PART I [Business](index=5&type=section&id=Item%201.%20Business) Information Analysis Incorporated specializes in developing and maintaining IT systems, modernizing legacy systems, and providing professional IT services to government and commercial clients - IAI's core business is modernizing IT systems for government and commercial entities, with a focus on legacy migration, web/mobile solutions, and data analytics[14](index=14&type=chunk) - The company is strategically expanding its service offerings to include high-growth areas such as cybersecurity, cloud services, artificial intelligence, and robotics process automation[14](index=14&type=chunk)[26](index=26&type=chunk) - IAI utilizes strategic alliances with technology leaders like Micro Focus (for legacy COBOL modernization) and Adobe (for web content management and forms) to enhance its service delivery[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) Contract Backlog as of December 31, 2020 | Category | Amount (USD) | | :--- | :--- | | Total Estimated Backlog (next 3 years) | ~$31.5 million | | Funded Backlog | $6.0 million | - As of December 31, 2020, the company employed **33 full-time** and **4 part-time** individuals, supplemented by **6 subcontractors**[40](index=40&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks primarily related to its heavy reliance on U.S. federal government contracts, which are subject to funding changes, budget shutdowns, and unfavorable contract terms - A primary risk is the company's dependence on the U.S. federal government as its largest customer, making it vulnerable to changes in government funding priorities, budget shutdowns, and contract terminations[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - The business is susceptible to technological obsolescence and must continually invest in new areas like cybersecurity, cloud services, and AI, with no guarantee of success or timely recovery of investments[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - IAI faces intense competition from larger companies with greater resources, and its profitability can be adversely affected by inaccurate cost estimations for contracts[55](index=55&type=chunk)[56](index=56&type=chunk) - The company's success is highly dependent on retaining key managerial and technical personnel in a competitive market[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - The global COVID-19 pandemic presents risks related to workforce availability, customer operations, and delays in securing new business[68](index=68&type=chunk)[69](index=69&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) The company's principal office is located at 11240 Waples Mill Road, Fairfax, VA 22030, where it leases 4,434 square feet, with the current lease expiring on June 30, 2021 - IAI leases **4,434 square feet** for its offices in Fairfax, VA, under a lease expiring June 30, 2021[76](index=76&type=chunk) [Legal Proceedings](index=14&type=section&id=Item%203.%20Legal%20Proceedings) As of the report date, Information Analysis Incorporated is not a party to any pending legal proceedings, and management is not aware of any contemplated or threatened legal actions against the company - There are no pending legal proceedings involving the company[77](index=77&type=chunk) [Mine Safety Disclosures](index=14&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[78](index=78&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=15&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the OTCQB market under the symbol IAIC, with 105 holders of record as of December 31, 2020, and no history or anticipation of cash dividends - The company's common stock began trading on the OTCQB market on January 15, 2021, under the symbol IAIC[80](index=80&type=chunk) Common Stock Price Range (High/Low Bid) | Quarter | 2020 | 2019 | | :--- | :--- | :--- | | Q1 | $0.25 / $0.09 | $0.26 / $0.20 | | Q2 | $0.24 / $0.10 | $0.23 / $0.18 | | Q3 | $0.87 / $0.13 | $0.20 / $0.17 | | Q4 | $1.63 / $0.59 | $0.17 / $0.08 | - IAI has never paid cash dividends and plans to retain future earnings for business development[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, IAI returned to profitability, driven by a **70% increase** in professional fees revenue, primarily from modernization services, resulting in a net income of **$413,000** and improved liquidity - The key factor for the 2020 return to profitability was a **70% increase** in professional fees revenue, largely from modernization services, after a major subcontract commenced following protest delays[87](index=87&type=chunk) Financial Performance Comparison (2020 vs. 2019) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $13.9M | $10.2M | +36.8% | | Professional Fees Revenue | $5.5M | $3.2M | +70.4% | | Software Sales Revenue | $8.4M | $6.9M | +21.0% | | Gross Profit | $2.2M | $1.4M | +57.8% | | Gross Margin | 15.9% | 13.8% | +2.1pp | | Net Income (Loss) | $413,000 | ($717,000) | +$1.1M | - Selling, General and Administrative (SG&A) expenses decreased by **$371,000** to **$1.5 million** in 2020, primarily due to lower non-billable labor costs compared to 2019 when staff was carried in anticipation of a delayed project[99](index=99&type=chunk) - The company's liquidity improved significantly, with cash and cash equivalents increasing by **$819,000** to **$1.9 million** at