homebuilding industry had a poor year which in turn resulted in curtailed spending across the board, including our solutions. K-12 Education faced uncertainty in federal funding levels and budget challenges, resulting in a similar spending hiatus for our solutions. Our margins remained stable by revenue source and we generated positive operating cash flow in 2025.

Operating expenses for 2025 increased 10.2%, primarily driven by intentional investments in sales and marketing to accelerate revenue growth, plus investments in general and administrative to further improve security and compliance and to better scale, as well as expanding our development team to bring product enhancements to market more swiftly.

Below are our key financial results for 2025 (consolidated unless otherwise noted):

●	Revenues were $16,583,446, representing revenue contraction of 8.0% year over year.
●	Cost of revenues was $5,630,862, a decrease of 15.3% year over year.
●	Operating expenses (excluding cost of revenues) were $12,741,153, an increase of 10.4% year over year.
●	Loss from operations was $1,788,569, compared to loss from operations of $173,505 for 2024.
●	Net loss was $1,872,895 with basic and diluted net loss per share of $0.44, compared to net loss of $546,215 with basic and diluted net loss per share of $0.13 for 2024.

●	Net cash provided by operating activities was $933,871, compared to $3,858,160 for 2024.
●	Investing activities include both capitalization of internal use software of $469,602, compared to $388,570 for 2024 and purchases of property and equipment of $354,378, compared to $439,203 for 2024.
●	Financing activities included $1,339,500 in full repayment of our notes payables, primarily utilizing $1,621,325 in net proceeds from the issuance of common stock via our at-the-market offering of common stock.
●	As of December 31, 2025, we had 167 employees, including 19 part-time employees, compared to 154 employees, including 16 part-time employees, as of December 31, 2024.

Financial Impact of Current Economic Conditions

Our overall performance depends on economic conditions, and our continuing growth will be due in part to continued growth in the US economy and stability of state and local governmental spending in the US. We do not have direct risk exposure to federal spending levels, but we could face exposure indirectly if federal spending reductions have a corresponding effect on state and local budgets, particularly in the K-12 Education sector. Our performance will also continue to be affected by any increased wage inflation, as well as modest GDP growth rates.

Volatility from trade protectionism is likely to have a minimal direct impact on us because we consume relatively little in raw materials. However, we have customers in industries that are likely to be affected, such as homebuilding and construction. Any industry-specific or macroeconomic downturn could affect our customers' and potential customers' budgets for technology procurement and stall our growth plans. However, absent economic disruptions, and based on the current trend of our business operations and our continued focus on strategic initiatives to grow our customer base, we believe in the strength of our brand and our focus on our strategic priorities.

Reportable Segments

We have two reportable segments: Software and Document Services. These reportable segments are discussed above under "Item 1. Business." We have recently renamed our reportable segments, but we have not changed the revenue streams constituting each segment. Our Software segment was previously referred to as Document Management, and our Document Services segment was previously referred to as Document Conversion.

Results of Operations

Revenues

The following table sets forth our revenues by reportable segment for the periods indicated:

		For the years ended December 31,
		2025				2024
Revenues by segment
Software		$	8,013,147			$	7,523,874
Document Services			8,570,299				10,494,499
Total revenues		$	16,583,446			$	18,018,373

The following table sets forth our revenues by revenue source for the periods indicated:

		For the years ended December 31,
		2025				2024
Revenues:
Software as a service		$	6,331,167			$	5,688,936
Software maintenance services			1,283,332				1,410,387
Professional services			8,141,155				10,017,974
Storage and retrieval services			827,792				901,076
Total revenues		$	16,583,446			$	18,018,373

The following tables sets forth our revenues by revenue source and segment for the periods indicated:

		For the years ended December 31,
		2025				2024
Software segment revenues:
Software as a service		$	6,331,167			$	5,688,936
Software maintenance services			1,283,332				1,410,387
Professional services			398,648				424,551
Total Software segment revenues		$	8,013,147			$	7,523,874

		For the years ended December 31,
		2025				2024
Document Services segment revenues:
Professional services		$	7,742,507			$	9,593,423
Storage and retrieval services			827,792				901,076
Total Document Services segment revenues		$	8,570,299			$	10,494,499

Our total revenues in 2025 decreased by $1,434,927, or 8.0%, from 2024 revenues, primarily driven by our Document Services professional services, due to a reduction in volume from our largest customer, more than offsetting growth of 11.3% in software as a service.

