According to SelectUSA, the software and information technology services industry hit $606 billion in 2011. The industry envelopes more than 100,000 companies in the United States, with nearly all of the companies being small or medium size, meaning less than 500 employees. Add it all up and there are about two million people employed in the industry.
The count of businesses may be dropping by one soon as Information Systems Associates (OTCPK: IOSA) said on Wednesday that it has entered into a non-binding letter of intent to merge with privately held Duos Technologies, Inc., an advanced intelligent technologies company headquartered in Jacksonville, Florida.
Established two decades ago, Coral Springs, FL-based Information Systems Associates is an IT, professional services and consulting company. Its most recent development includes a new SaaS based IT Asset Management system under the TrueVue 360 brand.
The deal is being structured as a reverse triangular merger, which can be a little different than the typical merger that most investors are aware of where two companies join into one. Generally, a reverse triangle merger entails the buyer creating a subsidiary and that subsidiary buying and merging with and into the target company. The target company assumes the subsidiary's assets, rights and liabilities and is the surviving entity of the merger and effectively now a subsidiary of the original buyer. This type of merger is often thought to be simpler than a direct merger because the acquiring company is the only shareholder of the subsidiary.
A full scope of details weren’t provided on the deal between Information Systems Associates (ISA) and Duos Technology, but it was disclosed that the LOI proposes that ISA exchange shares of IOSA for all the common stock of Duos. Once this happens, Duos stakeholders will own 96% of ISA on a fully diluted basis and Duos management will assume management of ISA.
In order to make the deal happen, ISA has to do a reverse stock split. The boards of both companies have unanimously approved the LOI with the closing of the merger expected by the end of January.
"For the past three years, we have been searching for ways to grow our business, both organically and through potential mergers and acquisitions," said ISA CEO Joe Coschera, in a statement today. "During this process we have evaluated and considered many alternatives. We concluded that in order to expand our capabilities we needed to find a partner with a broad technology footprint that could enable us to achieve proper scale and execute on our aggressive growth strategy. I believe that DUOS Technologies under the leadership of Gianni Arcaini and team is the right merger partner for us."
"We believe the union of our two enterprises will lay the foundation for an aggressive growth strategy," said Gianni Arcaini, DUOS' founder and CEO. "We are confident that the transition of DUOS to a publicly traded platform will enhance our ability to secure growth capital and to fund the delivery infrastructure for our innovative technologies," he added.
Investors seemed more jazzed about the news when it first hit Wednesday morning, taking shares to almost 1.6 cents, the highest level since late in June. By the end of the day, shares were flat at a penny.
