1.	Summary of Significant Accounting Policies

 

Organization and Business

 

Founded in 1979, Information Analysis Incorporated, which we refer to as the “Company”, “we”, or “IAI”, is in the business of modernizing client information systems, performing professional information technology (IT) services, and developing and maintaining IT systems for government and commercial organizations. IAI’s core competencies lie in legacy system (COBOL) migration and modernization, including developing user-friendly interfaces for complex legacy environments, database conversion and migration, development of electronic fillable forms (e-Forms), including smart forms, Section 508 compliant forms, and web-based and mobile device forms solutions, full life cycle Oracle development, and custom software development. The Company also engages in sales of third-party software for electronic forms development and management, legacy systems modernization, and robotics process automation. IAI’s ultimate customers include federal and state government agencies as well as private sector organizations throughout the United States, with a concentration in the Washington, D.C. metropolitan area.

 

Unaudited Interim Financial Statements

 

The accompanying unaudited financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair and not misleading presentation of the results of the interim periods presented. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019 included in the Annual Report on Form 10-K filed by the Company with the SEC on March 30, 2020 (the “Annual Report”), as amended. The accompanying December 31, 2019, balance sheet was derived from the audited financial statements included in the Annual Report. The results of operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

 

There have been no changes in the Company’s significant accounting policies as of June 30, 2020, as compared to the significant accounting policies disclosed in Note 1, "Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, that was filed with the SEC on March 30, 2020.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results can, and in many cases will, differ from those estimates. 

 

Income Taxes

 

The Company has analyzed its income tax positions using the criteria required by GAAP and concluded that as of June 30, 2020, and December 31, 2019, it has no material uncertain tax positions and no interest or penalties have been accrued. Through the filing of its 2019 federal income tax return, the Company has net operating loss carryforwards of approximately $3.5 million, of which $867,000 will expire, if unused, on December 31, 2020.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In December 2019, the Financial Accounting Standards Board issued ASU 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes,” that removes certain exceptions to the general principles in Topic 740 and simplifies the application of areas of Topic 740 by clarifying and amending existing guidance. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of ASU 2019-12 is not expected to have a material effect on the Company’s financial statements or cash flows.

 

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

 

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.

 

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 on a gross basis 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 on a gross basis 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.

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

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		3 Months ended 06/30/2020								3 Months ended 06/30/2019
Type		Amount				Percentage				Amount				Percentage
Services Time & Materials		$	730,813				15.2	%		$	577,779				15.6	%
Services Fixed Price			27,150				0.6	%			95,235				2.6	%
Services Combination			134,038				2.8	%			40,364				1.1	%
Services Fixed Price per Unit			36,420				0.7	%			48,251				1.3	%
Third-Party Software			3,607,116				74.8	%			2,789,648				75.3	%
Software Support & Maintenance			263,125				5.5	%			149,290				4.0	%
Incentive Payments			20,733				0.4	%			3,850				0.1	%
Total Revenue		$	4,819,395							$	3,704,417

 

 

Contract		6 Months ended 06/30/2020								6 Months ended 06/30/2019
Type		Amount				Percentage				Amount				Percentage
Services Time & Materials		$	1,321,383				19.2	%		$	1,174,530				24.1	%
Services Fixed Price			150,555				2.2	%			214,398				4.4	%
Services Combination			216,446				3.2	%			72,648				1.5	%
Services Fixed Price per Unit			84,440				1.2	%			62,171				1.3	%
Third-Party Software			4,611,420				67.0	%			3,057,367				62.5	%
Software Support & Maintenance			475,693				6.9	%			298,152				6.1	%
Incentive Payments			21,214				0.3	%			3,974				0.1	%
Total Revenue		$	6,881,151							$	4,883,240

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

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. There were no such allowances recognized at June 30, 2020, and December 31, 2019. The accounts receivable balance does not include the amount invoiced but withheld from payment as a financing component under one contract with a customer. The present value of the withheld amount is classified as a contract asset.

