U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-10416
____________________________________________________
INFODATA SYSTEMS INC.
(Exact Name of Small Business Issuer in its Charter)
Virginia 16-0954695
(State of Incorporation) (I.R.S. Employer Identification No.)
12150 Monument Drive, Fairfax, Virginia 22033
(Address of Principal Executive Office) (Zip Code)
(703) 934-5205 (Issuer's Telephone Number)
__________________________________________________
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
None Not applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock-$.03 Par Value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ____
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on October 21,
2002, as reported on the NASD OTC Bulletin Board, was approximately $712,000.
Shares of Common Stock held by each director and officer and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
The number of outstanding shares of the Company's Common Stock, par value $0.03
per share, was 4,875,822 on October 21, 2002.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
INFODATA SYSTEMS INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations 3
Three Months Ended September 30, 2002 and 2001
Condensed Consolidated Statements of Operations 4
Nine Months Ended September 30, 2002 and 2001
Condensed Consolidated Balance Sheets 5
September 30, 2002 and December 31, 2001
Condensed Consolidated Statements of Cash Flows 6
Nine Months Ended September 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements 7 - 12
Item 2. Management's Discussion and Analysis 13 - 21
Item 3. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 21
(b) Reports on Form 8-K 21
SIGNATURES 21
CERTIFICATIONS 22 - 24
2
PART I. FINANCIAL INFORMATION
Item 1.
INFODATA SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
September 30,
------------------------
2002 2001
-------- --------
Revenues ......................................... $ 2,237 $ 4,061
Cost of revenues ................................. 1,262 3,329
------- -------
Gross profit ..................................... 975 732
------- -------
Operating expenses:
Research and development ................ 132 159
Selling, general and administrative ..... 440 966
------- -------
572 1,125
------- -------
Operating income (loss) .......................... 403 (393)
Interest income .................................. 3 9
Interest expense ................................. (7) (11)
------- -------
Net income (loss) ................................ $ 399 $ (395)
======= =======
Basic net income (loss) per share ....... $ 0.08 $ (0.08)
======= =======
Weighted average basic shares outstanding ........ 4,792 4,755
======= =======
Diluted net income (loss) per share ..... $ 0.08 $ (0.08)
======= =======
Weighted average basic shares outstanding ........ 4,869 4,755
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
INFODATA SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts In Thousands, Except Per Share Data)
(Unaudited)
Nine Months Ended
September 30,
-------------------------
2002 2001
--------- ---------
Revenues ....................................... $ 7,644 $ 11,784
Cost of revenues ............................... 4,969 9,484
-------- --------
Gross profit ................................... 2,675 2,300
-------- --------
Operating expenses:
Research and development .............. 490 430
Selling, general and administrative ... 1,762 3,100
-------- --------
2,252 3,530
-------- --------
Operating income (loss) ........................ 423 (1,230)
Gain on sale of investment ..................... -- 1,068
Interest income ................................ 9 47
Interest expense ............................... (28) (45)
-------- --------
Net income (loss) .............................. $ 404 $ (160)
======== ========
Basic net income (loss) per share ..... $ 0.08 $ (0.03)
======== ========
Weighted average basic shares outstanding ...... 4,791 4,740
======== ========
Diluted net income (loss) per share ... $ 0.08 $ (0.03)
======== ========
Weighted average diluted shares outstanding .... 4,875 4,740
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
INFODATA SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
(Unaudited)
September 30, December 31,
2002 2001
------------- ------------
Assets
Current assets:
Cash and cash equivalents .............................. $ 990 $ 1,002
Accounts receivable, net of allowance of $39 in
2002 and $35 in 2001 ................................... 1,771 2,994
Prepaid expenses and other current assets .............. 137 447
-------- --------
Total current assets .......................... 2,898 4,443
-------- --------
Property and equipment, net
90 185
Other assets .................................................... 20 20
-------- --------
Total assets .................................................... $ 3,008 $ 4,648
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Line of credit ......................................... $ 203 $ 616
Accounts payable ....................................... 135 1,223
Accrued expenses ....................................... 793 1,116
Deferred revenue ....................................... 527 747
-------- --------
Total current liabilities ..................... 1,658 3,702
-------- --------
Commitments and contingencies ................................... -- --
Shareholders' equity:
Common stock ........................................... 142 142
Additional paid-in capital ............................. 20,221 20,221
Accumulated deficit .................................... (19,013) (19,417)
-------- --------
Total shareholders' equity ...................................... 1,350 946
-------- --------
Total liabilities and shareholders' equity ...................... $ 3,008 $ 4,648
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
INFODATA SYSTEMS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
2002 2001
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................. $ 404 $ (160)
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Gain on sale of investment .................................. -- (1,068)
Depreciation and amortization ............................... 106 154
Goodwill and other intangible amortization .................. -- 104
Provision for doubtful accounts ........................... 4 --
Change in related party receivables ......................... -- 302
Changes in operating assets and liabilities:
Accrued interest ............................................ -- (11)
Accounts receivable ......................................... 1,219 (298)
Prepaid expenses and other current assets ................... 310 --
Other assets .............................................. -- 23
Accounts payable ............................................ (1,088) 376
Accrued expenses ............................................ (323) 35
Deferred revenue ............................................ (220) (247)
------- -------
Net cash provided by (used in) operating
activities....................................... 412 (790)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
(20)
Purchases of property and equipment ................................. (11)
Purchases of short-term investments ................................. -- (200)
Proceeds from maturity of short-term investments .................... -- 700
Proceeds from sale of investment .................................... -- 1,092
------- -------
Net cash (used in) provided by investing activities ................. (11) 1,572
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term repayments ........................................... (413) (30)
Issuance of common stock ............................................ -- 37
------- -------
Net cash (used in) provided by financing
activities....................................... (413) 7
------- -------
Net (decrease) increase in cash and cash equivalents ................ (12) 789
Cash and cash equivalents at beginning of period .................... 1,002 321
------- -------
Cash and cash equivalents at end of period .......................... $ 990 $ 1,110
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002 and 2001
NOTE A - BASIS OF PRESENTATION AND LIQUIDITY
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three-month and nine-month periods
ended September 30, 2002, are not necessarily indicative of the results for the
year ending December 31, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2001.
The accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. However, with
the exception of the quarters ended June 30 and September 30, 2002, the Company
has suffered recurring losses from operations. The Company's financial
statements do not include any adjustments relating to the recoverability of
assets and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's continuation as
a going concern is dependent on, among other things, its ability to meet its
2002 budgeted cash flow projections.
Although the Company believes that it will be able to meet its budget
projections in 2002, there can be no assurance that the Company will be
successful in so doing. Failure by the Company to meet its budget expectations
may have a material adverse effect on the Company's financial position, results
of operations or cash flows.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
1) Revenue Recognition - The Company recognizes revenue from the sale of
software licenses in accordance with Statement of Positions No. 97-2,
"Software Revenue Recognition," as amended. Revenue from license
arrangements is recognized upon shipment of the product when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed
and determinable and collectibility is probable. If an ongoing vendor
obligation exists under the license arrangement, revenue is deferred based
on vendor-specific objective evidence of the undelivered element. If
vendor-specific objective evidence does not exist for all undelivered
elements, all revenue is deferred until sufficient evidence exists or all
elements have been delivered. Revenue from annual maintenance and support,
including third party maintenance, was deferred and recognized ratably over
the term of the contract. License revenue from resellers is recognized when
product is sold through to the end user and such sell through is reported
to the Company. Revenue from consulting and training is recognized when the
services are performed and collectibility is deemed probable. Revenue from
consulting and professional services contracts is recognized on the
percentage-of-completion method for fixed price contracts and on the basis
of hours incurred at contract rates for time and materials contracts.
Revenue from cost reimbursement contracts is recognized as costs are
incurred. Any amounts paid by customers prior to the actual performance of
services are recorded as deferred revenue until earned, at which time the
amounts are recognized in accordance with the type of contract.
7
2) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3) Adoption of Accounting Pronouncements - Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," was
issued in June 2001. Under SFAS No. 142, goodwill and other intangible
assets with indefinite lives are no longer amortized, but are reviewed at
least annually for impairment. A two-step impairment test is used to first
identify potential goodwill impairment and then measure the amount of
goodwill impairment loss, if any. SFAS No. 142 is effective for the Company
beginning in 2002, and is required to be applied as of January 1, 2002. The
Company has adopted SFAS 142 as of April 1, 2002, and since the Company had
no goodwill or intangibles on January 1, 2002, there has been no impact of
adopting SFAS No. 142 in the accompanying condensed consolidated financial
statements.
The following table adjusts the reported loss from continuing operations
for the quarter and nine months ended September 30, 2001, and the related
basic and diluted per share amounts to exclude goodwill amortization (in
thousands, except per share amounts):
Quarter Ended Nine Months Ended
September 30, 2001 September 30, 2001
Net loss as reported ................................. $ (395) $ (160)
Goodwill amortization ................................ 40 104
------- ------
Adjusted net loss .................................... $ (355) $ (56)
Basic and diluted net loss per share, as reported .... $ (0.08) $(0.03)
Goodwill amortization ................................ $ 0.01 $ 0.02
------- ------
Adjusted basic and diluted net loss per share ........ $ (0.07) $(0.01)
======= ======
NOTE C - CREDIT FACILITY
The Company maintained a working capital line of credit with Merrill Lynch
Business Financial Services Inc., collateralized by accounts receivable,
equipment and other intangibles that expired on April 30, 2001, thus
accelerating all amounts due under that line of credit. The credit facility
provided the Company with up to a $1,000,000 line of credit at a per annum
interest rate equal to 2.9% over the 30-day commercial paper rate. Advances
under the facility were based on eligible billed accounts receivable less than
90 days old. As of May 30, 2002, the Company had fully repaid all amounts
outstanding under this line of credit and, accordingly, Merrill Lynch Business
Financial Services Inc. has fully released all accounts receivable, equipment
and other intangibles collateralized under the line of credit.
