DEF 14A 1 ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

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 Under Rule 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)

 

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¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

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¨ 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:

 

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LOGO

May 14, 2008

Dear Stockholder,

We cordially invite you to attend our 2009 annual meeting of stockholders to be held at 10:00 AM on Thursday, June 11, 2009, at our offices at 11240 Waples Mill Road, Suite 201, Fairfax, Virginia 22030. The attached notice of annual meeting and proxy statement describe the business we will conduct at the meeting and provide information about Information Analysis Incorporated that you should consider when you vote your shares.

When you have finished reading the proxy statement, please promptly vote your shares by marking, signing, dating and returning the proxy card in the enclosed envelope. We encourage you to vote by proxy so that your shares will be represented and voted at the meeting, whether or not you can attend.

 

Sincerely,

/s/    Sandor Rosenberg

Sandor Rosenberg

Chairman of the Board and

Chief Executive officer

LOGO

May 14, 2009

NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS

 

TIME:

    10:00 AM

DATE:

    June 11, 2009

PLACE:

    Information Analysis Incorporated
   11240 Waples Mill Road, Suite 201
   Fairfax, Virginia 22030

PURPOSES:

 

1. To elect Four directors to serve terms expiring at the 2010 Annual Meeting.

 

2. To ratify the appointment of Reznick Group, P.C. as the company’s independent public accountants for the fiscal year ending December 31, 2009.

 

3. To consider any other business that is properly presented at the meeting.

WHO MAY VOTE:

You may vote if you were the record owner of Information Analysis Incorporated stock at the close of business on May 12, 2009. A list of stockholders of record will be available at the meeting and, during the 10 days prior to the meeting, at the office of the Secretary at the above address.

 

BY ORDER OF THE BOARD OF DIRECTORS

/s/    Richard S. DeRose

Richard S. DeRose

Secretary

Information Analysis Incorporated

 

    2009 Proxy Statement

 

INFORMATION ANALYSIS INCORPORATED

11240 WAPLES MILL ROAD, SUITE 201

FAIRFAX, VIRGINIA 22030

PROXY STATEMENT FOR THE INFORMATION ANALYSIS INCORPORATED

2009 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON

JUNE 11, 2009

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

Why Did You Send Me this Proxy Statement?

We sent you this proxy statement and the enclosed proxy card because Information Analysis Incorporated’s (IAI) Board of Directors is soliciting your proxy to vote at the 2009 annual meeting of stockholders and any adjournments of the meeting to be held at 10:00 AM on Wednesday, June 11, 2009, at our offices at 11240 Waples Mill Road, Suite 201, Fairfax, Virginia 22030. This proxy statement along with the accompanying Notice of Annual Meeting of Stockholders summarizes the purposes of the meeting and the information you need to know to vote at the annual meeting.

On May 14, 2009, we began sending this proxy statement, the attached notice of annual meeting and the enclosed proxy card to all stockholders entitled to vote at the meeting. Although not part of this proxy statement, we are also sending along with this proxy statement our 2008 annual report, which includes our financial statements for the fiscal year ended December 31, 2008. You can also find a copy of our 2008 Annual Report on Form 10-K on the Internet through the SEC’s electronic data system called EDGAR at www.sec.gov, or through the Investor Relations section of our website at www.infoa.com.

Who Can Vote?

Only stockholders who owned IAI common stock at the close of business on May 12, 2009, are entitled to vote at the annual meeting. On this record date, there were 11,196,760 shares of IAI common stock outstanding and entitled to vote. Information Analysis Incorporated common stock is our only class of voting stock.

You do not need to attend the annual meeting to vote your shares. Shares represented by valid proxies, received in time for the meeting and not revoked prior to the meeting, will be voted at the meeting. A stockholder may revoke a proxy before the proxy is voted by delivering to our Secretary a signed statement of revocation or a duly executed proxy card bearing a later date. Any stockholder who has executed a proxy card but attends the meeting in person may revoke the proxy and vote at the meeting.

How Many Votes Do I Have?

