UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
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 NUMBER: 000-29440
IDENTIV, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE |
|
77-0444317 |
(STATE OR OTHER JURISDICTION OF |
|
(I.R.S. EMPLOYER |
2201 Walnut Avenue, Suite 100
Fremont, California 94538
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(949) 250-8888
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
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. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a 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 ☐ |
|
Accelerated filer ☐ |
|
Non-accelerated filer ☐ |
|
Smaller reporting company ☑ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
At November 7, 2016, 11,086,151 shares of common stock were outstanding.
|
|
|
Page |
|
|||
Item 1. |
|
3 |
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 |
3 |
|
|
4 |
|
|
|
5 |
|
|
|
Condensed Consolidated Statement of Equity for the Nine Months Ended September 30, 2016 |
6 |
|
|
7 |
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
|
31 |
|
Item 4. |
|
31 |
|
|
|
||
|
|||
Item 1. |
|
34 |
|
Item 1A. |
|
34 |
|
|
|
|
|
Item 6. |
|
35 |
|
|
|
||
36 |
|||
37 |
2
IDENTIV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except par value)
|
September 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
$ |
9,183 |
|
|
$ |
16,667 |
|
Accounts receivable, net of allowances of $299 and $346 as of September 30, 2016 and December 31, 2015, respectively |
|
9,159 |
|
|
|
7,915 |
|
Inventories |
|
12,140 |
|
|
|
14,726 |
|
Prepaid expenses and other current assets |
|
3,399 |
|
|
|
1,518 |
|
Total current assets |
|
33,881 |
|
|
|
40,826 |
|
Property and equipment, net |
|
2,672 |
|
|
|
4,218 |
|
Intangible assets, net |
|
6,183 |
|
|
|
7,275 |
|
Other assets |
|
851 |
|
|
|
1,129 |
|
Total assets |
$ |
43,587 |
|
|
$ |
53,448 |
|
LIABILITIES AND STOCKHOLDERS´ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
6,369 |
|
|
$ |
6,280 |
|
Current portion - payment obligation |
|
760 |
|
|
|
681 |
|
Current portion - financial liabilities, net of discount of $375 and $0, respectively |
|
9,625 |
|
|
|
— |
|
Deferred revenue |
|
1,145 |
|
|
|
1,515 |
|
Accrued compensation and related benefits |
|
1,667 |
|
|
|
1,905 |
|
Other accrued expenses and liabilities |
|
6,876 |
|
|
|
5,835 |
|
Total current liabilities |
|
26,442 |
|
|
|
16,216 |
|
Long-term payment obligation |
|
4,209 |
|
|
|
4,878 |
|
Long-term financial liabilities, net of discount of $0 and $196, and debt issuance costs of $11 and $448, respectively (see Note 7) |
|
8,289 |
|
|
|
17,656 |
|
Other long-term liabilities |
|
549 |
|
|
|
508 |
|
Total liabilities |
|
39,489 |
|
|
|
39,258 |
|
Commitments and contingencies (see Note 11) |
|
|
|
|
|
|
|
Stockholders´ equity: |
|
|
|
|
|
|
|
Identiv, Inc. stockholders' equity: |
|
|
|
|
|
|
|
Preferred stock, $0.001 par value: 10,000 shares authorized; none issued and outstanding |
|
— |
|
|
|
— |
|
Common stock, $0.001 par value: 50,000 shares authorized; 11,788 and 11,365 shares issued and 11,078 and 10,747 shares outstanding as of September 30, 2016 and December 31, 2015, respectively |
|
11 |
|
|
|
11 |
|
Additional paid-in capital |
|
399,415 |
|
|
|
396,407 |
|
Treasury stock, 710 and 618 shares as of September 30, 2016 and December 31, 2015, respectively |
|
(6,667 |
) |
|
|
(6,487 |
) |
Accumulated deficit |
|
(390,445 |
) |
|
|
(377,814 |
) |
Accumulated other comprehensive income |
|
1,963 |
|
|
|
2,229 |
|
Total Identiv, Inc. stockholders' equity |
|
4,277 |
|
|
|
14,346 |
|
Noncontrolling interest |
|
(179 |
) |
|
|
(156 |
) |
Total stockholders´ equity |
|
4,098 |
|
|
|
14,190 |
|
Total liabilities and stockholders´equity |
$ |
43,587 |
|
|
$ |
53,448 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
IDENTIV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Net revenue |
|
$ |
15,560 |
|
|
$ |
17,196 |
|
|
$ |
41,521 |
|
|
$ |
47,717 |
|
Cost of revenue |
|
|
8,640 |
|
|
|
9,675 |
|
|
|
24,038 |
|
|
|
27,466 |
|
Gross profit |
|
|
6,920 |
|
|
|
7,521 |
|
|
|
17,483 |
|
|
|
20,251 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
1,480 |
|
|
|
2,235 |
|
|
|
4,997 |
|
|
|
6,567 |
|
Selling and marketing |
|
|
3,312 |
|
|
|
5,236 |
|
|
|
10,807 |
|
|
|
15,698 |
|
General and administrative |
|
|
2,115 |
|
|
|
6,456 |
|
|
|
9,674 |
|
|
|
15,057 |
|
Impairment of goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
988 |
|
Restructuring and severance |
|
|
160 |
|
|
|
215 |
|
|
|
3,100 |
|
|
|
408 |
|
Total operating expenses |
|
|
7,067 |
|
|
|
14,142 |
|
|
|
28,578 |
|
|
|
38,718 |
|
Loss from operations |
|
|
(147 |
) |
|
|
(6,621 |
) |
|
|
(11,095 |
) |
|
|
(18,467 |
) |
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(525 |
) |
|
|
(478 |
) |
|
|
(1,814 |
) |
|
|
(1,367 |
) |
Foreign currency gain (loss), net |
|
|
35 |
|
|
|
(10 |
) |
|
|
309 |
|
|
|
(186 |
) |
Loss before income taxes and noncontrolling interest |
|
|
(637 |
) |
|
|
(7,109 |
) |
|
|
(12,600 |
) |
|
|
(20,020 |
) |
Income tax benefit (provision) |
|
|
(105 |
) |
|
|
(59 |
) |
|
|
(35 |
) |
|
|
(141 |
) |
Loss before noncontrolling interest |
|
|
(742 |
) |
|
|
(7,168 |
) |
|
|
(12,635 |
) |
|
|
(20,161 |
) |
Less: Loss (income) attributable to noncontrolling interest |
|
|
(1 |
) |
|
|
6 |
|
|
|
4 |
|
|
|
72 |
|
Net loss attributable to Identiv, Inc. |
|
$ |
(743 |
) |
|
$ |
(7,162 |
) |
|
$ |
(12,631 |
) |
|
$ |
(20,089 |
) |
Basic and diluted net loss per share attributable to Identiv, Inc. |
|
$ |
(0.07 |
) |
|
$ |
(0.66 |
) |
|
$ |
(1.16 |
) |
|
$ |
(1.85 |
) |
Weighted average shares used to compute basic and diluted loss per share |
|
|
11,024 |
|
|
|
10,895 |
|
|
|
10,855 |
|
|
|
10,834 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IDENTIV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Net loss |
|
$ |
(742 |
) |
|
$ |
(7,168 |
) |
|
$ |
(12,635 |
) |
|
$ |
(20,161 |
) |
Other comprehensive loss, net of income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(64 |
) |
|
|
30 |
|
|
|
(285 |
) |
|
|
(112 |
) |
Foreign currency translation reclassified into net loss upon acquisition of noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(444 |
) |
Total other comprehensive (loss) income, net of income taxes |
|
|
(64 |
) |
|
|
30 |
|
|
|
(285 |
) |
|
|
(556 |
) |
Comprehensive loss |
|
|
(806 |
) |
|
|
(7,138 |
) |
|
|
(12,920 |
) |
|
|
(20,717 |
) |
Less: Comprehensive income attributable to noncontrolling interest |
|
|
11 |
|
|
|
6 |
|
|
|
23 |
|
|
|
78 |
|
Comprehensive loss attributable to Identiv, Inc. common stockholders |
|
$ |
(795 |
) |
|
$ |
(7,132 |
) |
|
$ |
(12,897 |
) |
|
$ |
(20,639 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
IDENTIV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
Nine Months Ended September 30, 2016
(Unaudited, in thousands)
|
|
Identiv, Inc. Stockholders´ Equity |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
|
|
|
||
|
|
Common Stock |
|
|
Paid-in |
|
|
Treasury |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stock |
|
|
Deficit |
|
|
Income |
|
|
Interest |
|
|
Equity |
|
||||||||
Balances, December 31, 2015 |
|
|
10,747 |
|
|
$ |
11 |
|
|
$ |
396,407 |
|
|
$ |
(6,487 |
) |
|
$ |
(377,814 |
) |
|
$ |
2,229 |
|
|
$ |
(156 |
) |
|
$ |
14,190 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,631 |
) |
|
|
— |
|
|
|
(4 |
) |
|
|
(12,635 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(266 |
) |
|
|
(19 |
) |
|
|
(285 |
) |
Issuance of warrants |
|
|
— |
|
|
|
— |
|
|
|
376 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
376 |
|
Issuance of common stock in connection with vesting of stock awards |
|
|
423 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
2,632 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,632 |
|
Repurchase of common stock |
|
|
(92 |
) |
|
|
— |
|
|
|
— |
|
|
|
(180 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(180 |
) |
Balances, September 30, 2016 |
|
|
11,078 |
|
|
$ |
11 |
|
|
$ |
399,415 |
|
|
$ |
(6,667 |
) |
|
$ |
(390,445 |
) |
|
$ |
1,963 |
|
|
$ |
(179 |
) |
|
$ |
4,098 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
IDENTIV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2016 |
|
|
2015 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(12,635 |
) |
|
$ |
(20,161 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
2,492 |
|
|
|
2,203 |
|
Impairment of goodwill and long-lived assets |
|
|
— |
|
|
|
988 |
|
Accretion of interest on long-term payment obligation |
|
|
335 |
|
|
|
398 |
|
Amortization of debt issuance costs |
|
|
633 |
|
|
|
698 |
|
Stock-based compensation expense |
|
|
2,245 |
|
|
|
3,700 |
|
Loss on disposal of fixed assets |
|
|
329 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(1,166 |
) |
|
|
2,961 |
|
Inventories |
|
|
2,741 |
|
|
|
(6,159 |
) |
Prepaid expenses and other assets |
|
|
(182 |
) |
|
|
(599 |
) |
Accounts payable |
|
|
154 |
|
|
|
(2,739 |
) |
Payment obligation liability |
|
|
(925 |
) |
|
|
(856 |
) |
Deferred revenue |
|
|
(370 |
) |
|
|
916 |
|
Accrued expenses and other liabilities |
|
|
155 |
|
|
|
1,792 |
|
Net cash used in operating activities |
|
|
(6,194 |
) |
|
|
(16,858 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(425 |
) |
|
|
(553 |
) |
Net cash used in investing activities |
|
|
(425 |
) |
|
|
(553 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of debt, net of issuance costs |
|
|
— |
|
|
|
4,000 |
|
Proceeds from issuance of common stock under stock plans |
|
|
— |
|
|
|
46 |
|
Repurchase of common stock |
|
|
(180 |
) |
|
|
(1,915 |
) |
Net cash (used in) provided by financing activities |
|
|
(180 |
) |
|
|
2,131 |
|
Effect of exchange rates on cash |
|
|
(685 |
) |
|
|
149 |
|
Net decrease in cash |
|
|
(7,484 |
) |
|
|
(15,131 |
) |
Cash at beginning of period |
|
|
16,667 |
|
|
|
36,547 |
|
Cash at end of period |
|
$ |
9,183 |
|
|
$ |
21,416 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Warrants issued as debt issuance costs in connection with debt modification |
|
$ |
376 |
|
|
$ |
— |
|
Common stock issued to settle earn-out obligation |
|
$ |
— |
|
|
$ |
3,510 |
|
Common stock issued to acquire share of noncontrolling interest |
|
$ |
— |
|
|
$ |
1,216 |
|
Property and equipment included in accruals |
|
$ |
83 |
|
|
$ |
51 |
|
Restricted stock units issued to Board of Directors in lieu of cash |
|
$ |
387 |
|
|
$ |
— |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
IDENTIV, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
1. Organization and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of Identiv, Inc. (“Identiv” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The preparation of unaudited condensed consolidated financial statements necessarily requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. The Company may experience significant variations in demand for its products quarter to quarter and typically experiences a stronger demand cycle in the second half of its fiscal year. As a result, the quarterly results may not be indicative of the full year results. The December 31, 2015 balance sheet was derived from the audited financial statements as of that date.
Certain reclassifications, such as the accounting for debt issuance costs consistent with Accounting Standards Update (“ASU”), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), have been made to the fiscal year 2015 financial statements to conform to the fiscal year 2016 presentation.
Concentration of Credit Risk — No customer represented more than 10% of net revenue for the three months ended September 30, 2016, and one customer accounted for 10% of net revenue for the nine months ended September 30, 2016. One customer represented 19% of net revenue for the three months ended September 30, 2015, and one customer represented 18% of net revenue for the nine months ended September 30, 2015. No customer represented more than 10% of the Company’s accounts receivable balance at September 30, 2016 or December 31, 2015.
Recent Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements.
In April 2015, the FASB issued 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”), which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. ASU 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 did not have a material impact on the Company’s condensed consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company adopted
8
this guidance as of January 1, 2016. The new guidance has been applied on a retrospective basis, wherein the consolidated balance sheet of December 31, 2015 has been retrospectively adjusted to reflect the effects of applying the new guidance. As a result of the change to the December 31, 2015 consolidated balance sheet, deferred debt issuance costs included in other assets and long-term financial liabilities decreased by $0.4 million. After the retrospective application to December 31, 2015, subsequent amortization of the deferred debt issuance costs results in an increase to long-term debt.
In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). Under ASU 2015-01, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. ASU 2015-01 is effective for interim and annual reporting periods beginning after December 15, 2015 with early adoption permitted. Upon adoption, the Company may elect prospective or retrospective application. The adoption of ASU 2015-01 did not have a material impact on the Company’s condensed consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, (“ASU 2014-15”), which requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption will have on its condensed consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606) (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to annual periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance is effective for the Company beginning January 1, 2018 and will provide the Company additional time to evaluate the method and impact that ASU 2014-09 will have on its condensed consolidated financial statements.
2. Fair Value Measurements
The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. Under the Accounting Standards Codification (“ASC”), ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
|
• |
Level 1 – Quoted prices (unadjusted) for identical assets and liabilities in active markets; |
|
• |
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly; and |
|
• |
Level 3 – Unobservable inputs. |
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of September 30, 2016 and December 31, 2015, there were no assets that are measured and recognized at fair value on a recurring basis. There were no cash equivalents as of September 30, 2016 and December 31, 2015.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
Certain of the Company's assets, including intangible assets, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections. During the three and nine months ended September 30, 2016, the Company noted no indicators of impairment. During the three and nine months ended September 30, 2015, the Company noted certain indicators of impairment, including a sustained decline in its stock price and continued reduced performance in its Identity reporting unit. Based on the results of step one of the goodwill impairment analysis, it was determined that the Company’s net adjusted carrying value exceeded its estimated fair value for the Identity reporting unit. As a result, goodwill relating to the Identity segment was determined to be fully impaired resulting in an
9
impairment charge of $1.0 million which was recorded in the condensed consolidated statements of operations for the period. For additional discussion of measurement criteria used in evaluating potential impairment involving intangible assets, refer to Note 5, Intangible Assets.
Privately-held investments, which are normally carried at cost, are measured at fair value due to events and circumstances that the Company identified as significantly impacting the fair value of investments. The Company estimates the fair value of its privately-held investments using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and the investee's capital structure.
As of September 30, 2016 and December 31, 2015, the Company had $0.3 million of privately-held investments measured at fair value on a nonrecurring basis which were classified as a Level 3 asset due to the absence of quoted market prices and inherent lack of liquidity. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. During the three and nine months ended September 30, 2016, the Company determined that no privately-held investments were impaired. The amount of privately-held investments is included in other assets in the condensed consolidated balance sheets.
As of September 30, 2016 and December 31, 2015, there were no liabilities that are measured and recognized at fair value on a non-recurring basis.
Assets and Liabilities Not Measured at Fair Value
The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, financial liabilities and other accrued liabilities approximate fair value due to their short maturities.
Common Stock Warrants
In connection with the Company’s entry into a consulting agreement in August 2014, the Company issued a consultant a warrant to purchase up to 85,000 shares of the Company’s common stock at a per share exercise price of $10.70 (the “Consultant Warrant”). One fourth of the shares under the warrant are exercisable for cash three months from the date the Consultant Warrant was issued and quarterly thereafter. The Consultant Warrant expires on August 13, 2019. In the event of an acquisition of the Company, the Consultant Warrant shall terminate and no longer be exercisable as of the closing of the acquisition. As of September 30, 2016, the Consultant Warrant had not been exercised.
In connection with the Company’s entry into a credit agreement with Opus Bank (“Opus”) as discussed in Note 7, Financial Liabilities, the Company issued Opus a warrant to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $9.90 (the “Opus Warrant”). On March 31, 2016, the Company entered into a third amendment to its Credit Agreement increasing the number of shares of common stock underlying the warrant from 100,000 to 200,000 shares and decreased the exercise price from $9.90 to $2.19 per share subject to modification. The Company also agreed to issue new warrants to purchase 100,000 shares of common stock in the event that the outstanding principal balance of the Company’s loans with Opus exceeds specified thresholds on each of September 30, 2016, December 31, 2016 and March 31, 2017. The terms of any new warrants issued will be identical to those of the existing warrant, except that each new warrant issued will be exercisable for 100,000 shares and have an exercise price equal to the average closing price of the Company’s common stock for the five trading days ending on the last day of the quarter with respect to which the new warrant is issued. In addition, the existing registration rights agreement was amended to include the new warrants and change the circumstances under which the Company must register shares underlying the warrants issued to Opus (the “Amended Rights Agreement”). The Opus Warrant is immediately exercisable for cash or by net exercise and expires on March 31, 2019. The shares issuable upon exercise of the Opus Warrant and new Opus warrants, if any, are to be registered at the request of Opus pursuant to the Registration Rights Agreement, dated March 31, 2014, as amended by Amendment No. 1 to Registration Rights Agreement, dated March 31, 2016, between the Company and Opus. As of September 30, 2016, the Opus Warrant had not been exercised.
On September 30, 2016, the Company’s outstanding principal threshold, as required in its Credit Agreement, as amended, was not attained. As a result, the Company issued a new warrant (“New Opus Warrant”) to purchase 100,000 shares of common stock at a per share exercise price of $2.22 per share to Opus. The New Opus Warrant is immediately exercisable for cash or by net exercise and expires on September 30, 2021.
On August 14, 2013, in a private placement, the Company issued 834,847 shares of its common stock at a price of $8.50 per share and warrants to purchase an additional 834,847 shares of its common stock at an exercise price of $10.00 per share (the “2013
10
Private Placement Warrants”) to accredited and other qualified investors (the “Investors”). The 2013 Private Placement Warrants have a term of four years and are exercisable beginning six months following the date of issuance. The number of shares issuable upon exercise of the 2013 Private Placement Warrants is subject to adjustment for any stock dividends, stock splits or distributions by the Company, or upon any merger or consolidation or sale of assets of the Company, tender or exchange offer for the Company’s common stock, or a reclassification of the Company’s common stock.
Below is the summary of outstanding warrants issued by the Company as of September 30, 2016:
Warrant Type |
|
Number of Shares Issuable Upon Exercise |
|
|
Weighted Average Exercise Price |
|
|
Issue Date |
|
Expiration Date |
||
Consultant Warrant |
|
|
85,000 |
|
|
$ |
10.70 |
|
|
August 13, 2014 |
|
August 13, 2019 |
Opus Warrant |
|
|
200,000 |
|
|
|
2.19 |
|
|
March 31, 2014 |
|
March 31, 2019 |
New Opus Warrant |
|
|
100,000 |
|
|
|
2.22 |
|
|
September 30, 2016 |
|
September 30, 2021 |
2013 Private Placement Warrants |
|
|
186,878 |
|
|
|
10.00 |
|
|
August 14, 2013 |
|
August 14, 2017 |
Total |
|
|
571,878 |
|
|
|
|
|
|
|
|
|
Stock-Based Compensation Plans
The Company has various stock-based compensation plans to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons. The Company’s stock-based compensation plans consist of the Director Option Plan, 1997 Stock Option Plan, 2000 Stock Option Plan, 2007 Stock Option Plan (the “2007 Plan”), the 2010 Bonus and Incentive Plan (the “2010 Plan”) and the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended.
