10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June30, 2020

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 incorporation or organization)	(I.R.S. Employer Identification No.)
2201 Walnut Avenue, Suite 100 Fremont, California	94538
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 250-8888

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.001 par value per share	INVE	The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted 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 such files).    Yes  ☑    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  

As of August 6, 2020, the registrant had 17,892,629 shares of common stock outstanding.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2020 and 2019	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6.	Exhibits	40
SIGNATURES		41

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value)

	June 30,			December 31,
	2020			2019
ASSETS
Current assets:
Cash	$	13,115		$	9,383
Accounts receivable, net of allowances of $465 and $299 as of June 30, 2020    and December 31, 2019, respectively		17,976			18,363
Inventories		18,747			16,145
Prepaid expenses and other current assets		2,957			2,292
Total current assets		52,795			46,183
Property and equipment, net		2,269			2,042
Operating lease right-of-use assets		3,492			4,629
Intangible assets, net		8,751			10,104
Goodwill		10,180			10,238
Other assets		1,011			1,122
Total assets	$	78,498		$	74,318
LIABILITIES AND STOCKHOLDERS´ EQUITY
Current liabilities:
Accounts payable	$	9,216		$	8,799
Current portion - contractual payment obligation		862			1,311
Current portion - financial liabilities, net of debt issuance costs of $410 and $41 as of June 30,    2020 and December 31, 2019, respectively		22,983			14,189
Operating lease liabilities		1,832			1,814
Deferred revenue		2,280			2,193
Accrued compensation and related benefits		2,144			1,671
Other accrued expenses and liabilities		2,296			4,498
Total current liabilities		41,613			34,475
Long-term contractual payment obligation		486			360
Long-term operating lease liabilities		2,989			3,013
Long-term deferred revenue		512			640
Other long-term liabilities		385			364
Total liabilities		45,985			38,852
Commitments and contingencies (see Note 17)
Stockholders´ equity:
Series B convertible preferred stock, $0.001 par value: 5,000 shares authorized; 5,000 shares    issued and outstanding as of June 30, 2020 and December 31, 2019		5			5
Common stock, $0.001 par value: 50,000 shares authorized; 19,177 and 18,209 shares    issued and 17,860 and 16,986 shares outstanding as of June 30, 2020 and    December 31, 2019, respectively		19			18
Additional paid-in capital		450,480			447,965
Treasury stock, 1,317 and 1,223 shares as of June 30, 2020 and December 31, 2019,    respectively		(9,451	)		(9,043	)
Accumulated deficit		(410,300	)		(405,504	)
Accumulated other comprehensive income		1,760			2,025
Total stockholders´ equity		32,513			35,466
Total liabilities and stockholders' equity	$	78,498		$	74,318

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited, in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Net revenue	$	19,105		$	22,237		$	37,225		$	41,759
Cost of revenue		11,393			12,354			22,013			23,172
Gross profit		7,712			9,883			15,212			18,587
Operating expenses:
Research and development		2,422			2,078			5,018			4,104
Selling and marketing		4,236			4,721			8,733			9,219
General and administrative		2,151			2,279			4,342			4,901
Decrease in fair value of earnout liability		(261	)		—			(261	)		—
Restructuring and severance		1,417			(2	)		1,482			(14	)
Total operating expenses		9,965			9,076			19,314			18,210
(Loss) income from operations		(2,253	)		807			(4,102	)		377
Non-operating income (expense):
Interest expense, net		(407	)		(241	)		(659	)		(520	)
Foreign currency gains (losses), net		(30	)		(70	)		56			(72	)
(Loss) income before income taxes		(2,690	)		496			(4,705	)		(215	)
Income tax provision		(59	)		(80	)		(91	)		(184	)
Net (loss) income	$	(2,749	)	$	416		$	(4,796	)	$	(399	)
Other comprehensive (loss) income:
Foreign currency translation adjustment		215			196			(265	)		67
Comprehensive (loss) income	$	(2,534	)	$	612		$	(5,061	)	$	(332	)
Net (loss) income per common share:
Basic	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)
Diluted	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)
Weighted average shares used in computing net (loss) income per common share:
Basic		17,941			16,953			17,730			16,896
Diluted		17,941			17,795			17,730			16,896

