Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 11-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | CICERO INC | |
Entity Central Index Key | 945384 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 155,353,377 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
ASSETS | ||
Cash and cash equivalents | $670 | $20 |
Trade accounts receivable, net | 50 | 1,035 |
Prepaid expenses and other current assets | 310 | 237 |
Total current assets | 1,030 | 1,292 |
Property and equipment, net | 16 | 14 |
Goodwill (Note 2) | 1,658 | 1,658 |
Total assets | 2,704 | 2,964 |
Current liabilities: | ||
Debt (Note 3) | 8,737 | 8,492 |
Accounts payable | 2,090 | 2,012 |
Accrued expenses: | ||
Salaries, wages, and related items | 1,486 | 1,400 |
Accrued interest | 1,905 | 1,674 |
Other | 587 | 573 |
Deferred revenue | 1,381 | 1,399 |
Total liabilities | 16,186 | 15,550 |
Commitments and contingencies (Note 6 and 7) | 0 | 0 |
Stockholders' deficit: | ||
Convertible preferred stock, $0.001 par value, 10,000,000 shares authorized Series A-1 - 1,499.6 shares issued and outstanding at March 31, 2015 and December 31, 2014 | 0 | 0 |
Series B - 10,400 shares issued and outstanding at March 31, 2015 and at December 31, 2014 | 0 | 0 |
Common stock, $0.001 par value, 215,000,000 shares authorized, 85,848,237 issued and outstanding at March 31, 2015 and at December 31, 2014 | 86 | 86 |
Additional paid-in capital | 237,206 | 237,206 |
Accumulated deficit | -250,774 | -249,878 |
Total stockholders' deficit | -13,482 | -12,586 |
Total liabilities and stockholders' deficit | $2,704 | $2,964 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Stockholders deficit: | ||
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares series A issued | 1,499.60 | 1,499.60 |
Preferred stock shares series A outstanding | 1,499.60 | 1,499.60 |
Preferred stock shares series B issued | 10,400 | 10,400 |
Preferred stock shares series B outstanding | 10,400 | 10,400 |
Common stock, par value | $0.00 | $0.00 |
Common stock shares authorized | 215,000,000 | 215,000,000 |
Common stock shares issued | 85,848,237 | 85,848,237 |
Common stock shares outstanding | 85,848,237 | 85,848,237 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Revenue: | ||
Software | $86 | $116 |
Maintenance | 367 | 361 |
Services | 7 | 62 |
Total operating revenue | 460 | 539 |
Cost of revenue | ||
Software | 0 | 0 |
Maintenance | 30 | 27 |
Services | 148 | 223 |
Total cost of revenue | 178 | 250 |
Gross margin | 282 | 289 |
Operating expenses: | ||
Sales and marketing | 281 | 259 |
Research and product development | 341 | 272 |
General and administrative | 291 | 302 |
Total operating expenses | 913 | 833 |
Loss from operations | -631 | -544 |
Other income/(expense): | ||
Interest expense | -234 | -179 |
Total other income/(expense) | -234 | -179 |
Net loss | -865 | -723 |
8% preferred stock Series B dividend | 31 | 31 |
Net loss applicable to common stockholders | ($896) | ($754) |
Loss per share applicable to common stockholders: | ||
Basic and Diluted | ($0.01) | ($0.01) |
Weighted average shares outstanding: | ||
Basic and Diluted | 85,848 | 85,806 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Cash flows from operating activities: | ||
Net loss | ($865) | ($723) |
Adjustments to reconcile net loss to net cash generated by operating activities: | ||
Depreciation and amortization | 4 | 5 |
Stock compensation expense | 0 | 22 |
Changes in assets and liabilities: | ||
Trade accounts receivable | 985 | 935 |
Prepaid expenses and other assets | -73 | 26 |
Accounts payable and accrued expenses | 378 | 20 |
Deferred revenue | -18 | -19 |
Net cash used by operating activities | 411 | 266 |
Cash flows from investing activities: | ||
Purchases of equipment | -6 | 0 |
Net cash used by investing activities | -6 | 0 |
Cash flows from financing activities: | ||
Borrowings under debt | 260 | 135 |
Repayments of debt | -15 | -391 |
Net cash generated/(used by) financing activities | 245 | -256 |
Net increase in cash | 650 | 10 |
Cash: | ||
Beginning of period | 20 | 5 |
End of period | $670 | $15 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited) (USD $) | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
In Thousands, except Share data | |||||
Beginning Balance, Amount at Dec. 31, 2014 | $86 | $0 | $237,206 | ($249,878) | ($12,586) |
Beginning Balance, Shares at Dec. 31, 2014 | 85,848,237 | 11,899 | |||
Dividend for preferred B stock | -31 | -31 | |||
Net loss | -865 | -865 | |||
Ending Balance, Amount (unaudited) at Mar. 31, 2015 | $86 | $0 | $237,206 | ($250,774) | ($13,482) |
Ending Balance, Shares (unaudited) at Mar. 31, 2015 | 85,848,237 | 11,899 |
