<PAGE>
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   FORM 10-Q
 
                               ----------------
 
(Mark One)
 
[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended September 30, 1997
 
                                      or
 
[_]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from ______________ 
     to ______________ .
 
                         Commission File No. 00021539
 
                               IA CORPORATION I
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

               DELAWARE                                       94-3161772
    (State or other jurisdiction of                         (IRS Employer
     incorporation or organization)                    Identification Number)

 
                         1900 POWELL STREET, SUITE 600
                         EMERYVILLE, CALIFORNIA 94608
                   (Address of principal executive offices)
 
                                (510) 450-7000
             (Registrant's telephone number, including area code)
 
  Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
 
                                [X] Yes [_] No
 
  The number of outstanding shares of the Registrant's Common Stock, $0.01 par
value, was 11,265,058 as of November 5, 1997.
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
 
                                IA CORPORATION I
                              REPORT ON FORM 10-Q
 
                               TABLE OF CONTENTS
 
<TABLE>
 <C>      <S>                                                               <C>
 PART I.  FINANCIAL INFORMATION
  Item 1. Financial Statements
          Condensed Consolidated Balance Sheets at September 30, 1997 and     3
           December 31, 1996..............................................
          Condensed Consolidated Statements of Operations for the Three       4
           and Nine Months Ended September 30, 1997 and 1996..............
          Condensed Consolidated Statements of Cash Flows for the Nine        5
           Months Ended
           September 30, 1997 and 1996....................................
          Notes to Condensed Consolidated Financial Statements............    6
  Item 2. Management's Discussion and Analysis of Financial Condition and     7
           Results of Operations..........................................
 PART II. OTHER INFORMATION
  Item 6. Exhibits and Reports on Form 8-K................................   17
 Signatures................................................................  18
 Exhibit Index.............................................................  19
</TABLE>
 
 
                                       2
<PAGE>
 
                                     PART I
 
                             FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
                                IA CORPORATION I
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                     SEPTEMBER 30, DECEMBER 31,
                                                         1997          1996
                                                     ------------- ------------
                                                      (UNAUDITED)
<S>                                                  <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents.........................   $  8,770      $10,806
  Receivables, including unbilled receivables of
   $6,488 at September 30, 1997 and $2,422 at
   December 31, 1996, less allowance for doubtful
   accounts of $46..................................      8,919        7,259
  Other current assets .............................        908          653
                                                       --------      -------
    Total current assets............................     18,597       18,718
  Property and equipment, net.......................        636          459
                                                       --------      -------
                                                       $ 19,233      $19,177
                                                       ========      =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..................................   $    343      $   740
  Accrued compensation and related liabilities......      1,450        1,433
  Deferred revenues.................................      1,870        2,007
  Other accrued liabilities.........................        459          421
                                                       --------      -------
    Total current liabilities.......................      4,122        4,601
Stockholders' equity:
  Preferred shares, $0.01 par value:
   Authorized shares -- 5,000,000
   Issued and outstanding shares -- none............        --           --
  Common shares, $0.01 par value:
   Authorized shares -- 35,000,000
   Issued and outstanding shares -- 8,838,867 at
    September 30, 1997 and 8,592,402 at December 31,
    1996............................................         88           86
  Class B Common shares, $0.01 par value:
   Authorized shares -- 5,000,000
   Issued and outstanding shares -- 2,417,112.......         25           25
  Additional paid-in capital........................     27,558       27,121
  Accumulated deficit...............................    (12,419)     (12,484)
  Deferred compensation.............................       (141)        (172)
                                                       --------      -------
    Total stockholders' equity......................     15,111       14,576
                                                       --------      -------
                                                       $ 19,233      $19,177
                                                       ========      =======
</TABLE>
 
                             See accompanying notes
 
                                       3
<PAGE>
 
                                IA CORPORATION I
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED    NINE MONTHS ENDED
                                         SEPTEMBER 30,        SEPTEMBER 30,
                                      --------------------  ------------------
                                        1997       1996       1997      1996
                                      ---------  ---------  --------  --------
<S>                                   <C>        <C>        <C>       <C>
Revenues:
  License............................ $   1,418  $   2,184  $  4,654  $  4,954
  Service............................     3,507      2,834     9,161     9,434
  Maintenance........................       804        690     2,360     1,776
  Hardware...........................       --         672       --      3,323
                                      ---------  ---------  --------  --------
    Total revenues...................     5,729      6,380    16,175    19,487
Cost of revenues:
  License............................       117         33       266       296
  Service............................     2,323      1,487     6,169     5,401
  Maintenance........................       292        355       989       989
  Hardware...........................       --         509       --      2,649
                                      ---------  ---------  --------  --------
    Total cost of revenues...........     2,732      2,384     7,424     9,335
Operating expenses:
  Sales and marketing................     1,145      1,373     3,537     3,817
  General and administrative.........       712        713     2,078     1,976
  Product development................       998      1,225     3,461     2,862
                                      ---------  ---------  --------  --------
    Total operating expenses.........     2,855      3,311     9,079     8,655
                                      ---------  ---------  --------  --------
Operating income (loss)..............       142        685      (325)    1,497
Other income (expense):
  Interest expense...................        (4)       (21)       (4)      (45)
  Interest income and other..........       131         24       397        56
                                      ---------  ---------  --------  --------
Income before taxes..................       269        688        68     1,508
Provision for income taxes...........         3        --          3       --
                                      ---------  ---------  --------  --------
Net income........................... $     266  $     688  $     65  $  1,508
Preferred dividends and accretion....       --        (294)      --       (880)
                                      ---------  ---------  --------  --------
Net income applicable to common
 stockholders                         $     266  $     394  $     65  $    628
                                      =========  =========  ========  ========
Pro forma net income per share....... $    0.02  $    0.07  $   0.01  $   0.15
                                      =========  =========  ========  ========
Pro forma shares used in per share
 calculations........................    12,063     10,105    12,065    10,083
                                      =========  =========  ========  ========
</TABLE>
 
