Business Context and Reporting Period
Company: Information Systems Associates, Inc. (ISA), a Florida corporation (Note: Request metadata listed "DUOS TECHNOLOGIES GROUP, INC." but the filing text identifies the registrant as Information Systems Associates, Inc.).
Reporting Period: Fiscal year ended December 31, 2009.
Business Overview: ISA operates as a Value Added Reseller (VAR) and solution provider for enterprise asset management software, focusing on corporate real estate and IT data center infrastructure. Key offerings include reselling third-party software (e.g., Aperture Technologies' VISTA, VisionFM) and providing proprietary data collection services via its "ON SITE PHYSICAL INVENTORY" (OSPI) software. The company also entered a strategic alliance with Rubicon Software Group, plc, in April 2009 to access European markets and reduce development costs.
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Revenue | $780,244 | $1,225,461 |
| Gross Profit | $742,677 | $1,180,772 |
| Gross Margin | 95.19% | 96.35% |
| Operating Expenses | $1,751,433 | $1,769,356 |
| Net Loss | $(1,009,195) | $(626,108) |
| Loss Per Share (Basic/Diluted) | $(0.06) | $(0.05) |
| Cash and Cash Equivalents | $21,047 | $204,768 |
| Total Assets | $488,892 | $838,495 |
| Total Liabilities | $113,316 | $33,825 |
| Stockholders' Equity | $375,576 | $804,670 |
| Working Capital | $140,729 | $783,502 |
Debt and Liquidity: As of December 31, 2009, the company had a line of credit with Wachovia Bank with an outstanding balance of $20,055 (personal guarantee by the President) and a note payable for insurance of $3,276. Cash flows used in operations were $183,645, primarily due to the net loss, partially offset by non-cash stock issuances for services ($671,438).
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by $445,217 (36.3%) from 2008 to 2009. Management attributes this to a decrease in the sale of professional services, maintenance contracts, and time-and-materials arrangements.
- Increased Net Loss: The net loss widened by $383,087 (61.2%) to $1,009,195. This was driven by the revenue decline and significant operating expenses, including $1.22 million in professional fees and increased payroll due to two new positions.
- Asset Composition: Property and equipment increased significantly from $21,168 to $174,288, primarily due to the capitalization of software development costs for Version 2 of the OSPI product.
- Cash Position: Available cash dropped by approximately 90% to $21,047, reflecting the cash burn from operations and investing activities (software development).
Guidance, Outlook, Risks, and Contingencies
Outlook and Guidance: Management expects revenues to increase in 2010 as the business plan is implemented. However, the company estimates it requires approximately $300,000 in capital to sustain operations through 2010. There is no formal quantitative guidance provided.
Going Concern: The independent auditors have issued a "going concern" opinion. The company has incurred significant losses and has an accumulated deficit of $1,808,504. Viability depends on obtaining future financing and the success of future operations.
Risks and Contingencies:
- Liquidity Risk: The company has no committed credit facilities sufficient to fund its business plan and may need to raise equity or debt, potentially causing dilution.
- Customer Concentration: One major customer accounted for 81% of revenue in 2009 ($634,357) and 41% of accounts receivable.
- Legal Proceedings: Phuture World, Inc. filed a lawsuit in April 2009 alleging breach of a software development contract, seeking damages in excess of $15,000. The company is contesting the claim and believes it has counterclaims.
- Stock Liquidity: Common stock is quoted on the Over-The-Counter Bulletin Board and is subject to "penny stock" regulations, which may limit the ability of shareholders to resell shares.
- Key Person Risk: The business is heavily dependent on President Joseph P. Coschera, who owns approximately 34% of the stock and controls the Board.
Investor Verification Checklist
- Capital Sufficiency: Verify if the company has secured the estimated $300,000 needed to fund operations through 2010, given the low cash balance of $21,047.
- Customer Dependency: Assess the stability of the single customer representing 81% of 2009 revenue and the risk of losing this contract.
- Revenue Recognition: Review the specific contracts for professional services and software licenses to understand the timing of revenue recognition, especially given the shift from time-and-materials to fixed-price or milestone-based models.
- Legal Exposure: Monitor the status of the Phuture World, Inc. lawsuit and any potential counterclaims.
- Stock Issuance: Analyze the impact of significant share-based compensation (stock issued for services) on shareholder dilution and future cash burn.