Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements. You can identify these statements by words such as "aim," "anticipate," "assume," "believe," "could," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "potential," "positioned," "predict," "should," "target," "will," "would" and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management's beliefs and assumptions. These statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
· The impact of the COVID-19 pandemic on our business and operations; · The impact of increasingly volatile public equity markets on our market capitalization; · The impact of supply chain issues; · Our ability to successfully execute our strategy; · Our ability to sustain profitability and positive cash flows; · Our ability to gain market acceptance for our products; · Our ability to win new contracts, execute contract extensions and expand scope of services on existing contracts; · Our ability to compete with companies that have greater resources than us; · Our ability to penetrate the commercial sector to expand our business; · Our ability to identify potential acquisition targets and close such acquisitions; · Our ability to successfully integrate acquired businesses with our existing operations; · Our ability to maintain a sufficient level of inventory necessary to meet our customers demand due to supply shortage and pricing; · Our ability to retain key personnel; · Our ability to mitigate the impact of inflation; and · The risk factors set forth in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSEC onMarch 28, 2022 .
The forward-looking statements included in this Form 10-Q are made only as of
the date hereof. We undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future events or
otherwise, except as otherwise required by law. Readers are cautioned not to put
undue reliance on forward-looking statements. In this Quarterly Report on Form
10-Q, unless the context indicates otherwise, the terms "Company" and
"
Business Overview
We are a leading provider of Technology Management as a Service (TMaaS) that consists of federally certified communications management, identity management, interactive bill presentment and analytics, and Information Technology as a Service solutions. We help our clients achieve their organizational missions for mobility management, information technology management, and cybersecurity objectives in this challenging and complex business environment.
We offer our TmaaS solutions through a flexible managed services model which includes both a scalable and comprehensive set of functional capabilities that can be used by any customer to meet the most common functional, technical and security requirements for mobility management. Our TmaaS solutions were designed and implemented with flexibility in mind such that it can accommodate a large variety of customer requirements through simple configuration settings rather than through costly software development. The flexibility of our TmaaS solutions enables our customers to be able to quickly expand or contract their mobility management requirements. Our TmaaS solutions are hosted and accessible on-demand through both a secure federal government certified proprietary portal and/or through a secure enterprise portal that provides our customers with the ability to manage, analyze and protect their valuable communications assets, and deploy identity management solutions that provide secured virtual and physical access to restricted environments.
22 Table of Contents Revenue Mix
Our revenue mix fluctuates due to customer driven factors including: i) timing of technology and accessory refresh requirements from our customers; ii) onboarding of new customers that require carrier services; iii) subsequent decreases in carrier services as we optimize their data and voice usage; iv) delays in delivering products or services; and v) changes in control or leadership of our customers that lengthens our sales cycle, changes in laws or funding, among other circumstances that may unexpectedly change the revenue earned and/or duration of our services. As a result, our revenue will vary by quarter.
For additional information related to our business operations, see the
description of our business set forth in our Annual Report on Form 10-K for the
year ended
Strategic Focus and Notable Events
We believe that demand for our TmaaS solutions will continue to grow as public
and private sectors seek to address the additional requirements for supporting a
mobile workforce. We also believe that the current post COVID-19 pandemic
environment will increase the need for
In fiscal 2022, we will continue to focus on the following key goals:
· Continue to find additional avenues for capturing new sales opportunities given the pandemic environment, · Continue to provide unmatched level of services to our current customer base, · Attain full FedRAMP certification in 2022 and continued technology refresh of our delivery infrastructure, · Grow our recurring high margin managed services revenues, · Add incremental capabilities to our Technology Management solution set and develop and acquire new high margin business lines, · Enhance our software platforms to grow our SaaS revenues and take advantage of the opportunities emerging from the growth in remote working, · Expand our customer base organically and inorganically, · Continue to leverage the R2v3 Certification to further our ESG commitment · Executing cross-sell opportunities identified from ITA acquisition, including Identity Management (IdM), Telecommunications Lifecycle Management (TLM) and Digital Billing & Analytics (DB&A) solution, · Growing our sales pipeline by continuing to invest in our business development and sales team assets, · Pursuing additional opportunities with our key systems integrator and strategic partners, and · Expanding our solution offerings into the commercial space.