Software as a Service Revenues

We provide access to our software solutions as a service, accessible through the internet. Our customers typically enter into our software as a service agreement for periods of one year or more. Under these agreements, we generally provide access to the applicable software, data storage and related customer assistance and support. Revenues from the sale of software as a service, which are reported as part of our Software segment increased by $642,231, or 11.3% in 2025 compared to 2024. This increase was primarily the result of new cloud-based solution sales, primarily our IntelliCloud Payables Automation Solutions. The payables automation growth was partially offset by weakness in our traditional content management solutions, including YellowFolder in K-12, which was relatively flat year over year.

Software Maintenance Services Revenues

Software maintenance services revenues consist of fees for post-contract customer support services provided to license (premise-based) holders through support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when and if available. A substantial portion of these revenues were generated from renewals of maintenance agreements, which typically run on a year-to-year basis. Revenues from the sale of software maintenance services, which are reported as part of our Software segment, decreased by $127,055, or 9.0%, in 2025 compared to 2024. The decrease was driven by slightly increased attrition and some migrations to our SAAS solutions more than offsetting price increases.

Professional Services Revenues

Professional services revenues primarily consist of revenues from document scanning and conversion services, plus consulting, discovery, training, and advisory services to assist customers with document management needs. These revenues include arrangements that do not involve the sale of software. Of our total 2025 professional services revenues of $8,141,155, $7,742,507 was derived from our Document Services operations and $398,648 was derived from our Software operations. Our overall professional services revenues decreased by $1,876,819, or 18.7%, in 2025 compared to 2024. This decrease is the result of reduced scanning projects in our Document Services segment, due to timing of projects, which experienced an unusually low ebb in backlog that corresponded with the expiry of our prior contract with our largest customer, prior to the renewal on June 1, 2025. We have since taken orders to refill the backlog and have experienced the ramp up in production in Q4 2025, which was just 1.8% below Q4 2024.

Storage and Retrieval Services Revenues

We provide document storage and retrieval services to customers, primarily in Michigan. Revenues from storage and retrieval services, which are reported as part of our Document Services segment, decreased by $73,284, or 8.1%, during 2025 compared to 2024. This decrease was the result of a reduction in volume of work from our largest storage and retrieval customer, Rocket Mortgage, due to reduced document destruction as well as the continued impact of the slowdown in the home mortgage and refinancing industry.

Costs of Revenues and Gross Profits

The following table sets forth our cost of revenues by reportable segment for the periods indicated:

		For the years ended December 31,
		2025				2024
Cost of revenues by segment
Software		$	1,087,207			$	978,262
Document Services			4,543,655				5,671,727
Total cost of revenues		$	5,630,862			$	6,649,989

The following table sets forth our cost of revenues, by revenue source, for the periods indicated:

		For the years ended December 31,
		2025				2024
Cost of revenues:
Software as a service		$	942,885			$	856,774
Software maintenance services			54,838				57,667
Professional services			4,356,066				5,387,545
Storage and retrieval services			277,073				348,003
Total cost of revenues		$	5,630,862			$	6,649,989

The following tables sets forth our cost of revenues by revenue source and segment for the periods indicated:

		For the years ended December 31,
		2025				2024
Software segment cost of revenues:
Software as a service		$	942,885			$	856,774
Software maintenance services			54,838				57,667
Professional services			89,484				63,821
Total Software segment cost of revenues		$	1,087,207			$	978,262

		For the years ended December 31,
		2025				2024
Document Services segment cost of revenues:
Professional services		$	4,266,582			$	5,323,724
Storage and retrieval services			277,073				348,003
Total Document Services segment cost of revenues		$	4,543,655			$	5,671,727

Our total cost of revenues during 2025 decreased by $1,019,127 or 15.3%, from 2024. Our cost of revenues for our Software segment increased by $108,945, or 11.1%, impacted by the increased volume in sales of software and professional services in that segment. Our cost of revenues for our Document Services segment decreased by $1,128,072, or 19.9%, in 2025 compared to 2024, corresponding with the reduction in revenues.

