Intellicheck Mobilisa, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; comparative period is Q1 2014. The company develops identity-verification and access-control products and wireless systems for government, military, and commercial markets. Financial statements are unaudited.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $987,127 | $1,092,049; down 9.6% |
| Gross profit / margin | $594,965 / 60.3% | $729,402 / 66.8% |
| Operating expenses | $1,922,228 | $1,639,230 |
| Operating loss | $(1,327,263) | $(909,828) |
| Net loss / diluted loss per share | $(1,302,113) / $(0.14) | $(909,684) / $(0.21) |
| Adjusted EBITDA (non-GAAP) | $(898,417) | $(709,916) |
| Cash used in operating activities | $(707,070) | $(1,031,280) |
Cash and cash equivalents were $9.735 million at March 31, 2015, compared with $2.966 million at December 31, 2014. Working capital was $8.389 million. Current assets were $10.573 million and current liabilities $2.184 million. Cash rose primarily from the January stock offering, which generated approximately $7.845 million in net proceeds; financing cash flow was $7.629 million. Investing activities used $154,000, including $125,000 for a patent purchase.
Total liabilities were $2.674 million. The company had no revolver borrowings and reported approximately $652,000 of unused availability under its asset-secured, $2 million credit facility, which matures October 15, 2015. A vehicle-related note had $24,404 outstanding, net of current portion. No cash equivalents were held at quarter-end.
Material changes and operating trends
- Identity Systems revenue fell 14% to approximately $928,000, primarily due to fewer defense identity contracts. Wireless revenue rose to approximately $59,000 from $18,000, attributed to two additional installation projects.
- Booked orders declined 28% to $791,000. Backlog was approximately $292,000 at March 31, versus $358,000 a year earlier and $530,000 at December 31, 2014.
- Gross margin declined to 60.3%, which management attributed to fewer defense identity-system contracts.
- Operating expenses rose 17.3%. Selling expense decreased, while general and administrative expense increased, principally due to non-compete amortization and higher stock-compensation costs; R&D expense also increased.
- Shares outstanding rose from 4,934,601 at year-end to 9,826,333 at quarter-end following issuance of 4,857,143 shares in the January offering. Weighted-average shares increased to 9,057,326 from 4,431,589.
Outlook, risks, and notable items
- Management said available cash, expected operating cash flow, and credit-facility availability should meet anticipated working-capital and capital-expenditure needs for at least 12 months from the filing date. This is a forward-looking expectation, not a guarantee.
- The company may seek additional capital for expansion, marketing, market development, infrastructure, competitive needs, or acquisitions; it gave no assurance that funding would be available on acceptable terms.
- Management reported no Q1 goodwill or definite-lived intangible impairment indicator. However, a $4.207 million goodwill impairment was recorded in Q4 2014, and the company planned its next annual goodwill test for Q4 2015.
- Approximately $44 million of federal and New York tax-loss carryforwards were reported, but realization is uncertain; potential Section 382 limitations had not been determined. A full valuation allowance was recorded against net deferred tax assets.
- The filing identifies economic weakness and reduced government or commercial spending as risks. The revolver is secured by company assets and has a tangible-net-worth covenant. Cash is maintained at one financial institution.
- Other notable commitments include payments under former executives’ separation/non-compete agreements, a related-party office lease guaranteed by the company, and a PR-services agreement at $8,000 per month for an initial 12-month term. The company reported no legal proceedings expected to have a material adverse effect.
Important facts for investors to verify
- Whether defense-contract activity, orders, and backlog recover after the Q1 declines.
- Cash burn and liquidity after the offering, including the credit facility’s borrowing-base availability, covenant compliance, and October 2015 maturity.
- Potential dilution from the large share issuance and outstanding options, restricted stock, and warrants.
- Assumptions underlying management’s 12-month liquidity outlook and the timing or need for further financing.
- Section 382 treatment and eventual realizability of tax-loss carryforwards, along with future goodwill impairment assessments.