DEF 14A 1 ddef14a.txt NOTICE AND PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12 Information Analysis Incorporated ------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) ------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: ------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------- 5) Total fee paid: ------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing: 1) Amount previously paid: ------------------------------------------------------------- 2) Form, Schedule or Registration Statement No: ------------------------------------------------------------- 3) Filing party: ------------------------------------------------------------- 4) Date Filed: ------------------------------------------------------------- INFORMATION ANALYSIS INCORPORATED 11240 Waples Mill Road, Suite 400 Fairfax, Virginia 22030 -------------------------------------------------------------------------------- Notice of Annual Meeting of Stockholders -------------------------------------------------------------------------------- TO THE STOCKHOLDERS: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Information Analysis Incorporated, a Virginia corporation (the "Company"), will be held on Thursday, August 8, 2002, at 10:00 a.m., local time, at the offices of Information Analysis Incorporated, 11240 Waples Mill Road, Suite 400, Fairfax, Virginia 22030, for the following purposes: 1. To elect four (4) directors to serve for the ensuing year; 2. To ratify the selection of independent auditors for fiscal 2002, 3. To consider and act upon any matter incidental to the foregoing and any other matters which may properly come before the meeting or any adjournment or postponement thereof. The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors has fixed the close of business on July 8, 2002 as the record date for determination of stockholders entitled to notice of and vote at the and at any adjournment thereof. All stockholders are cordially invited to attend the meeting. However, to assure that a quorum is present at the meeting on August 8, 2002, please mark, sign, date and return the enclosed proxy as promptly as possible in the postage-prepaid envelope enclosed for that purpose whether or not you expect to attend the meeting. Any stockholder attending the meeting may vote in person even if such stockholder has returned a proxy. By Order of the Board of Directors, Richard S. DeRose Secretary 11240 Waples Mill Road, Suite 400 Fairfax, Virginia 22030 July 10, 2002 INFORMATION ANALYSIS INCORPORATED 11240 Waples Mill Road, Suite 400 Fairfax, Virginia 22030 ---------------------------- PROXY STATEMENT ---------------------------- July 10, 2002 The enclosed Proxy is solicited by the Board of Directors of INFORMATION ANALYSIS INCORPORATED, a Virginia corporation (the "Company"), for use at the Annual Meeting of Stockholders to be held at the offices of the Company, 11240 Waples Mill Road, Suite 400, Fairfax, Virginia 22030 at 10:00 a.m. on Thursday, August 8, 2002 and at any adjournment or adjournments thereof. On July 8, 2002 there were 10,283,515 shares of Common Stock (the "Common Stock") outstanding. Stockholders of record at the close of business on July 8, 2002 will be entitled to vote at the meeting or any adjournment thereof. The Company has no other voting securities. Each share of Common Stock entitles the holder to one vote with respect to all matters submitted to stockholders at the meeting. A quorum for the meeting is a majority of the shares outstanding. The proposals to be voted upon by the stockholders of the Company require the votes of a majority of the voting securities present at the meeting for approval. Abstentions and broker non-votes (which result when a broker holding shares for a beneficial holder in "street name" has not received timely voting instructions on certain matters from such beneficial holder and the broker does not have discretionary voting power on such matters) are counted for purposes of determining the presence or absence of a quorum at the meeting. Abstentions are counted in tabulation of the votes cast on proposals presented to stockholders, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved. The Directors and officers of the Company as a group own approximately 21.4% of the outstanding voting securities of the Company. Each of the Directors and officers has indicated his intent to vote all shares of Common Stock owned or controlled by him in favor of each item set forth herein. Execution of a Proxy will not in any way affect a stockholder's right to attend the meeting and vote in person. The Proxy may be revoked at any time before it is exercised by written notice to the Secretary prior to the Annual Meeting or by giving to the Secretary a duly executed Proxy bearing a later date than the Proxy being revoked at any time before such Proxy is voted, or by appearing at the Annual Meeting and voting in person. The shares represented by all properly executed Proxies received in time for the meeting will be voted as specified therein. In the absence of a special choice, shares will be voted in favor all items set