year-end, bolstered by operations and a **$450,000** PPP loan[91](index=91&type=chunk)[105](index=105&type=chunk) - IAI maintains a **$1 million** revolving line of credit, which was undrawn as of December 31, 2020, and the company was in compliance with all covenants[106](index=106&type=chunk) [Financial Statements and Supplementary Data](index=20&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited financial statements for the fiscal years ended December 31, 2020 and 2019, including the independent auditor's report and detailed financial statements Key Balance Sheet Data (As of Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,858,160 | $1,039,442 | | Total Current Assets | $3,443,161 | $2,208,317 | | Total Assets | $3,773,701 | $2,374,041 | | Total Current Liabilities | $1,803,327 | $1,166,070 | | Total Liabilities | $2,160,318 | $1,211,665 | | Total Stockholders' Equity | $1,613,383 | $1,162,376 | Key Income Statement Data (Year Ended Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total Revenues | $13,903,071 | $10,164,981 | | Gross Profit | $2,209,333 | $1,399,979 | | Income (Loss) from Operations | $411,848 | ($727,787) | | Net Income (Loss) | $413,379 | ($717,246) | | Diluted EPS | $0.03 | ($0.06) | Key Cash Flow Data (Year Ended Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net cash from operating activities | $423,265 | ($917,146) | | Net cash used in investing activities | ($64,547) | ($8,368) | | Net cash from financing activities | $460,000 | $1,000 | | Net increase (decrease) in cash | $818,718 | ($924,514) | - The independent auditor's report identifies the gross versus net recognition of sales of third-party software as a critical audit matter, involving significant management and auditor judgment[124](index=124&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=43&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) During the two fiscal years ending December 31, 2020, the company had no changes in its independent registered accountants and no disagreements with them on any accounting or financial disclosure matters - There were no disagreements with the company's independent registered accountants during the last two years[226](index=226&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures, as well as its internal control over financial reporting, were effective as of December 31, 2020, with no material changes during the fourth quarter - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were effective[227](index=227&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of December 31, 2020[230](index=230&type=chunk) [Other Information](index=44&type=section&id=Item%209B.%20Other%20Information) There is no other information to report for this period - None[233](index=233&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=44&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides biographical information for the company's six directors and two executive officers, including the CEO & President and CFO, and details the audit committee's composition and financial expert designation - The Board of Directors consists of six members: Jack L. Johnson, Jr., Mark T. Krial (Chairman), Charles A. May, Jr., William H. Pickle, Stanley A. Reese, and Bonnie K. Wachtel[235](index=235&type=chunk) - The executive officers are Stanley A. Reese (CEO and President) and Matthew T. Sands (CFO)[255](index=255&type=chunk) - The company has a standing audit committee with two members, and the Board has determined that Bonnie K. Wachtel qualifies as the 'audit committee financial expert'[262](index=262&type=chunk) [Executive Compensation](index=47&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2020 included base salary, discretionary bonuses, and option awards, with severance agreements in place for certain executives and an annual fee for non-employee directors 2020 Summary Compensation Table | Name and Principal Position (2020) | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Sandor Rosenberg (CEO) | 142,000 | -- | -- | 174,654 | | Stanley A. Reese (COO) | 161,875 | 10,000 | 37,000 | 230,852 | | Matthew T. Sands (Acting CFO) | 141,500 | 5,000 | 37,000 | 190,851 | - Stanley A. Reese and Matthew T. Sands have severance agreements providing for three months' base salary upon termination without cause, with Mr. Reese's agreement also providing for six months' salary in a change-of-control event[267](index=267&type=chunk)[268](index=268&type=chunk) - Non-employee directors were paid an annual fee of **$2,000** for their service in 2020[270](index=270&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=49&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 25, 2021, five beneficial owners held over **5%** of common stock, with Joseph P. Daly holding the largest share at **14.8%**, while all directors and executive officers collectively owned **9.1%** Security Ownership of >5% Beneficial Owners (as of March 25, 2021) | Name of Beneficial Owner | Percent of Class | | :--- | :--- | | Joseph P. Daly | 14.8% | | Palm Management (US) LLC | 9.3% | | Traditions LP | 8.9% | | Alan Gelband | 8.3% | | Estate of Barry T. Brooks | 6.5% | - All directors and executive officers as a group beneficially owned **1,108,800 shares**, representing **9.1%** of the class, including **840,000 shares** issuable from stock options[276](index=276&type=chunk) - As