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income			Equity
Balances, December 31, 2019		5,000	$	5		16,986		$	18	$	447,965		$	(9,043	)	$	(405,504	)	$	2,025		$	35,466
Net loss		—		—		—			—		—			—			(2,047	)		—			(2,047	)
Unrealized loss from foreign    currency translation adjustments		—		—		—			—		—			—			—			(480	)		(480	)
Issuance of common stock in connection    with vesting of stock awards		—		—		150			—		—			—			—			—			—
Stock-based compensation		—		—		—			—		640			—			—			—			640
Shares withheld in payment of taxes in    connection with net share settlement of    restricted stock units		—		—		(48	)		—		—			(225	)		—			—			(225	)
Issuance of common stock in connection    with warrant exercise		—		—		387			1		(1	)		—			—			—			—
Balances, March 31, 2020		5,000		5		17,475			19		448,604			(9,268	)		(407,551	)		1,545			33,354
Net loss		—		—		—			—		—			—			(2,749	)		—			(2,749	)
Unrealized income from foreign currency    translation adjustments		—		—		—			—		—			—			—			215			215
Issuance of common stock in connection    with vesting of stock awards		—		—		212			—		—			—			—			—			—
Stock-based compensation		—		—		—			—		751			—			—			—			751
Shares withheld in payment of taxes in    connection with net share settlement    of restricted stock units		—		—		(46	)		—		—			(183	)		—			—			(183	)
Issuance of common stock in connection    with Viscount Earnout		—		—		157			—		489			—			—			—			489
Issuance of shares to non-employees		—		—		62			—		304			—			—			—			304
Issuance of warrants		—		—		—			—		332			—			—			—			332
Balances, June 30, 2020		5,000	$	5		17,860		$	19	$	450,480		$	(9,451	)	$	(410,300	)	$	1,760		$	32,513

5

	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive			Noncontrolling			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income			Interest			Equity
Balances, December 31, 2018		5,000	$	5		15,967		$	17	$	444,145		$	(8,153	)	$	(404,353	)	$	2,209		$	(170	)	$	33,700
Net loss		—		—		—			—		—			—			(815	)		—			—			(815	)
Unrealized loss from foreign    currency translation adjustments		—		—		—			—		—			—			—			(129	)		—			(129	)
Issuance of common stock in connection    with acquisition of business		—		—		419			1		1,634			—			—			—			—			1,635
Issuance of common stock in connection    with vesting of stock awards		—		—		126			—		—			—			—			—			—			—
Stock-based compensation		—		—		—			—		687			—			—			—			—			687
Shares withheld in payment of taxes in    connection with net share settlement of    restricted stock units		—		—		(43	)		—		—			(228	)		—			—			—			(228	)
Issuance of common stock in connection    with warrant exercise		—		—		10			—		—			—			—			—			—			—
Balances, March 31, 2019		5,000		5		16,479			18		446,466			(8,381	)		(405,168	)		2,080			(170	)		34,850
Net income		—		—		—			—		—			—			416			—			—			416
Unrealized income from foreign    currency translation adjustments		—		—		—			—		—			—			—			196			—			196
Issuance of common stock in connection    with acquisition of business		—		—		456			—		—			—			—			—			—			—
Stock-based compensation		—		—					—		693			—			—			—			—			693
Shares withheld in payment of taxes in    connection with net share settlement of    restricted stock units		—		—		(56	)		—					(275	)		—			—			—			(275	)
Cancellation of holdback shares in    connection with acquisition		—		—		(93	)		—		(340	)		—			—			—			—			(340	)
Balances, June 30, 2019		5,000	$	5		16,786		$	18	$	446,819		$	(8,656	)	$	(404,752	)	$	2,276		$	(170	)	$	35,540

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)