		For the years ended December 31,
		2025				2024
Gross profit by segment
Software		$	6,925,940			$	6,545,612
Document Services			4,026,644				4,822,772
Total gross profit		$	10,952,584			$	11,368,384

		For the years ended December 31,
		2025				2024
Gross profit:
Software as a service		$	5,388,282			$	4,832,162
Software maintenance services			1,228,494				1,352,720
Professional services			3,785,089				4,630,429
Storage and retrieval services			550,719				553,073
Total gross profit		$	10,952,584			$	11,368,384
Gross profit percentage:
Software as a service			85.1	%			84.9	%
Software maintenance services			95.7	%			95.9	%
Professional services			46.5	%			46.2	%
Storage and retrieval services			66.5	%			61.4	%
Total gross profit percentage			66.0	%			63.1	%

Our overall gross profit increased to 66.0% in 2025 from 63.1% in 2024. The revenue mix between segments shifted favorably, with more relative revenue from SaaS and less from professional services in 2025 compared to 2024, driving the increase in total margin percent. Gross profit margins within each revenue line were stable, except for the increase in storage and retrieval from reduced destruction costs.

Cost of Software as a Service

Cost of software as a service, or SaaS, consists primarily of technical support personnel, hosting services, and related costs. Cost of software as a service increased by $86,111, or 10.1%, from 2024. Cost of software as a service is impacted by increasing our implementations team and support desk, as well as periodic improvements to infrastructure, which occurred in 2024 and 2025 but was more than offset by a reduction in support calls. As a result, in 2025, our gross margin increased slightly to 85.1% from 84.9% in 2024.

Cost of Software Maintenance Services

Cost of software maintenance services consists primarily of technical support personnel and related costs. Cost of software maintenance services decreased by $2,829, or 4.9%, in 2025 from 2024, which is in line with the reduced sales volume for this revenue line. As a result, our gross margin for software maintenance services decreased slightly to 95.7% in 2025 compared to 95.9% in 2024.

Cost of Professional Services

Cost of professional services consists primarily of compensation for employees performing the document conversion services, compensation of our software engineers and implementation consultants and related third-party costs. Cost of professional services decreased in 2025 by $1,031,479, or 19.1%, from 2024, slightly exceeding the decrease in revenues of 18.7% for the year. Consolidated, our gross margin for professional services increased to 46.5% during 2025 compared to 46.2% in 2024. In our Document Services segment, as inbound document conversion project volume dipped, we adjusted our workforce accordingly, reducing temporary workers first, wherever possible. Due to the manual nature of the prepping and scanning work required to convert documents from paper to digital, we have maintained staff to the levels of the work available. As a result of our ability to match costs with revenues, our gross profit margin percent for professional services remained stable despite the reduction in volume, at 44.9% compared to 44.5% in 2024. In our much smaller Software segment, our professional services cost of professional services increased more significantly than the sales revenue, due to the nature of the projects completed, resulting in gross profit margin percentages for professional services in our Software segment decreasing to 77.6% in 2025 compared to 85.0% during 2024. 2024 was a strong margin year, as 2023 was 71.0%. Gross margins may vary in professional services, depending on the type of project, such as paper scanning, micrographics, or consulting services, as well as depending upon the nature of each project and the amount of labor required to complete that project.