forth herein. The Board of Directors knows of no other matter to be presented at the meeting. If any other matter should be presented at the meeting upon which a vote may be taken, such shares represented by all Proxies received by the Board of Directors will be voted with respect thereto in accordance with the judgment of the person named in the Proxies. The Board of Directors knows of no matter to be acted upon at the meeting that would give rise to appraisal rights for dissenting stockholders. This Proxy Statement and the accompanying Proxy were first mailed to stockholders on or about July 10, 2002. PROPOSAL ONE ELECTION OF DIRECTORS The Directors of the Company are elected annually and hold office until the next annual meeting of stockholders and until their successors have been elected and qualified. A board of four (4) directors is to be elected at the meeting. Shares represented by all proxies received and not so marked as to withhold authority to vote for any individual Director or for all Directors will be voted (unless one or more nominees are unable or unwilling to serve) for the election of the nominees named below. The Board of Directors of the Company currently consists of one member who is the Chief Executive Officer of the Company (Sandor Rosenberg), and three non-employee members (Charles A. May, Jr., Bonnie K. Wachtel, and James D. Wester). During the period commencing January 1, 2001 and ending December 31, 2001 ("fiscal 2001"), there were three (3) meetings of the Board of Directors of the Company. During 2001 each director of the Company attended 75% or more of the aggregate meetings of the board and the committees of the board of which he or she served, except for Mr. May and Mr. Wester who attended 67% of the meetings. Messrs. Wester (Chairman) and May and Ms. Wachtel served as members of the Audit Committee of the Board of Directors of the Company. The Audit Committee held three (3) meetings during fiscal 2001. The Audit Committee is responsible for recommending and selecting the appointment of outside auditors, reviewing financial reports of the Company and performing such other functions as directed from time to time by the Board. The Board of Directors has not adopted a written charter for the Audit Committee. Audit Committee Report The Audit Committee has reviewed and discussed the audited financial statements with management and with the Company's independent public accountants. The audit committee has received from the independent accountants all required written disclosures regarding the auditors' independence and has discussed the matter of independence with the independent public accountants in accordance with Independence Standards Board Standard No. 1. The Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, which includes, among other items, matters related to the audit of the Company's financial statements. Based on the reviews and discussions with management and the independent accountants, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-KSB for 2001 for filing with the Securities and Exchange Commission. Respectfully Submitted, Charles A. May, Jr. Bonnie K. Wachtel James D. Wester Ms. Wachtel (Chairman) and Messrs. May and Rosenberg served as members of the Compensation Committee of the Board of Directors of the Company. There were no committee meetings during 2001. The Board of Directors currently does not have a standing nominating committee or a committee performing similar functions. The Board will, as a matter of policy, give consideration to nominees recommended by stockholders. A stockholder who wishes to recommend a future nominee should direct his or her recommendation in writing to the Company's Board of Directors. 2 The terms of all current directors of the Company will expire at the time of the 2002 Annual Meeting. The Company proposes for re-election as directors of the Company each of Messrs. Rosenberg, May, and Wester, and Ms. Wachtel for a term ending at the 2003 Annual Meeting. If you do not wish your shares to be voted for any particular nominee, please identify the exceptions in the appropriate space provided on the proxy card. If at the time of the meeting, one or more of the nominees have become unavailable to serve, shares represented by proxies will be voted for the remaining nominees and for any substitute nominee or nominees designated by the Board of Directors or, if none, the size of the Board will be reduced. The Board of Directors knows of no reason why any of the nominees will be unavailable or unable to serve. All nominees are currently Directors of the Company and have served continuously since the date of their election shown below. The following table sets forth, for each nominee, the nominee's age and the date such nominee became a director of the Company. Following the table is a brief description of each nominee's principal occupation for at least the past five years. Name of Nominee Age Director Since --------------- --- -------------- Sandor Rosenberg 55 1979 James C. Wester 63 1985 Bonnie K. Wachtel 46 1992 Charles A. May, Jr. 64 1997 Sandor Rosenberg, 55, has