Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark
One)
☑ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-22405
Information
Analysis Incorporated
(Exact name of registrant as specified in its
charter)
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Virginia
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54-1167364
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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11240 Waples Mill Road
Suite 201
Fairfax, Virginia 22030
(Address of principal executive offices)
(703) 383-3000
Registrant’s telephone number, including area
code
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, par value $0.01 per share
(Title of class)
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section
15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”) during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☑No ☐
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files).Yes ☑No ☐
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§229.405
of this chapter) is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company, or emerging growth company. See the definitions
of “large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐ (Do not check if a smaller reporting
company)
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Smaller reporting company ☑
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Emerging growth company ☐
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the
Act). Yes
☐ No ☑
The
aggregate market value of the 7,146,068 shares of common stock held
by non-affiliates of the registrant based on the closing price of
the registrant’s common stock on June 30, 2018, was
approximately $2,572,584. For purposes of this computation, all
officers, directors and 10% beneficial owners of the registrant are
deemed to be affiliates. Such determination should not be deemed to
be an admission that such officers, directors or 10% beneficial
owners are, in fact, affiliates of the registrant.
As
of March 29, 2019, there were 11,201,760 outstanding shares of the
registrant’s common stock.
Documents Incorporated by Reference
Portions
of the registrant’s definitive proxy statement for the 2019
Annual Meeting of Stockholders, to be filed within 120 days after
the end of the fiscal year covered by this Form 10-K, are
incorporated by reference into Part III of this Form
10-K.
TABLE OF CONTENTS
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PART I
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1
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6
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9
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9
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9
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PART
II
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10
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11
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15
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34
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34
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34
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PART
III
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35
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35
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35
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35
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35
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PART
IV
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36
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37
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38
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Cautionary
Statement Regarding Forward-Looking Statements
This
Form 10-K contains forward-looking statements regarding our
business, customer prospects, or other factors that may affect
future earnings or financial results that are subject to the safe
harbor created by the Private Securities Litigation Reform Act of
1995. Such statements involve risks and uncertainties which could
cause actual results to vary materially from those expressed in the
forward-looking statements. Investors should read and understand
the risk factors detailed here in our Form 10-K and in other
filings with the Securities and Exchange Commission
(“SEC”). These risks include, among others, the
following:
●
changes in the way
the U.S. federal government contracts with businesses and changes
in its budgetary priorities;
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terms specific to
U.S. federal government contracts;
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our failure to keep
pace with a changing technological environment;
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intense competition
from other companies;
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inaccuracy in our
estimates of the cost of services and the timeline for completion
of contracts;
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non-performance by
our subcontractors and suppliers; and
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fluctuations in our
results of operations and its impact on our stock
price.
In some
cases, you can identify forward-looking statements by terms such as
“may,” “will,” “should,”
“could,” “would,” “expect,”
“plans,” “anticipates,”
“believes,” “estimates,”
“projects,” “predicts,”
“intends,” “potential” and similar
expressions intended to identify forward-looking statements. These
statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place
undue reliance on these forward-looking statements. We discuss many
of these risks in greater detail under the heading “Risk
Factors” in Item 1A. Also, these forward-looking statements
represent our estimates and assumptions only as of the date of this
report. Except as required by law, we assume no obligation to
update any forward-looking statements after the date of this
report.
PART I
Overview of Market
Founded
in 1979, Information Analysis Incorporated, which we sometimes
refer to as the Company or 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. Since its inception, we
have performed software development and conversion projects for
over 100 commercial and government customers including, but not
limited to the Department of Agriculture, Department of Defense,
Department of Education, Department of Energy, Department of
Homeland Security, Department of the Treasury, U.S. Small Business
Administration, U.S. Army, U.S. Air Force, Department of Veterans
Affairs, Citibank, and General Dynamics Information Technology
(formerly Computer Sciences Corporation, CSRA). At present, we
primarily apply our technology, services and experience to
developing web-based and mobile device solutions (including
electronic forms conversions) for various agencies of the federal
government, data analytics, and legacy software migration and
modernization.
Digital Solutions Marketplace
The
web, digital content, and cloud solutions market continues to be
one of the fastest growing segments of the information technology
professional services business as small and large companies, and
government agencies (state and federal) expand their presence via
cloud implementations and on the Internet. The range of products
and services involved in this sector is extensive and therefore,
require some specialization for a small company such as IAI to make
an impact. Most small web companies are involved in building
websites and typically have many short duration projects. More
complex web applications generally require knowledge of
customers’ back-end systems based on mainframe or mid-level
computers. Few small companies have the expertise to develop these
more sophisticated web applications. We distinguish ourselves among
smaller companies by having such expertise, typically associated
with larger companies, both internally and through strategic
business relationships with leading-edge software firms, such as
Adobe Systems.
Given
executive level directives to improve outreach to its stakeholders,
federal and state government agencies are now empowered to find
means of facilitating dissemination of information quickly and
efficiently. Government requirements are unique in that most
government processes are based on forms. Many government agencies
rely on thousands of internal and external forms to conduct their
business. Any company that wishes to develop governmental web
applications must competently address the forms issue. Adobe
electronic forms related products resold and supported by IAI as a
solutions partner are the predominant forms software in the federal
government.
Over
the last few years there has been a pronounced emphasis within the
U.S. federal government to employ more form data entry and citizen
communication using mobile devices such as iPhones, iPads, and
mobile devices employing the Android operating system. Working with
Adobe’s latest version of Adobe Experience Manager (AEM), we
have been able to build applications for several federal clients
employing mobile devices, as well as converting paper-based forms
into “dynamic” or “adaptive”
forms.
Legacy Migration and Modernization
The
migration and modernization market is complex and diverse as to the
multiple requirements clients possess to upgrade their older
systems. Many large legacy systems remain in use because of the
enormous cost to re-engineer these systems. Currently, the options
available to modernize these systems are many and include
introduction of new hardware systems, employing advanced software
languages, and utilization of the Internet or Intranet to achieve
desired efficiencies. All of these options are typically very
expensive and time consuming because they require starting all over
in defining requirements, designing structures, programming, and
testing.
Opportunities for
our modernization expertise continue to exist as government
agencies and private companies are being driven for various
reasons, including increased funding by federal and state
legislatures, to address the upgrading of their legacy systems. One
reason is the difficulty of finding and retaining staff with
outdated technical skills, many of which are possessed only by
senior programmers nearing retirement. Hardware platforms such as
Unisys are reaching the horizon of their usefulness, and
consequently, older programming and data base languages are
generally poorly supported by their providers. Additionally,
maintenance costs are materially increasing as vendors squeeze the
most out of clients before the life-cycles of hardware and software
expire. In addition, the Internet has added a new level of pressure
to compete in the electronic marketplace with sector rivals. We
expect that the foreseeable future should see an upsurge of
movement and change as organizations revamp their older legacy
systems.
A
segment of mainframe users is interested in simply updating their
legacy systems without drastic rewritings to these systems in newer
languages or adapting expensive enterprise products (such as SAP or
Oracle) to their needs. These potential customers are looking for
automated tools that can quickly and cost-effectively move
applications onto cheaper computer platforms without the risk of
failure. IAI, in conjunction with strategic partners, such as Micro
Focus and Software Mining, offers its own conversion tool set and
those of its partners in addressing this need and positioning us to
uniquely deliver successful results. It is difficult to determine
the exact size of this segment, but even a minor share of this
market would represent significant prospective customers with
meaningful opportunities. In December 2016, we were notified that
IAI was one of a number of subcontractors that were part of a prime
contractor’s team that was awarded a contract with the Small
Business Administration’s (SBA) 504 loan program. Under the
contract, IAI personnel provide analysis and modernization
activities to the SBA program platform. IAI personnel worked
extensively in calendar year 2017 on their assigned tasks and were
significant team contributors to a successful implementation of the
modernized application in the first quarter 2018. As a side benefit
on this project, IAI recruited a team of exceptional programmers
versed in Adobe Cold Fusion technology, which was used extensively
on the SBA 504 loan program. This added capability adds to our
unique set of capabilities and differentiates us from other
modernization companies.
Because
of IAI’s unique modernization capabilities, IAI has been
approached by various companies, some very large, to collaborate on
modernization opportunities that are suddenly imminent for a number
of federal agencies. We interpret this as a positive sign that our
backlog of modernization activities will expand over the next three
years.
Description of Business and Strategy
With
the advent of mobile and digital technology applications becoming
widespread in everyday life, coupled with government agencies
seeking better ways to improve outreach to its stakeholders, we
intend to capitalize on our proven expertise in this arena and
capture new business opportunities that are likely to arise in the
foreseeable future. This includes the conversion of paper-based
forms into digitally compatible “dynamic” and
“adaptive” forms, as well as developing mobile and
Internet based applications that replace cumbersome paper handling
processes currently in use by diverse organizations.
We are
using the experience we have acquired as an Adobe solutions partner
and reseller to help secure engagements for web-based applications
requiring forms. The Adobe Experience Manager products have evolved
over the years into robust tools that can form the backbone of
applications, especially those requiring forms and web content
management. We have used this expertise to penetrate a number of
federal government clients such as the Internal Revenue Service and
Veterans Affairs and build sophisticated web applications at the
Department of Homeland Security. One such application, a parking
and transit subsidy tool, was cited for award recognition by the
American Council for Technology – Industry Advisory Council
(ACT-IAC) and Federal Computer Week’s Fed 100 Awards. Our
knowledge of legacy system languages has been instrumental in
connecting these web applications to legacy databases residing on
mainframe computers. Our Company has built a core group of
professionals that can continue to build this practice over the
coming years. In addition, IAI, operating as a prime contractor,
has teamed with Adobe Systems to provide AEM Assets govCloud
services to DoD’s Defense Security Services and AEM related
application consulting to the Defense Finance and Accounting
Services.
Concentrating on
the niche of electronic forms-related web applications (including
securing digital content and documents) through our solutions
partner relationship with Adobe AEM products, we have developed a
cadre of professionals that can quickly and efficiently develop web
applications. We will focus on federal government clients during
2019 and beyond and leverage the Company’s reputation with
existing federal customers to penetrate other agencies. We will be
able to reference successful projects completed or in development
for various components of the Department of Homeland Security,
Department of Defense, Department of Veterans Affairs, Federal
Mediation and Conciliation Service, Department of Agriculture,
Department of Education, General Services Administration, U.S. Army
Reserve, and U.S. Air Force Logistics Command.
