Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 12, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | INFORMATION ANALYSIS INC | |
Entity Central Index Key | 803,578 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 11,201,760 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,053,691 | $ 2,731,510 |
Accounts receivable, net | 1,157,327 | 610,182 |
Prepaid expenses and other current assets | 466,263 | 368,626 |
Contract assets | 7,470 | 5,532 |
Note receivable | 0 | 1,719 |
Total current assets | 3,684,751 | 3,717,569 |
Property and equipment, net of accumulated depreciation and amortization of $292,504 and $284,667 | 7,371 | 11,133 |
Other assets | 6,281 | 6,281 |
Total assets | 3,698,403 | 3,734,983 |
Current liabilities: | ||
Accounts payable | 431,773 | 47,658 |
Commissions payable | 587,810 | 712,829 |
Contract liabilities | 453,595 | 387,002 |
Accrued payroll and related liabilities | 255,478 | 275,582 |
Other accrued liabilities | 63,034 | 411,487 |
Franchise taxes payable | 0 | 6,400 |
Total liabilities | 1,791,690 | 1,840,958 |
Stockholders' equity: | ||
Common stock, $0.01 par value, 30,000,000 shares? authorized, 12,844,376 shares issued, 11,201,760 shares? outstanding as of September 30, 2018, and December 31, 2017 | 128,443 | 128,443 |
Additional paid-in capital | 14,670,288 | 14,646,406 |
Accumulated deficit | (11,961,807) | (11,950,613) |
Treasury stock, 1,642,616 shares at cost? at September 30, 2018 and December 31, 2017 | (930,211) | (930,211) |
Total stockholders' equity | 1,906,713 | 1,894,025 |
Total liabilities and stockholders' equity | $ 3,698,403 | $ 3,734,983 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Property and equipment, accumulated depreciation and amortization | $ 292,504 | $ 284,667 |
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 | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues | ||||
Professional fees | $ 1,111,358 | $ 1,385,257 | $ 3,429,153 | $ 3,676,730 |
Software sales | 1,307,319 | 1,346,537 | 4,091,819 | 4,592,828 |
Total revenues | 2,418,677 | 2,731,794 | 7,520,972 | 8,269,558 |
Cost of revenues | ||||
Cost of professional fees | 575,200 | 776,404 | 1,828,542 | 1,990,383 |
Cost of software sales | 1,274,371 | 1,319,499 | 4,017,549 | 4,506,099 |
Total cost of revenues | 1,849,571 | 2,095,903 | 5,846,091 | 6,496,482 |
Gross profit | 569,106 | 635,891 | 1,674,881 | 1,773,076 |
Selling, general and administrative expenses | 409,761 | 386,929 | 1,319,790 | 1,231,863 |
Commissions expense | 134,255 | 140,963 | 374,815 | 380,267 |
(Loss) income from operations | 25,090 | 107,999 | (19,724) | 160,946 |
Other income | 2,874 | 2,285 | 8,530 | 6,440 |
Income before provision for income taxes | 27,964 | 110,284 | (11,194) | 167,386 |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net (loss) income | $ 27,964 | $ 110,284 | $ (11,194) | $ 167,386 |
Net (loss) income per common share: | ||||
Basic | $ 0 | $ 0.01 | $ 0 | $ 0.01 |
Diluted | $ 0 | $ 0.01 | $ 0 | $ 0.01 |
Weighted average common shares outstanding | ||||
Basic | 11,201,760 | 11,201,760 | 11,201,760 | 11,201,760 |
Diluted | 11,593,183 | 11,510,711 | 11,201,760 | 11,509,202 |
STATEMENTS OF CASH FLOWS (Unaud
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (11,194) | $ 167,386 |
Adjustments to reconcile net (loss) income to net cash used in (provided by) operating activities: | ||
Depreciation and amortization | 7,837 | 13,670 |
Stock option compensation | 23,882 | 6,618 |
Changes in operating assets and liabilities | ||
Accounts receivable and contract assets | (549,083) | (651,813) |
Prepaid expenses and other current assets | (97,637) | 170,033 |
Accounts payable | 384,115 | 909,315 |
Accrued payroll and related liabilities and other accrued liabilities | (374,957) | 301,234 |
Contract liabilities | 66,593 | (165,569) |
Commissions payable | (125,019) | (95,668) |
Net cash (used in) provided by operating activities | (675,463) | 655,206 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (4,075) | 0 |
Payments received on notes receivable - employees | 1,719 | 2,641 |
Increase in notes receivable | 0 | (2,500) |
