Table of Contents
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-QSB
 
   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
   THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarter Ended September 30, 2002
 
Commission File No. 0-22405
 
 
INFORMATION ANALYSIS INCORPORATED
(Exact name of Registrant as specified in its charter)
 
Virginia
  
54-1167364
(State or other jurisdiction of
incorporation or organization)
  
(IRS Employer
Identification No.)
 
11240 Waples Mill Road, Suite 400, Fairfax,VA
  
22030
(Address of principal executive offices)
  
(Zip Code)
 
(703) 383-3000
(Registrant’s telephone number, including area code)
 
 
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 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨
 
State the number of shares outstanding of each of the issuer’s classes of common stock, as of November 1, 2002:
 
Common Stock, par value $0.01, 10,283,515 shares
 
Transitional small business disclosure format.  Yes  ¨  No  x .
 

Table of Contents
 
INFORMATION ANALYSIS INCORPORATED
FORM 10-QSB
 
Index
 
         
Page
Number
PART I.
   
FINANCIAL INFORMATION
     
Item 1.
   
Financial Statements (Unaudited)
     
       
3
       
4
       
5
       
6
       
7
Item 2.
      
7
Item 3.
      
11
PART II.
   
OTHER INFORMATION
     
Item 6.
      
11
  
11
Annex A.
      
12
Annex B.
      
14

2

Table of Contents
 
INFORMATION ANALYSIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
    
September 30, 2002
     
December 31, 2001
  
    
Unaudited
     
Audited
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
104,747
 
   
$
102,640
 
Accounts receivable, net
   
 
971,261
 
   
 
1,526,372
 
Prepaid expenses
   
 
56,340
 
   
 
22,255
 
Note receivable
   
 
75,000
 
   
 
75,000
 
Other receivables
   
 
52,238
 
   
 
22,203
 
    
  
Total current assets
   
 
1,259,586
 
   
 
1,748,470
 
Fixed assets, net
   
 
36,227
 
   
 
34,654
 
Capitalized software, net
   
 
166,893
 
   
 
292,065
 
Other receivables
   
 
11,865
 
   
 
31,865
 
Other assets
   
 
58,275
 
   
 
58,275
 
    
  
Total assets
   
$
1,532,846
 
   
$
2,165,329
 
    
  
LIABILITIES & STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Revolving line of credit
   
$
402,100
 
   
$
596,000
 
Accounts payable
   
 
636,572
 
   
 
1,024,717
 
Accrued payroll and related liabilities
   
 
258,397
 
   
 
294,489
 
Other accrued liabilities
   
 
97,973
 
   
 
175,158
 
Deferred revenue
   
 
76,680
 
   
 
157,882
 
    
  
Total current liabilities
   
 
1,471,722
 
   
 
2,248,246
 
Long-term liabilities:
                  
Notes payable
   
 
125,001
 
   
 
125,001
 
    
  
Total liabilities
   
 
1,596,723
 
   
 
2,373,247
 
    
  
Stockholders’ equity:
                  
Common stock, par value $0.01, 30,000,000 shares authorized; 11,788,126 shares issued, 10,283,515 outstanding at September 30, 2002 and December 31, 2001
   
 
117,881
 
   
 
117,881
 
Additional paid in capital
   
 
14,122,019
 
   
 
14,122,019
 
Retained earnings
   
 
(13,449,464
)
   
 
(13,593,505
)
Less treasury stock, 1,504,611 shares at cost
   
 
(854,313
)
   
 
(854,313
)
    
  
Total stockholders’ equity
   
 
(63,877
)
   
 
(207,918
)
    
  
Total liabilities and stockholders’ equity
   
$
1,532,846
 
   
$
2,165,329
 
    
  
 
The accompanying notes are an integral part of the consolidated financial statements

3

Table of Contents
 
INFORMATION ANALYSIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
    
For the three months ended
  
    
September 30,
  
    
2002
     
2001
  
    
Unaudited
     
Unaudited
  
Sales
                  
Professional fees
   
$
943,801
 
   
$
1,456,079
 
Software sales
   
 
280,078
 
   
 
94,999
 
    
  
Total sales
   
 
1,223,879
 
   
 
1,551,078
 
Cost of sales
                  
Cost of professional fees
   
 
705,299
 
   
 
983,769
 
Cost of software sales
   
 
134,034
 
   
 
101,989
 
    
  
Total cost of sales
   
 
839,333
 
   
 
1,085,758
 
    
  