Stock Bonus and Incentive Plans
In June 2010, the Company’s stockholders approved the 2010 Plan which granted cash and equity-based awards to executive officers, directors and other key employees as designated by the Compensation Committee of the Board. An aggregate of 300,000 shares of the Company’s common stock was reserved for issuance under the 2010 Plan as equity-based awards, including shares, nonqualified stock options, restricted stock or deferred stock awards. These awards provide the Company´s executives, directors and other key employees the opportunity to earn shares of common stock depending on the extent to which certain performance goals are met. Since the adoption of the 2011 Plan (described below), the Company utilizes shares from the 2010 Plan only for performance-based awards and all equity awards granted under the 2010 Plan are issued pursuant to the 2011 Plan.
On June 6, 2011, the Company’s stockholders approved the 2011 Plan, which is administered by the Compensation Committee of the Board. The 2011 Plan provides that stock options, stock units, restricted shares, and stock appreciation rights may be granted to executive officers, directors, consultants, and other key employees. The Company reserved 400,000 shares of common stock under the 2011 Plan, plus 459,956 shares of common stock that remained available for delivery under the 2007 Plan and the 2010 Plan as of June 6, 2011. In aggregate, as of June 6, 2011, 859,956 shares were available for future grants under the 2011 Plan, including shares rolled over from the 2007 Plan and 2010 Plan. Subsequent to June 6, 2011, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 3.0 million shares.
11
A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2016 follows:
|
Number Outstanding |
|
|
Average Exercise Price per Share |
|
|
Weighted Average Remaining Contractual Term (Years) |
|
|
Average Intrinsic Value |
|
||||
Balance at December 31, 2015 |
|
781,804 |
|
|
$ |
11.48 |
|
|
|
|
|
|
$ |
— |
|
Granted |
|
444,460 |
|
|
|
4.36 |
|
|
|
|
|
|
|
|
|
Cancelled or Expired |
|
(299,929 |
) |
|
|
12.81 |
|
|
|
|
|
|
|
|
|
Exercised |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Balance at September 30, 2016 |
|
926,335 |
|
|
$ |
7.40 |
|
|
|
8.15 |
|
|
$ |
— |
|
Vested or expected to vest at September 30, 2016 |
|
887,433 |
|
|
$ |
7.49 |
|
|
|
8.10 |
|
|
$ |
— |
|
Exercisable at September 30, 2016 |
|
458,897 |
|
|
$ |
9.12 |
|
|
|
7.21 |
|
|
$ |
— |
|
The following table summarizes information about options outstanding as of September 30, 2016:
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||||||||
Range of Exercise Prices |
|
Number Outstanding |
|
|
Weighted Average Remaining Contractual Life (Years) |
|
|
Weighted Average Exercise Price |
|
|
Number Exercisable |
|
|
Weighted Average Exercise Price |
|
|||||
$4.36 - $7.20 |
|
|
540,363 |
|
|
|
9.15 |
|
|
$ |
4.58 |
|
|
|
183,894 |
|
|
$ |
4.90 |
|
$7.50 - $11.30 |
|
|
320,768 |
|
|
|
7.07 |
|
|
|
9.59 |
|
|
|
210,142 |
|
|
|
9.44 |
|
$12.00 - $19.70 |
|
|
40,009 |
|
|
|
6.46 |
|
|
|
13.56 |
|
|
|
39,666 |
|
|
|
13.55 |
|
$21.70 - $33.90 |
|
|
17,411 |
|
|
|
4.19 |
|
|
|
25.14 |
|
|
|
17,411 |
|
|
|
25.14 |
|
$34.40 - $43.40 |
|
|
7,784 |
|
|
|
0.40 |
|
|
|
41.33 |
|
|
|
7,784 |
|
|
|
41.33 |
|
$4.36 - $43.40 |
|
|
926,335 |
|
|
|
8.15 |
|
|
$ |
7.40 |
|
|
|
458,897 |
|
|
$ |
9.12 |
|
At September 30, 2016, there was $1.7 million of unrecognized stock-based compensation expense, net of estimated forfeitures related to unvested options, that is expected to be recognized over a weighted-average period of 2.28 years.
Restricted Stock and Restricted Stock Units
The following is a summary of restricted stock and restricted stock unit (“RSU”) activity for the nine months ended September 30, 2016:
|
Number Outstanding |
|
|
Weighted Average Fair Value |
|
|
Average Intrinsic Value |
|
|||
Balance at December 31, 2015 |
|
721,918 |
|
|
$ |
13.32 |
|
|
$ |
— |
|
Granted |
|
1,756,732 |
|
|
|
2.06 |
|
|
|
|
|
Vested |
|
(603,869 |
) |
|
|
7.29 |
|
|
|
|
|
Forfeited |
|
(243,515 |
) |
|
|
15.14 |
|
|
|
|
|
Balance at September 30, 2016 |
|
1,631,266 |
|
|
$ |
2.97 |
|
|
$ |
- |
|
The fair value of the Company’s restricted stock awards and RSUs is calculated based upon the fair market value of the Company’s stock at the date of grant. As of September 30, 2016, there was $2.1 million of unrecognized compensation cost related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.89 years. As of September 30, 2016, an aggregate of 1,631,266 RSUs were outstanding under the 2011 Plan.
12
Stock-Based Compensation Expense
The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Cost of revenue |
$ |
26 |
|
|
$ |
34 |
|
|
$ |
72 |
|
|
$ |
98 |
|
Research and development |
|
69 |
|
|
|
73 |
|
|
|
205 |
|
|
|
212 |
|
Selling and marketing |
|
148 |
|
|
|
363 |
|
|
|
433 |
|
|
|
911 |
|
General and administrative |
|
620 |
|
|
|
659 |
|
|
|
1,535 |
|
|
|
2,316 |
|
Total |
$ |
863 |
|
|
$ |
1,129 |
|
|
$ |
2,245 |
|
|
$ |
3,537 |
|
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance as of September 30, 2016 was as follows:
Exercise of outstanding stock options and vesting of RSUs |
|
|
2,557,601 |
|
ESPP |
|
|
293,888 |
|
Shares of common stock available for grant under the 2011 Plan |
|
|
697,984 |
|
Noncontrolling interest in Bluehill AG |
|
|
10,355 |
|
Warrants to purchase common stock |
|
|
571,878 |
|
Total |
|
|
4,131,706 |
|
Net Loss per Common Share Attributable to Identiv Stockholders’ Equity
Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. For the three and nine months ended September 30, 2016 and 2015, common stock equivalents consisting of outstanding stock options, RSUs and warrants were excluded from the calculation of diluted net loss per share because these securities were anti-dilutive due to the net loss in the respective periods. The total number of common stock equivalents excluded from diluted net loss per share relating to these securities was 3,129,479 common stock equivalents for the three and nine months ended September 30, 2016, and 2,323,430 common stock equivalents for the three and nine months ended September 30, 2015, respectively.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income (“AOCI”) at September 30, 2016 and December 31, 2015 consists of foreign currency translation adjustments totaling $2.0 million and $2.2 million, respectively. As a result of the acquisition of the noncontrolling interest in a subsidiary company, $0.5 million was reclassified out of AOCI into net loss during the nine months ended September 30, 2015.
4. Balance Sheet Components
The Company’s inventories are stated at the lower of cost or market. Inventories consist of (in thousands):
|
September 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Raw materials |
$ |
3,654 |
|
|
$ |
5,033 |
|
Work-in-progress |
|
764 |
|
|
|
12 |
|
Finished goods |
|
7,722 |
|
|
|
9,681 |
|
Total |
$ |
12,140 |
|
|
$ |
14,726 |
|
13
Property and equipment, net consists of (in thousands):
|
September 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Building and leasehold improvements |
$ |
2,252 |
|
|
$ |
2,670 |
|
Furniture, fixtures and office equipment |
|
2,290 |
|
|
|
2,242 |
|
Plant and machinery |
|
8,901 |
|
|
|
8,858 |
|
Purchased software |
|
1,941 |
|
|
|
2,510 |
|
Total |
|
15,384 |
|
|
|
16,280 |
|
Accumulated depreciation |
|
(12,712 |
) |
|
|
(12,062 |
) |
Property and equipment, net |
$ |
2,672 |
|
|
$ |
4,218 |
|
The Company recorded depreciation expense of $0.5 million and $0.4 million during the three months ended September 30, 2016 and 2015, respectively, and $1.4 million and $1.2 million during the nine months ended September 30, 2016 and 2015, respectively.
Other accrued expenses and liabilities consist of (in thousands):
|
September 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Accrued restructuring |
$ |
487 |
|
|
$ |
633 |
|
Accrued professional fees |
|
4,138 |
|
|
|
1,731 |
|
Income taxes payable |
|
187 |
|
|
|
282 |
|
Other accrued expenses |
|
2,064 |
|
|
|
3,189 |
|
Total |
$ |
6,876 |
|
|
$ |
5,835 |
|
5. Intangible Assets
The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands):
|
|
Existing |
|
|
Customer |
|
|
|
|
|
||
|
|
Technology |
|
|
Relationship |
|
|
Total |
|
|||
Amortization period (in years) |
|
|
11.75 |
|
|
4.0 – 11.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount at December 31, 2015 |
|
$ |
4,600 |
|
|
$ |
10,639 |
|
|
$ |
15,239 |
|
Accumulated amortization |
|
|
(2,361 |
) |
|
|
(5,603 |
) |
|
|
(7,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets, net at December 31, 2015 |
|
$ |
2,239 |
|
|
$ |
5,036 |
|
|
$ |
7,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying amount at September 30, 2016 |
|
$ |
4,600 |
|
|
$ |
10,639 |
|
|
$ |
15,239 |
|
Accumulated amortization |
|
|
(2,697 |
) |
|
|
(6,359 |
) |
|
|
(9,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets, net at September 30, 2016 |
|
$ |
1,903 |
|
|
$ |
4,280 |
|
|
$ |
6,183 |
|
Each period, the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. If a revision to the remaining period of amortization is warranted, amortization is prospectively adjusted over the remaining useful life of the intangible asset. Intangible assets subject to amortization are amortized over their useful lives as shown in the table above. The Company evaluates its amortizable intangible assets for impairment at the end of each reporting period. The Company did not identify any impairment indicators during the three and nine months ended September 30, 2016.
14
During the second quarter of 2015, the Company noted certain indicators of impairment, including a sustained decline in its stock price and continued reduced performance in its Identity reporting unit. Based on the results of step one of the goodwill impairment analysis, it was determined that the Company’s net adjusted carrying value exceeded its estimated fair value for the Identity reporting unit. As a result, the Company concluded that the carrying value of goodwill for the Identity reporting unit was fully impaired and recorded an impairment charge of approximately $1.0 million in its condensed consolidated statements of operations during the second quarter of 2015.
The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015, respectively (in thousands):
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Cost of revenue |
$ |
112 |
|
|
$ |
112 |
|
|
$ |
336 |
|
|
$ |
336 |
|
Selling and marketing |
|
252 |
|
|
|
252 |
|
|
|
756 |
|
|
|
756 |
|
Total |
$ |
364 |
|
|
$ |
364 |
|
|
$ |
1,092 |
|
|
$ |
1,092 |
|
The estimated annual future amortization expense for purchased intangible assets with definite lives over the next five years is as follows (in thousands):
2016 (remaining three months) |
|
$ |
363 |
|
2017 |
|
|
1,455 |
|
2018 |
|
|
1,455 |
|
2019 |
|
|
1,455 |
|
2020 |
|
|
1,455 |
|
Total |
|
$ |
6,183 |
|
6. Long-Term Payment Obligation
Hirsch Acquisition – Secure Keyboards and Secure Networks. Prior to the 2009 acquisition of Hirsch Electronics Corporation (“Hirsch”) by the Company, effective November 1994, Hirsch had entered into a settlement agreement (the “1994 Settlement Agreement”) with two limited partnerships, Secure Keyboards, Ltd. (“Secure Keyboards”) and Secure Networks, Ltd. (“Secure Networks”). At the time, Secure Keyboards and Secure Networks were related to Hirsch through certain common shareholders and limited partners, including Hirsch’s then President Lawrence Midland, who resigned as President of the Company effective July 31, 2014. Immediately following the acquisition, Mr. Midland owned 30% of Secure Keyboards and 9% of Secure Networks. Secure Networks was dissolved in 2012 and Mr. Midland owned 24.5% of Secure Keyboards upon his resignation from the Company effective July 31, 2014.
On April 8, 2009, Secure Keyboards, Secure Networks and Hirsch amended and restated the 1994 Settlement Agreement to replace the royalty-based payment arrangement under the 1994 Settlement Agreement with a new, definitive installment payment schedule with contractual payments to be made in future periods through 2020 (the “2009 Settlement Agreement”). The Company was not an original party to the 2009 Settlement Agreement as the acquisition of Hirsch occurred subsequent to the 2009 Settlement Agreement being entered into. The Company has, however, provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligations under the 2009 Settlement Agreement (the “Guarantee”). The 2009 Settlement Agreement and the Guarantee became effective upon the acquisition of Hirsch on April 30, 2009. The Company’s annual payment to Secure Keyboards and Secure Networks in any given year under the 2009 Settlement Agreement is subject to an increase based on the percentage increase in the Consumer Price Index during the previous calendar year.
The final payment to Secure Networks was made on January 30, 2012. The Company’s payment obligations under the 2009 Settlement Agreement to Secure Keyboards will continue through the calendar year ending December 31, 2020, with the final payment due on January 30, 2021, unless the Company elects at any time to satisfy its obligations by making a lump-sum payment to Secure Keyboards. The Company does not intend to make a lump-sum payment and therefore a portion of the payment obligation amount is classified as a long-term liability in the condensed consolidated balance sheets.
The Company included $0.1 million and $0.3 million of interest expense during the three and nine months ended September 30, 2016, respectively, and $0.1 million and $0.4 million of interest expense during the three and nine months ended September 30, 2015, respectively, in its condensed consolidated statements of operations for interest accreted on the long-term payment obligation.
15
The ongoing payment obligation in connection with the Hirsch acquisition as of September 30, 2016 is as follows (in thousands):
|
|
|
|
|
2016 (remaining three months) |
|
$ |
291 |
|
2017 |
|
|
1,200 |
|
2018 |
|
|
1,248 |
|
2019 |
|
|
1,298 |
|
2020 |
|
|
1,444 |
|
Thereafter |
|
|
372 |
|
Present value discount factor |
|
|
(884 |
) |
Total |
|
$ |
4,969 |
|
7. Financial Liabilities
Financial liabilities consist of (in thousands):
|
September 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Secured term loan |
$ |
10,000 |
|
|
$ |
10,000 |
|
Bank revolving loan facility |
|
8,300 |
|
|
|
8,300 |
|
Total before discount and debt issuance costs |
|
18,300 |
|
|
|
18,300 |
|
Less: Current portion of financial liabilities |
|
(10,000 |
) |
|
|
— |
|
Less: Long-term portion of unamortized discount and debt issuance costs |
|
(11 |
) |
|
|
(644 |
) |
Long-term financial liabilities |
$ |
8,289 |
|
|
$ |
17,656 |
|
Bank Term Loan and Revolving Loan Facility
On March 31, 2014, the Company entered into a credit agreement (the “Credit Agreement”) with Opus. The Credit Agreement provides for a term loan in aggregate principal amount of $10.0 million (“Term Loan”) and an additional $10.0 million revolving loan facility (“Revolving Loan Facility”). The obligations of the Company under the Credit Agreement are secured by substantially all assets of the Company. Certain of the Company’s domestic subsidiaries have guaranteed the credit facilities and have granted Opus security interests in substantially all of their respective assets. The Company may voluntarily prepay the Term Loan and outstanding amounts under the Revolving Loan Facility, without prepayment charges, and is required to make prepayments of the Term Loan in certain circumstances or condemnation events using the proceeds of asset sales or insurance.
In connection with the Company’s entry into the Credit Agreement, the Company paid customary lender fees and expenses, including facility fees. In addition, as discussed in Note 3, Stockholders’ Equity, the Company issued the Opus Warrant to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $9.90. The Company calculated the fair value of the Opus Warrant using the Black-Scholes pricing model using the following assumptions: estimated volatility of 92.09%, risk-free interest rate of 1.73%, no dividend yield, and an expected life of five years. In accordance with ASC 505-50, Equity-Based Payments to Non-Employees the fair value of the Opus Warrant of $0.8 million was classified as equity as the settlement of the warrant will be in shares and is within the control of the Company. The Company recognized $0.9 million in costs, both cash and equity, related to the Term Loan and Revolving Loan Facility. In accordance with ASC 835-30, Interest – Imputation of Interest amended by ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, the costs are recorded as a direct deduction from the carrying amount of the Term Loan the Revolving Loan Facility and amortized as interest expense over the term of the Credit Agreement.
On November 10, 2014, the Company entered into an amendment to its Credit Agreement (the “Amended Credit Agreement”) with Opus. Under the Amended Credit Agreement, the Revolving Loan Facility was increased from $10.0 million to $30.0 million and the revolving loan maturity date was extended to November 10, 2017. In addition, the Company is no longer be required to make scheduled monthly installment payments of principal under the Term Loan. Rather, the entire principal balance of the Term Loan will be due on March 31, 2017. Under the terms of the Amended Credit Agreement, both the principal amount of the Term Loan and the principal amount outstanding under the Revolving Loan Facility bear interest at a floating rate equal to: (a) if the Company holds more than $30.0 million in cash with Opus, the greater of (i) the prime rate plus 1.50% and (ii) 4.75%; (b) if the Company holds $30.0 million or less but more than $20.0 million in cash with Opus, the greater of (i) the prime rate plus 2.25% and (ii) 5.50%; or (c) if the Company holds $20.0 million or less in cash with Opus, the greater of (i) the prime rate plus 2.75% and (ii) 6.00%. Interest on both
16
facilities continues to be payable monthly. Additionally, the Amended Credit Agreement (i) modifies certain loan covenants applicable to the Company’s stock repurchase plan, (ii) removes from the loan collateral shares of the Company’s common stock repurchased by the Company and (iii) extends the current tangible net worth covenant by one year. The Company paid customary lender fees and third party fees related to the debt modification. In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the amendment has been treated as a debt modification, and costs related to the amendment are recorded as a direct deduction from the carrying amount of the Term Loan and Revolving Loan Facility and amortized as interest expense over the remaining term of the Amended Credit Agreement.
The Amended Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the Company’s ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and dispose of assets. The Amended Credit Agreement also provides for customary financial covenants, including a minimum tangible net worth covenant, a maximum senior leverage ratio and a minimum asset coverage ratio. In addition, it contains customary events of default that entitle Opus to cause any or all of the Company’s indebtedness under the Amended Credit Agreement to become immediately due and payable. Events of default, include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. Upon the occurrence and during the continuance of an event of default, Opus may terminate its lending commitments and/or declare all or any part of the unpaid principal of all indebtedness, all interest accrued and unpaid thereon and all other amounts payable under the Amended Credit Agreement to be immediately due and payable. The Company has considered the components of the material adverse change clause of the Amended Credit Agreement and determined the likelihood of default under the existing terms is remote. The Term Loan, net of discount and debt issuance costs, outstanding under the Amended Credit Agreement is classified as short-term and the Revolving Loan Facility, net of discount and debt issuance costs, is classified as long-term in the accompanying condensed consolidated balance sheets as of September 30, 2016.
On December 4, 2015, the Company entered into an additional amendment (the “Second Amendment”) to its Credit Agreement with Opus. The Second Amendment amended the financial covenants and restricts the Company from permitting its consolidated tangible net worth, plus amounts payable to Secure Keyboards (see Note 6), to be less than $8,000,000 plus, 50% of any proceeds from debt or equity issued after December 1, 2015.
On March 31, 2016, the Company entered into an additional amendment (the “Third Amendment”) to its Credit Agreement with Opus. Under the Third Amendment, the Revolving Loan Facility was reduced from $30.0 million to $10.0 million and certain financial covenants were amended and added, including covenants with respect to tangible net worth, maximum senior leverage ratio, minimum asset coverage ratio, minimum EBITDA, minimum cash of at least $7.5 million, and minimum future outstanding principal balance thresholds. In addition, as discussed in Note 3, Stockholders’ Equity the Company amended the Opus Warrant. On September 30, 2016, as a result of not attaining a minimum outstanding principal threshold, the Company issued the New Opus Warrant to purchase 100,000 shares of common stock. The Company calculated the fair value of the Opus Warrant and the New Opus Warrant using the Black-Scholes pricing model using the following assumptions: estimated volatility of 83.92%, risk free interest rate of 0.90%, no dividend yield, and an expected life of three years. The fair value of the Opus Warrant and the New Opus Warrant of $0.4 million is recorded as a direct deduction from the carrying amount of the Term Loan and is being amortized as interest expense over the remaining term of the Credit Agreement, as amended.
The Company was not in compliance with certain financial covenants under the Credit Agreement, as amended, as of September 30, 2016, which non-compliance was waived by Opus.
The following table summarizes the timing of repayment obligations for the Company’s financial liabilities for the next four years under the current terms of the Credit Agreement, as amended, at September 30, 2016 (in thousands):
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
Total |
|
|||||
Bank term loan and revolving loan facility |
|
$ |
18,300 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,300 |
|
8. Income Taxes
The Company conducts business globally and, as a result, files federal, state and foreign tax returns. The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the probable outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the condensed consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal.