Net cash (used in) provided by investing activities | (2,356) | 141 |
Net (decrease) increase in cash and cash equivalents | (677,819) | 655,347 |
Cash and cash equivalents, beginning of the period | 2,731,510 | 1,895,372 |
Cash and cash equivalents, end of the period | 2,053,691 | 2,550,719 |
Supplemental cash flow information | ||
Interest paid | 0 | 0 |
Income taxes paid | $ 0 | $ 0 |
1. Basis of Presentation
1. Basis of Presentation | 9 Months Ended |
Sep. 30, 2018 | |
Basis Of Presentation | |
1. Basis of Presentation | Organization and Business Founded in 1979, Information Analysis Incorporated (the “Company”, “we”), 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, 2017 included in the Annual Report on Form 10-K filed by the Company with the SEC on April 2, 2018 (the “Annual Report”). The accompanying December 31, 2017 balance sheet 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 September 30, 2018 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, 2017, that was filed with the SEC on April 2, 2018, except as described in Note 2 herein. 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 September 30, 2018, there have been no material changes to the Company’s uncertain tax position disclosures as provided in Note 7 of the Annual Report. Through the filing of its 2017 federal income tax return, the Company has net operating loss carryforwards in the amount of $14,959,541, of which $7,750,305 will expire, if unused, on December 31, 2018. ASC 606 Impact to Previously Reported Results On January 1, 2018, we adopted the FASB-issued ASU No. 2014-09, “ Revenue from Contracts with Customers (Topic 606)” Reclassification of Financial Statement Line Items Certain financial statement line items presented in prior periods have been reclassified for consistency between the periods presented. Contract assets in the form of unbilled receivables have been disaggregated from accounts receivable, net, and deferred revenue has been reclassified as contract liabilities. |
2. Revenue from Contracts with
2. Revenue from Contracts with Customers | 9 Months Ended |
Sep. 30, 2018 | |
Revenue From Contracts With Customers | |
2. Revenue from Contracts with Customers | Revenue is recognized when all of the following steps have been taken and criteria met for each contract: ● Identification of the contract, or contracts, with a customer ● Identification of the performance obligations in the contract ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, we satisfy performance obligations Nature of products and services We generate revenue from the sales of information technology professional services, sales of third-party software licenses and implementation and training services, sales of third-party support and maintenance contracts based on those software products, and incentive payments received from third-party software suppliers for facilitating sales directly between that supplier and a customer introduced by us. We sell through our direct relationships with end customers and under subcontractor arrangements. We account for our performance obligations in accordance with ASC 606, and all related interpretations. Professional services are offered through several arrangements – through time and materials arrangements, fixed-price-per-unit arrangements, fixed-price arrangements, or combinations of these arrangements within individual contracts. Revenue under time and materials arrangements is recognized over time in the period the hours are worked or the expenses are incurred, as control of the benefits of the work is deemed to have passed to the customer as the work is performed. Revenue under fixed-price-per-unit arrangements is recognized at a point in time when delivery of units have occurred and units are accepted by the customer or are reasonably expected to be accepted. Generally, revenue under fixed-price arrangements and mixed arrangements is recognized either over time or at a point in time based on the allocation of transaction pricing to each identified performance obligation as control of each is transferred to the customer. For fixed-price arrangements for which we are paid a fixed fee