 

Contract Assets 

 

Contract assets consist of assets resulting when revenue recognized exceeds the amount billed or billable to the customer due to allocation of transaction price, and of amounts withheld from payment of invoices as a financing component of a contract. There were $13,918 in long-term contract assets at June 30, 2020, and none at December 31, 2019.

 

Contract Liabilities

 

Contract liabilities 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. Changes in contracts liabilities balances in 2020 are as follows:

 

Contract Liabilities
Balance at December 31, 2019		$	464,223
Contract liabilities added			19,136
Revenue recognized			(212,568	)
Balance at March 31, 2020			270,791
Contract liabilities added			9,906
Revenue recognized			(216,353	)
Balance at June 30, 2020		$	64,344

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

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 no such assets at June 30, 2020, and December 31, 2019. When incurred, 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 that one of its subcontracts to a prime contractor includes a significant financing component. The subcontract is invoiced on a time and materials basis, under which 90% of each invoice amount is paid under regular terms, and the 10% payment balance of each invoice is deferred until the prime contractor meets a specific deliverable under its prime contract, which is expected to occur approximately June 2022. The primary purpose of this arrangement is to assist the prime contractor in meeting all of its financial obligations until it can realize the financial benefit of meeting the deliverable. The Company has estimated its interest rate of 4.5% based on a small premium over the rate of its revolving line of credit as of the measurement date.

 

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 and other current assets 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 $56,275 and $453,607 at June 30, 2020, and December 31, 2019, respectively.

 

Deferred Costs of Revenue
Balance at December 31, 2019		$	453,607
Defered costs added			182
Deferred costs expensed			(207,438	)
Balance at March 31, 2020			246,351
Defered costs added			2,472
Deferred costs expensed			(192,548	)
Balance at June 30, 2020		$	56,275

 

 

3.

Leases

 

The Company has an operating lease which is a real estate lease for its headquarters in Fairfax, Virginia. This lease has a fixed lease term of 49 months. The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use operating lease assets and operating lease liabilities in the Company’s balance sheet as of June 30, 2020, and December 31, 2019. As of June 30, 2020, and December 31, 2019, the Company does not have any sales-type or direct financing leases.

 

The Company’s operating lease asset represents its right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company’s lease agreement includes rental payments escalating annually for inflation at a fixed rate. These payments are included in the initial measurement of the operating lease liability and operating lease asset. The Company does not have any rental payments which are based on a change in an index or a rate that can be considered variable lease payments, which would be expensed as incurred.

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

The Company’s lease agreement does not contain any material residual value guarantees or material restrictions or covenants.

 

The Company does not sublease any real estate to third parties.

 

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

 

Balance Sheet		as of				as of
Classification		June 30, 2020				December 31, 2019
Assets:
Right-to-use operating lease asset		$	101,291			$	149,762
Liabilities:
Operating lease liability - current		$	98,956			$	103,955
Operating lease liability - non-current			-				45,595
Total lease liabilities		$	98,956			$	149,550

 

The following table reconciles the undiscounted cash flows to the operating lease liabilities recorded in the Company’s balance sheet at June 30, 2020.

 

		June 30, 2020
Remainder of 2020		$	55,719
2021			46,433
Total lease payments			102,152
Less: discount			(3,196	)
Present value of lease liabilities		$	98,956

 

As of June 30, 2020, the Company’s sole operating lease had a weighted average lease term of approximately 1.0 year. The discount rate of the lease is equal to IAI’s incremental borrowing rate at the measurement date of the lease agreement. The weighted average discount rate of the Company’s operating lease is approximately 5.5%. For the three months ended June 30, 2020 and 2019, the Company incurred $26,122 of expense related to its operating leases. Rent expense for the six months ended June 30, 2020 and 2019, was $52,244.

 

4.	Stock-Based Compensation

 

The Company has two shareholder–approved stock-based compensation plans. The 2006 Stock Incentive Plan was adopted in 2006 (“2006 Plan”) and had options granted under it through April 12, 2016. On June 1, 2016, the shareholders ratified the IAI 2016 Stock Incentive Plan (“2016 Plan”), which had been approved by the Board of Directors on April 4, 2016.