1_INTERIM_FINANCIAL_STATEMENTS
1. INTERIM FINANCIAL STATEMENTS | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Notes to Financial Statements | |||||
1. INTERIM FINANCIAL STATEMENTS | The accompanying financial statements for the three months ended March 31, 2015 and 2014 are unaudited, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations. Accordingly, these interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained in Cicero Inc.'s (the "Company") Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 31, 2015. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for other interim periods or for the full fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the interim results of operations. All such adjustments are of a normal, recurring nature. | ||||
The year-end condensed balance sheet data was derived from audited financial statements in accordance with the rules and regulations of the SEC, but does not include all disclosures required for financial statements prepared in accordance with accounting principles generally accepted in the United States of America. | |||||
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All of the Company's subsidiaries are wholly owned for the periods presented. | |||||
Liquidity | |||||
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred an operating loss of approximately $3,927,000 for the year ended December 31, 2014, and has a history of operating losses. For the three months ended March 31, 2015, the Company incurred losses of $865,000 and had a working capital deficiency of $15,156,000 as of March 31, 2015. Management believes that its repositioned strategy of leading with its Discovery product to use analytics to measure and then manage how work happens will shorten the sales cycle and allow for value based selling to our customers and prospects. The Company anticipates success in this regard based upon current discussions with active customers and prospects. The Company has borrowed $260,000 and $2,296,000 in 2015 and 2014, respectively. The Company has also repaid approximately $15,000 and $394,000 of debt in 2015 and 2014, respectively. Additionally, in April 2015, the Company’s Chairman, Mr. Launny Steffens, converted $6,950,514 of debt into 69,505,140 shares of common stock of the Company. Should the Company be unable to secure customer contracts that will drive sufficient cash flow to sustain operations, the Company will be forced to seek additional capital in the form of debt or equity financing; however, there can be no assurance that such debt or equity financing will be available on terms acceptable to the Company or at all. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | |||||
Use of Accounting Estimates | |||||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. Significant estimates include the recoverability of long-lived assets, valuation and recoverability of goodwill, stock based compensation, deferred taxes and related valuation allowances and valuation of equity instruments. | |||||
Financial Instruments: | |||||
The carrying amount of the Company’s financial instruments, representing accounts receivable, accounts payable and short-term debt approximate their fair value due to their short term nature. | |||||
Stock-Based Compensation | |||||
The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation” which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards under ASC 718. The Company did not issue any option in the first three months of 2015. The Company recognized stock-based compensation expense of $38 for the three months ended March 31, 2015 in connection with outstanding options. | |||||
The following table sets forth certain information as of March 31, 2015 about shares of the Company’s common stock, par value $.001 (the “Common Stock”), outstanding and available for issuance under the Company’s existing equity compensation plans: the Cicero Inc. 2007 Employee Stock Option Plan and the Outside Director Stock Option Plan. The Company’s stockholders approved all of the Company’s stock-based compensation plans. | |||||
Shares | |||||
Outstanding on December 31, 2014 | 3,150,110 | ||||
Granted | -- | ||||
Exercised | -- | ||||
Forfeited | -- | ||||
Outstanding on March 31, 2015 | 3,150,110 | ||||
Weighted average exercise price of outstanding options | $ | 0.24 | |||
Aggregate Intrinsic Value | $ | 0 | |||
Shares available for future grants on March 31, 2015 | 1,351,090 | ||||
Weighted average of remaining contractual life | 4.44 | ||||
Recent Accounting Pronouncements | |||||