to make ourselves available to support a customer, with no predetermined deliverables to which transaction prices can be estimated or allocated, revenue is recognized ratably over time. Third-party software licenses are classified as enterprise server-based software licenses or desktop software licenses, and desktop licenses are further classified by the type of customer and whether the licenses are bulk licenses or individual licenses. Our obligations as the seller for each class differ based on our reseller agreements and whether our customers are government or non-government customers. Revenue from enterprise server-based sales to either government or non-government customers is usually recognized in full at a point in time based on when the customer gains use of the full benefit of the licenses, after the licenses are implemented. If the transaction prices of the performance obligations related to implementation and customer support for the individual contract is material, these obligations are recognized separately over time, as performed. Revenue for desktop software licenses for government customers is usually recognized in full at a point in time, based on when the customer’s administrative contact gains training in and beneficial use of the administrative portal. If the transaction prices of the performance obligations related to implementing the government administrator’s use of the administrative portal and administrator support for the individual contract are material (rare), these obligations are recognized separately over time, as performed. Revenue for bulk desktop software licenses for non-government customers is usually recognized in full at a point in time, based on when the customer’s administrative contact gains training in and beneficial use of the administrative portal. For desktop software licenses sold on an individual license basis to non-government customers, where we have no obligation to the customer after the third-party makes delivery of the licenses, we have determined we are acting as an agent, and we recognize revenue upon delivery of the licenses only for the net of the selling price and our contract costs. Third-party support and maintenance contracts for enterprise server-based software include a performance obligation under our reseller agreements for us to be the first line of support (direct support) and second line of support (intermediary between customer and manufacturer) to the customer. Because of the support performance obligations, and because the amount of support is not estimable, we recognize revenue ratably over time as we make ourselves available to provide the support. Incentive payments are received under reseller agreements with software manufacturers and suppliers where we introduce and court a customer, but the sale occurs directly between the customer and the supplier or between the customer and the manufacturer. Since the transfer of control of the licenses cannot be measured from outside of these transactions, revenue is recognized when payment from the manufacturer or supplier is received. Disaggregation of Revenue from Contracts with Customers Contract Three months ended 9/30/2018 Three months ended 9/30/2017 Type Amount Percentage Amount Percentage Professional Services $ 1,111,358 45.9 % $ 1,385,257 50.7 % Third-Party Software 1,153,091 47.7 % 531,505 19.4 % Support & Maintenance 146,532 6.1 % 807,535 29.6 % Incentive Payments 7,696 0.3 % 7,497 0.3 % Total Revenue $ 2,418,677 $ 2,731,794 Contract Nine months ended 9/30/2018 Nine months ended 9/30/2017 Type Amount Percentage Amount Percentage Professional Services $ 3,429,153 45.6 % $ 3,676,730 44.5 % Third-Party Software 3,636,225 48.3 % 2,645,082 32.0 % Support & Maintenance 440,544 5.9 % 1,928,134 23.3 % Incentive Payments 15,050 0.2 % 19,612 0.2 % Total Revenue $ 7,520,972 $ 8,269,558 Revenue Three months ended 9/30/2018 Three months ended 9/30/2017 Recognition Type Amount Percentage Amount Percentage Time & Materials $ 694,524 28.7 % $ 913,432 33.4 % Fixed-Price Ratably over Time 541,057 22.4 % 561,337 20.5 % Fixed-Price per Unit 1,122,960 46.4 % 1,127,107 41.3 % Mixed 52,440 2.2 % 122,421 4.5 % Incentive Payments 7,696 0.3 % 7,497 0.3 % Total Revenue $ 2,418,677 $ 2,731,794 Revenue Nine months ended 9/30/2018 Nine months ended 9/30/2017 Recognition Type Amount Percentage Amount Percentage Time & Materials $ 2,223,949 29.6 % $ 2,374,280 28.7 % Fixed-Price Ratably over Time 2,098,920 27.9 % 1,733,911 21.0 % Fixed-Price per Unit 3,009,290 40.0 % 3,867,576 46.8 % Mixed 173,763 2.3 % 274,179 3.3 % Incentive Payments 15,050 0.2 % 19,612 0.2 % Total Revenue $ 7,520,972 $ 8,269,558 Contract Balances Accounts Receivable Trade accounts receivable are recorded at the billable amount where we have the unconditional right to bill, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on our assessment of the collectability of accounts. Management regularly reviews the adequacy of the allowance for doubtful accounts by considering the age of each outstanding invoice, each customer's expected ability to pay and collection history, when applicable, to determine whether a specific allowance is appropriate. Accounts receivable deemed uncollectible are charged against the allowance for doubtful accounts when identified. Contract Assets Contract assets consist of assets typically resulting when revenue recognized exceeds the amount billed or billable to the customer due to allocation of transaction price. Contract assets balances were $7,470 and $5,532 as of September 30, 2018, and December 31, 2017, respectively. The increase in contract assets from December 31, 2017, to September 30, 2018, is due primarily to one contract for which the invoice is a fixed monthly amount but for which the quantity of performance obligations satisfied varies each month. Contract Liabilities Contract liabilities, to which we formerly referred as deferred revenue, consist of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred. Contract liabilities balances were $453,595 and $387,002 at September 30, 2018, and December 31, 2017, respectively. The increase in contract liabilities from December 31, 2017, to September 30, 2018, is due primarily to the differences in the timing of the cycles of recognition of revenue from third-party support and maintenance contracts for enterprise server-based software sales. Costs to Obtain or Fulfill a Contract When applicable, we recognize an asset related to the costs incurred to obtain a contract only if we expect to recover those costs and we would not have incurred those costs if the contract had not been obtained. We recognize an asset from the costs incurred to fulfill a contract if the costs (i) are specifically identifiable to a contract, (ii) enhance resources that will be used in satisfying performance obligations in future and (iii) are expected to be recovered. There were $4,640 and $3,480 of such assets at September 30, 2018 and December 31, 2017, respectively. Financing Components In instances where the timing of revenue recognition differs from the timing of invoicing, 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. Examples include invoicing at the beginning of a software support and maintenance term with revenue recognized ratably over the contract period. Deferred Costs of Revenue Deferred costs of revenue consist of the costs of third-party support and maintenance contracts for enterprise server-based software. These costs are reported under the prepaid expenses caption on our balance sheet. We recognize these direct costs ratably over time as we make ourselves available to provide our performance obligation for software support, commensurate with our recognition of revenue. Deferred costs of revenue balances included in prepaid expenses were $404,243 and $300,558 at September 30, 2018, and December 31, 2017, respectively. |
3. Recent Accounting Pronouncem
3. Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2018 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
3. Recent Accounting Pronouncements | From time to time, new accounting pronouncements are issued by the FASB, or other standard setting bodies, that the Company adopts as of the specified effective date. In February 2016, the FASB issued ASU 2016-02, “Leases: Topic 842,” Codification Improvements to Topic 842, Leases Leases (Topic 842: Targeted Improvements In June 2018, the FASB issued ASU 2018-07, “ Compensation – Stock Compensation” |
