As filed with the Securities and Exchange Commission on January 31, 2000
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INFORMATION ANALYSIS INCORPORATED
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
54-1167364
(I.R.S. Employer
Identification No.)
11240 Waples Mill Road, Suite 400
Fairfax, Virginia 22030
(703) 383-3000
(Address, including zip code,
and telephone, including area code,
of registrant's principal executive offices)
Richard S. DeRose
Executive Vice President
Information Analysis Incorporated.
11240 Waples Mill Road, Suite 400
Fairfax, Virginia 22030
(703) 383-3000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Copy to:
Mark J. Wishner, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
12021 Sunset Hills Road, Suite 310
Reston, Virginia 20190
(703) 464-4800
--------------------------------------
Approximate date of commencement of proposed sale to public: At such time or
times after the effective date of this Registration Statement as any Selling
Shareholder shall determine.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x].
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier Registration Statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title of each class offering aggregate Amount of
of securities to be Amount to be price per offering registration
registered registered unit (1) price (1) fee
- ---------------------------------------------------------------------------------------------------------------
Common Stock, par 1,625,000 $0.8125 $1,320,312.50 $348.57
value $.01 per share
- ---------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended,
based upon the average of the high and low sales prices of the
Registrant's Shares on the Nasdaq OTC Bulletin Board on January 28,
2000.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
PROSPECTUS
INFORMATION ANALYSIS INCORPORATED
1,625,000 SHARES OF COMMON STOCK - (PAR VALUE $.01 PER SHARE)
This prospectus relates to 1,625,000 shares of the common stock, $.01
par value, of Information Analysis Incorporated, a Virginia corporation, which
may be offered from time to time by the selling shareholders who are named in
this prospectus. 1,525,000 of these shares are issuable upon exercise of certain
warrants issued in connection with a private placement that took place in
December of 1999 in which units were sold. Each unit consisted of one share of
common stock and one-half warrant. Each warrant is exercisable at $1.00 per
share (excluding 250,000 of the warrants which are exercisable at $0.73 per
share). We are not registering any of the shares contained within a unit.
Additionally, we are registering 100,000 shares which are issuable to one of our
employees as compensation. We will not receive any of the proceeds from the sale
of the shares. We will bear the costs relating to the registration of the shares
estimated to be approximately $10,948.57 . The following expenses will be borne
by the selling shareholders: underwriting discounts and selling commissions, if
any, and the fees of legal counsel, if any, for the selling shareholders in
connection with the registration of the shares offered herein. The filing by us
of this prospectus in accordance with the requirements of Form S-3 is not an
admission that the person whose shares are included in this prospectus is an
"affiliate" of ours.
The shares are registered as a result of our agreement to register the
shares in connection with certain transactions. We have been advised that each
selling shareholder expects to offer his, her or its shares to or through
brokers and dealers to be selected by the selling shareholder from time to time.
In addition, the shares may be offered for sale through the over-the-counter
market, through a market maker, in one or more private transactions, or a
combination of such methods of sale, at prices and on terms then prevailing.
Each selling shareholder may pledge all or a portion of the shares owned by him,
her or it as collateral in loan transactions. Upon default by any selling
shareholder, the pledgee in such loan transactions would have the same rights of
sale as such selling shareholder under this prospectus. Each selling shareholder
may also transfer the shares owned by him, her or it in other ways not involving
market makers or established trading markets, including directly by gift,
distribution, or other transfer without consideration, and upon any such
transfer the transferee would have the same rights of sale as such selling
shareholder under this prospectus. Each selling shareholder and any broker
executing selling orders on behalf of any selling stockholder may be deemed to
be "underwriters" within the meaning of the 1933 Act, in which event commissions
received by any such broker may be deemed to be underwriting commissions under
the 1933 Act. The shares are traded on the Nasdaq OTC Bulletin Board under the
symbol IAIC. On January 28, 2000, the closing sale price of the shares, as
reported by the Nasdaq OTC Bulletin Board, was $0.8125 per share.
Our executive offices are located, 11240 Waples Mill Road, Suite 300, Fairfax,
Virginia 22030, and our telephone number is (703) 383-3000.
THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 4 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO DEALER, SALESMAN, OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US. THIS PROSPECTUS IS NOT AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR
SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
The date of this prospectus is January 31, 2000.
All of the securities to be registered hereby are to be offered for the
account of security holders.