Each share of IAI common stock that you own entitles you to one vote.

How Do I Vote?

Whether you plan to attend the annual meeting or not, we urge you to vote by proxy. Voting by proxy will not affect your right to attend the annual meeting. If your shares are registered directly in your name through our stock transfer agent, American Stock Transfer, or you have stock certificates, you may vote:

 

  •  

By mail. Complete and mail the enclosed proxy card in the enclosed postage prepaid envelope. Your proxy will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted, they will be voted as recommended by our Board of Directors.

 

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  •  

In person at the meeting. If you attend the meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the meeting.

If your shares are held in “street name” (held in the name of a bank, broker or other nominee), you must provide the bank, broker or other nominee with instructions on how to vote your shares and can do so as follows:

 

  •  

By mail. You will receive instructions from your broker or other nominee explaining how to vote your shares.

 

  •  

In person at the meeting. Contact the broker or other nominee who holds your shares to obtain a broker’s proxy card and bring it with you to the meeting. You will not be able to vote at the meeting unless you have a proxy card from your broker.

How Does the Board of Directors Recommend That I Vote on the Proposals?

The board of directors recommends that you vote as follows:

 

  •  

“FOR” the election of the nominees for director;

 

  •  

“FOR” ratification of the selection of independent public accountants for our fiscal year ending December 31, 2009.

If any other matter is presented, the proxy card provides that your shares will be voted by the proxy holder listed on the proxy card in accordance with his or her best judgment. At the time this proxy statement was printed, we knew of no matters that needed to be acted on at the annual meeting, other than those discussed in this proxy statement.

May I Revoke My Proxy?

If you give us your proxy, you may revoke it at any time before the meeting. You may revoke your proxy in any one of the following ways:

 

  •  

signing a new proxy card and submitting it as instructed above;

 

  •  

notifying IAI’s Secretary in writing before the annual meeting that you have revoked your proxy; or

 

  •  

attending the meeting in person and voting in person. Attending the meeting in person will not in and of itself revoke a previously submitted proxy unless you specifically request it.

What if I Receive More Than One Proxy Card?

You may receive more than one proxy card or voting instruction form if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described under “How Do I Vote?” for each account to ensure that all of your shares are voted.

Will My Shares be Voted if I Do Not Return My Proxy Card?

If your shares are registered in your name or if you have stock certificates, they will not be voted if you do not return your proxy card by mail or vote at the meeting as described above under “How Do I Vote?”.

If your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above under “How Do I Vote?,” the bank, broker or other nominee has the authority to vote your unvoted shares on both Proposals 1 and 2 even if it does not receive instructions from you. We encourage you to provide voting instructions. This ensures your shares will be voted at the meeting in the manner you desire. If your broker cannot vote your shares on a particular matter because it has not received

 

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instructions from you and does not have discretionary voting authority on that matter or because your broker chooses not to vote on a matter for which it does have discretionary voting authority, this is referred to as a “broker non-vote”.

What Vote is Required to Approve Each Proposal and How are Votes Counted?

 

Proposal 1: Elect Directors

    The nominees for director who receive the most votes (also known as a “plurality” of the votes) will be elected. Abstentions are not counted for purposes of electing directors. You may vote either FOR all of the nominees, WITHHOLD your vote from all of the nominees or WITHHOLD your vote from any one or more of the nominees. Votes that are withheld will not be included in the vote tally for the election of directors. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name for the election of directors. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote.

Proposal 2: Ratify Selection of

Independent Public Accountants

    The affirmative vote of a majority of the votes present or represented by proxy and entitled to vote at the annual meeting is required to ratify the selection of independent public accountants. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to select our independent public accountants. However, if our stockholders do not ratify the selection of Reznick Group, P.C. as our independent public accountants for 2009, our Audit Committee of our Board of Directors will reconsider its selection.

Is Voting Confidential?

We will keep all the proxies, ballots and voting tabulations private. We only let our Inspectors of Election, American Stock Transfer, examine these documents. We will not disclose your vote to management unless it is necessary to meet legal requirements. We will, however, forward to management any written comments you make, on the proxy card or elsewhere.