In August 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard update which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting standard update on the financial statements and related disclosures. | |||||
In May 2014, the FASB issued a new accounting standard update on revenue recognition from contracts with customers. The new guidance will replace most current U.S. GAAP guidance on this topic and eliminate most industry-specific guidance. According to the new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration for which the Company expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is not permitted. The Company has not yet selected a transition method and is evaluating the impact of adopting this new accounting standard update on the consolidated financial statements and related disclosures. |
2_GOODWILL_AND_OTHER_INTANGIBL
2. GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||
2. GOODWILL AND OTHER INTANGIBLE ASSETS | The Company accounts for goodwill in accordance with ASC Topic 350 “Intangibles – Goodwill and Other Intangible Assets” which requires that goodwill and intangible assets with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. | ||||
Goodwill includes the excess of the purchase price over the fair value of net assets acquired of $2,832,000 in connection with the SOAdesk LLC acquisition in fiscal 2010. The Codification requires that goodwill be tested for impairment at the reporting unit level. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. | |||||
Pursuant to recent authoritative accounting guidance, the Company elects to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The Company is not required to calculate the fair value of a reporting unit unless the Company determines that it is more likely than not that its fair value is less than its carrying amount. If the Company determines that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying value exceeds its fair value, the second step would need to be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step is measuring the fair value of assets and liabilities of the reporting unit to determine the implied fair value of goodwill, which is compared with the carrying amount of that goodwill. Any excess of the goodwill carrying value over the respective implied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. | |||||
Upon completion of the fiscal year 2014 test, the goodwill of our SOAdesk LLC acquisition was determined to be impaired. The impairment was the result of slower than projected growth in revenue. This goodwill impairment charge of $1,174,000 also represented our accumulated goodwill impairment as of December 31, 2014. Through March 31, 2015, no indicator of impairment of goodwill has been identified. | |||||
Goodwill | |||||
Balance at December 31, 2014 | $ | 1,658,000 | |||
Additions | -- | ||||
Impairment | -- | ||||
Balance at March 31, 2015 | $ | 1,658,000 |
3_SHORT_TERM_DEBT
3. SHORT TERM DEBT | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
3. SHORT TERM DEBT | Debt and notes payable to related party consist of the following (in thousands): | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Note payable – asset purchase agreement (a) | $ | 700 | $ | 700 | |||||
Note payable – related party (b) | 6,951 | 6,706 | |||||||
Notes payable (c) | 1,086 | 1,086 | |||||||
Total short term debt | $ | 8,737 | $ | 8,492 | |||||
(a) | In January 2010, the Company entered into an unsecured convertible promissory note with SOAdesk for $700,000 with an annual interest rate of 5% as per the Asset Purchase Agreement. The note was originally scheduled to mature on March 31, 2010 but was subsequently amended and through a series of amendments, the maturity date was extended to June 30, 2015. At December 31, 2014, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $175,000 in interest. At March 31, 2015, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $183,000 in interest. | ||||||||
The note is convertible into shares of Series B Convertible Preferred Stock at the rate of one share per every $150 of principal and interest due under the note. The Company is obligated to repay any principal of the loan with 50% of any gross proceeds of any Series B Preferred capital raised through maturity of the note. The note is convertible at the holder’s option at any time or at maturity. | |||||||||
(b) | During 2013, the Company entered into a short-term note payable with Antony Castagno, the Chief Technology Officer, for various working capital needs. The note was non-interest bearing and unsecured. In March 2014, Mr. Castagno amended the note extending the term date till December 31, 2014 and the note bore interest at 10%. At December 31, 2014, the Company was indebted to Mr. Castagno in the approximate amount of $15,000 and approximately $1,400 in interest. No interest was paid in fiscal 2014. In March 2015, the debt of $15,000 and approximate interest of $1,700 was paid in full. | ||||||||