4. Stock-Based Compensation
4. Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2018 | |
Share-based Compensation [Abstract] | |
4. Stock-Based Compensation | The Company has 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. The Company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the awards. Generally such options vest over periods of nine months to two years. The fair values of option awards granted in the three months and nine months ended September 30, 2018 and 2017, were estimated using the Black-Sholes option pricing model under the following assumptions: Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017 Risk-free interest rate 2.75% 1.87% 2.65% - 2.92% 1.87% Dividend yield 0% 0% 0% 0% Expected term 5 years 5 years 5 years 5 years Expected volatility 53.4% 44.6% 49.0%-53.4% 44.6% 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. The maximum number of shares for which equity awards may be granted under the 2016 Plan is 1,000,000. Options under the 2016 Plan expire no later than ten years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The minimum exercise price of each option is the quoted market price of the Company’s stock on the date of grant. At September 30, 2018, there were unexpired options for 385,000 shares issued under the 2016 Plan, of which 217,000 were exercisable. 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 2006 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 1,003,500 unexpired options remaining from the 2006 Plan at September 30, 2018, of which 1,003,500 were exercisable. The status of the options issued under the foregoing option plans as of September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows: Options outstanding Weighted average Weighted average exercise price remaining Incentive Options Shares per share contractual term Outstanding at January 1, 2018 1,288,000 $ 0.21 Options granted 163,000 0.45 Options exercised - - Options expired (62,500 ) 0.31 Options forfeited - - Outstanding at September 30, 2018 1,388,500 $ 0.23 5 years Exercisable at September 30, 2018 1,220,500 $ 0.21 4 years, 6 months There were 3,000 options granted during the three months ended September 30, 2018, of which none were granted to non-employees, and 163,000 options granted during the nine months ended September 30, 2018, of which 5,000 options were granted to non-employees. There were 217,000 options granted during both the three months and nine months ended September 30, 2017, of which none were granted to non-employees. The weighted-average grant date fair values of options granted during the three months and nine months ended September 30, 2018, were $0.12 and $0.20, respectively, and the weighted-average grant date fair value of options granted during both the three months and nine months ended September 30, 2017, was $0.10. There were no options exercised during the nine months ended September 30, 2018 and 2017. As of September 30, 2018, there was $15,981 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 five months. Total compensation expense related to these plans was $8,226 and $6,908 for the three months ended September 30, 2018 and 2017, respectively, of which $426 and $0 related to options awarded to non-employees, respectively. Total compensation expense related to these plans was $23,882 and $7,230 for the nine months ended September 30, 2018 and 2017, respectively, of which $644 and $0 related to options awarded to non-employees, respectively. Compensation expense relating to prior periods in the amount of $612 was reversed in the nine months ended September 30, 2017, from options that were forfeited prior to vesting. Nonvested option awards as of September 30, 2018 and changes during the nine months ended September 30, 2018 were as follows: Nonvested Weighted average grant date Shares fair value Nonvested at January 1, 2018 232,000 $ 0.10 Granted 163,000 0.20 Vested (227,000 ) 0.10 Forfeited - - Nonvested at September 30, 2018 168,000 $ 0.20 |
