Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 05, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | INFORMATION ANALYSIS INC | |
Entity Central Index Key | 803,578 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 11,201,760 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 1,762,522 | $ 1,895,372 |
Accounts receivable, net | 1,055,404 | 1,157,387 |
Prepaid expenses and other current assets | 433,136 | 663,556 |
Note receivable, current | 4,162 | 2,630 |
Total current assets | 3,255,224 | 3,718,945 |
Property and equipment, net | 21,679 | 27,198 |
Other assets | 6,281 | 6,281 |
Total assets | 3,283,184 | 3,752,424 |
Current liabilities: | ||
Accounts payable | 234,911 | 48,974 |
Commissions payable | 816,840 | 853,340 |
Deferred revenue | 365,132 | 615,035 |
Accrued payroll and related liabilities | 226,769 | 206,475 |
Other accrued liabilities | 38,982 | 396,081 |
Total liabilities | 1,682,634 | 2,119,905 |
Stockholders' equity: | ||
Common stock, par value $0.01, 30,000,000 shares authorized; 12,844,376 shares issued, 11,201,760 shares outstanding as of March 31, 2017 and December 31, 2016 | 128,443 | 128,443 |
Additional paid-in capital | 14,631,009 | 14,631,362 |
Accumulated deficit | (12,228,691) | (12,197,075) |
Treasury stock, 1,642,616 shares at cost | (930,211) | (930,211) |
Total stockholders' equity | 1,600,550 | 1,632,519 |
Total liabilities and stockholders' equity | $ 3,283,184 | $ 3,752,424 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Stockholders Equity | ||
Common Stock shares par value | $ 0.01 | $ 0.01 |
Common Stock shares Authorized | 30,000,000 | 30,000,000 |
Common Stock shares Issued | 12,844,376 | 12,844,376 |
Common Stock shares Outstanding | 11,201,760 | 11,201,760 |
Treasury Stock | 1,642,616 | 1,642,616 |
STATEMENTS OF OPERATIONS (Unaud
STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Professional fees | $ 1,020,033 | $ 841,037 |
Software sales | 461,615 | 627,289 |
Total revenues | 1,481,648 | 1,468,326 |
Cost of revenues | ||
Cost of professional fees | 534,746 | 548,393 |
Cost of software sales | 447,057 | 562,260 |
Total cost of revenues | 981,803 | 1,110,653 |
Gross profit | 499,845 | 357,673 |
Selling, general and administrative expenses | 418,786 | 516,970 |
Commissions expense | 114,633 | 53,403 |
Loss from operations | (33,574) | (212,700) |
Other income | 1,958 | 2,430 |
Loss before provision for income taxes | (31,616) | (210,270) |
Provision for income taxes | 0 | 0 |
Net loss | $ (31,616) | $ (210,270) |
Net loss per common share: | ||
Basic: | $ 0 | $ (0.02) |
Diluted: | $ 0 | $ (0.02) |
Weighted average common shares outstanding | ||
Basic | 11,201,760 | 11,201,760 |
Diluted | 11,201,760 | 11,201,760 |
STATEMENTS OF CASH FLOWS (Unaud
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (31,616) | $ (210,270) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 5,519 | 7,779 |
Stock-based compensation | (353) | 666 |
Changes in operating assets and liabilities | ||
Accounts receivable | 101,983 | 588,120 |
Prepaid expenses and other current assets | 230,420 | 184,925 |
Accounts payable | 185,937 | 29,137 |
Accrued payroll and related liabilities, and other | (336,805) | (56,516) |
Commissions payable | (249,903) | (101,487) |
Deferred revenue | (36,500) | (212,438) |
Net cash (used in) provided by operating activities | (131,318) | 229,916 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | 0 | (7,158) |
Increase in notes receivable - employees | (2,500) | (5,768) |
Payments received on notes receivable - employees | 968 | 280 |
Net cash used in investing activities | (1,532) | (12,646) |
Net (decrease) increase in cash and cash equivalents | (132,850) | 217,270 |
Cash and cash equivalents, beginning of the period | 1,895,372 | 2,167,928 |
Cash and cash equivalents, end of the period | 1,762,522 | 2,385,198 |
Supplemental cash flow information | ||
Interest paid | 0 | 0 |
Income taxes paid | $ 0 | $ 0 |
1. Basis of Presentation
1. Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Basis Of Presentation | |
1. Basis of Presentation | Organization and Business Founded in 1979, Information Analysis Incorporated (“We”, the “Company”), to which we sometimes refer as IAI, is in the business of developing and maintaining information technology (IT) systems, modernizing client information systems, and performing professional services to government and commercial organizations. We presently concentrate our technology, services and experience to developing web-based and mobile device solutions (including electronic forms conversions), data analytics, cyber security applications, and legacy software migration and modernization for various agencies of the federal government. We provide software and services to government and commercial customers throughout the United States, with a concentration in the Washington, D.C. metropolitan area. Unaudited Interim Financial Statements The accompanying unaudited financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair and not misleading presentation of the results of the interim periods presented. These unaudited financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2016 included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2017 (the “Annual Report”). The accompanying December 31, 2016 balance sheet and financial information was derived from our audited financial statements included in the Annual