Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - INFORMATION ANALYSIS INC | iaic20210623_8ka.htm |
| EX-99.1 - EXHIBIT 99.1 - INFORMATION ANALYSIS INC | ex_259458.htm |
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:
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● |
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”). |
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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. |
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Tellenger’s audited financial statements as of and for the year ended December 31, 2020, contained elsewhere herein. |
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Tellenger’s unaudited financial statements as of and for the three months ended March 31, 2021, contained elsewhere herein. |
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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.
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Information Analysis Incorporated |
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Unaudited Pro Forma Combined Balance Sheet |
| March 31, 2021 |
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Information |
|||||||||||||||||
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Analysis |
Pro Forma |
Pro Forma |
|||||||||||||||
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Incorporated |
Tellenger, Inc. |
Adjustments |
Combined |
||||||||||||||
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ASSETS |
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Current Assets |
|||||||||||||||||
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Cash and cash equivalents |
$ | 3,015,943 | $ | 251,609 | $ | (251,609 | ) |
A |
$ | 934,486 | |||||||
| (2,312,930 | ) |
B |
|||||||||||||||
| 231,473 |
C |
||||||||||||||||
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Accounts receivable |
1,185,963 | 563,853 | (563,853 | ) |
A |
1,739,296 | |||||||||||
| 553,333 |
C |
||||||||||||||||
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Prepaid expenses and other current assets |
106,294 | 14,530 | (14,530 | ) |
A |
111,999 | |||||||||||
| 5,705 |
C |
||||||||||||||||
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Total current assets |
4,308,200 | 829,992 | (2,352,411 | ) | 2,785,781 | ||||||||||||
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Intangible assets and goodwill |
- | - | 2,305,143 |
C |
2,086,351 | ||||||||||||
| (218,792 | ) |
D |
|||||||||||||||
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Contract assets |
342,631 | - | - | 342,631 | |||||||||||||
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Property & equipment, net |
61,395 | - | - | 61,395 | |||||||||||||
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Right-of-use operating lease asset |
25,911 | - | - | 25,911 | |||||||||||||
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Other assets |
- | - | - | - | |||||||||||||
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Total Assets |
$ | 4,738,137 | $ | 829,992 | $ | (266,060 | ) | $ | 5,302,069 | ||||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
$ | 192,213 | $ | 284,667 | $ | (284,667 | ) |
A |
$ | 476,128 | |||||||
| 283,915 |
C |
||||||||||||||||
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Revolving line of credit |
500,000 | - | - | 500,000 | |||||||||||||
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Contract liabilities |
455,496 | - | - | 455,496 | |||||||||||||
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Accrued payroll and related liabilities |
421,183 | 120,937 | (120,937 | ) |
A |
541,350 | |||||||||||
| 120,167 |
C |
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Commissions payable |
276,794 | - | - | 276,794 | |||||||||||||
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Note payable - Tellenger purchase |
- | - | 150,000 |
C |
150,000 | ||||||||||||
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Note payable - current portion |
149,001 | - | - | 149,001 | |||||||||||||
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Liability - joint venture |
- | 28,642 | (28,642 | ) |
A |
28,642 | |||||||||||
| 28,642 |
C |
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Operating lease liability current |
18,363 | - | - | 18,363 | |||||||||||||
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Other accrued liabilities |
8,047 | - | - | 8,047 | |||||||||||||
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Interest payable |
4,583 | - | - | 4,583 | |||||||||||||
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Total current liabilities |
2,025,680 | 434,246 | 148,478 | 2,608,404 | |||||||||||||
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Note payable - non-current portion |
300,999 | 300,999 | |||||||||||||||
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Total liabilities |
2,326,679 | 434,246 | 148,478 | 2,909,403 | |||||||||||||
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Stockholders' equity |
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Common stock |
132,599 | 200 | (200 | ) |
A |
133,282 | |||||||||||
| 683 |
E |
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Additional paid-in capital |
15,243,769 | 28,079 | (28,079 | ) |
A |
15,443,086 | |||||||||||
| 199,317 |
E |
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Retained Earnings (accumulated deficit) |
(12,034,699 | ) | 367,467 | (367,467 | ) |
A |
(12,253,491 | ) | |||||||||
| (218,792 | ) |
D |
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Treasury stock |
(930,211 | ) | - | - | (930,211 | ) | |||||||||||
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Total stockholders' equity |
2,411,458 | 395,746 | (414,538 | ) | 2,392,666 | ||||||||||||
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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.