What Are the Costs of Soliciting these Proxies?

We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will pay these employees and directors no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.

 

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What Constitutes a Quorum for the Meeting?

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock is necessary to constitute a quorum at the meeting. Votes of stockholders of record who are present at the meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 24, 2009, for (a) the executive officers named in the Summary Compensation Table on page 9 of this proxy statement, (b) each of our directors and director nominees, (c) all of our current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of April 24,2009, pursuant to the exercise of options or warrants to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 11,196,760 shares of common stock outstanding on April 24, 2009.

SECURITY OWNERSHIP OF MANAGEMENT

TITLE OF CLASS: INFORMATION ANALYSIS INCORPORATED COMMON STOCK

 

Name of

Beneficial Owner (1)

    Amount and Nature of
Beneficial Ownership (2) 		    Percent
Of Class

Sandor Rosenberg, Chairman, CEO, and Director

    1,832,800     16.4

Richard S. DeRose, Executive Vice President

    500,345  (3)   4.4

Stanley A. Reese, Senior Vice President

    279,500  (4)   2.4

Charles A. May, Jr., Director

    60,000  (5)   *

Bonnie K. Wachtel, Director

    129,800  (6)   1.2

James D. Wester, Director

    164,947  (7)   1.5

All directors and executive officers as a group

    2,967,392  (8)   25.1

 

* represents 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 14th St. NW, Washington, DC 20001.

(2) All shares are held outright by the individuals listed.
(3) Includes 285,000 shares issuable upon the exercise of options to purchase common stock
(4) Includes 257,500 shares issuable upon the exercise of options to purchase common stock
(5) Includes 20,000 shares issuable upon the exercise of options to purchase common stock
(6) Includes 20,000 shares issuable upon the exercise of options to purchase common stock
(7) Includes 20,000 shares issuable upon the exercise of options to purchase common stock
(8) Includes 602,500 shares issuable upon the exercise of options to purchase common stock

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

TITLE OF CLASS: INFORMATION ANALYSIS INCORPORATED COMMON STOCK

 

Name and Address of

Beneficial Owner

    Amount and Nature of
Beneficial Ownership		    Percent
Of Class

Traditions LP

924 Ridge Drive

McLean, VA 22101

    1,000,000    8.9

 

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MANAGEMENT

The Board of Directors

Our Bylaws provide that our business is to be managed by or under the direction of our Board of Directors. All Directors are elected at each annual meeting of stockholders to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Our Board of Directors currently consists of four (4) members.

Our Board of Directors voted to nominate Charles A. May, Jr., Sandor Rosenberg, Bonnie K. Wachtel and James D. Wester for election at the annual meeting to serve until the 2010 annual meeting of stockholders, and until their respective successors have been elected and qualified.

Set forth below are the names of the persons nominated as directors, their ages, their offices in the Company, if any, their principal occupations or employment for the past five years, the length of their tenure as directors and the names of other public companies in which such persons hold directorships.

 

Name of Nominee

    Age    Director Since    Position with the Company

Charles A. May, Jr.

    71    1997    Director

Sandor Rosenberg

    62    1979    Chairman of the Board, Chief
Executive Officer and President

Bonnie K. Wachtel

    53    1992    Director

James C. Wester

    70    1985    Director

Charles A. May, Jr., 71, is a consultant focusing on national security and strategic business planning 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.

Sandor Rosenberg, 62, is the founder of the Company and has been Chairman of the Board and Chief Executive Officer of the Company since 1979, and President since 1998. Mr. Rosenberg holds a B.S. degree in Aerospace Engineering from Rensselaer Polytechnic Institute, and has done graduate studies in Operations Research at George Washington University.

Bonnie K. Wachtel, 53, has served as vice president and general counsel of Wachtel & Co., Inc., a Washington, D.C.-based brokerage and investment banking firm, since 1984. Ms. Wachtel holds BA and MBA degrees from the University of Chicago and a JD from the University of Virginia. Ms. Wachtel is a Certified Financial Analyst. She is a director of VSE Corporation, a provider of technical services to the federal government.