1
TABLE OF CONTENTS
PAGE
WHERE YOU CAN FIND MORE INFORMATION ABOUT US............................3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................3
RISK FACTORS............................................................4
THE COMPANY.............................................................7
RECENT EVENTS...........................................................8
USE OF PROCEEDS.........................................................8
DIVIDEND POLICY.........................................................8
SELLING SHAREHOLDERS....................................................9
PLAN OF DISTRIBUTION...................................................10
LEGAL MATTERS..........................................................10
EXPERTS................................................................10
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
FOR SECURITIES ACT LIABILITIES.........................................10
INFORMATION NOT REQUIRED IN PROSPECTUS.................................11
SIGNATURES.............................................................13
INDEX TO EXHIBITS......................................................14
2
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We are subject to certain informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith we file
reports and other information with the Securities and Exchange Commission. These
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024 of the SEC's
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and at
its regional offices located at 7 World Trade Center, Suite 1300, New York, NY
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661. Copies of such reports, proxy statements and other information can be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, DC 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the SEC's Web site is http://www.sec.gov. Additional updating
information with respect to the shares being registered may be provided in the
future to purchasers by means of appendices to this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
to those documents. This information incorporated by reference is considered to
be part of this prospectus, and information that we file later with the SEC will
automatically update or supersede this information. We incorporated by reference
the documents listed below and any future filings we will make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-KSB for the year ended December 31,
1998.
2. Our Quarterly Reports on Form 10Q-SB for the quarters ending March
31, 1999, June 30, 1999 and September 30, 1999.
We will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of any of the
information that is incorporated by reference in this prospectus (other than
exhibits to such documents which are not specifically incorporated by reference
into the information that this prospectus incorporates). Written or telephone
requests should be directed to: Mr. Richard S. DeRose, Executive Vice President,
Information Analysis Incorporated, 11240 Waples Mill Road, Suite 300, Fairfax,
Virginia 22030, (703) 383-3000.
This prospectus constitutes a part of a Registration Statement which we
have filed with the SEC under the Securities Act of 1933 with respect to the
shares. This prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related Exhibits thereto for further information with respect to
us. Any statements contained in this prospectus concerning the provisions of any
documents are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the SEC. Each such statement is qualified in its
entirety by such reference.
3
RISK FACTORS
AN INVESTMENT IN THE SHARES BEING OFFERED BY THIS PROSPECTUS INVOLVES A
HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS OR INCORPORATED IN THIS PROSPECTUS BY REFERENCE, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE PURCHASING
THE SHARES OFFERED HEREBY. THIS PROSPECTUS CONTAINS AND INCORPORATES BY
REFERENCE FORWARD-LOOKING STATEMENTS WITHIN THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WHICH ARE BASED ON MANAGEMENT'S
CURRENT EXPECTATIONS. TO THE EXTENT THAT ANY OF THE STATEMENTS CONTAINED IN THIS
PROSPECTUS RELATING TO OUR PRODUCTS AND OUR OPERATIONS ARE FORWARD LOOKING, SUCH
STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND INVOLVE A NUMBER
OF UNCERTAINTIES AND RISKS.
REFERENCE IS ALSO MADE IN PARTICULAR TO THE DISCUSSION SET FORTH UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" IN OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1998 AND IN OUR QUARTERLY REPORTS ON FORM 10-Q FOR THE QUARTERS ENDED MARCH
31, 1999, JUNE 30, 1999 AND SEPTEMBER 30, 1999 AND UNDER "DESCRIPTION OF
BUSINESS" IN THE FORM 10-K, INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. BOTH
THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS AND THOSE
INCORPORATED IN THIS PROSPECTUS BY REFERENCE ARE BASED ON CURRENT EXPECTATIONS
THAT INVOLVE A NUMBER OF UNCERTAINTIES INCLUDING THOSE SET FORTH IN THE RISK
FACTORS BELOW. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN
THE FORWARD-LOOKING STATEMENTS.
SHIFT IN BUSINESS FOCUS. While, in fiscal years 1997, 1998 and 1999, we
still derived most of our revenue from sales of our software conversion product
to remedy the Year 2000 problem resident in certain computing environments, we
have shifted our focus back to the development of application software and
offering related services including software conversion, information systems
reengineering, and systems integration. We expect to derive a substantial
majority of our total revenue and net income from sales of these services in the
future. Continued growth of our business will depend upon several factors,
including demand for our services, our ability to develop new technology to meet
the changing requirements of our customers, technological change and competitive
pressures. There can be no assurance that our services will re-establish itself
and grow.