The Company has no present intention of remitting undistributed retained earnings of any of its foreign subsidiaries. Accordingly, the Company has not established a deferred tax liability with respect to undistributed earnings of its foreign subsidiaries.
17
The Company applies the provisions of, and accounted for uncertain tax positions in accordance with ASC 740, Income Taxes, (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
The Company generally is no longer subject to tax examinations for years prior to 2011. However, if loss carryforwards of tax years prior to 2011 are utilized in the U.S., these tax years may become subject to investigation by the tax authorities. While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits would materially change in the next 12 months.
9. Segment Reporting and Geographic Information
ASC 280, Segment Reporting (“ASC 280”) establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses and about which separate financial information is available to its chief operating decision makers (“CODM”). The Company’s CODM is its CEO.
The Company is organized into four reportable operating segments: Physical Access Control Systems (“PACS”), previously referred to as Premises, Identity, Credentials and All Other.
The CODM reviews financial information and business performance for each operating segment. The Company evaluates the performance of its operating segments at the revenue and gross profit levels. The CODM does not review operating expenses or asset information by operating segment for purposes of assessing performance or allocating resources.
18
Net revenue and gross profit information by segment for the three and nine months ended September 30, 2016 and 2015 is as follows (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
PACS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
$ |
7,253 |
|
|
$ |
5,976 |
|
|
$ |
17,908 |
|
|
$ |
15,212 |
|
Gross profit |
|
4,334 |
|
|
|
3,531 |
|
|
|
10,244 |
|
|
|
9,130 |
|
Gross profit margin |
|
60 |
% |
|
|
59 |
% |
|
|
57 |
% |
|
|
60 |
% |
Identity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
3,508 |
|
|
|
3,109 |
|
|
|
8,923 |
|
|
|
8,970 |
|
Gross profit |
|
1,359 |
|
|
|
1,526 |
|
|
|
3,324 |
|
|
|
3,988 |
|
Gross profit margin |
|
39 |
% |
|
|
49 |
% |
|
|
37 |
% |
|
|
44 |
% |
Credentials: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
4,799 |
|
|
|
7,788 |
|
|
|
14,110 |
|
|
|
22,324 |
|
Gross profit |
|
1,227 |
|
|
|
2,255 |
|
|
|
3,654 |
|
|
|
6,357 |
|
Gross profit margin |
|
26 |
% |
|
|
29 |
% |
|
|
26 |
% |
|
|
28 |
% |
All Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
- |
|
|
|
323 |
|
|
|
580 |
|
|
|
1,211 |
|
Gross profit |
|
- |
|
|
|
209 |
|
|
|
261 |
|
|
|
776 |
|
Gross profit margin |
|
0 |
% |
|
|
65 |
% |
|
|
45 |
% |
|
|
64 |
% |
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
15,560 |
|
|
|
17,196 |
|
|
|
41,521 |
|
|
|
47,717 |
|
Gross profit |
|
6,920 |
|
|
|
7,521 |
|
|
|
17,483 |
|
|
|
20,251 |
|
Gross profit margin |
|
44 |
% |
|
|
44 |
% |
|
|
42 |
% |
|
|
42 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
1,480 |
|
|
|
2,235 |
|
|
|
4,997 |
|
|
|
6,567 |
|
Selling and marketing |
|
3,312 |
|
|
|
5,236 |
|
|
|
10,807 |
|
|
|
15,698 |
|
General and administrative |
|
2,115 |
|
|
|
6,456 |
|
|
|
9,674 |
|
|
|
15,057 |
|
Impairment of goodwill |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
988 |
|
Restructuring and severance |
|
160 |
|
|
|
215 |
|
|
|
3,100 |
|
|
|
408 |
|
Total operating expenses: |
|
7,067 |
|
|
|
14,142 |
|
|
|
28,578 |
|
|
|
38,718 |
|
Loss from operations |
|
(147 |
) |
|
|
(6,621 |
) |
|
|
(11,095 |
) |
|
|
(18,467 |
) |
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(525 |
) |
|
|
(478 |
) |
|
|
(1,814 |
) |
|
|
(1,367 |
) |
Foreign currency gain (loss), net |
|
35 |
|
|
|
(10 |
) |
|
|
309 |
|
|
|
(186 |
) |
Loss before income taxes and noncontrolling interest |
$ |
(637 |
) |
|
$ |
(7,109 |
) |
|
$ |
(12,600 |
) |
|
$ |
(20,020 |
) |
Geographic net revenue is based on customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended September 30, 2016 and 2015 is as follows (in thousands):
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
September 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Americas |
$ |
9,924 |
|
|
$ |
12,473 |
|
|
$ |
27,343 |
|
|
$ |
32,423 |
|
Europe and the Middle East |
|
2,834 |
|
|
|
2,294 |
|
|
|
6,654 |
|
|
|
7,386 |
|
Asia-Pacific |
|
2,802 |
|
|
|
2,429 |
|
|
|
7,524 |
|
|
|
7,908 |
|
Total |
$ |
15,560 |
|
|
$ |
17,196 |
|
|
$ |
41,521 |
|
|
$ |
47,717 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
64 |
% |
|
|
73 |
% |
|
|
66 |
% |
|
|
68 |
% |
Europe and the Middle East |
|
18 |
% |
|
|
13 |
% |
|
|
16 |
% |
|
|
15 |
% |
Asia-Pacific |
|
18 |
% |
|
|
14 |
% |
|
|
18 |
% |
|
|
17 |
% |
Total |
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
19
Long-lived assets by geographic location as of September 30, 2016 and December 31, 2015 are as follows (in thousands):
|
September 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Property and equipment, net: |
|
|
|
|
|
|
|
Americas |
$ |
1,152 |
|
|
$ |
2,096 |
|
Europe and the Middle East |
|
205 |
|
|
|
295 |
|
Asia-Pacific |
|
1,315 |
|
|
|
1,827 |
|
Total property and equipment, net |
$ |
2,672 |
|
|
$ |
4,218 |
|
10. Restructuring and Severance
During the nine months ended September 30, 2015, severance costs were incurred for certain employees terminated as part of management’s continuing efforts to simplify business operations. As a result, the Company recorded $0.4 million in restructuring and severance costs and other closure related costs and an additional $0.1 million in severance costs recorded in general and administrative expenses related to the elimination of certain executive positions in conjunction with the corporate restructuring and cost reduction activities.
In the first quarter of 2016, the Company implemented a worldwide restructuring plan designed to refocus the Company’s resources on its core business segments, including physical access and transponders, and to consolidate its operations in several worldwide locations. The restructuring plan included reducing the Company’s non-manufacturing employee base, reallocating overhead roles into direct business activities and eliminating certain management and executive roles. In the third quarter of 2016, the Company incurred additional facilities related restructuring costs of $0.1 million and severance related adjustments of $0.1 million in connection with this restructuring plan. As a result, the Company recorded $3.1 million in restructuring and severance costs in the nine months ended September 30, 2016.
All unpaid restructuring and severance accruals are included in other accrued expenses and liabilities within current liabilities in the condensed consolidated balance sheets at September 30, 2016 and December 31, 2015. Restructuring and severance activities during the nine months ended September 30, 2016 and September 30, 2015 were as follows (in thousands):
|
Nine Months Ended September 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Balance at beginning of period |
$ |
633 |
|
|
$ |
1,377 |
|
Restructuring expense incurred for the period |
|
3,100 |
|
|
|
408 |
|
Other cost reduction activities for the period |
— |
|
|
|
81 |
|
|
Payments and non-cash item adjustment during the period |
|
(3,246 |
) |
|
|
(1,855 |
) |
Balance at end of period |
$ |
487 |
|
|
$ |
11 |
|
11. Commitments and Contingencies
The Company leases its facilities, certain equipment, and automobiles under non-cancelable operating lease agreements. Those lease agreements existing as of September 30, 2016 expire at various dates during the next five years.
The Company recognized rent expense of $0.3 million and $1.2 million in the three and nine months ended September 30, 2016, respectively, and $0.4 million and $1.3 million, in the three and nine months ended September 30, 2015, respectively, in its condensed consolidated statements of operations.
Purchases for inventories are highly dependent upon forecasts of customer demand. Due to the uncertainty in demand from its customers, the Company may have to change, reschedule, or cancel purchases or purchase orders from its suppliers. These changes may lead to vendor cancellation charges on these purchases or contractual commitments.
20
The following table summarizes the Company’s principal contractual commitments as of September 30, 2016 (in thousands):
|
|
Operating Lease |
|
|
Purchase Commitments |
|
|
Other Contractual Commitments |
|
|
Total |
|
||||
2016 (remaining three months) |
|
$ |
368 |
|
|
$ |
6,312 |
|
|
$ |
13 |
|
|
$ |
6,693 |
|
2017 |
|
|
1,029 |
|
|
|
2,679 |
|
|
|
11 |
|
|
|
3,719 |
|
2018 |
|
|
266 |
|
|
|
— |
|
|
|
— |
|
|
|
266 |
|
2019 |
|
|
171 |
|
|
|
— |
|
|
|
— |
|
|
|
171 |
|
2020 |
|
|
159 |
|
|
|
— |
|
|
|
— |
|
|
|
159 |
|
Thereafter |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Total |
|
$ |
1,995 |
|
|
$ |
8,991 |
|
|
$ |
24 |
|
|
$ |
11,010 |
|
The Company provides warranties on certain product sales for periods ranging from 12 to 24 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be required in future periods. Historically the warranty accrual and the expense amounts have been immaterial.
On December 16, 2015, the Company and certain of its present and former officers and directors were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of California, entitled Rok v. Identiv, Inc., et al., Case No. 15-cv-05775, alleging violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act of 1934. On May 3, 2016, the court-appointed lead plaintiff Thomas Cunningham in the Rok lawsuit filed an amended complaint and a notice of dismissal without prejudice of all current or former officers and directors other than Jason Hart and Brian Nelson. On June 6, 2016, each of the Company, Jason Hart, and Brian Nelson filed a motion to dismiss for failure to state a claim upon which relief can be granted in the Rok lawsuit; on August 5, 2016, the court granted those motions with leave for the lead plaintiff to file a second amended complaint. On September 12, 2016, the lead plaintiff in the Rok lawsuit filed a second amended complaint. On October 10, 2016, the Company, Jason Hart, and Brian Nelson filed a motion to dismiss that second amended complaint for failure to state a claim upon which relief can be granted, which motions are scheduled to be heard on December 16, 2016. In addition, three shareholder derivative actions were filed between January and February 2016. On January 1, 2016, certain of the Company’s present and former officers and directors were named as defendants, and the Company was named as nominal defendant, in a shareholder derivative lawsuit filed in the United States District Court for the Northern District of California, entitled Oswald v. Humphreys, et al., Case No. 16-cv-00241-JCS, alleging breach of fiduciary duty and abuse of control claims. On January 25, 2016, certain of the Company’s present and former officers and directors were named as defendants, and the Company was named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Chopra v. Hart, et al., Case No. RG16801379, alleging breach of fiduciary duty claims. On February 9, 2016, certain of the Company’s present and former officers and directors were named as defendants, and the Company was named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Wollnik v. Wenzel, et al., Case No. HG16803342, alleging breach of fiduciary duty, corporate waste, gross mismanagement, and unjust enrichment claims. These lawsuits generally allege that the Company made false and/or misleading statements and/or failed to disclose information in certain public filings and disclosures between 2013 and 2015. Each of the lawsuits seeks one or more of the following remedies: unspecified compensatory damages, unspecified exemplary or punitive damages, restitution, declaratory relief, equitable and injunctive relief, and reasonable costs and attorneys’ fees. On May 2, 2016, the court in the Chopra lawsuit entered an order staying proceedings in the Chopra lawsuit in favor of the Oswald lawsuit, based on a stipulation to that effect filed by the parties in the Chopra lawsuit on April 28, 2016. Similarly, on June 28, 2016, the court in the Wollnik lawsuit entered a stipulated order staying proceedings in the Wollnik lawsuit in favor of the Oswald lawsuit. On June 17, 2016, the plaintiff in the Oswald lawsuit filed an amended complaint. On August 1, 2016, the Company filed a motion to dismiss for failure by plaintiff to make a pre-lawsuit demand upon the Company’s board of directors, which motion was heard on October 14, 2016. The judge in the Oswald lawsuit issued an order on November 7, 2016 granting the Company’s motion to dismiss, without prejudice. In addition, the court stayed the case so that plaintiff could exercise whatever rights he has under Section 220 of the Delaware General Corporation Law. The Company intends to vigorously defend against these lawsuits. The Company cannot currently predict the impact or resolution of each of these lawsuits or reasonably estimate a range of possible loss, if any, which could be material, and the resolution of these lawsuits may harm its business and have a material adverse impact on its financial condition.
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) contain forward-looking statements, within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A of this Quarterly Report under the heading “Risk Factors,” which are incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2015. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Each of the terms the “Company,” “Identiv,” “we” and “us” as used herein refers collectively to Identiv, Inc. and its wholly-owned subsidiaries, unless otherwise stated.
Overview
Identiv is a global security technology company that secures data, physical places and things. We sell our products globally to customers in the government, enterprise and commercial markets to address vertical market segments including public services administration, military and defense, law enforcement, healthcare, education, banking, industrial, retail and critical infrastructure. We empower them to create safe, secure, validated and convenient experiences in schools, government offices, factories, transportation, hospitals and virtually every type of facility and for every type of product.
We focus our business on the following solutions:
|
• |
Physical access control systems (“PACS”) is comprised of solutions securing buildings via an integrated access control system. |
|
• |
Information solutions securing enterprise information including PCs, networks, email encryption, login, and printers via delivery of smart card reader products and identity management via our idOnDemand service. |
|
• |
Everyday items solutions securing connected items, including electronic toys, medical devices, wearables and other internet of things applications |
The foundation of our business is our expertise in radio frequency identification (“RFID”) products and access control, our close customer relationships that allow us to develop customer-relevant products, and our core value of quality. To deliver these solutions, we have organized our operations into four reportable business segments, principally by product families: Physical Access Control Systems, previously referred to as Premises, Identity, Credentials and All Other.
PACS
In our PACS segment, we provide solutions and services that enable the issuance, management and use of secure identity credentials in diverse markets. The foundation of our PACS business is the Hirsch line of controllers including the advanced MX line, Hirsch's Velocity management software and our ICPAM software, EDGE controller and reader package. Our modular Hirsch MX controllers are designed to be scalable, allowing customers to start with a small system and expand over time. Hirsch MX controllers can operate autonomously, whether as a single controller or as part of a networked system with Velocity software. The Hirsch Velocity software platform enables centralized management of access and security operations across an organization, including control of doors, gates, turnstiles, elevators and other building equipment, monitoring users as they move around a facility, preventing unwanted access, maintaining compliance and providing a robust audit trail.
uTrust door readers provide unique features to support a number of security environments and standards. For example, uTrust Scramblepad readers employ numerical scrambling on the keypad to protect access codes from being stolen as they are entered. uTrust TS readers support the majority of legacy card credentials with a robust next-generation platform that can help companies migrate to more secure credentials and technologies, including smart cards, NFC and government-issued credentials.
22
In our Identity segment, we offer products to secure enterprise information, including PCs, networks, email encryption, login, and printers via delivery of smart card reader products and identity management via our idOnDemand service. Identiv offers smart card readers - a broad range of contact, contactless and mobile smart card readers, tokens and terminals - to enable logical (i.e., PC, network or data) access and security and identification applications, such as national ID, payment, e-Health and e-Government.
Related to our reader product line, we are a leading provider in the definition and provisioning of access cards and other devices to allow users to conveniently and securely access their facilities and resources, and to empower facilities and security administrators to deploy exactly the solutions they want to provide the optimal mix of cost, security and convenience to their user community, whether students, hospital patients, military and government personnel, consumers or a vast array of users.
Credentials
In our Credentials segment, we offer access cards and RFID and NFC products, including cards, inlays, labels, tags and stickers, as well as other RF components. These products are manufactured in our state-of-the-art facility in Singapore and are used in a diverse range of identity-based applications, including electronic entertainment, loyalty schemes, mobile payment, transit and event ticketing, and brand authenticity from pharmaceuticals to consumer goods, hospital resource management and many others.
Leveraging our expertise in RFID, physical access and physical authentication, we're developing new solutions to extend our platforms across a wide variety of physical use cases. The next major opportunity in our connected world is the Internet of things, which fundamentally is about physical things. We believe our core strength in physical access and physical instrumentation (RFID) markets, our well-established platforms and our deep knowledge of the relevant technologies, position us well in this growth market.
All Other
The All Other segment includes products, such as Chipdrive and Digital Media readers. The products included in the All Other segment do not meet the quantitative thresholds for determining reportable segments and therefore have been combined for reporting purposes.
We primarily conduct our own sales and marketing activities in each of the markets in which we compete, utilizing our own sales and marketing organization to solicit prospective channel partners and customers, provide technical advice and support with respect to products, systems and services, and manage relationships with customers, distributors and/or original equipment manufacturers (“OEMs”). We utilize indirect sales channels that may include OEMs, dealers, systems integrators, value added resellers, resellers or Internet sales, although we also sell directly to end users. In support of our sales efforts, we participate in industry events and conduct sales training courses, targeted marketing programs, and ongoing customer, channel partner and third-party communications programs.
Our corporate headquarters are located in Fremont, California. We maintain research and development facilities in California, and Chennai, India and local operations and sales facilities in Germany, Hong Kong, India, Singapore and the U.S. We were founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware.
Trends in Our Business
Geographic net revenue based on each customer’s ship-to location is as follows (in thousands):
|
Nine Months Ended |
|
|||||
|
September 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Americas |
$ |
27,343 |
|
|
$ |
32,423 |
|
Europe and the Middle East |
|
6,654 |
|
|
|
7,386 |
|
Asia-Pacific |
|
7,524 |
|
|
|
7,908 |
|
Total |
$ |
41,521 |
|
|
$ |
47,717 |
|
Revenues: |
|
|
|
|
|
|
|
Americas |
|
66 |
% |
|
|
68 |
% |
Europe and the Middle East |
|
16 |
% |
|
|
15 |
% |
Asia-Pacific |
|
18 |
% |
|
|
17 |
% |
Total |
|
100 |
% |
|
|
100 |
% |
23
Net revenue in the nine months ended September 30, 2016 was down 13% compared with the first nine months of 2015. Approximately 43% of our net revenue in the first nine months ended September 30, 2016 came from our PACS segment. Net revenue in the PACS segment was $17.9 million and $15.2 million for the nine months ended September 30, 2016 and 2015, respectively. Net revenue in our Credentials segment represented approximately 34% of our net revenue. Net revenue in the Credentials segment was $14.1 million in the nine months ended September 30, 2016 compared to $22.3 million in the comparable period in 2015. Net revenue in the Identity segment, which represents approximately 21% of total net revenue, was $8.9 million as compared to the prior year period of $9.0 million.
Net Revenue in the Americas
Net revenue in the Americas was approximately $26.3 million in the first nine of months of 2016, accounting for 63% of total net revenue, and was down 19% compared to $32.4 million in the first nine months of 2015. Net revenue from our PACS solution for security programs within various U.S. government agencies, as well as RFID and NFC products, inlays and tags comprise a significant proportion of our net revenue in the Americas region.
Net revenue in our PACS segment in the Americas increased by approximately 17% in the first nine months of 2016 compared with the same period of the previous year, while net revenue in our Credentials segment decreased 48% in the first nine months of 2016 compared with the same period of the previous year. PACS net revenue increases were primarily due to an increase in orders for physical access control solutions from federal government customers, and higher sales through our channel partners. Credentials segment net revenue decreases were primarily due to transponder sales to certain large customers for electronic gaming applications in the first nine months of 2015 that were not repeated in the comparable period of 2016. Net revenue from our Identity segment decreased in the nine months ended September 30, 2016 compared to the comparable period of the previous year due primarily to lower reader sales.
As a general trend, U.S. Federal agencies continue to be subject to security improvement mandates under programs such as Homeland Security Presidential Directive-12 (“HSPD-12”) and reiterated in memoranda from the Office of Management and Budget (“OMB M-11-11”). We believe that our solution for trusted physical access is an attractive offering to help federal agency customer’s move towards compliance with federal directives and mandates. To expand our sales opportunities in the United States in general and with our U.S. Government customers in particular, we have strengthened our U.S. sales organization and reopened a sales presence in Washington D.C.
Net Revenue in Europe, the Middle East, and Asia-Pacific
Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $15.3 million in the first nine months of 2016, accounting for 37% of total net revenue, and was comparable to the first nine months of 2015 as a result of primarily increased sales in our Asia-Pacific region offset by a decline in our Europe and the Middle East regions. Net revenue in these regions are very dependent on the completion of large projects and the timing of orders placed by some of our larger customers. Sales of Identity readers and RFID and NFC products and tags comprise a significant proportion of our net revenue in these regions.