Gross profit
   
 
384,546
 
   
 
465,320
 
Selling, general and administrative expenses
   
 
405,923
 
   
 
592,638
 
    
  
Income (loss) from operations
   
 
(21,377
)
   
 
(127,318
)
Other (expenses) income, net
   
 
(8,424
)
   
 
1,267
 
    
  
Loss before provision for income taxes
   
 
(29,801
)
   
 
(126,051
)
Provision for income taxes
   
 
—  
 
   
 
—  
 
    
  
Net loss before extraordinary item
   
 
(29,801
)
   
 
(126,051
)
Extraordinary gain - settlement of debt with equity
   
 
—  
 
   
 
107,883
 
    
  
Net loss
   
 
(29,801
)
   
 
(18,168
)
    
  
Earnings per common share:
                  
Basic:
                  
Net income (loss) before extraordinary Item
   
$
0.00
 
   
$
(0.01
)
Extraordinary gain - settlement of debt with equity
   
 
0.00
 
   
 
0.01
 
    
  
Net income (loss)
   
$
0.00
 
   
$
0.00
 
    
  
Diluted:
                  
Net income (loss) before extraordinary Item
   
$
0.00
 
   
$
(0.01
)
Extraordinary gain - settlement of debt with equity
   
 
0.00
 
   
 
0.01
 
    
  
Net income (loss)
   
$
0.00
 
   
$
0.00
 
    
  
Weighted average common shares outstanding:
                  
Basic
   
 
10,283,515
 
   
 
10,087,925
 
Diluted
   
 
10,283,515
 
   
 
10,087,925
 
 
The accompanying notes are an integral part of the consolidated financial statements

4

Table of Contents
 
INFORMATION ANALYSIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
For the nine months ended
  
    
September 30,
  
    
2002
     
2001
  
    
Unaudited
     
Unaudited
  
Sales
                  
Professional fees
   
$
4,301,275
 
   
$
3,700,823
 
Software sales
   
 
535,784
 
   
 
347,712
 
    
  
Total sales
   
 
4,837,059
 
   
 
4,048,535
 
Cost of sales
                  
Cost of professional fees
   
 
2,978,671
 
   
 
2,639,509
 
Cost of software sales
   
 
346,347
 
   
 
405,306
 
    
  
Total cost of sales
   
 
3,325,018
 
   
 
3,044,815
 
    
  
Gross profit
   
 
1,512,041
 
   
 
1,003,720
 
Selling, general and administrative expenses
   
 
1,354,813
 
   
 
1,282,539
 
    
  
Income (loss) from operations
   
 
157,228
 
   
 
(278,819
)
Other expenses, net
   
 
(13,187
)
   
 
(22,339
)
    
  
Income (loss) before provision for income taxes
   
 
144,041
 
   
 
(301,158
)
Provision for income taxes
   
 
—  
 
   
 
—  
 
    
  
Net income (loss) before extraordinary item
   
 
144,041
 
   
 
(301,158
)
Extraordinary gain - settlement of debt with equity
   
 
—  
 
   
 
228,478
 
    
  
Net income (loss)
   
 
144,041
 
   
 
(72,680
)
    
  
Earnings per common share:
                  
Basic:
                  
Net Income (loss) before extraordinary Item
   
$
0.01
 
   
$
(0.03
)
Extraordinary gain - settlement of debt with equity
   
 
0.00
 
   
 
0.02
 
    
  
Net income (loss)
   
$
0.01
 
   
$
(0.01
)
    
  
Diluted:
                  
Net Income (loss) before extraordinary Item
   
$
0.01
 
   
$
(0.03
)
Extraordinary gain - settlement of debt with equity
   
 
0.00
 
   
 
0.02
 
    
  
Net income (loss)
   
$
0.01
 
   
$
(0.01
)
    
  
Weighted average common shares outstanding:
                  
Basic
   
 
10,283,515
 
   
 
9,865,056
 
Diluted
   
 
10,923,312
 
   
 
9,865,056
 
 
The accompanying notes are an integral part of the consolidated financial statements

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Table of Contents
 
INFORMATION ANALYSIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    
For the nine months ended
  
    
September 30,
  
    
2002
     
2001
  
    
Unaudited
     
Unaudited
  
Net income (loss)
   
$
144,041
 
   
$
(72,680
)
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Extraordinary gain
   
 
—  
 
   
 
(228,478
)
Depreciation
   
 
28,800
 
   
 
60,991
 
Amortization of capitalized software
   
 
125,172
 
   
 