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Information Analysis Incorporated |
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Unaudited Pro Forma Combined Statement of Operations |
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Three months ended March 31, 2021 |
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Information |
|||||||||||||||||
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Analysis |
Pro Forma |
Pro Forma |
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Incorporated |
Tellenger, Inc. |
Adjustments |
Combined |
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Revenues |
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Professional fees/ consulting revenue |
$ | 2,439,259 | $ | 1,157,825 | $ | - | $ | 3,597,084 | |||||||||
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Software sales |
980,321 | - | 980,321 | ||||||||||||||
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Total revenues |
3,419,580 | 1,157,825 | - | 4,577,405 | |||||||||||||
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Cost of revenues |
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Cost of professional fees/ consulting revenue |
1,467,699 | 952,863 | - | 2,420,562 | |||||||||||||
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Cost of software sales |
932,231 | - | 932,231 | ||||||||||||||
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Total cost of revenues |
2,399,930 | 952,863 | - | 3,352,793 | |||||||||||||
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Gross profit |
1,019,650 | 204,962 | - | 1,224,612 | |||||||||||||
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Selling, general and administrative expenses |
545,663 | 102,484 | 43,758 |
D |
691,905 | ||||||||||||
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Commissions expense |
134,587 | - | 134,587 | ||||||||||||||
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Acquisition costs |
70,530 | - | - | 70,530 | |||||||||||||
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Income from operations |
268,870 | 102,478 | (43,758 | ) | 327,590 | ||||||||||||
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Other income, net |
1,945 | 86 | 2,031 | ||||||||||||||
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Income before provision for income taxes |
270,815 | 102,564 | (43,758 | ) | 329,621 | ||||||||||||
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Provision for income taxes |
- | - | - | - | |||||||||||||
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Net income |
$ | 270,815 | $ | 102,564 | $ | (43,758 | ) | $ | 329,621 | ||||||||
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Comprehensive Income |
$ | 270,815 | $ | 102,564 | $ | (43,758 | ) | $ | 329,621 | ||||||||
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Net income per share: |
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Basic |
$ | 0.02 | $ | 0.03 | |||||||||||||
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Diluted |
$ | 0.02 | $ | 0.03 | |||||||||||||
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Weighted average number of shares outatanding: |
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Basic |
11,282,671 | 68,264 | 11,350,935 | ||||||||||||||
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Diluted |
12,286,216 | 68,264 | 12,354,480 | ||||||||||||||
See notes to the unaudited pro forma condensed combined financial information.
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Information Analysis Incorporated |
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Unaudited Pro Forma Combined Statement of Operations |
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Year ended December 31, 2020 |
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Information |
|||||||||||||||||
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Analysis |
Pro Forma |
Pro Forma |
|||||||||||||||
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Incorporated |
Tellenger, Inc. |
Adjustments |
Combined |
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Revenues |
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Professional fees/ consulting revenue |
$ | 5,527,139 | $ | 4,449,113 | $ | - | $ | 9,976,252 | |||||||||
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Software sales |
8,375,932 | - | 8,375,932 | ||||||||||||||
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Total revenues |
13,903,071 | 4,449,113 | - | 18,352,184 | |||||||||||||
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Cost of revenues |
|||||||||||||||||
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Cost of professional fees/ consulting revenue |
3,566,229 | 3,608,613 | - | 7,174,842 | |||||||||||||
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Cost of software sales |
8,127,509 | - | 8,127,509 | ||||||||||||||
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Total cost of revenues |
11,693,738 | 3,608,613 | - | 15,302,351 | |||||||||||||
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Gross profit |
2,209,333 | 840,500 | - | 3,049,833 | |||||||||||||
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Selling, general and administrative expenses |
1,504,077 | 669,728 | 173,159 |
D |
2,346,964 | ||||||||||||
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Commissions expense |
293,408 | - | 293,408 | ||||||||||||||
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Income from operations |
411,848 | 170,772 | (173,159 | ) | 409,461 | ||||||||||||
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Other income, net |
1,531 | 10,020 | 11,551 | ||||||||||||||
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Income before provision for income taxes |
413,379 | 180,792 | (173,159 | ) | 421,012 | ||||||||||||
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Provision for income taxes |
- | - | - | - | |||||||||||||
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Net income |
$ | 413,379 | $ | 180,792 | $ | (173,159 | ) | $ | 421,012 | ||||||||
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Comprehensive income |
$ | 413,379 | $ | 180,792 | $ | (173,159 | ) | $ | 421,012 | ||||||||
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Net income per share: |
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Basic |
$ | 0.04 | $ | 0.04 | |||||||||||||
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Diluted |
$ | 0.03 | $ | 0.03 | |||||||||||||
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Weighted average number of shares outatanding |
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Basic |
11,222,826 | 68,264 | 11,291,090 | ||||||||||||||
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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
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Cash |
2,300,000 | |||
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Common stock |
200,000 | |||
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Working capital adjustment |
11,430 | |||
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Other non-interest-bearing liabilities assumed |
432,724 | |||
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Other consideration |
1,500 | |||
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Total purchase consideration |
2,945,654 |
The preliminary allocation for the consideration recorded for the acquisition is as follows:
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Current assets |
640,512 | |||
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Intangible assets and goodwill |
2,305,143 | |||
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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
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Note A |
To remove Tellenger, Inc. assets, liabilities, and equity. |
|
Note B |
To record cash consideration paid. |
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Note C |
To record assets acquired and liabilities assumed from Tellenger, Inc. |
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Note D |
To record depreciation/ amortization accumulation and effect on retained earnings (accumulated deficit). |
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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
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Note D |
To record depreciation/ amortization expense. |
Unaudited Pro Forma Condensed Combined Statement of Operations – For The Year Ended December 31, 2020
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Note D |
To record depreciation /amortization expense. |