On June 3, 2002, the Company entered into an Assignment and Transfer of
Receivables Agreement ("Assignment Agreement") with Commerce Funding Corporation
("Commerce Funding"). The terms of the Assignment Agreement provide for
assignment of the Company's receivables by Commerce Funding from time to time
and Commerce Funding will, at its sole
8
discretion, make funding available to the Company up to an amount not to exceed
$1,000,000. Interest under this Assignment Agreement is to be paid semi-monthly
at Prime +1.75 percentage points and Commerce Funding will also charge a
processing fee of 0.65% for the first thirty day period based on gross invoice
amounts. The Company is required to pay a minimum charge of approximately $2,000
per month for the interest and processing fees that is deductible from the
actual interest and processing fees due for the month.
Commerce Funding has full recourse against the Company in the event of
non-payment of any receivable assigned by the Company to Commerce Funding. The
Company has granted a security interest to Commerce Funding in all receivables
owned or hereinafter acquired, including all contract rights, proceeds and
returned goods thereof, and all accounts and cash held therein maintained by the
Company with any bank or financial institution. The Assignment Agreement can be
terminated by either party at their discretion and at any time, by giving a
thirty-day written notice to the other party. Commerce Funding may terminate the
Assignment Agreement at any time if the Company commits any event of default. As
of September 30, 2002, the Company had assigned approximately $242,000 of its
receivables which resulted in a line of credit balance of $203,000.
NOTE D - BUSINESS ACQUISITIONS
On March 30, 2000, the Company acquired a business unit from Earth Satellite
Corporation specializing in providing software development services to the U.S.
Government intelligence community. The Company issued 40,000 shares of its
Common Stock with a fair market value of $3.563 per share, which was equal to
the average of the closing bid and ask prices of the Company's Common Stock on
that date. On February 9, 2001, the Company issued an additional 13,334 shares
of its Common Stock with a fair market value of $1.50 per share to Earth
Satellite Corporation pursuant to an adjustment provision included in the
acquisition agreement between the Company and Earth Satellite Corporation in
this transaction. This event resulted in a purchase price adjustment of
approximately $20,000 that was attributed to goodwill. The acquisition cost of
this business unit was approximately $199,000, including $37,000 of direct cost
attributed to the business unit's sole contract. The contract's acquisition
value has been amortized over its life of 18 months, and as of October 31, 2001,
the Company had fully amortized that amount.
NOTE E- TERMINATION OF MERGER AND CUSTOMER CONTRACT
On January 10, 2002, the Company entered into an Agreement and Plan of Merger
(the "Agreement of Merger") between the Company and Science Applications
International Corporation ("SAIC") and Info Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of SAIC ("Acquisition"). Pursuant to the
Agreement of Merger, SAIC was to acquire all of the issued and outstanding
common stock of the Company through the merger (the "Merger") of Acquisition
with and into the Company.
At a meeting of the Company's shareholders held on March 1, 2002, the
shareholders of the Company approved the Agreement of Merger. However,
consummation of the Merger was delayed after the Company was notified by its
major U.S. Government intelligence community customer that the scope of a large
contract (the "Customer Contract"), accounting for approximately 40% of the
Company's revenue in 2001, was going to be substantially reduced. Although the
Company believes that it had performed well under the Customer Contract, and in
fact subsequently received a 100% award fee rating on its performance, the terms
of the Customer Contract gave the government customer the right to change the
scope of its services engagement, which is typical in government contracts.
In January 2002, pursuant to the terms of the Agreement of Merger, the Company's
Board of Directors adopted a resolution to suspend the 1997 Employee Stock
Purchase Plan during the first quarter of 2002 and to subsequently terminate it
upon the then anticipated consummation of the Merger.
9
On April 19, 2002, the Company received a notice from SAIC terminating its
proposed acquisition of the Company pursuant to the Agreement of Merger. As per
the Agreement of Merger, the Company may be required to pay a termination fee of
$50,000 to SAIC under certain specific conditions. Management does not believe
that these conditions exist and does not believe that it will have to pay this
termination fee and accordingly, this amount has not been accrued for in the
accompanying condensed consolidated financial statements.
On April 26, 2002, the Company submitted a settlement proposal to a U.S.
Government agency client in an effort to recover approximately $130,000 in costs
expended (or expected to be expended) by the Company related to the reduction in
scope of a contract and potential termination fees. On August 26, 2002, a
unilateral contract modification was executed in which the Company and the
government agency agreed to an equitable adjustment resulting from the de-scope
of the contract. Accordingly, a $47,105 contract revenue adjustment was recorded
in the quarter ended September 30, 2002.
NOTE F- COMMITMENTS AND CONTINGENCIES
Costs charged to cost-type U.S. Government contracts are subject to annual audit
by the Defense Contract Audit Agency or other duly authorized representatives of
the U.S. Government. No audits have been completed for any periods commencing
after 1998. During the year 2002, the Company anticipates that the audit for the
year 1999 will commence and in the opinion of management, adjustments resulting
from the completion of such audit and future audits are not expected to have a
material impact on the Company's financial position or results of future
operations.
As discussed in Note E, under certain specific conditions, the Company may be
required to pay a termination fee of $50,000 to SAIC.
From time to time, the Company is subject to claims arising in the ordinary
course of business. In the opinion of management, no such matter, individually
or in the aggregate, exists which is expected to have a material effect on the
results of operations, cash flows or financial position of the Company.
NOTE G - SEGMENT REPORTING
The table below presents information about reported segments for the three and
nine month periods ended September 30, 2002 and 2001, as well as a
reconciliation to reported income (loss) before income taxes. Management does
not assign identifiable assets to its segments.
