(Mark One)
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|||||
þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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||||
For the quarterly period ended June 30, 2014
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|||||
OR
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|||||
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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||||
For the transition period from to
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Virginia
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54-1167364
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer o
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Accelerated filer o
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||
Non-accelerated filer o
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Smaller reporting company þ
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||
(Do not check if a smaller reporting company)
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Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
PART I.
|
FINANCIAL INFORMATION
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Page
Number
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|||
Item 1.
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Financial Statements (unaudited except for the balance sheet as of December 31, 2013)
|
||||
Balance Sheets as of June 30, 2014
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|||||
and December 31, 2013
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3 | ||||
Statements of Operations and Comprehensive Loss for
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|||||
the three months ended June 30, 2014 and 2013
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4 | ||||
Statements of Operations and Comprehensive Loss for
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|||||
the six months ended June 30, 2014 and 2013
|
5 | ||||
Statements of Cash Flows for the six months ended
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|||||
June 30, 2014 and 2013
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6 | ||||
Notes to Financial Statements
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7 | ||||
Item 2.
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Management's Discussion and Analysis of
|
||||
Financial Condition and Results of Operations
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12 | ||||
Item 4.
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Controls and Procedures
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15 | |||
PART II.
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OTHER INFORMATION
|
||||
Item 1.
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Legal Proceedings
|
16 | |||
Item 1A.
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Risk Factors
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16 | |||
Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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16 | |||
Item 3.
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Defaults Upon Senior Securities
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16 | |||
Item 5.
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Other Information
|
16 | |||
Item 6.
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Exhibits
|
16 | |||
SIGNATURES
|
17 |
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
June 30,
2014
|
December 31,
2013
|
|||||||
(Unaudited)
|
(see Note 1)
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 1,926,333 | $ | 2,359,527 | ||||
Accounts receivable, net
|
886,341 | 1,437,754 | ||||||
Prepaid expenses and other current assets
|
436,871 | 534,992 | ||||||
Notes receivable, current
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5,559 | 6,294 | ||||||
Total current assets
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3,255,104 | 4,338,567 | ||||||
Property and equipment, net
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55,110 | 52,887 | ||||||
Notes receivable, long-term
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6,642 | 8,665 | ||||||
Other assets
|
6,281 | 6,281 | ||||||
Total assets
|
$ | 3,323,137 | $ | 4,406,400 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 65,238 | $ | 611,781 | ||||
Commissions payable
|
752,933 | 902,972 | ||||||
Deferred revenue
|
393,126 | 503,482 | ||||||
Accrued payroll and related liabilities
|
212,947 | 221,378 | ||||||
Other accrued liabilities
|
42,915 | 60,796 | ||||||
Total current liabilities
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1,467,159 | 2,300,409 | ||||||
Stockholders' equity
|
||||||||
Common stock, par value $0.01, 30,000,000 shares authorized;
|
||||||||
12,844,376 shares issued, 11,201,760 shares outstanding as of June 30, 2014 and December 31, 2013
|
128,443 | 128,443 | ||||||
Additional paid-in capital
|
14,608,501 | 14,599,696 | ||||||
Accumulated deficit
|
(11,950,755 | ) | (11,691,937 | ) | ||||
Treasury stock, 1,642,616 shares at cost
|
(930,211 | ) | (930,211 | ) | ||||
Total stockholders' equity
|
1,855,978 | 2,105,991 | ||||||
Total liabilities and stockholders' equity
|
$ | 3,323,137 | $ | 4,406,400 | ||||
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
For the three months ended
|
||||||||
June 30,
|