                             See accompanying notes
 
                                       4
<PAGE>
 
                                IA CORPORATION I
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                           NINE MONTHS ENDED
                                                             SEPTEMBER 30,
                                                           ------------------
                                                             1997      1996
                                                           --------  --------
<S>                                                        <C>       <C>
OPERATING ACTIVITIES
Net income................................................ $     65  $  1,508
Adjustments to reconcile net income to net cash provided
 by (used in) operating activities:
  Depreciation and amortization...........................      241       203
  Amortization of deferred compensation...................       31        20
  Loss on disposal of property and equipment..............       --        (9)
  Changes in operating assets and liabilities:
    Receivables...........................................   (1,660)   (3,348)
    Other current assets..................................     (255)      210
    Accounts payable......................................     (397)      (11)
    Accrued compensation and related liabilities..........       17     1,173
    Deferred revenues.....................................     (137)      546
    Other accrued liabilities.............................       38       256
                                                           --------  --------
Net cash provided by (used in) operating activities.......   (2,057)      548
INVESTING ACTIVITIES
Purchases of property and equipment.......................     (418)     (299)
Proceeds from sales of property and equipment.............       --        16
                                                           --------  --------
Net cash used in investing activities.....................     (418)     (283)
FINANCING ACTIVITIES
Borrowings under bank line of credit......................      300       778
Repayment of borrowings under bank line of credit.........     (300)       --
Deferred financing costs..................................       --      (465)
Net proceeds from exercise of stock options...............       18         8
Net proceeds from employee stock purchase plan............      421        --
                                                           --------  --------
Net cash provided by financing activities.................      439       321
Net increase (decrease) in cash...........................   (2,036)      586
Cash at beginning of period...............................   10,806     1,079
                                                           --------  --------
Cash at end of period..................................... $  8,770  $  1,665
                                                           ========  ========
  Supplemental disclosure of cash flow information:
    Deferred compensation related to stock options........ $     --  $    202
                                                           ========  ========
    Cash paid for interest................................ $      4  $     39
                                                           ========  ========
</TABLE>
 
                             See accompanying notes
 
                                       5
<PAGE>
 
                               IA CORPORATION I
 
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)
 
1. BASIS OF PRESENTATION
 
  The unaudited condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of management are necessary to fairly present the
Company's consolidated financial position, results of operations, and cash
flows for the periods presented. These financial statements should be read in
conjunction with the Company's audited consolidated financial statements as
included in the Annual Report on Form 10-K for the year ended December 31,
1996. Certain information and footnote disclosures normally included in
audited financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission rules and regulations. The consolidated
results of operations for the period ended September 30, 1997 are not
necessarily indicative of the results to be expected for any subsequent
quarter or for the entire fiscal year ending December 31, 1997.
 
2. NET INCOME PER SHARE
 
  Net income per share applicable to common stockholders is computed using the
weighted average number of shares of common stock outstanding. Common
equivalent shares from stock options (using the treasury stock method) have
been included in the computation only when dilutive, except that pursuant to
the Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares issued by the Company at prices below the initial
public offering price during the twelve month period prior to the Company's
initial public offering of its common stock have been included in the
calculation as if they were outstanding for all periods presented (using the
treasury stock method) through September 30, 1996. Per share information
calculated on this basis is as follows:
 
<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED NINE MONTHS ENDED
                                             SEPTEMBER 30,      SEPTEMBER 30,
                                           -------------------------------------
                                             1997      1996     1997      1996
                                           --------- ------------------ --------
<S>                                        <C>       <C>      <C>       <C>
Net income per share applicable to common
 stockholders............................      $0.02    $0.06     $0.01    $0.09
Shares used in computing net income per
 share (in thousands)....................     12,063    7,132    12,065    7,110
</TABLE>
 
  The pro forma calculation of net income per share presented in the
consolidated statements of operations is computed as described above and also
gives retroactive effect to the conversion of all outstanding shares of
convertible preferred stock and accrued dividends into common stock upon the
closing of the Company's initial public offering in November 1996. All of the
convertible preferred stock outstanding upon the completion of the initial
public offering was automatically converted into an aggregate of 2,973,117
shares of common stock.
 
  In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
The new requirements will include a calculation of basic earnings per share
from which the dilutive effect of stock options and warrants will be excluded.
The basic earnings per share are not expected to differ from the pro forma net
income per share reported for the quarters ended September 30, 1997 and 1996,
or the nine months ended September 30, 1997. The basic earnings per share are
expected to reflect an increase of $0.01 per share over the pro forma net
income per share reported for the nine months ended September 30, 1996. A
calculation of diluted earnings per share will also be required; however, this
is not expected to differ materially from the Company's pro forma net income
per share.
 
