Information Analysis Incorporated (“the Company”) was incorporated under the corporate laws of the Commonwealth of Virginia in to develop and market computer applications software systems, programming services, and related software products and automation systems. The Company provides services to customers throughout the United States, with a concentration in the Washington, D.C. metropolitan area.

 

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. 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.

 

 

In the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update - (“ASU -). The Company adopted ASU - and its related amendments (collectively known as “ASC ) effective by applying the modified retrospective transition method to all of the Company’s contracts. See Note for a detailed description of revenue recognition under ASC

 

 

The Company has concluded that it operates in business segment, providing products and services to modernize client information systems.

 

 

The Company considers all highly liquid investments with maturities of days or less at the time of purchase to be cash equivalents. Deposits are maintained with a federally insured bank. Balances at times exceed federally insured limits, but management does consider this to be a significant concentration of credit risk.

 

 

Accounts receivable consist of trade accounts receivable and do bear interest. The Company typically does require collateral from its customers. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company reviews its allowance for doubtful accounts monthly. Accounts with receivable balances past due over days are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does have any off-balance sheet credit exposure related to its customers. allowance for doubtful accounts has been recorded at and Prompt payment discounts in effect at that were offered and expected to be taken by customers, are reflected as a reduction in the Company’s accounts receivable at such discounts were offered at

 

 

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. Furniture and fixtures are depreciated over the lesser of the useful life or years, off-the-shelf software is depreciated over the lesser of years or the term of the license, custom software is depreciated over the least of years, the useful life, or the term of the license, and computer equipment is depreciated over years. Leasehold improvements are amortized over the estimated term of the lease or the estimated life of the improvement, whichever is shorter. Maintenance and minor repairs are charged to operations as incurred. Gains and losses on dispositions are recorded in operations.

 

 

At the Company had the stock-based compensation plans described in Note below. Total compensation expense related to these plans was and for the years ended and 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.

 

Deferred tax assets and liabilities are computed based on the difference between the financial statement and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse. In addition, a valuation allowance is required to be recognized if it is believed more likely than that a deferred tax asset will be fully realized. Authoritative guidance prescribes a recognition threshold of more likely than and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those positions to be recognized in the financial statements. The Company continually reviews tax laws, regulations and related guidance in order to properly record any uncertain tax liabilities.

 

 

The Company’s loss per share calculations are based upon the weighted average number of shares of common stock outstanding. The dilutive effect of stock options, warrants and other equity instruments are included for purposes of calculating diluted earnings per share, except for periods when the Company reports a net loss, in which case the inclusion of such equity instruments would be antidilutive. See Note for more details.

 

 

During the year ended the Company’s prime contracts with U.S. government agencies represented of revenue, subcontracts under federal procurements represented of revenue, and of revenue came from commercial contracts. The terms of these contracts and subcontracts vary from single transactions to years. Within this group of prime contracts with U.S. government agencies, individual contract represented of revenue. One subcontract under a federal procurement represented of revenue.

 

In the year ended the Company’s prime contracts with U.S. government agencies represented of revenue, subcontracts under federal procurements represented of revenue, of revenue came from commercial contracts, and less than of revenue came from state and local government contracts. The terms of these contracts and subcontracts vary from single transactions to years. Within this group of prime contracts with U.S. government agencies, individual contracts represented and of revenue, respectively. One subcontract under a federal procurement represented of revenue.

 

The Company sold -party software and maintenance contracts under agreements with major supplier in and accounting for and of total revenue, respectively.

 

At the Company’s accounts receivable included receivables from prime contracts with U.S. government agencies that represented and of the Company’s outstanding accounts receivable, respectively, and receivables from subcontract under a federal procurement that represented of the Company’s outstanding accounts receivable.

 

At the Company’s accounts receivable included receivables from prime contracts with U.S. government agencies that represented and of the Company’s outstanding accounts receivable, respectively, and receivables from subcontract under a federal procurement that represented of the Company’s outstanding accounts receivable.

 

 

The Company’s Director of Human Resources is the spouse of the Senior Vice President and Chief Operating Officer of the Company. During the years ended and the Director of Human Resources received wages and paid leave distributions totaling and respectively, as an employee of the Company.

 

In the Financial Accounting Standards Board issued ASU - that removes certain exceptions to the general principles in Topic and simplifies the application of areas of Topic by clarifying and amending existing guidance. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after The adoption of ASU - is expected to have a material effect on the Company’s financial statements or cash flows.

 

 

In the Financial Accounting Standards Board issued ASU - that requires lessees to recognize assets and liabilities on the balance sheet for most leases including operating leases, and followed it up with ASUs - - - and - (collectively “Topic ), which clarified certain aspects of the new leases standard and provided an optional transition method.

 

The Company adopted Topic on and elected the optional transition method to initially apply the standard at the adoption date. As a result, the Company applied the new lease standard prospectively to its leases existing or commencing on or after Comparative periods presented were restated upon adoption. Similarly, new disclosures under the standard were made for periods beginning and for prior comparative periods. Prior periods will continue to be reported under guidance in effect prior to In addition, the Company elected the package of practical expedients permitted under the transition guidance within the standard, which among other things, allowed the Company to reassess contracts to determine if they contain leases, lease classification and initial direct costs. The standard did impact the Company’s statements of operations and had impact on its cash flows.

 

The Company has an operating lease which is a real estate lease for its headquarters in Fairfax, Virginia. This lease has a fixed lease term of months. The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use operating lease assets, other current liabilities, and operating lease liabilities in the Company’s balance sheet as of As of the Company does have any sales-type or direct financing leases.

 

The Company’s operating lease asset represents its right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the lease does provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company’s lease agreement includes rental payments escalating annually for inflation at a fixed rate. These payments are included in the initial measurement of the operating lease liability and operating lease asset. The Company does have any rental payments which are based on a change in an index or a rate that can be considered variable lease payments, which would be expensed as incurred.

 

The Company has lease agreements which contain lease and non-lease components, which are accounted for as a single performance obligation to the extent that the timing and pattern of transfer are similar for the lease and non-lease components and the lease component qualifies as an operating lease. The Company does recognize lease liabilities and operating lease assets for leases with a term of months or less. It recognizes these lease payments on a straight-line basis over the lease term.

 

Upon adoption of Topic on the Company recorded a right-of-use operating lease asset of and lease liabilities of

 

The Company’s lease agreement does contain any material residual value guarantees or material restrictions or covenants.

 

The Company does sublease any real estate to parties.

 

The following table provides supplemental balance sheet information related to the Company’s operating lease:

 

Balance Sheet
Classification		December 31, 2019
Assets:
Right-to-use operating lease asset		$	149,762
Liabilities:
Operating lease liability - current		$	103,955
Operating lease liability - non-current			45,595
Total lease liabilities		$	149,550

 

The following table reconciles the undiscounted cash flows to the operating lease liabilities recorded in the Company’s balance sheet.

 

		December 31, 2019
2020		$	110,086
2021			46,433
Total lease payments			156,519
Less: discount			(6,969	)
Present value of lease liabilities		$	149,550

 

 

As of the Company’s operating lease had a weighted average lease term of approximately years. The discount rate of the lease is equal to IAI’s incremental borrowing rate at the measurement date of the lease agreement. The weighted average discount rate of the Company’s operating lease is approximately For the year ended the Company incurred of expense related to its operating leases. Rent expense for the year ended was For the year ended there were short-term leases with a term less than months.