10
Infodata Systems Inc.
Three Months Ended
September 30, 2002
Segment Information
(In Thousands)
Solutions Proprietary Third Party Total
Products Products
----------------- --------------- ------------------ ---------------
Revenues $1,555 $ 572 $ 110 $ 2,237
Direct costs 963 32 110 1,105
----------------- --------------- ------------------ ---------------
Segmental profit $ 592 $ 540 $ 0 1,132
====== ===== ======
Research and development (132)
Other costs not allocated to segments,
primarily selling, general and
administrative (597)
Interest income - net (4)
------
Net income $ 399
======
Infodata Systems Inc.
Three Months Ended
September 30, 2001
Segment Information
(In Thousands)
Solutions Proprietary Third Party Total
Products Products
----------------- --------------- ------------------ ---------------
Revenues $ 2,921 $ 343 $ 797 $4,061
Direct costs 2,239 30 743 3,012
----------------- --------------- ------------------ ---------------
Segmental profit $ 682 $ 313 $ 54 1,049
======= ===== ======
Research and development (159)
Other costs not allocated to segments,
primarily selling, general and
administrative (1,287)
Interest income - net 2
------
Loss $ (395)
======
11
Infodata Systems Inc.
Nine months Ended
September 30, 2002
Segment Information
(In Thousands)
Solutions Proprietary Third Party Total
Products Products
----------------- --------------- ------------------ ---------------
Revenues $ 5,782 $ 1,391 $ 471 $ 7,644
Direct costs 3,888 127 467 4,482
----------------- --------------- ------------------ ---------------
Segmental profit $ 1,894 $ 1,264 $ 4 3,162
======= ======= =====
Research and development (490)
Other costs not allocated to segments,
primarily selling, general and
administrative (2,249)
Interest income - net (19)
------
Net income $ 404
======
Infodata Systems Inc.
Nine months Ended
September 30, 2001
Segment Information
(In Thousands)
Solutions Proprietary Third Party Total
Products Products
----------------- --------------- ------------------ ---------------
Revenues $ 9,305 $ 1,115 $ 1,364 $11,784
Direct costs 7,245 91 1,263 8,599
----------------- --------------- ------------------ ---------------
Segmental profit $ 2,060 $ 1,024 $ 101 3,185
======= ======== =======
Research and development (430)
Other costs not allocated to segments,
primarily selling, general and
administrative (3,985)
Gain on sale of asset 1,068
Interest income - net 2
-------
Net income (loss) $ (160)
=======
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD-LOOKING STATEMENTS RELATING TO PRODUCT AND SERVICE DEVELOPMENT, FUTURE
CONTRACTS, REVENUE, NET INCOME AND THE ADEQUACY OF WORKING CAPITAL ARE BASED ON
CURRENT EXPECTATIONS THAT INVOLVE UNCERTAINTIES AND RISKS ASSOCIATED WITH NEW
PRODUCT AND SERVICE OFFERINGS INCLUDING, BUT NOT LIMITED TO, MARKET CONDITIONS,
SUCCESSFUL PRODUCT DEVELOPMENT, SERVICE INTRODUCTION AND ACCEPTANCE, THE
INTRODUCTION OF COMPETITIVE PRODUCTS, ECONOMIC CONDITIONS, AND THE TIMING OF
ORDERS AND CONTRACT INITIATION. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM CURRENT EXPECTATIONS. READERS ARE CAUTIONED NOT TO PUT UNDUE
RELIANCE ON FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY INTENT OR
OBLIGATION TO UPDATE PUBLICLY THESE FORWARD-LOOKING STATEMENTS, WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
Company Overview
The Company provides its customers with complex information technology solutions
in the area of knowledge management. The Company specializes in creating
solutions that are enabled for use over internal intranets as well as the public
Internet. These products and services are provided to corporate and government
workgroups, departments and enterprises in three market segments. The segments
are information technology consulting services ("Solutions"), sales of
proprietary products ("Proprietary Products"), and the sale of third party
software and hardware ("Third Party Products"). Solutions includes systems
integration, document management analysis and implementation, training and
consulting services surrounding the implementation of the Company's Proprietary
Products, Third Party Products, and other related services. Proprietary Products
include license sales of INQUIRE(R)/Text, Compose(R), AnnoDoc(TM) and their
associated maintenance. Third Party Products include software and hardware with
some related services. For the quarter ended September 30, 2002, Solutions
accounted for 68% of total revenue, Proprietary Products accounted for 26%, and
Third Party Products accounted for the remaining 6%.
The Company's future operating results may vary significantly and are difficult
to predict due to a number of factors, of which many are beyond our control.
These factors include the demand for our services and products, the level of
product and price competition, the length of the consulting services sales
cycle, the delay of deferral or customer implementation, the success of our
direct sales force and indirect distribution channels, the mix of products and
services sold, the timing of new hires, the ability of the Company to control
costs and general domestic economic and political conditions which could have an
adverse effect on the Company's ability to meet its operating goals.
