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[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                                                to

 

Delaware	11-2920559
(State or other jurisdiction of incorporation or organization)	(I.R.S Employer Identification Number)

 

8000 Regency Parkway, Suite 542, Cary, North Carolina	27518
(Address of principal executive offices)	(Zip Code)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated Filer o Non accelerated filer o Smaller reporting company o

Yes o No o

Yes o No o

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PART I.     Financial Information	Page Number
Item 1.     Condensed  Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013 (unaudited)	4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)	5
Condensed Consolidated Statement of Stockholders’ Deficit as of September 30, 2014 (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.     Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.   Controls and Procedures	17
PART II.    Other Information	18
Item 1.    Legal Proceedings	18
Item 1A. Risk Factors	18
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Mine Safety Disclosures	18
Item 5. Other Information	18
Item 6. Exhibits	18
SIGNATURE	19

 
 

 

(unaudited)

 

 

		Nine months Ended September 30,
		2014				2013
Cash flows from operating activities:
Net loss		$	(2,168	)		$	(2,542	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization			16				49
Stock compensation expense			65				69
Stock issuance for external consulting fees			--				35
Changes in assets and liabilities:
Trade accounts receivable			1,015				1,153
Prepaid expenses and other assets			14				174
Accounts payable and accrued expenses			629				191
Deferred revenue			(660	)			(666	)
Net cash used by operating activities			(1,089	)			(1,537	)
Cash flows from investing activities:
Purchases of equipment			(7	)			(7	)
Net cash used by investing activities			(7	)			(7	)
Cash flows from financing activities:
Issuance of common stock			--				65
Borrowings under short and long-term debt			1,536				1,860
Repayments of short and long-term debt			(394	)			(416	)
Net cash generated by financing activities			1,142				1,509
Net increase/(decrease) in cash			46				(35	)
Cash:
Beginning of period			5				69
End of period		$	51			$	34

 

 

 

 

 

 
 

 

 

The following table sets forth certain information as of September 30, 2014 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, 2013			3,396,210
Granted			15,000
Exercised			--
Forfeited			(168,600	)
Outstanding on September 30, 2014			3,242,610
Weighted average exercise price of outstanding options		$	0.24
Aggregate Intrinsic Value		$	0.00
Shares available for future grants on September 30, 2014			1,258,590
Weighted average of remaining contractual life			4.89

 

 

 

 

 

 

		September 30, 2014				December 31, 2013
Note payable - asset purchase agreement (a)		$	700			$	--
Note payable – related party (b)			5,946				21
Notes payable (c)			1,086				435
		$	7,732			$	456

(a)

In June 2014, the Company reclassified to short-term debt its 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 September 30, 2014, the Company was indebted to SOAdesk in the amount of $700,000 in principal and $165,000 in interest. At December 31, 2013, this debt was classified as long-term debt but subsequently has been reclassified to short term debt.

(b)

From 2012 through 2014, the Company entered into various short-term notes payable with John Broderick, the Chief Executive Officer and Chief Financial Officer, for various working capital needs. The notes bear interest at 12% and were unsecured. At December 31, 2013, the Company was indebted to Mr. Broderick in the approximate amount of $6,000. In February 2014, the debt of $6,000 and approximate interest of $500 was paid in full.

(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 and $435,000, respectively, as of September 30, 2014 and December 31, 2013, bear interest between 10% and 36% per annum.  The Company repaid approximately $385,000 of the outstanding notes and $52,000 of interest in fiscal 2014.

 

 

 

		Lease Commitments
2014		$	17
2015			102
2016			103
2017			106
2018			89
		$	417

 

 

●	We develop new and unproven technology and products;

●	We depend on an unproven strategy for ongoing revenue;

●	Economic conditions could adversely affect our revenue growth and cause us not to achieve desired revenue;

●	The so-called “penny stock rule” could make it cumbersome for brokers and dealers to trade in our common stock, making the market for our common stock less liquid which could cause the price of our stock to decline;

●	Because we cannot accurately predict the amount and timing of individual sales, our quarterly operating results may vary significantly, which could adversely impact our stock price;

●	Loss of key personnel associated with Cicero Discovery and XM development could adversely affect our business;

●	Different competitive approaches or internally developed solutions to the same business problem could delay or prevent adoption of Cicero Discovery and XM;

●	Our ability to compete may be subject to factors outside our control;

●	The markets for our products are characterized by rapidly changing technologies, evolving industry standards, and frequent new product introductions;

●	We may face damage to the reputation of our software and a loss of revenue if our software products fail to perform as intended or contain significant defects;

●	We may be unable to enforce or defend our ownership and use of proprietary and licensed technology; and

●	Our business may be adversely impacted if we do not provide professional services to implement our solutions.

 

 

		Three months ended September 30,							Nine months ended September 30,
		2014				2013				2014				2013
Total revenue		$	383			$	542			$	1,475			$	1,640
Total cost of revenue			165				283				604				836
Gross margin			218				259				871				804
Total operating expenses			814				778				2,488				2,973
Income/(loss) from operations		$	(596	)		$	(519	)		$	(1,617	)		$	(2,169	)

 

 

 

 

 

 

 

 

 

 

 

Exhibit No.	Description
31.1	Certification of Chief Executive Officer/Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith).
32.1	Certification of Chief Executive Officer/Chief Financial Officer pursuant to 18 USC § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

 

 

 

 

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