of March 15, 2021, under the company's equity compensation plans, there were **1,395,000 outstanding options** with a weighted-average exercise price of **$0.34**, and **369,000 securities** remaining available for future issuance[273](index=273&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=53&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company reported no related party transactions for the year ended December 31, 2020, and the Board determined that five of its members qualify as independent under NASDAQ Stock Market definitions - No related party transactions subject to reporting occurred during the fiscal year ended December 31, 2020[278](index=278&type=chunk)[279](index=279&type=chunk) - The Board has determined that five directors are independent: Mark T. Krial, Jack L. Johnson, Jr., Charles A. May, Jr., William H. Pickle, and Bonnie K. Wachtel[280](index=280&type=chunk) [Principal Accounting Fees and Services](index=53&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section details the fees paid to CohnReznick LLP for audit and tax services in 2020 and 2019, totaling **$99,777** and **$96,916** respectively, with all services pre-approved by the Audit Committee Fees Paid to CohnReznick LLP | Fee Category | 2020 Fees ($) | 2019 Fees ($) | | :--- | :--- | :--- | | Audit Fees | 95,145 | 92,284 | | Tax Fees | 4,632 | 4,632 | | All Other Fees | -- | -- | | **Total Fees** | **99,777** | **96,916** | - All audit and non-audit services provided by CohnReznick LLP in 2020 and 2019 were pre-approved by the Audit Committee[282](index=282&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=54&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements included in Item 8 and provides an index of all exhibits filed as part of this Annual Report on Form 10-K, including corporate governance documents and material contracts - This item provides a list of the financial statements presented in Item 8 and an index of all exhibits filed with the Form 10-K[284](index=284&type=chunk)[285](index=285&type=chunk) - Filed exhibits include key corporate documents, the 2016 Stock Incentive Plan, the line of credit agreement, and certifications required by the Sarbanes-Oxley Act[285](index=285&type=chunk)[286](index=286&type=chunk)

Revenue Performance - Revenue for Q3 2020 was $3,922,746, an increase of $740,149 or 23.3% compared to Q3 2019[78] - Revenue for the first nine months of 2020 was $10,803,897, an increase of $2,738,060 or 33.9% compared to $8,065,837 in the same period of 2019[85] Professional Fee and Software Revenue - Professional fee revenue increased by $692,022 or 77.9% to $1,580,684 in Q3 2020, driven by new contracts[78] - Professional fee revenue increased by $941,099 or 39.0% to $3,353,508 in 2020, while software revenue rose by $1,796,961 or 31.8% to $7,450,389[85] Gross Profit and Expenses - Gross profit for Q3 2020 was $614,328, representing 15.7% of revenue, up from 12.1% in Q3 2019[79] - Gross profit for the first nine months of 2020 was $1,282,171, representing 11.9% of revenue, down from 13.2% in 2019[86] - Selling, general and administrative expenses decreased by $124,889 or 26.7% to $342,778, representing 8.7% of revenues in Q3 2020[80][81] - Selling, general and administrative expenses decreased by $431,933 or 29.2% to $1,049,761, accounting for 9.7% of revenues in 2020[87] Net Income - Net income for Q3 2020 was $214,703, or 5.5% of revenue, compared to a net loss of ($179,224) in Q3 2019[83] - Net income for the nine months ended September 30, 2020, was $53,744, or 0.5% of revenue, compared to a net loss of ($578,679) or (7.2%) in 2019[89] Cash Flow and Financial Position - Net cash provided by operating activities was $38,569, with an overall increase in cash and cash equivalents of $429,929, totaling $1,469,371 at September 30, 2020[90] - The company received a Paycheck Protection Program loan of $450,000 to support employee payroll and benefits, with plans to apply for forgiveness[92] - The company has a revolving line of credit of up to $1,000,000, with no amounts outstanding as of September 30, 2020[91] - The company anticipates being able to meet its cash requirements for at least one year from the filing date of the Quarterly Report[93] Strategic Focus and Market Conditions - The company is refocusing its strategy to pursue targeted markets and explore growth through strategic acquisitions[69] - The commencement of delayed contracts, including a significant subcontract, positively impacted revenue and net income[84] - The company recognizes the urgent need for IT modernization in federal and state agencies due to challenges highlighted by the coronavirus pandemic[68] Revenue Concentration Risks - Prime contracts with U.S. government agencies generated 54.1% of revenue in Q3 2020, while subcontracts generated 44.8%[71] - One software sales contract accounted for 12.1% of total revenue in Q3 2020, highlighting revenue concentration risks[71] Internal Control - There were no changes in the company's internal control over financial reporting that materially affected its effectiveness during the quarter ended September 30, 2020[98]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-22405 Information Analysis Incorporated (Exact name of registrant as specified in its charter) Virginia 54-1167364 (State or oth ...