Report. The results of operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year. There have been no changes in the Company’s significant accounting policies as of March 31, 2017 as compared to the significant accounting policies disclosed in Note 1, "Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 that was filed with the SEC on March 31, 2017. Use of Estimates and Assumptions The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain 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 revenue and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. Income Taxes As of March 31, 2017, there have been no material changes to the Company’s uncertain tax position disclosures as provided in Note 7 of the Annual Report. The Company does not anticipate that total unrecognized tax benefits will significantly change prior to March 31, 2018. Revenue Recognition The Company earns revenue from both professional services and sales of software and related support. The Company recognizes revenue when a contract has been executed, the contract price is fixed and determinable, delivery of services or products has occurred, and collectability of the contract price is considered probable and can be reasonably estimated. Revenue from professional services is earned under time and materials and fixed-price contracts. For sales of third-party software products, revenue is recognized upon product delivery, with any maintenance related revenues recognized ratably over the maintenance period. Revenue on time and materials contracts is recognized based on direct labor hours expended at contract billing rates and adding other billable direct costs. For fixed-price contracts that are based on unit pricing, the Company recognizes revenue for the number of units delivered in any given reporting period. For fixed-price contracts in which the Company is paid a specific amount to be available to provide a particular service for a stated period of time, revenue is recognized ratably over the service period. The Company applies this method of revenue recognition to renewals of maintenance contracts on third-party software sales and to separable maintenance elements of sales of third-party software that include fixed terms of maintenance, such as Adobe and Micro Focus software, for which the Company is responsible for “first line support” to the customer and for serving as a liaison between the customer and the third-party maintenance provider for issues the Company is unable to resolve. The Company reports revenue on both gross and net bases on a transaction by transaction analysis using authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”). The Company considers the following factors to determine the gross versus net presentation: if the Company (i) acts as principal in the transaction; (ii) takes title to the products; (iii) has risks and rewards of ownership, such as the risk of loss for collection, delivery or return; and (iv) acts as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis. Generally, sales of third-party software products such as Adobe and Micro Focus products are reported on a gross basis with the Company acting as the principal in these arrangements. This determination is based on the following: 1) the Company has inventory risk as suppliers are not obligated to accept returns, 2) the Company has reasonable latitude, within economic constraints, in establishing price, 3) the Company, in its marketing efforts, frequently aids the customer in determining product specifications, 4) the Company has physical loss and inventory risk as title transfers at the shipping point, 5) the Company bears full credit risk, and 6) the amount the Company earns in the transaction is neither a fixed dollar amount nor a fixed percentage. Generally, revenue derived for facilitating a sales transaction of Adobe products in which a customer introduced by the Company makes a purchase directly from the Company’s supplier or another designated reseller is recognized net when the commission payment is received since the Company is merely acting as an agent in these arrangements. Since the Company is not a direct party in the sales transaction, payment by the supplier is the Company’s confirmation that the sale occurred. For software and software-related multiple element arrangements, the Company must: (1) determine whether and when each element has been delivered; (2) determine whether undelivered products or services are essential to the functionality of the delivered products and services; (3) determine the fair value of each undelivered element using vendor-specific objective evidence ("VSOE"), and (4) allocate the total price among the various elements. Changes in assumptions or judgments or changes to the elements in a software arrangement could cause a material increase or decrease in the amount of revenue that the Company reports in a particular period. The Company determines VSOE for each element based on historical stand-alone sales to third parties or from the stated renewal rate for the elements contained in the initial arrangement. The Company has established VSOE for its third-party software maintenance and support services. The Company’s contracts with agencies of the U.S. federal government are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception of the contract, ratably throughout the contract as the services are provided, or subject