Critical Accounting Policies and Significant Estimates
The preparation of condensed consolidated financial statements requires
management to make judgments based upon estimates and assumptions that are
inherently uncertain. Such judgments affect the reported amounts of revenues on
long-term contracts. Management continuously evaluates its estimates and
assumptions related to long-term contracts and award fee provisions. Management
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions.
13
A portion of our revenue is derived from long-term contracts. Revenues on
long-term fixed-price or time and material contracts with a maximum price are
generally recognized using the percentage-of-completion method of accounting.
Such revenues are recorded based on the percentage that costs incurred in the
applicable reporting period bear to the most recent estimates of total costs to
complete each contract. Estimating future costs and, therefore, revenues and
profits, is a process requiring a high degree of management judgment, including
management's assumptions regarding future operations of the Company as well as
general economic conditions. In the event of a change in total estimated
contract cost or profit, the cumulative effect of such change is recorded in the
period the change in estimate occurs. Frequently, the period of performance of a
contract extends over a long period of time and, as such, revenue recognition
and our profitability from a particular contract may be adversely affected to
the extent that estimated cost to complete or award fee estimates are revised,
delivery schedules are delayed or progress under a contract is otherwise
impeded. Accordingly, our recorded revenues and gross profits from year to year
can fluctuate significantly. In the event cost estimates indicate a loss on a
contract, the total amount of such loss is recorded in the period in which the
loss is first estimated. License revenue from resellers is recognized when
product is sold through to the end user and such sell through is reported to the
Company.
Certain contracts include award fee provisions for increased or decreased
revenue and profit based on actual performance against established targets.
Award fees are included in estimated contract revenue at the time the amounts
can be reasonably determined and are reasonably assured based on historical
experience and other objective criteria. Should the Company fail to perform
sufficiently under such contracts, previously recognized revenues could be
reversed and/or future period revenues could be reduced.
We have recorded a full valuation allowance to reduce our deferred tax assets to
the amount that is more likely than not to be realized. In the event we were to
determine that we would be able to realize our deferred tax assets in the future
in excess of our net recorded amount, an adjustment to the deferred tax
valuation allowance would increase income in the period such determination is
made.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER
30, 2002, AND SEPTEMBER 30, 2001.
Revenues
The Company derives revenues from three segments, Solutions, Proprietary
Products and Third Party Products. Solutions revenue includes consulting
services for both commercial and government customers. Proprietary Product
revenue includes the sale of INQUIRE/Text and AnnoDoc products and services and
related maintenance, and sales of the Company's plug-in based software products.
Third Party Products include software and hardware sold to both government and
commercial customers. Total revenue decreased by $1,824,000, or 45%, for the
three months ended September 30, 2002, as compared to the corresponding period
of the prior year. Revenues for each period consisted of the following:
14
Three Months Ended
(Dollar Amounts in Thousands)
Increase
September 30, 2002 September 30, 2001 (Decrease) %
Solutions
Business Solutions $ 612 $ 744 (18%)
Intelligence 865 2,135 (59%)
INQUIRE 78 42 86%
-------------------------------------------------------------------
Total Solutions Revenue $ 1,555 $ 2,921 (47%)
===================================================================
Proprietary Products
AnnoDoc, Compose and Others 453 122 271%
INQUIRE/Text 119 221 (46%)
-------------------------------------------------------------------
Total Proprietary Products Revenue $ 572 $ 343 67%
===================================================================
Total Third Party Products Revenue $ 110 $ 797 (86%)
===================================================================
Total Revenue $ 2,237 $ 4,061 (45%)
===================================================================
Revenues from Solutions decreased overall by $1,366,000, or 47%, from $2,921,000
for the three months ended September 30, 2001, to $1,555,000 for the three-month
period ended September 30, 2002. The Business Solutions unit within the
Solutions segment decreased by $132,000, or 18%, from $744,000 for the three
months ended September 30, 2001, to $612,000 for the three months ended
September 30, 2002. This decline resulted from the completion of several large
contracts without follow-on or new contracts to replace them. The Intelligence
Solutions unit within the Solutions segment decreased by $1,270,000 or 59%, from
$2,135,000 for the three months ended September 30, 2001, to $865,000 for the
three months ended September 30, 2002, largely because the Company's major U.S.
Government intelligence community customer substantially reduced the scope of a
large contract with the Company during the first quarter of 2002. Although the
Company had performed well, the terms of the contract provide for a unilateral
right for the U.S. Government customer to change the scope of services, which is
typical in government contracts. During the third quarter, the government
customer modified the contract value to provide for an equitable adjustment
resulting from the de-scope of the contract amounting to $47,105. The INQUIRE
Solutions unit within the Solutions segment increased by $36,000, or 86%, from
$42,000 for the three months ended September 30, 2001, to $78,000 for the three
months ended September 30, 2002, due to an increase in consulting work from a
state government customer in the quarter ended September 30, 2002.
Proprietary Product revenue increased by $229,000, or 67%, from $343,000 for the
three months ended September 30, 2001, to $572,000 for the three months ended
September 30, 2002. The increase in proprietary revenue of $229,000 is based on
a few factors. The newly introduced AnnoDoc product contributed sales of
$308,000, which was offset by the declines in INQUIRE/Text maintenance revenues
of $102,000 and Compose and related products of $18,000. The INQUIRE/Text
maintenance revenues will continue to decline as customers move applications off
mainframes.