Net revenue from our PACS products increased from the prior year period due to higher sales of physical access control solutions in both regions. Net revenue from our Identity products increased by approximately 13% in the first nine months of 2016 compared with the same period of the previous year, primarily due to higher sales of smart card readers in these regions. Identity readers comprised approximately 42% of the net revenue throughout these regions in the first nine months of 2016. Net revenue from our Credentials products, which comprised approximately 38% of sales in this region, declined by approximately 10% in the first nine months of 2016 compared with the same period of the previous year primarily as a result of lower transponder and access card product sales in the Asia-Pacific.
Seasonality and Other Factors
In our business overall, we may experience significant variations in demand for our offerings from quarter to quarter, and typically experience a stronger demand cycle in the second half of our fiscal year. Sales of our PACS solutions to U.S. Government agencies are subject to annual government budget cycles and generally are highest in the third quarter of each year. However, the usual seasonal trend can be negatively impacted by actions such as government shutdowns and the passing of continuing resolutions which can act to delay the completion of certain projects. Sales of our identity reader chips, many of which are sold to government agencies worldwide, are impacted by testing and compliance schedules of government bodies as well as roll-out schedules for application deployments, both of which contribute to variability in demand from quarter to quarter. Further, this business is typically subject to seasonality based on differing commercial and global government budget cycles. Lower sales are expected in the U.S. in the first half, and in particular the first quarter of the year, with higher sales typically in the second half of each year. In Asia-Pacific,
24
with fiscal year-ends in March and June, order demand can be higher in the first quarter as customers attempt to complete projects before the end of the fiscal year. Accordingly, our net revenue levels in the first quarter each year often depends on the relative strength of project completions and sales mix between our U.S. customer base and our International customer base.
In addition to the general seasonality of demand, overall U.S. Government expenditure patterns have a significant impact on demand for our products due to the significant portion of revenues that are typically sourced from U.S. Government agencies. Therefore, any significant reduction in U.S. Government spending could adversely impact our financial results and could cause our operating results to fall below any guidance we provide to the market or below the expectations of investors or security analysts.
Operating Expense Trends
Base Operating Expenses
Our base operating expenses (i.e., research and development, selling and marketing, and general and administrative spending) decreased 32% in the first nine of months of 2016 compared with the same period of 2015. Research and development spending decreased by 24% in the first nine months of 2016 compared with the same period of 2015 as the benefit of restructuring initiatives realized during the first nine months of 2016. Selling and marketing spending in the first nine months of 2016 was down by 31% compared with the first nine months of 2015, due to cost saving initiatives taken in the sales and marketing organization reducing both headcount and marketing program spending. General and administrative spending in the first nine months of 2016 decreased 36% from the same period in the previous year primarily as a result of cost savings associated with the restructuring initiatives implemented in the beginning of 2016.
25
The following table includes segment net revenue and segment net profit information for our PACS, Identity, Credentials and All Other segments and reconciles gross profit to results of continuing operations before income taxes and noncontrolling interest:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
PACS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
$ |
7,253 |
|
|
$ |
5,976 |
|
|
|
21 |
% |
|
$ |
17,908 |
|
|
$ |
15,212 |
|
|
|
18 |
% |
Gross profit |
|
4,334 |
|
|
|
3,531 |
|
|
|
23 |
% |
|
|
10,244 |
|
|
|
9,130 |
|
|
|
12 |
% |
Gross profit margin |
|
60 |
% |
|
|
59 |
% |
|
|
|
|
|
|
57 |
% |
|
|
60 |
% |
|
|
|
|
Identity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
3,508 |
|
|
|
3,109 |
|
|
|
13 |
% |
|
|
8,923 |
|
|
|
8,970 |
|
|
|
(1 |
%) |
Gross profit |
|
1,359 |
|
|
|
1,526 |
|
|
|
(11 |
%) |
|
|
3,324 |
|
|
|
3,988 |
|
|
|
(17 |
%) |
Gross profit margin |
|
39 |
% |
|
|
49 |
% |
|
|
|
|
|
|
37 |
% |
|
|
44 |
% |
|
|
|
|
Credentials: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
4,799 |
|
|
|
7,788 |
|
|
|
(38 |
%) |
|
|
14,110 |
|
|
|
22,324 |
|
|
|
(37 |
%) |
Gross profit |
|
1,227 |
|
|
|
2,255 |
|
|
|
(46 |
%) |
|
|
3,654 |
|
|
|
6,357 |
|
|
|
(43 |
%) |
Gross profit margin |
|
26 |
% |
|
|
29 |
% |
|
|
|
|
|
|
26 |
% |
|
|
28 |
% |
|
|
|
|
All Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
- |
|
|
|
323 |
|
|
|
(100 |
%) |
|
|
580 |
|
|
|
1,211 |
|
|
|
(52 |
%) |
Gross profit |
|
- |
|
|
|
209 |
|
|
|
(100 |
%) |
|
|
261 |
|
|
|
776 |
|
|
|
(66 |
%) |
Gross profit margin |
|
0 |
% |
|
|
65 |
% |
|
|
|
|
|
|
45 |
% |
|
|
64 |
% |
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
15,560 |
|
|
|
17,196 |
|
|
|
(10 |
%) |
|
|
41,521 |
|
|
|
47,717 |
|
|
|
(13 |
%) |
Gross profit |
|
6,920 |
|
|
|
7,521 |
|
|
|
(8 |
%) |
|
|
17,483 |
|
|
|
20,251 |
|
|
|
(14 |
%) |
Gross profit margin |
|
44 |
% |
|
|
44 |
% |
|
|
|
|
|
|
42 |
% |
|
|
42 |
% |
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
1,480 |
|
|
|
2,235 |
|
|
|
(34 |
%) |
|
|
4,997 |
|
|
|
6,567 |
|
|
|
(24 |
%) |
Selling and marketing |
|
3,312 |
|
|
|
5,236 |
|
|
|
(37 |
%) |
|
|
10,807 |
|
|
|
15,698 |
|
|
|
(31 |
%) |
General and administrative |
|
2,115 |
|
|
|
6,456 |
|
|
|
(67 |
%) |
|
|
9,674 |
|
|
|
15,057 |
|
|
|
(36 |
%) |
Impairment of goodwill |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
988 |
|
|
|
(100 |
%) |
Restructuring and severance |
|
160 |
|
|
|
215 |
|
|
|
(26 |
%) |
|
|
3,100 |
|
|
|
408 |
|
|
|
660 |
% |
Total operating expenses: |
|
7,067 |
|
|
|
14,142 |
|
|
|
(50 |
%) |
|
|
28,578 |
|
|
|
38,718 |
|
|
|
(26 |
%) |
Loss from operations |
|
(147 |
) |
|
|
(6,621 |
) |
|
|
(98 |
%) |
|
|
(11,095 |
) |
|
|
(18,467 |
) |
|
|
(40 |
%) |
Non-operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(525 |
) |
|
|
(478 |
) |
|
|
10 |
% |
|
|
(1,814 |
) |
|
|
(1,367 |
) |
|
|
33 |
% |
Foreign currency gains (losses), net |
|
35 |
|
|
|
(10 |
) |
|
|
(450 |
%) |
|
|
309 |
|
|
|
(186 |
) |
|
|
(266 |
%) |
Loss before income taxes and noncontrolling interest |
$ |
(637 |
) |
|
$ |
(7,109 |
) |
|
|
(91 |
%) |
|
$ |
(12,600 |
) |
|
$ |
(20,020 |
) |
|
|
(37 |
%) |
Net Revenue
Total net revenue in the third quarter of 2016 was $15.6 million, down 10% compared with $17.2 million in the third quarter of 2015. For the nine months ended September 30, 2016, total net revenue was $41.5 million, down 13% compared with $47.7 million for the comparable period for 2015. Total net revenue was lower in the first nine months of 2016, mainly driven by lower sales in our Credentials segment partially offset by higher sales in our PACS and Identity segments. A more detailed discussion of net revenue by segment follows below.
Net revenue in our PACS segment was $7.3 million in the third quarter of 2016, an increase of 21% from $6.0 million in the third quarter of 2015. In the nine months ended September 30, 2016, net revenue in our PACS segment was $17.9 million, an increase of 18% from $15.2 million in the nine months ended September 30, 2015. The increase in the nine months ended September 30, 2016 primarily was due to higher sales of physical access control solutions, including an increase in professional services engagements, attributable to greater demand from federal government customers and higher sales through our channel partners compared to the comparable period of the prior year.
Net revenue in our Identity segment of $3.5 million in the third quarter of 2016 increased 13% from $3.1 million in the third quarter of 2015. In the nine months ended September 30, 2016, net revenue in our Identity segment was $8.9 million, a decrease of 1%
26
from $9.0 million in the nine months ended September 30, 2015. This decrease in Identity segment net revenue was primarily due to lower smart card reader sales in Europe and the Asia-Pacific regions, partially offset by increases in smart card reader sales in the U.S. and to federal government customers.
Net revenue in our Credentials segment was $4.8 million in the third quarter of 2016, a decrease of 38% from $7.8 million in the third quarter of 2015. In the nine months ended September 30, 2016, net revenue in our Credentials segment was $14.1 million, a decrease of 37% from $22.3 million in the nine months ended September 30, 2015. The decrease was primarily due to transponder sales to certain large customers for electronic gaming applications in the comparable periods of 2015 that were not repeated in the third quarter of 2016, partially offset by an increase in access card sales in the U.S.
Net revenue in our All Other segment was less than $0.1 million in the third quarter of 2016, compared to $0.3 million in the third quarter of 2015. In the nine months ended September 30, 2016, net revenue in our All Other segment was $0.6 million, compared to $1.2 million in the nine months ended September 30, 2015. Digital Media reader product sales were down significantly in the three and nine months ended September 30, 2016 compared to the same period in 2015 and are expected to remain at low levels as certain customers are expected to exit this business. In addition, we are exiting the Chipdrive business and negligible future sales are expected.
Gross Profit
Gross profit for the third quarter of 2016 was $6.9 million, or 44% of net revenue, compared with $7.5 million or 44% of net revenue in the third quarter of 2015. In the nine months ended September 30, 2016, gross profit was $17.5 million, or 42% of net revenue, compared with $20.3 million, or 42% of net revenue in the nine months ended September 30, 2015. Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, inventory adjustments and amortization, where applicable. The decrease in gross profit margins in 2016 was primarily attributable to the change in product mix, with a higher proportion of sales of lower margin physical access control system products and information readers and modules.
In our PACS segment, gross profit on sales of physical access control solutions, including panels, controllers, and access readers was $4.3 million in the third quarter of 2016 and $3.5 million in the third quarter of 2015, and $10.2 million and $9.1 million in the nine months ended September 30, 2016 and 2015, respectively. Gross profit was higher in the nine months ended September 30, 2016 as a direct result of higher sales in the PACS segment during the period. Gross profit margins in the PACS segment of 60% were higher in the third quarter of 2016 compared to 59% in the comparable period of 2015, and lower in the nine months ended September 30, 2016 compared to the comparable period of 2015 at 57% and 60%, respectively, both primarily attributable to the impact of product mix within the segment.
In our Identity segment, gross profit on sales of information readers and modules as well as cloud-based credential provisioning and management services was $1.4 million in the third quarter of 2016 compared to $1.5 million in the third quarter of 2015, and $3.3 million and $4.0 million in the nine months ended September 30, 2016 and 2015, respectively. Gross profit was lower in the nine months ended September 30, 2016 as a direct result of lower sales in the Identity segment during the period. Gross profit margins in the Identity segment were lower in the nine months ended September 30, 2016, at 37%, compared to the nine months ended September 30, 2015 of 44%, due to product mix and lower margins on smart card readers following the go-to market change to a distribution sales model in certain international markets.
In our Credentials segment, gross profit on sales of physical access credentials and RFID and NFC inlays and tags used in electronic entertainment applications was $1.2 million in the third quarter of 2016 compared to $2.3 million in the third quarter of 2015, and $3.7 million and $6.4 million in the nine months ended September 30, 2016 and 2015, respectively. Gross profit margins in the Credentials segment were lower in the third quarter of 2016 at 26% compared to 28% in the third quarter of 2015 due to manufacturing inefficiencies attributable to lower transponder production volumes during the quarter.
We expect there will be some variation in our gross profit from period to period, as our gross profit has been and will continue to be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, software and services, risk of inventory write-downs and the cost and availability of components.
27
Information about our operating expenses for the three and nine months ended September 30, 2016 and September 30, 2015 is set forth below.
Research and Development
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
Research and development |
$ |
1,480 |
|
|
$ |
2,235 |
|
|
|
(34 |
%) |
|
$ |
4,997 |
|
|
$ |
6,567 |
|
|
|
(24 |
%) |
as a % of net revenue |
|
10 |
% |
|
|
13 |
% |
|
|
|
|
|
|
12 |
% |
|
|
14 |
% |
|
|
|
|
Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.
Research and development expenses in the three and nine months ended September 30, 2016 decreased primarily due to the benefit of restructuring initiatives realized during the first three quarters of 2016.
Selling and Marketing
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
Selling and marketing |
$ |
3,312 |
|
|
$ |
5,236 |
|
|
|
(37 |
%) |
|
$ |
10,807 |
|
|
$ |
15,698 |
|
|
|
(31 |
%) |
as a % of net revenue |
|
21 |
% |
|
|
30 |
% |
|
|
|
|
|
|
26 |
% |
|
|
33 |
% |
|
|
|
|
Selling and marketing expenses consist primarily of employee compensation as well as amortization expense of certain intangible assets, customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs.
Selling and marketing expenses decreased primarily due to a reduction in headcount and marketing program spending attributable to our restructuring initiatives realized during the first three quarters of 2016.
General and Administrative
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
General and administrative |
$ |
2,115 |
|
|
$ |
6,456 |
|
|
|
(67 |
%) |
|
$ |
9,674 |
|
|
$ |
15,057 |
|
|
|
(36 |
%) |
as a % of net revenue |
|
14 |
% |
|
|
38 |
% |
|
|
|
|
|
|
23 |
% |
|
|
32 |
% |
|
|
|
|
General and administrative expenses consist primarily of compensation expense for employees performing administrative functions as well as professional fees arising from legal, auditing and other professional services.
General and administrative expenses decreased primarily due to lower legal and professional fees and the benefit of restructuring initiatives realized during the first three quarters of 2016.
Restructuring and Severance Charges
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
Restructuring and severance |
$ |
160 |
|
|
$ |
215 |
|
|
|
(26 |
%) |
|
$ |
3,100 |
|
|
$ |
408 |
|
|
|
660 |
% |
In the first quarter of 2016, we implemented a worldwide restructuring plan designed to refocus our resources on our core business segments, including physical access and transponders, and to consolidate our operations in several worldwide locations. The restructuring plan included reducing our non-manufacturing employee base, reallocating overhead roles into direct business activities and eliminating certain management and executive roles. In the third quarter of 2016, we incurred additional facilities related restructuring costs and severance related adjustments in connection with this restructuring plan.
28
See Note 10, Restructuring and Severance, in the accompanying notes to our unaudited condensed consolidated financial statements for more information.
Interest Expense, Net
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
Interest expense, net |
$ |
525 |
|
|
$ |
478 |
|
|
|
10 |
% |
|
$ |
1,814 |
|
|
$ |
1,367 |
|
|
|
33 |
% |
Interest expense, net consists of interest on financial liabilities and interest accretion expense for a liability to a long-term payment obligation arising from our acquisition of Hirsch Electronics Corporation. The higher net interest expense in the three and nine months ended September 30, 2016 compared to the comparable periods of 2015 is primarily due to the write-down of unamortized debt issuance costs of approximately $0.2 million relating to the revolving loan facility modification in the first quarter of 2016 and the higher amount of borrowings outstanding during the nine months ended September 30, 2016 compared to the comparable period of 2015.
See Note 6, Long-term Payment Obligation, and Note 7, Financial Liabilities, in the accompanying notes to our unaudited condensed consolidated financial statements for more information.
Foreign Currency Gain (Loss), Net
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
Foreign currency gain (loss), net |
$ |
35 |
|
|
$ |
(10 |
) |
|
|
(450 |
%) |
|
$ |
309 |
|
|
$ |
(186 |
) |
|
|
(266 |
%) |
Changes in currency valuation in the periods mainly were the result of exchange rate movements between the U.S. dollar and the Euro. Accordingly, they are predominantly non-cash items. Our foreign currency gains and losses primarily result from the valuation of current assets and liabilities denominated in a currency other than the functional currency of the respective entity in the local financial statements.
Income Taxes
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||||
Income tax benefit (provision) |
$ |
(105 |
) |
|
$ |
(59 |
) |
|
|
78 |
% |
|
$ |
(35 |
) |
|
$ |
(141 |
) |
|
|
(75 |
%) |
Effective tax rate |
|
16 |
% |
|
|
1 |
% |
|
|
|
|
|
|
0 |
% |
|
|
1 |
% |
|
|
|
|
As of September 30, 2016, our deferred tax assets are fully offset by a valuation allowance. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against all of our net U.S. and foreign deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made.
We recorded a minimal income tax provision during the three and nine months ended September 30, 2016. The effective tax rates for the nine months ended September 30, 2016 and September 30, 2015 differ from the federal statutory rate of 34% primarily due to a change in valuation allowance and, the provision or benefit in certain foreign jurisdictions, which are subject to lower tax rates.
Liquidity and Capital Resources
As of September 30, 2016, our working capital, which we define as current assets less current liabilities, was $7.5 million, a decrease of $17.1 million compared to $24.6 million as of December 31, 2015. As of September 30, 2016, our cash balance was $9.2 million.
29
The following summarizes our cash flows for the nine months ended September 30, 2016 and 2015 (in thousands):
|
Nine Months Ended September 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Net cash used in operating activities |
$ |
(6,194 |
) |
|
$ |
(16,858 |
) |
Net cash used in investing activities |
|
(425 |
) |
|
|
(553 |
) |
Net cash (used in) provided by financing activities |
|
(180 |
) |
|
|
2,131 |
|
Effect of exchange rates on cash |
|
(685 |
) |
|
|
149 |
|
Net decrease in cash |
|
(7,484 |
) |
|
|
(15,131 |
) |
Cash, beginning of period |
|
16,667 |
|
|
|
36,547 |
|
Cash, end of period |
$ |
9,183 |
|
|
$ |
21,416 |
|
Significant commitments that will require the use of cash in future periods include obligations under operating leases, a long-term payment obligation, secured note and revolver, purchase commitments and other obligations. Gross committed operating lease obligations were $2.0 million, the long-term payment obligation was $5.9 million, the bank term loan, revolving loan facility and interest related obligation were $19.4 million, and purchase commitments and other obligations were $9.0 million at September 30, 2016. Total commitments due within one year were $20.8 million and due thereafter were $15.5 million at September 30, 2016. These commitment levels as of September 30, 2016 are based on existing terms of our operating leases, obligations with suppliers, a liability to a former related party and an existing credit agreement, as amended, with Opus.
Cash used in operating activities for the nine months ended September 30, 2016 was primarily due to the net loss of $12.6 million partially offset by increases in cash from net changes in operating assets and liabilities of $0.3 million and by adjustments for certain non-cash items of $6.0 million, consisting primarily of depreciation, amortization, amortization of debt issue costs, loss on disposal of fixed assets and stock-based compensation. For the nine months ended September 30, 2015, cash used in operating activities was primarily due to the net loss of $20.2 million and decreases in cash from net changes in operating assets and liabilities of $4.7 million which were partially offset by adjustments for certain non-cash items of $8.0 million.
Cash used in investing activities for the nine months ended September 30, 2016 and 2015 was $0.4 million and $0.6 million, respectively, and was related to capital expenditures.
Cash used in financing activities during the nine months ended September 30, 2016 related to repurchases of our common stock surrendered to us to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees of $0.2 million. Cash provided by financing activities during the nine months ended September 30, 2016 primarily reflects $4.0 million proceeds from draws on the bank revolver which was partially offset by $1.9 million for the repurchase of common stock.
We consider the undistributed earnings of our foreign subsidiaries, if any, as of September 30, 2016, to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon. Generally most of our foreign subsidiaries have accumulated deficits and cash positions that are held outside the U.S. and are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the U.S. We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences. As of September 30, 2016, the amount of cash held at such subsidiaries was $1.2 million. We have not, nor do we currently anticipate the need to, repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.
On March 31, 2014, we entered into a Credit Agreement with Opus (as amended from time to time as of the date of this report). The Credit Agreement provides for a term loan in the aggregate principal amount of $10.0 million and an additional $10.0 million revolving loan facility. For additional information concerning the amendment of the Credit Agreement, see Note 7, Financial Liabilities, in the accompanying notes to our unaudited condensed consolidated financial statements.
We have historically incurred operating losses and negative cash flows from operating activities. As of September 30, 2016, we have a total accumulated deficit of $390.4 million. During the nine months ended September 30, 2016, we had a consolidated net loss of $12.6 million. Although we have, and expect to continue, to realize benefits of the restructuring initiatives realized in nine months of 2016, we may continue to incur losses in the future.