From time to time during 2012 through 2015, the Company entered into several short-term notes payable with John L. (Launny) Steffens, the Chairman of the Board of Directors, for various working capital needs. The notes bear interest at 12% per year, are unsecured and mature on June 30, 2015. At December 31, 2014, the Company was indebted to Mr. Steffens in the approximate amount of $6,691,000 of principal and $1,139,000 in interest. At March 31, 2015, the Company was indebted to Mr. Steffens in the approximate amount of $6,950,514 of principal and $1,343,000 of interest. In April 2015, Mr. Steffens converted all of his principal of $6,950,514 into 69,505,140 shares of common stock of the Company. | |||||||||
(c) | The Company has issued a series of short-term promissory notes with private lenders, which provide for short term borrowings, both secured by accounts receivable and unsecured. The notes in the aggregate principal amount of $50,000 of principal and $41,000 of interest and $50,000 of principal and $44,000 of interest, respectively, as of December 31, 2014 and March 31, 2015, bear interest between 10% and 36% per annum. | ||||||||
In March 2014, the Company reclassified to short-term debt its unsecured convertible promissory note with SOAdesk that was entered into as part of the Asset Purchase Agreement with SOAdesk for $1,000,000 with an annual interest rate of 5% and a maturity date of January 14, 2015. In March 2012, SOAdesk elected to convert $300,000 of the outstanding note balance into 2,000,000 shares of Company’s Common Stock and the note was amended to extend the maturity date till March 28, 2015. In March 2015, the note was amended to extend the maturity date till June 30, 2015. At December 31, 2014, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $207,000 in interest. At March 31, 2015, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $215,000 in interest. The note is only convertible into shares of the Company’s common stock at the rate of one share for every $0.15 of principal and interest due under the note. | |||||||||
In June 2014, the Company reclassified to short-term debt its unsecured promissory note with a private lender that was originally entered into in March 2012 for $336,000 at an interest rate of 12% and a maturity date of March 31, 2013. In March 2013, the maturity date of the note was extended to June 30, 2015. At December 31, 2014, the Company was indebted to this private lender in the amount of $336,000 in principal and $112,000 in interest. At March 31, 2015, the Company was indebted to this private lender in the amount of $336,000 in principal and $121,000 in interest. |
4_INCOME_TAXES
4. INCOME TAXES | 3 Months Ended |
Mar. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
4. INCOME TAXES | The Company accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) guidance ASC 740 “Income Taxes”. The Company's effective tax rate differs from the statutory rate primarily due to the fact that no income tax benefit or expense was recorded for the first three months of fiscal year 2015 or 2014. Because of the Company's recurring losses, the deferred tax assets have been fully offset by a valuation allowance. |
5_LOSS_PER_SHARE
5. LOSS PER SHARE | 3 Months Ended |
Mar. 31, 2015 | |
Earnings Per Share [Abstract] | |
5. LOSS PER SHARE | Basic loss per share is computed based upon the weighted average number of common shares outstanding. Diluted loss per share is computed based upon the weighted average number of common shares outstanding and any potentially dilutive securities. Potentially dilutive securities outstanding during the periods presented include stock options, warrants, restricted stock, preferred stock and convertible debt. |
Options to purchase shares of common stock are excluded from the calculation of diluted earnings per share when their inclusion would have an anti-dilutive effect on the calculation. No options were included for the three months ended March 31, 2015 and 2014. The weighted average number of common shares is increased by the number of dilutive potential common shares issuable on the exercise of options less the number of common shares assumed to have been purchased with the proceeds from the exercise of the options pursuant to the treasury stock method; those purchases are assumed to have been made at the average price of the common stock during the respective period. |