been President and Chairman of the Board since 1979. Mr. Rosenberg holds a B.S. degree in Aerospace Engineering from Rensselear Polytechnic Institute, and has done graduate studies in Operations Research at George Washington University. James D. Wester, 63, has been a Director since 1985. He has been a computer services marketing consultant for more than 15 years. Since 1984, he has been president of Results, Inc. Mr. Wester obtained a B.M.E. degree from Auburn University and an M.B.A. from George Washington University. Bonnie K. Wachtel, 46, has been a Director since 1992. Since 1984, she has served as vice president and general counsel of Wachtel & Co., Inc., investment bankers in Washington, D.C. Ms. Wachtel holds BA and MBA degrees from the University of Chicago and a JD from the University of Virginia. She is a director of Integral Systems, Inc., a provider of computer systems and software for the satellite communications market; and VSE Corporation, a provider of technical services to the federal government. Charles A. May, Jr., 64, is a consultant focusing on national security and defense conversion issues. In 1992, he retired as a Lt. General from the Air Force where he last served as Assistant Vice Chief of Staff, Headquarters US Air Force, Washington, D.C. He is a graduate of the U.S. Air Force Academy, where he once served as an Associate Professor of Political Science. General May has also graduated from the NATO Defense College and has completed the University of Pittsburgh's Management Program for Executives. 3 Director Compensation Directors of the Company who are not executive officers of the Company receive a stipend of $500 per quarter plus reimbursement of reasonable expenses incurred in attending meetings. In addition to the foregoing, all Directors except Mr. Rosenberg receive stock option grants. The Company has not paid the stipend since first quarter 2000. The granting of options to Directors is not currently executed according to a formal Directors Stock Option Plan or agreement. No Option grants were made to any Director in the fiscal year ended December 31, 2001. Vote Required and Recommendation of the Board of Directors Each stockholder of the Company will have one vote for each share of Common Stock such stockholder holds in the Company. Votes withheld will be counted for purposes of determining the presence or absence of a quorum for the transaction of business at the meeting, but have no other legal effect upon election of directors under Virginia law. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE NOMINEES SET FORTH HEREIN. Executive Officers The current executive officers of the Company are Sandor Rosenberg, Chairman and Chief Executive Officer; Richard S. DeRose, Executive Vice President, Chief Financial Officer, Treasurer, and Secretary and Stanley A. Reese, Senior Vice President and Chief Operating Officer. There are no family relationships among any of the executive officers, directors, or persons nominated to become directors of the Company. The executive officers are chosen annually at the first meeting of the Board of Directors following the annual meeting of stockholders and serve for one year and until their successors are chosen and qualify. The previous identification of directors sets forth the age, business experience, and certain other information regarding Mr. Rosenberg. Richard S. DeRose, 63, joined the Company in 1991 upon the acquisition of DHD, Inc., a company founded by Mr. DeRose and of which he was President and Chief Executive Officer. Prior to DHD, Mr. DeRose held several management positions in the information technology and telecommunication industries at RCA, Burroughs, and MCI. Mr. DeRose holds a BS degree in Science from the US Naval Academy and an MS degree in Computer Systems Management from the US Naval Post Graduate School. Stanley A. Reese, 45, joined the Company in 1993. Mr. Reese has been Senior Vice President since 1997 and Chief Operating Officer since March 1999. From 1992 to 1993, he served as Vice President, Technical Services at Tomco Systems, Inc. Prior to Tomco Systems, he served as Senior Program manager at ICF Information Technology, Inc. Mr. Reese has over 19 years experience managing and marketing large scale mainframes. Security Ownership of Certain Beneficial Owners & Management The following table sets forth, as of July 8, 2002 the number of shares and percentage of the Company's Common Stock owned by all persons known by the Company to own beneficially more than 5% of the Company's Common Stock, by each director, by each executive officer named in the Summary Compensation Table, and by all directors and executive officers as a group. This information has been obtained in part from such persons and in part from the Company's records. Each person has sole voting and investment power with respect to the shares indicated except for shares which may be acquired upon exercise of options and as otherwise noted. 4