James D. Wester, 70, was president of Results, Inc., a computer services marketing consulting firm, for more than 15 years. Mr. Wester holds a BME degree from Auburn University and an MBA from George Washington University.

Our Board has determined that the following members of the Board qualify as independent under the definition promulgated by the NASDAQ Stock Market:

Charles A. May, Jr.

Bonnie K. Wachtel

James D. Wester

There are no family relationships between any directors or executive officers of the Company.

 

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Committees of the Board of Directors and Meetings

Meeting Attendance. During the fiscal year ended December 31, 2008 there was one meeting of our Board of Directors. All directors attended the meeting of the Board and of committees of the Board on which he or she served during fiscal 2008. The Board has adopted a policy under which each member of the Board is strongly encouraged to attend each annual meeting of our stockholders.

Audit Committee. Our Audit Committee met one time during 2008. This committee currently has two members, Bonnie K. Wachtel (Chairman) and Charles A. May, Jr. Our Audit Committee has the authority to retain and terminate the services of our independent public accountants, reviews annual financial statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits. All members of the Audit Committee satisfy the current independence standards promulgated by the Securities and Exchange Commission and by the NASDAQ Stock Market, as such standards apply specifically to members of audit committees. The Board has determined that Ms. Wachtel is our “audit committee financial expert,” as the Securities and Exchange Commission has defined that term in Item 407 of Regulation S-K. Please also see the report of the Audit Committee set forth elsewhere in this proxy statement. The current audit committee charter is available for viewing on our Web site at www.infoa.com under the Investor Relations section of the Company Profile.

Compensation Committee. Our Compensation Committee met one time during 2008. This committee currently has two members, Ms. Wachtel (Chairman) and Mr. May. This committee does not operate under a charter. Our Compensation Committee reviews, approves and makes recommendations regarding our compensation policies, practices and procedures to ensure that legal and fiduciary responsibilities of the Board of Directors are carried out and that such policies, practices and procedures contribute to our success. The Compensation Committee is responsible for the determination of the compensation of our Executive Officers, and shall conduct its decision-making process with respect to that issue without the executive officers present. All members of the Compensation Committee qualify as independent under the definition promulgated by the NASDAQ Stock Market.

Nominating Committee. Our Nominating Committee met one time during 2008 and has four members, Mr. Rosenberg (Chairman), Ms. Wachtel, and Messrs. May and Wester. This committee does not operate under a charter. This committee’s role is to make recommendations to the full Board as to the size and composition of the Board and its committees, and to evaluate and make recommendations as to potential candidates. All members of the Nominating Committee qualify as independent under the definition promulgated by the NASDAQ Stock Market except for Mr. Rosenberg. The Nominating Committee may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. For all potential candidates, the Nominating Committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the Board, and concern for the long-term interests of the stockholders. In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to nominate a candidate to be considered for election as a director at the 2010 Annual Meeting of Stockholders, it must follow the procedures described in “Stockholder Proposals and Nominations For Director.”

Shareholder Communications to the Board

Generally, shareholders who have questions or concerns should contact our Investor Relations department at (703) 383-3000. However, any shareholders who wish to address questions regarding our business directly with the Board of Directors, or any individual director, should direct his or her questions in writing to:

Board of Directors of Information Analysis Incorporated

ATTN: (Chairman of the Board/Board member name)

11240 Waples Mill Road, Suite 201

Fairfax, Virginia 22030

Shareholder communications addressed to the Board, but not addressed to a specific Board member, will be relayed to the Chairman of the Board, and from there will be distributed to the Chairperson of the committee that oversees the subject matter of the communication.

 

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Compensation of Directors

The Company pays each non-employee director an annual fee of $2,000 to serve on the Board, payable quarterly. Expenses incurred in attending Board of Director meetings and committee meetings may be reimbursed. The following Table describes all compensation for each director for the year ended December 31, 2008.