Cost of Storage and Retrieval Services

Cost of storage and retrieval services consists primarily of compensation for employees performing the document storage and retrieval services, including logistics, provided primarily by our Michigan operations and to a much lesser extent, our K-12 customers in Texas. Cost of storage and retrieval services decreased by $70,930, or 20.4%, during 2025 compared to 2024. The decrease was greater than the revenue decrease of 8.1% due to a significant decrease in document destruction, which carries a higher cost than other components of storage and retrieval. Document destruction was unusually high in 2024. Gross margins for our storage and retrieval services, which exclude the cost of facilities rental, maintenance, and related overheads, increased to 66.5% during 2025 compared to 61.4% in 2024.

Operating Expenses

The following table sets forth our operating expenses for the periods indicated:

		For the years ended December 31,
		2025				2024
Operating expenses:
General and administrative		$	8,690,615			$	8,010,025
Sales and marketing			2,804,898				2,403,251
Depreciation and amortization			1,245,640				1,128,613
Total operating expenses		$	12,741,153			$	11,541,889

General and Administrative Expenses

General and administrative expenses increased in 2025 by $680,590, or 8.5%, over 2024. Share-based compensation expense continues to be a significant portion of general and administrative expense, amounting to $1,287,242 in 2025 compared to $1,496,774 in 2024. The share-based compensation expense components for 2025 and 2024 are described in the following table:

		For the years ended
		December 31,
		2025				2024
Share based compensation expense components:
Stock options granted 2020 and 2022		$	391,809			$	690,819
Restricted stock awards granted			895,433				805,955
Total share-based compensation expense			1,287,242				1,496,774
Less amount related to cashless exercise			(283,399	)			(69,525	)
Share based compensation equity impact		$	1,003,843			$	1,427,249

Excluding the share-based compensation expense, total general and administrative expenses increased by $890,122, or 13.7% in 2025 over 2024, related to investments made in order to scale, including expanding our development and service delivery teams, enhancing our IT systems monitoring, and our SOC2 accreditation process, as well as wage increases.

Sales and Marketing Expenses

Sales and marketing expenses increased by $401,647, or 16.7%, in 2025 over 2024. The increases were primarily driven by the expansion of our sales and marketing teams as part of our investments intended to accelerate our sales. Additionally, we increased our spending on lead generation, primarily through an outsourced service, on consolidating our customer relationship management tools, and on select campaigns and increased travel and trade show materials and attendance.

Depreciation and Amortization

Depreciation and amortization increased by $117,027, or 10.4%, in 2025 over 2024, driven by both increased amortization on capitalizable software, which has increased in recent quarters as we bring new functionality to our payables automation solution, and by purchases of server hardware in 2025 and 2024 to update our infrastructure.

Other Items of Income and Expense

Interest Expense

Interest expense, net was $84,326 during 2025 as compared with $372,710 during 2024, representing a decrease of $288,384 or 77.4%. The decrease resulted from reduced interest expense from principal repayments in March, June, and August 2024 and culminating in June 2025 with full repayment of notes payable.

Liquidity and Capital Resources

We have financed our operations primarily through a combination of cash on hand, cash generated from operations, borrowings from third parties and related parties, and proceeds from private sales of equity. Since 2012, we have raised a net total of approximately $23.1 million in cash through issuances of equity securities and a further $5.0 million in cash through issuances of debt securities, of which all have been repaid as of June 18, 2025.

In recent years we engaged in several actions that significantly improved our liquidity and cash flows, including (i) effective June 1, 2025 through May 31, 2030, securing a renewal contract with our largest customer, (ii) on May 28, 2025, commencing an at-the-market offering, discussed below, (iii) repaying all of our debt securities as of June 18, 2025, and (iv) effective February 16, 2026, securing a line of credit through JPMorgan Chase Bank, N.A. ("JPMorgan Chase") in the amount of $1 million, as discussed in more detail below.

At December 31, 2025, we had $2.5 million in cash and cash equivalents, net working capital of $0.2 million, which includes $3.4 million in deferred revenues. Based on our current plans and assumptions, we believe our capital resources, including our cash and cash equivalents, along with funds expected to be generated from our operations and potential financing options, will be sufficient to meet our anticipated cash flow needs for at least the next 12 months, including to satisfy our expected working capital needs and our capital and debt service commitments over that period.

