Monday April 20, 4:00 pm Eastern TimeCompany Press ReleaseSOURCE: Information Analysis IncorporatedInformation Analysis Inc. Reports a Profit for FY1998 FirstQuarterQuarterly highlights: * Revenues of $4.2 million, up 167% vs. 1Q97 * Netincome of $60,000, or $0.01 per share, vs. year-earlier loss * Quarterlybookings of $5.8 million * 17 Year 2000 remediation contracts currently inhouseFAIRFAX, Va., April 20 /PRNewswire/ -- Information Analysis Inc. (Nasdaq: IAIC - news) today reportedresults for the first quarter of fiscal 1998 ended March 31, 1998. Revenues were $4,169,000, up 167% fromthe $1,562,000 reported in 1997's first quarter. IAI reported net income of $60,000, or $0.01 per share,compared to a loss of $371,000, or $0.07 per share in 1997's first quarter. On a sequential basis, revenues improved 43% from the fourth quarter of 1997's $2,914,000, and the companyreversed a loss of $424,000, or $0.07 per share, reported in the prior quarter. 'We're very pleased by these results, and especially pleased that we achieved profitability in the quarter,' saidSandor Rosenberg, IAI's Chairman and Chief Executive Officer. 'We began the quarter with six Year 2000contracts in house; we closed the quarter with 17. We are assembling a blue- chip roster of customers for ourUNICAST/2000 software tool, including Canada Life Assurance (UK), Arbitron, Gulfstream International, andthe Bureau of National Affairs. Moreover, our partnership with Computer Associates International, Inc. (CA)brought us a significant number of new orders in the quarter that just ended, plus leads which we believe wewill convert to orders as this quarter progresses.' The company reported total Year 2000 bookings in the quarter of $5.8 million, including product and factoryservices that will be performed at the company's Year 2000 International Solutions Factory in Fairfax, Virginia.This compares to product and service bookings of $1.6 million in the fourth quarter of FY1997. In addition toits own solutions factory, the company now has five solutions partners that use UNICAST/2000 for remediationof certain CA languages. These partners include CACI International, ManTech, and Software InternationalCorporation. Next several quarters will be crucial 'We believe we're successfully positioning ourselves as a provider of Year 2000 software and services,' Mr.Rosenberg said. 'However, the next few quarters will be crucial to sustaining the momentum we'veestablished. To maintain our order flow, we are dependent upon the continuing efforts of CA, and theircontinued emphasis on finding Year 2000 solutions for their customers. To that end, our highest priority mustbe to support and train CA's sales force.' Mr. Rosenberg said IAI's revenues over the next year would be driven by growth in both professional servicesand in sales of UNICAST/2000 software. 'We are aware a general perception that Year 2000 issues maysomehow be overblown, and that the market will be much smaller than previously anticipated,' Mr. Rosenbergsaid. 'After meeting with dozens of prospective customers, we do not share this pessimism. Rather, we findthat organizations are coming to terms with the absolute need for Year 2000 compliance, but are doing somethodically and with costs and resources uppermost in their minds. The ability to both provide a remediationtool and serve as an external resource to carry out that remediation is a decided plus for IAI.' Finally, Mr. Rosenberg outlined the company's plan for achieving sustained revenue growth and profitability.'During the first quarter, UNICAST/2000 for CA-ADS went from factory availability to general availability,UNICAST/2000 for CA-IDMS COBOL became factory available, and UNICAST/2000-PC for UNISYSCOBOL entered beta testing. Our goal is to quickly follow with remediation tools for other CA and non-CAlanguages, and to enhance existing software tools. On the professional services side of our business, we willstaff our Fairfax International Solutions Factory to provide quick, thorough, and accurate remediation servicesto our customers. We are currently moving toward a goal of having the capacity to remediate 400 million lines ofcode per year.' About Information Analysis Incorporated Information Analysis Incorporated (www.infoa.com), headquartered in Fairfax, Virginia, is a world-classprovider of products and services for automated transition engineering of computer systems. IAI provideshighly automated software and platform conversion, modernization and migration. Through its UNICAST/2000product family, IAI provides clients the ability to achieve Year 2000 compliance in-house or off-site at IAI's orother certified solution factories. Additional information for investors This release may contain forward-looking statements regarding the Company's business, customer prospects, orother factors that may affect future earnings or financial results. Such statements involve risks and uncertaintieswhich could cause actual results to vary materially from those expressed in the forward-looking statements.Investors should read and understand the risk factors detailed in the Company's 10-KSB for the fiscal yearended December 31, 1997 and in other filings with the Securities and Exchange Commission. All product names referenced herein are the trademarks of their respective companies. Information Analysis IncorporatedCondensed Consolidated Income StatementsThree months ended March 31,(in thousands, except per sharedata; unaudited) 1998 1997Net revenue:Professional services $2,037 $1,498Software sales 2,132 64Total revenue 4,169 1,562Cost of goods sold and servicesprovided:Cost of professional services 1,593 1,200Cost of software sales 575 51Total cost of goods soldand services provided 2,168 1,251Gross margin 2,001 311Operating expenses:Sales, general andadministrative 1,686 579Research and development 287 24Total operating expenses 1,973 603Operating income (loss) 28 (292)Other income (expense) 32 (5)Income (loss) before incometaxes 60 (297)Provision (benefit) forincome taxes -- 74Net income (loss) $60 $(371)Net income (loss) per share:Basic $0.01 $(0.07)Diluted $0.01 $(0.07)Shares used in calculatingearnings per share:Basic 6,497,215 5,007,349Diluted 8,205,965 5,007,349Information Analysis IncorporatedCondensed Consolidated Balance SheetsMarch 31, December 31,(in thousands; unaudited) 1998 1997AssetsCurrent AssetsCash and cash equivalents $3,356 $364Accounts receivable, net 5,089 3,128Refundable income taxes 33 33Other 308 156Total current assets 8,786 3,681Fixed assets, net 864 780Capital leases, net 43 50Capitalized software, net 5,207 4,431Goodwill and other 61 75Total assets $14,961 $9,017Liabilities and Shareholders' EquityCurrent liabilities:Accounts payable 1,331 1,122Payroll and other accruedliabilities 1,443 1,178Revolving line of credit -- 600Current portion of long-term debt 103 104Other 20 23Total current liabilities 2,897 3,027Long term debt -- --Other non-current liabilities 12 12Total liabilities 2,909 3,039Common stock, par value $0.01,15,000,000 shares authorized;8,116,655 and 7,498,430 issued;6,612,044 and 5,993,819outstanding at March 31, 1998 andDecember 31, 1997 respectively 81 75Additional paid-in capital 12,527 6,518Retained earnings 298 239Less treasury stock;1,504,611 shares at cost (854) (854)Total shareholders' equity 12,052 5,978Total liabilities andshareholders' equity $14,961 $9,017SOURCE: Information Analysis Incorporated
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