                                       6
<PAGE>
 
  This report contains forward-looking statements that involve risks and
uncertainties, including statements regarding the Company's strategy,
financial performance, expense levels and revenue sources. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" and elsewhere in this report.
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
 OVERVIEW
 
  The Company was incorporated in July 1992, when the management of the
Company, in partnership with Warburg Pincus purchased certain assets and
liabilities of Litton Industries' Integrated Automation Division, a leading
system integrator with a primary focus on the aerospace industry and secondary
focus on the financial services and transportation industries. Following this
acquisition, the Company began its transition from a system integrator to a
provider of software development services and a developer of application
framework software products. The Company decided to de-emphasize the aerospace
market, to develop its transaction management platform into a stand-alone
software product, and to build a series of standard software application
products based upon its complex transaction management platform targeted
initially to the financial services industry. To date, a majority of the
Company's total revenues has been derived from the provision of services to
customers pursuant to large software development contracts. The Company's
objective is to increase the portion of the Company's total revenue derived
from software product sales.
 
  The Company currently sells two leading application framework software
products for advanced cash management services, CheckVision(R) and
RemitVision(R), which are built upon the Company's advanced, client/server
complex transaction management software platform, WorkVision(R). CheckVision
is designed to add new products and services to a commercial bank's check
processing business offerings, and RemitVision is designed to provide banks
and other remittance processors with the ability to combine high volume
consumer payment activity with complex accounts receivable processing in one
production environment. The Company has also invested in growing a sales and
marketing organization to sell its software products. At the same time, the
Company has continued to develop specific software solutions under application
development contracts for customers primarily in the financial services
industry, which the Company believes may be the basis for future software
products.
 
  During the transition from providing software development services to
developing and selling software products, which is still under way, a majority
of the Company's total revenues has been derived from the provision of
services to customers pursuant to large software development contracts,
certain of which provide the basis for the Company's application framework
software products. The Company recognizes revenue from software development
contracts on the percentage-of-completion basis. Service revenue as a
percentage of total revenue for the nine months ended September 30, 1997, and
the years ended December 31, 1996 and 1995, was 56.6%, 48.0%, and 57.9%,
respectively. In addition, the Company has transitioned from selling hardware.
Due in large part to these transitions, the Company did not experience
significant growth in total revenue in 1995 and 1994. While the Company
experienced growth in the year ended December 31, 1996 as compared to the year
ended December 31, 1995, the Company recorded lower revenues for the quarter
and nine months ended September 30, 1997 than in comparable periods in 1996.
To achieve revenue growth and improve operating margins, the Company must
continue to increase market acceptance and sales of the Company's software
products. As the Company becomes increasingly reliant upon software product
sales, it could experience a decline in total revenues if service revenue
declines more quickly than the Company can increase revenue from software
product sales. The Company must develop and enhance its sales and marketing
capabilities and software production and distribution infrastructure as it
continues the transition from a service business to a software product
business. There can be no assurance that the Company will be successful in
creating the necessary capabilities and infrastructure in a timely manner or
at all. Any significant failure by the Company to manage the transition
successfully would have a material adverse effect on the Company's business,
operating results and financial condition and would create significant
fluctuation in quarterly operating results.
 
                                       7
<PAGE>
 
  Installation of the Company's software products requires the cooperation of
the Company's customers. To the extent the installation of the Company's
software products is delayed, the Company's recognition of revenue may be
delayed, which could have a material adverse effect on the Company's business,
operating results and financial condition. For example, the Company has
experienced product installation delays which have resulted in the Company
having lower than expected revenues and profits from RemitVision customers in
the quarters ended June 30, 1997 and September 30, 1997. The failure to
resolve similar situations in the future could have an adverse effect on the
Company's operating results and could also adversely effect the Company's
ability to market its products.
 
  At September 30, 1997, the Company had $6.5 million in unbilled receivables.
These receivables are the result of delays in RemitVision implementations and
timing differences between revenue recognition and cash collections on a
number of contracts. Any inability on the part of the Company to collect these
receivables may materially, adversely affect the financial performance of the
Company.
 
  The Company's total revenues are derived from software licenses, services,
and maintenance. Through 1996, the Company also sold hardware. The Company
licenses software to end users under non-cancelable license agreements and
provides services such as installation, training and software maintenance. To
date, the Company has provided its software primarily under contracts
requiring significant customization services. Software license and service
revenues from contracts requiring significant customization services are
recognized on the percentage-of-completion method based on the ratio of
incurred costs to total estimated costs. Actual costs and gross margins on
such contracts could differ from the Company's estimates and such differences
could be material to the financial statements. Software license revenue for
contracts not requiring significant customization services is recognized when
a product has been shipped and all significant contractual obligations have
been satisfied and the resulting receivable is deemed collectible by
management. Allowances for future estimated warranty costs are provided at the
time revenue is recognized. Maintenance revenue is recognized ratably over the
term of the related agreements, which in most cases is one year.
 
  At September 30, 1997, the Company had an accumulated deficit of
approximately $12.4 million. The Company achieved net income of approximately
$327,000 for the quarter ended March 31, 1995, and incurred losses during the
remaining three quarters and for the year ended December 31, 1995. The Company
was profitable in each quarter of 1996 and for the quarters ended March 31,
1997 and September 30, 1997. The Company incurred a loss for the quarter ended
June 30, 1997. There can be no assurance that the Company will have operating
profits in any future period and prior operating results should not be
considered indicative of future financial performance.
 