PART I. FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, and internal controls for the reporting period [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited financial statements for Q1 2020 reflect increased revenues, a reduced net loss, and a decrease in total assets, with a subsequent PPP loan receipt [Balance Sheets](index=4&type=section&id=Balance%20Sheets) As of March 31, 2020, total assets and liabilities decreased, primarily due to reduced cash and accounts payable, leading to a slight decline in stockholders' equity Balance Sheet Summary (as of March 31, 2020 vs. December 31, 2019) | Account | March 31, 2020 (Unaudited) (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $751,046 | $1,039,442 | | Total current assets | $1,637,435 | $2,208,317 | | **Total assets** | **$1,777,847** | **$2,374,041** | | Total current liabilities | $722,997 | $1,166,070 | | **Total liabilities** | **$741,360** | **$1,211,665** | | **Total stockholders' equity** | **$1,036,487** | **$1,162,376** | [Statements of Operations and Comprehensive Loss](index=5&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Loss) Total revenues significantly increased in Q1 2020, primarily from software sales, while gross profit declined, yet the net loss narrowed due to reduced SG&A expenses Statements of Operations (For the three months ended March 31) | Metric | 2020 (USD) | 2019 (USD) | | :--- | :--- | :--- | | Total revenues | $2,061,756 | $1,178,823 | | Gross profit | $278,827 | $322,839 | | Loss from operations | ($127,607) | ($193,559) | | **Net loss** | **($126,339)** | **($190,853)** | | Net loss per share (basic & diluted) | ($0.01) | ($0.02) | [Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows) Net cash used in operating activities increased in Q1 2020, primarily due to decreased accounts payable, resulting in a lower cash and cash equivalents balance Cash Flow Summary (For the three months ended March 31) | Metric | 2020 (USD) | 2019 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($288,396) | ($160,756) | | Net decrease in cash and cash equivalents | ($288,396) | ($160,756) | | Cash and cash equivalents, end of the period | $751,046 | $1,803,200 | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Financial%20Statements) The notes provide details on accounting policies, revenue disaggregation, lease obligations, stock incentive plans, and the subsequent receipt of a $450,000 PPP loan - The company's business involves modernizing information systems for government and commercial organizations, with a focus on **legacy system migration**, e-Forms, and custom software development, with customers primarily **U.S. federal and state government agencies**[16](index=16&type=chunk) Disaggregation of Revenue (Q1 2020 vs Q1 2019) | Contract Type | Q1 2020 Amount (USD) | Q1 2020 Percentage | Q1 2019 Amount (USD) | Q1 2019 Percentage | | :--- | :--- | :--- | :--- | :--- | | Services Time & Materials | $590,570 | 28.7% | $596,751 | 50.6% | | Third-Party Software | $1,004,305 | 48.7% | $267,292 | 22.7% | | Software Support & Maintenance | $212,568 | 10.3% | $149,289 | 12.7% | | **Total Revenue** | **$2,061,756** | | **$1,178,823** | | - Subsequent to the quarter end, the company received a **$450,000 Paycheck Protection Program (PPP) loan** on April 20, 2020, due to uncertainties from the COVID-19 pandemic, with a 1% interest rate and a two-year term, and potential for forgiveness[52](index=52&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a significant Q1 2020 revenue increase driven by software sales, a decline in gross margin, improved net loss, and strategic actions to manage liquidity and address concentration risks - The company's business strategy is to aggressively pursue markets for **legacy system modernization**, which has become more critical due to the COVID-19 pandemic's stress on existing systems in government, banking, and healthcare[60](index=60&type=chunk)[61](index=61&type=chunk) - The company faces significant customer and supplier concentration risk, with prime contracts with U.S. government agencies generating **73.2% of revenue** in Q1 2020, one subcontract accounting for **22.0%**, and sales related to one major software supplier accounting for **59.0% of total revenue**[63](index=63&type=chunk)[65](index=65&type=chunk) - The