Our future cash resources and capital requirements may vary materially from those now planned. For example, from time to time we evaluate opportunities to expand our current offerings or to develop new products and services and technology or to acquire or invest in complementary businesses, which could increase our capital needs. Our ability to meet our capital needs in the short term will depend on many factors, including maintaining and enhancing our operating cash flow and successfully retaining and growing our client base in the midst of continuing uncertainty regarding inflation and economic growth, the impact of AI disruption in our markets, the timing of sales, the success of our new business partners expanding our product and service lines, the mix of products and services, unanticipated events over which we have no control increasing our operating costs or reducing our revenues beyond our current expectations, and other factors discussed in this Annual Report.

We believe we could seek additional debt or equity financing on acceptable terms. However, our ability to obtain additional capital, or to modify our existing debt arrangements, when needed or desired, will depend on many factors, including general economic and market conditions, our operating performance and investor and lender sentiment, and thus cannot be assured.

At-the-Market Offering

We maintain an effective registration statement covering up to $12.9 million of common stock, warrants, and units. The registration statement includes a prospectus covering the offer, issuance and sale of up to $10.0 million in our common stock from time to time in "at-the-market offerings" pursuant to an At the Market Agreement (the "ATM Program") with Lucid Capital Markets, LLC as our sales agent. We have sold 145,938 shares of our common stock pursuant to the ATM Program during 2025, and received aggregate net proceeds totaling $1,621,325. As of the filing date of this Annual Report, approximately $8.2 million remained available under the ATM Program

Indebtedness

As of December 31, 2025, we have no outstanding indebtedness. On June 18, 2025, we repaid the remaining outstanding principal and interest on our 2022 Notes. See Note 6 and Note 7 to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further information on the 2022 Notes.

On February 16, 2026, we entered into a $1 million secured term loan line of credit pursuant to a Credit Agreement (the "Credit Agreement") and other related agreements with JPMorgan Chase. The line of credit will expire on December 31, 2026 unless renewed by mutual agreement of the Company and JPMorgan Chase. The Company expects the proceeds of any borrowings under the line of credit to be used for, among other things, working capital, capital expenditures, and general corporate purposes.

Capital Expenditures

We anticipate capital expenditures in the range of $750,000 to $1 million for 2026, although there were no material commitments for capital expenditures at December 31, 2025. This is higher than recent years as we continue to refresh aging servers and evaluate a project to expand our storage and retrieval offering.

Cash Provided by Operating Activities.

From our inception, we have generated revenues from the sales, implementation, subscriptions, and maintenance of our internally generated software applications, as well as significantly increased revenues from document conversion services beginning in 2020. Our uses of cash from operating activities include compensation and related costs, hardware costs, rent for our corporate offices and warehouses, hosting fees for our cloud-based software services, other general corporate expenditures, and travel costs to client sites.

The majority of our software as a service revenues and our maintenance support services revenues are annual contracts which are generally invoiced and collected at the beginning of each renewal period. Of these annual renewals, we experience seasonality favoring the third quarter each year, due to governmental entity preferences for a July to June annual period. Accordingly, our cash collections are largest in the third quarter, and our deferred revenues are generally correspondingly at their highest during that period as well.

Net cash provided by operating activities during 2025 was $933,871, primarily attributable to the net loss adjusted for non-cash expenses of $2,758,386, a decrease in operating assets of 203,257 and a decrease in operating liabilities of $154,877. Net cash provided by operating activities during 2024 was $3,858,160, primarily attributable to the net loss adjusted for non-cash expenses of $2,840,747, a decrease in operating assets of $812,924 and an increase in operating liabilities of $750,704.

Cash Used in Investing Activities.