Third Party Product sales decreased by $687,000, or 86%, from $797,000 for the
three months ended September 30, 2001, to $110,000 for the three months ended
September 30, 2002. The
15
decrease in the third quarter ended September 30, 2002, is due to the decision
by the Company to eliminate low margin sales except for sales of third party
products for those engagements that require hardware and software components
integrated with consulting services.
Gross Profit
Gross profit increased by $243,000, or 33% from $732,000 for the three months
ended September 30, 2001, to $975,000 for the three months ended September 30,
2002. Gross margin as a percent of revenues increased from 18% for the three
months ended September 30, 2001 to 44% for the three months ended September 30,
2002. The reasons for the increase in gross margin ended September 30, 2002
were: (i) increase in utilization of consulting personnel resulting in
reductions in unabsorbed overhead labor; and (ii) high margins on the Company's
product sales for AnnoDoc, Compose and related products.
Research and Development Expenses
Research and development expenses decreased $27,000, or 17%, from $159,000 for
the three months ended September 30, 2001, to $132,000 for the three months
ended September 30, 2002.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $526,000, or 54%, from
$966,000 for the three months ended September 30, 2001, to $440,000 for the
three months ended September 30, 2002. The substantial decrease was due to the
planned reduction in selling and administrative personnel costs, rent expense
and other non-essential expenditures.
Interest Income and Expense
Interest income decreased $6,000, or 67%, from $9,000 for the three months ended
September 30, 2001, to $3,000 for the three months ended September 30, 2002. The
reduction in interest income is due to lower cash and cash equivalent balances,
lesser short-term investments, and lower interest rates compared to the same
period in 2001. Conversely, the Company incurred approximately $7,000 in
interest expense for the quarter ended September 30, 2002, compared to $11,000
of interest expense for the quarter ended September 30, 2001, that resulted from
lower interest rates and lower credit balances.
Net Profit (Loss)
As a result of the above, the Company recorded a net profit of $399,000 in the
second quarter ended September 30, 2002, compared to a net loss of $395,000 for
the quarter ended September 30, 2001. The return to profitability was primarily
attributable to: (i) improved margins and reduced costs; and (ii) increased
utilization for consulting personnel.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2002 AND 2001
Revenues
Total revenue decreased by $4,140,000, or 35%, for the nine months ended
September 30, 2002, as compared to the corresponding period of the prior year.
Revenues for each period consisted of the following:
16
Nine months Ended
(Dollar Amounts in Thousands)
Increase
September 30, 2002 September 30, 2001 (Decrease) %
Solutions
Business Solutions $ 1,786 $ 2,791 (36%)
Intelligence 3,783 6,309 (40%)
INQUIRE 213 205 4%
--------------------------------------------------------------------
Total Solutions Revenue $ 5,782 $ 9,305 (38%)
====================================================================
Proprietary Products
AnnoDoc, Compose and Others 955 456 109%
INQUIRE/Text 436 659 (34%)
--------------------------------------------------------------------
Total Proprietary Products Revenue $ 1,391 $ 1,115 25%
====================================================================
Total Third Party Products Revenue $ 471 1,364 (65%)
====================================================================
Total Revenue $ 7,644 $ 11,784 (35%)
====================================================================
Revenues from Solutions decreased overall by $3,523,000, or 38%, from $9,305,000
for the nine months ended September 30, 2001, to $5,782,000 for the nine-month
period ended September 30, 2002. The Business Solutions unit within the
Solutions segment decreased by $1,005,000, or 36%, from $2,791,000 for the nine
months ended September 30, 2001, to $1,786,000 for the nine months ended
September 30, 2002. This decline resulted from the completion of several large
contracts without follow-on or new contracts to replace them. The Intelligence
Solutions unit within the Solutions segment decreased by $2,526,000 or 40%, from
$6,309,000 for the nine months ended September 30, 2001, to $3,783,000 for the
nine months ended September 30, 2002, largely because the Company's major U.S.
Government intelligence community customer substantially reduced the scope of a
large contract with the Company. Although the Company had performed well under
the contract, the terms of the contract provide for a unilateral right for the
U.S. Government customer to change the scope of services, which is typical in
government contracts. During the third quarter, the government customer modified
the contract value to provide for an equitable adjustment resulting from the
de-scope of the contract amounting to $47,105. The INQUIRE Solutions unit within
the Solutions segment increased by $8,000 or 4%, from $205,000 for the nine
months ended September 30, 2001, to $213,000 for the second quarter ended
September 30, 2002, due to an increase in consulting work from a state
government customer.
Proprietary Product revenue increased by $276,000, or 25%, from $1,115,000 for
the nine months ended September 30, 2001, to $1,391,000 for the nine months
ended September 30, 2002. The increase in proprietary products revenue is
attributed to sales of the Company's recently introduced AnnoDoc product that
had sales of $517,000 for the nine months ended September 30, 2002. This
increase was partially offset by the decline in INQUIRE/Text maintenance
revenues of $223,000 that are expected to decline over time as customers move
applications off mainframes. Compose and related product sales declined by
$18,000 in the nine months ended September 30, 2002.