As a
recent example of our capability, IAI was contracted by the US
Citizenship and Immigration Services agency (USCIS) to provide
technical and design support to complete development of an enhanced
Form I-9 (Employment Eligibility Verification) that incorporates
drop-down menus, helper text and hover text that embed the
instructions into the form, field logic, error messages and form
validation into a fillable PDF format. IAI’s successful
programming of the enhanced form per our client’s
requirements led to the form’s release by the government in
September 2017 to the general public as USCIS’s official form
for that designated purpose.
In
an effort to increase IAI’s profile and visibility in the
expanding digital technology marketplace, IAI personnel have
actively participated in industry programs such as the Adobe
Digital Government Assembly and the Department of Homeland
Security’s Government Forms Forum, which bring together
senior government officials, technology leaders and information
technology leaders interested in advances in digital technology
applications. IAI senior staff typically participate in related
panel discussions and IAI exhibits its digital related competencies
and innovative capabilities to the attendees.
We
recognize the need to enhance our service and product capabilities
as a means of expanding our business base and maintaining growth in
the future. To that end, over the last several years, we have
aggressively pursued strategic business relationships with certain
technology firms in our local area that have developed unique and
innovative software-based products and services. These new business
areas include, but are not limited to, legacy modernization
applications and expanded product opportunities. In addition, we
have teamed with other local technology firms on proposal
submissions to federal government agencies to gain access to
Government Wide Acquisition Contracts, such as the Navy’s
multiple SeaPort NxG contract.
Where
appropriate, we have entered into teaming arrangements or product
reseller agreements with certain of these firms. These products and
services are synergistic to our present business strategy and also
allow us to expand into new business areas, both within the federal
government and commercial sectors, without the expenditure of
significant technical development dollars. Our partners benefit by
our potential to leverage their new technology developments into
our existing client base, as well as utilize our expertise and
credibility in developing applications around their inventive
products.
Since
the mid-1990’s we have migrated customers, both private firms
and government agencies, from older computer languages generally
associated with legacy computer systems to more modern languages
used with current-day computer system platforms. As part of this
modernization, many organizations wish to extend these legacy
systems to interface with web-based applications. Our strategy has
been to develop and/or acquire tools through strategic
relationships that will facilitate the modernization process and
differentiate our offerings in the marketplace.
In
2004, we aligned with Micro Focus, an established company in the
legacy COBOL environment, to jointly participate in the conversion
of large legacy mainframe systems to PC and Unix server platforms.
Micro Focus has developed a suite of products that simplify the
conversion process and enable the entry screens to be Internet
accessible. As an authorized reseller and installer of the Micro
Focus tools, our plan is to derive revenue from software sales and
installation services as well as acquire supplementary programming
services that typically may occur with each
engagement.
We have
structured our Company to address the wide range of requirements
that we envision the market will demand. We believe that the use of
our proprietary ICONS legacy conversion tools suite and that of our
strategic partners will give us a competitive edge in performing
certain conversions and migrations faster and more economically
than many other vendors. The diverse capabilities of our staff in
mainframe technology and client-server implementations help to
assure that our staff can analyze the original systems properly to
conduct accurate and thorough conversions both from a technical and
business perspective. In addition, our modernization methodology
has evolved over time through the successful completion of numerous
conversion projects.
Our
strategy to exploit the conversion and modernization market is also
predicated on continuing to form alliances with large information
technology consulting firms who currently maintain the legacy
systems for large government agencies and Fortune 1000 companies.
These alliances have resulted in significant opportunities in the
past and are likely to be important in procuring future
business.
Our
management will generally continue to explore ways to expand our
current market spaces and develop new ones that may offer more
opportunity. This may take the shape of organic growth or through
acquisition or merger with other companies. In any event, IAI will
explore the potential of diversified business opportunities and
seek targets of acquisition.
We are
a small business team member on the Defense Logistics
Agency’s (DLA) J6 Enterprise Technical Services (JETS)
contract. The DLA JETS contract is a five-year, $6.015B ceiling,
base Indefinite Delivery Indefinite Quantity (IDIQ) contract
vehicle for a full range of IT services as well as technical and
management expertise that supports applications, software,
hardware, infrastructure, and systems, across the DLA Enterprise.
Additionally, this contract vehicle is available for use by other
Department of Defense agencies and organizations.
Certain
government contracts related to IAI’s business are now
limiting future awards to companies certified under designated
quality management systems such as ISO 9001:2015. The ISO 9001 family of quality management systems
is designed to help organizations ensure that they meet the needs
of customers and other stakeholders while meeting statutory and
regulatory requirements related to a product or program.
Third-party certification bodies provide independent confirmation
that organizations meet the requirements of ISO 9001. In the second
half of 2016, IAI developed the processes and procedures required
by the ISO 9001:2015 so as to be in compliance with this standard
and expand our ability to bid on future contracts that require such
certification. We received notice by the independent registrar in
June 2017 that IAI passed its Stage Two Audit and was subsequently
awarded ISO 9001:2015 certification. IAI continues to undergo
periodic internal and external audits as required by regulations to
ensure compliance with the ISO quality management standard. IAI has
subsequently passed all such follow-on surveillance audits to
date.
Backlog
As of
December 31, 2018, we estimated our backlog at approximately $13.2
million over the next three years, of which $2.9 million was
funded. This backlog consists of outstanding contracts and general
commitments from current clients. We regularly provide services to
certain clients on an as-needed basis without regard to a specific
contract. General commitments represent those services which we
anticipate providing to such clients during a twelve-month
period.
Competition
In the
ever-expanding realm of enterprise-based web content management
systems, there are a number of small and large companies offering
such software products and related consulting services. We believe
that the Adobe Experience Manager product suite will continue to
dominate in the future against such competition, including
offerings such as Microsoft’s SharePoint solution. AEM has
performed well in the federal marketplace due to its full offering
of powerful capabilities such as cloud integration and intuitive
customization. Adobe Experience Manager is a solution that
optimizes the authoring, management and delivery of digital media
and content across owned channels, including Web, mobile, email,
print and social communities. In 2018, Gartner named Adobe as a
leader in multiple categories of its Magic Quadrant reporting
including, but not limited to, Digital Experience Platforms, Web Content
Management, Personalization Engines and Content Marketing
Platforms.
There
are hundreds of firms performing traditional information technology
services, business intelligence and cybersecurity, and general
consulting for the federal government. A great number of them are
much larger than IAI, and are more established in the marketplace,
and have more resources to pursue individual
prospects.
The
competition in the conversion and modernization market is very
strong. Many software professional services companies have had some
involvement in this area and profess proficiency in performing
these projects. We also face competition from other companies that
purport to substantially automate the process through software
tools including Blue Phoenix Solutions, Fujitsu, and IBM. Software
for enterprise resource planning, such as SAP and Oracle, provides
an additional source of competition, although to date, the cost and
lengthy installation time for enterprise resource planning software
has slowed its implementation in the market place. No matter what
type of solution is offered, many of our competitors have greater
name recognition than our company, a larger, more established
customer base, and significantly greater financial and market
resources.
Government Regulation
We are
bound by various rules and regulations promulgated by the federal
government and agencies thereunder. We have not experienced undue
expense beyond those expenses normally incurred in our ordinary
course of business in adhering to such rules and regulations. Since
historically most of our business is derived from contracts either
directly with the U.S. federal government or as a subcontractor on
behalf of U.S. federal government customers, most of our contracts
are subject to termination at the election of the
government.
Intellectual Property
We
depend upon a combination of trade secret and copyright laws,
nondisclosure and other contractual provisions and technical
measures to protect our proprietary rights in our methodologies,
databases and software. We have not filed any patent applications
covering our methodologies and software. In addition, we attempt to
protect the secrecy of our proprietary databases and other trade
secrets and proprietary information through agreements with
employees and consultants.
We also
seek to protect the source code of our proprietary ICONS legacy
code conversion tools suite as trade secrets. The copyright
protection accorded to databases, however, is fairly limited. While
the arrangement and selection of data can be protected, the actual
data is not, and others are free to create software performing the
same function. We believe, however, that the creation of competing
databases would be very time consuming and costly.
Employees
As of
December 31, 2018, we employed twenty-one full-time and three
part-time individuals. In addition, we maintained subcontractor
relationships with companies and individuals that add eight
individuals for professional information technology services. All
of our billable professional employees have at least four years of
related experience. For computer related services, we believe that
the diverse professional opportunities and interaction among our
employees contribute to maintaining a stable professional staff
with limited turnover.
We have
no collective bargaining agreements or other such labor contracts
with our employees and believe that our employee relationships are
satisfactory. In the long-term, management will likely hire
additional staff to meet its anticipated growth requirements. We do
not anticipate encountering material problems in our ability to
hire individuals with the requisite employee skill sets, despite a
competitive market for our requisite technical skill sets and
government clearances, when required. We utilize fee-based
recruiting firms when it is necessary to speed up the process of
locating and hiring employees with specialized skill sets and
clearances.
Available Information
We make available free of charge on
or through our website our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, proxy
statements, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed
with or furnished to the Securities and Exchange Commission, or
SEC. Our website address is www.infoa.com.
We
operate in a rapidly changing environment that involves a number of
risks, some of which are beyond our control. This discussion
highlights some of the risks which may affect future operating
results. These are the risks and uncertainties we believe are most
important for you to consider. Additional risks and uncertainties
not presently known to us which we currently deem immaterial or
which are similar to those faced by other companies in our industry
or business in general, may also impair our business operations. If
any of the following risks or uncertainties actually occurs, our
business, financial condition and operating results would likely
suffer.
Changes in the funding priorities of the U.S. federal government,
and changes in the way the U.S. federal government contracts with
businesses, may materially and adversely affect our revenue and
earnings.
Since
the U.S. federal government is our largest customer, both directly
and with us as a subcontractor, changes in the funding priorities
of the U.S. federal government may materially and adversely affect
us if funding is cut or shifted away from the information
technology services that we are equipped to provide. Additionally,
changes in the way the government awards contracts may create a
disadvantage for us to compete in certain markets.
Temporary or extended budget-related shutdowns of parts of the U.S.
federal government may materially and adversely affect our revenue
and earnings.
Since
the U.S. federal government is our largest customer, both directly
and with us as a subcontractor, budget impasses that lead to
temporary or extended shutdowns of agencies of the U.S. federal
government with which we contract or for which we provide services
may adversely affect cash flow and earnings as we carry key
personnel during periods in which they are unable to perform work
which can be invoiced to the customers.
U.S. federal government contracts are generally subject to terms
more favorable to the customer than commercial
contracts.