NEGATIVE CURRENT NET WORTH; MAY INCUR FUTURE LOSSES. We have a negative
current net worth and have been incurring losses on our business operations for
the past several years. We are not currently able to satisfy our obligations and
require additional working capital. We may continue to incur operating losses.
Operating results may be affected by factors beyond our control, such as the
state of the economy, business conditions in general and the other factors
discussed in this prospectus.
NEED TO MANAGE CHANGING AND EXPANDING OPERATIONS. Our goal is to grow
our business. If achieved, this growth may place a significant strain on our
business resources, which have been reduced as a result of our recent losses. To
manage this growth effectively, we may need to implement additional management
information systems capabilities, further develop our operating, administrative,
financial and accounting systems and controls, improve coordination among
accounting, finance, marketing and operations and hire and train additional
personnel. We may not successfully implement our expansion program in whole or
in part. We cannot be certain that our management will be able to successfully
identify, manage and exploit existing and potential market opportunities.
MARKET IS HIGHLY COMPETITIVE. We do business in a market that is highly
competitive, and we expect competition to intensify in the future. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, any of which could harm our net revenue and results of
operations. We may not be able to compete with current and potential
competitors, many of whom have longer operating histories, greater name
recognition, larger, more established customer bases and significantly greater
financial, technical, and marketing resources. Further, some of our competitors
provide or have the ability to provide the same range of services we offer.
Also, competitors may compete directly with us by adopting a similar business
model or through the acquisition of companies which can provide complementary
products or services. Our failure to compete effectively in our markets would
have a material adverse affect on our business.
DEPENDENCE ON EXPERIENCED PERSONNEL; RELIANCE ON SENIOR MANAGEMENT. The
success of our business depends to a large extent upon the efforts of our
officers and management personnel. If we fail to attract, assimilate or retain
highly qualified managerial and technical personnel our business could be
materially adversely affected.
4
Our performance is substantially dependent on the performance of our executive
officers and key employees who must be knowledgeable and experienced. We are
also dependent on our ability to retain and motivate high quality personnel,
especially management and highly skilled technical teams. The loss of the
services of any executive officers or key employees could have a material
adverse effect on our business. Our future success also depends on the
continuing ability to identify, hire, train and retain other highly qualified
managerial and technical personnel. Competition for such personnel is intense.
REVENUE MAY BE INSUFFICIENT TO REVERSE LOSSES. We are hopeful that cash
flow from operations will be positive; however, our losses may continue. We have
several large potential contracts that are being negotiated, but if any of these
contracts do not become finalized, it could have a material adverse effect on
our operations.
RAPID TECHNOLOGICAL CHANGE. The computer industry in general, and the
market for our application software in particular, are characterized by rapidly
changing technology, frequent new technology introductions, and significant
competition. In order to keep pace with this rapidly changing market
environment, we must continually develop and incorporate into our services new
technological advances and features desired by the marketplace at acceptable
prices. The successful development and commercialization of new services and
technology involves many risks, including the identification of new
opportunities, timely completion of the development process, the control and
recoupment of development and production costs and acceptance by customers of
our products. There can be no assurance that we will be successful in
identifying, developing and marketing new service and technology, or that these
services and technology will be accepted in the marketplace.
PROTECTION OF PROPRIETARY TECHNOLOGY. Our ability to compete
effectively with other companies will depend, in part, on our ability to
maintain the proprietary nature of our technology. There can be no assurance
that competitors in both the United States and foreign countries, many of which
have substantially greater resources and have made substantial investments in
competing technologies, do not have or will not obtain patents that will
prevent, limit or interfere with our ability to perform our services or
intentionally infringe upon our proprietary rights. We rely in large part on
unpatented proprietary technology, and there can be no assurance that others may
not independently develop the same or similar technology, whether or not
patented, or otherwise obtain access to our proprietary technology.
CYCLICAL NATURE OF THE COMPUTER INDUSTRY. The computer industry is
highly cyclical and has historically experienced periodic downturns. The
cyclical nature of the computer industry is beyond our control. As an example,
we experienced a substantial reduction in demand for Year 2000 computer
solutions. A similar decrease in demand for our new applications and related
services could materially adversely affect our business and products.