157,763
 
Gain on sale of fixed assets
   
 
(3,710
)
   
 
(9,353
)
Changes in operating assets and liabilities
                  
Accounts receivable
   
 
555,111
 
   
 
(299,773
)
Other receivables and prepaid expenses
   
 
(44,120
)
   
 
110,663
 
Accounts payable and accrued expenses
   
 
(501,422
)
   
 
143,186
 
Deferred revenue
   
 
(81,202
)
   
 
—  
 
    
  
Net cash provided by operating activities
   
 
222,670
 
   
 
(137,681
)
    
  
Cash flows from investing activities
                  
Purchases of fixed assets
   
 
(30,373
)
   
 
—  
 
Proceeds from sale of fixed assets
   
 
3,710
 
   
 
9,364
 
    
  
Net cash (used) provided by investing activities
   
 
(26,663
)
   
 
9,364
 
Cash flows from financing activities
                  
Net (payments) borrowings under bank revolving line of credit
   
 
(193,900
)
   
 
10,409
 
Net proceeds from issuance of notes payable
   
 
—  
 
   
 
70,000
 
    
  
Net cash used by financing activities
   
 
(193,900
)
   
 
80,409
 
    
  
Net increase (decrease) in cash and cash equivalents
   
 
2,107
 
   
 
(47,908
)
Cash and cash equivalents at beginning of the period
   
 
102,640
 
   
 
42,881
 
    
  
Cash and cash equivalents at end of the period
   
$
104,747
 
   
$
(5,027
)
    
  
Supplemental cash flow Information
                  
Interest paid
   
$
41,902
 
   
$
37,566
 
    
  
Non-cash financing activity:
                  
Issuance of common stock to settle debt
   
$
—  
 
   
$
193,362
 
    
  
Non-cash operating activity:
                  
Reduction of accounts payable through issuance of equity
   
$
—  
 
   
$
421,840
 
    
  
 
The accompanying notes are an integral part of the consolidated financial statements

6

Table of Contents
 
PART I
 
Item 1.    Financial Statements.
 
INFORMATION ANALYSIS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Basis of Presentation
 
The accompanying consolidated financial statements have been prepared by Information Analysis Incorporated (“IAI” or the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Financial information included herein is unaudited; however, in the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been made. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations, but the Company believes that the disclosures made are adequate to make the information presented not misleading. For more complete financial information, these financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2001 included in the Company’s annual report on Form 10-KSB. Results for interim periods are not necessarily indicative of the results for any other interim period or for the full fiscal year.
 
Item 2.     Management’s Discussion and Analysis of Financial Condition or Plan of Operation
 
Cautionary Statement Regarding Forward-Looking Statements
 
This Form 10-QSB contains forward-looking statements regarding the Company’s 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 in the Company’s 10-KSB for the fiscal year ended December 31, 2001 and in other filings with the Securities and Exchange Commission.

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Table of Contents
 
Net Income (Loss) Per Share
 
Earnings per share are presented in accordance with SFAS No. 128, “Earnings Per Share.” This statement requires dual presentation of basic and diluted earnings per share on the face of the income statement. Basic 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 income per common share.
 
    
Income Before
Extraordinary
Item
     
Extraordinary
Item
   
Net
Income
     
Shares
   
Per Share
Amount
  
              
              
Basic net loss per common share for the three months ended September 30, 2002:
                                     
Income available to common stockholders
   
$
(29,801
)
   
—  
   
$
(29,801
)
   
10,283,515
   
$
0.00
 
Effect of dilutive stock options, warrants, and convertible notes
   
 
—  
 
   
—  
   
 
—  
 
   
—  
   
 
—  
 
Diluted net loss per common share for the three months ended September 30, 2002:
   
$
(29,801
)
   
—  
   
$
29,801
)
   
10,283,515
   
$
0.00
 
Basic net loss per common share for the three months ended September 30, 2001:
                                     
Income available to common stockholders
   
$
(126,051
)
   
107,883
   
$
(18,168
)
   
10,087,925
   
$
0.00
 
Effect of dilutive stock options, warrants, and convertible notes
   
 
—  
 
   
—  
   
 
—  
 
   
—  
   
 
—  
 
Diluted net loss per common share for the three months ended September 30, 2001:
   
$
(126,051
)
   
107,883
   
$
(18,168
)
   
10,087,925
   
$
0.00
 
Basic net income per common share for the nine months ended September 30, 2002:
                                     
