8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 12, 2021

INFORMATION ANALYSIS INCORPORATED

(Exact name of registrant as specified in its charter)

VA	000-22405	54-1167364
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

12015 Lee Jackson Memorial Highway

Suite 210

Fairfax, VA 22033

(Address of principal executive offices, including zip code)

703-383-3000

(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01          Entry into a Material Definitive Agreement

On November 12, 2021, Information Analysis Incorporated (“IAI”) entered into a Stock Purchase Agreement among IAI, Jeffrey P. Gerald, as Seller, and Gray Matters, Inc., a Delaware corporation (“GMI”), under which IAI is to purchase all of the outstanding shares of GMI. See the press release under Item 9.01 which describes GMI’s business. Subject to positive or negative adjustments tied to GMI’s working capital at the closing as measured against a working capital target, the purchase price for the shares consists of (i) $1,500,000 in value of IAI shares of common stock which shall be escrowed at the closing, (ii) $7,500,000 in cash consideration, (iii) deferred consideration of $1,500,000 payable 24 months after the closing of the transaction and (iv) earn-out consideration of up to $4,000,000 of which up to $2,000,000 is dependent upon GMI achieving gross revenue targets in 2022 and up to $2,000,000 is dependent upon GMI achieving gross profit targets in 2022. 2022 gross revenue and gross profits of at least $6,000,000 and $3,750,000, respectively, will result in the full $4,000,000 earn-out payment being achieved.

The Stock Purchase Agreement contains standard representations, warranties and covenants. There is an indemnity cap of $1,000,000 in excess of a $1,000,000 indemnity basket which if exceeded will result in dollar one indemnity coverage, provided the cap is increased to $4,500,000 for indemnity claims arising from breaches of representations for intellectual property matters, environmental claims, employee benefits, taxes and government contract matters. IAI indemnity claims shall first be satisfied from the stock escrow, then from the deferred consideration, and then from the 2022 earn-out consideration. The Seller is subject to a three-year non-competition covenant.

The closing of the Stock Purchase Agreement is subject to standard closing conditions.

Item 9.01         Financial Statements and Exhibits

Exhibit No.                           Description         

99.1                                        Press release which IAI issued on November 16, 2021

104                                       Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		INFORMATION ANALYSIS INCORPORATED
Date: November 16, 2021	By:	/s/ Timothy G. Hannon
		Timothy G. Hannon
		Chief Financial Officer

EX-99.1

Exhibit 99.1

Information Analysis Begins Corporate Transformation - Enters Into Definitive Agreement to Acquire Gray Matters, a Zero Trust, Blockchain-Enabled Technology Platform

November 16, 2021- Fairfax, Virginia – Information Analysis Incorporated (“IAI” or “the Company”) (OTCQB:IAIC) entered into a definitive agreement, subject to customary closing conditions, to acquire Gray Matters, Inc (“Gray Matters”) in a combined cash and stock transaction valued at $10.5 million consisting of $7.5 million cash at close; deferred consideration of $1.5 million; and $1.5 million in IAI stock. The terms also include up to $4.0 million in additional consideration for achieving certain performance metrics in 2022. The parties anticipate closing no later than December 2021.

Gray Matters is a leader in blockchain and encryption algorithm technology and was founded to solve real-world problems through innovation in secure Supply Chain Management (SCM) in United States intelligence, national security and diplomatic organizations. Gray Matters has operated in “stealth mode” since its inception. In that time-frame, the company has transformed how blockchain supports SCM; constructing a Zero Trust product to secure and monitor the lifecycle of mission-critical materials from manufacturing through destruction and recycling.

“I’m excited to announce the first anchor transaction in the transformation of our business we announced two months ago,” said IAI Chairman and CEO Jamie Benoit. He added, “Gray Matters’ foundational proof-of-concept contracts in global government organizations with endlessly complex missions, demonstrate the viability of its technology. Gray Matters’ zero-trust blockchain stack is adaptable to numerous commercial and government markets and we expect to make significant investments in building out the team we’ll need to take a Software-as-a-Service (SaaS) offering to the broader commercial and government marketplace. The strength of this acquisition lies within the technology’s ability to touch all aspects of supply chain from visibility to management and security. With renewed focus on the global supply chain, we believe this investment positions us well to capture market share. We expect this acquisition to be disruptive and fundamentally challenge the existing supply chain security paradigm across the private sector as well as Federal, State, and Local governments. Upon closing, our initial plan is to operate Gray Matters as a stand-alone business unit as we execute on our broader technology thesis.”

Gray Matters CEO Jeff Gerald added, “We are extremely excited about our future with IAI. Our secure supply chain technology is perfectly in line with IAI’s long term vision to create a comprehensive and secure SaaS solution to manage an increasingly complex global supply chain. Jamie has the right blend of experience with our core customers combined with a proven track record growing technology companies and I am excited to work with him to take our platform to the next level.”

This transaction offers compelling strategic value for IAI and its stockholders because the Gray Matters’ technology:

● Provide a disruptive solution to international supply-chain challenges for an existing and expanding customer base;

● Significantly improves security and efficiencies in complex supply chain systems by establishing immutable technological trust between parties;

● Is based upon scalable core intellectual property which can be applied to a diverse array of organizations and industries;

● Product is sold on a SaaS basis, provides solid recurring revenue potential.

About Information Analysis Incorporated

Information Analysis Incorporated (www.infoa.com), headquartered in Fairfax, Virginia, is an information technology products and services company. The Company historically specializes in software conversions, systems modernization and security.

In August 2021, IAI appointed Jamie Benoit to lead a corporate transformation of IAI into a provider of edge technology solutions to commercial and government organizations. For over a decade, he served as Chief Executive Officer of FedData, a technology products and services firm focused on mission support in the intelligence community and DoD. In that capacity, Mr. Benoit led FedData through the acquisition of three different companies and through a sale in that delivered an 80%+ IRR to FedData’s private equity partners and employee shareholders. He subsequently delivered nearly 50% EBITDA growth in 18 months to his new private equity partners prior to leaving the company in 2019.

Additional information for investors

This release may contain forward-looking statements regarding the Company's business, customer prospects, or other factors that may affect future earnings or financial results. Such statements involve risks and uncertainties which could cause actual results to vary materially from those expressed in the forward-looking statements. Investors should read and understand the risk factors detailed in the Company's 10-K for the fiscal year ended December 31, 2020, and in other filings with the Securities and Exchange Commission.

For additional information contact:

Jeremy Hellman, CFA

Vice President

The Equity Group Inc.

(212) 836-9626

Tim Hannon, CFO

thannon@infoa.com

(703) 293-7925

XML

Document And Entity Information	Nov. 12, 2021
Document Information [Line Items]
Entity, Registrant Name	INFORMATION ANALYSIS INCORPORATED
Document, Type	8-K
Document, Period End Date	Nov. 12, 2021
Entity, Incorporation, State or Country Code	VA
Entity, File Number	000-22405
Entity, Tax Identification Number	54-1167364
Entity, Address, Address Line One	12015 Lee Jackson Memorial Highway
Entity, Address, Address Line Two	Suite 210
Entity, Address, City or Town	Fairfax
Entity, Address, State or Province	VA
Entity, Address, Postal Zip Code	22033
City Area Code	703
Local Phone Number	383-3000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0000803578