UNCERTAINTIES RELATED TO COMPANY'S ABILITY TO RAISE ADDITIONAL
NECESSARY CAPITAL. In December 1999, we completed a private placement of common
stock which resulted in approximately $1.275 million in gross proceeds to the
Company. However, because of our continuing losses from operations, we
anticipate that unless revenues increase significantly, we will require
additional capital in order to continue our operations. We have no assurance
that we will be able to raise such additional capital, if needed, in a timely
manner or on favorable terms, if at all. If we are unable to increase revenues
significantly and/or secure additional financing, we could be forced to curtail
or discontinue our operations.
LOSSES. For the nine months ended September 30, 1999, we incurred a
loss of $1,222,944 of revenues of $8,139,219. For the fiscal year ended December
31, 1998, we incurred a loss of $9,023,945 on revenues of $15,332,358. These
losses are primarily the result of lower than expected demand for our services
and technology in the Year 2000 remediation market combined with our making a
large investment and commitment in that market.
It is possible that our losses could continue into the foreseeable future.
VOLATILITY OF SHARE PRICE. Market prices for securities of technology
companies have been volatile. The market price for our shares has fluctuated
significantly, and it is likely that the market price will continue to fluctuate
in the future. Quarterly fluctuations in operating results, announcements by us
or our present or potential competitors, technological innovations or new
commercial products or services, developments or disputes concerning patent or
proprietary rights and other events or factors may have a significant impact on
our business and on the market price of the shares.
5
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of shares
in the public market could have an adverse effect on the price of our shares. As
of January 26, 2000, approximately 5,018,673 shares of common stock were freely
tradable on the open market. In addition, approximately 4,450,000 shares are
eligible for sale pursuant to Rule 144 of the 1933 Act. Also, there were a total
of 1,637,989 options and warrants to purchase shares outstanding as of January
26, 2000 pursuant to our stock option plans, and 1,608,989 of such options and
warrants were vested and can be exercised at any time prior to their respective
expiration dates.
The shares offered hereby are issuable upon exercise of warrants to
purchase shares issued to certain Shareholders in connection with our December
private placement. The warrants are exercisable at any time prior to December
31, 2004 at an exercise price of $1.00 per share of shares. We have agreed to
register for resale the shares underlying the warrants. We are obligated to
register the shares sold in our December private placement within six months.
All of the shares registered for resale by the holders thereof, including the
shares offered hereby, may be reoffered and resold in the public trading market
from time to time during the period we have agreed to maintain the effectiveness
of the Registration Statement registering those shares.
DILUTION. Dilution is likely to occur upon exercise of the warrants and
also upon the exercise of existing stock options. The warrants can be converted
into our shares of common stock at any time prior to December 31, 2004 at an
exercise price of $1.00 per share of shares (excluding 250,000 of the warrants
which may be converted into common stock at any time prior to December 31, 2006
at an exercise price of $0.73).
6
THE COMPANY
We are a Virginia corporation which was organized in 1979. We develop
application software and offer related services including software conversions,
information systems reengineering, and systems integration. Beginning in 1996,
we began a concentrated effort to enhance our software conversion product to
remedy the Year 2000 problem resident in certain computing environments.
Recently, the focus of our business shifted back from Year 2000 computer
solutions to providing a full range of software conversion, information system
reengineering, and computer systems integration to both commercial and
government clients. In the past, we have been engaged on a variety of projects
including web solutions, re-engineering, system conversion, platform migration,
and application testing.
We have also been in the business of designing, creating, and
automating solutions for the processing of data collected, assimilated, and
distributed via the Internet. We specialize in engineering solutions that
leverage an organization's investment in its present legacy systems by
modernizing the interface to the Internet. Our personnel are able to create
Internet applications that operate on stand-alone PCs and then interconnect
these applications to the customer's legacy system. We have developed a
modernization workbench tool, ICONS, to support the migration initiatives, which
typically include client/server development, web enablement, and software
reengineering services.
Apart from computer system services, we provide contract personnel for
planned workloads and supplementary staff to satisfy peak demands, and we can
provide candidate screening and evaluation to assist our clients in satisfying
their staffing needs. Overall, our clients have included, among others,
Arbitron, MCI, Computer Sciences Corporation, IBM, Sprint, Citibank, the United
States Customs Service, the United States Department of Energy, the United
States Army, the United States Air Force, the Veterans Administration and the
Federal Deposit Insurance Corporation.
The mailing address and telephone number of our principal executive
offices is 11240 Waples Mill Road, Suite 400, Fairfax, Virginia 22030, (703)
383-3000.
