Exhibit 99.1

 

     

For additional information contact:

     

Richard S. DeRose (703) 293-7901

     

For release:

     

November 9, 2006

Information Analysis Inc. Reports Third Quarter Results

FAIRFAX, VIRGINIA – Information Analysis Inc. (IAIC:OTCBB) today reported results for its third fiscal quarter ended September 30, 2006. Revenues were $2,574,000, compared to $2,629,000 reported in the third quarter 2005. The information technology services company reported net income of $157,000, or $0.01 per share basic and diluted, compared to net income of $251,000 or $0.02 per share basic and diluted, in the third quarter 2005.

For the nine months ended September 30, 2006, IAI’s revenues were $7,457,000, compared to revenues of $7,822,000 for the same period in 2005. The Company reported net income of $396,000, or $0.04 per share basic and $0.03 per share diluted, compared to net income of $471,000, or $0.05 per share basic and $0.04 per share diluted, reported for the comparable 2005 period.

“Our third quarter revenue was essentially the same as this year’s second quarter. Some of the business that we expected during this quarter came in late in the quarter and we expect to derive revenue from these contracts during the fourth quarter and into 2007,” 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 the fourth quarter. This should give the company impetus to increase revenue in 2007.

“Since we engaged an advisory firm in July, our M&A activities have increased significantly.”

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, 2005 and in other filings with the Securities and Exchange Commission.

 

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Information Analysis Reports Third Quarter Results

November 9, 2006

Page 2 of 4

 

Information Analysis Incorporated

Statements of Operations

 

    

Three months ended

September 30,

 
(in thousands, except per share data; unaudited)    2006    2005  

Revenue:

     

Professional fees

   $ 2,180    $ 2,371  

Software sales

     394      258  
               

Total revenue

     2,574      2,629  

Cost of goods sold and services provided:

     

Cost of professional fees

     1,626      1,753  

Cost of software sales

     183      208  
               

Total cost of sales

     1,809      1,961  
               

Gross margin

     765      668  

Selling, general and administrative expense

     610      413  
               

Operating income

     155      255  

Other income (expense)

     2      (4 )
               

Income before income taxes

     157      251  

Provision for income taxes

     —        —    
               

Net income

   $ 157    $ 251  
               

Earnings per share:

     

Basic

   $ 0.01    $ 0.02  

Diluted

   $ 0.01    $ 0.02  

Shares used in calculating earnings per share:

     

Basic

     11,137,371      10,301,494  

Diluted

     11,478,082      10,655,071  

 

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Information Analysis Reports Third Quarter Results

November 9, 2006

Page 3 of 4

 

Information Analysis Incorporated

Statements of Operations

 

    

Nine months ended

September 30,

 
(in thousands, except per share data; unaudited)    2006    2005  

Revenue:

     

Professional fees

   $ 6,675    $ 6,858  

Software sales

     782      964  
               

Total revenue

     7,457      7,822  

Cost of goods sold and services provided:

     

Cost of professional fees

     5,080      5,272  

Cost of software sales

     478      813  
               

Total cost of sales

     5,558      6,085  
               

Gross margin

     1,899      1,737  

Selling, general and administrative expense

     1,508      1,253  
               

Operating income

     391      484  

Other income (expense)

     5      (13 )
               

Income before income taxes

     396      471  

Provision for income taxes

     —        —    
               

Net income

   $ 396    $ 471  
               

Earnings per share:

     

Basic

   $ 0.04    $ 0.05  

Diluted

   $ 0.03    $ 0.04  

Shares used in calculating earnings per share:

     

Basic

     10,973,470      10,293,910  

Diluted

     11,436,461      10,687,084  

 

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Information Analysis Reports Third Quarter Results

November 9, 2006

Page 4 of 4

 

Information Analysis Incorporated

Balance Sheets

 

     As of
September 30, 2006
    As of
December 31, 2005
 
(in thousands)    (unaudited)     (audited)  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 477     $ 452  

Accounts receivable, net

     2,096       1,994  

Prepaid expenses

     422       183  

Notes receivable

     113       85  

Other assets

     12       —    

Other receivables

     6       15  
                

Total current assets

     3,126       2,729  

Fixed assets, net

     56       57  

Other assets

     2       9  
                

Total assets

   $ 3,184     $ 2,795  
                

LIABILITIES & STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 944     $ 1,175  

Deferred revenue

     371       214  

Accrued payroll and related payroll items

     249       321  

Other accrued liabilities

     72       125  

Income taxes payable

     —         4  
                

Total current liabilities

     1,636       1,839  
                

Total liabilities

     1,636       1,839  
                

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

     128       121  

Additional paid in capital

     14,478       14,212  

Accumulated deficit

     (12,115 )     (12,511 )

Accumulated other comprehensive income

     (12 )     (12 )

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

     (931 )     (854 )
                

Total stockholders’ equity

     1,548       956  
                

Total liabilities and stockholders’ equity

   $ 3,184     $ 2,795  
                

 

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