                                       8
<PAGE>
 
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
  REVENUES
 
  License. License revenue is primarily derived from licenses of the Company's
CheckVision, RemitVision, and WorkVision software products. License revenue
decreased 35.1% to $1.4 million from $2.2 million for the quarters ended
September 30, 1997 and 1996, respectively. As a percentage of total revenues,
license revenues decreased to 24.8% for the quarter ended September 30, 1997
as compared to 34.2% for the quarter ended September 30, 1996. Total license
revenues decreased primarily as a result of RemitVision product installation
delays.
 
  Service. Service revenue has been comprised primarily of fees from software
application development contracts, and to a lesser extent, fees from
installation services and training for the Company's CheckVision and
RemitVision products. Service revenue increased 23.7% to $3.5 million from
$2.8 million for the quarters ended September 30, 1997 and 1996, respectively.
The increase in service revenue for the quarter ended September 30, 1997 is
the result of an increase in application framework development services. As a
percentage of total revenues, service revenues increased to 61.2% for the
quarter ended September 30, 1997 as compared to 44.4% for the quarter ended
September 30, 1996. Service revenue as a percentage of total revenues will
vary between periods due to changes in demand for the Company's services and
changes in the rate of growth in license revenue.
 
  Maintenance. Maintenance revenue is generated primarily by software support
agreements that include telephone support, minor software upgrades, and in
some cases, third party support. Maintenance revenue increased 16.5% to
$804,000 from $690,000 for the quarters ended September 30, 1997 and 1996,
respectively. As a percentage of total revenues, maintenance revenue increased
to 14.0% for the quarter ended September 30, 1997 as compared to 10.8% for the
quarter ended September 30, 1996. The growing installed base of CheckVision
products has resulted in a corresponding increase in demand for maintenance
services. Accordingly, the Company believes that fluctuations in the demand
for its CheckVision and RemitVision products could result in fluctuations in
maintenance revenue.
 
  Hardware. The Company had no hardware revenue for the quarter ended
September 30, 1997 compared to hardware revenue of $672,000 for the quarter
ended September 30, 1996.
 
  COST OF REVENUES
 
  License. Cost of license revenue increased 254.5% to $117,000 from $33,000
for the quarters ended September 30, 1997 and 1996, representing 8.3% and 1.5%
of license revenues, respectively. Cost of license revenue increased primarily
due to royalties payable to third parties for RemitVision. Cost of license
revenue as a percentage of license revenue may increase in the future if the
Company's strategy of increasing revenue from software products developed
under software application framework development contracts is successful and
associated royalties become due.
 
  Service. Cost of service revenue is primarily comprised of employee-related
costs and fees for third party consultants incurred in providing installation,
training and development services. Cost of service revenue increased 56.2% to
$2.3 million from $1.5 million for the quarters ended September 30, 1997 and
1996, representing 66.2% and 52.5% of service revenues, respectively. The
increase in cost of service revenue in the quarter ended September 30, 1997
was due to an increase in application framework development projects.
 
  Maintenance. Cost of maintenance revenue is primarily comprised of employee-
related costs incurred in providing customer support and also includes the
costs of services provided by third parties for hardware-related maintenance
for certain of the installed base of customers. Cost of maintenance revenue
decreased 17.7% to $292,000 from $355,000 for the quarters ended September 30,
1997 and 1996, representing 36.3% and 51.4% of maintenance revenues,
respectively. The cost of maintenance revenue decrease is due to economies of
scale resulting from supporting a growing installed base of CheckVision
customers for the quarter ended September 30, 1997.
 
                                       9
<PAGE>
 
  OPERATING EXPENSES
 
  Sales and marketing. Sales and marketing expenses consist primarily of
salaries, commissions, and bonuses earned by sales and marketing personnel,
field office expenses, travel and entertainment, promotional expenses, and
advertising. Sales and marketing expenses decreased 16.6% to $1.1 million from
$1.4 million for the quarters ended September 30, 1997 and 1996, respectively.
The decrease is a result of lower commissions in the quarter ended September
30, 1997. Sales and marketing expenses represent 20.0% and 21.5% of total
revenues for the quarters ended September 30, 1997 and 1996, respectively.
 
  General and administrative. General and administrative expenses were
consistent for the quarters ended September 30, 1997 and 1996, respectively.
General and administrative expenses represent 12.4% and 11.2% of total
revenues for the quarters ended September 30, 1997 and 1996, respectively.
 
  Product development. Product development expenses consist primarily of
salaries and other personnel-related expenses. Product development expenses
decreased 18.5% to $1.0 million from $1.2 million for the quarters ended
September 30, 1997 and 1996, respectively. These decreases are a result of the
reallocation of labor from product development to RemitVision projects.
Product development expenses represent 17.4% and 19.2% of total revenues for
the quarters ended September 30, 1997 and 1996, respectively. The Company
believes that a significant level of investment for product development is
required to remain competitive. Accordingly, the Company anticipates that it
will continue to devote substantial resources to product development in the
future.
 
  Interest income and other. Interest income and other primarily represents
interest earned by the Company on its cash and cash equivalents. Interest
income and other increased to $131,000 from $24,000 for the quarters ended
September 30, 1997 and 1996, respectively. These increases are primarily a
result of interest income related to the proceeds from the Company's initial
public offering completed in November 1996.
 
