Virginia
|
54-1167364
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
o
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
Smaller reporting company
þ
|
|
(Do not check if a smaller reporting company)
|
March 31,
2015
|
December 31,
2014
|
|||||||
(Unaudited)
|
(see Note 1)
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 2,122,914 | $ | 2,450,006 | ||||
Accounts receivable, net
|
1,110,325 | 970,621 | ||||||
Prepaid expenses and other current assets
|
486,810 | 759,982 | ||||||
Notes receivable, current
|
4,092 | 3,896 | ||||||
Total current assets
|
3,724,141 | 4,184,505 | ||||||
Property and equipment, net
|
48,254 | 53,675 | ||||||
Notes receivable, long-term
|
4,250 | 5,102 | ||||||
Other assets
|
6,281 | 6,281 | ||||||
Total assets
|
$ | 3,782,926 | $ | 4,249,563 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 62,531 | $ | 32,327 | ||||
Commissions payable
|
1,004,079 | 1,017,047 | ||||||
Deferred revenue
|
451,109 | 737,994 | ||||||
Accrued payroll and related liabilities
|
228,345 | 255,703 | ||||||
Other accrued liabilities
|
28,427 | 116,097 | ||||||
Total liabilities
|
1,774,491 | 2,159,168 | ||||||
Stockholders' equity:
|
||||||||
Common stock, par value $0.01, 30,000,000 shares authorized;
|
||||||||
12,844,376 shares issued, 11,201,760 shares outstanding as of March 31, 2015 and December 31, 2014
|
128,443 | 128,443 | ||||||
Additional paid-in capital
|
14,616,758 | 14,613,887 | ||||||
Accumulated deficit
|
(11,806,555 | ) | (11,721,724 | ) | ||||
Treasury stock, 1,642,616 shares at cost
|
(930,211 | ) | (930,211 | ) | ||||
Total stockholders' equity
|
2,008,435 | 2,090,395 | ||||||
Total liabilities and stockholders' equity
|
$ | 3,782,926 | $ | 4,249,563 |
For the three months ended
|
||||||||
March 31
,
|
||||||||
2015
|
2014
|
|||||||
Revenues:
|
||||||||
Professional fees
|
$ | 1,115,096 | $ | 875,260 | ||||
Software sales
|
361,027 | 304,550 | ||||||
Total revenues
|
1,476,123 | 1,179,810 | ||||||
Cost of revenues:
|
||||||||
Cost of professional fees
|
643,284 | 497,827 | ||||||
Cost of software sales
|
348,584 | 227,705 | ||||||
Total cost of revenues
|
991,868 | 725,532 | ||||||
Gross profit
|
484,255 | 454,278 | ||||||
Selling, general and administrative expenses
|
432,094 | 445,819 | ||||||
Commission expense
|
139,471 | 108,677 | ||||||
Loss from operations
|
(87,310 | ) | (100,218 | ) | ||||
Other income
|
2,479 | 2,699 | ||||||
Loss before provision for income taxes
|
(84,831 | ) | (97,519 | ) | ||||
Provision for income taxes
|
-- | -- | ||||||
Net loss
|
$ | (84,831 | ) | $ | (97,519 | ) | ||
Comprehensive loss
|
$ | (84,831 | ) | $ | (97,519 | ) | ||
Net loss per common share:
|
||||||||
Basic
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
Diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average common shares outstanding:
|
||||||||
Basic
|
11,201,760 | 11,201,760 | ||||||
Diluted
|
11,201,760 | 11,201,760 |
For the three months ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (84,831 | ) | $ | (97,519 | ) | ||
Adjustments to reconcile net loss to net cash
used in operating activities:
|
||||||||
Depreciation and amortization
|
7,805 | 7,585 | ||||||
Stock option compensation
|
2,871 | 5,254 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(139,704 | ) | 644,025 | |||||
Prepaid expenses and other current assets
|
273,172 | 42,469 | ||||||
Accounts payable, accrued payroll and related
liabilities, and other accrued liabilities
|
(84,824 | ) | (572,553 | ) | ||||
Commissions payable
|
(12,968 | ) | (49,525 | ) | ||||
Deferred revenue
|
(286,885 | ) | (58,639 | ) | ||||
Net cash used in operating activities
|
(325,364 | ) | (78,903 | ) | ||||
Cash flows from investing activities:
|
||||||||
Acquisition of furniture and equipment
|
(2,384 | ) | (13,214 | ) | ||||
Payments received on notes receivable