6_COMMITMENTS
6. COMMITMENTS | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
6. COMMITMENTS | In June 2014, the Company entered into an amendment with its landlord and renewed its lease through 2018. Future minimum lease commitments on operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2015 consisted of only one lease as follows (in thousands): | ||||
Lease | |||||
Commitments | |||||
2015 | $ | 77 | |||
2016 | 103 | ||||
2017 | 106 | ||||
2018 | 89 | ||||
$ | 375 |
7_CONTINGENCIES
7. CONTINGENCIES | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
7. CONTINGENCIES | The Company, from time to time, is involved in legal matters arising in the ordinary course of its business including matters involving proprietary technology. While management believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations. |
Under the indemnification clause of the Company’s standard reseller agreements and software license agreements, the Company agrees to defend the reseller/licensee against third party claims asserting infringement by the Company’s products of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the reseller/licensee. There were no claims against the Company as of March 31, 2015. |
8_SUBSEQUENT_EVENTS
8. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2015 | |
Subsequent Events [Abstract] | |
8. SUBSEQUENT EVENTS | On April 8, 2015, the Company entered into an Exchange Agreement with Mr. Steffens to convert an aggregate of $6,950,514 of principal amount of debt into 69,505,140 shares of the Company’s common stock at a conversion rate of $0.10 per share. The debt was represented by various promissory notes issued by the Company to Mr. Steffens between March 2012 and January 2015. |
1_INTERIM_FINANCIAL_STATEMENTS1
1. INTERIM FINANCIAL STATEMENTS (Policies) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Notes to Financial Statements | |||||
Liquidity | The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred an operating loss of approximately $3,927,000 for the year ended December 31, 2014, and has a history of operating losses. For the three months ended March 31, 2015, the Company incurred losses of $865,000 and had a working capital deficiency of $15,156,000 as of March 31, 2015. Management believes that its repositioned strategy of leading with its Discovery product to use analytics to measure and then manage how work happens will shorten the sales cycle and allow for value based selling to our customers and prospects. The Company anticipates success in this regard based upon current discussions with active customers and prospects. The Company has borrowed $260,000 and $2,296,000 in 2015 and 2014, respectively. The Company has also repaid approximately $15,000 and $394,000 of debt in 2015 and 2014, respectively. Additionally, in April 2015, the Company’s Chairman, Mr. Launny Steffens, converted $6,950,514 of debt into 69,505,140 shares of common stock of the Company. Should the Company be unable to secure customer contracts that will drive sufficient cash flow to sustain operations, the Company will be forced to seek additional capital in the form of debt or equity financing; however, there can be no assurance that such debt or equity financing will be available on terms acceptable to the Company or at all. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | ||||
Use of Accounting Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. Significant estimates include the recoverability of long-lived assets, valuation and recoverability of goodwill, stock based compensation, deferred taxes and related valuation allowances and valuation of equity instruments. | ||||
Financial Instruments | The carrying amount of the Company’s financial instruments, representing accounts receivable, accounts payable and short-term debt approximate their fair value due to their short term nature. | ||||
Stock-Based Compensation | The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation” which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards under ASC 718. The Company did not issue any option in the first three months of 2015. The Company recognized stock-based compensation expense of $38 for the three months ended March 31, 2015 in connection with outstanding options. | ||||
The following table sets forth certain information as of March 31, 2015 about shares of the Company’s common stock, par value $.001 (the “Common Stock”), outstanding and available for issuance under the Company’s existing equity compensation plans: the Cicero Inc. 2007 Employee Stock Option Plan and the Outside Director Stock Option Plan. The Company’s stockholders approved all of the Company’s stock-based compensation plans. | |||||