company's **$1M revolving line of credit expires on May 31, 2020**, and management is working with the lender to renew it, as failure to do so would impede working capital borrowing if needed[72](index=72&type=chunk) - Management anticipates that current cash, combined with cost reduction measures and the recent PPP loan, will be sufficient to meet cash requirements for at least one year from the filing date[76](index=76&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) Q1 2020 revenues significantly increased due to software sales, but gross profit declined, while reduced SG&A expenses contributed to a narrower net loss Revenue Comparison (Q1 2020 vs Q1 2019) | Revenue Type | Q1 2020 (USD) | Q1 2019 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Professional Fee Revenue | $844,403 | $762,118 | +10.8% | | Software Revenue | $1,217,353 | $416,705 | +192.1% | | **Total Revenue** | **$2,061,756** | **$1,178,823** | **+74.9%** | Gross Profit Comparison (Q1 2020 vs Q1 2019) | Metric | Q1 2020 (USD) | Q1 2019 (USD) | | :--- | :--- | :--- | | Gross Profit | $278,827 | $322,839 | | Gross Profit Margin | 13.5% | 27.4% | - Selling, general and administrative (SG&A) expenses decreased by **$144,639**, or **29.8%**, in Q1 2020 compared to Q1 2019, primarily due to lower overhead, administrative labor costs, and reduced legal and accounting fees[68](index=68&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash decreased in Q1 2020, but liquidity was bolstered by a $450,000 PPP loan and ongoing efforts to renew its $1 million line of credit - Cash and cash equivalents stood at **$751,000** at March 31, 2020, down from **$1.04 million** at the start of the quarter[71](index=71&type=chunk) - A material subcontract, delayed by a protest, is now expected to begin providing services late in Q2 or early Q3 2020, though the coronavirus pandemic is causing indirect delays[73](index=73&type=chunk) - The company applied for and received a **$450,000 Paycheck Protection Program (PPP) loan** on April 20, 2020, to support payroll and benefits amid liquidity constraints and COVID-19 uncertainty[75](index=75&type=chunk) [Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2020, the Chief Executive Officer and Acting Principal Financial Officer concluded that the company's disclosure controls and procedures are effective[80](index=80&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[81](index=81&type=chunk) PART II. OTHER INFORMATION This section provides disclosures on legal proceedings, risk factors, and other miscellaneous items not covered in the financial information [Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no material legal proceedings during the reporting period - None[84](index=84&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2019 - There have been no material changes from the risk factors described in the annual report on Form 10-K for the year ended December 31, 2019[85](index=85&type=chunk) [Other Items (2, 3, 4, 5, 6)](index=21&type=section&id=Other%20Items%20(2,%203,%204,%205,%206)) The company reported no unregistered equity sales, no defaults on senior securities, no other material disclosures, and included a list of exhibits - Item 2: No unregistered sales of equity securities[86](index=86&type=chunk) - Item 3: No defaults upon senior securities[87](index=87&type=chunk) - Item 6: A list of exhibits filed with the report is provided, including certifications and XBRL data files[89](index=89&type=chunk)[93](index=93&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 11240 Waples Mill Road Suite 201 Fairfax, Virginia 22030 (Address of principal executive of ices) (703) 383-3000 Registrant's telephone number, including area code ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-22405 Information Analysis Incorporated (Exact name of registrant as specified in its charter) Virginia 54-1167364 (State o ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-22405 Information Analysis Incorporated (Exact name of registrant as specified in its charter) Virginia 54-116 ...

Information Analysis Incorporated Form 10-Q First Quarter 2019 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-22405 Information Analysis Incorporated (Exact name of registrant as specifie ...

