Exhibit 99.2

 

 

Information Analysis Incorporated

Unaudited Pro Forma Condensed Combined Financial Information

 

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 and the unaudited pro forma condensed combined statements of operations for each of the three months ended March 31, 2021 and for the year ended December 31, 2020 combine the financial statements of Information Analysis Incorporated (“IAI”) and Tellenger, Inc. (“Tellenger”) giving effect to the transaction described in the Stock Purchase Agreement, as if they had occurred on January 1, 2020 in respect of the unaudited pro forma condensed combined statements of operations and on March 31, 2021 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with:

 

 

●

IAI’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2020, as contained in the Form 10-K filed on March 31, 2020 with the United States Securities and Exchange Commission (the “SEC”).
 

●

IAI’s unaudited condensed consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2020, as contained in its Quarterly Report on Form 10-Q filed on May 14, 2020 with the SEC.
 

●

Tellenger’s audited financial statements as of and for the year ended December 31, 2020, contained elsewhere herein.
 

●

Tellenger’s unaudited financial statements as of and for the three months ended March 31, 2021, contained elsewhere herein.
 

●

the other information contained in or incorporated by reference into this filing.

 

The final purchase consideration and the allocation of the purchase consideration may materially differ from that reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized.

 

The unaudited pro forma adjustments give effect to events that are directly attributable to the transaction and are based on available data and certain assumptions that management believes are factually supportable. In addition, with respect to the unaudited condensed combined statements of operations, the unaudited pro forma adjustments are expected to have a continuing impact on the combined results.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and to aid you in your analysis of the financial aspects of the acquisition. The unaudited pro forma condensed combined financial information described above has been derived from the historical financial statements of IAI and Tellenger and the related notes included elsewhere in this Form 8-K. The unaudited pro forma condensed combined financial information is based on IAI’s accounting policies. Further review may identify additional differences between the accounting policies of IAI and Tellenger. The unaudited pro forma adjustments and the pro forma condensed combined financial information don’t reflect the impact of synergies or post-transaction management actions and are not necessarily indicative of the financial position or results of operations that may have actually occurred had the transaction taken place on the dates noted, or of IAI’s future financial position or operating results.

 

 
 

 

Information Analysis Incorporated

Unaudited Pro Forma Combined Balance Sheet
March 31, 2021

 

   

Information

                            
   

Analysis

            

Pro Forma

      

Pro Forma

  
   

Incorporated

    

Tellenger, Inc.

    

Adjustments

      

Combined

  

ASSETS

                                  

Current Assets

                                  

Cash and cash equivalents

   $ 3,015,943     $ 251,609     $ (251,609 )

A

   $ 934,486  
                      (2,312,930 )

B

        
                      231,473  

C

        

Accounts receivable

     1,185,963       563,853       (563,853 )

A

     1,739,296  
                      553,333  

C

        

Prepaid expenses and other current assets

     106,294       14,530       (14,530 )

A

     111,999  
                      5,705  

C

        

Total current assets

     4,308,200       829,992       (2,352,411 )       2,785,781  
                                   

Intangible assets and goodwill

     -       -       2,305,143  

C

     2,086,351  
                      (218,792 )

D

        

Contract assets

     342,631       -       -         342,631  

Property & equipment, net

     61,395       -       -         61,395  

Right-of-use operating lease asset

     25,911       -       -         25,911  

Other assets

     -       -       -         -  

Total Assets

   $ 4,738,137     $ 829,992     $ (266,060 )     $ 5,302,069  
                                   

LIABILITIES AND STOCKHOLDERS' EQUITY

                                  

Current liabilities

                                  

Accounts payable

   $ 192,213     $ 284,667     $ (284,667 )

A

   $ 476,128  
                      283,915  

C

        

Revolving line of credit

     500,000       -       -         500,000  

Contract liabilities

     455,496       -       -         455,496  

Accrued payroll and related liabilities

     421,183       120,937       (120,937 )

A

     541,350  
                      120,167  

C

        

Commissions payable

     276,794       -       -         276,794  

Note payable - Tellenger purchase

     -       -       150,000  

C

     150,000  

Note payable - current portion

     149,001       -       -         149,001  

Liability - joint venture

     -       28,642       (28,642 )