	Six Months Ended
	June 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(4,796	)	$	(399	)
Adjustments to reconcile net loss to net cash (used in) provided by    operating activities:
Depreciation and amortization		1,650			1,750
Accretion of interest on contractual payment obligation		87			82
Stock-based compensation expense		1,391			1,380
Amortization of debt issuance costs		146			33
Impairment of right-of-use operating lease asset		1,199			—
Decrease in fair value of earnout liability		(261	)		—
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		405			(1,930	)
Inventories		(2,608	)		298
Prepaid expenses and other assets		(555	)		(123	)
Accounts payable		699			2,177
Contractual payment obligation liability		(410	)		(629	)
Deferred revenue		(41	)		868
Accrued expenses and other liabilities		(1,176	)		(1,084	)
Net cash (used in) provided by operating activities		(4,270	)		2,423
Cash flows from investing activities:
Capital expenditures		(614	)		(105	)
Acquisition of business, net of cash acquired		—			(1,287	)
Net cash used in investing activities		(614	)		(1,392	)
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs		4,345			3,073
Repayments of debt		(2,097	)		(1,371	)
Proceeds from April 21 Funds promissory notes		4,000			—
Proceeds from Paycheck Protection Program promissory note		2,915			—
Repayments of notes payable		—			(2,000	)
Taxes paid related to net share settlement of restricted stock units		(408	)		(503	)
Net cash provided by (used in) financing activities		8,755			(801	)
Effect of exchange rates on cash		(139	)		21
Net increase in cash		3,732			251
Cash at beginning of period		9,383			10,866
Cash at end of period	$	13,115		$	11,117
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	515		$	476
Taxes paid, net	$	17		$	110
Non-cash investing and financing activities:
Common stock issued to settle vendor liability	$	304		$	—
Common stock issued to settle earnout liability	$	489		$	—
Fair value of warrants issued in connection with financial liabilities	$	332		$	—
Common stock issued for acquisition of business, net	$	—		$	1,635
Cancellation of holdback shares in connection with acquisition	$	—		$	340

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

June 30, 2020

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Identiv, Inc. and its wholly and majority owned subsidiaries (“Identiv” or the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements of 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, consisting of 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 three months and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 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,” and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

2. Significant Accounting Policies and Recent Accounting Pronouncements

Significant Accounting Policies

No material changes have been made to the Company's significant accounting policies disclosed in Note 1, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts.  ASU No. 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. Subsequent to the issuance of ASU No. 2016-13, the FASB issued ASU No. 2018-19, Codification Improvement to Topic 326, Financial Instruments – Credit Losses, ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU No. 2019-05, Financial Instruments Credit Losses (Topic 326) Targeted Transition Relief, ASU No. 2016-13, the FASB issued ASU No. 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU No. 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The subsequent ASUs do not change the core principle of the guidance in ASU No. 2016-13. Instead these amendments are intended to clarify and improve operability of certain topics included within ASU No. 2016-13.

Additionally, ASU No. 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as a SRC. In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses.  The subsequent amendments will have the same effective date and transition requirements as ASU No. 2016-13.  Early adoption is permitted. Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.  While the Company is currently evaluating the impact of Topic 326, Company does not expect the adoption of the ASU to have a material impact on its condensed consolidated financial statements.

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

8

3. Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of its products, software licenses, and services, which are generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price. The stated contract value is generally the transaction price to be allocated to the separate performance obligations. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.

Nature of Products and Services

The Company derives revenue primarily from sales of hardware products, software licenses, professional services, software maintenance and support, and extended hardware warranties.

Hardware Product Revenue —The Company generally has two performance obligations in arrangements involving the sale of hardware products. The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product). The second performance obligation is to provide assurance that the product complies with its agreed-upon specifications and is free from defects in material and workmanship for a period of one to three years (i.e. assurance warranty). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. The Company has concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. None of the transaction price is allocated to the assurance warranty component, as the Company accounts for these product warranty costs in accordance with Accounting Standards Codification ("ASC”) 460, Guarantees (“ASC 460”).  

Software License Revenue— The Company’s license arrangements grant customers the perpetual right to access and use the licensed software products at the outset of an arrangement. Technical support and software updates are generally made available throughout the term of the support agreement, which is generally one to three years. The Company accounts for these arrangements as two performance obligations: (1) the software licenses, and (2) the related updates and technical support. The software license revenue is recognized upon delivery of the license to the customer, while the software updates and technical support revenue is recognized over the term of the support contract.  