U.S.
federal government contracts generally contain provisions and are
subject to laws and regulations that give the federal government
rights and remedies not typically found in commercial contracts,
including provisions permitting the federal government
to:
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terminate our
existing contracts;
■
reduce potential
future income from our existing contracts;
■
modify some of the
terms and conditions in our existing contracts;
■
suspend or
permanently prohibit us from doing business with the federal
government or with any specific government agency;
■
impose fines and
penalties;
■
subject the award
of some contracts to protest or challenge by competitors, which may
require the contracting federal agency or department to suspend our
performance pending the outcome of the protest or challenge and
which may also require the government to solicit new proposals
for the contract or result in the termination, reduction or
modification of the awarded contract;
■
suspend work under
existing multiple year contracts and related task orders if the
necessary funds are not appropriated by Congress;
■
decline to exercise
an option to extend an existing multiple year contract;
and
■
claim rights in
technologies and systems invented, developed or produced by
us.
The
U.S. federal government may terminate a contract either “for
convenience” (for instance, due to a change in its perceived
needs or its desire to consolidate work under another contract) or
if a default occurs by failing to perform under the contract. If
the federal government terminates a contract for convenience, we
generally would be entitled to recover only our incurred or
committed costs, settlement expenses and profit on the work
completed prior to termination. If the federal government
terminates a contract based upon a default, we generally would be
denied any recovery for undelivered work, and instead may be
liable for excess costs incurred by the federal government in
procuring undelivered items from an alternative source and other
damages as authorized by law.
The opportunities among our exisiting
customers for forms modernization is nearing
maturity.
Over
the last several years, we have modernized nearly all of the forms
for which modernization was needed to meet compliance standards
within agencies that have been our key electronic forms customers.
While we continue to assist these customers with incremental
changes on their internal and external forms, we must position
ourselves to find forms business within some new agencies. While we
do not anticipate a material effect on our overall results of
operations, we may experience a material decline in
revenue.
Over half of our revenue is concentrated among
a small number of contracts.
The
loss of one or a few key contracts that represent large portions of
our revenue could materially affect our revenue and our results of
operations.
Failure to keep pace with a changing technological environment
could negatively impact our business.
The
computer industry in general, and the market for our application
software offerings and services, is characterized by rapidly
changing technology, frequent new technology introductions, and
significant competition. In order to keep pace with this rapidly
changing market environment, we must continually develop and
incorporate into our services new technological advances and
features desired by the marketplace at acceptable prices. The
successful development and commercialization of new services and
technology involves many risks, including the identification of new
opportunities, timely completion of the development process, the
control and recovery of development and production costs and
acceptance by customers of our products and services. If we are
unsuccessful in identifying, developing and marketing our services
and technology or adapting our business to rapid technological
change, it will have a material negative impact on our results of
operations.
We are subject to intense competition from other companies engaged
in software development and computer related services.
The
market for our products and services is competitive, rapidly
evolving, and can be affected by new product introductions and
other market activities of industry participants. Some of these
companies have longer operating histories, greater financial,
marketing and other resources, greater name recognition in other
markets and a larger base of customers than IAI. In addition, some
companies have well-established relationships with our current and
prospective customers. As a result, these competitors may be able
to devote greater resources to the development, promotion and sale
of their products and services than we can. Should we not be able
to maintain our competitive advantages in light of these factors,
it could have a material negative impact on our results of
operations.
If we are unable to accurately estimate the cost of services and
the timeline for completion of contracts, the profitability of our
contracts may be materially and adversely affected.
Our
commercial and federal government contracts are typically awarded
on a competitive basis. Our bids are based upon, among other items,
the cost to provide the services. To generate an acceptable return
on our investment in these contracts we must be able to accurately
estimate our costs to provide the services required by the contract
and be able to complete the contracts in a timely manner. If we
fail to accurately estimate our costs or the time required to
complete a contract the profitability of our contracts may be
materially and adversely affected.
Contracts on which we utilize subcontractors or suppliers may be
adversely affected if our subcontractors or suppliers fail to
perform required obligations under the contract.
We
frequently utilize subcontract labor on contracts where we lack
specific functional expertise or where the subcontractor has
brought the opportunity to us. If our subcontractors or suppliers
fail to perform as specified, it may adversely affect our contracts
and subject us to loss of the contracts, unintended expenses,
and/or the inability to secure future contracts due to our
nonperformance.
Our
federal government contracts typically have terms of one or more
base years and one or more option years. Federal governmental
agencies generally have the right not to exercise options to extend
a contract. A decision to terminate or not to exercise options to
extend our existing contracts could have a material adverse effect
on our business, prospects, financial condition and results of
operations.
We are dependent on key personnel to maintain our profitability and
grow our business.
Our
future success depends, to a significant extent, on the continued
services of our key personnel. A loss of certain key personnel,
both managerial and technical, would most likely have an adverse
effect on our business. In addition, competition for
qualified technical personnel throughout the industry is
significant and we may be unable to retain our current personnel or
attract, integrate or retain other highly qualified personnel in
the future. If we do not succeed in retaining our current
personnel or in attracting and motivating new personnel, our
business could be adversely affected.
Our software sales are subject to increasing price competition,
fluctuation in demand, and our relationships with third-party
software and software maintenance suppliers.
Federal
government customers are increasingly utilizing systems to accept
software bids that make it easier for a larger number of sellers to
participate in the bid process, which puts downard pressure on
prices. At the same time, we obtain software licenses and related
software maintenance contracts for resale from third-party
suppliers. Increases in costs from these suppliers may affect our
ability to bid winning prices to potential customers, which could
have a material efffect on software sales revenue. Also, any delay
in our suppliers' fulfillment of our orders could impair our
ability to deliver products and maintenance to customers and,
accordingly, could have a material adverse effect on business,
results of operations, financial condition, and
reputation.
Fluctuations in our results of operations from period to period may
cause fluctuations in our stock price.
Our
financial results vary from quarter to quarter based on certain
factors such as the timing of significant orders, contract funding
approvals and contract completions, some of which are beyond our
control. As a consequence, our quarterly and annual revenue and
operating results may fluctuate from period to period, and period
comparisons may therefore not be meaningful. Such fluctuations in
the future could contribute to corresponding fluctuations in our
stock price and in certain cases cause the trading price of our
stock to decline.
The exercise of outstanding options to purchase our common stock
could substantially dilute shareholders’
investments.
Under
the terms of outstanding options to acquire our common stock issued
to employees and others, the holders thereof are given an
opportunity to profit from a rise in the market price of our common
stock that, upon the exercise of such options, could result in
dilution in the interests of our other shareholders.
There is a limited public market for our common stock.
Our
common stock is presently quoted on the OTC Markets under the
symbol “IAIC”, and the securities are traded through
broker-dealers. Because our stock trades on the OTC Markets rather
than on a national securities exchange, a shareholder may find it
difficult to either dispose of or obtain quotations as to the price
of our common stock. There has historically been a low trading
volume of our shares which may have an adverse impact on a
shareholder’s ability to execute transactions of our
shares.
Our
offices are located at 11240 Waples Mill Road, Fairfax, VA 22030.
We hold a lease for 4,434 square feet. This lease expires on June
30, 2021. We believe that our current facility is suitable and
adequate to meet our current needs, and that suitable additional or
substitute space will be available as needed to accommodate
expansion of our operations.
Item 3. Legal Proceedings
There
are presently no pending legal proceedings to which we are a party
or to which any of our property is subject and, to the best of our
knowledge, no such actions against us are contemplated or
threatened.
Item 4. Mine Safety Disclosures
Not
applicable.
PART II
Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our
Common Stock trades on the Over-the-Counter Bulletin Board under
the symbol IAIC. The following table sets forth, for the fiscal
periods indicated, the high and low bid prices of the Common
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
$0.50
|
$0.47
|
$0.36
|
$0.27
|
$0.26
|
$0.35
|
$0.30
|
$0.42
|
|
Low
|
$0.36
|
$0.27
|
$0.21
|
$0.14
|
$0.14
|
$0.17
|
$0.19
|
$0.19
|
The
quotations on which the above data are based reflect inter-dealer
prices without adjustment for retail mark-up, mark-down or
commission, and may not necessarily represent actual
transactions.
Because
our stock trades on the OTC Bulletin Board rather than on a
national securities exchange, a shareholder may find it difficult
to either dispose of or obtain quotations as to the price of our
common stock. There has historically been a low trading volume of
our shares which may have an adverse impact on a
shareholder’s ability to execute transactions of our
shares.
Holders
As of
December 31, 2018, we had 104 holders of record of our Common
Stock.
Dividends
We have
never paid any cash dividends on our common stock and do not
anticipate paying cash dividends within the foreseeable future. Our
management anticipates that all earnings, if any, will be retained
for development of our business. Any future dividends will be
subject to the discretion of the board of directors and will depend
on, among other things, future earnings, our operating and
financial condition, our capital requirements and general business
conditions.
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table contains information regarding securities
authorized and available for issuance under our equity compensation
plans for certain employees, directors, and
consultants.
Equity Compensation Plan Information
|
Plan category
|
Number of securities to be issued upon exercise of outstanding
options, warrants, and rights
|
Weighted average exercise price of outstanding options, warrants,
and rights
|
Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column
(a))
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders(1,2)
|
1,376,500
|
$0.23
|
627,000
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
Totals
|
1,376,500
|
$0.23
|
627,000
|
1 The Company has a
stock incentive plan, which became effective June 1, 2016, and
expires April 4, 2026 (the “2016 Plan”). The 2016 Plan
provides for the granting of equity awards to employees and
directors. The maximum number of shares for which equity awards may
be granted under the 2016 Plan is 1,000,000. Options granted under
the 2016 Plan expire no later than ten years from the date of grant
or 90 days after employment ceases, whichever comes first, and vest
over periods determined by the Board of Directors.
2 The Company had a
stock incentive plan, which became effective May 18, 2006, and
expired April 12, 2016 (the “2006 Plan”). The 2006 Plan
provided for the granting of equity awards to employees and
directors. Options granted under the 2006 Plan expire no later than
ten years from the date of grant or 90 days after employment
ceases, whichever comes first, and vest over periods determined by
the Board of Directors.
Recent Sales of Unregistered Securities
We had
no sales of unregistered securities during 2018 that have not been
previously disclosed in a Current Report on Form 8-K or Quarterly
Reports on Form 10-Q.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
We did
not repurchase any of our equity securities during
2018.
Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
The
following discussion should be read in conjunction with the
attached financial statements and notes thereto. Reference is made
to “Cautionary Statement Regarding Forward-Looking
Statements” on page 1 hereof, which describes important
factors that could cause actual results to differ from expectations
and non-historical information contained herein.
Overview
In 2018
we incurred a net loss of $51,000, a $297,000 decrease in earnings
from our 2017 net income of $246,000. Our stockholders’
equity was $1.87 million at December 31, 2018, a decrease of
$21,000 from 2017’s year-end balance. Our gross profit
decreased by $273,000 on a decrease in total revenue of $1.71
million. The revenue decrease includes a $612,000 decrease in fees
for professional services from new contracts and a $1.10 million
decrease in software sales. Our selling, general and administrative
expenses increased $72,000, or 4.3%, in 2018.
Cash
and cash equivalents decreased $767,554, due mostly to the decrease
in revenue in 2018 and decreasing the balances of accrued expenses
and commissions payable. We were able to operate throughout 2018
without borrowing against our line of credit.
Results of Operations
The
following table sets forth, for the periods indicated, selected
information from our Statements of Operations, expressed as a
percentage of revenue:
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
Professional
fees
|
49.2%
|
47.0%
|
|
Software
sales
|
50.8%
|
53.0%
|
|
Total
revenues
|
100.0%
|
100.0%
|
|
Cost
of revenues
|
|
|
|
Cost
of professional fees
|
26.6%
|
25.6%
|
|
Cost
of software sales
|
49.4%
|
51.7%
|
|
Total
cost of revenues
|
76.0%
|
77.3%
|
|
Gross
profit
|
24.0%
|
22.7%
|
|
Operating
expenses
|
|
|
|
Selling,
general and administrative expenses
|
19.5%
|
15.8%
|
|
Commissions
expense
|
5.2%
|
4.7%
|
|
(Loss)
income from operations
|
(0.7%)
|
2.2%
|
|
Other
income
|
0.1%
|
0.1%
|
|
(Loss)
income before provision for income taxes
|
(0.6%)
|
2.3%
|
|
Provision
for income taxes
|
0.0%
|
0.0%
|
|
Net
(loss) income
|
(0.6%)
|
2.3%
|
2018 Compared to 2017
Revenue. Total revenue for 2018 decreased $1.71 million, or
16.0%, to $8.93 million from $10.64 million in 2017. Revenue from
professional services fees decreased $612,000 or 12.2%, to $4.39
million in 2018 from $5.00 million in 2017. The decrease in our
revenue from professional services fees is primarily due to the
expiration of some contracts and to one particular contract that
graduated from development mode to maintenance mode following the
successful implementation of a major modernization effort. Revenue
from software sales decreased $1.10 million, or 19.4%, to $4.54
million in 2018 from $5.64 million in 2017. Software product and
maintenance sales and commissions on registered sales are subject
to considerable fluctuation from period to period, based on the
product mix sold and customer demand. Revenue from software sales
comprised 50.8% of total sales in 2018, compared to 53.0% of total
sales in 2017.
Gross Profit. Gross profit decreased $273,000, or 11.3%, in
2018 versus 2017. Gross profit on professional fees revenue is
higher than gross profit on software sales, as gross profit on
software sales is more dependent on the costs from third-party
suppliers, and revenue is generally based on
increasingly-competitive bidding in which identical products are
offered by all bidders. Overall gross profit as a percentage of
revenue increased to 24.0% of revenue in 2018 from 22.7% of revenue
in 2017. Gross profit from professional fees for 2018 was $2.01
million, or 45.8% of professional fees revenue, while gross profit
for 2017 from professional fees was $2.28 million, or 45.6% of
professional fees revenue. For software sales, gross profit
percentage increased to 2.9% in 2018 from 2.4% in
2017.
Selling, General and Administrative. Selling, general and
administrative expense for 2018 increased $72,000 to $1.75 million,
or 19.5% of revenue, from $1.67 million, or 15.7% of revenue, in
2017. The increase is due mostly to increases in non-billable labor
cost and the cost of fringe benefits allocated to that labor, stock
compensation costs, which increased largely due to the effect of
greater stock price volatility on the fair value of awarded
incentive stock options, and increased costs of labor allocated to
bids and proposals.
Commission Expense. Commission expense in 2018 was $460,000,
or 5.2% of revenue, versus $504,000, or 4.7%, in 2017. Commission
expenses vary based on income generated from contracts sold by our
commission-based sales associates.
Outlook. In January 2017, we began work on a contract that
added approximately $2.0 million in revenue in each of 2018 and
2017. While that modernization implementation contract has entered
a maintenance mode, it is expected to continue to generate revenue
exceeding $1.4 million in 2019, and that relationship is expected
to yield additional opportunities within that U.S. federal agency
for similar projects. In addition, we will aggressively pursue
other professional services opportunities and
relationships.
In
March 2018, we were awarded a new General Services Administration
(“GSA”) Multiple Award Schedule contract for
Information Technology services. The award has a base period of
five years, with the possibility of three five-year option periods.
The new GSA schedule contract replaces our previous GSA schedule
contract, which expired in November 2018.
The
U.S. federal government shutdown that occurred from December 2018
into January 2019 caused the Company to cease work on several
federal contracts during that period. In addition, solicitations on
other U.S. federal government opportunities were delayed by the
shutdown. We have reported losses in each of the last six first
calendar quarters. In 2019, we expect that trend to continue, and
expect the losses to carry into the second calendar
quarter.
Recent Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the
Financial Accounting Standards Board (the “FASB”), or
other standard setting bodies that the Company adopts as of the
specified effective date.
For
a discussion of the accounting standards recently adopted or
pending adoption and the affect such accounting changes will have
on our results of operations, financial position or liquidity, see
Note 1 to the financial statements.
Liquidity and Capital Resources
Our
beginning cash and cash equivalents balance, when combined with our
cash flow from operations, were sufficient to provide financing for
our operations. For 2018, net cash used in operating and investing
activities was $768,000. Our net cash used, when subtracted from a
beginning balance of $2.73 million, yielded cash and cash
equivalents of $1.96 million at December 31, 2018. Our accounts
payable and accrued expenses balances decreased $410,000 due to a
combination of the timing of receiving supplier invoices from a
2017 software sales transaction and a reduction in payroll
liabilities at year-end from 2017 to 2018. Our commission payable
balance decreased $204,746 as existing commissions payable balances
were paid out faster than new commissions were earned in 2018. Our
contract liabilities balances are largely composed of deferred
revenue from sales of software maintenance contracts, for which we
recognize the costs and revenue ratably over the life of the
maintenance contract. These balances decreased
$68,000.
We have
a revolving line of credit with a bank providing for demand or
short-term borrowings of up to $1,000,000. The line became
effective December 20, 2005, and expires on May 31, 2020. As of
December 31, 2018, no amounts were outstanding under this line of
credit. We did not borrow against this line of credit in
2018.
Based
on our current cash position and operating plan, we anticipate that
we will be able to meet our cash requirements beyond twelve months
from the filing of this Annual Report on Form 10-K.
We
presently lease our corporate offices on a contractual basis with
certain timeframe commitments and obligations. We believe that our
existing offices will be sufficient to meet our foreseeable
facility requirement. Should we need additional space to
accommodate increased activities, management believes we can secure
such additional space on reasonable terms.
We have
no material commitments for capital expenditures.
Off-Balance Sheet Arrangements
We do
not have any off-balance-sheet arrangements that have or are likely
to have a material current or future effect on our financial
condition, or changes in financial condition, liquidity or capital
resources or expenditures.
Critical Accounting Policies and Estimates
Our
significant accounting policies are described in Note 1 to our
accompanying financial statements. We consider the accounting
policies related to revenue recognition to be critical to the
understanding of our results of operations. Our critical accounting
policies also include the areas where we have made what we consider
to be particularly difficult, subjective or complex judgments in
making estimates, and where these estimates can significantly
impact our financial results under different assumptions and
conditions. We prepare our financial statements in conformity with
accounting principles generally accepted in the United States. As
such, we are required to make certain estimates, judgments and
assumptions that we believe are reasonable based upon the
information available. These estimates, judgments and assumptions
affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenue and
expenses during the periods presented. Actual results could be
different from these estimates.
Revenue Recognition
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. On January 1, 2018,
we adopted Accounting Standards Update (“ASU”) No.
2014-9, Revenue from Contracts
with Customers (Topic 606) and its related amendments
(collectively known as “ASC 606”). We account for our
performance obligations in accordance with ASC 606, and all related
interpretations.
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 - A contract with a customer exists when
(i) we enter into an enforceable contract with a customer that
defines each party’s rights regarding the goods or services
to be transferred and identifies the payment terms related to these
goods or services, (ii) the contract has commercial substance and
the parties are committed to perform and, (iii) we determine that
collection of substantially all consideration to which we will be
entitled in exchange for goods or services that will be transferred
is probable based on the customer’s intent and ability to pay
the promised consideration.
●
Identification of the
performance obligations in the contract - Performance obligations promised in a
contract are identified based on the goods or services that will be
transferred to the customer that are both capable of being
distinct, whereby the customer can benefit from the goods or
service either on its own or together with other resources that are
readily available from third parties or from us, and are distinct
in the context of the contract, whereby the transfer of the goods
or services is separately identifiable from other promises in the
contract. To the extent a contract includes multiple promised goods
or services, we apply judgment to determine whether promised goods
or services are capable of being distinct and distinct in the
context of the contract. If these criteria are not met the promised
goods or services are accounted for as a combined performance
obligation.
●
Determination of the
transaction price -
The transaction price is determined based on the consideration to
which we will be entitled in exchange for transferring goods or
services to the customer adjusted for estimated variable
consideration, if any. We typically estimate the transaction price
impact of discounts offered to the customers for early payments on
receivables or rebates based on sales target achievements.
Constraints are applied when estimating variable considerations
based on historical experience where applicable.
●
Allocation of the
transaction price to the performance obligations in the
contract - If the
contract contains a single performance obligation, the entire
transaction price is allocated to the single performance
obligation. Contracts that contain multiple performance obligations
require an allocation of the transaction price to each performance
obligation based on a relative standalone selling price basis. We
determine standalone selling price by taking into account available
information such as historical selling prices of the performance
obligation, geographic location, overall strategic pricing
objective, market conditions and internally approved pricing
guidelines related to the performance obligations.
●
Recognition of revenue
when, or as, we satisfy performance obligations - We satisfy performance obligations
either over time or at a point in time. Revenue is recognized at or
over the time the related performance obligation is satisfied by
transferring a promised good or service to a customer.