Our condensed consolidated financial statements as of September 30, 2016 were prepared assuming that we will continue as a going concern. This assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our continuation as a going concern is contingent upon our ability to generate revenues and cash flows to meet our obligations on a timely basis and our ability to raise capital, secure financing or dispose of certain noncore assets as required. Our plans may be
30
adversely impacted if we fail to realize our assumed levels of revenues and expenses or savings from our cost reduction activities. If events, such as reductions or delays in spending under various federal budget programs, cause a significant adverse impact on our revenues, expenses or savings from our cost reduction activities, we may need to delay, reduce the scope of, or eliminate one or more of our development programs or obtain funds through collaborative arrangements with others that may require us to relinquish rights to certain of our technologies, or programs that we would otherwise seek to develop or commercialize ourselves, and to reduce personnel related costs. We believe cash generated from operations and bank borrowing capacity provides sufficient liquidity to meet our obligations and continue as a going concern for the next twelve months.
Over the longer term, we believe our existing cash balance, together with available credit under our Amended Credit Agreement and our ability to raise capital through public and private offerings will be sufficient to satisfy our working capital needs to fund operations. However, there can be no assurance that additional capital, if required, will be available to us or that such capital will be available to us on acceptable terms.
Off-Balance Sheet Arrangements
We have not entered into off-balance sheet arrangements, or issued guarantees to third parties.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to establish accounting policies that contain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These policies relate to revenue recognition, inventory, income taxes, goodwill, intangible and long-lived assets and stock-based compensation. We have other important accounting policies and practices; however, once adopted, these other policies either generally do not require us to make significant estimates or assumptions or otherwise only require implementation of the adopted policy and not a judgment as to the policy itself. Management bases its estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Despite our intention to establish accurate estimates and assumptions, actual results may differ from these estimates under different assumptions or conditions.
During the three months ended September 30, 2016, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2015.
Recent Accounting Pronouncements
See Note 1, Organization and Summary of Significant Accounting Policies, in the accompanying notes to our unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report for a full description of recent accounting pronouncements, which is incorporated herein by reference.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes in our exposure to market risk during the three months ended September 30, 2016. For discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, contained in our Annual Report on Form 10-K for the year ended December 31, 2015.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the three months ended September 30, 2016, as required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation under the supervision and with the participation of members of our senior management, including our CEO and interim CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures are those controls and other procedures that are designed to provide reasonable assurance that the information required to be disclosed in our SEC reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our CEO and interim CFO, as appropriate to allow timely decisions regarding required disclosure.
31
Based on our evaluation, our management, including our CEO and interim CFO, concluded that as of September 30, 2016, our disclosure controls and procedures were not effective because of the material weakness described below in Management’s Report on Internal Control over Financial Reporting. Notwithstanding the material weakness discussed below, our management, including our CEO and interim CFO, has concluded that the condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and or directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the interim or annual consolidated financial statements.
A control system, no matter how well designed and operated, can only provide reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected.
A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Our management, including our CEO and interim CFO, assessed our internal control over financial reporting as of September 30, 2016. In making the assessment of internal control over financial reporting, our management based its assessment on the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control — Integrated Framework of 2013.” Our management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. This assessment is supported by testing and monitoring performed by our internal accounting and finance organization.
Based on management’s assessment, including consideration of the control deficiencies discussed below, management has concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2016, due to the following material weakness.
Inadequate design and application of controls related to financial statement close process – Management determined that the design and operating effectiveness of our controls over the financial statement close process related to the application of our accounting policies and the presentation of disclosures in the financial statements has been inadequate. Specifically, this material weakness arises from insufficient review and oversight of the recording of complex and non-routine transactions due to an insufficient number of accounting personnel with appropriate knowledge, experience or training in U.S. GAAP. A similar material weakness was previously identified and disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012, 2013 and 2015, and a remediation plan was implemented. However in 2015, in the context of managing a significant change in accounting systems and organizational structure, the loss of legacy knowledge in respect of our old consolidation system, the diversion of resources related to an internal investigation which delayed the filing of our quarterly reports on Form 10-Q, and other external factors, it became apparent that all the information necessary to record complex and non-routine transactions had not been available and addressed timely, resulting in a number of late accounting adjustments.
Remediation of Material Weakness in Internal Control Over Financial Reporting
A number of remediation actions and organizational changes have been enacted to address specific control weaknesses identified in our revenue and expenditure cycles, and have completed the move to a single accounting system across substantially all our businesses during the course of 2016. In particular, we have carried out the financial close and consolidation process entirely
32
within our new system environment since the second quarter of 2016. Additionally, as part of our restructuring changes announced in the first quarter of 2016, we are continuing to streamline our global operations and concentrate our accounting and finance function in Orange County, California, close to our executive management and U.S. GAAP resources. Management expects to complete the implementation of remediation measures, and as a result remediate the existing material weakness described above, during 2016.
In addition, under the direction of the Audit Committee of the Board, our management will continue to review and make necessary changes to the overall design of our internal control environment, as well as to policies and procedures to improve the overall effectiveness of internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, our management may determine to take additional measures to address control deficiencies.
Changes in Internal Controls over Financial Reporting
Other than the items noted above, we have made no changes to our internal control over financial reporting during the three months ended September 30, 2016 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
33
From time to time, we could be subject to claims arising in the ordinary course of business or be a defendant in lawsuits. The outcome of such claims or other proceedings cannot be predicted with certainty, and the resolution of any such claims could be material.
On December 16, 2015, we and certain of our present and former officers and directors were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of California, entitled Rok v. Identiv, Inc., et al., Case No. 15-cv-05775, alleging violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act of 1934. On May 3, 2016, the court-appointed lead plaintiff Thomas Cunningham in the Rok lawsuit filed an amended complaint and a notice of dismissal without prejudice of all current or former officers and directors other than Jason Hart and Brian Nelson. On June 6, 2016, each of us, Jason Hart, and Brian Nelson filed a motion to dismiss for failure to state a claim upon which relief can be granted in the Rok lawsuit; on August 5, 2016, the court granted those motions with leave for the lead plaintiff to file a second amended complaint. On September 12, 2016, the lead plaintiff in the Rok lawsuit filed a second amended complaint. On October 10, 2016, each of us, Jason Hart, and Brian Nelson filed a motion to dismiss that second amended complaint for failure to state a claim upon which relief can be granted, which motions are scheduled to be heard on December 16, 2016. In addition, three shareholder derivative actions were filed between January and February 2016. On January 1, 2016, certain of our present and former officers and directors were named as defendants, and we were named as nominal defendant, in a shareholder derivative lawsuit filed in the United States District Court for the Northern District of California, entitled Oswald v. Humphreys, et al., Case No. 16-cv-00241-JCS, alleging breach of fiduciary duty and abuse of control claims. On January 25, 2016, certain of our present and former officers and directors were named as defendants, and we were named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Chopra v. Hart, et al., Case No. RG16801379, alleging breach of fiduciary duty claims. On February 9, 2016, certain of our present and former officers and directors were named as defendants, and we were named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Wollnik v. Wenzel, et al., Case No. HG16803342, alleging breach of fiduciary duty, corporate waste, gross mismanagement, and unjust enrichment claims. These lawsuits generally allege that we made false and/or misleading statements and/or failed to disclose information in certain public filings and disclosures between 2013 and 2015. Each of the lawsuits seeks one or more of the following remedies: unspecified compensatory damages, unspecified exemplary or punitive damages, restitution, declaratory relief, equitable and injunctive relief, and reasonable costs and attorneys’ fees. On May 2, 2016, the court in the Chopra lawsuit entered an order staying proceedings in the Chopra lawsuit in favor of the Oswald lawsuit, based on a stipulation to that effect filed by the parties in the Chopra lawsuit on April 28, 2016. Similarly, on June 28, 2016, the court in the Wollnik lawsuit entered a stipulated order staying proceedings in the Wollnik lawsuit in favor of the Oswald lawsuit. On June 17, 2016, the plaintiff in the Oswald lawsuit filed an amended complaint. On August 1, 2016, we filed a motion to dismiss for failure by plaintiff to make a pre-lawsuit demand on our board of directors, which motion was heard on October 14, 2016. The judge in the Oswald lawsuit issued an order on November 7, 2016 granting our motion to dismiss, without prejudice. In addition, the court stayed the case so that plaintiff could exercise whatever rights he has under Section 220 of the Delaware General Corporation Law. We intend to vigorously defend against these lawsuits. We cannot currently predict the impact or resolution of each of these lawsuits or reasonably estimate a range of possible loss, if any, which could be material, and the resolution of these lawsuits may harm our business and have a material adverse impact on our financial condition.
Our business and results of operations are subject to numerous risks, uncertainties and other factors that you should be aware of. The risks, uncertainties and other factors described in these risk factors are not the only ones facing our company. Additional risks, uncertainties and other factors not presently known to us or that we currently deem immaterial may also impair our business operations. Any of the risks, uncertainties and other factors could have a materially adverse effect on our business, financial condition, results of operations, cash flows or product market share and could cause the trading price of our common stock to decline substantially.
Our loan covenants may affect our liquidity or limit our ability to incur debt, make investments, sell assets, merge or complete other significant transactions.
In March 2014, we entered into a Senior Secured Credit Facility Agreement with Opus Bank, as lender, (as amended from time to time as of the date of this report, the “Credit Agreement”). The Credit Agreement includes provisions that place limitations on a number of our activities, including our ability to incur additional debt, create liens on our assets or make guarantees, make certain investments or loans, pay dividends or dispose of or sell assets or enter into a merger or similar transaction. Our obligations under the Credit Agreement are secured by substantially all of our assets. Certain of our domestic subsidiaries have guaranteed the credit facilities under the Credit Agreement and have granted the lender security interests in substantially all of their assets. The Credit Agreement contains financial covenants, including covenants that require us to achieve certain levels of financial performance as
34
measured periodically in terms of our tangible net worth, EBITDA, and specific asset levels as they relate to outstanding debt. We have failed to maintain compliance with the financial covenants a number of times, and we and the lender have amended the Credit Agreement in the past to modify and/or waive compliance with certain of these financial covenants, most recently in March 2016. We were not in compliance with certain of the financial covenants as of September 30, 2015, March 31, 2016, June 30, 2016, and September 30, 2016. While we have obtained waivers from the lender with respect to these events, we cannot assure you that we will not be out of compliance with one or more financial covenants again in the future, or that the lender will continue to waive any such failures to be in compliance with covenants. If an event of default with respect to certain covenants (including financial covenants) occurs, the lender may, among other things, accelerate the indebtedness and seize collateral or exercise other remedies provided under the Credit Agreement. If repayment of the indebtedness is accelerated, we could face a substantial liquidity problem and may be forced to dispose of material assets or operations, seek to obtain equity capital, or restructure or refinance our indebtedness. Such alternative measures may not be available or successful. Also, our loan covenants may limit our ability to dispose of material assets or operations or to restructure or refinance our indebtedness. Even if we are able to restructure or refinance our indebtedness, the economic terms may not be favorable to us. Any of the foregoing could have a material adverse effect on our financial condition and results of operations. Our ability to make periodic interest payments and to repay our debt when due in 2017 depends on our financial and operating performance, which in turn, is subject to prevailing economic and competitive conditions and the other factors discussed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2015 and the other information discussed in this report. If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to dispose of material assets or operations, seek to obtain equity capital, or restructure or refinance our indebtedness as noted above. Such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
In addition to the above and the other information set forth in this Quarterly Report, you should carefully consider the risk factors previously disclosed in Item 1A. to Part I of our Annual Report on Form 10-K for the year ended December 31, 2015.
Exhibits are listed on the Exhibit Index at the end of this Quarterly Report. The exhibits required by Item 601 of Regulation S-K, listed on such Index in response to this Item, are incorporated herein by reference.
35
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.
|
|
IDENTIV, INC. |
||
|
|
|
|
|
November 14, 2016 |
|
By: |
|
/S/ Steven Humphreys |
|
|
|
|
Steven Humphreys |
|
|
|
|
Chief Executive Officer |
|
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
November 14, 2016 |
|
By: |
|
/S/ Steven Finney |
|
|
|
|
Steven Finney |
|
|
|
|
Interim Chief Financial Officer and Secretary |
|
|
|
|
(Principal Financial Officer) |
36
Exhibit |
|
DESCRIPTION OF DOCUMENT |
|
|
|
|
|
|
4.1 |
|
Warrant issued to Opus Bank, dated September 30, 2016. |
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. |
|
|
|
32* |
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS |
|
XBRL Instance Document |
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
* |
Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
37
Exhibit 4.1
THIS WARRANT, AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT |
To Purchase Shares of Common Stock of |
IDENTIV, INC. |
Dated as of September 30, 2016 (the “Effective Date”) |
WHEREAS, Identiv, Inc., a Delaware corporation, has entered into a Credit Agreement, dated as of March 31, 2014, as subsequently amended pursuant to its terms (the “Credit Agreement”), with Opus Bank, a California commercial bank (each of Opus Bank and its successors and assigns is referred to herein as the “Warrantholder”); and
WHEREAS, pursuant to the Credit Agreement the Company (as defined below) has agreed to grant to Warrantholder the right to purchase shares of Common Stock (as defined below) upon the satisfaction of certain conditions pursuant to this Warrant (this “Warrant”), which is a New Warrant (as defined in the Credit Agreement).
NOW, THEREFORE, the Company and the Warrantholder agree as follows:
SECTION 1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from the Company, up to 100,000 fully paid and non-assessable shares of the Common Stock (as defined below). As used herein, the following terms shall have the following meanings:
“Act” means the Securities Act of 1933, as amended.
“Company” means Identiv, Inc., a Delaware corporation, and any successor or surviving entity that assumes the obligations of the Company under this Warrant pursuant to Section 8(a).
“Charter” means the Company’s Certificate of Incorporation, as may be amended from time to time.
“Common Stock” means the Company’s common stock, $0.001 par value per share; “Exercise Price” means $2.22 per share, subject to adjustment pursuant to Section 8.
“Purchase Price” means, with respect to any exercise of this Warrant, an amount equal to the Exercise Price as of the relevant time multiplied by the number of shares of Common Stock requested to be exercised under this Warrant pursuant to such exercise.
SECTION 2. TERM OF THE WARRANT. |
(a) Except as otherwise provided for herein, the term of this Warrant and the right to purchase Common Stock as granted herein shall commence on the Effective Date and shall be exercisable through the date which is five (5) years from the Effective Date, inclusive.
(b) In the event of an Acquisition, this Warrant shall terminate and no longer be exercisable as of the closing of such Acquisition. At least twenty (20) days prior to the consummation of an Acquisition, the Company shall give to the Warrantholder notice of the proposed Acquisition and afford the Warrantholder an opportunity to exercise this Warrant in accordance with the terms and conditions hereof. For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company; (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
SECTION 3. EXERCISE OF THE PURCHASE RIGHTS.
(a) Exercise. The purchase rights set forth in this Warrant are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a notice of exercise in the form attached to the Credit Agreement as Exhibit I (the “Notice of Exercise”), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the Purchase Price in accordance with the terms set forth below, and in no event later than three (3) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Common Stock purchased and shall execute the acknowledgment of exercise in the form attached to the Credit Agreement as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases, if any.
Except as provided in the following sentence, each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in the paragraph above. Notwithstanding the foregoing, if an exercise of all or any portion of this Warrant is being made in connection with (i) a proposed Acquisition, (ii) a proposed issuance or sale of, or dividend or distribution in respect of, capital stock or any other securities of the Company, or (iii) a proposed transfer of capital stock or other securities of the Company, then, at the election of the Warrantholder, such exercise may be conditioned upon the consummation of such public offering, Acquisition, issuance, sale, dividend, distribution or transfer, in which case (A) such exercise shall be effective concurrently with the consummation of such public offering, Acquisition, issuance, sale, dividend, distribution or transfer, and (B) appropriate modifications will be made to the Notice of Exercise to reflect the conditionality specified in this sentence.
The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant for shares of Common Stock to be exercised under this Warrant and, if applicable, an amended Warrant representing the remaining number of shares purchasable hereunder, as determined below (“Net Issuance”). If the Warrantholder elects the Net Issuance method, the Company will issue Common Stock in accordance with the following formula:
|
|
|
|
X = Y(A-B) |
|
|
|
|
A |
Where: |
|
X = |
|
the number of shares of Common Stock to be issued to the Warrantholder. |
|
|
Y = |
|
the number of shares of Common Stock requested to be exercised under this |
|
|
|
|
Warrant. |
|
|
A = |
|
the fair market value of one (1) share of Common Stock at the time of issuance |
|
|
|
|
of such shares of Common Stock. |
|
|
B = |
|
the Exercise Price. |
2
For purposes of the above calculation, current fair market value of Common Stock shall mean with respect to each share of Common Stock:
(i) if the Common Stock is traded on a securities exchange, the fair market value shall be deemed to be the average of the closing prices over a five (5) day period ending three days before the day the current fair market value of one (1) share of Common Stock is being determined; or
(ii) if the Common Stock is traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the five (5) day period ending three days before the day the current fair market value of one (1) share of Common Stock is being determined; or
(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in The NASDAQ Stock Market or the over-the-counter market, the current fair market value of Common Stock shall be the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors, unless the Company shall become subject to an Acquisition, in which case the fair market value of Common Stock shall be deemed to be the per share value received by the holders of Common Stock pursuant to such Acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Warrant shall be identical to those contained herein, including, but not limited to the Effective Date hereof.
(b) Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all Common Stock subject hereto, and if the fair market value of one share of the Common Stock is greater than the Exercise Price then in effect, this Warrant shall (unless otherwise affirmatively elected in writing by the Warrantholder) be deemed automatically exercised pursuant to Section 3(a) (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of the Common Stock upon such expiration shall be determined pursuant to Section 3(a). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of shares of Common Stock, if any, the Warrantholder is to receive by reason of such automatic exercise.
SECTION 4. RESERVATION OF SHARES. |
During the term of this Warrant, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase Common Stock as provided for herein.
SECTION 5. NO FRACTIONAL SHARES OR SCRIP. |
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.
SECTION 6. NO RIGHTS AS STOCKHOLDER. |
This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company prior to the exercise of this Warrant.
SECTION 7. WARRANTHOLDER REGISTRY. |
3
The Company shall maintain a registry showing the name and address of the registered holder of this Warrant. Warrantholder’s initial address, for purposes of such registry, is set forth below Warrantholder’s signature on this Warrant. Warrantholder may change such address by giving written notice of such changed address to the Company.
The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment, as follows:
(a) Reclassification of Shares. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such combination, reclassification, exchange, subdivision or other change. The provisions of this Section 8(a) shall similarly apply to each successive combination, reclassification, exchange, subdivision or other change.
(b) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Common Stock, (i) in the case of a subdivision, the Exercise Price shall be proportionately decreased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Common Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares of Common Stock issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.
(c) Notice of Adjustments. Upon the occurrence of any adjustment pursuant to this Section 8, the Company, at its expense, shall promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of shares of Common Stock or other securities issuable upon exercise of this Warrant (as applicable), and describing the transactions giving rise to such adjustment and showing in detail the facts upon which such adjustment is based. The Company shall promptly deliver a copy of each such certificate to the Warrantholder and to the Company's transfer agent.
(d) Calculations. All calculations under this Section 8 shall be made to the nearest cent or the nearest share, as applicable.
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Common Stock. The Common Stock issuable upon exercise of the Warrantholder’s rights has been or will be duly and validly reserved and, when issued in accordance with the provisions of this Warrant, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever, and free from statutory and contractual equityholders preemptive rights and rights of first refusal; provided, that the Common Stock issuable pursuant to this Warrant may be subject to restrictions on transfer under state and/or federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and current bylaws. The issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Common Stock; provided, that the Company shall not be required to pay any tax which may be payable in respect of any transfer and the issuance and delivery of any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this Warrant and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Common Stock and the Common Stock into which it may be converted, have been duly authorized by all necessary corporate action on the part of the Company. This Warrant: (1) does not violate the Company’s Charter or current bylaws; (2) does not contravene any law or governmental rule, regulation or order applicable to it; and (3) does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other
4
instrument to which it is a party or by which it is bound. This Warrant constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms.
(c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant (including the issuance of Common Stock upon the exercise of this Warrant), except for the filing of notices pursuant to Regulation D under the Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby. The Company will take all such action as may be necessary to assure that the shares of Common Stock issuable upon exercise of this Warrant (i) may be so issued without violation of any applicable law or regulation, or of any applicable requirements of the National Association of Securities Dealers Inc., or any domestic securities exchange upon which the Common Stock or other equity securities of the Company may be listed, and (ii) when issued, will be listed on each domestic securities exchange upon which the Common Stock is then listed.
(d) Issued Securities. All issued and outstanding shares of Common Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock and any other securities were issued in full compliance with all federal and state securities laws. In addition, as of the date immediately preceding the date of this Warrant:
(i) The authorized capital of the Company consists of 50,000,000 shares of Common Stock, of which 11,077,634 shares are issued and outstanding, and 10,000,000 shares of preferred stock, of which none are issued and outstanding.
