Exhibit 99.1

For additional information contact:        

Richard S. DeRose (703) 293-7901

For release: August 8, 2006 at 9:00 a.m.

Information Analysis Inc. Reports Second Quarter Results

FAIRFAX, VIRGINIA – Information Analysis Inc. (OTCBB: IAIC) reported results for the second quarter ended June 30, 2006. Revenues were $2,569,000 compared to $3,006,000 reported in 2005’s second quarter. The Company reported net income of $154,000, or $0.01 per share, compared to net income of $148,000, or $0.01 per share in 2005’s second quarter. IAI had revenue of $4,883,000, compared to $5,193,000 reported for six months ending June 30, 2005. Net income for the first six months of fiscal 2006 was $239,000, or $0.02 per share, versus net income of $220,000, or $0.02 per share, in the comparable 2005 period.

“Our second quarter profit continued to improve over last year’s results,” said Sandor Rosenberg, Chairman and Chief Executive Officer of IAI. “The Company is continuing the active pursuit of the conversion and system modernization business in addition to developing business opportunities in the area of Web applications. We now are working on a number of bid opportunities for new business and additional add-on business to existing contracts, which are expected to be awarded during the later part of the year.

“As our financial strength continues to grow, we expect more opportunities to expand our business through M&A activities.”

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. These include the failure to obtain sufficient contracts, and to profitably complete those contracts. Investors should read and understand the risk factors detailed in the Company’s 10-KSB for the fiscal year ended December 31, 2005 and in other filings with the Securities and Exchange Commission.

 

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Information Analysis Reports Second Quarter Results

August 8, 2006

Page 2 of 4

Information Analysis Incorporated

Condensed Income Statements

 

     Three months ended June 30,  
     2006    2005  

(in thousands, except per share data; unaudited)

      

Sales:

      

Professional fees

    $ 2,299    $ 2,372  

Software sales

      270      634  
               

Total sales

      2,569      3,006  

Cost of goods sold and services provided:

      

Cost of professional fees

      1,703      1,837  

Cost of software sales

      225      564  
               

Total cost of sales

      1,928      2,401  
               

Gross margin

      641      605  

Operating expenses:

      

Selling, general and administrative

      489      452  
               

Operating income

      152      153  

Other income (expense)

      2      (5 )
               

Income before income taxes

      154      148  

Provision for income taxes

      —        —    
               

Net income

    $ 154    $ 148  
               

Comprehensive Income

    $ 154    $ 148  
               

Net income per share:

      

Basic and diluted

    $ 0.01    $ 0.01  
               

Shares used in calculating earnings per share:

      

Basic

      11,035,507      10,296,527  

Diluted

      11,504,714      11,292,107  

 

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Information Analysis Reports Second Quarter Results

August 8, 2006

Page 3 of 4

Information Analysis Incorporated

Condensed Income Statements

 

     Six months ended June 30,  
     2006    2005  

(in thousands, except per share data; unaudited)

      

Sales:

      

Professional fees

    $ 4,495    $ 4,486  

Software sales

      388      707  
               

Total sales

      4,883      5,193  

Cost of goods sold and services provided:

      

Cost of professional fees

      3,454      3,519  

Cost of software sales

      295      605  
               

Total cost of sales

      3,749      4,124  
               

Gross margin

      1,134      1,069  

Operating expenses:

      

Selling, general and administrative

      898      840  
               

Operating income

      236      229  

Other income (expense)

      3      (9 )
               

Income before income taxes

      239      220  

Provision for income taxes

      —        —    
               

Net income

    $ 239    $ 220  
               

Comprehensive Income

    $ 239    $ 220  
               

Net income per share:

      

Basic and diluted

    $ 0.02    $ 0.02  
               

Shares used in calculating earnings per share:

      

Basic

      10,890,164      10,290,057  

Diluted

      11,399,119      11,151,036  

 

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Information Analysis Reports Second Quarter Results

August 8, 2006

Page 4 of 4

Information Analysis Incorporated

Condensed Balance Sheets

 

    

As of

June 30, 2006

    

As of

December 31, 2005

  
     (unaudited)     (audited)  

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 668     $ 452  

Accounts receivable, net

      2,233       1,994  

Prepaid expenses

      324       183  

Note receivable

      105       85  

Other assets

      12       —    

Other receivables

      4       15  
                

Total current assets

      3,346       2,729  

Fixed assets, net

      58       57  

Other assets

      2       9  
                

Total assets

    $ 3,406     $ 2,795  
                

LIABILITIES & STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

    $ 1,137     $ 1,175  

Deferred revenues

      440       214  

Accrued payroll and related liabilities

      328       321  

Other accrued liabilities

      129       125  

Income taxes payable

      —         4  
                

Total liabilities

      2,034       1,839  
                

Common stock, par value $0.01, 30,000,000 shares authorized; 12,779,987 shares issued,
11,137,371 outstanding at June 30, 2006, and 12,127,626 shares issued, 10,623,015
outstanding at December 31, 2005

      128       121  

Additional paid in capital

      14,458       14,212  

Accumulated deficit

      (12,272 )     (12,511 )

Accumulated other comprehensive loss

      (12 )     (12 )

Less treasury stock; 1,642,616 shares at cost at June 30, 2006, and 1,504,611 shares at
cost At December 31, 2005

      (930 )     (854 )
                

Total stockholders’ equity

      1,372       956  
                

Total liabilities and stockholders’ equity

    $ 3,406     $ 2,795