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

The Company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the awards. Such options generally vest over periods of six months to two years. Fair values of option awards granted in the three months and six months ended June 30, 2020 and 2019, were estimated using the Black-Sholes option pricing model under the following assumptions:

 

 

2016 Stock Incentive Plan

 

The 2016 Plan became effective June 1, 2016, and expires April 4, 2026. The 2016 Plan provides for the granting of equity awards to key employees, including officers and directors. The maximum number of shares for which equity awards may be granted under the 2016 Plan is 1,000,000. Options under the 2016 Plan expire no later than ten years from the date of grant or within prescribed periods following cessation of employment, 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 June 30, 2020, there were unexpired options for 381,000 shares issued under the 2016 Plan, of which 368,000 were exercisable.

 

2006 Stock Incentive Plan

 

The 2006 Plan became effective May 18, 2006, and expired April 12, 2016. The 2006 Plan provides for the granting of equity awards to key employees, including officers and directors. Options under the 2006 Plan were generally granted at-the-money or above, expire no later than ten years from the date of grant or within within prescribed periods following cessation of employment, whichever comes first, and vest over periods determined by the Board of Directors. The number of shares subject to options available for issuance under the 2006 Plan could not exceed 1,950,000. There were 839,000 unexpired options remaining from the 2006 Plan at June 30, 2020, all of which were exercisable.

 

The status of the options issued under the foregoing option plans as of June 30, 2020, and changes during the six months ended June 30, 2020, were as follows:

 

		Options outstanding
						Weighted average			Weighted average		Aggregate
						exercise price			remaining		intrinsic
Incentive Options		Shares				per share			contractual term		value
Outstanding at December 31, 2019			1,349,000			$	0.23
Options granted			-				-
Options exercised			-				-
Options expired			(129,000	)			0.17
Options forfeited			-				-
Outstanding at March 31, 2020			1,220,000			$	0.24
Options granted			10,000				0.15
Options exercised			-				-
Options expired			(10,000	)			0.19
Options forfeited			-				-
Outstanding at June 30, 2020			1,220,000			$	0.24		3 years, 9 months		$	37,353
Exercisable at June 30, 2020			1,207,000			$	0.24		3 years, 8 months		$	36,703

 

There were 10,000 options granted during the three months and six months ended June 30, 2020, and there were 3,000 options granted during the three months and six months ended June 30, 2019. There were no options exercised during the three months and six months ended June 30, 2020, and there were 10,000 options exercised in the three months and six months ended June 30, 2019. As of June 30, 2020, there was $775 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock incentive plans; that cost is expected to be recognized over a weighted-average period of nine months.

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

Total compensation expense related to these plans was $356 and $482 for the three months ended June 30, 2020 and 2019, respectively, and $806 and $4,936 for the six months ended June 30, 2020 and 2019, respectively.

 

Nonvested option awards as of June 30, 2020 and changes during the six months ended June 30, 2020 were as follows:

 

		Nonvested
						Weighted average
						grant date
		Shares				fair value
Nonvested at January 1, 2020			23,500			$	0.17
Granted			-				-
Vested			(5,000	)			0.21
Forfeited			-				-
Nonvested at March 31, 2020			18,500			$	0.15
Granted			10,000				0.08
Vested			(15,500	)			0.16
Forfeited			-				-
Nonvested at June 30, 2020			13,000			$	0.09

 

 

5.	Revolving Line of Credit

 

The Company has a revolving line of credit with a bank providing for demand or short-term borrowings of up to $1,000,000. The line expires on July 31, 2021. As of June 30, 2020, no amounts were outstanding under this line of credit. The Company did not borrow against this line of credit in the last twelve months.