(ii) The Company has reserved 3,467,018 shares of Common Stock for issuance under its 2011 Incentive Compensation Plan, under which approximately 1,714,956 options and restricted stock units are outstanding. Additionally, the Company has reserved 571,878 shares of Common Stock for issuance pursuant to outstanding warrants, which in the aggregate are exercisable for or convertible into, as applicable, a maximum 571,878 shares of Common Stock. There are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company’s capital stock or other securities of the Company, other than as set forth in the Credit Agreement, as amended.
(iii) In accordance with the Company’s Charter, no stockholder of the Company or other person has preemptive rights to purchase new issuances of the Company’s capital stock.
(e) Insurance. The Company has in full force and effect insurance policies, with extended coverage, insuring the Company and its property and business against such losses and risks, and in such amounts, as are customary for corporations engaged in a similar business and similarly situated and as otherwise may be required pursuant to the terms of any other contract or agreement.
(f) Other Commitments to Register Securities. Except (i) as set forth in this Warrant, (ii) as otherwise disclosed in its filings under the Exchange Act, or (iii) pursuant to that certain Registration Rights Agreement, dated as of the date hereof, between Company and the Warrantholder, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the Act any of its presently outstanding securities or any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder’s representations in Section 10, the issuance of the Common Stock upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.
(h) Compliance with Rule 144. If the Warrantholder proposes to sell Common Stock issuable upon the exercise of this Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, then, upon Warrantholder’s written request to the Company, the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements
5
of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time.
SECTION 10. REPRESENTATIONS OF THE WARRANTHOLDER.
This Warrant has been entered into by the Company in reliance upon the following representations of the Warrantholder:
(a) Investment Purpose. The right to acquire Common Stock is being acquired for investment and not with a view to the sale or distribution of any part thereof in violation of the Act, and the Warrantholder has no present intention of selling or engaging in any public distribution of such rights or the Common Stock except pursuant to an effective registration statement or an exemption from the registration requirements of the Act.
(b) Private Issue. The Warrantholder understands (i) that the Common Stock issuable upon exercise of this Warrant is not registered under the Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Warrant will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on such exemption is predicated on the representations set forth in this Section 10.
(c) Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment.
(d) Risk of No Registration. The Warrantholder understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the Securities Exchange Act of 1934 (the “1934 Act”), or file reports pursuant to Section 15(d) of the 1934 Act, or if a registration statement covering the securities under the Act is not in effect when it desires to sell (i) the rights to purchase Common Stock pursuant to this Warrant or (ii) the Common Stock issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period. The Warrantholder also understands that any sale of (A) its rights hereunder to purchase Common Stock or (B) Common Stock issued or issuable hereunder which might be made by it in reliance upon Rule 144 under the Act may be made only in accordance with the terms and conditions of that Rule.
(e) Accredited Investor. Warrantholder is an “accredited investor” within the meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in effect.
SECTION 11. TRANSFERS. |
Subject to compliance with applicable federal and state securities laws, this Warrant and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes) upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Warrant shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant. The transfer of this Warrant shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer Notice”), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof as the owner for all purposes.
SECTION 12. MISCELLANEOUS. |
(a) Effective Date. The provisions of this Warrant shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Warrant shall be binding upon any
6
successors of the Company. The Company shall not be permitted to assign this Warrant without the express, prior written consent of the Warrantholder.
(b) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company expressly agrees that it shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Warrant requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Warrant.
(c) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment.
(d) Additional Documents. The Company shall provide the Warrantholder with such documents as the Warrantholder may from time to time reasonably request.
(e) Attorney’s Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys’ fees and expenses and all costs of proceedings incurred in enforcing this Warrant. For the purposes of this Section 12(e), attorneys’ fees shall include without limitation fees incurred in connection with the following: (i) contempt proceedings; (ii) discovery; (iii) any motion, proceeding or other activity of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.
(f) Severability. In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.
(g) Notices. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication that is required, contemplated, or permitted under this Warrant or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the day of transmission by facsimile or hand delivery if transmission or delivery occurs on a business day at or before 5:00 pm in the time zone of the recipient, or, if transmission or delivery occurs on a non-business day or after such time, the first business day thereafter, or the first business day after deposit with an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid, and shall be addressed to the party to be notified as follows:
If to Warrantholder: |
|
OPUS BANK |
If to Company: |
7
|
IDENTIV, INC. Facsimile: 949 250-7372 |
or to such other address as each party may designate for itself by like notice.
(h) Entire Agreement; Amendments. This Warrant constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersedes and replaces in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof. None of the terms of this Warrant may be amended except by an instrument executed by each of the parties hereto.
(i) Headings. The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.
(j) Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss) with its counsel this Warrant and, specifically, the provisions of Sections 12(n), 12(o), 12(p). 12(q) and 12(r).
(k) No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Warrant. In the event an ambiguity or question of intent or interpretation arises, this Warrant shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Warrant.
(l) No Waiver. No omission or delay by Warrantholder at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by the Company at any time designated, shall be a waiver of any such right or remedy to which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to enforce such provisions thereafter.
(m) Survival. All agreements, representations and warranties contained in this Warrant or in any document delivered pursuant hereto shall be for the benefit of Warrantholder and shall survive the execution and delivery of this Warrant and the expiration or other termination of this Warrant.
(n) Governing Law. This Warrant has been negotiated and delivered to Warrantholder in the State of California, and shall have been accepted by Warrantholder in the State of California. Delivery of Common Stock to Warrantholder by the Company under this Warrant is due in the State of California. This Warrant shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.
(o) Consent to Jurisdiction and Venue. All judicial proceedings arising in or under or related to this Warrant may be brought in any state or federal court of competent jurisdiction located in the State of California. By execution and delivery of this Warrant, each party hereto generally and unconditionally: (a) consents to personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Warrant. Service of process on any party hereto in any action arising out of or relating to this Warrant shall be effective if given in accordance with the requirements for notice set forth in Section 12(g), and shall be deemed effective and received as set forth in Section 12(g). Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.
(p) Mutual Waiver of Jury Trial. Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws. EACH OF THE COMPANY AND WARRANTHOLDER SPECIFICALLY WAIVES
8
ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY THE COMPANY AGAINST WARRANTHOLDER OR ITS ASSIGNEE OR BY WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY. This waiver extends to all such Claims, including Claims that involve persons other than the Company and Warrantholder; Claims that arise out of or are in any way connected to the relationship between the Company and Warrantholder; and any Claims for damages, breach of contract, specific performance, or any equitable or legal relief of any kind, arising out of this Warrant.
(q) Judicial Reference. If the waiver of jury trial set forth above is ineffective or unenforceable, the parties agree that all Claims shall be resolved by reference to a private judge sitting without a jury, pursuant to Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of Santa Clara County, California. Such proceeding shall be conducted in Santa Clara County, California, with California rules of evidence and discovery applicable to such proceeding.
(r) Prejudgment Relief. In the event Claims are to be resolved by arbitration, either party may seek from a court of competent jurisdiction identified in Section 12(o), any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by judicial reference.
(s) Counterparts. This Warrant and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.
(t) Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to Warrantholder by reason of the Company’s failure to perform any of the obligations under this Warrant and agree that the terms of this Warrant shall be specifically enforceable by Warrantholder. If Warrantholder institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that Warrantholder has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.
(u) Notices of Certain Transactions. In case:
(i) the Company shall take a record of the holders of its equity securities for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of Common Stock or any other securities, or to receive any other right, to subscribe for or purchase any shares of Common Stock or any other securities, or to receive any other right, or
(ii) of any capital reorganization of the Company, any reclassification of the equity securities of the Company, or any Acquisition, or
(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, or
(iv) of any redemption of equity securities of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the Warrantholder a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the effective date on which such reorganization, reclassification, Acquisition, dissolution, liquidation, winding-up or redemption is to take place, and the time, if any is to be fixed, as of which the holders of equity securities (or such other securities at the time deliverable upon such reorganization, reclassification, Acquisition, dissolution, liquidation, winding-up or redemption) are to be determined. Such notice shall be mailed at least twenty (20) days prior to the record date or effective date for the event specified in such notice.
9
(v) Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction), if requested by the Company, upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.
[Remainder of Page Intentionally Left Blank]
10
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be executed by its officers thereunto duly authorized as of the Effective Date.
COMPANY: |
|
IDENTIV, INC. |
||
|
||||
|
|
By: |
|
/s/ Steven Humphreys |
|
|
Name: |
|
Steven Humphreys |
|
|
Title: |
|
CEO |
|
||||
WARRANTHOLDER: |
|
OPUS BANK |
||
|
||||
|
|
By: |
|
/s/ Douglas Stewart |
|
|
Name: |
|
Douglas Stewart |
|
|
Title: |
|
Senior Managing Director |
11
EXHIBIT I
NOTICE OF EXERCISE
To: |
_____________________ |
(1) |
The undersigned Warrantholder hereby elects to purchase _____________ shares of the Common Stock of Identive Group, Inc., pursuant to the terms of the Warrant dated September 30, 2016 (the “Warrant”) between Identiv, Inc. and the Warrantholder, and [CASH PAYMENT: tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any.] [NET ISSUANCE: elects pursuant to Section 3(a) of the Warrant to effect a Net Issuance.] |
(2) |
Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below. |
(Name)
(Address)
WARRANTHOLDER: |
OPUS BANK |
12
ACKNOWLEDGMENT OF EXERCISE
The undersigned, _____________________________, hereby acknowledge receipt of the “Notice of Exercise” from Opus Bank, a California commercial bank, to purchase _______________ shares of the Common Stock of Identiv, Inc., a Delaware corporation, pursuant to the terms of the Warrant, and further acknowledges that _____________ shares remain subject to purchase under the terms of the Warrant.
COMPANY:
IDENTIV, INC.
By: |
|
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the Warrantholder hereby sells, assigns and transfer all of the rights of the undersigned under the attached Warrant with respect to _______ shares of Common Stock covered thereby to:
(Please Print)
whose address is:
Dated: |
Warrantholder’s Signature:
|
Warrantholder’s Address:
|
NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
Exhibit 31.1
CERTIFICATION
I, Steven Humphreys, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Identiv, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 14, 2016 |
|
/s/ Steven Humphreys |
|
|
Steven Humphreys |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Steven Finney, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Identiv, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 14, 2016 |
|
/s/ Steven Finney |
|
|
Steven Finney |
|
|
Interim Chief Financial Officer and Secretary |
|
|
(Principal Financial Officer) |
Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven Humphreys, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that (1) the Quarterly Report of Identiv, Inc. on Form 10-Q for the quarterly period ended September 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (2) the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Identiv, Inc.
Date: November 14, 2016 |
|
/s/ Steven Humphreys |
|
|
Steven Humphreys |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
I, Steven Finney, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that (1) the Quarterly Report of Identiv, Inc. on Form 10-Q for the quarterly period ended September 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (2) the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Identiv, Inc.
Date: November 14, 2016 |
|
/s/ Steven Finney |
|
|
Steven Finney |
|
|
Interim Chief Financial Officer and Secretary |
|
|
(Principal Financial Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Nov. 07, 2016 |
|
Document Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | INVE | |
Entity Registrant Name | Identiv, Inc. | |
Entity Central Index Key | 0001036044 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 11,086,151 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 299 | $ 346 |
Debt instrument unamortized discount, current | 375 | 0 |
Debt instrument unamortized discount , non-current | 0 | 196 |
Unamortized debt issuance expense | $ 11 | $ 448 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 11,788,000 | 11,365,000 |
Common stock, shares outstanding | 11,078,000 | 10,747,000 |
Treasury stock, shares | 710,000 | 618,000 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Net revenue | $ 15,560 | $ 17,196 | $ 41,521 | $ 47,717 |
Cost of revenue | 8,640 | 9,675 | 24,038 | 27,466 |
Gross profit | 6,920 | 7,521 | 17,483 | 20,251 |
Operating expenses: | ||||
Research and development | 1,480 | 2,235 | 4,997 | 6,567 |
Selling and marketing | 3,312 | 5,236 | 10,807 | 15,698 |
General and administrative | 2,115 | 6,456 | 9,674 | 15,057 |
Impairment of goodwill | 988 | |||
Restructuring and severance | 160 | 215 | 3,100 | 408 |
Total operating expenses | 7,067 | 14,142 | 28,578 | 38,718 |
Loss from operations | (147) | (6,621) | (11,095) | (18,467) |
Non-operating income (expense): | ||||
Interest expense, net | (525) | (478) | (1,814) | (1,367) |
Foreign currency gain (loss), net | 35 | (10) | 309 | (186) |
Loss before income taxes and noncontrolling interest | (637) | (7,109) | (12,600) | (20,020) |
Income tax benefit (provision) | (105) | (59) | (35) | (141) |
Loss before noncontrolling interest | (742) | (7,168) | (12,635) | (20,161) |
Less: Loss (income) attributable to noncontrolling interest | (1) | 6 | 4 | 72 |
Net loss attributable to Identiv, Inc. | $ (743) | $ (7,162) | $ (12,631) | $ (20,089) |
Basic and diluted net loss per share attributable to Identiv, Inc. | $ (0.07) | $ (0.66) | $ (1.16) | $ (1.85) |
Weighted average shares used to compute basic and diluted loss per share | 11,024 | 10,895 | 10,855 | 10,834 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net loss | $ (742) | $ (7,168) | $ (12,635) | $ (20,161) |
Other comprehensive loss, net of income taxes: | ||||
Foreign currency translation adjustment | (64) | 30 | (285) | (112) |
Foreign currency translation reclassified into net loss upon acquisition of noncontrolling interest | (444) | |||
Total other comprehensive (loss) income, net of income taxes | (64) | 30 | (285) | (556) |
Comprehensive loss | (806) | (7,138) | (12,920) | (20,717) |
Less: Comprehensive income attributable to noncontrolling interest | 11 | 6 | 23 | 78 |
Comprehensive loss attributable to Identiv, Inc. common stockholders | $ (795) | $ (7,132) | $ (12,897) | $ (20,639) |
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Additional Paid-in Capital |
Treasury Stock |
Accumulated Deficit |
Accumulated Other Comprehensive Income |
Noncontrolling Interest |
---|---|---|---|---|---|---|---|
Beginning Balances at Dec. 31, 2015 | $ 14,190 | $ 11 | $ 396,407 | $ (6,487) | $ (377,814) | $ 2,229 | $ (156) |
Beginning Balances (in shares) at Dec. 31, 2015 | 10,747 | 10,747 | |||||
Net loss | $ (12,635) | (12,631) | (4) | ||||
Other comprehensive loss | (285) | (266) | (19) | ||||
Issuance of warrants | 376 | 376 | |||||
Issuance of common stock in connection with vesting of stock awards (in shares) | 423 | ||||||
Stock-based compensation | 2,632 | 2,632 | |||||
Repurchase of common stock | (180) | (180) | |||||
Repurchase of common stock (in shares) | (92) | ||||||
Ending Balances at Sep. 30, 2016 | $ 4,098 | $ 11 | $ 399,415 | $ (6,667) | $ (390,445) | $ 1,963 | $ (179) |
Ending Balances (in shares) at Sep. 30, 2016 | 11,078 | 11,078 |
Organization and Summary of Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies The accompanying unaudited condensed consolidated financial statements of Identiv, Inc. (“Identiv” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The preparation of unaudited condensed consolidated financial statements necessarily requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. The Company may experience significant variations in demand for its products quarter to quarter and typically experiences a stronger demand cycle in the second half of its fiscal year. As a result, the quarterly results may not be indicative of the full year results. The December 31, 2015 balance sheet was derived from the audited financial statements as of that date. Certain reclassifications, such as the accounting for debt issuance costs consistent with Accounting Standards Update (“ASU”), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), have been made to the fiscal year 2015 financial statements to conform to the fiscal year 2016 presentation. Concentration of Credit Risk — No customer represented more than 10% of net revenue for the three months ended September 30, 2016, and one customer accounted for 10% of net revenue for the nine months ended September 30, 2016. One customer represented 19% of net revenue for the three months ended September 30, 2015, and one customer represented 18% of net revenue for the nine months ended September 30, 2015. No customer represented more than 10% of the Company’s accounts receivable balance at September 30, 2016 or December 31, 2015. Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements. In April 2015, the FASB issued 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”), which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. ASU 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 did not have a material impact on the Company’s condensed consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company adopted this guidance as of January 1, 2016. The new guidance has been applied on a retrospective basis, wherein the consolidated balance sheet of December 31, 2015 has been retrospectively adjusted to reflect the effects of applying the new guidance. As a result of the change to the December 31, 2015 consolidated balance sheet, deferred debt issuance costs included in other assets and long-term financial liabilities decreased by $0.4 million. After the retrospective application to December 31, 2015, subsequent amortization of the deferred debt issuance costs results in an increase to long-term debt. In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). Under ASU 2015-01, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. ASU 2015-01 is effective for interim and annual reporting periods beginning after December 15, 2015 with early adoption permitted. Upon adoption, the Company may elect prospective or retrospective application. The adoption of ASU 2015-01 did not have a material impact on the Company’s condensed consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, (“ASU 2014-15”), which requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption will have on its condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606) (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to annual periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance is effective for the Company beginning January 1, 2018 and will provide the Company additional time to evaluate the method and impact that ASU 2014-09 will have on its condensed consolidated financial statements. |
Fair Value Measurements |
9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||
Fair Value Disclosures [Abstract] | ||||||||||
Fair Value Measurements | 2. Fair Value Measurements The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. Under the Accounting Standards Codification (“ASC”), ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
Assets and Liabilities Measured at Fair Value on a Recurring Basis As of September 30, 2016 and December 31, 2015, there were no assets that are measured and recognized at fair value on a recurring basis. There were no cash equivalents as of September 30, 2016 and December 31, 2015. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis Certain of the Company's assets, including intangible assets, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections. During the three and nine months ended September 30, 2016, the Company noted no indicators of impairment. During the three and nine months ended September 30, 2015, the Company noted certain indicators of impairment, including a sustained decline in its stock price and continued reduced performance in its Identity reporting unit. Based on the results of step one of the goodwill impairment analysis, it was determined that the Company’s net adjusted carrying value exceeded its estimated fair value for the Identity reporting unit. As a result, goodwill relating to the Identity segment was determined to be fully impaired resulting in an impairment charge of $1.0 million which was recorded in the condensed consolidated statements of operations for the period. For additional discussion of measurement criteria used in evaluating potential impairment involving intangible assets, refer to Note 5, Intangible Assets. Privately-held investments, which are normally carried at cost, are measured at fair value due to events and circumstances that the Company identified as significantly impacting the fair value of investments. The Company estimates the fair value of its privately-held investments using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and the investee's capital structure. As of September 30, 2016 and December 31, 2015, the Company had $0.3 million of privately-held investments measured at fair value on a nonrecurring basis which were classified as a Level 3 asset due to the absence of quoted market prices and inherent lack of liquidity. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. During the three and nine months ended September 30, 2016, the Company determined that no privately-held investments were impaired. The amount of privately-held investments is included in other assets in the condensed consolidated balance sheets. As of September 30, 2016 and December 31, 2015, there were no liabilities that are measured and recognized at fair value on a non-recurring basis. Assets and Liabilities Not Measured at Fair Value The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, financial liabilities and other accrued liabilities approximate fair value due to their short maturities.