|
656 | 1,442 | ||||||
Net cash used in investing activities
|
(1,728 | ) | (11,772 | ) | ||||
Net decrease in cash and cash equivalents
|
(327,092 | ) | (90,675 | ) | ||||
Cash and cash equivalents, beginning of the period
|
2,450,006 | 2,359,527 | ||||||
Cash and cash equivalents, end of the period
|
$ | 2,122,914 | $ | 2,268,852 | ||||
Supplemental cash flow information
|
||||||||
Interest paid
|
$ | -- | $ | -- | ||||
Income taxes paid
|
$ | -- | $ | -- |
2015
|
|||
Risk free interest rate
|
1.61 – 1.97% | ||
Dividend yield
|
0% | ||
Expected term
|
5-10 years
|
||
Expected volatility
|
41.2 – 54.2% |
Options outstanding
|
||||||||
Number of shares
|
Weighted average exercise price per share
|
|||||||
Balance at December 31, 2014
|
1,264,000 | $ | 0.26 | |||||
Options granted
|
20,000 | 0.20 | ||||||
Options exercised
|
-- | -- | ||||||
Options expired or forfeited
|
(1,000 | ) | 0.24 | |||||
Balance at March 31, 2015
|
1,283,000 | $ | 0.26 |
Options outstanding
|
||||||||
Number of shares
|
Weighted average exercise price per share
|
|||||||
Balance at December 31, 2013
|
1,187,000 | $ | 0.26 | |||||
Options granted
|
-- | -- | ||||||
Options exercised
|
-- | -- | ||||||
Options expired or forfeited
|
-- | -- | ||||||
Balance at March 31, 2014
|
1,187,000 | $ | 0.26 |
Options outstanding
|
Options exercisable
|
|||||||||||||||||||||||||||||
Total shares
|
Weighted average exercise price
|
Weighted average remaining contractual life in years
|
Aggregate intrinsic value
|
Total shares
|
Weighted average exercise price
|
Weighted average remaining contractual life in years
|
Aggregate intrinsic value
|
|||||||||||||||||||||||
1,283,000 | $ | 0.26 | 5.36 | $ | 42,258 | 1,059,500 | $ | 0.28 | 4.56 | $ | 30,602 |
Nonvested
|
||||||||
Number of shares
|
Weighted average grant date fair value
|
|||||||
Balance at December 31, 2014
|
209,500 | $ | 0.07 | |||||
Granted
|
20,000 | 0.11 | ||||||
Vested
|
(5,000 | ) | 0.08 | |||||
Expired before vesting
|
(1,000 | ) | 0.10 | |||||
Balance at March 31, 2015
|
223,500 | $ | 0.08 |
Net Income | Shares | Per Share Amount | ||||||||||
Basic net loss per common share for the three months ended March 31, 2015: | ||||||||||||
Loss available to common stockholders | $ | (84,831 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Effect of dilutive stock options | - | - | - | |||||||||
Diluted net loss per common share for the three months ended March 31, 2015 | $ | (84,831 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Basic net loss per common share for the three months ended March 31, 2014: | ||||||||||||
Loss available to common stockholders | $ | (97,519 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Effect of dilutive stock options | - | - | - | |||||||||
Diluted net loss per common share for the
three months ended March 31, 2014
|
$ | (97,519 | ) | 11,201,760 | $ | (0.01 | ) |
●
|
changes in the funding priorities of the U.S. federal government;
|
●
|
changes in the way the U.S. federal government contracts with businesses;
|
●
|
terms specific to U.S. federal government contracts;
|
●
|
our failure to keep pace with a changing technological environment;
|
●
|
intense competition from other companies;
|
●
|
inaccuracy in our estimates of the cost of services and the timeline for completion of contracts;
|
●
|
non-performance by our subcontractors and suppliers;
|
●
|
our dependence on third-party software and software maintenance suppliers;
|
●
|
our failure to adequately integrate businesses we may acquire;
|
●
|
fluctuations in our results of operations and the resulting impact on our stock price;
|
●
|
the limited public market for our common stock;
|
●
|
changes in the economic health of our non U.S. federal government customers; and
|
●
|
our forward-looking statements and projections may prove to be inaccurate.