to funds made available incrementally by legislators. In evaluating the probability of funding for purposes of assessing collectability of the contract price, the Company considers its previous experiences with its customers, communications with its customers regarding funding status, and the Company’s knowledge of available funding for the contract or program. If funding is not assessed as probable, revenue recognition is deferred until realization is deemed probable. Payments received in advance of services performed are recorded and reported as deferred revenue. Services performed prior to invoicing customers are recorded as unbilled accounts receivable and are presented on the Company’s balance sheets in the aggregate with accounts receivable. Prompt payment discounts taken and expected to be taken by customers in conjunction with orders received under the Company’s General Services Administration Multiple Award Schedule (“GSA Schedule”) are reflected as a reduction in the Company’s revenue. |
2. Recent Accounting Pronouncem
2. Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
2. Recent Accounting Pronouncements | From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB"), or other standard setting bodies that the Company adopts as of the specified effective date. In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" . “Revenue from Contracts with Customers: Topic 606 There have been three new ASUs issued amending certain aspects of ASU 2014-09. ASU 2016-08, " Principal versus Agent Considerations (Reporting Revenue Gross Versus Net) "Identifying Performance Obligations and Licensing" "Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients" In February 2016, the FASB issued ASU 2016-02, “ Leases: Topic 842,” In August 2016, the FASB issued ASU 2016-15, “ Classification of Certain Cash Receipts and Cash Payments, |
3. Stock-Based Compensation
3. Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Share-based Compensation [Abstract] | |
3. Stock-Based Compensation | During the three months ended March 31, 2017, the Company had two shareholder–approved stock-based compensation plans. The 2006 Stock Incentive Plan was adopted in 2006 (“2006 Plan”) and had options granted under it through April 12, 2016. On June 1, 2016, the shareholders ratified the IAI 2016 Stock Incentive Plan (“2016 Plan”), which had been approved by the Board of Directors on April 4, 2016. 2016 Stock Incentive Plan The 2016 Plan became effective June 1, 2016, and expires April 4, 2026. The 2016 Plan provides for the granting of equity awards to key employees, including officers and directors. Options under the 2016 Plan are generally granted at-the-money or above, expire no later than ten years from the date of grant or within three months of when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The number of shares subject to options available for issuance under the 2016 Plan cannot exceed 1,000,000. At March 31, 2017, there were no options yet issued under the 2016 Plan. 2006 Stock Incentive Plan The 2006 Plan became effective May 18, 2006, and expired April 12, 2016. The 2006 Plan provides for the granting of equity awards to key employees, including officers and directors. Options under the 2016 Plan were generally granted at-the-money or above, expire no later than ten years from the date of grant or within three months of when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The number of shares subject to options available for issuance under the 2006 Plan could not exceed 1,950,000. There were 1,289,500 and 1,240,000 unexpired options remaining from the 2006 Plan at March 31, 2017 and 2016, respectively. The Company estimates the fair value of options granted using a Black-Scholes valuation model to establish the expense. When stock-based compensation is awarded to employees, the expense is recognized ratably over the vesting period. When stock-based compensation is awarded to non-employees, the expense is recognized over the period of performance. The fair values of option awards granted in the three months ended March 31, 2017 and 2016, were estimated using the Black-Scholes option pricing model using the following assumptions: Three Months ended March 31, 2017 2016 Risk free interest rate n/a 1.15% - 1.55% Dividend yield n/a 0% Expected term n/a 5 years Expected volatility n/a 34.9% - 35.0% A summary of the activity under the stock incentive plans as of March 31, 2017, and changes during the quarter then ended is presented below. Incentive Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate IntrinsicValue Outstanding at January 1, 2017 1,313,000 $ 0.22 Granted - - Exercised - - Expired (3,500 ) 0.42 Forfeited (20,000 ) 0.13 Outstanding at March 31, 2017 1,289,500 $ 0.22 4.9 $ 37,098 Exercisable at March 31, 2017 1,269,500 $ 0.23 4.8 $ 35,898 There were no options granted during the three months ended March 31, 2017, and the weighted-average grant date fair value of options granted during the three months ended March 31, 2016, was $0.04. There were no options exercised during the three months ended March 31, 2017 and 2016. As of March 31, 2017, there was $250 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock incentive plans; that cost is expected to be recognized over a weighted-average period of four months. Total compensation expense related to these plans was $259 and $666 for the quarters ended March 31, 2017 and 2016, respectively, none of which related to options awarded to non-employees. Compensation expense relating to prior periods of $612 were reversed in the quarter ended March 31, 2017, from options that were forfeited prior to vesting. Nonvested option awards as of March 31, 2017 and changes during the three months ended March 31, 2017 were as follows: Shares Weighted average grant date fair value Nonvested at January 1, 2017 45,000 $ 0.07 Granted - Vested (5,000 ) 0.08 Forfeited (20,000 ) 0.04 Nonvested at March 31, 2017 20,000 $ 0.05 |