||||||||
2014
|
2013
|
|||||||
Revenues
|
||||||||
Professional fees
|
$ | 789,054 | $ | 899,090 | ||||
Software sales
|
235,253 | 219,120 | ||||||
Total revenues
|
1,024,307 | 1,118,210 | ||||||
Cost of revenues
|
||||||||
Cost of professional fees
|
479,751 | 522,780 | ||||||
Cost of software sales
|
227,387 | 192,044 | ||||||
Total cost of revenues
|
707,138 | 714,824 | ||||||
Gross profit
|
317,169 | 403,386 | ||||||
Selling, general and administrative expenses
|
425,989 | 438,268 | ||||||
Commissions on sales
|
55,076 | 103,569 | ||||||
Loss from operations
|
(163,896 | ) | (138,451 | ) | ||||
Other income
|
2,597 | 1,932 | ||||||
Loss before provision for income taxes
|
(161,299 | ) | (136,519 | ) | ||||
Provision for income taxes
|
-- | -- | ||||||
Net loss
|
$ | (161,299 | ) | $ | (136,519 | ) | ||
Comprehensive loss
|
$ | (161,299 | ) | $ | (136,519 | ) | ||
Loss per common share:
|
||||||||
Basic
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
Diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average common shares outstanding:
|
||||||||
Basic
|
11,201,760 | 11,201,760 | ||||||
Diluted
|
11,201,760 | 11,201,760 |
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
For the six months ended
|
||||||||
June 30,
|
||||||||
2014
|
2013
|
|||||||
Revenues
|
||||||||
Professional fees
|
$ | 1,664,314 | $ | 2,079,896 | ||||
Software sales
|
539,803 | 355,363 | ||||||
Total revenues
|
2,204,117 | 2,435,259 | ||||||
Cost of revenues
|
||||||||
Cost of professional fees
|
977,579 | 1,213,423 | ||||||
Cost of software sales
|
455,092 | 305,386 | ||||||
Total cost of revenues
|
1,432,671 | 1,518,809 | ||||||
Gross profit
|
771,446 | 916,450 | ||||||
Selling, general and administrative expenses
|
871,808 | 892,548 | ||||||
Commissions on sales
|
163,752 | 215,875 | ||||||
Loss from operations
|
(264,114 | ) | (191,973 | ) | ||||
Other income
|
5,296 | 3,313 | ||||||
Loss before provision for income taxes
|
(258,818 | ) | (188,660 | ) | ||||
Provision for income taxes
|
-- | -- | ||||||
Net loss
|
$ | (258,818 | ) | $ | (188,660 | ) | ||
Comprehensive loss
|
$ | (258,818 | ) | $ | (188,660 | ) | ||
Loss per common share:
|
||||||||
Basic
|
$ | (0.02 | ) | $ | (0.02 | ) | ||
Diluted
|
$ | (0.02 | ) | $ | (0.02 | ) | ||
Weighted average common shares outstanding:
|
||||||||
Basic
|
11,201,760 | 11,201,760 | ||||||
Diluted
|
11,201,760 | 11,201,760 |
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
For the six months ended
June 30,
|
||||||||
2014
|
2013
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$ | (258,818 | ) | $ | (188,660 | ) | ||
Adjustments to reconcile net loss to
|
||||||||
net cash used in operating activities
|
||||||||
Depreciation and amortization
|
15,482 | 11,496 | ||||||
Stock-based compensation
|
8,805 | 7,427 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
551,413 | (6,243 | ) | |||||
Prepaid expenses and other current assets
|
98,121 | (113,024 | ) | |||||
Accounts payable and accrued expenses
|
(572,855 | ) | 116,014 | |||||
Commissions payable
|
(150,039 | ) | (49,567 | ) | ||||
Deferred revenue
|
(110,356 | ) | 64,286 | |||||
Net cash used in operating activities
|
(418,247 | ) | (158,271 | ) | ||||
Cash flows from investing activities
|
||||||||
Capital expenditures
|
(17,705 | ) | (14,440 | ) | ||||
Payments received on notes receivable
|
2,758 | 1,771 | ||||||
Increase in note receivable
|
-- | (10,000 | ) | |||||
Net cash used in investing activities
|
(14,947 | ) | (22,669 | ) | ||||
Net decrease in cash and cash equivalents
|
(433,194 | ) | (180,940 | ) | ||||
Cash and cash equivalents, beginning of the period
|
2,359,527 | 2,623,016 | ||||||
Cash and cash equivalents, end of the period
|
$ | 1,926,333 | $ | 2,442,076 | ||||
Supplemental cash flow information
|
||||||||
Interest paid
|
$ | -- | $ | -- | ||||
Income taxes paid
|
$ | -- | $ | -- | ||||
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Three Months ended
June 30,
|
Six Months ended
June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Risk free interest rate
|
1.77% | 0.70% | 1.77% | 0.70 – 0.90% | ||||||||||||
Dividend yield
|
0% | 0% | 0% | 0% | ||||||||||||
Expected term
|
5 years
|
5 years
|
5 years
|
5 years
|
||||||||||||
Expected volatility
|
47.3% | 62.2% | 47.3% | 62.2 - 62.8% |
Options outstanding
|
||||||||
Number of
shares
|
Weighted average price per share
|
|||||||
Balance at December 31, 2013
|
1,187,000 | $ | 0.26 | |||||
Options granted, exercised, expired or forfeited
|
-- | -- | ||||||
Balance at March 31, 2014
|
1,187,000 | $ | 0.26 | |||||
Options granted
|
1,000 | 0.24 | ||||||
Options exercised, expired or forfeited
|
(3,000 | ) | 0.11 | |||||
Balance at June 30, 2014
|
1,185,000 | $ | 0.26 |
Number of
shares
|
Weighted average price per share
|
|||||||
Balance at December 31, 2012
|
1,032,500 | $ | 0.29 | |||||
Options granted
|
160,000 | 0.16 | ||||||
Options exercised, expired or forfeited
|
(10,000 | ) | 0.15 | |||||
Balance at March 31, 2013
|
1,182,500 | $ | 0.28 | |||||
Options granted
|
20,000 | 0.18 | ||||||
Options exercised, expired or forfeited
|
(226,000 | ) | 0.22 | |||||
Balance at June 30, 2013
|
976,500 | $ | 0.29 |
Options outstanding
|
Options exercisable
|
|||||||||||||||||||||||||||||
Total shares
|
Weighted average exercise price
|
Weighted average remaining contractual life in years