Shares | |||||
Outstanding on December 31, 2014 | 3,150,110 | ||||
Granted | -- | ||||
Exercised | -- | ||||
Forfeited | -- | ||||
Outstanding on March 31, 2015 | 3,150,110 | ||||
Weighted average exercise price of outstanding options | $ | 0.24 | |||
Aggregate Intrinsic Value | $ | 0 | |||
Shares available for future grants on March 31, 2015 | 1,351,090 | ||||
Weighted average of remaining contractual life | 4.44 | ||||
Recent Accounting Pronouncements | In August 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard update which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting standard update on the financial statements and related disclosures. | ||||
In May 2014, the FASB issued a new accounting standard update on revenue recognition from contracts with customers. The new guidance will replace most current U.S. GAAP guidance on this topic and eliminate most industry-specific guidance. According to the new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration for which the Company expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is not permitted. The Company has not yet selected a transition method and is evaluating the impact of adopting this new accounting standard update on the consolidated financial statements and related disclosures. |
1_INTERIM_FINANCIAL_STATEMENTS2
1. INTERIM FINANCIAL STATEMENTS (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Interim Financial Statements Tables | |||||
Stock-Based Compensation | Shares | ||||
Outstanding on December 31, 2014 | 3,150,110 | ||||
Granted | -- | ||||
Exercised | -- | ||||
Forfeited | -- | ||||
Outstanding on March 31, 2015 | 3,150,110 | ||||
Weighted average exercise price of outstanding options | $ | 0.24 | |||
Aggregate Intrinsic Value | $ | 0 | |||
Shares available for future grants on March 31, 2015 | 1,351,090 | ||||
Weighted average of remaining contractual life | 4.44 |
2_GOODWILL_AND_OTHER_INTANGIBL1
2. GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Goodwill And Other Intangible Assets Tables | |||||
Schedule of goodwill and impairment | Goodwill | ||||
Balance at December 31, 2014 | $ | 1,658,000 | |||
Additions | -- | ||||
Impairment | -- | ||||
Balance at March 31, 2015 | $ | 1,658,000 |
3_SHORT_TERM_DEBT_Tables
3. SHORT TERM DEBT (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Short-term debt, and notes payable to related party | March 31, | December 31, | |||||||
2015 | 2014 | ||||||||
Note payable – asset purchase agreement (a) | $ | 700 | $ | 700 | |||||
Note payable – related party (b) | 6,951 | 6,706 | |||||||
Notes payable (c) | 1,086 | 1,086 | |||||||
Total short term debt | $ | 8,737 | $ | 8,492 |
6_COMMITMENTS_Tables
6. COMMITMENTS (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Commitments Tables | |||||
Schedule of lease commitments | Lease | ||||
Commitments | |||||
2015 | $ | 77 | |||
2016 | 103 | ||||
2017 | 106 | ||||
2018 | 89 | ||||
$ | 375 |
1_INTERIM_FINANCIAL_STATEMENTS3
1. INTERIM FINANCIAL STATEMENTS (Details) (USD $) | 3 Months Ended |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 |
Interim Financial Statements Details | |
Outstanding on December 31, 2014 | 3,150,110 |
Granted | 0 |
Exercised | 0 |
Forfeited | 0 |
Outstanding on March 31, 2015 | 3,150,110 |
Weighted average exercise price of outstanding options | $0.24 |
Aggregate Intrinsic Value | $0 |
Shares available for future grants on March 31, 2015 | 1,351,090 |
Weighted average of remaining contractual life | 4 years 5 months 8 days |
1_INTERIM_FINANCIAL_STATEMENTS4
1. INTERIM FINANCIAL STATEMENTS (Details Narrative) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Interim Financial Statements Details Narrative | ||
Net loss | $865 | $723 |
Working capital deficiency | $15,156,000 |
2_GOODWILL_AND_OTHER_INTANGIBL2
2. GOODWILL AND OTHER INTANGIBLE ASSETS (Details) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Goodwill And Other Intangible Assets Details | |
Balance at December 31, 2014 | $1,658 |
Additions | 0 |
Impairment | 0 |
Balance at March 31, 2015 | $1,658 |
3_SHORT_TERM_DEBT_Details
3. SHORT TERM DEBT (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Short Term Debt Details | ||
Note payable asset purchase agreement (a) | $700 | $700 |
Note payable - related party (b) | 6,951 | 6,706 |
Note payable (c) | 1,086 | 1,086 |
Total short term debt | $8,737 | $8,492 |
6_COMMITMENTS_Details
6. COMMITMENTS (Details) (USD $) | Mar. 31, 2015 |
In Thousands, unless otherwise specified | |
Commitments Tables | |
2015 | $77 |
2016 | 103 |
2017 | 106 |
2018 | 89 |
Total | $375 |