Professional Services Revenue—Professional services revenue consists primarily of programming customization services performed relating to the integration of the Company’s software products with the customers other systems, such as human resources systems. Professional services contracts are generally billed on a time and materials basis and revenue is recognized as the services are performed.

Software Maintenance and Support Revenue— Support and maintenance contract revenue consists of the services provided to support the specialized programming applications performed by the Company’s professional services group. Support and maintenance contracts are typically billed at inception of the contract and recognized as revenue over the contract period, typically over a one to three year period.

9

Extended Hardware Warranties Revenue— Sales ofthe Company’s hardware products may also include optional extended hardware warranties, which typically provide assurance that the product will continue function as initially intended. Extended hardware warranty contracts are typically billed at inception of the contract and recognized as revenue over the respective contract period, typically over one to two year periods after the expiration of the original assurance warranty.

Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Hardware products	When customer obtains control of the product (point-in-time)	Within 30-60 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)	Within 30-60 days of the beginning of license period	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional services	As services are performed and/or when the contract is fulfilled (point-in-time)	Within 30-60 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance    and support services	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions
Extended hardware    warranties	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions

Significant Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price (“SSP”).

Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, the Company estimates SSP using historical transaction data. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based on the shipping location of the customer. The geographic regions that are tracked are the Americas, Europe and the Middle East, and Asia-Pacific regions. The Company operates as two operating segments.

Total net revenue based on the disaggregation criteria described above is as follows (in thousands):

	Three Months Ended June 30,
	2020						2019
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	12,725	$	945	$	13,670	$	14,760	$	1,185	$	15,945
Europe and the Middle East		2,535		95		2,630		3,332		91		3,423
Asia-Pacific		2,805		—		2,805		2,869		—		2,869
Total	$	18,065	$	1,040	$	19,105	$	20,961	$	1,276	$	22,237

10

	Six Months Ended June 30,
	2020						2019
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	25,370	$	2,168	$	27,538	$	28,284	$	2,386	$	30,670
Europe and the Middle East		5,038		192		5,230		6,197		156		6,353
Asia-Pacific		4,457		—		4,457		4,736		—		4,736
Total	$	34,865	$	2,360	$	37,225	$	39,217	$	2,542	$	41,759

Contract Balances

Amounts invoiced in advance of services being provided are accounted for as deferred revenue. Nearly all of the Company’s deferred revenue balance is related to software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 60 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from its customers.

Changes in deferred revenue during the six months ended June 30, 2020 were as follows (in thousands):

	Amount
Deferred revenue as of December 31, 2019	$	2,833
Deferral of revenue billed in current period, net of recognition		1,619
Recognition of revenue deferred in prior periods		(1,660	)
Deferred revenue as of June 30, 2020	$	2,792

Unsatisfied Performance Obligations

Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $1.0 million as of June 30, 2020. Since the Company typically invoices customers at contract inception, this amount is included in its deferred revenue balance. As of June 30, 2020, the Company expects to recognize 28% of the revenue related to these unsatisfied performance obligations during the remainder of 2020, 43% during 2021, and 29% thereafter.          

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs (i.e. commissions) meet the requirements to be capitalized. Capitalized incremental costs related to contracts are amortized over the respective contract periods. For the six months ended June 30, 2020 and 2019, total capitalized costs to obtain contracts were immaterial.

4. Business Combinations

Thursby Software Systems

On November 1, 2018, the Company completed the acquisition of Thursby Software Systems, Inc. (“Thursby”), a provider of security software for mobile devices, pursuant to an Agreement and Plan of Merger (the “Thursby Agreement”), by and among the Company, TSS Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub 1”), TSS Acquisition, LLC., a wholly owned subsidiary of the Company (“Merger Sub 2” and together with Merger Sub 1, the “Merger Subs”), Thursby, and William Thursby as the sole Shareholder of Thursby. Pursuant to the Thursby Agreement, at the effective time, Merger Sub 1 merged with and into Thursby and Thursby became a wholly-owned subsidiary of the Company (“Merger 1”), following which Thursby merged with and into Merger Sub 2, whereupon which the separate corporate existence of Thursby ceased with Merger Sub 2 surviving the merger (“Merger 2”).

