Filing summary: Form 10-Q for the quarter ended March 31, 2012
Issuer identity: The filing identifies the registrant as Information Analysis Incorporated, a Virginia information-technology services and software company—not Firefly Neuroscience, Inc. Verify that this is the intended filing before relying on the figures below.
Business context
Information Analysis Incorporated provides information-systems modernization, software migration, IT services and consulting, primarily to government and commercial customers. The filing covers the three months ended March 31, 2012, with comparison to the same quarter in 2011. Financial statements are unaudited except the December 31, 2011 balance sheet.
Financial performance and position
| Metric | Q1 2012 | Q1 2011 / comparator |
|---|---|---|
| Revenue | $1,513,990 | $1,423,737; up 6.3% |
| Gross profit and margin | $532,687; 35.2% | $554,438; 38.9% |
| Operating loss | $(24,041) | $(11,228) |
| Net loss | $(22,550) | $(9,095) |
| Operating cash flow | $1,131,556 | $(117,677) |
| Cash and cash equivalents | $2,414,127 at March 31 | $1,280,926 at December 31, 2011 |
| Current assets / current liabilities | $3,697,209 / $1,720,666 | At March 31, 2012 |
| Debt and credit availability | No borrowings under the line; $481,000 available based on receivables | $1 million revolving facility expires December 1, 2012 |
Professional-services revenue rose 5.6% to $1,165,249; software product and maintenance revenue rose 8.8% to $348,741. Gross margin declined as a percentage of sales in both professional services and software. The company reported no non-current liabilities and no material capital-expenditure commitments.
Changes, outlook and risks
- Management attributed higher revenue to new and expanded contracts and a new maintenance contract. Lower margins reflected reduced activity or maturity of more profitable contracts and newer work with lower margins.
- SG&A excluding commissions increased 5.0% to $408,079, while commissions declined 16.0% to $148,649. The net loss widened, which management attributed to lower aggregate contract margins and higher overhead labor.
- Operating cash flow improved substantially, primarily reflecting a $2,185,832 decrease in accounts receivable; accounts payable and accrued expenses also decreased $971,400. Deferred revenue declined $305,461. Thus, the positive quarterly cash flow included significant working-capital effects.
- Management said current cash and its operating plan should meet cash requirements for the next 12 months and beyond. No specific revenue or earnings guidance was provided.
- Four customers represented 34.0%, 15.9%, 27.1% and 12.4% of Q1 revenue, respectively. Key risks include federal funding and contracting changes, competition, technology change, contract cost or timing estimates, subcontractor and supplier performance, key-person dependence, and reliance on third-party software providers.
- No legal proceedings or material subsequent events were reported. Management stated that disclosure controls were effective and that there were no material changes to internal control over financial reporting during the quarter; risk factors were unchanged from the 2011 Form 10-K.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing is for Information Analysis Incorporated, not Firefly Neuroscience, Inc.
- Reconcile the reported 6.3% revenue growth with the decline in gross margin and the wider net loss; assess whether lower-margin contract mix persists.
- Evaluate customer concentration and the sustainability of operating cash flow, given the large receivables collection and reductions in payables and deferred revenue.
- Confirm actual borrowing capacity: the filing reports $481,000 available under a $1 million receivables-based line, with expiration on December 1, 2012.
- Check share-count disclosures: the balance sheet reports 11,196,760 shares outstanding, while the cover page reports 11,201,760 shares as of May 8, 2012.