Mergers and Acquisitions - The Company entered into a merger agreement with Firefly Neuroscience, Inc. in an all-stock transaction, expected to close in late May or early June 2024[25] - The Company plans to sell its Tellenger subsidiary to WaveTop Solutions, Inc. as part of the merger[25] - The merger agreement includes the sale of Tellenger subsidiary for $1.5 million in cash, which is expected to contribute to the company's liquidity[91] - The company entered into a merger agreement with Firefly Neuroscience, Inc. in November 2023, contingent upon shareholder approval and other closing conditions[91] Financial Performance - Total revenue for the three months ended March 31, 2024, was $1,915,372, a decrease of 11.3% from $2,160,123 in the same period of 2023[50] - Professional services revenue decreased by $217,591 or 10.3%, from $2,103,458 in Q1 2023 to $1,885,867 in Q1 2024[99] - Gross profit increased by $42,460 or 6.5%, to $699,258 for Q1 2024, with professional services gross profit as a percentage of revenue rising from 31.2% to 37.1%[100] - Operating loss from continuing operations improved by $280,759 or 29.4%, from a loss of $954,730 in Q1 2023 to a loss of $673,971 in Q1 2024[102] - The company generated a net loss from continuing operations of $673,950 for the quarter ended March 31, 2024, with a net working capital deficit of $480,073[106] Revenue Sources - The Company reported that its prime contracts with U.S. government agencies represented 8.9% of revenue for the three months ended March 31, 2024, while subcontracts under federal procurements accounted for 91.1%[34] - Three subcontracts under federal procurements represented 29.0%, 23.0%, and 17.0% of revenue, respectively, during the same period[34] - Revenue from services under time and materials arrangements was $1,654,001, accounting for 86.4% of total revenue, compared to 87.1% in the prior year[50] Assets and Liabilities - Accounts receivable as of March 31, 2024, totaled $776,025, down from $1,117,862 as of December 31, 2023[52] - The Company’s accounts receivable included receivables from three subcontracts that represented 24.0%, 20.7%, and 14.0% of outstanding accounts receivable, respectively[36] - Contract liabilities decreased to $85,035 as of March 31, 2024, from $114,540 at the end of 2023, with $55,531 recognized as revenue during the quarter[53] - Deferred costs of revenue were reported at $58,658 as of March 31, 2024, down from $87,988 at the end of 2023[54] - Cash equivalents, primarily in money market funds, were valued at $330,593 as of March 31, 2024, down from $631,258 at the end of 2023[60] - As of March 31, 2024, net identifiable intangible assets totaled $961,478, down from $1,005,539 as of December 31, 2023, reflecting a decrease of approximately 4.4%[65] Stock and Compensation - The company executed a reverse stock split at a ratio of one-for-ten on October 18, 2023, reducing issued and outstanding shares from approximately 19.8 million to about 1.98 million[27] - Total compensation expense related to stock-based compensation plans was $113,780 for the three months ended March 31, 2024, compared to $288,172 for the same period in 2023, indicating a decrease of approximately 60.6%[70] - The company sold no shares of common stock during the three months ended March 31, 2024, while it sold 7,429 shares at an average price of $7.20 per share in the same period of 2023, generating net proceeds of $53,453[76] Tax and Financial Health - The effective tax rate for the company was 0% for both the three months ended March 31, 2024 and 2023, primarily due to a full valuation allowance against all deferred tax assets[77] - The company has experienced operating losses in four of the last five years, raising concerns about future profitability[81] - The company is seeking a short-term extension on its new line of credit, which has a maximum availability of $500,000 and expires on May 16, 2024[72] - The company has no allowances for doubtful accounts recognized as of March 31, 2024, indicating no uncollectible accounts[51] Business Operations - The company has modernized over 100 million lines of COBOL code for over 35 governmental and commercial customers, showcasing its expertise in software modernization[87] - The company is focused on enterprise IT solutions, particularly in system modernization, cloud-based solutions, and cybersecurity protection[85] - The company anticipates using $1.0 million to $1.5 million in operating activities over the next twelve months[109] - The company is focusing on closing the merger and must have Parent Net Cash of no less than zero on the closing date[107] - If the merger does not close, the company may consider ceasing to be a reporting company, raising capital through private placement, or selling its business to satisfy liabilities[108]
WaveDancer(WAVD) - 2024 Q1 - Quarterly Report