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Under the terms of the Thursby Agreement, at the closing of the acquisition, the Company acquired all of the outstanding shares of Thursby for total purchase consideration of $3.1 million, consisting of:

(i) $0.6 million in cash, net of cash acquired; and

(ii) the issuance of 426,621 shares of the Company’s common stock with a value of approximately $2.5 million.  

An aggregate of up to $0.5 million, or 85,324 shares, of the Company’s common stock issuable at the closing of the transaction were held back for a period of up to 12 months following the closing for the satisfaction of certain indemnification claims. In the fourth quarter of 2019, the Company and William Thursby reached agreement as to the satisfaction of the indemnification claims, and accordingly, the Company released the 85,324 holdback shares.

Additionally, in the event that revenue from Thursby products was greater than $8.0 million, $11.0 million, or $15.0 million in product shipments in 2019, the Company would have been obligated to issue earnout consideration of up to a maximum of $7.5 million payable in shares of the Company’s common stock, subject to certain conditions. In the event that such revenue was less than $15.0 million in 2019, but 2020 revenue from Thursby products exceeds $15.0 million, the Company will be obligated to issue an additional $2.5 million in earnout consideration payable in shares of the Company’s common stock. The maximum total earnout consideration payable for all periods is $7.5 million in the aggregate, payable in shares of the Company’s common stock. Management has assessed the probability of the issuance of shares related to the earnout consideration and determined it as remote. Accordingly, no value was ascribed to the earnout consideration as of June 30, 2020.

Acquisition related intangibles included in the below table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):  

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	200		5
Customer relationships		1,500		10
Developed technology		700		10
	$	2,400

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Thursby resulted in $3.6 million of goodwill, which is not deductible for tax purposes. With the addition of the Thursby security software for mobile devices, the Company believes this goodwill largely reflects the synergistic strengthening of its Identity offerings providing complete solutions for secure and convenient logical access across smart cards and derived credentials on Apple iOS and Android mobile devices. In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter. See Note 6, Goodwill and Intangible Assets.

Pursuant to ASC 805, the Company incurred and expensed approximately$27,000 in acquisition and transactional costs associated with the acquisition of Thursby in the six months ended June 30, 2019, which were primarily general and administrative expenses. No expenses were incurred in the six months ended June 30, 2020.

Viscount Systems, Inc.

On January 2, 2019, the Company completed the purchase of substantially all the assets of the Freedom, Liberty, and Enterphone™ MESH products and services of Viscount Systems, Inc. (“Viscount”) and the assumption of certain liabilities (the “Asset Purchase”). Under the terms of the Asset Purchase, the Company was obligated to pay at closing aggregate consideration of $2.9 million consisting of:

(i) payment in cash of approximately $1.3 million, and

(ii) the issuance of 419,288 shares of the Company’s common stock with a value of approximately $1.6 million.

An aggregate of approximately 31,447 shares of the Company’s common stock issuable at the closing of the transaction were held back for 12 months following the closing for the satisfaction of certain indemnification claims. In the first quarter of 2020, the Company released the 31,447 holdback shares as the indemnification claims were satisfied.