A

     28,642  
                      28,642  

C

        

Operating lease liability current

     18,363       -       -         18,363  

Other accrued liabilities

     8,047       -       -         8,047  

Interest payable

     4,583       -       -         4,583  

Total current liabilities

     2,025,680       434,246       148,478         2,608,404  
                                   

Note payable - non-current portion

     300,999                         300,999  

Total liabilities

     2,326,679       434,246       148,478         2,909,403  
                                   

Stockholders' equity

                                  

Common stock

     132,599       200       (200 )

A

     133,282  
                      683  

E

        

Additional paid-in capital

     15,243,769       28,079       (28,079 )

A

     15,443,086  
                      199,317  

E

        

Retained Earnings (accumulated deficit)

     (12,034,699 )     367,467       (367,467 )

A

     (12,253,491 )
                      (218,792 )

D

        

Treasury stock

     (930,211 )     -       -         (930,211 )

Total stockholders' equity

     2,411,458       395,746       (414,538 )       2,392,666  
                                   

Total liabilities and stockholders' equity

   $ 4,738,137     $ 829,992     $ (266,060 )     $ 5,302,069  

 

See notes to the unaudited pro forma condensed combined financial information.

 

 
 

 

Information Analysis Incorporated

Unaudited Pro Forma Combined Statement of Operations

Three months ended March 31, 2021

 

   

Information

                            
   

Analysis

            

Pro Forma

      

Pro Forma

  
   

Incorporated

    

Tellenger, Inc.

    

Adjustments

      

Combined

  
                                   

Revenues

                                  

Professional fees/ consulting revenue

   $ 2,439,259     $ 1,157,825     $ -       $ 3,597,084  

Software sales

     980,321               -         980,321  

Total revenues

     3,419,580       1,157,825       -         4,577,405  
                                   

Cost of revenues

                                  

Cost of professional fees/ consulting revenue

     1,467,699       952,863       -         2,420,562  

Cost of software sales

     932,231               -         932,231  

Total cost of revenues

     2,399,930       952,863       -         3,352,793  
                                   

Gross profit

     1,019,650       204,962       -         1,224,612  
                                   

Selling, general and administrative expenses

     545,663       102,484       43,758  

D

     691,905  

Commissions expense

     134,587               -         134,587  

Acquisition costs

     70,530       -       -         70,530  
                                   

Income from operations

     268,870       102,478       (43,758 )       327,590  
                                   

Other income, net

     1,945       86                 2,031  
                                   

Income before provision for income taxes

     270,815       102,564       (43,758 )       329,621  
                                   

Provision for income taxes

     -       -       -         -  
                                   

Net income

   $ 270,815     $ 102,564     $ (43,758 )     $ 329,621  
                                   

Comprehensive Income

   $ 270,815     $ 102,564     $ (43,758 )     $ 329,621  
                                   

Net income per share:

                                  

Basic

   $ 0.02                       $ 0.03  

Diluted

   $ 0.02                       $ 0.03  
                                   

Weighted average number of shares outatanding:

                            

Basic

     11,282,671               68,264         11,350,935  

Diluted

     12,286,216               68,264         12,354,480  

 

See notes to the unaudited pro forma condensed combined financial information.

 

 
 

 

Information Analysis Incorporated

Unaudited Pro Forma Combined Statement of Operations

Year ended December 31, 2020

 

   

Information

                            
   

Analysis

            

Pro Forma

      

Pro Forma

  
   

Incorporated

    

Tellenger, Inc.

    

Adjustments

      

Combined

  
                                   

Revenues

                                  

Professional fees/ consulting revenue

   $ 5,527,139     $ 4,449,113     $ -       $ 9,976,252  

Software sales

     8,375,932               -         8,375,932  

Total revenues

     13,903,071       4,449,113       -         18,352,184  
                                   

Cost of revenues

                                  