Effects of Inflation
In the
opinion of management, inflation has not had a material effect on
our operations.
Item 8. Financial Statements and
Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Stockholders of
Information
Analysis Incorporated
Opinion on the Financial Statements
We have
audited the accompanying balance sheets of Information Analysis
Incorporated (the “Company”) as of December 31, 2018
and 2017, and the related statements of operations and
comprehensive (loss) income, stockholders’ equity, and cash
flows for each of the years in the two-year period ended December
31, 2018, and the related notes
(collectively referred to as the “financial
statements”). In our opinion, the financial statements
referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2018 and 2017,
and the results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2018, in
conformity with accounting principles generally accepted in the
United Stated of America.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/ CohnReznick LLP
We have served as the Company’s auditor since
2012.
Tysons,
Virginia
April
1, 2019
INFORMATION ANALYSIS
INCORPORATED
BALANCE SHEETS
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
and cash equivalents
|
$1,963,956
|
$2,731,510
|
|
Accounts
receivable, net
|
652,839
|
610,182
|
|
Prepaid
expenses and other current assets
|
393,533
|
368,626
|
|
Contract
assets
|
-
|
5,532
|
|
Notes
receivable
|
-
|
1,719
|
|
Total
current assets
|
3,010,328
|
3,717,569
|
|
|
|
|
|
Property
and equipment, net of accumulated depreciation
|
|
|
|
and
amortization of $294,424 and $284,667
|
7,147
|
11,133
|
|
Other
assets
|
6,281
|
6,281
|
|
Total
assets
|
$3,023,756
|
$3,734,983
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$25,294
|
$47,658
|
|
Commissions
payable
|
508,083
|
712,829
|
|
Contract
liabilities
|
318,552
|
387,002
|
|
Accrued
payroll and related liabilities
|
217,751
|
275,582
|
|
Other
accrued liabilities
|
81,485
|
411,487
|
|
Franchise
taxes payable
|
-
|
6,400
|
|
Total
liabilities
|
1,151,165
|
1,840,958
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
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 December 31, 2018 and 2017
|
128,443
|
128,443
|
|
Additional
paid-in capital
|
14,676,006
|
14,646,406
|
|
Accumulated
deficit
|
(12,001,647)
|
(11,950,613)
|
|
Treasury
stock, 1,642,616 shares at cost
|
|
|
|
at
December 31, 2018 and 2017
|
(930,211)
|
(930,211)
|
|
Total
stockholders' equity
|
1,872,591
|
1,894,025
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
$3,023,756
|
$3,734,983
|
The accompanying notes are an integral part of the financial
statements
INFORMATION ANALYSIS
INCORPORATED
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
|
|
For the years ended December 31,
|
|
|
|
|
|
Revenues
|
|
|
|
Professional
fees
|
$4,392,311
|
$5,003,908
|
|
Software
sales
|
4,541,464
|
5,636,695
|
|
Total
revenues
|
8,933,775
|
10,640,603
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
Cost
of professional fees
|
2,380,670
|
2,723,501
|
|
Cost
of software sales
|
4,410,267
|
5,501,673
|
|
Total
cost of revenues
|
6,790,937
|
8,225,174
|
|
|
|
|
|
Gross
profit
|
2,142,838
|
2,415,429
|
|
|
|
|
|
Selling,
general and administrative expenses
|
1,745,320
|
1,673,762
|
|
Commission
expense
|
459,863
|
503,893
|
|
|
|
|
|
(Loss)
income from operations
|
(62,345)
|
237,774
|
|
|
|
|
|
Other
income
|
11,311
|
8,688
|
|
|
|
|
|
(Loss)
income before provision for income taxes
|
(51,034)
|
246,462
|
|
|
|
|
|
Provision
for income taxes
|
-
|
-
|
|
|
|
|
|
Net
(loss) income
|
$(51,034)
|
$246,462
|
|
|
|
|
|
Comprehensive
(loss) income
|
$(51,034)
|
$246,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income per commion share - basic
|
$-
|
$0.02
|
|
|
|
|
|
Net
(loss) income per commion share - diluted
|
$-
|
$0.02
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
Basic
|
11,201,760
|
11,201,760
|
|
Diluted
|
11,201,760
|
11,583,578
|
The accompanying notes are an integral part of the financial
statements
INFORMATION ANALYSIS
INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2016
|
12,844,376
|
$128,443
|
$14,631,362
|
$(12,197,075)
|
$(930,211)
|
$1,632,519
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
246,462
|
|
246,462
|
|
|
|
|
|
|
|
|
|
Stock
option compensation
|
|
|
15,044
|
|
|
15,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2017
|
12,844,376
|
128,443
|
14,646,406
|
(11,950,613)
|
(930,211)
|
1,894,025
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
(51,034)
|
|
(51,034)
|
|
|
|
|
|
|
|
|
|
Stock
option compensation
|
|
|
29,600
|
|
|
29,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2018
|
12,844,376
|
$128,443
|
$14,676,006
|
$(12,001,647)
|
$(930,211)
|
$1,872,591
|
The accompanying notes are an integral part of the financial
statements
INFORMATION ANALYSIS
INCORPORATED
STATEMENTS OF CASH FLOWS
|
|
For the years ended December 31,
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
Net
(loss) income
|
$(51,034)
|
$246,462
|
|
Adjustments
to reconcile net (loss) income to net cash
|
|
|
|
(used
in) provided by operating activities
|
|
|
|
Depreciation
and amortization
|
9,757
|
16,905
|
|
Stock-based
compensation
|
29,600
|
15,044
|
|
Changes
in operating assets and liabilities
|
|
|
|
Accounts
receivable
|
(37,125)
|
541,673
|
|
Prepaid
expenses and other current assets
|
(24,907)
|
294,930
|
|
Accounts
payable, accrued payroll and related liabilities,
|
|
|
|
and
other accrued liabilities
|
(410,197)
|
83,197
|
|
Deferred
revenue
|
(68,450)
|
(228,033)
|
|
Commissions
payable
|
(204,746)
|
(140,511)
|
|
Franchise
taxes payable
|
(6,400)
|
6,400
|
|
Net
cash (used in) provided by operating activities
|
(763,502)
|
836,067
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Acquisition
of property and equipment
|
(5,771)
|
(840)
|
|
Payments
received on notes receivable
|
1,719
|
3,411
|
Increase
in notes receivable
|
-
|
(2,500)
|
|
Net
cash (used in) provided by investing activities
|
(4,052)
|
71
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
(767,554)
|
836,138
|
|
|
|
|
|
Cash
and cash equivalents, beginning of the year
|
2,731,510
|
1,895,372
|
|
|
|
|
|
Cash
and cash equivalents, end of the year
|
$1,963,956
|
$2,731,510
|
|
|
|
|
|
Supplemental
cash flow Information
|
|
|
|
Interest
paid
|
$-
|
$-
|
|
|
|
|
|
Franchise
taxes paid
|
$7,200
|
$800
|
The accompanying notes are an integral part of the financial
statements
INFORMATION ANALYSIS
INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1.
Summary
of Significant Accounting Policies
Operations
Information
Analysis Incorporated (“the Company”) was incorporated
under the corporate laws of the Commonwealth of Virginia in 1979 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.
Use of Estimates
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.
Revenue Recognition
In May
2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic
606) (“ASU 2014-09”). The Company adopted ASU
2014-09 and its related amendments (collectively known as
“ASC 606”) effective January 1, 2018, by applying the
modified retrospective transition method to all of the Company's
contracts. Comparative information has not been restated and
continues to be reported under the accounting standards in effect
for the periods presented. Based on the results of the Company's
evaluation, the adoption of ASC 606 did not have a material impact
on its revenue recognition policies. In addition, the adoption of
ASC 606 did not have a material impact on our financial statements
for the years ended December 31, 2018 and 2017. Additionally, the
cumulative effect to the opening balance sheet on January 1, 2018,
from the adoption of ASC 606 was not material.See Note 2 for a
detailed description of revenue recognition under ASC
606.
Segment Reporting
The
Company has concluded that it operates in one business segment,
providing products and services to modernize client information
systems.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with maturities of
ninety 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 not
consider this to be a significant concentration of credit
risk.
Accounts Receivable
Accounts receivable
consist of trade accounts receivable and do not bear interest. The
Company typically does not 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 90 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 not
have any off-balance sheet credit exposure related to its
customers. No allowance for doubtful accounts has been recorded at
December 31, 2018 and 2017. Prompt payment discounts offered and
expected to be taken by customers in conjunction with orders
received under the Company’s GSA Schedule are reflected as a
reduction in the Company’s accounts receivable.
Notes Receivable
The
Company had an outstanding note receivable and accrued interest
from one non-officer employee at December 31, 2017. It bore
interest at 3.5% and was repaid in full in2018.
Property and Equipment
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 five years, off-the-shelf software is depreciated
over the lesser of three years or the term of the license, custom
software is depreciated over the least of five years, the useful
life, or the term of the license, and computer equipment is
depreciated over three 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.
Stock-Based Compensation
At
December 31, 2018, the Company had the stock-based compensation
plans described in Note 10 below. Total compensation expense
related to these plans was $29,600 and $15,044 for the years ended
December 31, 2018 and 2017, 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.
Income Taxes
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 not that a deferred tax asset will not
be fully realized. Authoritative guidance prescribes a recognition
threshold of more likely than not, 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.
In
December 2017, the U.S. government enacted comprehensive tax
legislation commonly referred to as the Tax Cuts and Jobs Act (the
"Tax Act"). The Tax Act makes broad and complex changes to
the U.S. tax code, including, but not limited to: (i) reducing the
U.S. federal corporate tax rate from 35 percent to 21 percent; (ii)
eliminating the corporate alternative minimum tax
(“AMT”) and changing how existing AMT credits can be
realized; (iii) creating a new limitation on deductible interest
expense;(iv) changing rules related to uses and limitations of net
operating carryforwards created in tax years beginning after
December 31, 2017; and (v) changing the U.S. federal taxation of
earnings of foreign subsidiaries.
As a
result, the Company experienced a reduction of approximately
$1,870,800 of the deferred tax assets related to net operating
losses and other deferred tax assets as of December 31, 2017. Such
reduction was offset by a change in the Company’s valuation
allowance.
(Loss) Earnings Per Share
The
Company’s (loss) earnings 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. 452,724 shares representing the
dilutive effect of stock options were excluded from diluted loss
per share for the year ended December 31, 2018, due to the net loss
reported for the period. 381,818 shares representing the dilutive
effect of stock options were included in diluted earnings per share
for the year ended December 31, 2017.