5. Revolving Line of Credit
5. Revolving Line of Credit | 9 Months Ended |
Sep. 30, 2018 | |
Revolving Line Of Credit | |
5. 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, 2020. As of September 30, 2018, no amounts were outstanding under this line of credit. The Company did not borrow against this line of credit in the last twelve months. |
6. Earnings (Loss) Per Share
6. Earnings (Loss) Per Share | 9 Months Ended |
Sep. 30, 2018 | |
Net (loss) income per common share: | |
6. (Loss) Earnings Per Share | Basic earnings (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) earnings 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 511,118 shares from stock options were excluded from diluted shares for the nine months ended September 30, 2018. The following is a reconciliation of the amounts used in calculating basic and diluted net income (loss) per common share: Per share Net income (loss) Shares amount Basic net income per common share for the three months ended September 30, 2018: Income available to common shareholders $ 27,964 11,201,760 $ - Effect of dilutive stock options - 391,423 - Diluted net income per common share for the three months ended September 30, 2018 $ 27,964 11,593,183 $ - Basic net income per common share for the three months ended September 30, 2017: Income available to common shareholders $ 110,284 11,201,760 $ 0.01 Effect of dilutive stock options - 308,951 - Diluted net income per common share for the three months ended September 30, 2017 $ 110,284 11,510,711 $ 0.01 Basic net loss per common share for the nine months ended September 30, 2018: Loss available to common shareholders $ (11,194 ) 11,201,760 $ - Effect of dilutive stock options - - - Diluted net loss per common share for the nine months ended September 30, 2018 $ (11,194 ) 11,201,760 $ - Basic net income per common share for the nine months ended September 30, 2017: Income available to common shareholders $ 167,386 11,201,760 $ 0.01 Effect of dilutive stock options - 307,442 - Diluted net income per common share for the nine months ended September 30, 2017 $ 167,386 11,509,202 $ 0.01 |
1. Basis of Presentation (Polic
1. Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Organization and Business | Founded in 1979, Information Analysis Incorporated (the “Company”, “we”), 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, 2017 included in the Annual Report on Form 10-K filed by the Company with the SEC on April 2, 2018 (the “Annual Report”). The accompanying December 31, 2017 balance sheet 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 September 30, 2018 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, 2017, that was filed with the SEC on April 2, 2018, except as described in Note 2 herein. |
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 September 30, 2018, there have been no material changes to the Company’s uncertain tax position disclosures as provided in Note 7 of the Annual Report. Through the filing of its 2017 federal income tax return, the Company has net operating loss carryforwards in the amount of $14,959,541, of which $7,750,305 will expire, if unused, on December 31, 2018. |
ASC 606 Impact to Previously Reported Results | On January 1, 2018, we adopted the FASB-issued ASU No. 2014-09, “ Revenue from Contracts with Customers (Topic 606)” |
Reclassification of Financial Statement Line Items | Certain financial statement line items presented in prior periods have been reclassified for consistency between the periods presented. Contract assets in the form of unbilled receivables have been disaggregated from accounts receivable, net, and deferred revenue has been reclassified as contract liabilities. |
2. Revenue from Contracts wit_2
2. Revenue from Contracts with Customers (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue From Contracts With Customers Tables Abstract | |