Director Compensation

 

Name

(a)

    Fees Earned
or Paid in
Cash
($)
(b)		    Stock
Awards
($)
(c)		    Option
Awards
($)1
(d)		    All Other
Compensation
($)
(g)		    Total
($)
(j)

Charles A. May, Jr.

    2,000    —      —      —      2,000

Bonnie K. Wachtel

    2,000    —      —      —      2,000

James D. Wester

    2,000    —      —      —      2,000

There were no options to purchase shares of our common stock issued to directors in 2008.

Executive Officers

The following table sets forth certain information regarding our executive officers who are not also directors.

 

Name

    Age    Position

Richard S. DeRose

    70    Executive Vice President, Secretary, and
Chief Financial Officer

Stanley A. Reese

    52    Senior Vice President and Chief Operating

Officer

Richard S. DeRose, 70, has been Executive Vice President since 1991. Prior to that, he served as the President and CEO of DHD Services, Inc., a company he founded, from 1979 until DHD’s acquisition by the Company in 1991. Prior to DHD, Mr. DeRose held several management positions in the information technology and telecommunications 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 Postgraduate School, Monterey.

Stanley A. Reese, 52, 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 20 years experience managing and marketing large scale mainframe and PC-based applications. Mr. Reese holds a BA in History from George Mason University.

 

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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, 2008 (collectively “Named Executive Officers”):

SUMMARY COMPENSATION TABLE

 

Name and principal position

                (a)

    Year
(b)		    Salary
($)
(c)		    Bonus
($)
(d)		    Stock
Awards
($)
(e)		    Option
Awards1
($)
(f)		    All Other
Compensation2
($)
(i)		    Total
($)
(j)

Sandor Rosenberg

    2008    142,500    —      —      —      —      142,500

Chairman of the Board and Chief Executive Officer

    2007    134,120    6,000    —      —      —      140,120
                                  

Richard S. DeRose

    2008    113,279    —      —      —      1,219    114,498

Executive Vice President

    2007    130,000    6,000    —      12,500    2,040    150,540
                                  

Stanley A. Reese

    2008    154,854    —      —      3,750    1,670    160,274

Chief Operating Officer

    2007    133,995    6,000    —      25,000    2,100    167,095

 

1

The assumptions used in calculating the value of Option Awards are detailed in the financial statement footnotes in our 2008 Annual Report on Form 10-K as filed with the SEC on March 31, 2009.

2

All references to All Other Compensation are for employer contributions to each individual’s 401(k) defined contribution account under our company-wide 401(k) Pension and Profit Sharing Plan.

On May 5, 2008, Mr. Reese was awarded an option to purchase 25,000 shares of our common stock. The exercise price of each share is $0.28, that day’s closing price. The options expire ten years from the issue date. Options to purchase 12,500 shares vest over a period of twelve months, and options to purchase 12,500 shares vest over twenty-four months. The grant date fair value was $0.15 per share.

On April 20, 2007, Mr. DeRose was awarded an option to purchase 50,000 shares of our common stock, and Mr. Reese was awarded an option to purchase 100,000 shares of our common stock. The exercise price of each share is $0.40, that day’s closing price. The options expire ten years from the issue date. The options vested over a period of six months. The grant date fair value was $0.25 per share.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

OPTION AWARDS

 

Name

  (a)

    Number of Securities
Underlying
Unexercised Options
(#)
Exercisable
(b)		    Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable
(c)		    Option
Exercise
Price
($)
(e)		    Option Expiration
Date
(f)

Richard S. DeRose

    20,000       0.59    05/11/2009

Richard S. DeRose

    50,000       0.4375    07/03/2010

Richard S. DeRose

    50,000       0.22    05/27/2013

Richard S. DeRose

    25,000       0.42    10/27/2015

Richard S. DeRose

    90,000       0.52    06/23/2016

Richard S. DeRose

    50,000       0.40    04/20/2017

Stanley A. Reese

    20,000       0.59    05/11/2009

Stanley A. Reese

    50,000       0.20    09/07/2011

Stanley A. Reese

    50,000       0.22    05/27/2013

Stanley A. Reese

    25,000       0.42    10/27/2015

Stanley A. Reese

    100,000       0.40    04/20/2017

Stanley A. Reese

       25,000    0.28    05/05/2018

 

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Equity Compensation Plan Information

The following table contains information regarding securities authorized and available for issuance under our equity compensation plans for certain employees, directors, and consultants, as of April 24, 2009.