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
  REVENUES
 
  License. License revenue is primarily derived from licenses of the Company's
CheckVision, RemitVision, and WorkVision software products. License revenue
decreased 6.1% in absolute dollars to $4.7 million from $5.0 million for the
nine months ended September 30, 1997 and 1996, respectively. However, as a
percentage of total revenues, license revenues increased to 28.8% for the nine
months ended September 30, 1997 as compared to 25.4% for the nine months ended
September 30, 1996. Total license revenues as a percentage of total revenues
increased primarily as a result of a growing base of CheckVision, RemitVision
and WorkVision customers.
 
  Service. Service revenue has been comprised primarily of fees from software
application development contracts, and to a lesser extent, fees from
installation services and training for the Company's CheckVision and
RemitVision products. Service revenue decreased 2.9% to $9.2 million from $9.4
million for the nine months ended September 30, 1997 and 1996, respectively.
As a percentage of total revenues, service revenues increased to 56.6% for the
nine months ended September 30, 1997 as compared to 48.4% for the nine months
ended September 30, 1996. The Company believes the decrease in service revenue
for the nine months ended September 30, 1997 is the result of the
implementation of its strategy to focus on product sales as well as a decrease
in the amount of application development services. Service revenue as a
percentage of total revenues will vary between periods due to changes in
demand for the Company's services and changes in the rate of growth in license
revenue.
 
  Maintenance. Maintenance revenue is generated primarily by software support
agreements that include telephone support, minor software upgrades, and in
some cases, third party support. Maintenance revenue increased 32.9% to $2.4
million from $1.8 million for the nine months ended September 30, 1997 and
1996, respectively. As a percentage of total revenues, maintenance revenue
increased to 14.6% for the nine months ended September 30, 1997 as compared to
9.1% for the nine months ended September 30, 1996. The growing
 
                                      10
<PAGE>
 
installed base of CheckVision products has resulted in a corresponding
increase in demand for maintenance services. Accordingly, the Company believes
that fluctuations in the demand for its CheckVision and RemitVision products
could result in fluctuations of maintenance revenue.
 
  Hardware. The Company did not record revenue for hardware sales for the nine
months ended September 30, 1997 compared to hardware revenue of $3.3 million
for the nine months ended September 30, 1996. The Company does not expect to
record significant hardware revenue in the future as it has found alternate
distribution channels to support its customers.
 
COST OF REVENUES
 
  License. Cost of license revenue decreased 10.1% to $266,000 from $296,000
for the nine months ended September 30, 1997 and 1996, representing 5.7% and
6.0% of license revenues, respectively. Cost of license revenue decreased as a
result of decreased royalties payable to third parties due to lower license
revenues for RemitVision customers. The cost of license revenue as a
percentage of license revenue may increase in the future if the Company's
strategy of increasing revenue from software products developed under software
application framework development contracts is successful and associated
royalties become due.
 
  Service. Cost of service revenue is primarily comprised of employee-related
costs and fees for third party consultants incurred in providing installation,
training and development services. Cost of service revenue increased 14.2% to
$6.2 million from $5.4 million for the nine months ended September 30, 1997
and 1996, representing 67.3% and 57.3% of service revenues, respectively. Cost
of service revenue was higher due to an increase in costs to complete
RemitVision contracts.
 
  Maintenance. Cost of maintenance revenue is primarily comprised of employee-
related costs incurred in providing customer support and also includes the
costs of services provided by third parties for hardware-related maintenance
for certain of the installed base of customers. Cost of maintenance revenue
was consistent at $989,000 for the nine months ended September 30, 1997 and
1996, representing 41.9% and 55.7% of maintenance revenues, respectively. Cost
of maintenance revenue did not increase in proportion to maintenance revenue
growth due to economies of scale for the nine months ended September 30, 1997.
There can be no assurance that the cost of maintenance as compared to
maintenance revenues will continue to decline.
 
  OPERATING EXPENSES
 
  Sales and marketing. Sales and marketing expenses consist primarily of
salaries, commissions, and bonuses earned by sales and marketing personnel,
field office expenses, travel and entertainment, promotional expenses, and
advertising. Sales and marketing expenses decreased 7.3% to $3.5 million from
$3.8 million for the nine months ended September 30, 1997 and 1996,
respectively, due to lower commissions. Sales and marketing expenses represent
21.9% and 19.6% of total revenues for the nine months ended September 30, 1997
and 1996, respectively.
 
  General and administrative. General and administrative expenses increased
5.2% to $2.1 million from $2.0 million in the nine months ended September 30,
1997 and 1996. General and administrative expenses represent 12.8% and 10.1%
of total revenues for the nine months ended September 30, 1997 and 1996,
respectively.
 
  Product development. Product development expenses consist primarily of
salaries, and other personnel-related expenses. Product development expenses
increased 20.9% to $3.5 million from $2.9 million for the nine months ended
September 30, 1997 and 1996, respectively. These increases are primarily
attributable to personnel costs related to the development of RemitVision, and
to a lesser extent, new software products. Product development expenses
represent 21.4% and 14.7% of total revenues for the nine months ended
September 30, 1997 and 1996, respectively. The Company believes that a
significant level of investment for product development is required to remain
competitive. Accordingly, the Company anticipates that it will continue to
devote substantial resources to product development.
 