Disaggregation of revenue from contracts with customers | Contract Three months ended 9/30/2018 Three months ended 9/30/2017 Type Amount Percentage Amount Percentage Professional Services $ 1,111,358 45.9 % $ 1,385,257 50.7 % Third-Party Software 1,153,091 47.7 % 531,505 19.4 % Support & Maintenance 146,532 6.1 % 807,535 29.6 % Incentive Payments 7,696 0.3 % 7,497 0.3 % Total Revenue $ 2,418,677 $ 2,731,794 Contract Nine months ended 9/30/2018 Nine months ended 9/30/2017 Type Amount Percentage Amount Percentage Professional Services $ 3,429,153 45.6 % $ 3,676,730 44.5 % Third-Party Software 3,636,225 48.3 % 2,645,082 32.0 % Support & Maintenance 440,544 5.9 % 1,928,134 23.3 % Incentive Payments 15,050 0.2 % 19,612 0.2 % Total Revenue $ 7,520,972 $ 8,269,558 Revenue Three months ended 9/30/2018 Three months ended 9/30/2017 Recognition Type Amount Percentage Amount Percentage Time & Materials $ 694,524 28.7 % $ 913,432 33.4 % Fixed-Price Ratably over Time 541,057 22.4 % 561,337 20.5 % Fixed-Price per Unit 1,122,960 46.4 % 1,127,107 41.3 % Mixed 52,440 2.2 % 122,421 4.5 % Incentive Payments 7,696 0.3 % 7,497 0.3 % Total Revenue $ 2,418,677 $ 2,731,794 Revenue Nine months ended 9/30/2018 Nine months ended 9/30/2017 Recognition Type Amount Percentage Amount Percentage Time & Materials $ 2,223,949 29.6 % $ 2,374,280 28.7 % Fixed-Price Ratably over Time 2,098,920 27.9 % 1,733,911 21.0 % Fixed-Price per Unit 3,009,290 40.0 % 3,867,576 46.8 % Mixed 173,763 2.3 % 274,179 3.3 % Incentive Payments 15,050 0.2 % 19,612 0.2 % Total Revenue $ 7,520,972 $ 8,269,558 |
4. Stock-Based Compensation (Ta
4. Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Black-Scholes option pricing model assumptions | Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017 Risk-free interest rate 2.75% 1.87% 2.65% - 2.92% 1.87% Dividend yield 0% 0% 0% 0% Expected term 5 years 5 years 5 years 5 years Expected volatility 53.4% 44.6% 49.0%-53.4% 44.6% |
Options outstanding | Options outstanding Weighted average Weighted average exercise price remaining Incentive Options Shares per share contractual term Outstanding at January 1, 2018 1,288,000 $ 0.21 Options granted 163,000 0.45 Options exercised - - Options expired (62,500 ) 0.31 Options forfeited - - Outstanding at September 30, 2018 1,388,500 $ 0.23 5 years Exercisable at September 30, 2018 1,220,500 $ 0.21 4 years, 6 months |
Nonvested stock awards | Nonvested Weighted average grant date Shares fair value Nonvested at January 1, 2018 232,000 $ 0.10 Granted 163,000 0.20 Vested (227,000 ) 0.10 Forfeited - - Nonvested at September 30, 2018 168,000 $ 0.20 |
6. Earnings (Loss) Per Share (T
6. Earnings (Loss) Per Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
Reconciliation of (loss) earnings per share | Per share Net income (loss) Shares amount Basic net income per common share for the three months ended September 30, 2018: Income available to common shareholders $ 27,964 11,201,760 $ - Effect of dilutive stock options - 391,423 - Diluted net income per common share for the three months ended September 30, 2018 $ 27,964 11,593,183 $ - Basic net income per common share for the three months ended September 30, 2017: Income available to common shareholders $ 110,284 11,201,760 $ 0.01 Effect of dilutive stock options - 308,951 - Diluted net income per common share for the three months ended September 30, 2017 $ 110,284 11,510,711 $ 0.01 Basic net loss per common share for the nine months ended September 30, 2018: Loss available to common shareholders $ (11,194 ) 11,201,760 $ - Effect of dilutive stock options - - - Diluted net loss per common share for the nine months ended September 30, 2018 $ (11,194 ) 11,201,760 $ - Basic net income per common share for the nine months ended September 30, 2017: Income available to common shareholders $ 167,386 11,201,760 $ 0.01 Effect of dilutive stock options - 307,442 - Diluted net income per common share for the nine months ended September 30, 2017 $ 167,386 11,509,202 $ 0.01 |
2. Revenue from Contracts wit_3
2. Revenue from Contracts with Customers (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | $ 2,418,677 | $ 2,731,794 | $ 7,520,972 | $ 8,269,558 |
Time & Materials | ||||
Revenue | $ 694,524 | $ 913,432 | $ 2,223,949 | $ 2,374,280 |
Revenue percentage | 28.70% | 33.40% | 29.60% | 28.70% |
Fixed-Price Ratably over Time | ||||