|
Stockholders' Equity |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | 3. Stockholders’ Equity Common Stock Warrants In connection with the Company’s entry into a consulting agreement in August 2014, the Company issued a consultant a warrant to purchase up to 85,000 shares of the Company’s common stock at a per share exercise price of $10.70 (the “Consultant Warrant”). One fourth of the shares under the warrant are exercisable for cash three months from the date the Consultant Warrant was issued and quarterly thereafter. The Consultant Warrant expires on August 13, 2019. In the event of an acquisition of the Company, the Consultant Warrant shall terminate and no longer be exercisable as of the closing of the acquisition. As of September 30, 2016, the Consultant Warrant had not been exercised. In connection with the Company’s entry into a credit agreement with Opus Bank (“Opus”) as discussed in Note 7, Financial Liabilities, the Company issued Opus a warrant to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $9.90 (the “Opus Warrant”). On March 31, 2016, the Company entered into a third amendment to its Credit Agreement increasing the number of shares of common stock underlying the warrant from 100,000 to 200,000 shares and decreased the exercise price from $9.90 to $2.19 per share subject to modification. The Company also agreed to issue new warrants to purchase 100,000 shares of common stock in the event that the outstanding principal balance of the Company’s loans with Opus exceeds specified thresholds on each of September 30, 2016, December 31, 2016 and March 31, 2017. The terms of any new warrants issued will be identical to those of the existing warrant, except that each new warrant issued will be exercisable for 100,000 shares and have an exercise price equal to the average closing price of the Company’s common stock for the five trading days ending on the last day of the quarter with respect to which the new warrant is issued. In addition, the existing registration rights agreement was amended to include the new warrants and change the circumstances under which the Company must register shares underlying the warrants issued to Opus (the “Amended Rights Agreement”). The Opus Warrant is immediately exercisable for cash or by net exercise and expires on March 31, 2019. The shares issuable upon exercise of the Opus Warrant and new Opus warrants, if any, are to be registered at the request of Opus pursuant to the Registration Rights Agreement, dated March 31, 2014, as amended by Amendment No. 1 to Registration Rights Agreement, dated March 31, 2016, between the Company and Opus. As of September 30, 2016, the Opus Warrant had not been exercised. On September 30, 2016, the Company’s outstanding principal threshold, as required in its Credit Agreement, as amended, was not attained. As a result, the Company issued a new warrant (“New Opus Warrant”) to purchase 100,000 shares of common stock at a per share exercise price of $2.22 per share to Opus. The New Opus Warrant is immediately exercisable for cash or by net exercise and expires on September 30, 2021. On August 14, 2013, in a private placement, the Company issued 834,847 shares of its common stock at a price of $8.50 per share and warrants to purchase an additional 834,847 shares of its common stock at an exercise price of $10.00 per share (the “2013 Private Placement Warrants”) to accredited and other qualified investors (the “Investors”). The 2013 Private Placement Warrants have a term of four years and are exercisable beginning six months following the date of issuance. The number of shares issuable upon exercise of the 2013 Private Placement Warrants is subject to adjustment for any stock dividends, stock splits or distributions by the Company, or upon any merger or consolidation or sale of assets of the Company, tender or exchange offer for the Company’s common stock, or a reclassification of the Company’s common stock. Below is the summary of outstanding warrants issued by the Company as of September 30, 2016:
Stock-Based Compensation Plans The Company has various stock-based compensation plans to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons. The Company’s stock-based compensation plans consist of the Director Option Plan, 1997 Stock Option Plan, 2000 Stock Option Plan, 2007 Stock Option Plan (the “2007 Plan”), the 2010 Bonus and Incentive Plan (the “2010 Plan”) and the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended. Stock Bonus and Incentive Plans In June 2010, the Company’s stockholders approved the 2010 Plan which granted cash and equity-based awards to executive officers, directors and other key employees as designated by the Compensation Committee of the Board. An aggregate of 300,000 shares of the Company’s common stock was reserved for issuance under the 2010 Plan as equity-based awards, including shares, nonqualified stock options, restricted stock or deferred stock awards. These awards provide the Company´s executives, directors and other key employees the opportunity to earn shares of common stock depending on the extent to which certain performance goals are met. Since the adoption of the 2011 Plan (described below), the Company utilizes shares from the 2010 Plan only for performance-based awards and all equity awards granted under the 2010 Plan are issued pursuant to the 2011 Plan. On June 6, 2011, the Company’s stockholders approved the 2011 Plan, which is administered by the Compensation Committee of the Board. The 2011 Plan provides that stock options, stock units, restricted shares, and stock appreciation rights may be granted to executive officers, directors, consultants, and other key employees. The Company reserved 400,000 shares of common stock under the 2011 Plan, plus 459,956 shares of common stock that remained available for delivery under the 2007 Plan and the 2010 Plan as of June 6, 2011. In aggregate, as of June 6, 2011, 859,956 shares were available for future grants under the 2011 Plan, including shares rolled over from the 2007 Plan and 2010 Plan. Subsequent to June 6, 2011, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 3.0 million shares. Stock Option Plans A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2016 follows:
The following table summarizes information about options outstanding as of September 30, 2016:
At September 30, 2016, there was $1.7 million of unrecognized stock-based compensation expense, net of estimated forfeitures related to unvested options, that is expected to be recognized over a weighted-average period of 2.28 years. Restricted Stock and Restricted Stock Units The following is a summary of restricted stock and restricted stock unit (“RSU”) activity for the nine months ended September 30, 2016:
The fair value of the Company’s restricted stock awards and RSUs is calculated based upon the fair market value of the Company’s stock at the date of grant. As of September 30, 2016, there was $2.1 million of unrecognized compensation cost related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.89 years. As of September 30, 2016, an aggregate of 1,631,266 RSUs were outstanding under the 2011 Plan. Stock-Based Compensation Expense The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):
Common Stock Reserved for Future Issuance Common stock reserved for future issuance as of September 30, 2016 was as follows:
Net Loss per Common Share Attributable to Identiv Stockholders’ Equity Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. For the three and nine months ended September 30, 2016 and 2015, common stock equivalents consisting of outstanding stock options, RSUs and warrants were excluded from the calculation of diluted net loss per share because these securities were anti-dilutive due to the net loss in the respective periods. The total number of common stock equivalents excluded from diluted net loss per share relating to these securities was 3,129,479 common stock equivalents for the three and nine months ended September 30, 2016, and 2,323,430 common stock equivalents for the three and nine months ended September 30, 2015, respectively. Accumulated Other Comprehensive Income Accumulated other comprehensive income (“AOCI”) at September 30, 2016 and December 31, 2015 consists of foreign currency translation adjustments totaling $2.0 million and $2.2 million, respectively. As a result of the acquisition of the noncontrolling interest in a subsidiary company, $0.5 million was reclassified out of AOCI into net loss during the nine months ended September 30, 2015.
|
Balance Sheet Components |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statement Of Financial Position [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Components | 4. Balance Sheet Components The Company’s inventories are stated at the lower of cost or market. Inventories consist of (in thousands):
Property and equipment, net consists of (in thousands):
The Company recorded depreciation expense of $0.5 million and $0.4 million during the three months ended September 30, 2016 and 2015, respectively, and $1.4 million and $1.2 million during the nine months ended September 30, 2016 and 2015, respectively. Other accrued expenses and liabilities consist of (in thousands):
|
Intangible Assets |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | 5. Intangible Assets Intangible Assets The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands):
Each period, the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. If a revision to the remaining period of amortization is warranted, amortization is prospectively adjusted over the remaining useful life of the intangible asset. Intangible assets subject to amortization are amortized over their useful lives as shown in the table above. The Company evaluates its amortizable intangible assets for impairment at the end of each reporting period. The Company did not identify any impairment indicators during the three and nine months ended September 30, 2016.
During the second quarter of 2015, the Company noted certain indicators of impairment, including a sustained decline in its stock price and continued reduced performance in its Identity reporting unit. Based on the results of step one of the goodwill impairment analysis, it was determined that the Company’s net adjusted carrying value exceeded its estimated fair value for the Identity reporting unit. As a result, the Company concluded that the carrying value of goodwill for the Identity reporting unit was fully impaired and recorded an impairment charge of approximately $1.0 million in its condensed consolidated statements of operations during the second quarter of 2015. The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015, respectively (in thousands):
The estimated annual future amortization expense for purchased intangible assets with definite lives over the next five years is as follows (in thousands):
|
Long-Term Payment Obligation |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Payment Obligation | 6. Long-Term Payment Obligation Hirsch Acquisition – Secure Keyboards and Secure Networks. Prior to the 2009 acquisition of Hirsch Electronics Corporation (“Hirsch”) by the Company, effective November 1994, Hirsch had entered into a settlement agreement (the “1994 Settlement Agreement”) with two limited partnerships, Secure Keyboards, Ltd. (“Secure Keyboards”) and Secure Networks, Ltd. (“Secure Networks”). At the time, Secure Keyboards and Secure Networks were related to Hirsch through certain common shareholders and limited partners, including Hirsch’s then President Lawrence Midland, who resigned as President of the Company effective July 31, 2014. Immediately following the acquisition, Mr. Midland owned 30% of Secure Keyboards and 9% of Secure Networks. Secure Networks was dissolved in 2012 and Mr. Midland owned 24.5% of Secure Keyboards upon his resignation from the Company effective July 31, 2014. On April 8, 2009, Secure Keyboards, Secure Networks and Hirsch amended and restated the 1994 Settlement Agreement to replace the royalty-based payment arrangement under the 1994 Settlement Agreement with a new, definitive installment payment schedule with contractual payments to be made in future periods through 2020 (the “2009 Settlement Agreement”). The Company was not an original party to the 2009 Settlement Agreement as the acquisition of Hirsch occurred subsequent to the 2009 Settlement Agreement being entered into. The Company has, however, provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligations under the 2009 Settlement Agreement (the “Guarantee”). The 2009 Settlement Agreement and the Guarantee became effective upon the acquisition of Hirsch on April 30, 2009. The Company’s annual payment to Secure Keyboards and Secure Networks in any given year under the 2009 Settlement Agreement is subject to an increase based on the percentage increase in the Consumer Price Index during the previous calendar year. The final payment to Secure Networks was made on January 30, 2012. The Company’s payment obligations under the 2009 Settlement Agreement to Secure Keyboards will continue through the calendar year ending December 31, 2020, with the final payment due on January 30, 2021, unless the Company elects at any time to satisfy its obligations by making a lump-sum payment to Secure Keyboards. The Company does not intend to make a lump-sum payment and therefore a portion of the payment obligation amount is classified as a long-term liability in the condensed consolidated balance sheets. The Company included $0.1 million and $0.3 million of interest expense during the three and nine months ended September 30, 2016, respectively, and $0.1 million and $0.4 million of interest expense during the three and nine months ended September 30, 2015, respectively, in its condensed consolidated statements of operations for interest accreted on the long-term payment obligation. The ongoing payment obligation in connection with the Hirsch acquisition as of September 30, 2016 is as follows (in thousands):
|
Financial Liabilities |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Liabilities | 7. Financial Liabilities Financial liabilities consist of (in thousands):
Bank Term Loan and Revolving Loan Facility On March 31, 2014, the Company entered into a credit agreement (the “Credit Agreement”) with Opus. The Credit Agreement provides for a term loan in aggregate principal amount of $10.0 million (“Term Loan”) and an additional $10.0 million revolving loan facility (“Revolving Loan Facility”). The obligations of the Company under the Credit Agreement are secured by substantially all assets of the Company. Certain of the Company’s domestic subsidiaries have guaranteed the credit facilities and have granted Opus security interests in substantially all of their respective assets. The Company may voluntarily prepay the Term Loan and outstanding amounts under the Revolving Loan Facility, without prepayment charges, and is required to make prepayments of the Term Loan in certain circumstances or condemnation events using the proceeds of asset sales or insurance. In connection with the Company’s entry into the Credit Agreement, the Company paid customary lender fees and expenses, including facility fees. In addition, as discussed in Note 3, Stockholders’ Equity, the Company issued the Opus Warrant to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $9.90. The Company calculated the fair value of the Opus Warrant using the Black-Scholes pricing model using the following assumptions: estimated volatility of 92.09%, risk-free interest rate of 1.73%, no dividend yield, and an expected life of five years. In accordance with ASC 505-50, Equity-Based Payments to Non-Employees the fair value of the Opus Warrant of $0.8 million was classified as equity as the settlement of the warrant will be in shares and is within the control of the Company. The Company recognized $0.9 million in costs, both cash and equity, related to the Term Loan and Revolving Loan Facility. In accordance with ASC 835-30, Interest – Imputation of Interest amended by ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, the costs are recorded as a direct deduction from the carrying amount of the Term Loan the Revolving Loan Facility and amortized as interest expense over the term of the Credit Agreement. On November 10, 2014, the Company entered into an amendment to its Credit Agreement (the “Amended Credit Agreement”) with Opus. Under the Amended Credit Agreement, the Revolving Loan Facility was increased from $10.0 million to $30.0 million and the revolving loan maturity date was extended to November 10, 2017. In addition, the Company is no longer be required to make scheduled monthly installment payments of principal under the Term Loan. Rather, the entire principal balance of the Term Loan will be due on March 31, 2017. Under the terms of the Amended Credit Agreement, both the principal amount of the Term Loan and the principal amount outstanding under the Revolving Loan Facility bear interest at a floating rate equal to: (a) if the Company holds more than $30.0 million in cash with Opus, the greater of (i) the prime rate plus 1.50% and (ii) 4.75%; (b) if the Company holds $30.0 million or less but more than $20.0 million in cash with Opus, the greater of (i) the prime rate plus 2.25% and (ii) 5.50%; or (c) if the Company holds $20.0 million or less in cash with Opus, the greater of (i) the prime rate plus 2.75% and (ii) 6.00%. Interest on both facilities continues to be payable monthly. Additionally, the Amended Credit Agreement (i) modifies certain loan covenants applicable to the Company’s stock repurchase plan, (ii) removes from the loan collateral shares of the Company’s common stock repurchased by the Company and (iii) extends the current tangible net worth covenant by one year. The Company paid customary lender fees and third party fees related to the debt modification. In accordance with ASC 470-50, Debt – Modifications and Extinguishments, the amendment has been treated as a debt modification, and costs related to the amendment are recorded as a direct deduction from the carrying amount of the Term Loan and Revolving Loan Facility and amortized as interest expense over the remaining term of the Amended Credit Agreement. The Amended Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the Company’s ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and dispose of assets. The Amended Credit Agreement also provides for customary financial covenants, including a minimum tangible net worth covenant, a maximum senior leverage ratio and a minimum asset coverage ratio. In addition, it contains customary events of default that entitle Opus to cause any or all of the Company’s indebtedness under the Amended Credit Agreement to become immediately due and payable. Events of default, include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. Upon the occurrence and during the continuance of an event of default, Opus may terminate its lending commitments and/or declare all or any part of the unpaid principal of all indebtedness, all interest accrued and unpaid thereon and all other amounts payable under the Amended Credit Agreement to be immediately due and payable. The Company has considered the components of the material adverse change clause of the Amended Credit Agreement and determined the likelihood of default under the existing terms is remote. The Term Loan, net of discount and debt issuance costs, outstanding under the Amended Credit Agreement is classified as short-term and the Revolving Loan Facility, net of discount and debt issuance costs, is classified as long-term in the accompanying condensed consolidated balance sheets as of September 30, 2016. On December 4, 2015, the Company entered into an additional amendment (the “Second Amendment”) to its Credit Agreement with Opus. The Second Amendment amended the financial covenants and restricts the Company from permitting its consolidated tangible net worth, plus amounts payable to Secure Keyboards (see Note 6), to be less than $8,000,000 plus, 50% of any proceeds from debt or equity issued after December 1, 2015. On March 31, 2016, the Company entered into an additional amendment (the “Third Amendment”) to its Credit Agreement with Opus. Under the Third Amendment, the Revolving Loan Facility was reduced from $30.0 million to $10.0 million and certain financial covenants were amended and added, including covenants with respect to tangible net worth, maximum senior leverage ratio, minimum asset coverage ratio, minimum EBITDA, minimum cash of at least $7.5 million, and minimum future outstanding principal balance thresholds. In addition, as discussed in Note 3, Stockholders’ Equity the Company amended the Opus Warrant. On September 30, 2016, as a result of not attaining a minimum outstanding principal threshold, the Company issued the New Opus Warrant to purchase 100,000 shares of common stock. The Company calculated the fair value of the Opus Warrant and the New Opus Warrant using the Black-Scholes pricing model using the following assumptions: estimated volatility of 83.92%, risk free interest rate of 0.90%, no dividend yield, and an expected life of three years. The fair value of the Opus Warrant and the New Opus Warrant of $0.4 million is recorded as a direct deduction from the carrying amount of the Term Loan and is being amortized as interest expense over the remaining term of the Credit Agreement, as amended. The Company was not in compliance with certain financial covenants under the Credit Agreement, as amended, as of September 30, 2016, which non-compliance was waived by Opus. The following table summarizes the timing of repayment obligations for the Company’s financial liabilities for the next four years under the current terms of the Credit Agreement, as amended, at September 30, 2016 (in thousands):
|
Income Taxes |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes The Company conducts business globally and, as a result, files federal, state and foreign tax returns. The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the probable outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the condensed consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The Company has no present intention of remitting undistributed retained earnings of any of its foreign subsidiaries. Accordingly, the Company has not established a deferred tax liability with respect to undistributed earnings of its foreign subsidiaries. The Company applies the provisions of, and accounted for uncertain tax positions in accordance with ASC 740, Income Taxes, (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company generally is no longer subject to tax examinations for years prior to 2011. However, if loss carryforwards of tax years prior to 2011 are utilized in the U.S., these tax years may become subject to investigation by the tax authorities. While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits would materially change in the next 12 months.
|
Segment Reporting and Geographic Information |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting and Geographic Information | 9. Segment Reporting and Geographic Information ASC 280, Segment Reporting (“ASC 280”) establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses and about which separate financial information is available to its chief operating decision makers (“CODM”). The Company’s CODM is its CEO. The Company is organized into four reportable operating segments: Physical Access Control Systems (“PACS”), previously referred to as Premises, Identity, Credentials and All Other. The CODM reviews financial information and business performance for each operating segment. The Company evaluates the performance of its operating segments at the revenue and gross profit levels. The CODM does not review operating expenses or asset information by operating segment for purposes of assessing performance or allocating resources. Net revenue and gross profit information by segment for the three and nine months ended September 30, 2016 and 2015 is as follows (in thousands):
Geographic net revenue is based on customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended September 30, 2016 and 2015 is as follows (in thousands):
Long-lived assets by geographic location as of September 30, 2016 and December 31, 2015 are as follows (in thousands):
|
Restructuring and Severance |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring And Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Severance | 10. Restructuring and Severance During the nine months ended September 30, 2015, severance costs were incurred for certain employees terminated as part of management’s continuing efforts to simplify business operations. As a result, the Company recorded $0.4 million in restructuring and severance costs and other closure related costs and an additional $0.1 million in severance costs recorded in general and administrative expenses related to the elimination of certain executive positions in conjunction with the corporate restructuring and cost reduction activities. In the first quarter of 2016, the Company implemented a worldwide restructuring plan designed to refocus the Company’s resources on its core business segments, including physical access and transponders, and to consolidate its operations in several worldwide locations. The restructuring plan included reducing the Company’s non-manufacturing employee base, reallocating overhead roles into direct business activities and eliminating certain management and executive roles. In the third quarter of 2016, the Company incurred additional facilities related restructuring costs of $0.1 million and severance related adjustments of $0.1 million in connection with this restructuring plan. As a result, the Company recorded $3.1 million in restructuring and severance costs in the nine months ended September 30, 2016. All unpaid restructuring and severance accruals are included in other accrued expenses and liabilities within current liabilities in the condensed consolidated balance sheets at September 30, 2016 and December 31, 2015. Restructuring and severance activities during the nine months ended September 30, 2016 and September 30, 2015 were as follows (in thousands):
|
Commitments and Contingencies |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | 11. Commitments and Contingencies The Company leases its facilities, certain equipment, and automobiles under non-cancelable operating lease agreements. Those lease agreements existing as of September 30, 2016 expire at various dates during the next five years. The Company recognized rent expense of $0.3 million and $1.2 million in the three and nine months ended September 30, 2016, respectively, and $0.4 million and $1.3 million, in the three and nine months ended September 30, 2015, respectively, in its condensed consolidated statements of operations. Purchases for inventories are highly dependent upon forecasts of customer demand. Due to the uncertainty in demand from its customers, the Company may have to change, reschedule, or cancel purchases or purchase orders from its suppliers. These changes may lead to vendor cancellation charges on these purchases or contractual commitments. The following table summarizes the Company’s principal contractual commitments as of September 30, 2016 (in thousands):
The Company provides warranties on certain product sales for periods ranging from 12 to 24 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. On December 16, 2015, the Company and certain of its present and former officers and directors were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of California, entitled Rok v. Identiv, Inc., et al., Case No. 15-cv-05775, alleging violations of Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act of 1934. On May 3, 2016, the court-appointed lead plaintiff Thomas Cunningham in the Rok lawsuit filed an amended complaint and a notice of dismissal without prejudice of all current or former officers and directors other than Jason Hart and Brian Nelson. On June 6, 2016, each of the Company, Jason Hart, and Brian Nelson filed a motion to dismiss for failure to state a claim upon which relief can be granted in the Rok lawsuit; on August 5, 2016, the court granted those motions with leave for the lead plaintiff to file a second amended complaint. On September 12, 2016, the lead plaintiff in the Rok lawsuit filed a second amended complaint. On October 10, 2016, the Company, Jason Hart, and Brian Nelson filed a motion to dismiss that second amended complaint for failure to state a claim upon which relief can be granted, which motions are scheduled to be heard on December 16, 2016. In addition, three shareholder derivative actions were filed between January and February 2016. On January 1, 2016, certain of the Company’s present and former officers and directors were named as defendants, and the Company was named as nominal defendant, in a shareholder derivative lawsuit filed in the United States District Court for the Northern District of California, entitled Oswald v. Humphreys, et al., Case No. 16-cv-00241-JCS, alleging breach of fiduciary duty and abuse of control claims. On January 25, 2016, certain of the Company’s present and former officers and directors were named as defendants, and the Company was named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Chopra v. Hart, et al., Case No. RG16801379, alleging breach of fiduciary duty claims. On February 9, 2016, certain of the Company’s present and former officers and directors were named as defendants, and the Company was named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Wollnik v. Wenzel, et al., Case No. HG16803342, alleging breach of fiduciary duty, corporate waste, gross mismanagement, and unjust enrichment claims. These lawsuits generally allege that the Company made false and/or misleading statements and/or failed to disclose information in certain public filings and disclosures between 2013 and 2015. Each of the lawsuits seeks one or more of the following remedies: unspecified compensatory damages, unspecified exemplary or punitive damages, restitution, declaratory relief, equitable and injunctive relief, and reasonable costs and attorneys’ fees. On May 2, 2016, the court in the Chopra lawsuit entered an order staying proceedings in the Chopra lawsuit in favor of the Oswald lawsuit, based on a stipulation to that effect filed by the parties in the Chopra lawsuit on April 28, 2016. Similarly, on June 28, 2016, the court in the Wollnik lawsuit entered a stipulated order staying proceedings in the Wollnik lawsuit in favor of the Oswald lawsuit. On June 17, 2016, the plaintiff in the Oswald lawsuit filed an amended complaint. On August 1, 2016, the Company filed a motion to dismiss for failure by plaintiff to make a pre-lawsuit demand upon the Company’s board of directors, which motion was heard on October 14, 2016. The judge in the Oswald lawsuit issued an order on November 7, 2016 granting the Company’s motion to dismiss, without prejudice. In addition, the court stayed the case so that plaintiff could exercise whatever rights he has under Section 220 of the Delaware General Corporation Law. The Company intends to vigorously defend against these lawsuits. The Company cannot currently predict the impact or resolution of each of these lawsuits or reasonably estimate a range of possible loss, if any, which could be material, and the resolution of these lawsuits may harm its business and have a material adverse impact on its financial condition.