Concentration of Credit Risk
During
the year ended December 31, 2018, the Company's prime contracts
with U.S. government agencies represented 68.8% of revenue,
subcontracts under federal procurements represented 26.5% of
revenue, 4.7% of revenue came from commercial contracts, and less
than 0.05% of revenue came from state and local government
contracts. The terms of these contracts and subcontracts vary from
single transactions to five years. Within this group of prime
contracts with U.S. government agencies, two individual contracts
represented 20.5% and 12.4% of revenue, respectively. One
subcontract under a federal procurement represented 22.1% of
revenue.
In the
year ended December 31, 2017, the Company's prime contracts with
U.S. government agencies represented 70.9% of revenue, subcontracts
under federal procurements represented 23.2% of revenue, and 5.9%
of revenue came from commercial contracts. The terms of these
contracts and subcontracts vary from single transactions to five
years. Within this group of prime contracts with U.S. government
agencies, three individual contracts represented 15.8%, 12.4%, and
8.1% of revenue, respectively. One subcontract under a federal
procurement represented 18.8% of revenue.
The
Company sold third-party software and maintenance contracts under
agreements with one major supplier in 2018 and 2017, accounting for
50.0% and 52.7% of total revenue, respectively.
At
December 31, 2018, the Company’s accounts receivable included
receivables from prime contracts with two U.S. government agencies
that represented 16.6% and 16.3% of the Company’s outstanding
accounts receivable, respectively, and receivables from one
subcontract under a federal procurement that represented 44.3% of
the Company’s outstanding accounts receivable.
At
December 31, 2017, the Company’s accounts receivable included
receivables from prime contracts with one U.S. government agency
that represented 17.8% of the Company’s outstanding accounts
receivable, and receivables from two subcontracts under federal
procurements that represented 35.2% and 10.6% of the
Company’s outstanding accounts receivable,
respectively.
Related Party Transactions
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 December 31, 2018 and 2017, she received
wages and paid leave distributions totaling $148,932 and $136,705,
respectively, as an employee of the Company.
A
member of the Company's Board of Directors currently serves as
president of an information technology and professional services
firm which serves the federal government and commercial markets.
Revenues generated from doing business with this company totaled $0
and $14,271 during the years ended December 31, 2018 and 2017,
respectively.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02,
“Leases: Topic
842,” which provided
updated guidance on lease accounting. ASU 2016-02 is effective for
annual reporting periods beginning after December 15, 2018,
including interim periods within that annual period, with early
adoption permitted. Adoption of this new standard will not have a
material impact on the Company’s financial statements. When
adopted effective January 1, 2019, the Company’s operating
lease for office space will be presented as a right-of-use asset
and as an offsetting liability for the present value of the
contractual cash flows. The Company does not currently have any
other material lease obligations.
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 - A contract with a customer exists when
(i) the Company enters into an enforceable contract with a customer
that defines each party’s rights regarding the goods or
services to be transferred and identifies the payment terms related
to these goods or services, (ii) the contract has commercial
substance and the parties are committed to perform and, (iii) it
determines that collection of substantially all consideration to
which the Company will be entitled in exchange for goods or
services that will be transferred is probable based on the
customer’s intent and ability to pay the promised
consideration.
●
Identification of the
performance obligations in the contract - Performance obligations promised in a
contract are identified based on the goods or services that will be
transferred to the customer that are both capable of being
distinct, whereby the customer can benefit from the goods or
service either on its own or together with other resources that are
readily available from third parties or from the Company, and are
distinct in the context of the contract, whereby the transfer of
the goods or services is separately identifiable from other
promises in the contract. To the extent a contract includes
multiple promised goods or services, the Company applies judgment
to determine whether promised goods or services are capable of
being distinct and distinct in the context of the contract. If
these criteria are not met, the promised goods or services are
accounted for as a combined performance obligation.
●
Determination of the
transaction price -
The transaction price is determined based on the consideration to
which the Company will be entitled in exchange for transferring
goods or services to the customer adjusted for estimated variable
consideration, if any. The Company typically estimates the
transaction price impact of discounts offered to the customers for
early payments on receivables or rebates based on sales target
achievements. Constraints are applied when estimating variable
considerations based on historical experience where
applicable.
●
Allocation of the
transaction price to the performance obligations in the
contract - If the
contract contains a single performance obligation, the entire
transaction price is allocated to the single performance
obligation. Contracts that contain multiple performance obligations
require an allocation of the transaction price to each performance
obligation based on a relative standalone selling price basis. The
Company determines standalone selling price by taking into account
available information such as historical selling prices of the
performance obligation, geographic location, overall strategic
pricing objective, market conditions and internally approved
pricing guidelines related to the performance
obligations.
●
Recognition of revenue
when, or as, the Company satisfies performance obligations
- The Company satisfies
performance obligations either over time or at a point in time as
discussed in further detail below. Revenue is recognized at or over
the time the related performance obligation is satisfied by
transferring a promised good or service to a customer.
Nature of Products and Services
The
Company generates 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 the Company. The Company sells through its direct
relationships with end customers and under subcontractor
arrangements. The Company accounts for its 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 the Company
is paid a fixed fee to make itself 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. The
Company's obligations as the seller for each class differ based on
its reseller agreements and whether its 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 the Company has no obligation to the customer
after the third-party makes delivery of the licenses, the Company
has determined it is acting as an agent, and the Company recognizes
revenue upon delivery of the licenses only for the net of the
selling price and its contract costs.
Third-party support
and maintenance contracts for enterprise server-based software
include a performance obligation under the Company's reseller
agreements for it 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,
the Company recognizes revenue ratably over time as it makes itself
available to provide the support.
Incentive payments
are received under reseller agreements with software manufacturers
and suppliers where the Company introduces 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
|
|
|
|
Type
|
|
|
|
|
|
Services Time &
Materials
|
$3,010,891
|
33.7%
|
$3,296,721
|
31.0%
|
|
Services Fixed
Price
|
1,103,828
|
12.4%
|
1,315,135
|
12.4%
|
|
Services
Combination
|
207,942
|
2.3%
|
341,136
|
3.2%
|
|
Services Fixed
Price per Unit
|
69,650
|
0.8%
|
50,916
|
0.5%
|
|
Third‐Party
Software
|
3,897,421
|
43.6%
|
4,081,171
|
38.3%
|
|
Software Support
& Maintenance
|
589,975
|
6.6%
|
1,508,113
|
14.2%
|
|
Incentive
Payments
|
54,068
|
0.6%
|
47,411
|
0.4%
|
|
Total
Revenue
|
$8,933,775
|
|
$10,640,603
|
|
Contract Balances
Accounts Receivable
Trade
accounts receivable are recorded at the billable amount where the
Company has the unconditional right to bill, net of allowances for
doubtful accounts. The allowance for doubtful accounts is based on
the Company's 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 $0
and $5,532 as of December 31, 2018 and 2017,
respectively.
Contract Liabilities
Contract
liabilities, to which the Company 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 $318,552
and $387,002 at December 31, 2018 and 2017,
respectively.
Costs to Obtain or Fulfill a Contract
When
applicable, the Company
recognizes an asset related to the costs incurred to obtain a
contract only if it expects to recover those costs and it would not
have incurred those costs if the contract had not been
obtained. The Company
recognizes 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 $3,480 and $3,480 of such assets at December 31, 2018 and
2017, respectively. These costs are amortized ratably over the
periods of the contracts to which those costs apply.
Financing Components
In
instances where the timing of revenue recognition differs from the
timing of invoicing, the Company
has determined its contracts do not include a significant financing
component. The primary purpose of the
Company's invoicing terms is to provide customers with
simplified and predictable ways of purchasing its products and
services, not to receive financing from its 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 the
Company's balance sheets. The Company
recognizes these direct costs ratably over time as it makes itself
available to provide its performance obligation for software
support, commensurate with its recognition of revenue. Deferred
costs of revenue balances included in prepaid expenses were
$294,115 and $300,558 at December 31, 2018 and 2017,
respectively.
Accounts receivable
at December 31, 2018 and 2017, consist of the
following:
|
|
|
|
|
Billed
federal government
|
$612,679
|
$560,942
|
|
Billed
commercial and other
|
40,160
|
49,240
|
|
Total
billed
|
652,839
|
610,182
|
|
Contract
assets
|
-
|
5,532
|
Allowance
for doubtful accounts
|
-
|
-
|
|
Accounts
receivable, net
|
$652,839
|
$615,714
|
Billed
receivables from the federal government include amounts due from
both prime contracts and subcontracts where the federal government
is the end customer. Contract assets are unbilled receivables for
services provided through the balance sheet date that are expected
to be billed and collected within one year.
4.
Fair
Value Measurements
The
Company defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants
on the measurement date. Valuation techniques used to measure fair
value must maximize the use of observable inputs and minimize the
use of unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two
are considered observable and the last unobservable, that may be
used to measure fair value which are the following:
●
Level
1—Quoted prices in active markets for identical assets or
liabilities;
●
Level
2—Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities; and
●
Level
3—Unobservable inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities.
The
following table represents the fair value hierarchy for
the
Company 's financial assets (cash equivalents) measured at
fair value on a recurring basis as of December 31, 2018 and
2017:
|
|
|
|
|
December
31, 2018
|
|
|
|
|
|
$1,706,376
|
$-
|
$-
|
|
Total
|
$1,706,376
|
$-
|
$-
|
|
|
|
|
|
|
December
31, 2017
|
|
|
|
|
|
$2,120,269
|
$-
|
$-
|
|
Total
|
$2,120,269
|
$-
|
$-
|
Money
market funds are highly liquid investments. The pricing information
on these investment instruments are readily available and can be
independently validated as of the measurement date. This approach
results in the classification of these securities as Level 1 of the
fair value hierarchy.
The
carrying amount of financial instruments such as accounts
receivable, accounts payable, and accrued liabilities approximate
the related fair value due to the short-term maturities of these
instruments.
5.
Property
and Equipment
A
summary of property and equipment at December 31, 2018 and 2017,
consist of the following:
|
|
|
|
|
Furniture
and equipment
|
$75,747
|
$75,747
|
|
Computer
equipment and software
|
219,010
|
213,239
|
|
Leasehold
improvements
|
6,814
|
6,814
|
|
Subtotal
|
301,571
|
295,800
|
Less:
accumulated depreciation and amortization
|
(294,424)
|
(284,667)
|
|
Total
|
$7,147
|
$11,133
|
Depreciation and
amortization expense for the years ended December 31, 2018 and
2017, was $9,757 and $16,905, respectively.