Revenue | $ 541,057 | $ 561,337 | $ 2,098,920 | $ 1,733,911 |
Revenue percentage | 22.40% | 20.50% | 27.90% | 21.00% |
Fixed-Price per Unit | ||||
Revenue | $ 1,122,960 | $ 1,127,107 | $ 3,009,290 | $ 3,867,576 |
Revenue percentage | 46.40% | 41.30% | 40.00% | 46.80% |
Mixed | ||||
Revenue | $ 52,440 | $ 122,421 | $ 173,763 | $ 274,179 |
Revenue percentage | 2.20% | 4.50% | 2.30% | 3.30% |
Professional Services | ||||
Revenue | $ 1,111,358 | $ 1,385,257 | $ 3,429,153 | $ 3,676,730 |
Revenue percentage | 45.90% | 50.70% | 45.60% | 44.50% |
Third-Party Software | ||||
Revenue | $ 1,153,091 | $ 531,505 | $ 3,636,225 | $ 2,645,082 |
Revenue percentage | 47.70% | 19.40% | 48.30% | 32.00% |
Support & Maintenance | ||||
Revenue | $ 146,532 | $ 807,535 | $ 440,544 | $ 1,928,134 |
Revenue percentage | 6.10% | 29.60% | 5.90% | 23.30% |
Incentive Payments | ||||
Revenue | $ 7,696 | $ 7,497 | $ 15,050 | $ 19,612 |
Revenue percentage | 0.30% | 0.30% | 0.20% | 0.20% |
4. Stock-Based Compensation (De
4. Stock-Based Compensation (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Stock-based Compensation | ||||
Risk free interest rate | 2.75% | 1.87% | 1.87% | |
Risk free interest rate, minimum | 2.65% | |||
Risk free interest rate, maximum | 2.92% | |||
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Expected term | 5 years | 5 years | 5 years | 5 years |
Expected volatility | 53.40% | 44.60% | 44.60% | |
Expected volatility, minimum | 49.00% | |||
Expected volatility, maximum | 53.40% |
4. Stock-Based Compensation (_2
4. Stock-Based Compensation (Details 1) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Stock Options Abstract | |
Beginning Balance | shares | 1,288,000 |
Options granted | shares | 163,000 |
Options exercised | shares | 0 |
Options expired | shares | (62,500) |
Options forfeited | shares | 0 |
Ending Balance | shares | 1,388,500 |
Ending Balance, exercisable | shares | 1,220,500 |
Weighted average price per share, beginning balance | $ / shares | $ 0.21 |
Weighted average price per share, granted | $ / shares | 0.45 |
Weighted average price per share, exercised | $ / shares | 0 |
Weighted average exercise price per share, expired | $ / shares | 0.31 |
Weighted average exercise price per share, forfeited | $ / shares | 0 |
Weighted average exercise price , ending balance, outstanding | $ / shares | 0.23 |
Weighted average exercise price, ending balance, exercisable | $ / shares | $ 0.21 |
Weighted average remaing contractual life in years | 5 years |
Weighted average remaining contractual life, exercisable | 4 years 6 months |
4. Stock-Based Compensation (_3
4. Stock-Based Compensation (Details 2) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Number of Shares | |
Nonvested Stock Awards Beginning Balance | shares | 232,000 |
Granted | shares | 163,000 |
Vested | shares | (227,000) |
Forfeited | shares | 0 |
Nonvested Stock Awards Ending Balance | shares | 168,000 |
Weighted Average Grant Date Fair Value | |
Nonvested Stock Awards Beginning Balance | $ / shares | $ 0.10 |
Granted | $ / shares | 0.20 |
Vested | $ / shares | 0.10 |
Forfeitures | $ / shares | 0 |
Nonvested Stock Awards Ending Balance | $ / shares | $ 0.20 |
4. Stock-Based Compensation (_4
4. Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Summary Of Significant Accounting Policies Details Narrative 1Abstract | ||||
Unrecognized compensation cost associated with non-vested share-based compensation | $ 15,981 | $ 15,981 | ||
Total compensation expense for stock options | $ 8,226 | $ 6,908 | $ 23,882 | $ 7,230 |
6. Earnings (Loss) Per Share (D
6. Earnings (Loss) Per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Loss Per Share | ||||
Basic net income (loss) | $ 27,964 | $ 110,284 | $ (11,194) | $ 167,386 |
Basic shares | 11,201,760 | 11,201,760 | 11,201,760 | 11,201,760 |
Basic net income (loss) per common share | $ 0 | $ 0.01 | $ 0 | $ 0.01 |
Effect of dilutive stock options | 391,423 | 308,951 | 0 | 307,442 |
Diluted net income (loss) | $ 27,964 | $ 110,284 | $ (11,194) | $ 167,386 |
Diluted shares | 11,593,183 | 11,510,711 | 11,201,760 | 11,509,202 |
Diluted earnings per share | $ 0 | $ 0.01 | $ 0 | $ 0.01 |