7
RECENT EVENTS
Between December 20 and 31, 1999, we raised approximately $1.15 million
in capital from private sales of shares of our common stock to holders through
the sale of 2,300,000 shares at a price of $0.50 per share. As part of such
private placement, 250,000 shares additional were sold totaling $125,000 on
January 21, 2000.
USE OF PROCEEDS
The selling shareholders are selling all of the shares covered by this
prospectus for their own account. Accordingly, we will not receive any of the
proceeds from the sale of the shares being registered. We may receive proceeds
from the exercise of the warrants. We will use such net proceeds for general
corporate purposes. We have agreed to bear the expenses relating to registration
of the shares, other than brokerage commissions and expenses, if any, which will
be paid by the selling shareholders.
DIVIDEND POLICY
We have not paid dividends since our inception and do not anticipate
paying any dividends in the foreseeable future.
8
SELLING SHAREHOLDERS
Except for the shares offered by Gerald Parsons, the shares offered by
the selling shareholders are issuable upon exercise of warrants to purchase
shares issued to the selling shareholders in connection with our December
private placement, the form of the warrants is filed as Exhibit 99.1 to the
Registration Statement of which this prospectus is a part. The shares offered by
Gerald Parsons are issuable to him at his option as of February 1, 2000.
The following table sets forth information with respect to the
beneficial ownership of our shares by the selling shareholders as of December
31, 1999, as adjusted to reflect the sale of the shares offered hereby by each
selling stockholder.
Shares Shares
Owned Prior to Number of Owned After
Offering (1) Shares Being Offering (2)
------------ -------------
Selling Stockholder Number Percent Offered Number Percent
Joseph Kalb 91,000 * 25,000 66,000 *
Harry Binder 344,000 3.60 50,000 244,000 2.55
Alexander Zeltzer 150,000 1.58 50,000 100,000 1.05
Lev Paukman 300,000 3.14 100,000 200,000 2.09
Raoul Biniaurishvill 75,000 * 25,000 50,000 *
Irina Benaur 75,000 * 25,000 50,000 *
Eugene Khavinson 150,000 1.58 50,000 100,000 1.05
Roman Shlossberg 75,000 * 25,000 50,000 *
Howard Bernstein 150,000 1.58 50,000 100,000 1.05
Gregory Lipkin 75,000 * 25,000 50,000 *
Fernando Giancola 150,000 1.58 50,000 100,000 1.05
Steve Weintraub 75,000 * 25,000 50,000 *
Michael Pento 95,000 1.00 25,000 70,000 *
Henry Grinberg 150,000 1.58 50,000 100,000 1.05
Leon Rubakhim 75,000 * 25,000 50,000 *
B&J Realty, LLC 150,000 1.58 50,000 100,000 1.05
Traditions, LP 1,500,000 15.05 500,000 1,000,000 10.03
SCI Partnership 250,000 2.57 250,000 0 *
C. Barry Zolot 225,000 2.36 75,000 150,000 1.57
Gerald Parsons 110,000 1.75 100,000 10,000 *
- -------------------
(1) The number of shares of common stock issued and outstanding on January
26, 2000 was 9,468,673. The calculation of percentage ownership for
each listed selling stockholder is based upon the number of shares of
common stock issued and outstanding at January 26, 2000, plus the
shares of common stock offered hereby by the selling shareholders,
which are issuable upon exercise of the warrants, or in the case of
Gerald Parsons, plus the shares to which he is entitled but have not
yet been issued. The shares owned prior to the offering by each selling
shareholder, other than Gerald Parsons, includes the warrants each such
selling shareholder holds. A percentage ownership of less than one
percent is indicated by an asterisk.
(2) Assuming all shares offered hereby are sold to unaffiliated third
parties. A percentage ownership of less than one percent is indicated
by an asterisk.
9
PLAN OF DISTRIBUTION
The 1,625,000 shares of our common stock offered hereby may be offered
and sold from time to time by the selling shareholders, or by pledgees, donees,
transferees or other successors in interest. The selling shareholders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale. Such sales may be made on the Nasdaq OTC Bulletin Board or
otherwise, at prices related to the then current market price or in negotiated
transactions, including pursuant to an underwritten offering or one or more of
the following methods: (a) purchases by a broker-dealer as principal and resale
by such broker or dealer for our account pursuant to this prospectus; (b)
ordinary brokerage transactions and transactions in which a broker solicits
purchasers; and (c) block trades in which a broker-dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction. In effecting sales, brokers or
dealers engaged by the selling shareholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions or discounts
from the selling shareholders or from the purchasers in amounts to be negotiated
immediately prior to the sale. The selling shareholders may also sell the shares
in accordance with Rule 144 under the 1933 Act.