NAME AND ADDRESS OF SHARES BENEFICIALLY BENEFICIAL OWNER (1) OWNED (2) % OF CLASS --------------------------------------------------------------------------------------- Sandor Rosenberg, Chairman, CEO, and Director 1,752,800 17.0% Richard S. DeRose, Executive Vice President 365,900 (3) 3.5% Stanley A. Reese, Senior Vice President 200,750 (4) 1.9% Charles A. May, Jr., Director 16,000 (5) * Bonnie K. Wachtel, Director 112,800 (6) 1.1% James D. Wester, Director 427,355 (7) 4.0% Kenneth Parsons 712,500 (8) 6.5% Traditions LP 1,500,000 (9) 13.9% All directors and executive officers as a group 2,875,605 (10) 26.4% *less than 1%
(1) The address of all beneficial holders is in care of the Company, except Ms. Wachtel, whose address of record is 1101 14/th/ St. NW, Washington, DC 20001, Kenneth Parsons, whose address of record is 4318 Pennbrooke Court, West River, MD 20764, and Traditions LP, whose address of record is 1717 Main Street, Suite 2500, Dallas, TX 75201. (2) All shares are held outright by the individuals listed. References to options and warrants include all options and warrants exercisable within 60 days of July 8, 2002. (3) Includes options on 167,900 shares. (4) Includes options on 178,750 shares (5) Includes options on 16,000 shares. (6) Includes options on 13,000 shares. (7) Includes warrants for 108,000 shares, and options on 190,000 shares. (8) Includes options on 712,500 shares. (9) Includes warrants on 500,000 shares. (10) Includes options on 565,650 shares and warrants for 108,000 shares. Executive Compensation The Summary Compensation Table below sets forth individual compensation information for the Chief Executive Officer and the other executive officers serving as executive officers as of December 31, 2001 (collectively "Named Executive Officers"): Summary Compensation Table
Name and Principal Annual Compensation Securities ------------------- Underlying Position Year Salary Bonus Options (#) -------- ---- ------ ----- ------- Sandor Rosenberg 2001 $85,165 -- -- Chairman of the Board and 2000 $76,904 -- -- Chief Executive Officer 1999 $76,457 -- -- ------------------------------------------------------------------------------------------ Richard S. DeRose 2001 $87,017 -- -- Executive Vice President 2000 $75,000 -- 50,000 Chief Financial Officer 1999 $97,617 -- 20,000 ------------------------------------------------------------------------------------------ Stanley A. Reese 2001 $82,742 50,000 Senior Vice President and 2000 $75,000 -- -- Chief Operating Officer 1999 $97,867 -- 20,000
No Named Executive Officer has received any perquisite or benefit, securities, or property that exceeded the lesser of $50,000 or 10% of the total annual salary and bonus reported for such executive officer. 5 Option Grants in Last Fiscal Year The following table sets forth all option grants during 2001 to all executive officers: Option Grants in Last Fiscal Year
% of Total Options Granted Exercise Name Granted To Employees in Fiscal Price Expiration Date ---- ------- ---------------------- ----- --------------- Year ---- Stanley A. Reese 50,000 37.5% $0.20 09/07/11
The following table depicts option exercise activity in the last fiscal year and fiscal year-end option values with respect to each of the Named Executive Officers. The value of unexercised in-the-money options at December 31, 2001 equals the market value of the underlying common stock at December 31, 2001 minus the option exercise price. The fair market value of the Company's common stock at December 31, 2001 was $0.55. Aggregated Option Exercises in Last Fiscal Year and FY End Option Values
Shares Number of Securities Value of Unexercised In- Acquired Underlying Unexercised the-Money Options at on Value Options at 12/31/01 12/31/01 ----- ------------------- -------- Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- -------- -------- ----------- ------------- ----------- ------------- Richard S. DeRose -- 167,900 $15,285 -- Stanley A. Reese -- 178,750 $18,428 --
Compliance With Section 16(a) of The Exchange Act Section 16(a) ("Section 16(a)") of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires executive officers and Directors and persons who beneficially own more than ten percent (10%) of the Company's Common Stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the "Commission") and any national securities exchange on which the Company's securities are registered. Executive officers, Directors and greater than ten percent (10%) beneficial owners are required by the Commission's regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company and written representations from the executive officers and Directors, the Company believes that all Section 16(a) filing requirements applicable to its executive officers, Directors and greater than ten percent (10%) beneficial owners were satisfied in 2001. 6 PROPOSAL TWO RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS The Board of Directors, on the recommendation of its Audit Committee, has selected the firm of Rubino & McGeehin, Chtd. ("Rubino & McGeehin"), independent auditors, as auditors of the Company for the fiscal year ending December 31, 2002. A representative of Rubino & McGeehin will not be present at the Annual Meeting and will not make a statement or be available to answer questions from stockholders. Although stockholder approval of the Board of Directors' selection of Rubino & McGeehin is not required by law, the Board of Directors believes that it is advisable to give stockholders an opportunity to ratify this selection. If this proposal is not approved at the Meeting, the Board of Directors will reconsider its selection of Rubino & McGeehin. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" SO AS TO RATIFY THE SELECTION OF RUBINO & MCGEEHIN AS THE COMPANY'S INDEPENDENT ACCOUNTANTS. OTHER MATTERS TO COME BEFORE THE MEETING In addition to the matters described above, there will be an address by the Chief Executive Officer and a general discussion period during which stockholders will have an opportunity to ask questions about the business of the Company. If any matter not described in this proxy statement should come before the meeting, it is the intention of the persons named in the enclosed proxy to vote the shares they represent as the Board of Directors may recommend. At the time this proxy statement went to press, the Board of Directors knew of no other matters which might be presented for stockholder action at the meeting. SUBMISSION OF STOCKHOLDER PROPOSALS Proposals intended for inclusion in next year's proxy statement should be sent to the Corporate Secretary of the Company at 11240 Waples Mill Rd. - Suite 400, Fairfax, VA 22030, and must be received by April 10, 2003. 7 SOLICITATION OF PROXIES The cost of soliciting proxies in the accompanying form will be borne by the Company. In addition to solicitations by mail, directors, officers, and regular employees of the Company may solicit proxies in person or by telephone. No additional compensation will be paid to directors, officers, or regular employees for such services. Arrangements will be made with banks, brokerage houses, and other custodians, nominees, and fiduciaries to forward solicitation material to the beneficial owners of stock held of record by such persons or firms, and the Company will reimburse such persons of firms for reasonable out-of-pocket expenses incurred by them in so doing. REVOCATION OF PROXY Subject to the terms and conditions set forth herein, all Proxies received by the Company will be effective, notwithstanding any transfer of the shares to which such Proxies relate, unless prior to the meeting the Company receives a written notice of revocation signed by the person who, as of the record date, was the registered holder of such shares. The Notice of Revocation must indicate the certificate number or numbers of the shares to which such revocation relates and the aggregate number of shares represented by such certificate(s). ANNUAL REPORT Stockholders may obtain a copy of the Company's annual report (10-KSB), which includes the financial statements for the Company's most recent fiscal year ended December 31, 2001 on the Company's web site, www.infoa.com. MISCELLANEOUS The management does not know of any other matters which may come before the meeting. However, if any other matters are properly presented to the meeting, it is the intention of the person named in the accompanying Proxy to vote, or otherwise act, in accordance with his judgment on such matters. By Order of the Board of Directors Richard S. DeRose, Secretary Dated: July 10, 2002 8 -------------------------------------------------------------------------------- INFORMATION ANALYSIS INCORPORATED PROXY -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INFORMATION ANALYSIS INCORPORATED The undersigned hereby appoints Richard S. DeRose with the power to appoint his substitute, and hereby authorizes him to represent and to vote, as designated below, all the shares of common stock of Information Analysis Incorporated held on record by the undersigned on July 8, 2002, at the annual meeting of the stockholders to be held on August 8, 2002 or any adjournment thereof. 1. ELECTION OF DIRECTORS [_] FOR all nominees listed below (except as marked to the contrary below). [_] WITHHOLD AUTHORITY to vote for all nominees listed below. INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's name in the list below. Sandor Rosenberg Charles A. May, Jr Bonnie K. Wachtel James D. Wester 2. RATIFICATION OF INDEPENDENT AUDITORS [_] FOR the ratification of Rubino & McGeehin as the independent auditors. [_] AGAINST the ratification of Rubino & McGeehin as the independent auditors. [_] ABSTAIN from voting in the ratification of Rubino & McGeehin as the independent auditors. 3. In his discretion, the proxy is authorized to vote upon such other business as may properly come before the meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR AND FOR THE SELECTION OF Rubino & McGeehin AS INDEPENDENT AUDITORS. Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by the President or other authorized officer. If a partnership, please sign in partnership name by authorized person. PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. ------------------------------ Signature ------------------------------ Signature, if held jointly ------------------------------ Title (If Applicable) 2