Information Analysis Releases Third Quarter 2021 Results Highlighted by Continued Growth in Higher Margin Professional Fee Business

Gross Profit Improves 59.3% Versus the Prior Year Period

FAIRFAX, Va., Nov. 02, 2021 (GLOBE NEWSWIRE) -- Information Analysis Incorporated (OTCQB: IAIC) (“IAI”) today reported its results for the third quarter and nine months ended September 30, 2021, which were highlighted by continued expansion in professional fee revenues, significant gross profit growth, a private placement of IAI Common Stock and the appointment of Jamie Benoit as Chief Executive Officer and Tim Hannon as Interim Chief Financial Officer.

Third Quarter 2021 Financial Highlights (all comparisons to prior year period unless otherwise noted)

• Total revenues increased 9.6% to $4.3 million, compared with $3.9 million.
• Professional fees increased 77.0% to $2.8 million up from $1.6 million.
• Gross profit improved 59.3%, with gross margin expanding to 22.8%, compared with 15.7%; higher-margin professional fees accounted for 65.1% of revenues.
• Net loss of $(95,527), compared with net income of $214,703.
• Adjusted EBITDA¹ of $126 thousand, compared with $225 thousand.
  

Nine Months 2021 Financial Highlights (all comparisons to prior year period unless otherwise noted)

• Total revenues increased 15.2% to $12.5 million, compared with $10.8 million.
• Professional fees increased 155% to $8.6 million up from $3.4 million
• Gross profit expanded significantly, increasing to $3.0 million, or 23.7%, compared with $1.3 million, or 11.9%; higher-margin professional fees accounted for 68.8% of revenues.
• Net income of $218,445, compared with net income of $53,744.
• Adjusted EBITDA of $876 thousand, compared with $67 thousand.
  

IAI CEO Jamie Benoit commented, “I want to first thank everyone at IAI for the warm welcome when I joined the team just over two months ago. Since then, we have been hard at work building the foundation to support my growth vision for our company. We have a tremendous group and we are ready to seize the opportunity ahead of us.”

Mr. Benoit continued, “Our third quarter was highlighted by continued strong growth in professional fees. Driving our business mix to favor professional services is having a significant, positive effect on gross margins, with third quarter gross profit improving 59.3%, compared with last year’s third quarter. Our focus will continue to be on driving professional fee business, as the impact on margins is clear. Our bottom line was impacted by an increase in SG&A expense, some of which is non-recurring, resulting from investments to position the company for growth and the transformation we will outline in coming months.”

Mr. Benoit concluded, “When I joined the company in August, we noted our mission was to ‘aggressively strive to reposition the company as a disruptive technology and commercial enablement leader in government and global private sector verticals’. The first stage of this evolution has been establishing a proper foundation, from senior management down to the various systems and vendors on which our business relies. We raised just under $3 million at the end of August as a down-payment on our plan, with that capital going directly into the SG&A investments made during the third quarter. Although that expense impacted our bottom line, I am very pleased with our top-line growth and significant gross margin expansion.”

Total Revenues
Three and nine-month revenues continued to benefit from IAI’s SBA 7a modernization contract, which began in June 2020. The contract is expected to run through May 2027, providing a relatively stable level of professional fees revenues throughout its duration.

Total revenue was $4.3 million for the third quarter ended September 30, 2021, compared with $3.9 million in the prior year quarter. Professional fees increased $1.2 million, or 77.0%, while software sales revenue decreased by $0.8 million, or 35.9%. The decrease in software revenue in 2021 versus the same period in 2020 is due to the non-recurring nature of software sales transactions, as well as the timing of recurring orders.

Gross Profit / Margin
Gross profit increased $364,548, or 59.3%, to $978,875, in the third quarter of 2021 over the third quarter of 2020, due to the increase in the revenue generated from professional fees. Overall gross profit margin was 22.8% in 2021, up from 15.7% in 2020, due to the increase in professional fees revenue relative to software sales revenue. Gross profit percentage for professional fees in the third quarter of 2021 was 34.5%, while software sales contributed a gross profit percentage of 0.9%.

Income (Loss) from Operations
(Loss) from operations was $(84,267) in the third quarter of 2021 compared to income from operations of $214,906 in 2020.

About Information Analysis Incorporated
Information Analysis Incorporated (www.infoa.com), headquartered in Fairfax, Virginia, is an information technology product and services company. The Company is a software conversion specialist, modernizing legacy systems and securely extending their reach to the cloud and more modern platforms.

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-K for the fiscal year ended December 31, 2020 and in other filings with the Securities and Exchange Commission.