We have agreed to use diligent efforts to maintain the effectiveness of
the registration of the shares being offered hereunder until the expiration date
of the warrants (December 31, 2004) or such shorter period which will terminate
when all of our shares issued or issuable upon exercise of the warrants have
been registered under the 1933 Act and disposed of in accordance with an
effective Registration Statement under the 1933 Act.
The selling shareholders and any brokers participating in such sales
may be deemed to be underwriters within the meaning of the 1933 Act. There can
be no assurance that the selling shareholders will sell any or all of the shares
offered hereunder.
All proceeds from any such sales will be the property of the selling
shareholders who will bear the expense of underwriting discounts and selling
commissions, if any, and the selling shareholders' own legal fees, if any.
LEGALITY OF SHARES
The validity of the issuance of our shares offered hereby is being
passed upon for us by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
Reston, Virginia.
EXPERTS
The financial statements of the Company as of December 31, 1998
incorporated by reference in this prospectus and elsewhere in the Registration
Statement, have been audited by Rubino & McGeehin, Chartered, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated in this prospectus in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or persons controlling the
Company we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in therein and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of ours in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of competent jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
10
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses relating to the registration of the shares will be borne
by us. Other than the registration fee, the amounts stated are estimates.
SEC Registration Fee $348.57
Legal Fees and Expenses 10,000.00
Accounting Fees and Expenses 500.00
Miscellaneous 100.00
-----------
TOTAL $10,948.57
===========
The selling shareholders will bear the expense of their own legal
counsel, if any.
Item 15. Indemnification of Officers and Directors
Section 5 of the Amended and Restated Articles of Incorporation of
Information Analysis Incorporated as filed with the Virginia State Corporation
Commission provides as follows:
5. Officer and Director Liability. In any proceeding brought by or in
the right of the Corporation or brought by or on behalf of a
shareholder in the right of the Corporation, an officer or director of
the Corporation shall not be liable for any damages assessed against
such officer or director arising out of a single transaction,
occurrence or course of conduct. However, the liability of an officer
or director shall not be so limited if the officer or director engaged
in willful misconduct or a knowing violation of the criminal law or of
any federal or state securities law, including, without limitation, any
claim of insider trading or manipulation of the market for any
security.
Item 16. Exhibits.
The Exhibits to this Registration Statement are listed in the Index to
Exhibits on Page 14.
Item 17. Undertakings.
A. Rule 415 Offering
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.
11
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not
apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant with or
furnished to the SEC pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in
the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Request for Acceleration of Effective Date or Filing of Registration
Statement on Form S-8
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in Fairfax, Virginia on January 31, 2000.
INFORMATION ANALYSIS INCORPORATED.
By: /s/ Sandor Rosenberg
------------------------------
Sandor Rosenberg
Chairman and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sandor Rosenberg his attorneys-in-fact,
for him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement (or any other
Registration Statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorney-in-fact
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact or his substitute may lawfully do or
cause to be done by virtue of this prospectus.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/ Sandor Rosenberg Chairman of the Board January 31, 2000
- --------------------------- and President
Sandor Rosenberg (principal executive officer)
/s/ Charles A. May, Jr. Director January 31, 2000
- ---------------------------
Charles A. May, Jr.
/s/ Bonnie K. Wachtel Director January 31, 2000
- ---------------------------
Bonnie K. Wachtel
/s/ James D. Wester Director January 31, 2000
- ---------------------------
James D. Wester
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INFORMATION ANALYSIS INCORPORATED.
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
Exhibit Sequential
Number Description Page No.
3.1 Amended and Restated Articles of Incorporation n/a
of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1998)
3.2 By-Laws of the Registrant (incorporated by n/a
reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-18 dated
November 20, 1986 (Commission File No. 33-9390)
5 Opinion of Mintz, Levin, Cohn, Ferris, 15
Glovsky and Popeo, P.C., with respect to
the legality of the securities being registered
(filed herewith)
23.1 Consent of Rubino & McGeehin, Chartered (filed herewith) 16
23.2 Consent of Mintz, Levin, Cohn, Ferris, 15
Glovsky and Popeo, P.C. (reference is
made to Exhibit 5)
24 Power of Attorney (filed in Part II of 13
this Registration Statement)
99.1 Form of Warrant 17-23
14