|
Exhibit No. | Description | |
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.
|
||
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934
|
||
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934
|
||
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Information Analysis Incorporated | |||
(Registrant) | |||
Date:
May 15, 2015
|
By:
|
/s/ Sandor Rosenberg | |
Sandor Rosenberg,
|
|||
Chairman of the Board, Chief Executive Officer, and President | |||
Date: May 15, 2015 |
By:
|
/s/ Richard S. DeRose | |
Richard S. DeRose | |||
Richard S. DeRose, Executive Vice President, Treasurer, and Chief Financial Officer |
1.
|
The Schedule of Defined Terms as referenced in section 1 of the Loan Agreement shall be amended by deleting the definition of "Termination Date" and replacing such definition as follows:
"Termination Date" means May 31, 2016, as the same may be extended from time to time by the Bank in its sole discretion.
|
2.
|
Section 2 (b) of the Loan Agreement shall be amended by deleting the section in its entirely and replacing it with the following:
(a) Interest. Advances shall bear interest at a per annum rate equal to 3.00% plus LIBOR. Accrued interest shall be payable monthly, in arrears, on the first (1st) day of each month, and on the Termination Date. The interest rate shall be adjusted monthly on the first Business Day of each month to reflect LIBOR then in effect.
|
3.
|
Section 7(a) of the Loan Agreement shall be restated as follows:
(a) Financial Reporting Requirements. The Borrower shall deliver to the
Bank:
|
●
|
within 120 days after the close of each fiscal year audited consolidated and consolidating financial statements of the Borrower and its Subsidiaries, prepared in accordance with GAAP, including consolidated and consolidating balance sheets, income statements, statements of equity and of cash flows, for the fiscal year then ended, prepared by an independent certified public accounting firm acceptable to the Bank.
|
●
|
within 45 days after the end of each quarter of each of its fiscal years, unaudited consolidated and consolidating financial statements of the Borrower and its Subsidiaries, including consolidated and consolidating balance sheets and income statements, for the period then ended, prepared in accordance with GAAP;
|
●
|
when there is an outstanding balance*, within 15 days after the end of each calendar month (i) an appropriately completed Borrowing Base Certificate setting forth a calculation of the Borrowing Base as of the end of the preceding calendar month, (ii) agings of accounts receivable of the Borrower and its Subsidiaries as of the end of such month, and (iii) agings of accounts payable of the Borrower and its Subsidiaries as of the end of such month. * when there is no outstanding balance, said reports are not required;
|
●
|
within 45 days after the end of each fiscal quarter of the Borrower and its Subsidiaries, status and backlog reports relating to the contracts of the Borrower and its Subsidiaries as of the end of such fiscal quarter;
|
●
|
within 45 days after the end of each quarter of each of its fiscal years a Covenant Compliance Certificate of the Borrower's chief financial officer for the period then ended;
|
●
|
promptly after receipt, copies of any reports from auditors of Government Contracts to the extent such reports are not classified;
|
●
|
promptly upon receipt, copies of any reports submitted to the Borrower by independent certified public accountants in connection with examination of the financial statements of the Borrower made by such accountants; and
|
●
|
such other information concerning the Collateral or the financial condition of the Borrower, any Subsidiary or any Guarantor as the Bank from time to time may reasonably request.
All financial statements and reports shall be in form and detail acceptable to the Bank and shall be certified to be accurate by a duly authorized officer of the Borrower.
|
4.
|
Section 8 of the Loan Agreement shall be amended as follows:
|
●
|
Minimum
Tangible
Net
Worth.