PART I [Business](index=5&type=section&id=Item%201.%20Business) Information Analysis Incorporated (IAI) specializes in IT systems development, modernization, and professional services for U.S. federal government agencies - IAI's primary business involves IT systems development, modernization, and professional services for government and commercial organizations, focusing on web/mobile solutions, data analytics, and legacy software migration[14](index=14&type=chunk) - The company distinguishes itself through expertise in complex web applications connected to legacy back-end systems, leveraging a strategic partnership with Adobe Systems for electronic forms solutions[15](index=15&type=chunk)[17](index=17&type=chunk)[25](index=25&type=chunk) - IAI's strategy includes capitalizing on its digital technology expertise, focusing on federal government clients, and forming alliances with larger IT consulting firms to pursue opportunities[24](index=24&type=chunk)[26](index=26&type=chunk)[35](index=35&type=chunk) Backlog as of December 31, 2018 | Category | Amount (USD) | | :--- | :--- | | Total Estimated Backlog | **$13.2 million** | | Funded Backlog | **$2.9 million** | - The company faces intense competition from hundreds of firms, many of which are larger, more established, and have greater financial resources[42](index=42&type=chunk)[43](index=43&type=chunk) - As of December 31, 2018, the company employed **21 full-time** and **3 part-time** individuals, supplemented by **8 individuals** through subcontractor relationships[47](index=47&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its heavy reliance on the U.S. federal government and intense market competition - A significant risk is the company's dependence on the U.S. federal government, making it vulnerable to changes in funding priorities, budget shutdowns, and unfavorable contract terms that allow termination for convenience[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Over half of the company's revenue is concentrated among a small number of contracts, making the loss of any key contract a material risk to revenue and operations[56](index=56&type=chunk) - The business is exposed to market risks such as the failure to adapt to a rapidly changing technological environment and intense competition from companies with greater resources[57](index=57&type=chunk)[58](index=58&type=chunk) - Operational risks include the potential for inaccurate cost and timeline estimates on contracts, which could adversely affect profitability, and non-performance by subcontractors[59](index=59&type=chunk)[60](index=60&type=chunk) - The company's future success is significantly dependent on the continued services of its key managerial and technical personnel[62](index=62&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) The company's principal office is located in Fairfax, Virginia, under a lease expiring on June 30, 2021 - The company leases **4,434 square feet** of office space at 11240 Waples Mill Road, Fairfax, VA 22030, with the lease expiring on June 30, 2021[70](index=70&type=chunk) [Legal Proceedings](index=14&type=section&id=Item%203.%20Legal%20Proceedings) Information Analysis Incorporated is not a party to any pending or threatened legal proceedings - There are no pending or, to the company's knowledge, threatened legal proceedings[71](index=71&type=chunk) [Mine Safety Disclosures](index=14&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[72](index=72&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=15&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the OTC Bulletin Board with low volume and no plans for future dividends - The company's common stock trades on the Over-the-Counter Bulletin Board under the symbol **IAIC**. The market is limited with historically low trading volume[74](index=74&type=chunk)[75](index=75&type=chunk) Quarterly Common Stock Price Range (2017-2018) | Quarter Ended | 2018 High | 2018 Low | 2017 High | 2017 Low | | :--- | :--- | :--- | :--- | :--- | | March 31 | **$0.50** | **$0.36** | **$0.26** | **$0.14** | | June 30 | **$0.47** | **$0.27** | **$0.35** | **$0.17** | | September 30 | **$0.36** | **$0.21** | **$0.30** | **$0.19** | | December 31 | **$0.27** | **$0.14** | **$0.42** | **$0.19** | - As of December 31, 2018, there were **104 holders of record** of the company's common stock[76](index=76&type=chunk) - The company has never paid cash dividends and anticipates retaining all future earnings to develop the business[77](index=77&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2018, the company incurred a net loss of **$51,000** due to decreased revenue and increased expenses [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Total revenue decreased by **16.0%** to **$8.93 million** in 2018, resulting in a net loss of **$51,000** Financial Performance Comparison (2018 vs. 2017) | Metric | 2018 | 2017 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | **$8.93M** | **$10.64M** | **($1.71M)** | **(16.0%)** | | Gross Profit | **$2.14M** | **$2.42M** | **($0.27M)** | **(11.3%)** | | (Loss) Income from Operations | **($62K)** | **$238K** | **($300K)** | **(126.2%)** | | Net (Loss) Income | **($51K)** | **$246K** | **($297K)** | **(120.7%)** | - The **$1.71 million** revenue decrease was driven by a **$612,000** drop in professional services fees and a **$1.10 million** decline in software sales[88](index=88&type=chunk) - Overall