 

6.	Note Payable

 

Due to the coronavirus uncertainty, and pending staffing and payroll cuts due to liquidity constraints, the Company applied for a Paycheck Protection Program loan (“PPP”), guaranteed by the U.S. Small Business Administration (“SBA”). The Company was funded by its lender on April 20, 2020, in the amount of $450,000. The loan accrues interest at a fixed rate of 1% and has a term of two years. The first payment is deferred for six months, though interest accrues during the deferral period. The loan has been used exclusively to support maintaining employee payroll and benefits. Though the PPP program was amended by the U.S. Congress to allow the proceeds of the loan that qualify for forgiveness to be extended to twenty-four weeks, the Company has opted to apply for forgiveness under the original PPP based on the use of proceeds over eight weeks. The Company will apply to the SBA through its lender for forgiveness for an amount of $395,000 as soon as its lender’s PPP forgiveness portal is available, which is currently expected to be in late August 2020. The amount of forgiveness for which IAI may be approved is uncertain.

 

7.	Loss Per Share

 

Basic loss per share excludes dilution and is computed by dividing loss available to common shareholders by the weighted-average number of shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, except for periods when the Company reports a net loss because the inclusion of such items would be antidilutive. The antidilutive effect of 64,076 shares and 185,234 shares from stock options were excluded from diluted shares for the three months ended June 30, 2020 and 2019, respectively, and the antidilutive effect of 64,076 shares and 229,741 shares from stock options were excluded from diluted shares for the six months ended June 30, 2020 and 2019, respectively.

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020

 

 

The following is a reconciliation of the amounts used in calculating basic and diluted net loss per common share:

 

										Per share
		Net loss				Shares				amount
Basic net loss per common share for the three months ended June 30, 2020:
Loss available to common shareholders		$	(34,620	)			11,211,760			$	-
Effect of dilutive stock options			-				-				-
Diluted net loss per common share for the
three months ended June 30, 2020:		$	(34,620	)			11,211,760			$	-
Basic net loss per common share for the three months ended June 30, 2019:
Loss available to common shareholders		$	(208,602	)			11,207,804			$	(0.02	)
Effect of dilutive stock options			-				-				-
Diluted net loss per common share for the
three months ended June 30, 2019:		$	(208,602	)			11,207,804			$	(0.02	)
Basic net loss per common share for the six months ended June 30, 2020:
Loss available to common shareholders		$	(160,959	)			11,211,760			$	(0.01	)
Effect of dilutive stock options			-				-				-
Diluted net loss per common share for the
six months ended June 30, 2020:		$	(160,959	)			11,211,760			$	(0.01	)
Basic net loss per common share for the six months ended June 30, 2019:
Loss available to common shareholders		$	(399,455	)			11,204,799			$	(0.04	)
Effect of dilutive stock options			-				-				-
Diluted net loss per common share for the
six months ended June 30, 2019:		$	(399,455	)			11,204,799			$	(0.04	)

 

8.	Subsequent Events

 

The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including, but not limited to, the temporary closures of many businesses, “shelter in place” and other governmental regulations, and “work from home” directives. There are many unknowns, and many regional inconsistencies. Notable potential effects on the Company include U.S. government procurements may be delayed or cancelled, work on new or existing contracts that require personal interactions may be suspended, payment processing for customer invoices may be delayed, employees and customers or their families may become infected, and personal business development meetings may not be able to take place. The Company continues to monitor the impact of the COVID-19 outbreak closely. The extent to which the COVID-19 outbreak will impact the Company’s business, results of operations, financial condition, and cash flows is uncertain.

 

The Company’s revolving line of credit was due to expire July 31, 2020. The lender and the Company agreed to terms to renew the line of credit until July 31, 2021. The material terms of the line of credit were modified such that the interest rate is now ICE LIBOR + 3.5%, with a floor of 4.0%, which is the current rate, the Company is subject to a commitment fee for amounts not borrowed, there is more frequent reporting, a covenant has been added to have no more than two quarters per year with a loss and net income overall each year, the Company must maintain minimum cash and cash equivalents of $500,000, and the Company must report and maintain quarterly a minimum tangible net worth that is adjustable upward as a percentage of net income.

 

 

Information Analysis Incorporated

Form 10-Q Second quarter 2020