The Borrower and its subsidiaries shall maintain a Tangible Net Worth of not less than $1,800,000.00, tested annually, defined as: the book value of net worth (total assets – total liabilities) as set forth in the statement of financial position of the Borrower determined in accordance with Generally Accepted Accounting Principals (GAAP), minus the net book value of the following items (but only to the extent that such items are included in anydetermination of the total assets of the Borrower): (i) good will, patents, trademarks, copyrights, trade names, customer lists, and other like intangible assets; (ii) receivables due from affiliates, subsidiaries or other related parties, including officers, employees or stockholders of the Borrower; and (ill) any capitalized start-up or development expenses, and (iv) any write-up or reappraisal of the Borrower's existing assets.
|
●
|
Waive the Positive Net Income covenant as of 12/31/2014 and testing of this covenant will no longer be required subsequent to 12/31/2014.
|
5.
|
Representations and Warranties. Borrower warrants and represents to Bank that:
|
a.
|
Prior Representations
.
By execution of this Amendment, Borrower reconfirms all warranties and representations made to Bank under the Loan Agreement and the other Loan Documents respectively and restate such warranties and representations as of the date hereof, all of which shall be deemed continuing until all of the obligations due to Bank are indefeasibly paid and satisfied in full.
|
b.
|
Authorization
. The execution and delivery by Borrower of this Amendment and the performance by Borrower of the transactions herein contemplated (i) are and will be within its powers, (ii) have been duly authorized by all necessary action on behalf of Borrower and (iii) are not and will not be in contravention of any order of court or other agency of government, of law or of any indenture, agreement or undertaking to which Borrower is a party or by which the property of Borrower is bound, or be in conflict with, result in a breach of or constitute (with due notice and/ or lapse of time) a default under any such indenture, agreement or undertaking, or result in the imposition of any lien, charge or encumbrance of any nature on any of the properties of the Borrower.
|
c.
|
Valid,
Binding
and
Enforceable
. This Amendment and any assignment or other instrument, document or agreement executed and delivered in connection herewith, will be valid, binding and enforceable in accordance with their respective terms.
|
d.
|
No
Default
.
No Default or Event of Default exists after giving effect to this Amendment.
|
6.
|
Ratification
of
Loan
Documents
.
This Amendment is hereby incorporated into and made a part of the Loan Agreement and all other Loan Documents respectively, the terms and provisions of which, except to the extent modified by this Amendment are each ratified and confirmed and continue unchanged in full force and effect. Any reference to the Loan Agreement and all other Loan Documents respectively in this or any other instrument, document or agreement related thereto or executed in connection therewith shall mean the Loan Agreement and all other Loan Documents respectively as amended by this Amendment. As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in the Loan Agreement, Borrower hereby confirms its prior grant to Bank of a continuing first lien on and security interest in, upon and to all of Borrower's now owned or hereafter acquired, created or arising Collateral as described in the Loan Agreement.
|
7.
|
Governing
Law
. THIS AMENDMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS SET FORTH IN SECTION 10(h) OF THE LOAN AGREEMENT. THE PROVISIONS OF THIS AMENDMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
|
8.
|
Mo
dific
ation
. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Bank.
|
9.
|
Duplicate
Originals
. Two or more duplicate originals of this Amendment may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.
|
10.
|
Waiver of
Jury
Trial
. BORROWER AND BANK EACH HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Information Analysis Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
May 15, 2015
|
By:
|
/s/ Sandor Rosenberg | |
Sandor Rosenberg | |||
Chairman of the Board,
Chief Executive Officer and President
|
|||
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Information Analysis Incorporated;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
May 15, 2015
|
By:
|
/s/ Richard S. DeRose | |
Richard S. DeRose | |||
Executive Vice President, Treasurer, Chief Financial Officer | |||
|
1
|
the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof, (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2
|
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods presented therein.
|
Date:
May 15, 2015
|
By:
|
/s/ Sandor Rosenberg | |
Sandor Rosenberg | |||
Chairman of the Board,
Chief Executive Officer and President
|
|||
|
1
|
the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof, (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2
|
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods presented therein.
|
Date:
May 15, 2015
|
By:
|
/s/ Richard S. DeRose | |
Richard S. DeRose | |||
Executive Vice President, Treasurer, Chief Financial Officer | |||