4. Revolving Line of Credit
4. Revolving Line of Credit | 3 Months Ended |
Mar. 31, 2017 | |
Revolving Line Of Credit | |
4. Revolving Line of Credit | The Company has a revolving line of credit with a bank providing for demand or short-term borrowings of up to $1,000,000. The line expires on May 31, 2017. As of March 31, 2017, the Company was in default of a covenant to maintain a minimum tangible net worth of $1,800,000. The Company’s bank has issued a waiver of the default through the expiration of the current term of the line of credit. At that time the bank will review the Company’s balance sheets and results of operations for 2017. The Company anticipates the bank will renew its line of credit with some adjustment to terms, covenants, or both, but can provide no assurance that the bank will indeed renew the line of credit nor renew it under terms deemed favorable to the Company. As of March 31, 2017, no amounts were outstanding under this line of credit. The Company did not borrow against this line of credit in the last twelve months. |
5. Loss Per Share
5. Loss Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Net loss per common share: | |
5. Loss Per Share | Basic loss per share excludes dilution and is computed by dividing loss available to common shareholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, except for periods when the Company reports a net loss because the inclusion of such items would be antidilutive. The antidilutive effect of 179,490 and 27,097 shares from stock options were excluded from diluted shares as of March 31, 2017 and 2016, respectively. The following is a reconciliation of the amounts used in calculating basic and diluted net loss per common share: Net Loss Shares Per Share Amount Basic net loss per common share for the three months ended March 31, 2017: Loss available to common stockholders $ (31,616 ) 11,201,760 $ 0.00 Effect of dilutive stock options - - - Diluted net loss per common share for the three months ended March 31, 2017 $ (31,616 ) 11,201,760 $ 0.00 Basic net loss per common share for the three months ended March 31, 2016: Loss available to common stockholders $ (210,270 ) 11,201,760 $ (0.02 ) Effect of dilutive stock options - - - Diluted net loss per common share for the three months ended March 31, 2016 $ (210,270 ) 11,201,760 $ (0.02 ) |
6. Financial Instruments
6. Financial Instruments | 3 Months Ended |
Mar. 31, 2017 | |
Financial Instruments, Owned, at Fair Value [Abstract] | |
Financial Instruments | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in the principal or most advantageous market in an orderly transaction. To increase consistency and comparability in fair value measurements, the FASB established a three-level hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of fair value measurements are: ● Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. ● Level 2—Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. ● Level 3—Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The inputs used in measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the Company’s funds. The fair value of short-term financial instruments (primarily cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities) approximate their carrying values because of their short-term nature. |
1. Basis of Presentation (Polic
1. Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Organization and Business | Founded in 1979, Information Analysis Incorporated (“We”, the “Company”), to which we sometimes refer as IAI, is in the business of developing and maintaining information technology (IT) systems, modernizing client information systems, and performing professional services to government and commercial organizations. We presently concentrate our technology, services and experience to developing web-based and mobile device solutions (including electronic forms conversions), data analytics, cyber security applications, and legacy software migration and modernization for various agencies of the federal government. We provide software and services to government and commercial customers throughout the United States, with a concentration in the Washington, D.C. metropolitan area. |
Unaudited Interim Financial Statements | The accompanying unaudited financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair and not misleading presentation of the results of the interim periods presented. These unaudited financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2016 included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2017 (the “Annual Report”). The accompanying December 31, 2016 balance sheet and financial information was derived from our audited financial statements included in the Annual Report. The results of operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year. There have been no changes in the Company’s significant accounting policies as of March 31, 2017 as compared to the significant accounting policies disclosed in Note 1, "Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 that was filed with the SEC on March 31, 2017. |
