Information Analysis Inc. Reports Third Quarter Results

FAIRFAX, Va.--(BUSINESS WIRE)--

Information Analysis Inc. (OTCBB:IAIC) today reported results for its third fiscal quarter ended September 30, 2007. Revenues were $2,635,000, compared to $2,574,000 reported in the third quarter 2006. The information technology services company reported net income of $95,000, or $0.01 per share basic and diluted, compared to net income of $157,000 or $0.01 per share basic and diluted, in the third quarter 2006.

For the nine months ended September 30, 2007, IAI's revenues were $7,797,000, compared to revenues of $7,457,000 for the same period in 2006. The Company reported net income of $207,000, or $0.02 per share basic and diluted, compared to net income of $396,000, or $0.04 per share basic and $0.03 per share diluted, reported for the comparable 2006 period.

"We have begun to increase our investment in sales and marketing efforts starting in the fourth quarter to improve our rate of growth and profitability," said Sandor Rosenberg, Chairman and Chief Executive Officer of IAI. "We still have a number of bid opportunities outstanding for new business and additional add-on business to existing contracts, which are expected to materialize during future quarters.

    "We continue to pursue merger and acquisition opportunities."

    About Information Analysis Incorporated

Information Analysis Incorporated (www.infoa.com), headquartered in Fairfax, Virginia, is an information technology services company. The Company is a web solution provider and software conversion specialist, modernizing legacy systems and extending their reach to the internet world.

Additional information for investors

This release may contain forward-looking statements regarding the Company's business, customer prospects, or other factors that may affect future earnings or financial results. 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 in the Company's 10-KSB for the fiscal year ended December 31, 2006 and in other filings with the Securities and Exchange Commission.

                  Information Analysis Incorporated
                       Statements of Operations

                                                 Three months ended
                                                    September 30,
(in thousands, except per share data;
 unaudited)                                       2007        2006
                                               ----------- -----------
Revenue:
      Professional fees                        $     1,688 $     2,180
      Software sales                                   947         394
                                               ----------- -----------
      Total revenue                                  2,635       2,574
Cost of goods sold and services provided:
      Cost of professional fees                      1,272       1,626
      Cost of software sales                           749         183
                                               ----------- -----------
      Total cost of sales                            2,021       1,809
                                               ----------- -----------
Gross margin                                           614         765
Selling, general and administrative expense            527         610
                                               ----------- -----------
Operating income                                        87         155
Other income (expense)                                   8           2
                                               ----------- -----------
Income before income taxes                              95         157
Provision for income taxes                              --          --
                                               ----------- -----------
Net income                                     $        95 $       157
                                               =========== ===========


Earnings per share:
      Basic                                    $      0.01 $      0.01
      Diluted                                  $      0.01 $      0.01

Shares used in calculating earnings per share:
      Basic                                     11,196,760  11,137,371
      Diluted                                   11,414,922  11,478,082
                  Information Analysis Incorporated
                       Statements of Operations

                                                 Nine months ended
                                                    September 30,
(in thousands, except per share data;
 unaudited)                                       2007        2006
                                               ----------- -----------
Revenue:
      Professional fees                        $     5,365 $     6,675
      Software sales                                 2,432         782
                                               ----------- -----------
      Total revenue                                  7,797       7,457
Cost of goods sold and services provided:
      Cost of professional fees                      4,093       5,080
      Cost of software sales                         1,931         478
                                               ----------- -----------
      Total cost of sales                            6,024       5,558
                                               ----------- -----------
Gross margin                                         1,773       1,899
Selling, general and administrative expense          1,586       1,508
                                               ----------- -----------
Operating income                                       187         391
Other income, net                                       20           5
                                               ----------- -----------
Income before income taxes                             207         396
Provision for income taxes                              --          --
                                               ----------- -----------
Net income                                     $       207 $       396
                                               =========== ===========

Earnings per share:
      Basic                                    $      0.02 $      0.04
      Diluted                                  $      0.02 $      0.03


Shares used in calculating earnings per share:
      Basic                                     11,196,760  10,973,470
      Diluted                                   11,408,401  11,436,461
                  Information Analysis Incorporated
                            Balance Sheets

                                        As of              As of
                                  September 30, 2007 December 31, 2006
(in thousands)                       (unaudited)         (audited)
                                  ------------------ -----------------
ASSETS
Current assets:
     Cash and cash equivalents     $          1,263   $           808
     Accounts receivable, net                 1,759             1,758
     Prepaid expenses                           349               382
     Note receivable                            116               116
     Other assets                                 7                 4
     Other receivables                            6                 6
                                  ------------------ -----------------
          Total current assets                3,500             3,074

Fixed assets, net                                63                67
Other assets                                      6                 9
                                  ------------------ -----------------
          Total assets             $          3,569   $         3,150
                                  ================== =================


LIABILITIES & STOCKHOLDERS'
 EQUITY
Current liabilities:
     Accounts payable              $            755   $           644
     Deferred revenues                          482               513
     Accrued payroll and related
      liabilities                               294               265
     Other accrued liabilities                   99                53
                                  ------------------ -----------------
         Total liabilities                    1,630             1,475
                                  ------------------ -----------------

Common stock, par value $0.01,
 30,000,000 shares authorized;
 12,839,376 shares issued,
 11,196,760 outstanding                         128               128
Additional paid in capital                   14,543            14,486
Accumulated deficit                         (11,802)          (12,009)
Less treasury stock; 1,642,616
 shares at cost                                (930)             (930)
                                  ------------------ -----------------
         Total stockholders'
          equity                              1,939             1,675
                                  ------------------ -----------------
         Total liabilities and
          stockholders' equity     $          3,569   $         3,150
                                  ================== =================

Source: Information Analysis Inc.