6.
Revolving
Line of Credit
On
December 20, 2005, the Company entered into a revolving line of
credit agreement with TD Bank providing for demand or short-term
borrowings up to $1,000,000. The credit agreement includes an
interest rate indexed to 3.00% above the Intercontinental Exchange
Benchmark Administration Ltd. London Interbank Offered Rate. The
line of credit will expire on May 31, 2020. The total amount
allowed to be drawn against the line is limited by varying
percentages of the Company’s eligible accounts receivable. At
December 31, 2018, the limit would have been approximately
$550,000. The bank is granted a security interest in all of the
Company’s assets if there are borrowings under the line of
credit. Interest on outstanding balances is payable monthly. The
effective rate at December 31, 2018 was 5.479%. At December 31,
2017, the effective rate was 4.511%.
The
bank has a first priority security interest in the Company’s
receivables and a direct assignment of its U.S. federal government
contracts. Under the line of credit agreement, the Company is bound
by certain covenants, including maintaining a minimum tangible net
worth and producing a number of periodic financial reports for the
benefit of the bank. There was no outstanding balance on the line
of credit at December 31, 2018 or 2017.
7.
Commitments
and Contingencies
Operating Leases
The
Company leases its facility under a long-term operating lease
agreement through May 2021. Rent expense was $104,487 and $103,007
for the years ended December 31, 2018 and 2017,
respectively.
The
future minimum rental payments to be made under long-term operating
leases are as follows:
|
Year
ending December 31,:
|
2019
|
$106,617
|
|
|
2020
|
109,816
|
|
|
2021
|
55,719
|
|
Total
minimum rent payments
|
|
$272,152
|
The
above minimum lease payments reflect the base rent under the lease
agreements. However, these base rents can be adjusted each year to
reflect the Company’s proportionate share of increases in the
building’s operating costs and the Company’s
proportionate share of real estate tax increases on the leased
property.
The tax
effects of significant temporary differences representing deferred
tax assets at
December 31, 2018
and 2017 are as follows:
|
|
|
|
|
Deferred
tax assets (liabilities)
|
|
|
|
Net
operating loss carryforwards
|
$1,934,300
|
$3,889,200
|
|
Accrued
commissions
|
102,600
|
154,400
|
|
Accrued
vacation
|
24,500
|
29,400
|
|
Fixed
assets
|
(24,100)
|
(25,500)
|
|
Other
|
6,400
|
6,000
|
|
Subtotal
|
2,043,700
|
4,053,500
|
|
Valuation
allowance
|
(2,043,700)
|
(4,053,500)
|
|
Total
|
$-
|
$-
|
The
provision for income taxes is at an effective rate different from
the federal statutory rate due principally to the
following:
|
|
|
|
|
|
|
|
(Loss)
income before taxes
|
$(51,034)
|
$246,462
|
|
Income
tax (benefit) expense on above
|
|
|
|
amount
at federal statutory rate
|
$(10,700)
|
$83,800
|
|
State
income tax (benefit) expense, net of
|
|
|
|
federal
(benefit) expense
|
(2,600)
|
9,900
|
|
Permanent
differences
|
8,600
|
7,500
|
|
Other
|
(1,900)
|
5,800
|
|
NOL
Expirations
|
2,015,100
|
-
|
|
Tax
Cuts and Jobs Act of 2017
|
-
|
1,870,800
|
Change
in valuation allowance
|
(2,008,500)
|
(1,977,800)
|
|
Provision
for income taxes
|
$-
|
$-
|
Income
tax expense for the years ended December 31, 2018 and 2017 consists
of the following:
|
|
|
|
Current
income taxes
|
|
|
|
Federal
|
$-
|
$16,300
|
|
State
|
-
|
2,400
|
|
Benefit
from utilization of net operating losses
|
-
|
(18,700)
|
|
Subtotal
|
-
|
-
|
|
|
-
|
-
|
|
Provision
for income taxes
|
$-
|
$-
|
The
Company has recorded a valuation allowance to the full extent of
its currently available net deferred tax assets which the Company
determined to be not more-likely-than-not realizable. The Company
has net operating loss carryforwards of approximately $7.4 million,
which expire, if unused, between the years 2019 and
2036.
The
Company may have been deemed to have experienced changes in
ownership which may impose limitations on its ability to utilize
net operating loss carryforwards under Section 382 of the Internal
Revenue Code. However, as the deferred tax asset is fully offset by
a valuation allowance, the Company has not yet conducted a Section
382 study to determine the extent of any such
limitations.
The Company has analyzed its income tax positions
using the criteria required by U.S. GAAP and concluded that as of
December 31, 2018 and 2017, it has no material uncertain tax
positions and no interest or penalties have been accrued.
The Company has elected to recognize any estimated penalties and
interest on its income tax liabilities as a component of its
provision for income taxes.
The
income tax returns of the Company for 2015, 2016, and 2017 are
subject to examination by income taxing authorities, generally for
three years after each was filed.
The
Company has a Cash or Deferred Arrangement Agreement, which
satisfies the requirements of Section 401(k) of the Internal
Revenue Code. This defined contribution retirement plan covers
substantially all employees. Participants can elect to have up to
the maximum percentage allowable of their salaries reduced and
contributed to the plan. The Company may make matching
contributions equal to a discretionary percentage of the
participants’ elective deferrals. In 2018 and 2017, the
Company matched 25% of the first 6% of the participants’
elective deferrals. The balance of funds forfeited by former
employees from unvested employer matching contribution accounts may
be used to offset current and future employer matching
contributions. The Company may also make additional contributions
to all eligible employees at its discretion. The Company did not
make additional contributions during 2018 or 2017. Expenses for
matching contributions for the years ended December 31, 2018 and
2017 were $30,599 and $31,116, respectively.
10.
Stock
Options and Warrants
The
Company has two 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 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 six months
to two years. The fair values of option awards granted in 2018 and
2017 were estimated using the Black-Sholes option pricing model
under the following assumptions:
|
|
|
2018
|
|
2017
|
|
Risk-free interest rate
|
|
2.65% - 2.92%
|
|
1.87% - 2.06%
|
|
Dividend yield
|
|
0%
|
|
0%
|
|
Expected term
|
|
5 years
|
|
5 years
|
|
Expected volatility
|
|
49.0% - 55.1%
|
|
44.6% - 47.0%
|
2016 Stock Incentive Plan
The
2016 Plan became effective June 1, 2016, and expires April 4, 2026.
The 2016 Plan provided 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
December 31, 2018 and 2017, there were 373,000 and 222,000 options,
respectively, issued under the 2016 Plan, of which 224,500 and 0
were exercisable, respectively.
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. The maximum number
of shares for which equity awards could be granted under the 2006
Plan was 1,950,000. Options under the 2006 Plan expire no later
than ten years from the date of grant or when employment ceases,
whichever comes first, and vested over periods determined by the
Board of Directors. There were 1,003,500 and 1,056,000 unexpired
exercisable options remaining from the 2006 Plan at December 31,
2018 and 2017, respectively.
The
status of the options issued under the foregoing option plans as of
December 31, 2018, and changes during the year ended December 31,
2018, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
options
|
|
|
|
|
|
Outstanding
at December 31, 2017
|
1,288,000
|
$0.18
|
|
|
|
Options
granted
|
166,000
|
0.44
|
|
|
|
Options
exercised
|
-
|
-
|
|
|
|
Options
expired
|
(62,500)
|
0.31
|
|
|
|
Options
forfeited
|
(15,000)
|
0.46
|
|
|
|
Outstanding
at December 31, 2018
|
1,376,500
|
$0.23
|
|
$1,145
|
|
Exercisable
at December 31, 2018
|
1,228,000
|
$0.21
|
|
$1,145
|
Nonvested stock
option awards as of December 31, 2018, and changes during the year
ended December 31, 2018, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
at January 1, 2018
|
232,000
|
$0.10
|
|
Granted
|
166,000
|
0.20
|
|
Vested
|
(234,500)
|
0.10
|
|
Forfeited
|
(15,000)
|
0.21
|
|
Nonvested
at December 31, 2018
|
148,500
|
$0.20
|
As of December 31, 2018, unrecognized compensation
cost associated with non-vested share-based employee and
non-employee compensation totaled $7,533, which is expected to be
recognized over a weighted average period of 5 months.
11.
(Loss)
Earnings Per Share
Basic
(loss) earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the
weighted-average number of shares outstanding for the period.
Diluted 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
following is a reconciliation of the amounts used in calculating
basic and diluted net (loss) income per common share.
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss per common share for the
|
|
|
|
|
year
ended December 31, 2018:
|
|
|
|
|
Income
available to common shareholders
|
$(51,034)
|
11,201,760
|
$-
|
|
Effect
of dilutive stock options
|
-
|
-
|
-
|
|
Diluted
net loss per common share for the
|
|
|
|
|
year
ended December 31, 2018:
|
$(51,034)
|
11,201,760
|
$-
|
|
|
|
|
|
|
Basic
net income per common share for the
|
|
|
|
|
year
ended December 31, 2017:
|
|
|
|
|
Income
available to common shareholders
|
$246,462
|
11,201,760
|
$0.02
|
|
Effect
of dilutive stock options
|
-
|
381,818
|
-
|
|
Diluted
net income per common share for the
|
|
|
|
|
year
ended December 31, 2017:
|
$246,462
|
11,583,578
|
$0.02
|
12.
Financial
Statement Captions
The
following table summarizes the Company’s prepaid expenses and
other current assets as of December 31, 2018 and 2017:
|
|
|
|
|
Deferred
costs of software sales
|
$294,115
|
$300,558
|
|
Other
|
37,609
|
29,642
|
|
Credit
with software supplier
|
37,557
|
-
|
|
Prepaid
insurance
|
15,499
|
14,500
|
|
Prepaid
rent
|
8,753
|
8,499
|
|
|
-
|
15,427
|
|
Total
|
$393,533
|
$368,626
|
The
following table summarizes the Company’s other current
liabilities as of December 31, 2018 and 2017:
|
|
|
|
|
Accrued
accounting and auditing expense
|
$48,750
|
$49,500
|
|
Accrued
costs of software sales
|
13,500
|
337,560
|
|
Other
|
19,235
|
24,427
|
|
Total
|
$81,485
|
$411,487
|
Item 9. Changes in and Disagreements With
Accountants on Accounting and Financial Disclosures
During
the last two years, for which financial statements are presented
herein, there have been no changes in or disagreements with our
independent registered accountants on accounting and financial
disclosures.