Third Party Product sales decreased by $893,000 or 65%, from $1,364,000 for the
nine months ended September 30, 2001, to $471,000 for the nine months ended
September 30, 2002. The decrease in the nine months ended September 30, 2002, is
due to the decision by the Company to
17
eliminate low margin sales except for sales of third party products for
engagements that require hardware and software components integrated with
consulting services.
Gross Profit
Gross profit increased by $375,000, or 16%, from $2,300,000 for the nine months
ended September 30, 2001, to $2,675,000 for the nine months ended September 30,
2002. Gross margin as a percent of revenues increased from 20% for the nine
months ended September 30, 2001 to 35% for the nine months ended September 30,
2002. The reasons for the increase in gross margin for the nine months ended
September 30, 2002 were: (i) increase in utilization of consulting personnel
resulting in reductions in unabsorbed overhead labor; (ii) high margins on the
Company's product sales for AnnoDoc, Compose and related products; and (iii) the
receipt of a $195,000 award fee (100% of the maximum).
Research and Development Expenses
Research and development expenses increased $60,000, or 14%, from $430,000 for
the nine months ended September 30, 2001, to $490,000 for the nine months ended
September 30, 2002. The increase was attributable to increased spending for the
development and enhancement of the Company's proprietary products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $1,338,000, or 43%, from
$3,100,000 for the nine months ended September 30, 2001, to $1,762,000 for the
nine months ended September 30, 2002. The decrease in selling, general and
administrative expenses was due to a reduction in selling and administrative
costs and was partially offset by severance costs of $108,922 associated with
the departure of the former president and CEO.
Interest Income and Expense
Interest income decreased $38,000, or 81%, from $47,000 for the nine months
ended September 30, 2001, to $9,000 for the nine months ended September 30,
2002. The reduction in interest income was due to lower cash and cash equivalent
balances, lesser short-term investments, and lower interest rates compared to
the same period in 2001. Conversely, the Company incurred approximately $28,000
in interest expense for the nine months ended September 30, 2002, compared to
$45,000 of interest expense for the nine months ended September 30, 2001, that
resulted from lower interest rates and lower credit balance.
Net Profit
The Company recorded a net profit of $404,000 in the first nine months ended
September 30, 2002, compared to a net loss of $160,000 for the nine months ended
September 30, 2001. The return to profitability was primarily attributable to:
(i) improved margins and reduced costs; and (ii) the receipt of the $195,000
award fee partially offset by the actual $108,922 of severance costs and
associated legal fees of $20,000.
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. However, with
exception of the quarters ended June 30 and September 30, 2002, the Company has
suffered recurring losses from operations. The Company's financial statements do
not include any adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
18
The Company's continuation as a going concern is dependent on, among other
things, its ability to meet its 2002 budgeted cash flow projections.
Although the Company believes that it will be able to meet its budget
projections in 2002, there can be no assurance that the Company will be
successful in so doing. Failure by the Company to meet its budget expectations
may have a material adverse effect on the Company's financial position, results
of operations or cash flows.
At September 30, 2002, the Company had cash and cash equivalents of $990,000.
Net working capital on September 30, 2002, amounted to $1,240,000 as compared to
$741,000 at December 31, 2001. On June 3, 2002, the Company entered into an
agreement to assign its receivables to Commerce Funding Corporation for up to
$1,000,000. This agreement is collateralized by all receivables owned or
hereinafter acquired, including all contract rights, proceeds and returned goods
thereof, and all accounts and cash held therein maintained by the Company with
any bank or financial institution.
Net cash provided by operating activities for the nine months ended September
30, 2002, was $412,000. The primary adjustments to the net income of $404,000 to
arrive at net cash provided in operating activities included: (i) increases in
depreciation and amortization of $106,000; and (ii) decreases in accounts
receivable of $1,219,000, prepaid expenses and other current assets of $310,000,
accrued expenses of $323,000, accounts payable of $1,088,000 and deferred
revenue of $220,000.
Net cash used in investing activities for the nine months ended September 30,
2002, of $11,000 was for the purchase of equipment.
Net cash used in financing activities for the nine months ended September 30,
2002, arose from paying down portions of the line of credit of $413,000.
Net cash flow from operating activities for the nine months ended September 30,
2002, was sufficient to fund the operations of the business. In addition, a new
facility to assign its receivables has been put in place and Management believes
that it will be able to sufficiently meet the Company's working capital
requirements for the next twelve months. The Company's actual cash requirements
may vary materially from those now planned and will depend upon numerous
factors, including the general market acceptance of the Company's products and
services, the growth of the Company's marketing channels, the technological
advances and activities of competitors, and other factors.
Termination of Agreement of Merger
On January 10, 2002, the Company entered into an Agreement and Plan of Merger
(the "Agreement of Merger") between the Company and Science Applications
International Corporation ("SAIC") and Info Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of SAIC ("Acquisition"). Pursuant to the
Agreement of Merger, SAIC was to acquire all of the issued and outstanding
common stock of the Company through the merger (the "Merger") of Acquisition
with and into the Company.