For additional information contact:
Jeremy Hellman, CFA
Vice President
The Equity Group
(212) 836-9626

Matt Sands, SVP & Corporate Controller
msands@infoa.com 
(703) 293-7925

Information Analysis Incorporated
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)

				Three months ended September 30,
					2021				2020
Revenues
	Professional fees			$	2,798,105			$	1,580,684
	Software sales				1,501,820				2,342,062
		Total revenues			4,299,925				3,922,746
Cost of revenues
	Cost of professional fees				1,832,812				1,051,102
	Cost of software sales				1,488,238				2,257,317
		Total cost of revenues			3,321,050				3,308,419
Gross profit					978,875				614,327
Selling, general and administrative expenses					1,000,880				342,778
Commissions expense					23,017				56,643
Acquisition costs					39,245				-
(Loss) income from operations					(84,267	)			214,906
Other expense, net					(11,260	)			(203	)
(Loss) income before provision for income taxes					(95,527	)			214,703
Provision for income taxes					-				-
Net (loss) income				$	(95,527	)		$	214,703
Comprehensive (loss) income				$	(95,527	)		$	214,703
Net (loss) income per common share - basic				$	(0.01	)		$	0.02
Net (loss) income per common share - diluted				$	(0.01	)		$	0.02
Weighted average common shares outstanding
	Basic				12,596,126				11,211,760
	Diluted				12,596,126				11,837,427

Information Analysis Incorporated
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)

				Nine months ended September 30,
					2021				2020
Revenues
	Professional fees			$	8,565,639			$	3,353,508
	Software sales				3,885,828				7,450,389
		Total revenues			12,451,467				10,803,897
Cost of revenues
	Cost of professional fees				5,698,407				2,232,405
	Cost of software sales				3,798,607				7,289,321
		Total cost of revenues			9,497,014				9,521,726
Gross profit					2,954,453				1,282,171
Selling, general and administrative expenses					2,346,680				1,049,761
Commissions expense					176,660				179,560
Acquisition costs					192,530				-
Income from operations					238,583				52,850
Other (expense) income, net					(20,138	)			894
Income before provision for income taxes					218,445				53,744
Provision for income taxes					-				-
Net income				$	218,445			$	53,744
Comprehensive income				$	218,445			$	53,744
Net income per common share - basic				$	0.02			$	-
Net income per common share - diluted				$	0.02			$	-
Weighted average common shares outstanding
	Basic				11,957,878				11,211,760
	Diluted				12,584,914				11,810,392

Information Analysis Incorporated
Condensed Consolidated Balance Sheets

			September 30, 2021				December 31, 2020
			(Unaudited)
		ASSETS
Current assets
	Cash and cash equivalents		$	3,682,613			$	1,858,160
	Accounts receivable			2,874,656				1,442,231
	Contract assets			-				-
	Prepaid expenses			283,567				142,770
	Other current assets			5,556				-
		Total current assets		6,846,392				3,443,161
Intangible assets, net of amortization of $87,912 and $0				1,402,088				-
Goodwill				785,000				-
Contract assets - non-current				-				210,688
Right-of-use operating lease asset				285,667				51,405
Property and equipment, net of accumulated depreciation
	and amortization of $324,442 and $312,320			94,965				62,166
Other assets				5,707				6,281
		Total assets	$	9,419,819			$	3,773,701
		LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable		$	926,643			$	103,646
	Revolving line of credit			402,306				-
	Notes payable - current			797,295				93,009
	Accrued payroll and related liabilities			555,483				375,168
	Commissions payable			236,438				181,626
	Other accrued liabilities			82,158				54,274
	Contract liabilities			78,045				946,884
	Operating lease liability - current			35,805				45,595
	Interest payable			2,666				3,125
		Total current liabilities		3,116,840				1,803,327
Note payable - non-current				400,856				356,991
Operating lease liability - non-current				260,141				-
		Total liabilities		3,777,836				2,160,318
Stockholders' equity
	Common stock, $0.01 par value, 30,000,000 shares authorized,
	15,153,306 and 12,904,376 shares issued, 13,510,690 and
	11,261,760 shares outstanding as of September 30, 2021,
	and December 31, 2020, respectively			151,532				129,043
	Additional paid-in capital			18,507,731				14,720,065
	Accumulated deficit			(12,087,069	)			(12,305,514	)
	Treasury stock, 1,642,616 shares at cost			(930,211	)			(930,211	)
		Total stockholders' equity		5,641,983				1,613,383
		Total liabilities and stockholders' equity	$	9,419,819			$	3,773,701

Non-GAAP Financial Measures
In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measure is Adjusted EBITDA, a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) plus depreciation and amortization expense, net interest expense (income), and taxes, as further adjusted to eliminate the impact of, when applicable, expenses that are unusual or non-recurring that we believe do not reflect our core operating results. and non-cash stock-based compensation. We believe that Adjusted EBITDA is meaningful to our investors to enhance their understanding of our financial performance for the current period and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. We understand that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA. Our calculation of Adjusted EBITDA, however, may not be comparable to similarly titled measures reported by other companies. When assessing our operating performance, investors and others should not consider this data in isolation or as a substitute for net income (loss) calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes. A reconciliation of net income (loss) to Adjusted EBITDA, the most comparable GAAP measure, is provided below.

We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as “backlog.” Backlog includes unexercised contract options.

Reconciliation of Net income (loss) to Adjusted EBITDA
	Three months ended										Nine months ended
	September 30,										September 30,
(in thousands)		2021					2020					2021					2020
Net income (loss)	$	(96	)			$	215				$	218				$	54
Adjustments:
Depreciation		11					4					23					7
Amortization		44					-					88					-
Interest expense (income), net		10					0					19					(1		)
Acquisition Costs		39					-					193					-
Non-cash stock-based compensation		81					6					220					7
Post-employment agreement		36					-					107					-
Moving expense		1					-					8					-
Taxes		-					-					-					-
Adjusted EBITDA	$	126				$	225				$	876				$	67

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¹ Please see non-GAAP reconciliation on page 7