  Interest income and other. Interest income and other primarily represents
interest earned by the Company on its cash and cash equivalents. Interest
income and other increased to $397,000 from $56,000 for the nine
 
                                      11
<PAGE>
 
months ended September 30, 1997 and 1996, respectively. These increases are
primarily a result of interest income related to the proceeds from the
Company's initial public offering completed in November 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  The Company completed an initial public offering of common stock on November
7, 1996 with net proceeds of $10.6 million. The common stock is trading on the
Nasdaq National Market under the symbol IACP.
 
  The Company used cash of $2.1 million for operating activities for the nine
months ended September 30, 1997 compared to $548,000 of cash generated from
operating activities for the nine months ended September 30, 1996. The use of
cash for operations for the nine months ended September 30, 1997, was mainly
attributable to increases in accounts receivable and other assets coupled by
decreases in accounts payable and deferred revenue. For the nine months ended
September 30, 1996, cash provided by operations was mainly attributable to
profitability, offset in part by working capital needs due to an increase in
accounts receivable.
 
  The Company's investing activities have consisted primarily of purchases of
short-term investments and property and equipment. Expenditures for property
and equipment totaled $418,000 for the nine months ended September 30, 1997,
compared to $299,000 for the nine months ended September 30, 1996. Capital
expenditures consisted of purchases of computer equipment and office furniture
to support the Company's growing employee base. The Company currently has no
significant capital spending requirements or purchase commitments other than a
non-cancelable operating lease for its facilities.
 
  Cash provided by financing activities for the nine months ended September
30, 1997 was from proceeds of the employee stock purchase plan and exercises
of stock options. For the nine months ended September 30, 1996, net cash
provided by financing activities resulted primarily from borrowings against
the bank line of credit offset by initial public offering financing costs.
 
  At September 30, 1997, the Company had $8.8 million in cash and cash
equivalents and $14.5 million in working capital. The Company has a $2.0
million bank line of credit agreement that expires in May 1998. Under the
terms of the credit agreement, the Company may borrow up to $2.0 million under
a revolving line of credit, which includes up to $500,000 in commercial and
standby letters of credit. The line of credit, which contains both financial
and non-financial covenants, is secured by substantially all of the Company's
assets. Advances under the line of credit are limited to 80% of eligible
billed accounts receivable. Borrowings accrue interest at the bank's prime
rate plus 0.5% (9.0% at September 30, 1997). There were no borrowings under
this line of credit at September 30, 1997.
 
  The Company believes that its existing cash and cash equivalents, together
with cash flow from operations and available borrowings under its revolving
line of credit, will be sufficient to meet its working capital requirements
for at least the next 12 months.
 
                                      12
<PAGE>
 
RISK FACTORS
 
  History of Operating Losses; No Assurance of Profitability. Through 1995,
the Company has incurred significant net losses of $4.0 million, $3.9 million
and $1.3 million for 1993, 1994 and 1995, respectively. At September 30, 1997,
the Company had an accumulated deficit of approximately $12.4 million. The
Company achieved net income of approximately $327,000 for the quarter ended
March 31, 1995, and incurred losses during the remaining three quarters and
for the year ended December 31, 1995. While the Company achieved net income of
approximately $2.3 million for the year ended December 31, 1996, $850,000 for
the quarter ended March 31, 1997 and $266,000 for the quarter ended September
30, 1997, the Company incurred a loss of approximately $1.1 million for the
quarter ended June 30, 1997. There can be no assurance that the Company will
have operating profits in any future period.
 
  Variability of Quarterly Operating Results. The Company's quarterly
operating results have varied in the past, and the Company expects quarterly
operating results to vary significantly in the future. The Company's revenues
and operating results are difficult to forecast and could be materially
adversely affected by many factors, some of which are outside the control of
the Company, including, among others, the relatively long sales and
implementation cycles of the Company's software products, the variable size
and timing of individual license transactions, the timing of revenue
recognized under the percentage-of-completion method, increased competition,
the timing of new product releases by the Company and its competitors, market
acceptance of the Company's software products, delay or deferral of customer
implementation of the Company's software products, software defects or other
quality problems with the Company's software products, changes in the
Company's and its competitors' pricing policies, the mix of license and
service revenue, budgeting cycles of the Company's customers, the introduction
of indirect sales into the Company's revenue mix which could result in lower
gross margins, changes in operating expenses, changes in Company strategy,
personnel changes and general economic factors. In addition, the Company is in
the process of transitioning from providing software development services to
developing and selling software products, which entails a number of risks,
including potential declines in revenue and the need to develop the
appropriate sales, marketing and software production and distribution
infrastructure. Further, because the Company's orders range in size from
several hundred thousand dollars to several million dollars, any deferral or
cancellation of an expected new order, termination of, or delay in completion
of, an existing large application development contract may have a significant
impact on quarterly operating results. For example, the Company had lower than
anticipated revenues and profits from RemitVision customers in the quarters
ended June 30, and September 30, 1997. In addition, in the event of any
downturn in any potential customer's business or the economy in general,
purchases of the Company's software products may be deferred or canceled. The
Company has had operating profits only in the quarters ended March 31, 1995,
1996, and 1997, June 30, 1996, September 30, 1996 and 1997, and December 31,
1996, and there can be no assurance that the Company will have operating
profits in future quarters or on an annual basis.
 