 

Plan Category

    Number of securities to be
issued upon exercise of
outstanding options,
warrants, and rights		    Weighted average
exercise price of
outstanding options,
warrants, and rights		    Number of securities
remaining available
for future issuance

Equity compensation plans approved by security holders

    1,092,500    $ 0.35    575,500

Equity compensation plans not approved by security holders

    0      

Total

    1,092,500    $ 0.35    575,500

Employment Contracts, Termination of Employment and Change-in-Control Arrangements

On June 18, 1997, the Company agreed in writing to provide to Richard S. DeRose, Executive Vice President, Chief Financial Officer, and Secretary, twelve months severance pay of his base salary, payable in normal payroll increments, in the event of the termination of his employment other than for cause. In the event of a change of control or the sale or transfer of substantially all of the Company’s assets, the Company agreed that in the event of Mr. DeRose’s termination, substantial reduction of duties, or requirement to be based at a location outside of a 30-mile radius of Fairfax, Virginia, he will receive a twelve month severance payment of base salary, payable in lump sum or monthly, at the Company’s discretion. Had the event of termination or change-in-control occurred on December 31, 2008, Mr. DeRose’s compensation under the agreement would have been $130,000.

Retirement Plans

The Company has a Cash or Deferred Arrangement Agreement (CODA), which satisfies the requirements of section 401(k) of the Internal Revenue Code. This defined contribution retirement plan covers substantially all employees. Participants can elect to have up to the maximum percentage allowable of their salaries reduced and contributed to the plan. The Company may make matching contributions equal to a discretionary percentage of a discretionary percentage of the participants’ elective deferrals. In 2008, the Company matched 25% of the first 6% of the participants’ elective deferrals. The Company may also make additional contributions to all eligible employees at its discretion. The Company did not make additional contributions during 2008.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

There have been no changes in or disagreements with our independent public accountants on accounting and financial disclosure.

TRANSACTIONS WITH RELATED PERSONS

In the year ended December 31, 2008, there were no related party transactions subject to reporting herein.

 

9

Information Analysis Incorporated

 

    2009 Proxy Statement

 

REPORT OF AUDIT COMMITTEE

The Audit Committee of the Board of Directors, which consists entirely of directors who meet the independence and experience requirements of the NASDAQ stock market, has furnished the following report:

The Audit Committee assists the Board in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality of internal and external audit processes. This committee’s role and responsibilities are set forth in a our charter adopted by the Board. This committee reviews and reassesses our charter annually and recommends any changes to the Board for approval. The Audit Committee is responsible for overseeing our overall financial reporting process, and for the appointment, compensation, retention, and oversight of the work of Reznick Group, P.C. In fulfilling its responsibilities for the financial statements for fiscal year December 31, 2008, the Audit Committee took the following actions:

 

  •  

Reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2008, with management and Reznick Group, P.C., our independent auditors;

 

  •  

Discussed with Reznick Group, P.C. the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, relating to the conduct of the audit; and

 

  •  

Received written disclosures and the letter from Reznick Group, P.C., regarding its independence as required by Independence Standards Board Standard No. 1. The Audit Committee further discussed with Reznick Group, P.C., their independence. The Audit Committee also considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit process that the committee determined appropriate.

Based on the Audit Committee’s review of the audited financial statements and discussions with management and Reznick Group, P.C., the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2008, for filing with the SEC.

 

  

Members of the Information Analysis Incorporated Audit Committee

Bonnie K. Wachtel

Charles A. May, Jr.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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, there were no officers, Directors and 10% beneficial owners who failed to file on a timely basis the forms required under Section 16(a) of the Exchange Act.