|
Aggregate intrinsic value
|
Total shares
|
Weighted average exercise price
|
Weighted average remaining contractual life in years
|
Aggregate intrinsic value
|
|||||||||||||||||||||||
1,185,000 | $ | 0.26 | 5.76 | $ | 52,808 | 939,000 | $ | 0.29 | 4.85 | $ | 32,735 |
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Nonvested
|
||||||||
Number of
shares
|
Weighted average
grant date
fair value
|
|||||||
Balance at December 31, 2013
|
431,250 | $ | 0.08 | |||||
Vested
|
(155,000 | ) | 0.08 | |||||
Balance at March 31, 2014
|
276,250 | $ | 0.08 | |||||
Granted
|
1,000 | 0.10 | ||||||
Vested
|
(31,250 | ) | 0.08 | |||||
Balance at June 30, 2014
|
246,000 | $ | 0.08 |
Net Loss
|
Shares
|
Per Share
Amount
|
||||||||||
Basic net loss per common share for the
|
||||||||||||
three months ended June 30, 2014:
|
||||||||||||
Loss available to common stockholders
|
$ | (161,299 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Effect of dilutive stock options
|
-- | -- | -- | |||||||||
Diluted net loss per common share for the
|
||||||||||||
three months ended June 30, 2014:
|
$ | (161,299 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Basic net loss per common share for the
|
||||||||||||
three months ended June 30, 2013:
|
||||||||||||
Loss available to common stockholders
|
$ | (136,519 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Effect of dilutive stock options
|
-- | -- | -- | |||||||||
Diluted net loss per common share for the
|
||||||||||||
three months ended June 30, 2013:
|
$ | (136,519 | ) | 11,201,760 | $ | (0.01 | ) | |||||
Basic net loss per common share for the
|
||||||||||||
six months ended June 30, 2014:
|
||||||||||||
Loss available to common stockholders
|
$ | (258,818 | ) | 11,201,760 | $ | (0.02 | ) | |||||
Effect of dilutive stock options
|
-- | -- | -- | |||||||||
Diluted net loss per common share for the
|
||||||||||||
six months ended June 30, 2014:
|
$ | (258,818 | ) | 11,201,760 | $ | (0.02 | ) | |||||
Basic net loss per common share for the
|
||||||||||||
six months ended June 30, 2013:
|
||||||||||||
Loss available to common stockholders
|
$ | (188,660 | ) | 11,201,760 | $ | (0.02 | ) | |||||
Effect of dilutive stock options
|
-- | -- | -- | |||||||||
Diluted net loss per common share for the
|
||||||||||||
six months ended June 30, 2013:
|
$ | (188,660 | ) | 11,201,760 | $ | (0.02 | ) | |||||
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
●
|
changes in the funding priorities of the U.S. federal government;
|
●
|
changes in the way the U.S. federal government contracts with businesses;
|
●
|
terms specific to U.S. federal government contracts;
|
●
|
our failure to keep pace with a changing technological environment;
|
●
|
intense competition from other companies;
|
●
|
inaccuracy in our estimates of the cost of services and the timeline for completion of contracts;
|
●
|
non-performance by our subcontractors and suppliers;
|
●
|
our dependence on key personnel;
|
●
|
our dependence on third-party software and software maintenance suppliers;
|
●
|
our failure to adequately integrate businesses we may acquire;
|
●
|
fluctuations in our results of operations and the resulting impact on our stock price;
|
●
|
the exercise of outstanding options;
|
●
|
our failure to adequately protect our intellectual property;
|
●
|
the limited public market for our common stock; and
|
●
|
our forward-looking statements and projections may prove to be inaccurate.
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934
|
|
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Information Analysis Incorporated
|
Form 10-Q Second Quarter 2014
|
Information Analysis Incorporated
(Registrant)
|
|||
Date: August 14, 2014
|
By:
|
/s/ Sandor Rosenberg | |
Sandor Rosenberg, Chairman of the
|
|||
Board, Chief Executive Officer,
|
|||
and President
|
Date: August 14, 2014
|
By:
|
/s/ Richard S. DeRose | |
Richard S. DeRose, Executive Vice
|
|||
President, Treasurer, and Chief
|
|||
Financial Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Information Analysis Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 14, 2014
|
By:
|
/s/ Sandor Rosenberg | |
Sandor Rosenberg, Chairman of the Board,
|
|||
Chief Executive Officer and President
|
|||
|
I, Richard S. DeRose, certify that:
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Information Analysis Incorporated;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 14, 2014
|
By:
|
/s/ Richard S. DeRose | |
Richard S. DeRose, Executive Vice
|
|||
President, Treasurer, Chief Financial Officer
|
|||
|
1
|
the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof, (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2
|
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods presented therein.
|
Date: August 14, 2014
|
By:
|
/s/ Sandor Rosenberg | |
Sandor Rosenberg, Chairman of the
|
|||
Board, Chief Executive Officer, and President
|
|
1
|
the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof, (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2
|
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company for the periods presented therein.
|
Date: August 14, 2014
|
By:
|
/s/ Richard S. DeRose | |
Richard S. DeRose, Executive
|
|||
Vice President, Treasurer, and
|
|||
Chief Financial Officer |
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