Use of Estimates and Assumptions | The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain 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 revenue and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. |
Income Taxes | As of March 31, 2017, there have been no material changes to the Company’s uncertain tax position disclosures as provided in Note 7 of the Annual Report. The Company does not anticipate that total unrecognized tax benefits will significantly change prior to March 31, 2018. |
Revenue recognition | The Company earns revenue from both professional services and sales of software and related support. The Company recognizes revenue when a contract has been executed, the contract price is fixed and determinable, delivery of services or products has occurred, and collectability of the contract price is considered probable and can be reasonably estimated. Revenue from professional services is earned under time and materials and fixed-price contracts. For sales of third-party software products, revenue is recognized upon product delivery, with any maintenance related revenues recognized ratably over the maintenance period. Revenue on time and materials contracts is recognized based on direct labor hours expended at contract billing rates and adding other billable direct costs. For fixed-price contracts that are based on unit pricing, the Company recognizes revenue for the number of units delivered in any given reporting period. For fixed-price contracts in which the Company is paid a specific amount to be available to provide a particular service for a stated period of time, revenue is recognized ratably over the service period. The Company applies this method of revenue recognition to renewals of maintenance contracts on third-party software sales and to separable maintenance elements of sales of third-party software that include fixed terms of maintenance, such as Adobe and Micro Focus software, for which the Company is responsible for “first line support” to the customer and for serving as a liaison between the customer and the third-party maintenance provider for issues the Company is unable to resolve. The Company reports revenue on both gross and net bases on a transaction by transaction analysis using authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”). The Company considers the following factors to determine the gross versus net presentation: if the Company (i) acts as principal in the transaction; (ii) takes title to the products; (iii) has risks and rewards of ownership, such as the risk of loss for collection, delivery or return; and (iv) acts as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis. Generally, sales of third-party software products such as Adobe and Micro Focus products are reported on a gross basis with the Company acting as the principal in these arrangements. This determination is based on the following: 1) the Company has inventory risk as suppliers are not obligated to accept returns, 2) the Company has reasonable latitude, within economic constraints, in establishing price, 3) the Company, in its marketing efforts, frequently aids the customer in determining product specifications, 4) the Company has physical loss and inventory risk as title transfers at the shipping point, 5) the Company bears full credit risk, and 6) the amount the Company earns in the transaction is neither a fixed dollar amount nor a fixed percentage. Generally, revenue derived for facilitating a sales transaction of Adobe products in which a customer introduced by the Company makes a purchase directly from the Company’s supplier or another designated reseller is recognized net when the commission payment is received since the Company is merely acting as an agent in these arrangements. Since the Company is not a direct party in the sales transaction, payment by the supplier is the Company’s confirmation that the sale occurred. For software and software-related multiple element arrangements, the Company must: (1) determine whether and when each element has been delivered; (2) determine whether undelivered products or services are essential to the functionality of the delivered products and services; (3) determine the fair value of each undelivered element using vendor-specific objective evidence ("VSOE"), and (4) allocate the total price among the various elements. Changes in assumptions or judgments or changes to the elements in a software arrangement could cause a material increase or decrease in the amount of revenue that the Company reports in a particular period. The Company determines VSOE for each element based on historical stand-alone sales to third parties or from the stated renewal rate for the elements contained in the initial arrangement. The Company has established VSOE for its third-party software maintenance and support services. The Company’s contracts with agencies of the U.S. federal government are subject to periodic funding by the respective contracting agency. Funding for a contract may be provided in full at inception of the contract, ratably throughout the contract as the services are provided, or subject to funds made available incrementally by legislators. In evaluating the