gross profit as a percentage of revenue increased to **24.0%** in 2018 from **22.7%** in 2017, primarily due to a better gross profit percentage on software sales (**2.9%** in 2018 vs **2.4%** in 2017)[89](index=89&type=chunk) - Selling, general and administrative expenses increased by **$72,000**, mainly due to higher non-billable labor costs, stock compensation costs, and costs related to bids and proposals[90](index=90&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by **$768,000** in 2018, ending at **$1.96 million** - Net cash used in operating and investing activities was **$768,000** in 2018, leading to a year-end cash and cash equivalents balance of **$1.96 million**, down from **$2.73 million** at the start of the year[97](index=97&type=chunk) - The company has a **$1,000,000** revolving line of credit that expires on May 31, 2020, with no amounts outstanding as of December 31, 2018[98](index=98&type=chunk) - Management anticipates that the current cash position and operating plan will be sufficient to meet cash requirements for more than twelve months from the filing date[99](index=99&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Revenue recognition is a critical accounting policy, with ASC 606 adoption having no material impact - Revenue recognition is considered a critical accounting policy, requiring subjective judgments and estimates that can significantly impact financial results[104](index=104&type=chunk) - The company adopted **ASC 606** (Revenue from Contracts with Customers) on January 1, 2018, with no material impact on its revenue recognition policies or financial statements[105](index=105&type=chunk)[127](index=127&type=chunk) [Financial Statements and Supplementary Data](index=20&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited financial statements for 2018 and 2017, along with explanatory notes [Financial Statements](index=21&type=section&id=Financial%20Statements) Total assets decreased to **$3.02 million** in 2018, with a net loss of **$51,034** and negative operating cash flow Balance Sheet Summary (as of Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Total Current Assets | **$3,010,328** | **$3,717,569** | | Total Assets | **$3,023,756** | **$3,734,983** | | Total Liabilities | **$1,151,165** | **$1,840,958** | | Total Stockholders' Equity | **$1,872,591** | **$1,894,025** | Statement of Operations Summary (for year ended Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Total Revenues | **$8,933,775** | **$10,640,603** | | Gross Profit | **$2,142,838** | **$2,415,429** | | (Loss) Income from Operations | **($62,345)** | **$237,774** | | Net (Loss) Income | **($51,034)** | **$246,462** | | Diluted (Loss) Earnings Per Share | **$0.00** | **$0.02** | [Notes to Financial Statements](index=26&type=section&id=Notes%20to%20Financial%20Statements) Notes detail significant customer concentration, net operating loss carryforwards, and stock incentive plans - In 2018, prime contracts with U.S. government agencies represented **68.8%** of revenue, and subcontracts under federal procurements represented **26.5%**[140](index=140&type=chunk) - Sales of third-party software and maintenance from one major supplier accounted for **50.0%** of total revenue in 2018 and **52.7%** in 2017[142](index=142&type=chunk) - The company has net operating loss carryforwards of approximately **$7.4 million**, which expire between 2019 and 2036, with a full valuation allowance recorded against related deferred tax assets[178](index=178&type=chunk) Stock Option Status (as of Dec 31, 2018) | Category | Shares | Weighted Avg. Exercise Price | | :--- | :--- | :--- | | Outstanding | **1,376,500** | **$0.23** | | Exercisable | **1,228,000** | **$0.21** | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosures](index=39&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) No changes or disagreements with independent registered accountants have occurred in the last two fiscal years - There have been no changes in or disagreements with the company's independent registered accountants during the last two years[194](index=194&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Management concluded that as of the end of the period, the company's disclosure controls and procedures were effective[195](index=195&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018[198](index=198&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of 2018 that have materially affected, or are reasonably likely to affect, these controls[196](index=196&type=chunk) [Other Information](index=39&type=section&id=Item%209B.%20Other%20Information) There is no other information to be reported in this section - None[201](index=201&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Compensation, and Related Matters](index=40&type=section&id=Item%2010-14) Information for these items is incorporated by reference from the company's 2019 Annual Meeting Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's Definitive Proxy Statement for the 2019 Annual Meeting of Stockholders[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=41&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and provides an index of all exhibits filed with the Form 10-K - This section provides a list of the financial statements included in the report and an index of all exhibits filed concurrently[206](index=206&type=chunk)[214](index=214&type=chunk)