Information Analysis Inc. Announces Fourth Quarter Results

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

Information Analysis Inc. (OTCBB:IAIC) today reported results for the fourth quarter and full year ended December 31, 2006. Revenues were $2,002,000, compared to $2,950,000 reported in the fourth quarter 2005. The Information Technology services company reported net income of $106,000 or $0.01 per share basic and diluted, compared to net income of $261,000 or $0.02 per share basic and diluted in the comparable period in 2005.

For the year ended December 31, 2006, IAI posted revenue of $9,459,000 and net income of $502,000, or $0.05 per share basic and $0.04 diluted. The Company reported revenue of $10,772,000 and net income of $732,000 or $0.07 per share basic and diluted for the year ended December 31, 2005.

"We experienced a downturn of revenues in 2006 as a result of delays in the government ordering process," said Sandor Rosenberg, Chairman and Chief Executive Officer of IAI. "During the past few years we were able to reach financial stability, which has allowed us to plan for future growth. We have been working diligently on building a larger pipeline. This is expected to add additional revenue during 2007 and future years. We continue to see more opportunities through our Adobe relationship that should enhance our future business.

"We are continuing too pursue merger/acquisition opportunities with other organizations."

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
                  Condensed Statements of Operations

                                                Three months ended
                                                   December 31,
(in thousands, except per share data)            2006         2005
                                              -----------  -----------
Sales:
      Professional fees                      $     1,809  $     2,187
      Software sales                                 193          763
                                              -----------  -----------
      Total sales                                  2,002        2,950
Cost of goods sold and services provided:
      Cost of professional fees                    1,322        1,689
      Cost of software sales                         143          534
                                              -----------  -----------
      Total cost of sales                          1,465        2,223
                                              -----------  -----------
Gross profit                                         537          727
Operating expenses:
      Selling, general and administrative           (421)        (462)
                                              -----------  -----------
Income from operations                               116          265
Other expenses, net                                   (9)           1
                                              ----------- ------------
Income before provision for income taxes             107          266
Provision for income taxes                             1            5
                                             ------------ ------------
Net income                                   $       106  $       261
                                             ============ ============

Earnings per Common Share: Basic and Diluted
      Basic net income                       $      0.01  $      0.02
                                             ============ ============
      Diluted net income                     $      0.01  $      0.02
                                             ============ ============

Shares used in calculating earnings per
 share:
      Basic                                   11,151,394   10,620,570
      Diluted                                 11,366,653   11,388,849


                                               Twelve months ended
                                                    December 31,
(in thousands, except per share data)            2006         2005
                                              -----------  -----------
Sales:
      Professional fees                      $     8,484  $     9,045
      Software sales                                 975        1,727
                                             ------------ ------------
      Total revenue                                9,459       10,772
Cost of goods sold and services provided:
      Cost of professional fees                    6,402        6,960
      Cost of software sales                         621        1,348
                                             ------------ ------------
      Total cost of sales                          7,023        8,308
                                             ------------ ------------
Gross profit                                       2,436        2,464
Operating expenses:
      Selling, general and administrative         (1,929)      (1,715)
                                             ------------ ------------
Income from operations                               507          749
Other expenses, net                                   (4)         (12)
                                             ------------ ------------
Income before provision for income taxes             503          737
Provision for income taxes                             1            5
                                             ------------ ------------
Net income                                   $       502  $       732
                                             ============ ============

Earnings per Common Share: Basic and Diluted
      Basic net income                       $      0.05  $      0.07
                                             ============ ============
      Diluted net income                     $      0.04  $      0.07
                                             ============ ============

Shares used in calculating earnings per
 share:
      Basic                                   11,018,317   10,376,247
      Diluted                                 11,342,072   10,968,026
                  Information Analysis Incorporated
                            Balance Sheets
                                               As of         As of
                                           December 31,  December 31,
(in thousands)                                  2006          2005
                                           ------------- -------------
ASSETS
Current assets:
  Cash and cash equivalents                $        808  $        452
  Accounts receivable, net                        1,758         1,994
  Prepaid expenses                                  382           183
  Note receivable                                   116            85
  Other receivables                                   6            15
  Other assets                                        4            --
                                           ------------- -------------
          Total current assets                    3,074         2,729

Fixed assets, net                                    67            57

Other assets                                          9             9
                                           ------------- -------------
Total assets                               $      3,150  $      2,795
                                           ============= =============

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                      $        644  $      1,175
     Deferred revenue                               513           214
     Accrued payroll and related
      liabilities                                   265           321
     Other accrued liabilities                       53           125
     Income taxes payable                            --             4
     Revolving line of credit                        --            --
                                           ------------- -------------
         Total current liabilities                1,475         1,839
                                           ------------- -------------

         Total liabilities                        1,475         1,839
                                           ------------- -------------

Common stock, par value $0.01, 30,000,000
 shares authorized; 12,839,376 shares
 issued, 11,196,760 outstanding at December
 31, 2006, and 12,127,626 shares issued,
 10,623,015 outstanding at December 31,
 2005,                                              128           121
Additional paid in capital                       14,486        14,212
Accumulated deficit                             (12,009)      (12,511)
Other comprehensive income                           --           (12)
Less treasury stock; 1,642,616 and
 1,504,611 shares at cost at December 31,
 2006 and 2005, respectively                       (930)         (854)
                                           ------------- -------------
         Total stockholders' equity               1,675           956
                                           ------------- -------------
Total liabilities and stockholders' equity $      3,150  $      2,795
                                           ============= =============

Source: Information Analysis Inc.