  It typically takes the Company four to five months to install CheckVision
after an order is placed and the Company anticipates a six month to one year
installation period for RemitVision. Installation of the Company's software
products requires the cooperation of the Company's customers. To the extent
the installation of the Company's software products is delayed, the Company's
recognition of revenue may be delayed, which could have a material adverse
effect on the Company's business, operating results and financial condition.
In the quarters ended June 30, and September 30, 1997, the Company's revenues
were lower than expected due to lower than anticipated RemitVision revenues.
The Company has in the past experienced product installation delays which have
resulted in strained customer relations. The Company has been successful in
resolving such issues in the past. However, there is no assurance that the
Company will be successful in resolving similar situations in the future. The
failure to resolve similar situations in the future could have an adverse
effect on the Company's operating results and could also adversely effect the
Company's ability to market its products. The Company's expense levels are
based in part on its expectations of future revenues. If revenue is below
expectations, net income may be disproportionately affected because a
significant portion of the Company's expenses does not vary with revenues. The
Company's future operating results could be adversely affected if revenues do
not meet the Company's expectations. The Company may also choose to reduce
prices, increase spending in response to competition or to pursue new market
opportunities. In particular, the Company's operating margins may be
 
                                      13
<PAGE>
 
materially adversely affected in the future if new competitors, technological
advances by existing competitors, other competitive factors, or the Company's
failure to continue to obtain software development contracts require the
Company to invest significantly greater resources in software product
development efforts.
 
  Because of the foregoing factors, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and that
such comparisons should not be relied upon as indications of future
performance. Further, it is possible that in future periods the Company's
operating results may be below the expectations of public market analysts and
investors. In such an event, the price of the Company's Common Stock would
likely be materially adversely affected. See "--Risks Associated with
Transition to Software Product Business," "--Reliance on Banking Industry;
Need to Penetrate Additional Segments of the Financial Services Industry," and
"--Lengthy Sales Cycle".
 
  Risks Associated with Transition to Software Product Business. When the
Company was formed in 1992, the Company shifted its strategy to focus
increasingly on deriving revenue from software products rather than from
system integration services. During the transition from providing software
development services to developing and selling software products, which is
still under way, a majority of the Company's total revenues has been derived
from the provision of services pursuant to large software development
contracts, certain of which provide the basis for the Company's software
products. The Company recognizes revenue from software development contracts
on the percentage-of-completion basis. Service revenue as a percentage of
total revenues for 1996 and 1995 was 48.0% and 57.9%, respectively, and 56.6%
and 48.4% for the nine months ended September 30, 1997 and 1996, respectively.
To achieve revenue growth and improve operating margins, the Company must
continue to increase market acceptance and sales of the Company's software
products. As the Company becomes increasingly reliant upon software product
sales, it could experience a decline in total revenues if service revenue
declines more quickly than the Company can increase revenue from software
product sales. The Company must develop and enhance its sales and marketing
capabilities and software production and distribution infrastructure as it
continues the transition from a service business to a software product
business. There can be no assurance that the Company will be successful in
creating the necessary capabilities and infrastructure in a timely manner or
at all. Any significant failure by the Company to manage the transition
successfully would have a material adverse effect on the Company's business,
operating results and financial condition and would create significant
fluctuation in quarterly operating results.
 
  Dependence on Development Services. To date, the majority of the Company's
total revenues has been derived from large application development contracts.
Although the Company's strategy is to reduce the percentage of its total
revenues from such contracts over time, the Company's total revenues for the
foreseeable future will continue to be substantially dependent upon its
ability to perform services under existing contracts and to attract new
customers to enter into such contracts. Furthermore, the Company has
historically used the research derived from its software development contracts
as the basis for its software products and anticipates that any future
software products will arise from new or existing software development
contracts. To the extent that the Company is unable to complete work on its
existing software development contracts or to attract new customers to enter
into such contracts, the Company's ability to develop new software products
will be materially adversely affected. In addition, to the extent the Company
is required to develop future software products without software development
contracts, the Company's expenditures for software product development will
have to increase, which may materially adversely affect operating margins.
There can be no assurance that the Company will be able to successfully
complete work on its existing software development contracts, that it will be
able to attract new customers to enter into software development contracts or
that it will be able to develop new software products based on the research
undertaken in connection with new or existing software development contracts,
and any such failure would have a material adverse effect on the Company's
business, operating results and financial condition. To the extent that the
Company does develop new software products based upon technology developed in
connection with software development contracts, the Company may have to expend
substantial additional financial resources on software product development,
and there can be no assurance that such software products will achieve market
acceptance. In addition, upon commercialization of any such software products,
the Company has agreed under certain circumstances in the past, and may in the
future agree to pay royalties to
 
                                      14
<PAGE>
 
repay development expenses to the customer for whom the development services
were undertaken, and any such payments could have a material adverse effect on
the Company's business, operating results and financial condition.
 
  Reliance on Banking Industry; Need to Penetrate Additional Segments of the
Financial Services Industry. Currently, a substantial majority of the
Company's total revenues results from services and licenses provided to banks.
The Company's future operating results will depend in part on its ability to
penetrate additional segments of the financial services industry such as the
insurance, credit card and brokerage segments. While the Company may devote
substantial resources to penetrate these and other markets, there can be no
assurance that the revenues generated from this effort, if any, will exceed
the cost of such efforts. To be successful in expanding its product offerings
to market segments other than the banking industry, the Company will be
required to create new software products and to modify its existing software
products. There can be no assurance that it will be able to create or modify
such software products effectively or that such software products, if
successfully created or modified, will achieve market acceptance. To the
extent that the Company is unable to penetrate new markets, its future
financial condition will be dependent upon its ability to further penetrate
the banking industry. If the Company is unable to adapt its software products,
or its sales and marketing efforts to meet the needs of new markets, or if the
Company is unsuccessful in its efforts to further penetrate the banking
industry, the Company's business, operating results and financial condition
could be materially adversely affected.
 
