Information Analysis Releases Third Quarter 2021 Results


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  

1 Please see non-GAAP reconciliation on page 7

Information Analysis Incorpora



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