Income available to common stockholders
   
$
144,041
 
   
—  
   
$
144,041
 
   
10,283,515
   
$
0.01
 
Effect of dilutive stock options
   
 
—  
 
   
—  
   
 
—  
 
   
38,854
   
 
—  
 
Effect of dilutive warrants
   
 
—  
 
   
—  
   
 
—  
 
   
100,943
   
 
—  
 
Effect of dilutive convertible notes
   
 
11,250
 
   
—  
   
 
11,250
 
   
500,000
   
 
—  
 
Diluted net income per common share for the nine months ended September 30, 2002:
   
$
155,291
 
   
—  
   
$
155,291
 
   
10,923,312
   
$
0.01
 
Basic net loss per common share for the nine months ended September 30, 2001:
                                     
Income available to common stockholders
   
$
(301,158
)
   
228,478
   
$
(72,680
)
   
9,865,056
   
$
(0.01
)
Effect of dilutive stock options, warrants, and convertible notes
   
 
—  
 
   
—  
   
 
—  
 
   
—  
   
 
—  
 
Diluted net loss per common share for the nine months ended September 30, 2001:
   
$
(301,158
)
   
228,478
   
$
(72,680
)
   
9,865,056
   
$
(0.01
)

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Three Months Ended September 30, 2002 Versus Three Months Ended September 30, 2001
 
Revenue
IAI’s revenues in the third quarter of fiscal 2002 were $1,223,879, compared to $1,551,078 in the third quarter of fiscal 2001, a decrease of 21.1%. Professional services revenue was $943,801 versus $1,456,079, a decrease of 35.2%, and product revenue was $280,078 versus $94,999, an increase of 194.8%.
 
Gross Margins
Gross margin was $384,546, or 31.4% of sales, in the third quarter of fiscal 2002 versus $465,320, or 30.0% of sales, in the third quarter of fiscal 2001. Of the $384,546 in 2002, $238,502 was attributable to services and $146,044 was attributable to software sales. Gross margin, as a percentage of sales, was 25.3% for professional services and 52.1% for software sales for 2002. In the third quarter of 2001, the Company reported gross margins of approximately 32.4% for professional services and (7.4%) for software sales. The increase in software sales gross margin is mainly due to the handling of a software product support package contract in-house that was previously outsourced, and to sales of the Company’s ICONS software tool for the third quarter of 2002, versus no ICONS sales for the same period in 2001.
 
Selling, General and Administrative
Selling, general and administrative expenses (SG&A) were $405,923, or 33.2% of revenues, in the third quarter of 2002 versus $592,638, or 38.2% of revenues, in the third quarter of 2001, a decrease in expenses of 31.5%. The decrease is largely attributable to continuing cost control measures including elimination of unnecessary expenses and services.
 
Profits
The Company generated an operating loss before other expenses of $21,377 in the third quarter of 2002 compared to operating loss before other expenses of $127,318 in the third quarter of 2001. There was a net loss of $29,801 for the third quarter of 2002 versus a net loss before extraordinary gain of $126,051 for the same period in 2001. In general, the operating loss and net loss decreases are a result of cost containment measures and improved software sales margins during the third quarter of 2002.
 

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Nine Months Ended September 30, 2002 Versus Nine Months Ended September 30, 2001
 
Revenue
IAI’s revenues in the first nine months of fiscal 2002 were $4,837,059, compared to $4,048,535 in the first nine months of fiscal 2001, an increase of 19.5%. Professional services revenues were $4,301,275 versus $3,700,823, an increase of 16.2%, and product revenues were $535,784 versus $347,712, an increase of 54.1%.
 
Gross Margins
Gross margins were $1,512,041, or 31.3% of sales, in the first nine months of fiscal 2002 versus $1,003,720, or 24.8% of sales, in the first nine months of fiscal 2001. Of the $1,512,041 in 2002, $1,322,604 was attributable to professional services and $189,437 was due to software sales. Gross margins as a percentage of sales were 30.7% for professional services and 35.4% for software sales for 2002, versus 28.7% for professional services and (16.6)% for software sales in 2001. The increase in professional services gross margin is a result of better margins on some of the Company’s newer projects for 2002 that were not present during the same period for 2001. The increase in software sales gross margin was mainly attributable to sales of the Company’s ICONS software tool for 2002, versus no ICONS sales for the same period of 2001, and also due to due to the handling of a software product support package contract in-house that was previously outsourced.
 