  Lengthy Sales Cycle. The Company's sales cycle is typically six to twelve
months and varies substantially from customer to customer. The Company
believes the purchase of its software products is discretionary and represents
a strategic decision requiring a significant capital investment by its
customers. As a result, purchase of the Company's software products generally
involves a significant commitment of management attention and resources by
prospective customers and requires multiple approvals. Accordingly, the
Company's sales are subject to a long approval process. The Company's
business, operating results and financial condition have been in the past, and
could be in the future, materially adversely affected if customers delay,
reduce or cancel orders. The Company's future operating results could be
adversely affected if revenues do not meet the Company's expectations. Such
delays, reductions or cancellations may contribute to significant fluctuations
of quarterly operating results in the future and may adversely affect such
results.
 
  Customer Concentration. To date, the Company has been highly dependent on a
concentrated customer base. In 1993, 1994, 1995 and 1996, the Company's two
largest customers provided 48%, 39%, 45% and 34% of the Company's total
revenues, respectively. For the nine months ended September 30, 1997, two
customers provided 22% of the Company's total revenues. The Company's reliance
on a concentrated base of customers has been due primarily to the Company's
dependence on large software development contracts. The Company intends to
continue to seek customer support for strategic development projects that may
yield additional software products and expects that it may continue to
experience a dependence on a few significant customers for the foreseeable
future. If the Company is unable to establish relationships with additional
significant customers and if the Company is unable to increase revenues
derived from the sale of software products as a percentage of total revenues,
the Company's business, operating results and financial condition could be
materially adversely affected.
 
  Rapid Technological Change and Dependence on New Software Products. The
market for the Company's software products is characterized by rapid
technological developments, evolving industry standards and rapid changes in
customer requirements. The introduction of competitive software products
responding to these trends could render the Company's existing software
products obsolete and unmarketable. As a result, the Company's success depends
upon its ability to continue to enhance its existing software products,
respond to changing customer requirements and develop and introduce in a
timely manner new software products that keep pace with technological
developments and emerging industry standards. Customer requirements include,
but are not limited to, operability across distributed heterogeneous and
changing hardware platforms, operating systems, relational databases and
networks. For example, as certain of the Company's customers start to utilize
Microsoft NT or other emerging operating systems on server platforms, it may
be necessary for the Company to enhance its software products to operate on
such platforms in order to maintain its competitive ability. There can be no
 
                                      15
<PAGE>
 
assurance that the Company's software products will achieve broader market
acceptance, or will adequately address the changing needs of the marketplace,
or that the Company will be successful in developing and marketing
enhancements to its existing software products, or new software products
incorporating new technology on a timely basis. If the Company is unable to
develop and introduce new software products, or enhancements to existing
software products, in a timely manner to adequately address changing market
conditions or customer requirements, the Company's business, operating results
and financial condition will be materially adversely affected.
 
  The Company has a number of ongoing software development projects. The
Company expects to release enhancements to its CheckVision and RemitVision
products, as well as a new software product. The Company's objective is to
increase the portion of the Company's total revenues derived from these
software products. There can be no assurance the Company will release these
enhancements in a timely manner or at all, or that the features these enhanced
software products include will be features required to achieve market
acceptance. The Company's product development programs have been delayed in
the past and the Company has recently experienced delays in the development of
RemitVision. The Company had lower than anticipated profits due to delays in
RemitVision contracts. The inability of the Company to complete and
successfully install upgraded versions of RemitVision would materially
adversely affect the Company's business, operating results and financial
condition. The failure of the Company's software products to achieve broader
market acceptance and increased sales could have a material adverse effect on
the Company's business, operating results and financial condition.
 
  Additional Risks. For a discussion of additional risks and uncertainties
that could affect the Company's business, operating results or financial
condition, please see the Company's Annual Report on Form 10-K, "Item 1,
Business Risk Factors."
 
                                      16
<PAGE>
 
                               IA CORPORATION I
 
                          PART II. OTHER INFORMATION
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
  a. Exhibits
 
    The following exhibits are furnished along with this Form 10-Q Quarterly
  Report for the period ended September 30, 1997:
 
<TABLE>
      <C>  <S>
      11.1  Statement of Computation of Net Income per Share Applicable to
            Common Stockholders and Pro Forma Net Income per Share
      27    Financial Data Schedule
</TABLE>
 
  b. Reports on Form 8-K
 
    The Company did not file any reports on Form 8-K during the three months
  ended September 30, 1997.
 
                                      17
<PAGE>
 
                                IA CORPORATION I
 
                                   SIGNATURES
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                          IA CORPORATION I
 

Date: November 13, 1997                   /s/ David M. Winkler
                                          --------------------
                                          David M. Winkler
                                          Vice President and Chief 
                                            Financial Officer
                                          (Principal Financial and Accounting
                                           Officer)
 
                                       18
<PAGE>
 
                                IA CORPORATION I
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT NO.
 <C>         <S>
 11.1        Statement of Computation of Net Income per Share Applicable to
             Common Stockholders and Pro Forma Net Income per Share
 27          Financial Data Schedule
</TABLE>
 
                                       19