 

10

Information Analysis Incorporated

 

    2009 Proxy Statement

 

ELECTION OF DIRECTORS

(Notice Item 1)

The Board of Directors nominated Charles A. May, Jr., Sandor Rosenberg, Bonnie K. Wachtel and James D. Wester for election at the Annual Meeting. If they are elected, they will serve on our Board of Directors until the 2010 Annual Meeting of Stockholders and until their respective successors have been elected and qualified.

Unless authority to vote for any of these nominees is withheld, the shares represented by the enclosed proxy will be voted FOR the election as directors of Charles A. May, Jr., Sandor Rosenberg, Bonnie K. Wachtel and James D. Wester. In the event that any nominee becomes unable or unwilling to serve, the shares represented by the enclosed proxy will be voted for the election of such other person as the Board of Directors may recommend in his/her place. We have no reason to believe that any nominee will be unable or unwilling to serve as a director.

All nominees are currently Directors of the Company and have served continuously since the dates of their elections as shown on page 5.

A plurality of the shares voted affirmatively or negatively at the Meeting is required to elect each nominee as a director.

The Board Of Directors Recommends The Election Of Charles A. May, Jr., Sandor Rosenberg, Bonnie K. Wachtel and James D. Wester As Directors, And Proxies Solicited By The Board Will Be Voted In Favor Thereof Unless A Stockholder Has Indicated Otherwise On The Proxy.

 

11

Information Analysis Incorporated

 

    2009 Proxy Statement

 

INDEPENDENT PUBLIC ACCOUNTANTS

(Notice Item 2)

The Audit Committee has appointed Reznick Group, P.C., independent public accountants, to audit our financial statements for the fiscal year ending December 31, 2009. The Board proposes that the stockholders ratify this appointment. Reznick Group, P.C., audited our financial statements for the fiscal years ended December 31, 2008, 2007 and 2006. We expect that representatives of Reznick Group, P.C., will not be present at the meeting, will therefore be unable to make a statement, and will not be available to respond to appropriate questions.

The following table presents fees for professional audit services rendered by Reznick Group, P.C., for the audit of the Company’s annual financial statements for the years ended December 31, 2008 and 2007, respectively, and fees billed for other services rendered by our principal accountants during those periods.

 

Fee Category

    2008 Fees    2007 Fees

Audit Fees

    $ 65,000    $ 59,500

Audit-Related Fees

-        Out of Pocket Expenses

         440

Tax Fees

      5,000      4,000

All   Other Fees

      

-        Discussions regarding response to SEC comment letter in reference to 2007 Form 10-KSB

      4,945   

-        FIN 48 review and FAS 109 review

      3,500   

-        Initial application and adoption of FIN 48, including review of preliminary memo and discussions with audit committee

         5,500

-        Professional services—due diligence assistance

         1,200

Total Fees and Services

    $ 78,445    $ 70,640

The Audit Committee directly engages the Independent Certified Public Accountants as it relates to the audit of the Company’s fiscal year and the reviews of its fiscal quarters and the associated fees. In accordance with its written charter, our Audit Committee pre-approves all audit and permissible non-audit services, including the scope of contemplated services and the related fees, that are to be performed by Reznick Group, P.C., our independent registered public accounting firm, subject to the de minimis exceptions described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee’s pre-approval of non-audit services involves consideration of the impact of providing such services on Reznick Group’s independence. All 2008 non-audit services were pre-approved by the Audit Committee.

Although stockholder approval of the Board of Directors’ selection of Reznick Group is not required by law, the Board of Directors believes that it is advisable to give stockholders an opportunity to ratify this selection.

In the event the stockholders do not ratify the appointment of Reznick Group, P.C., as our independent public accountants, the Audit Committee will reconsider its appointment.

The affirmative vote of a majority of the shares present or represented and entitled to vote at the Meeting is required to ratify the appointment of the independent public accountants.

