Summary of Significant Accounting Policies

 

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.

 

 

See Note for a detailed description of revenue recognition under ASC Accounting Standards Update - Revenue from Contracts with Customers (Topic ) (“ASU -). The Company adopted ASU - and its related amendments (collectively known as “ASC ).

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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

 

 

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 income (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 income 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. Three subcontracts under federal procurements represented and of revenue, respectively. One prime contractor under which the Company has multiple subcontracts represented of revenue in aggregate.

 

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.

 

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 agency that represented of the Company's outstanding accounts receivable, and receivables from subcontracts under federal procurements that represented and of the Company's outstanding accounts receivable, respectively. Receivables from prime contractor under which the Company has multiple subcontracts represented of the Company's outstanding accounts receivable in aggregate.

 

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 Stan Reese, who served as the Senior Vice President and Chief Operating Officer of the Company through and now serves as Chief Executive Officer and President. 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.

 

 

The COVID- (coronavirus) outbreak has had a notable impact on general economic conditions, including, but limited to, the temporary closures of many businesses, “shelter in place” and other governmental regulations, and “work from home” directives. There are many unknowns, and many regional inconsistencies. Notable potential effects on the Company include U.S. government procurements be delayed or cancelled, work on new or existing contracts that require personal interactions be suspended, payment processing for customer invoices be delayed, employees and customers or their families become infected, and personal business development meetings be able to take place. The Company continues to monitor the impact of the COVID- outbreak closely.

 

To date, the COVID- impact on the Company's existing business has been minimal.  The Company had previously implemented the necessary infrastructure for its employees to work remotely, so it did experience material issues supporting its customers.  The Company rapidly adapted to the challenges presented to its administration, including challenges to management, accounting, and information technology infrastructure.  The extent to which business development efforts have been hampered by the inability to meet with potential customers in person is indeterminable.  The full extent to which the COVID- outbreak will impact the Company's business, results of operations, financial condition, and cash flows over time is uncertain.