Net cash used in investing activities in 2025 was $823,980, including purchases of property and equipment of $354,378, which included server and laptop upgrades, and $469,602 in capitalized internal use software. Net cash used in investing activities in 2024 was $827,773, including purchases of property and equipment of $439,203, which included server upgrades, and $388,570 in capitalized internal use software.

Cash Used in Financing Activities.

Net cash used by financing activities during 2025 amounted to $70,846, including $1,797,106 in gross proceeds from the issuance of common stock, offset by $175,781 in costs paid for issuance of common stock, $69,260 in the principal portion of payments on the finance lease liabilities, $1,339,500 in repayment of notes payable, and $283,411 related to share-based compensation and warrants, primarily withholdings on vesting of restricted stock awards. Net cash used in financing activities during 2024 amounted to $1,625,000 in repayment of notes payable and $61,874 in payments for the principal portion of finance lease liabilities, as well as $69,525 in payments to taxing authorities in connection with shares directly withheld from employees.

Critical Accounting Policies and Estimates

These critical accounting policies and estimates made by management should be read in conjunction with Note 3 Summary of Significant Accounting Policies to the Consolidated Financial Statements.

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. The actual results experienced by us may differ materially from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected.

We consider the following accounting policies and estimates to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment:

	●	Revenue Recognition
	●	Business Acquisition, Goodwill and Intangibles
	●	Accounts Receivable, Unbilled
	●	Deferred Revenues
	●	Accounting for Costs of Computer Software to be Sold, Leased or Marketed and Accounting for Internal Use Software
	●	Accounting Stock-Based Compensation

Revenue Recognition

In accordance with ASC 606, "Revenue From Contracts With Customers," we follow a five-step model to assess each contract of a sale or service to a customer: identify the legally binding contract, identify the performance obligations, determine the transaction price, allocate the transaction price, and determine whether revenue will be recognized at a point in time or over time. Revenue is recognized when a performance obligation is satisfied and the customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services. In addition, ASC 606 requires disclosures of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

Our contracts with customers often contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price ("SSP") basis. We determine the SSP based on an observable standalone selling price when it is available, as well as other factors, including, the price charged to customers, our discounting practices, and our overall pricing objectives, while maximizing observable inputs. In situations where pricing is highly variable or uncertain, we estimate the SSP using a residual approach.

Revenue from on-premises licenses is recognized upfront upon transfer of control of the software, which occurs at delivery, or when the license term commences, if later. We recognize revenue from maintenance contracts ratably over the service period. Cloud services revenue is recognized ratably over the cloud service term. Training, professional services, and storage and retrieval services are provided either on a time and material basis, in which revenues are recognized as services are delivered, or over a contractual term, in which revenues are recognized ratably. With respect to contracts that include customer acceptance provisions, we recognize revenue upon customer acceptance. Our policy is to record revenues net of any applicable sales, use or excise taxes.

Payment terms and conditions vary by contract type, although our terms generally include a requirement of payment within 30 to 60 days. We assess whether payment terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring. In instances where the timing of revenue recognition differs from the timing of payment, we have determined our contracts 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 or to provide customers with financing.

We generally do not offer rights of return or any other incentives such as concessions, product rotation, or price protection and, therefore, do not provide for or make estimates of rights of return and similar incentives.

We establish allowances for doubtful accounts when available information causes us to believe that credit loss is probable.

Business Acquisition, Goodwill and Intangibles Assets

The Company's impairment analyses for goodwill and indefinite-lived intangible assets involve significant judgments and estimates that can materially affect the amount and timing of impairment charges, if any, recognized in the consolidated financial statements. Goodwill is tested for impairment at the reporting unit level at least annually as of December 31, 2025, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount.

When the Company performs a quantitative goodwill impairment test, the estimated fair value of each reporting unit is determined using valuation techniques that may include a discounted cash flow ("DCF") analysis, market multiples of comparable publicly traded companies, and/or recent transaction multiples. These valuation models require the Company to make assumptions about future revenues and margins, long-term growth rates, discount rates, working capital needs, and capital expenditure requirements. The discount rates used in the DCF analyses are intended to reflect the risk and uncertainty inherent in the projected cash flows of the reporting unit. Changes in any of these assumptions, individually or in combination, could materially affect the estimated fair value of the reporting units and the determination of whether goodwill is impaired.