Our longer-term strategic focus and goals are driven by our need to expand our critical mass so that we have more flexibility to fund investments in technology solutions and introduce new sales and marketing initiatives to expand our marketplace share and increase the breadth of our offerings in order to improve company sustainability and growth. Our strategy for achieving our longer-term goals include:
· pursuing accretive and strategic acquisitions to expand our solutions and our customer base, · delivering new incremental offerings to add to our existing TMaaS offering, · developing and testing innovative new offerings that enhance our TMaaS offering, and · transitioning our data center and support infrastructure into a more cost-effective and federally approved cloud environment to comply with perceived future contract requirements.
We believe these actions could drive a strategic repositioning our TMaaS offering and may include the sale of non-aligned offerings coupled with acquisitions of complementary and supplementary offerings that could result in a more focused core set of TMaaS offerings.
23 Table of Contents Results of Operations
Three Months Ended
2021
Revenues. Revenues for the three month period ended
THREE MONTHS ENDED MARCH 31, Dollar 2022 2021 Variance (Unaudited) Carrier Services$ 12,932,059 $ 11,348,869 $ 1,583,190 Managed Services: Managed Service Fees 7,258,277 8,259,430 (1,001,153 ) Billable Service Fees 1,120,106 1,021,517 98,589 Reselling and Other Services 1,125,985 21,027 1,104,958 9,504,368 9,301,974 202,394$ 22,436,427 $ 20,650,843 $ 1,785,584
Our carrier services increased compared with the same period in 2021 primarily
due to carrier credits of approximately
Our managed service fees decreased by
Billable service fee revenue remained consistent with the same period in 2021
Reselling and other services increased as compared to last year due to product resales to federal government customers. Reselling and other services are transactional in nature and as a result the amount and timing of revenue will vary significantly from quarter to quarter.
Cost of Revenues. Cost of revenues for the three months period ended
Gross Profit. Gross profit for the three months period ended
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Sales and Marketing. Sales and marketing expense for the three month period
ended
General and Administrative. General and administrative expenses for the three
months period ended
Depreciation and Amortization. Depreciation and amortization expense for the
three month period ended
Other Income. Other income (expense) for the three month period ended
Income Taxes. Income tax benefit for the three month period ended
Net (Loss) Income. As a result of the cumulative factors annotated above, net
loss for the three month period ended
Liquidity and Capital Resources
Our immediate sources of liquidity include cash and cash equivalents, accounts
receivable, unbilled receivables and access to a working capital credit facility
with
At
ATM Sales Program
On
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Cash Flows from Operating Activities
Cash provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business activities. Our single largest cash operating expense is the cost of labor and company sponsored healthcare benefit programs. Our second largest cash operating expense is our facility costs and related technology communication costs to support delivery of our services to our customers. We lease most of our facilities under non-cancellable long term contracts that may limit our ability to reduce fixed infrastructure costs in the short term. Any changes to our fixed labor and/or infrastructure costs may require a significant amount of time to take effect depending on the nature of the change made and cash payments to terminate any agreements that have not yet expired. We experience temporary collection timing differences from time to time due to customer invoice processing delays that are often beyond our control.
For the three months ended
Cash Flows from Investing Activities
Cash used in investing activities provides an indication of our long term infrastructure investments. We maintain our own technology infrastructure and may need to make additional purchases of computer hardware, software and other fixed infrastructure assets to ensure our environment is properly maintained and can support our customer obligations. We typically fund purchases of long term infrastructure assets with available cash or capital lease financing agreements.
For the three months ended
For the three months ended
Cash Flows from Financing Activities
Cash provided by (used in) financing activities provides an indication of our debt financing and proceeds from capital raise transactions and stock option exercises.
For the three months ended
For the three months ended
Net Effect of Exchange Rate on Cash and Equivalents
For the three months ended
Off-Balance Sheet Arrangements
The Company has no existing off-balance sheet arrangements as defined under
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