Item 9A. Controls and
Procedures
Evaluation of Disclosure Controls and Procedures
Our
management, under the supervision and with the participation of our
Chief Executive Office and Chief Financial Officer, and people
performing similar functions, has evaluated the effectiveness of
the design and operation of our controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the
end of the period reported in this annual report (the
“Evaluation Date”). Based upon this evaluation, our
Chief Executive Office and Chief Financial Officer have concluded
that, as of the Evaluation Date, our disclosure controls and
procedures were effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the
Exchange Act was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange
Commission’s rules and forms and that such information
required to be disclosed was accumulated and communicated to
management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure.
Changes in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting
during the quarter ended December 31, 2018 that have materially
affected, or are reasonably likely to affect, our internal control
over financial reporting.
Management’s Annual Report on Internal Control over Financial
Reporting
Management is
responsible for establishing and maintaining adequate internal
control over financial reporting. A company’s internal
control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management,
including the Chief Executive Officer and Chief Financial Officer,
has conducted an evaluation of the effectiveness of our internal
control over financial reporting as of the Evaluation Date, based
on the criteria for effective internal control described in
Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its assessment,
management concluded that our internal control over financial
reporting was effective as of the Evaluation Date.
This
Annual Report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by our independent registered public
accounting firm.
This
report shall not be deemed to be filed for purposes of Section 18
of the Exchange Act, or otherwise subject to the liabilities of
that section, and is not incorporated by reference into any filing
of Information Analysis Incorporated, whether made before or after
the date hereof, regardless of any general incorporation language
in such filing.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
(The information required by this Item is incorporated by reference
from the corresponding sections and subsections of our Definitive
Proxy Statement to be filed pursuant to Section 14(a) of the
Exchange Act with respect to our 2019 Annual Meeting of
Stockholders.)
Item 11. Executive
Compensation
(The information required by this Item is incorporated by reference
from the corresponding sections and subsections of our Definitive
Proxy Statement to be filed pursuant to Section 14(a) of the
Exchange Act with respect to our 2019 Annual Meeting of
Stockholders.)
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
(The information required by this Item is incorporated by reference
from the corresponding sections and subsections of our Definitive
Proxy Statement to be filed pursuant to Section 14(a) of the
Exchange Act with respect to our 2019 Annual Meeting of
Stockholders.)
Item 13. Certain Relationships and Related
Transactions, and Director Independence
(The information required by this Item is incorporated by reference
from the corresponding sections and subsections of our Definitive
Proxy Statement to be filed pursuant to Section 14(a) of the
Exchange Act with respect to our 2019 Annual Meeting of
Stockholders.)
Item 14. Principal Accounting Fees and
Services
(The information required by this Item is incorporated by reference
from the corresponding sections and subsections of our Definitive
Proxy Statement to be filed pursuant to Section 14(a) of the
Exchange Act with respect to our 2019 Annual Meeting of
Stockholders.)
PART IV
Item 15. Exhibits, Financial Statement
Schedules
(a)
(1) Financial
Statements
|
(as presented in Item 8 of this Annual Report)
|
Page
|
|
|
|
|
|
16
|
|
|
17
|
|
|
18
|
|
|
19
|
|
|
20
|
|
|
21
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
INFORMATION
ANALYSIS INCORPORATED
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
By:
|
/s/ Sandor
Rosenberg
|
|
|
|
|
Sandor Rosenberg,
President
|
|
|
|
|
April 1,
2019
|
|
POWER OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sandor Rosenberg and Richard
S. DeRose, jointly and severally, his attorney-in-fact, each with
the full power of substitution, for such person, in any and all
capacities, to sign any and all amendments to this Annual Report on
Form 10-K, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might do or could do in
person hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute, may do or cause to
be done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
Sandor
Rosenberg
|
|
Chairman of the
Board, Chief Executive Officer
and President
|
|
April 1,
2019
|
|
Sandor
Rosenberg
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/s/
Mark T.
Krial
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Director
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April 1,
2019
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Mark T.
Krial
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/s/
Charles
A. May
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Director
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April 1,
2019
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Charles A.
May
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/s/
William
Pickle
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Director
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April 1,
2019
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William
Pickle
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/s/
Bonnie
K. Wachtel
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Director
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April 1,
2019
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Bonnie K.
Wachtel
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/s/
James
D. Wester
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Director
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April 1,
2019
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James D.
Wester
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/s/
Richard
S. DeRose
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Chief Financial
Officer, Secretary and
Treasurer
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April 1,
2019
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Richard S.
DeRose
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/s/
Matthew
T. Sands
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Director
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April 1,
2019
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Matthew T.
Sands
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Exhibit
No.
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Description
|
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Location
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Amended
and Restated Articles of Incorporation effective March 18,
1997
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Incorporated
by reference from the Registrant’s Form 10-KSB/A for the
fiscal year ending December 31, 1996 and filed on July 3,
1997
|
|
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|
Articles of
Amendment to the Articles of Incorporation
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|
Incorporated
by reference from the Registrant’s Form 10-KSB/A for the
fiscal year ending December 31, 1997 and filed on March 30,
1998
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|
3.3
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Amended
By-Laws of the Company
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|
Incorporated
by reference from the Registrant’s Form S-18 dated November
20, 1986 (Commission File No. 33-9390).
|
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Copy of
Stock Certificate
|
|
Incorporated
by reference from the Registrant’s Form 10-KSB/A for the
fiscal year ending December 31, 1997 and filed on March 30,
1998
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|
Office
Lease for 18,280 square feet at 11240 Waples Mill Road, Fairfax,
Virginia 22030.
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|
Incorporated
by reference from the Registrant’s Form 10-KSB/A for the
fiscal year ending December 31, 1996 and filed on July 3,
1997
|
|
|
|
Company’s
401(k) Profit Sharing Plan through Aetna Life Insurance and Annuity
Company (now ING).
|
|
Incorporated
by reference from the Registrant’s Form 10-KSB/A for the
fiscal year ending December 31, 1996 and filed on July 3,
1997
|
|
10.3
|
|
1996
Stock Option Plan
|
|
Incorporated
by reference from the Registrant’s Form S-8 filed on June 25,
1996
|
|
|
|
Second
Modification of Lease, dated February 10, 2004, to 4,434 square
feet at 11240 Waples Mill Road, Fairfax, Virginia
22030
|
|
Incorporated
by reference from the Registrant’s Form 10-KSB for the period
ended December 31, 2003, and filed on March 30, 2004
|
|
|
|
Termination and/or
change in control arrangement for Richard S. DeRose dated June 18,
1997
|
|
Incorporated
by reference from the Registrant’s Form 10-KSB for the year
ended December 31, 2004, and filed on March 30, 2005
|
|
|
|
Line of
Credit Agreement with TD Bank, N.A. (formerly Commerce Bank,
N.A.)
|
|
Incorporated
by reference from the Registrant’s Form 10-KSB for the year
ended December 31, 2005, and filed on March 31, 2006
|
|
|
|
Information
Analysis Incorporated 2006 Stock Incentive Plan
|
|
Incorporated
by reference from the Registrant’s definitive proxy statement
on Schedule 14A filed on April 19, 2006
|
|
|
|
Modification
Agreement regarding Line of Credit Agreement with TD Bank, N.A.,
successor to Commerce Bank, N.A., dated July 18, 2008.
|
|
Incorporated
by reference from the Registrant’s Form 10-K for the period
ended December 31, 2008, and filed on March 31, 2009
|
|
|
|
Modification
Agreement regarding Line of Credit Agreement with TD Bank, N.A.,
successor to Commerce Bank, N.A., dated December 29,
2009.
|
|
Incorporated
by reference from the Registrant’s Form 10-K for the period
ended December 31, 2009, and filed on March 31, 2010
|
|
Exhibit
No.
|
|
Description
|
|
Location
|
|
|
|
Modification
Agreement regarding Line of Credit Agreement with TD Bank, N.A.,
successor to Commerce Bank, N.A., dated November 30,
2012.
|
|
Incorporated
by reference from the Registrant’s Form 10-K for the period
ended December 31, 2012, and filed on March 29, 2013
|
|
|
|
Fifth
Modification of Lease, dated February 6, 2013, to extend term of
lease four years.
|
|
Incorporated
by reference from the Registrant’s Form 10-K for the period
ended December 31, 2012, and filed on March 29, 2013
|
|
|
|
Modification
Agreement regarding Line of Credit Agreement with TD Bank, N.A.,
successor to Commerce Bank, N.A., dated November 26,
2013.
|
|
Incorporated
by reference from the Registrant’s Form 10-K for the period
ended December 31, 2013, and filed on March 31, 2014
|
|
|
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Eighth
Amendment to Loan Agreement regarding Line of Credit Agreement with
TD Bank, N.A., successor to Commerce Bank, N.A., dated April 21,
2015.
|
|
Incorporated
by reference from the Registrant’s Form 10-Q for the period
ended March 31, 2015, and filed on May 15, 2015
|
|
|
|
Modification
Agreement regarding Line of Credit Agreement with TD Bank, N.A.,
successor to Commerce Bank, N.A., dated May 26, 2016.
|
|
Incorporated
by reference from the Registrant’s Form 10-Q for the period
ended June 30, 2016, and filed on August 11, 2016
|
|
|
|
Sixth
Modification of Lease, dated December 9, 2016, to extend term of
lease four years.
|
|
Incorporated
by reference from the Registrant’s Form 10-K for the year
ended December 31, 2016, and filed on March 31, 2017
|
|
|
|
Modification
Agreement regarding Line of Credit Agreement with TD Bank, N.A.,
successor to Commerce Bank, N.A., dated May 28, 2017.
|
|
Incorporated
by reference from the Registrant’s Form 10-Q for the period
ended June 30, 2017, and filed on August 14, 2017
|
|
|
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Consent
of Independent Registered Public Accounting Firm, CohnReznick
LLP
|
|
Filed
with this Form 10-K
|
|
|
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Rule
13a-14(a) / 15a-14(a) Certification by Chief Executive
Officer
|
|
Filed
with this Form 10-K
|
|
|
|
Rule
13a-14(a) / 15a-14(a) Certification by Chief Financial
Officer
|
|
Filed
with this Form 10-K
|
|
|
|
Certification by
Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
Filed
with this Form 10-K
|
|
|
|
Certification by
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
Filed
with this Form 10-K
|