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Basis of Presentation
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3 Months Ended | ||
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Mar. 31, 2014
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| Basis of Presentation [Abstract] | |||
| Basis of Presentation |
The condensed consolidated financial statements included herein have been prepared by the Company (which may be referred to as we, us or our), without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the Commission”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2014.
We suggest that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.
Reverse Stock Split
The Company effected a reverse stock split at a ratio of 1-for-5 of the Company’s then outstanding Common Stock (“Common Stock”), and shares of Common Stock issuable upon exercise of the then outstanding stock options and warrants, effective as of 12:01 a.m. on October 15, 2013. As a result of the reverse stock split, each five shares of the outstanding Common Stock and shares held in treasury were combined into one share of Common Stock without any change to the par value per share. The reverse stock split did not affect the number of authorized shares of Common Stock which remains at 75,000,000. As a result of this reverse stock split, all references in the financial statements and notes thereto to the number of shares outstanding, per share amounts, and outstanding stock option and warrant data of the Company’s Common Stock have been restated to reflect the effect of the stock split for all periods presented.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. Our independent registered public accounting firm included in its report covering our 2013 audited consolidated financial statements an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial position and operating results raise substantial doubt about the Company’s ability to continue as a going concern, as reflected by the accumulated deficit of $59,047,000 incurred through March 31, 2014. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. During the three months ended March 31, 2014, the Company incurred a net loss of $3,969,000. As of March 31, 2014, we have a deficit in working capital of $4,462,000. Revenues for the three months ended March 31, 2014 were $10,544,000 and were below our expectations and internal forecasts as a result, in large part, of the government sequestration, federal governmental clients operating under reduced budgets, ending of contracts, and general adverse economic conditions.
The Company’s cash flow requirements during the three months ended March 31, 2014 and fiscal year 2013 were financed by cash on hand, operations, our credit facility, and debt financing. The Company is continually reviewing operating costs and is committed to further reducing operating costs to bring them in line with revenue levels.
Our ability to achieve and maintain profitability is dependent upon our ability to successfully raise additional capital and develop our business plans that will generate profitable revenues. The Company continues to explore all sources of increasing revenue. If the Company is unable in the near term to raise capital on commercially reasonable terms or increase revenue, it may not have sufficient cash to sustain its operations for the remainder of 2014. As a result, the Company may be forced to further reduce or even curtail its operations.
The Company continues to focus on expansion into both commercial and international markets to help offset the uncertainties of government spending in the USA. This includes new services, new customers and increasing market share in our current markets. Although no assurances can be given, we believe we will be able to successfully implement this plan. In January 2014, the fiscal year 2014 Omnibus spending bill was approved by Congress and the President. This budget, the first approved in several years, restores federal government funding cuts instituted in 2013 from sequestration and allows for new spending on projects that was not allowed under Continuing Resolutions (“CR”).
Reclassifications
Certain prior period amounts have been reclassified to conform with the current period presentation.
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