Finite-lived intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, such as adverse changes in projected cash flows, loss of key customers, or significant negative industry or economic trends. Recoverability is assessed by comparing the carrying amount of the asset or asset group to the sum of the undiscounted cash flows expected to be generated by the asset or asset group. If the carrying amount is not recoverable on this basis, the impairment loss is measured as the excess of carrying amount over fair value, which is estimated using an income or market approach as appropriate.

Because these estimates and assumptions are inherently subjective and forward-looking, they are subject to a high degree of uncertainty. Actual results may differ from the Company's estimates, and such differences could result in the recognition of material impairment charges in future periods if the fair values of reporting units or intangible assets decline below their carrying amounts

Accounts Receivable, Unbilled

We recognize professional services revenue over time as the services are delivered using an input or output method (e.g., labor hours incurred as a percentage of total labor hours budgeted, images scanned, or similar milestones), as appropriate for the contract, provided all other revenue recognition criteria are met. When our revenue recognition policies recognize revenue that has not yet been billed, we record those contract asset amounts in accounts receivable, unbilled.

Deferred Revenues

Amounts that have been invoiced are recognized in accounts receivable, deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred revenues typically relate to maintenance and software-as-a-service agreements which have been paid for by customers prior to the performance of those services, and payments received for professional services and license arrangements and software-as-a-service performance obligations that have been deferred until fulfilled under our revenue recognition policy.

Accounting for Costs of Computer Software to be Sold, Leased or Marketed and Accounting for Internal Use Software

We design, develop, test, market, license, and support new software products and enhancements of current products. We continuously monitor our software products and enhancements to remain compatible with standard platforms and file formats. In accordance with ASC 985-20 "Costs of Software to be Sold, Leased or Otherwise Marketed," we expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Once technological feasibility has been established, certain software development costs incurred during the application development stage are eligible for capitalization. Based on our software development process, technical feasibility is established upon completion of a working model. Technological feasibility is typically reached shortly before the release of such products. No such costs were capitalized during the periods presented in this report.

In accordance with ASC 350-40, "Internal-Use Software," we capitalize purchase and implementation costs of internal use software. Once an application has reached development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. We also capitalize costs related to specific upgrades and enhancements when it is probable that the expenditure will result in additional functionality. Such costs in the amount of $469,602 were capitalized during 2025. Such costs in the amount $388,570 were capitalized during 2024.

Capitalized costs are stated at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the related assets on a straight-line basis, which is three years.

Stock-Based Compensation

We maintain three stock-based compensation plans. We account for stock-based payments to employees and directors in accordance with ASC 718, "Compensation - Stock Compensation." Stock-based payments to employees include grants of stock that are recognized in the consolidated statements of income based on their fair values at the date of grant. We account for stock-based payments to non-employees in accordance with ASC 718, "Compensation - Stock Compensation," which requires that such equity instruments are recorded at their fair value on the grant date. The Company issues common stock under its share-based payment plans from authorized and unissued shares.

The grant date fair value of stock option awards is recognized in earnings as stock-based compensation cost over the requisite service period of the award using the straight-line attribution method. We estimate the fair value of the stock option awards using the Black-Scholes-Merton option pricing model. The exercise price of options is specified in the stock option agreements. The expected volatility is based on the historical volatility of our stock for the previous period equal to the expected term of the options. The expected term of options granted is based on the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected term of the options. The expected dividend yield is based upon the yield expected on date of grant to occur over the term of the option.

The Company has elected to account for forfeitures of share-based awards as they occur. As a result, the Company does not estimate expected forfeitures when determining the amount of share-based compensation expense to recognize. Instead, previously recognized compensation cost is reversed in the period in which an award is forfeited, and no additional expense is recognized for awards that do not vest.