Cost of professional fees/ consulting revenue

     3,566,229       3,608,613       -         7,174,842  

Cost of software sales

     8,127,509               -         8,127,509  

Total cost of revenues

     11,693,738       3,608,613       -         15,302,351  
                                   

Gross profit

     2,209,333       840,500       -         3,049,833  
                                   

Selling, general and administrative expenses

     1,504,077       669,728       173,159  

D

     2,346,964  

Commissions expense

     293,408               -         293,408  
                                   

Income from operations

     411,848       170,772       (173,159 )       409,461  
                                   

Other income, net

     1,531       10,020                 11,551  
                                   

Income before provision for income taxes

     413,379       180,792       (173,159 )       421,012  
                                   

Provision for income taxes

     -       -       -         -  
                                   

Net income

   $ 413,379     $ 180,792     $ (173,159 )     $ 421,012  
                                   

Comprehensive income

   $ 413,379     $ 180,792     $ (173,159 )     $ 421,012  
                                   

Net income per share:

                                  

Basic

   $ 0.04                       $ 0.04  

Diluted

   $ 0.03                       $ 0.03  
                                   

Weighted average number of shares outatanding

                                  

Basic

     11,222,826               68,264         11,291,090  

Diluted

     12,049,322               68,264         12,117,586  

 

See notes to the unaudited pro forma condensed combined financial information.

 

 
 

 

Information Analysis Incorporated

Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

Note 1. Basis of Presentation

 

The unaudited pro forma condensed combined financial information set forth herein is based upon the consolidated financial statements of Information Analysis Incorporated (“IAI”) and Tellenger, Inc. (“Tellenger”). The unaudited pro forma condensed combined financial information is presented as if the transaction had been completed on January 1, 2020 with respect to the unaudited pro forma condensed combined statements of operations for each of the three months ended March 31, 2021 and for the year ended December 31, 2020 and on March 31, 2021 in respect of the unaudited pro forma condensed combined balance sheet.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations had the transaction occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined company will experience after the completion of the transactions.

 

We have accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of accounting, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

 

Pro forma adjustments reflected in the unaudited pro forma condensed combined balance sheet are based on items that are factually supportable and directly attributable to the transaction. Pro forma adjustments reflected in the pro forma condensed combined statements of operations are based on items that are factually supportable, directly attributable to the transaction and expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from the transaction, including potential synergies that may be generated in future periods.

 

Note 2. Description of the Transaction

 

On April 7, 2021, Information Analysis Incorporated executed and closed upon a Stock Purchase Agreement to which the Company, Tellenger, Inc. and David and Heather Tortorelli are parties. Under this Stock Purchase Agreement, IAI purchased all of the issued and outstanding shares of Tellenger. The purchase price for the acquisition was $2,300,000 and 68,264 shares of the Company’s common stock, par value $0.01.

 

Note 3. Purchase Price Allocation

 

The fair value of the consideration transferred was valued as of the date of the acquisition as follows:

 

Tellenger, Inc. Purchase Price Allocation

 

Cash

     2,300,000  

Common stock

     200,000  

Working capital adjustment

     11,430  

Other non-interest-bearing liabilities assumed

     432,724  

Other consideration

     1,500  

Total purchase consideration

     2,945,654  

 

 
 

 

The preliminary allocation for the consideration recorded for the acquisition is as follows:

 

Current assets

     640,512  

Intangible assets and goodwill

     2,305,143  

Total purchase consideration

     2,945,654  

 

The purchase price allocation is preliminary. The purchase price allocation will continue to be preliminary until a third-party valuation is finalized and the fair value and useful life of the assets acquired is determined. The amounts from the final valuation may significantly differ from the preliminary allocation.

 

Note 4. Pro Forma Adjustments

 

The following pro forma adjustments give effect to the transaction.

 

Unaudited Pro Forma Condensed Combined Balance Sheet – As of March 31, 2021

 

Note A

To remove Tellenger, Inc. assets, liabilities, and equity.

Note B

To record cash consideration paid.

Note C

To record assets acquired and liabilities assumed from Tellenger, Inc.

Note D

To record depreciation/ amortization accumulation and effect on retained earnings (accumulated deficit).

Note E

To record common stock issued as consideration.

 

Unaudited Pro Forma Condensed Combined Statement of Operations – For The Three Months Ended March 31, 2021

 

Note D

To record depreciation/ amortization expense.

 

Unaudited Pro Forma Condensed Combined Statement of Operations – For The Year Ended December 31, 2020

 

Note D

To record depreciation /amortization expense.