Selling, General & Administrative
SG&A was $1,354,813, or 28.0% of revenues, in the first nine months of 2002 versus $1,282,539, or 31.7% of revenues, in the first nine months of 2001, an increase in expenses of 5.6%. The increase is largely attributable to the additional services needed to support the increase in sales of professional services.
 
Profit
The Company reported a net operating profit of $157,228 in the first nine months of 2002 compared to an operating loss before an extraordinary item of $278,819 in the first nine months of 2001. In general, the operating profit and net income increases are a result of increased professional services and software sales, and improved sales margins during 2002. The Company’s increased profits are also a result of its continuing cost containment efforts.
 
Liquidity and Capital Resources
 
Through the first nine months of 2002, the Company financed its operations from current collections and through its bank line of credit. Cash and cash equivalents at September 30, 2002 were $104,747 compared to $102,640 at December 31, 2001. As of September 30, 2002 the Company had an outstanding balance on its line of credit of $402,100.
 
The Company is in default with its line of credit with First Virginia Bank as a result of the Company’s failure to meet certain financial tests. However, First Virginia Bank has agreed to extend its forbearance agreement with the Company, which effectively decreases the line of credit to $700,000 and extends it to December 19, 2002. The Company is in negotiations with various organizations to obtain new financing.
 
The Company believes that if revenue continues at current levels and the current line of credit is maintained, it will derive sufficient cash flow to continue to pay all essential expenses which are required to operate the business. Any material reduction in revenue could have a

10

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material adverse effect on the Company’s operational capabilities. Current operations, however, are insufficient to provide the additional working capital that is necessary to repay approximately $350,000 of past due payables. The Company cannot be certain that there will not be a need for additional cash resources at some point in fiscal 2002 or 2003. Accordingly, the Company may from time to time consider additional equity offerings to finance business expansion. The Company is uncertain that it will be able to raise additional capital.
 
The Company has no material commitments for capital expenditures.
 
Item 3.     Controls and procedures
 
(a)  Evaluation of Disclosure Controls and Procedures. The Company’s principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) on September 30, 2002, have concluded that, based on such evaluation, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-QSB was being prepared.
 
(b)  Changes in Internal Controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. Accordingly, no corrective actions were required or undertaken.
 
PART II - OTHER INFORMATION
 
Item 6.     Exhibits and Reports on Form 8-K
 
(a)  No reports on Form 8-K were filed for the quarter for which this report is filed.
 
SIGNATURES
 
In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Information Analysis Incorporated
(Registrant)
         
Date:
  
November 13, 2002
  
By:
   
/S/ Sandor Rosenberg
            
Sandor Rosenberg, Chairman of the
Board and President
       
By:
   
/S/ Richard S. DeRose
            
Richard S. DeRose, Executive Vice
President, Treasurer, and Chief
Financial Officer

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Annex A.     CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT
                    OF 2002
 
I, Sandor Rosenberg, certify that:
 
 
1.
 
I have reviewed this quarterly report on Form 10-QSB of Information Analysis Incorporated;
 
2.
 
Based on my knowledge, this quarterly 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 quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other information included in this quarterly 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 quarterly report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
a)
 
designed such disclosure controls and procedures 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 quarterly report is being prepared;
 
b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
c)
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date:
   
November 13, 2002
  
By:
   
/S/ Sandor Rosenberg
             
Sandor Rosenberg, Chairman of the
Board and President

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I, Richard S. DeRose, certify that:
 
 
1.
 
I have reviewed this quarterly report on Form 10-QSB of Information Analysis Incorporated;
 
2.
 
Based on my knowledge, this quarterly 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 quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other information included in this quarterly 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 quarterly report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
a)
 
designed such disclosure controls and procedures 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 quarterly report is being prepared;
 
b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
c)
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date:
   
November 13, 2002
  
By:
   
/S/ Richard S. DeRose
             
Richard S. DeRose, Executive Vice
President, Treasurer, and Chief
Financial Officer

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Annex  B.
 
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
 
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Information Analysis Incorporated, a Virginia corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
 
The Form 10-QSB for the quarter ended September 30, 2002, (the “Form 10-QSB”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-QSB fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:
   
November 13, 2002
  
By:
   
/S/ Sandor Rosenberg
             
Sandor Rosenberg, Chairman of the
Board and President
 
Date:
   
November 13, 2002
  
By:
   
/S/ Richard S. DeRose
             
Richard S. DeRose, Executive Vice
President, Treasurer, and Chief
Financial Officer

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