Business context and reporting period
The supplied filing is Information Analysis Incorporated’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2014. The request identifies Firefly Neuroscience, Inc.; that does not match the registrant named in the filing and should be verified. Information Analysis provides IT modernization, software migration, software sales, and related consulting services, primarily to government and commercial customers.
Financial performance and liquidity
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $1.357 million | $3.218 million | $3.561 million | $5.653 million |
| Gross profit; margin | $604,152; 44.5% | $755,517; 23.5% | $1.376 million; 38.6% | $1.672 million; 29.6% |
| Operating income (loss) | $25,553 | $105,715 | $(238,561) | $(86,258) |
| Net income (loss) | $27,988 | $108,367 | $(230,830) | $(80,293) |
| Operating cash flow | Not presented quarterly | $(277,164) | $(300,804) |
For Q3, professional-fee revenue was $944,131, down 7.2%, and software revenue was $413,016, down 81.2%. For the nine-month period, professional-fee revenue fell 15.8% to $2.608 million and software revenue fell 62.7% to $952,819. Nine-month basic and diluted loss per share was $0.02, versus $0.01 loss a year earlier; Q3 earnings per share rounded to $0.00, versus $0.01.
At September 30, cash and equivalents were $2.067 million, down from $2.360 million at December 31, 2013. Current assets were $3.218 million and current liabilities $1.393 million; stockholders’ equity was $1.887 million. The company reported no non-current liabilities and no borrowings under its $1 million revolving credit line. The line was due to expire March 1, 2015. Nine-month investing cash use was $15,607; there were no financing cash flows presented. No interest or income taxes were paid.
Changes versus comparable periods
- Q3 revenue decreased 57.8% and net income declined to $27,988. The prior-year quarter included a large software order; management also cited changes in product mix and smaller, unevenly timed orders.
- Nine-month revenue fell 37.0%, and net loss widened from $80,293 to $230,830, mainly amid lower software sales and reduced professional-services work.
- Gross margin improved in both comparisons, largely because software gross margin rose as referral fees and product mix changed. Professional-services gross margin declined: management cited contract expirations, funding reductions, phase changes, and, for Q3, a lower proportion of fixed-price unit billing.
- Cash declined by $292,771 over the first nine months. Receivables fell by $573,885, primarily from collections on large software orders; payables/accruals, commissions payable, and deferred revenue also declined.
Outlook, risks and other matters
Management said existing cash and its operating plan should be sufficient to meet cash requirements for the next 12 months. It reported no material capital-expenditure commitments or off-balance-sheet arrangements. No specific revenue or earnings guidance was provided.
Four customers accounted for 57.6% of Q3 revenue, including two federal agencies, a government-services subcontracting company, and one commercial customer. Management highlighted exposure to federal funding and contracting changes, customer concentration, contract timing and cost estimates, competition, technology changes, key personnel, and reliance on third-party software suppliers. It said risk factors had not materially changed from the 2013 Form 10-K. No legal proceedings were reported. Management stated disclosure controls were effective and there were no material quarterly changes in internal control over financial reporting.
The filing discusses newly issued accounting standards, including revenue recognition Topic 606, effective for the company beginning January 1, 2017; management was assessing its impact and adoption method. It did not expect ASU 2014-12 or the new going-concern disclosure guidance to materially affect the financial statements.
Investor verification points
- Confirm the registrant identity: the filing is for Information Analysis Incorporated, not the company named in the request.
- Assess the persistence of revenue and profitability given the sharp software-sales decline, contract changes, and customer concentration.
- Verify the revolving credit line’s renewal or replacement after its stated March 1, 2015 expiration.
- Monitor cash use and management’s 12-month liquidity assessment, particularly if operating losses continue.
- Review the underlying 2013 Form 10-K for full risk-factor, tax, and commitment disclosures; this 10-Q refers readers to it.