|
Organization and Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Concentration of Credit Risk | Concentration of Credit Risk — No customer represented more than 10% of net revenue for the three months ended September 30, 2016, and one customer accounted for 10% of net revenue for the nine months ended September 30, 2016. One customer represented 19% of net revenue for the three months ended September 30, 2015, and one customer represented 18% of net revenue for the nine months ended September 30, 2015. No customer represented more than 10% of the Company’s accounts receivable balance at September 30, 2016 or December 31, 2015. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements. In April 2015, the FASB issued 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”), which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. ASU 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 did not have a material impact on the Company’s condensed consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company adopted this guidance as of January 1, 2016. The new guidance has been applied on a retrospective basis, wherein the consolidated balance sheet of December 31, 2015 has been retrospectively adjusted to reflect the effects of applying the new guidance. As a result of the change to the December 31, 2015 consolidated balance sheet, deferred debt issuance costs included in other assets and long-term financial liabilities decreased by $0.4 million. After the retrospective application to December 31, 2015, subsequent amortization of the deferred debt issuance costs results in an increase to long-term debt. In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). Under ASU 2015-01, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. ASU 2015-01 is effective for interim and annual reporting periods beginning after December 15, 2015 with early adoption permitted. Upon adoption, the Company may elect prospective or retrospective application. The adoption of ASU 2015-01 did not have a material impact on the Company’s condensed consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, (“ASU 2014-15”), which requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption will have on its condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606) (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to annual periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance is effective for the Company beginning January 1, 2018 and will provide the Company additional time to evaluate the method and impact that ASU 2014-09 will have on its condensed consolidated financial statements. |
Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Outstanding Warrants Issued By Company | Below is the summary of outstanding warrants issued by the Company as of September 30, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity under Stock-Based Compensation Plans | A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2016 follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Information about Options Outstanding | The following table summarizes information about options outstanding as of September 30, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Stock and Restricted Stock Unit Activity | The following is a summary of restricted stock and restricted stock unit (“RSU”) activity for the nine months ended September 30, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation Expense Related To Stock Options and RSUs | The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Common Stock Reserved For Future Issuance | Common stock reserved for future issuance as of September 30, 2016 was as follows:
|
Balance Sheet Components (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statement Of Financial Position [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | The Company’s inventories are stated at the lower of cost or market. Inventories consist of (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, Net | Property and equipment, net consists of (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Accrued Expenses and Liabilities | Other accrued expenses and liabilities consist of (in thousands):
|
Intangible Assets (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gross Carrying Amount and Accumulated Amortization for Intangible Assets Resulting from Acquisitions | The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization Expense Included in Condensed Consolidated Statements of Operations | The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015, respectively (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Amortization Expense of Purchased Intangible Assets with Definite Lives | The estimated annual future amortization expense for purchased intangible assets with definite lives over the next five years is as follows (in thousands):
|
Long-Term Payment Obligation (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Payment Obligations To Former Related Party Liability | The ongoing payment obligation in connection with the Hirsch acquisition as of September 30, 2016 is as follows (in thousands):
|
Financial Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Liabilities | Financial liabilities consist of (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company's Financial Obligations | The following table summarizes the timing of repayment obligations for the Company’s financial liabilities for the next four years under the current terms of the Credit Agreement, as amended, at September 30, 2016 (in thousands):
|
Segment Reporting and Geographic Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Regarding Net Revenue and Gross Profit by Segment | Net revenue and gross profit information by segment for the three and nine months ended September 30, 2016 and 2015 is as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Regarding Net Revenue by Geographic Region | Geographic net revenue is based on customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended September 30, 2016 and 2015 is as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Lived Assets by Geographic Location | Long-lived assets by geographic location as of September 30, 2016 and December 31, 2015 are as follows (in thousands):
|
Restructuring and Severance (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring And Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Severance | All unpaid restructuring and severance accruals are included in other accrued expenses and liabilities within current liabilities in the condensed consolidated balance sheets at September 30, 2016 and December 31, 2015. Restructuring and severance activities during the nine months ended September 30, 2016 and September 30, 2015 were as follows (in thousands):
|
Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Principal Contractual Obligations | The following table summarizes the Company’s principal contractual commitments as of September 30, 2016 (in thousands):
|
Organization and Summary of Significant Accounting Policies - Additional Information (Detail) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016
Customer
|
Sep. 30, 2015
Customer
|
Sep. 30, 2016
Customer
|
Sep. 30, 2015
Customer
|
Dec. 31, 2015
USD ($)
Customer
|
|
Accounting Policies [Line Items] | |||||
Number of major customer represented stated percentage of total net revenue | Customer | 0 | 1 | 1 | 1 | |
Number of customers who accounted for more than 10% accounts receivable balance | Customer | 0 | 0 | |||
Concentration Risk, Customer | One customer represented 19% of net revenue for the three months ended September 30, 2015, and one customer represented 18% of net revenue for the nine months ended September 30, 2015. No customer represented more than 10% of the Company’s accounts receivable balance at September 30, 2016 or December 31, 2015. | ||||
New Accounting Pronouncement, Early Adoption, Effect | |||||
Accounting Policies [Line Items] | |||||
Decrease in deferred debt issuance costs | $ | $ 0.4 | ||||
Decrease in long-term financial liabilities | $ | $ 0.4 | ||||
Net revenue | Customer Concentration Risk | |||||
Accounting Policies [Line Items] | |||||
Percentage concentration risk | 10.00% | 19.00% | 10.00% | 18.00% |
Fair Value Measurements - Additional Information (Detail) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Jun. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||||
Asset measured and recognized at fair value on recurring basis | $ 0 | $ 0 | $ 0 | ||
Impairment of goodwill | $ 1,000,000 | $ 988,000 | |||
Liability measured and recognized at fair value on non-recurring basis | 0 | 0 | 0 | ||
Fair Value, Measurements, Recurring | |||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||||
Cash equivalent at recurring basis | 0 | 0 | 0 | ||
Fair Value Measurements, Non-recurring | Fair Value, Level 3 | |||||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |||||
Privately-held investments measured at fair value | 300,000 | 300,000 | $ 300,000 | ||
Impairment of privately-held investments | $ 0 | $ 0 |
Summary of Activity under Stock-Based Compensation Plans (Detail) |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Stock Options Number Outstanding | |
Beginning Balance | shares | 781,804 |
Granted | shares | 444,460 |
Cancelled or Expired | shares | (299,929) |
Ending Balance | shares | 926,335 |
Vested or expected to vest at September 30, 2016 | shares | 887,433 |
Exercisable at September 30, 2016 | shares | 458,897 |
Stock Options Average Exercise Price per share | |
Beginning Balance | $ / shares | $ 11.48 |
Granted | $ / shares | 4.36 |
Cancelled or Expired | $ / shares | 12.81 |
Ending Balance | $ / shares | 7.40 |
Vested or expected to vest at September 30, 2016 | $ / shares | 7.49 |
Exercisable at September 30, 2016 | $ / shares | $ 9.12 |
Stock Options Remaining Contractual Life (in years) | |
Remaining Contractual Life | 8 years 1 month 24 days |
Vested or expected to vest at September 30, 2016 | 8 years 1 month 6 days |
Exercisable at September 30, 2016 | 7 years 2 months 16 days |
Summary of Restricted Stock and Restricted Stock Unit Activity (Detail) - Restricted Stock And Restricted Stock Units |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Beginning Balance, Number Outstanding | shares | 721,918 |
Granted, Number Outstanding | shares | 1,756,732 |
Vested, Number Outstanding | shares | (603,869) |
Forfeited, Number Outstanding | shares | (243,515) |
Ending Balance, Number Outstanding | shares | 1,631,266 |
Beginning Balance, Weighted Average Fair Value | $ / shares | $ 13.32 |
Granted, Weighted Average Fair Value | $ / shares | 2.06 |
Vested, Weighted Average Fair Value | $ / shares | 7.29 |
Forfeited, Weighted Average Fair Value | $ / shares | 15.14 |
Ending Balance, Weighted Average Fair Value | $ / shares | $ 2.97 |
Inventories (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 3,654 | $ 5,033 |
Work-in-progress | 764 | 12 |
Finished goods | 7,722 | 9,681 |
Total | $ 12,140 | $ 14,726 |
Property and Equipment, Net (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 15,384 | $ 16,280 |
Accumulated depreciation | (12,712) | (12,062) |
Property and equipment, net | 2,672 | 4,218 |
Building and Leasehold Improvements | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 2,252 | 2,670 |
Furniture, Fixtures and Office Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 2,290 | 2,242 |
Plant and Machinery | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 8,901 | 8,858 |
Purchased Software | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 1,941 | $ 2,510 |
Balance Sheet Components - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Property Plant And Equipment [Abstract] | ||||
Depreciation expense | $ 0.5 | $ 0.4 | $ 1.4 | $ 1.2 |
Other Accrued Expenses and Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Accrued Liabilities And Other Liabilities Current [Abstract] | ||
Accrued restructuring | $ 487 | $ 633 |
Accrued professional fees | 4,138 | 1,731 |
Income taxes payable | 187 | 282 |
Other accrued expenses | 2,064 | 3,189 |
Total | $ 6,876 | $ 5,835 |
Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Jun. 30, 2015 |
Sep. 30, 2015 |
|
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Impairment of goodwill | $ 1,000 | $ 988 |
Amortization Expense Included in Condensed Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Finite Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 364 | $ 364 | $ 1,092 | $ 1,092 |
Cost of revenue | ||||
Finite Lived Intangible Assets [Line Items] | ||||
Amortization expense | 112 | 112 | 336 | 336 |
Selling and Marketing Expense | ||||
Finite Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 252 | $ 252 | $ 756 | $ 756 |
Estimated Future Amortization Expense of Purchased Intangible Assets with Definite Lives (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Goodwill And Intangible Assets Disclosure [Abstract] | ||
2016 (remaining three months) | $ 363 | |
2017 | 1,455 | |
2018 | 1,455 | |
2019 | 1,455 | |
2020 | 1,455 | |
Intangible Assets, net | $ 6,183 | $ 7,275 |
Long-Term Payment Obligation - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2012 |
|
Related Party Transaction [Line Items] | |||||
Interest accreted on long-term payment obligation | $ 0.1 | $ 0.1 | $ 0.3 | $ 0.4 | |
Secure Keyboards Ltd | |||||
Related Party Transaction [Line Items] | |||||
Percentage of ownership by a related party following acquisition | 24.50% | 30.00% | |||
Secure Networks Ltd | |||||
Related Party Transaction [Line Items] | |||||
Percentage of ownership by a related party following acquisition | 9.00% | ||||
Settlement Agreement | Maximum | |||||
Related Party Transaction [Line Items] | |||||
Installment payment, contractual payment year | 2020 |
Payment Obligation in Connection with Hirsch Acquisition (Detail) - Hirsch Electronics $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Related Party Transaction [Line Items] | |
2016 (remaining three months) | $ 291 |
2017 | 1,200 |
2018 | 1,248 |
2019 | 1,298 |
2020 | 1,444 |
Thereafter | 372 |
Present value discount factor | (884) |
Total | $ 4,969 |
Summary of Financial Liabilities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Instrument [Line Items] | ||
Total before discount and debt issuance costs | $ 18,300 | $ 18,300 |
Less: Current portion of financial liabilities | (10,000) | |
Less: Long-term portion of unamortized discount and debt issuance costs | (11) | (644) |
Long-term financial liabilities | 8,289 | 17,656 |
Secured Term Loan | ||
Debt Instrument [Line Items] | ||
Total before discount and debt issuance costs | 10,000 | 10,000 |
Bank Revolving Loan Facility | ||
Debt Instrument [Line Items] | ||
Total before discount and debt issuance costs | $ 8,300 | $ 8,300 |
Company's Financial Obligations (Detail) - Amended Credit Agreement $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
2017 | $ 18,300 |
Total | $ 18,300 |
Segment Reporting and Geographic Information - Additional Information (Detail) |
9 Months Ended |
---|---|
Sep. 30, 2016
Segment
| |
Segment Reporting [Abstract] | |
Number of reportable business segments | 4 |
Information Regarding Net Revenue and Gross Profit by Segment (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 15,560 | $ 17,196 | $ 41,521 | $ 47,717 | |
Gross profit | $ 6,920 | $ 7,521 | $ 17,483 | $ 20,251 | |
Gross profit margin | 44.00% | 44.00% | 42.00% | 42.00% | |
Operating expenses: | |||||
Research and development | $ 1,480 | $ 2,235 | $ 4,997 | $ 6,567 | |
Selling and marketing | 3,312 | 5,236 | 10,807 | 15,698 | |
General and administrative | 2,115 | 6,456 | 9,674 | 15,057 | |
Impairment of goodwill | $ 1,000 | 988 | |||
Restructuring and severance | 160 | 215 | 3,100 | 408 | |
Total operating expenses | 7,067 | 14,142 | 28,578 | 38,718 | |
Loss from operations | (147) | (6,621) | (11,095) | (18,467) | |
Non-operating income (expense): | |||||
Interest expense, net | (525) | (478) | (1,814) | (1,367) | |
Foreign currency gain (loss), net | 35 | (10) | 309 | (186) | |
Loss before income taxes and noncontrolling interest | (637) | (7,109) | (12,600) | (20,020) | |
PACS | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | 7,253 | 5,976 | 17,908 | 15,212 | |
Gross profit | $ 4,334 | $ 3,531 | $ 10,244 | $ 9,130 | |
Gross profit margin | 60.00% | 59.00% | 57.00% | 60.00% | |
Identity | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 3,508 | $ 3,109 | $ 8,923 | $ 8,970 | |
Gross profit | $ 1,359 | $ 1,526 | $ 3,324 | $ 3,988 | |
Gross profit margin | 39.00% | 49.00% | 37.00% | 44.00% | |
Credentials | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 4,799 | $ 7,788 | $ 14,110 | $ 22,324 | |
Gross profit | $ 1,227 | $ 2,255 | $ 3,654 | $ 6,357 | |
Gross profit margin | 26.00% | 29.00% | 26.00% | 28.00% | |
All Other | |||||
Segment Reporting Information [Line Items] | |||||
Net revenue | $ 323 | $ 580 | $ 1,211 | ||
Gross profit | $ 209 | $ 261 | $ 776 | ||
Gross profit margin | 0.00% | 65.00% | 45.00% | 64.00% |
Information Regarding Net Revenue by Geographic Region (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 15,560 | $ 17,196 | $ 41,521 | $ 47,717 |
Percentage of net revenue | 100.00% | 100.00% | 100.00% | 100.00% |
Americas | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 9,924 | $ 12,473 | $ 27,343 | $ 32,423 |
Percentage of net revenue | 64.00% | 73.00% | 66.00% | 68.00% |
Europe And Middle East | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 2,834 | $ 2,294 | $ 6,654 | $ 7,386 |
Percentage of net revenue | 18.00% | 13.00% | 16.00% | 15.00% |
Asia-Pacific | ||||
Segment Reporting Information [Line Items] | ||||
Net revenue | $ 2,802 | $ 2,429 | $ 7,524 | $ 7,908 |
Percentage of net revenue | 18.00% | 14.00% | 18.00% | 17.00% |
Long-Lived Assets by Geographic Location (Detail) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Property and equipment, net | $ 2,672 | $ 4,218 |
Americas | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 1,152 | 2,096 |
Europe And Middle East | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | 205 | 295 |
Asia-Pacific | ||
Segment Reporting Information [Line Items] | ||
Property and equipment, net | $ 1,315 | $ 1,827 |
Restructuring and Severance - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring and severance | $ 160 | $ 215 | $ 3,100 | $ 408 |
Facility Closing | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Restructuring and severance | 100 | |||
Employee Severance | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Severance costs | $ 100 | |||
General and Administrative Expense | ||||
Restructuring Cost And Reserve [Line Items] | ||||
Severance costs | $ 100 |
Restructuring and Severance (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Restructuring And Related Activities [Abstract] | ||||
Restructuring and Severance Beginning Balance | $ 633 | $ 1,377 | ||
Restructuring expense incurred for the period | $ 160 | $ 215 | 3,100 | 408 |
Other cost reduction activities for the period | 81 | |||
Payments and non-cash item adjustment | (3,246) | (1,855) | ||
Restructuring and Severance Ending Balance | $ 487 | $ 11 | $ 487 | $ 11 |
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Commitment And Contingencies [Line Items] | ||||
Operating leases expiration period | 5 years | |||
Rent expense | $ 0.3 | $ 0.4 | $ 1.2 | $ 1.3 |
Minimum | ||||
Commitment And Contingencies [Line Items] | ||||
Term of warranties on certain product sales | 12 months | |||
Maximum | ||||
Commitment And Contingencies [Line Items] | ||||
Term of warranties on certain product sales | 24 months |
Summary of Principal Contractual Obligations (Detail) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Operating Lease | |
2016 (remaining three months) | $ 368 |
2017 | 1,029 |
2018 | 266 |
2019 | 171 |
2020 | 159 |
Thereafter | 2 |
Contractual Obligation, Total | 1,995 |
Purchase Commitments | |
2016 (remaining three months) | 6,312 |
2017 | 2,679 |
Contractual Obligation, Total | 8,991 |
Other Contractual Commitments | |
2016 (remaining three months) | 13 |
2017 | 11 |
Contractual Obligation, Total | 24 |
Total Commitments | |
2016 (remaining three months) | 6,693 |
2017 | 3,719 |
2018 | 266 |
2019 | 171 |
2020 | 159 |
Thereafter | 2 |
Contractual Obligation, Total | $ 11,010 |
AZV'>J]8;DNQ 8V
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MJ.T@X.V-5JNCN3 5N^ L\=6;Y) WH,?&WALV-^;]EMWL;:/?M35
MM7O97?K^]AS'W?%BZZ+[U-SL=?CGW+1UT0^;[5O "ZCLY0&^?-%():NQ1M5@/"FCM
M28)C$L &PO=V]R
M:W-H965T$PC?(K?<'LJNR8V-DA17IK?NR5:6PSZS0(
M/6)SU5[9G]"B0H"]-H.3O9HO]&5QH#OVBXI=TTOOE2M]P=O;>,NY8CKQ\$'W
MTKT>[:9-R[;*+(E>BV'8&3:*'\ZSVS1 EO\!4$L#!!0 ( %R$;DG7D=3?
M! , !<, 8 >&PO=V]R:W-H965T'8MJ/:IX45?5Y78^T7@F7_"J'%@'/YGIN++HK)T_V7@,K=8.O(GL
M;H]1[]_/D@AH70@??&S2E4J)T\/U@2ROM/H$4$L#!!0 ( %R$;DE(7D_&
MI $ +$# 9 >&PO=V]R:W-H965T&PO=V]R:W-H965T8&4&\^MR"KK68Z'1!
MI^OT[1I]FQQNKQS>KPOD:P)Y$LC_-V+"'*\P]]D_3
U"G!#]/(EZ,\"9RG1[U*!&Y@UT3&QA+-'DB .TO?4\^?TE0/_):O+LR/
M>0ZMGI4)BET(E-^!/' =3E':W('\N[*?:JXQCR8FM0<9],499?CYWVZ<
M0+J>,0' 6G0WRJ1C58B9#MS0CQ-H:C5$\M3.QX1AXC@$:-63F1#R]>1,"*TO
M8@[L36F@D/.V0JOXS'1,]