The Board Of Directors Recommends A Vote To Ratify The Appointment Of Reznick Group, P.C., As Independent Public Accountants, And Proxies Solicited By The Board Will Be Voted In Favor Of Such Ratification Unless A Stockholder Indicates Otherwise On The Proxy.

 

12

Information Analysis Incorporated

 

    2009 Proxy Statement

 

CODE OF CONDUCT AND ETHICS

We have adopted a code of conduct and ethics that applies to all of our employees, including our chief executive officer and chief financial and accounting officers. The text of the code of conduct and ethics is posted on our Web site at www.infoa.com under the Investor Relations section of the Company Profile and will be made available to stockholders without charge, upon request, in writing to the Corporate Secretary at Information Analysis Incorporated, 11240 Waples Mill Road, Suite 201, Fairfax, Virginia 22030. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.

OTHER MATTERS

The Board of Directors knows of no other business which will be presented to the Annual Meeting. If any other business is properly brought before the Annual Meeting, proxies in the enclosed form will be voted in accordance with the judgment of the persons voting the proxies.

STOCKHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTOR

To be considered for inclusion in the proxy statement relating to our Annual Meeting of Stockholders to be held in 2010, stockholder proposals must be received no later than January 14, 2010. If we do not receive notice of any matter to be considered for presentation at the Annual Meeting, although not included in the proxy statement, by March 31, 2010, management proxies may confer discretionary authority to vote on the matters presented at the Annual Meeting by a stockholder in accordance with Rule 14a-4 under the Securities Exchange Act. All stockholder proposals should be marked for the attention of Richard S. DeRose, Secretary, Information Analysis Incorporated, 11240 Waples Mill Road, Suite 201, Fairfax, Virginia 22030.

Fairfax, Virginia

May 14, 2009

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (other than exhibits thereto) filed with the SEC, which provides additional information about us, is available on the Internet at www.infoa.com and is available in paper form to beneficial owners of our common stock without charge upon written request to Richard S. DeRose, Secretary, Information Analysis Incorporated, 11240 Waples Mill Road, Suite 201, Fairfax, Virginia 22030.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Sandor Rosenberg, President and Chief Executive Officer, and attested to by Richard S. DeRose, Secretary, this 14th day of May, 2009.

 

INFORMATION ANALYSIS INCORPORATED
By:  

/s/    Sandor Rosenberg

  Sandor Rosenberg
  President and Chief Executive Officer

ATTEST:

 

/s/    Richard S. DeRose

Richard S. DeRose
Secretary

 

13

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 May 14, 2008, at the annual meeting of the stockholders to be held on June 11, 2009, or any adjournment thereof.

Please sign, date, and return promptly in the enclosed envelope. Please mark your vote in blue or black ink as shown here  x

 

  1. ELECTION OF DIRECTORS

 

  ¨ FOR all nominees.

 

  ¨ WITHHOLD AUTHORITY for all nominees.

 

  ¨ FOR ALL EXCEPT (see instructions below)

 

INSTRUCTION:

   To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill the circle next to each nominee you wish to withhold, as shown here  ¨

 

  ¨ Charles A. May, Jr
  ¨ Sandor Rosenberg
  ¨ Bonnie K. Wachtel
  ¨ James D. Wester

 

  2. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

 

  ¨ FOR the ratification of Reznick Group, P.C. as the independent public accountants.

 

  ¨ AGAINST the ratification of Reznick Group, P.C. as the independent public accountants.

 

  ¨ ABSTAIN from ratification of Reznick Group, P.C. as the independent public accountants.

 

  3. In his discretion, the proxy is authorized to vote upon such other business as may properly come before the meeting.

Information Analysis Incorporated

 

    2009 Proxy Statement

 

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 REZNICK GROUP, P.C. AS INDEPENDENT PUBLIC ACCOUNTANTS.

Note: Please sign exactly as your names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee, or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

PLEASE DATE, SIGN, AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.

 

 

Signature of Stockholder

   

 

Date

 

Signature of Stockholder

   

 

Date

 

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