At a meeting of the Company's shareholders held on March 1, 2002, the
shareholders of the Company approved the Agreement of Merger. However,
consummation of the Merger was delayed after the Company was notified by its
major U.S. Government intelligence community customer that the scope of a large
contract (the "Customer Contract"), accounting for approximately 40% of the
Company's revenue in 2001, was going to be substantially reduced. Although the
Company believes that it had performed well under the Customer Contract, and in
fact subsequently received a 100% award fee rating on its performance, the terms
of the Customer Contract gave the
19
government customer the right to change the scope of its services engagement,
which is typical in government contracts.
In January 2002, pursuant to the terms of the Agreement of Merger, the Company's
Board of Directors adopted a resolution to suspend the 1997 Employee Stock
Purchase Plan during the first quarter of 2002 and to subsequently terminate it
upon the then anticipated consummation of the Merger.
On April 19, 2002, the Company received a notice from SAIC terminating its
proposed acquisition of the Company pursuant to the Agreement of Merger. As per
the Agreement of Merger, the Company may be required to pay a termination fee of
$50,000 to SAIC under certain specific conditions. Management does not believe
that these conditions exist and does not believe that it will have to pay this
termination fee and accordingly, this amount has not been accrued for in the
accompanying condensed consolidated financial statements.
On April 26, 2002, the Company submitted a settlement proposal to a U.S.
Government agency client in an effort to recover approximately $130,000 in costs
expended (or expected to be expended) by the Company related to the reduction in
scope of a contract and potential termination fees. On August 26, 2002, the U.S.
Government agency delivered a unilateral contract modification to the Company
agreeing to an equitable adjustment from the de-scope of the contract.
Accordingly, a $47,105 contract revenue adjustment was recorded in the quarter
ended September 30, 2002.
Termination of Chief Executive Officer
On May 20, 2002, the Company's Chief Executive Officer and President left the
Company and, on August 2, 2002, agreed to a lump-sum severance payment of
$108,922. This amount, in addition to the Company's legal fees of $20,000
incurred in connection with the matter, was fully paid in the quarter ended
September 30, 2002.
On August 8, 2002, Harry Kaplowitz, who was then serving as Executive
Vice-President of the Company in charge of its Intelligence Solutions business
unit, was appointed President and Chief Executive Officer. However, Mr.
Kaplowitz and the Company's Board of Directors were unable to agree on the terms
of an employment agreement. On September 4, 2002, Mr. Kaplowitz resumed his
position as Executive Vice President and assumed an expanded role including all
commercial and government IT consulting operations in addition to the
Intelligence Solutions business unit.
On September 4, 2002, Richard T. Bueschel, the Chairman of the Board of
Directors, was appointed acting Chief Executive Officer of the Company until a
new person is appointed to that position.
Contingencies
Costs charged to cost-type U.S. Government contracts are subject to annual audit
by the Defense Contract Audit Agency or other duly authorized representatives of
the U.S. Government. No audits have been completed for any periods commencing
after 1998. During the year 2002, the Company anticipates that the audit for the
year 1999 will commence and in the opinion of management, adjustments resulting
from the completion of such audits and future audits are not expected to have a
material impact on the Company's financial position or results of future
operations.
As discussed above, under certain specific conditions the Company might be
required to pay a termination fee of $50,000 to SAIC.
From time to time, the Company is subject to claims arising in the ordinary
course of business. In the opinion of management, no such matter, individually
or in the aggregate, exists which is
20
expected to have a material effect on the results of operations, cash flows or
financial position of the Company.
Item 3. Controls and Procedures
The officers of the Company executing the certifications set forth below
following the signature page of this report, based on their evaluation of the
Company's disclosure controls and procedures on November 11, 2002 (the
"Evaluation Date"), believe that such disclosure controls and procedures are
effective. Furthermore, such officers have advised that there were no
significant changes in internal controls or other factors that could
significantly affect internal controls subsequent to the Evaluation Date.
The Company does not have a designated "chief financial officer" and does not
have any one person performing functions similar to those generally performed by
a chief financial officer. Mr. Curtis D. Carlson, Secretary of the Company, and
Mr. Gary Gordon, Chief Accounting Officer of the Company, perform functions
which collectively constitute functions similar to those generally performed by
a chief financial officer. Therefore, the representations contained in the
certifications included in and filed as exhibits to this report, as signed by
such two officers, must be read collectively and not individually.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports On Form 8-K
(a) Exhibits
The following Exhibits are filed herewith:
Exhibit Number Document
99.1 Certification of Acting Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350
99.2 Certification of Chief Accounting Officer Pursuant to 18
U.S.C. Section 1350
99.3 Certification of Corporate Secretary Pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
three-month period ended September 30, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INFODATA SYSTEMS INC.
Date: November 14, 2002 BY: /s/ Gary I. Gordon
-----------------------------
Gary I. Gordon
Chief Accounting Officer
(Principal Financial and
Accounting Officer)
21
CERTIFICATIONS
I, Richard T. Bueschel, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Infodata Systems
Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Richard T. Bueschel
------------------------
Richard T. Bueschel
Acting Chief Executive Officer
22
CERTIFICATIONS
I, Gary I. Gordon, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Infodata Systems
Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Gary I. Gordon
------------------------
Gary I. Gordon
Chief Accounting Officer
23
CERTIFICATIONS
I, Curtis D. Carlson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Infodata Systems
Inc.;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/s/ Curtis D. Carlson
--------------------------
Curtis D. Carlson
Corporate Secretary
24