probability of funding for purposes of assessing collectability of the contract price, the Company considers its previous experiences with its customers, communications with its customers regarding funding status, and the Company’s knowledge of available funding for the contract or program. If funding is not assessed as probable, revenue recognition is deferred until realization is deemed probable. Payments received in advance of services performed are recorded and reported as deferred revenue. Services performed prior to invoicing customers are recorded as unbilled accounts receivable and are presented on the Company’s balance sheets in the aggregate with accounts receivable. Prompt payment discounts taken and expected to be taken by customers in conjunction with orders received under the Company’s General Services Administration Multiple Award Schedule (“GSA Schedule”) are reflected as a reduction in the Company’s revenue. |
3. Stock Based Compensation (Ta
3. Stock Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Black-Scholes option pricing model assumptions | Three Months ended March 31, 2017 2016 Risk free interest rate n/a 1.15% - 1.55% Dividend yield n/a 0% Expected term n/a 5 years Expected volatility n/a 34.9% - 35.0% |
Options outstanding | Incentive Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate IntrinsicValue Outstanding at January 1, 2017 1,313,000 $ 0.22 Granted - - Exercised - - Expired (3,500 ) 0.42 Forfeited (20,000 ) 0.13 Outstanding at March 31, 2017 1,289,500 $ 0.22 4.9 $ 37,098 Exercisable at March 31, 2017 1,269,500 $ 0.23 4.8 $ 35,898 |
Nonvested Stock awards | Shares Weighted average grant date fair value Nonvested at January 1, 2017 45,000 $ 0.07 Granted - Vested (5,000 ) 0.08 Forfeited (20,000 ) 0.04 Nonvested at March 31, 2017 20,000 $ 0.05 |
5. Loss Per Share (Tables)
5. Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Reconciliation of Loss per Share | Net Loss Shares Per Share Amount Basic net loss per common share for the three months ended March 31, 2017: Loss available to common stockholders $ (31,616 ) 11,201,760 $ 0.00 Effect of dilutive stock options - - - Diluted net loss per common share for the three months ended March 31, 2017 $ (31,616 ) 11,201,760 $ 0.00 Basic net loss per common share for the three months ended March 31, 2016: Loss available to common stockholders $ (210,270 ) 11,201,760 $ (0.02 ) Effect of dilutive stock options - - - Diluted net loss per common share for the three months ended March 31, 2016 $ (210,270 ) 11,201,760 $ (0.02 ) |
3. Stock-Based Compensation (De
3. Stock-Based Compensation (Details) | 3 Months Ended |
Mar. 31, 2016 | |
Stock-based Compensation Details | |
Risk free interest rate, minimum | 1.15% |
Risk free interest rate, maximum | 1.55% |
Dividend yield | 0.00% |
Expected term, minimum | 5 years |
Expected term, maximum | 5 years |
Expected volatility, minimum | 34.90% |
Expected volatility, maximum | 35.00% |
3. Stock-Based Compensation (16
3. Stock-Based Compensation (Details 1) | 3 Months Ended |
Mar. 31, 2017USD ($)$ / sharesshares | |
Stock-based Compensation Details 1 | |
Beginning Balance | shares | 1,313,000 |
Options granted | shares | 0 |
Options exercised | shares | 0 |
Options expired | shares | (3,500) |
Options forfeited | shares | 20,000 |
Ending Balance | shares | 1,289,500 |
Ending Balance, exercisable | shares | 1,269,500 |
Weighted average price per share, beginning balance | $ / shares | $ 0.22 |
Weighted average price per share, granted | $ / shares | 0 |
Weighted average price per share, exercised | $ / shares | 0 |
Weighted average exercise price per share, expired | $ / shares | 0.42 |
Weighted average exercise price per share, forfeited | $ / shares | 0.13 |
Weighted average exercise price , ending balance, outstanding | $ / shares | 0.22 |
Weighted average exercise price, ending balance, exercisable | $ / shares | $ 0.23 |
Weighted average remaing contractual life in years | 4 years 10 months 24 days |
Weighted average remaining contractual life, exercisable | 4 years 9 months 18 days |
Aggregate intrinsic value, outstanding | $ | $ 37,098 |
Aggregate intrinsic value, exercisable | $ | $ 35,898 |
3. Stock-Based Compensation (17
3. Stock-Based Compensation (Details 2) | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of Shares | |
Nonvested Stock Awards Beginning Balance | 45,000 |
Granted | 0 |
Vested | (5,000) |
Forfeited | (20,000) |
Nonvested Stock Awards Ending Balance | 20,000 |
Weighted Average Grant Date Fair Value | |
Nonvested Stock Awards Beginning Balance | $ / shares | $ 0.07 |
Vested | $ / shares | 0.08 |
Expired before Vesting | $ / shares | 0.04 |
Nonvested Stock Awards Ending Balance | $ / shares | $ 0.05 |
3. Stock-Based Compensation (18
3. Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock-based Compensation Details Narrative | ||
Total compensation expense for stock options | $ 259 | $ 666 |
Unrecognized compensation cost associated with non-vested share-based compensation | $ 250 |
4. (Loss) Income Per Share (Det
4. (Loss) Income Per Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Loss Income Per Share Details | ||
Basic net loss | $ (31,616) | $ (210,270) |
Basic shares | 11,201,760 | 11,201,760 |
Basic net loss per common share | $ 0 | $ (0.02) |
Diluted Net Loss | $ (31,616) | $ (210,270) |
Diluted shares | 11,201,760 | 11,201,760 |
Diluted earnings per share | $ 0 | $ (0.02) |