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Additionally, in the event that revenue from the assets purchased under the agreement in 2019 was greater than certain specified revenue targets, the Company would be obligated to issue earnout consideration of up to a maximum of $3.5 million payable in shares of the Company’s common stock (subject to certain conditions).  In the event that such revenue targets were not met in 2019, but 2020 revenue from the assets purchased exceeds certain higher targets for 2020, then the Company will be obligated to issue up to a maximum of $2.25 million in earnout consideration in the form of common stock. The maximum total earnout consideration liability for all periods is $3.5 million in the aggregate, payable in the Company’s common stock.At December 31, 2019, management had assessed the probability of the issuance of shares related to the earnout consideration and determined its fair value to be $750,000. In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the revenue targets were achieved. In the second quarter of 2020, the Company issued to the selling stockholders earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000.The Company recognized a reduction in earnout consideration expense of$261,000 in the statement of comprehensive (loss) income during the quarter ended June 30, 2020, representing the settlement date fair value of the shares issued and the recorded earnout liability.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Accounts receivable	$	636
Inventory		249
Prepaid expenses and other current assets		29
Property and equipment		190
Operating lease ROU assets		550
Trademarks		160
Customer relationships		710
Developed technology		800
Total identifiable assets acquired		3,324
Accounts payable		(372	)
Operating lease liabilities		(61	)
Accrued expenses and liabilities		(120	)
Deferred revenue		(34	)
Earnout consideration liability		(200	)
Other current liabilities		(326	)
Long-term operating lease liabilities		(489	)
Total liabilities assumed		(1,602	)
Net identifiable assets acquired		1,722
Goodwill		1,200
Net purchase price	$	2,922

Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	160		5
Customer relationships		710		10
Developed technology		800		10
	$	1,670

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The Asset Purchase resulted in $1.2 million of goodwill. With the addition of Viscount’s products and services, the Company believes this goodwill largely reflects the expansion of its Premises offerings with advanced, complementary solutions for the commercial and small- and medium-sized business markets, leveraging Freedom’s IT-centric software, defined architecture, and hardware-light platform. In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter. See Note 6, Goodwill and Intangible Assets.

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Pursuant to ASC 805, the Company incurred and expensed approximately$27,000 in acquisition and transactional costs associated with the Asset Purchaseduring the year ended December 31, 2019, which were primarily general and administrative expenses.Nominal transactional costs were incurred in the six months ended June 30, 2020.

5. 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 ASC Topic 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 June 30, 2020 and December 31, 2019, therewere nominal cash equivalents.

The Company’s only liabilities measured at fair value on a recurring basis are the contingent consideration associated with the acquisitions of Thursby and Viscount. The fair value of the earnout consideration is based on achieving certain revenue and profit targets as defined under the respective acquisition agreements. The valuation of the earnout consideration is classified as a Level 3 measurement as it is based on significant unobservable inputs and involves management judgment and assumptions about achieving revenue and profit targets and discount rates. The unobservable inputs used in the measurement of the earnout consideration are highly sensitive to fluctuations and any changes in the inputs or the probability weighting thereof could significantly change the measured value of the earnout consideration at each reporting period. As of December 31, 2019, management had assessed the probability of the issuance of shares related to the Viscount earnout consideration and determined its fair value to be $750,000. In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the revenue targets were achieved. Accordingly, in the second quarter of 2020, the Company issued to the selling stockholders the related earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000.

Changes in the fair value of liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):

	Viscount Earnout Consideration
Balance as of December 31, 2019	$	750
Decrease in fair value of earnout liability		(261	)
Issuance of common stock in connection with earnout consideration		(489	)
Balance as of June 30, 2020	$	—

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain of the Company's assets, including goodwill, 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. For additional discussion of measurement criteria used in evaluating potential impairment involving goodwill and intangible assets, refer to Note 6, Goodwill and 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 the 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.

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As of June 30, 2020 and December 31, 2019, the Company had $348,000 of privately-held investments measured at fair value on a nonrecurring basis which were classified as Level 3 assets 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 impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. The amount of privately-held investments is included in other assets in the accompanying condensed consolidated balance sheets.

As of June 30, 2020 and December 31, 2019, 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. Based on the borrowing rates currently available to the Company for debt with similar terms, the carrying value of the outstanding debt approximates fair value.

6. Goodwill and Intangible Assets

Goodwill

The following table summarizes the activity in goodwill (in thousands):

	Premises			Identity		Total
Balance as of December 31, 2019	$	6,684		$	3,554	$	10,238
Currency translation adjustment		(58	)		—		(58	)
Balance as of June 30, 2020	$	6,626		$	3,554	$	10,180

The Company tests goodwill for impairment on an annual basis, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. In testing for goodwill impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. No impairment of goodwill was identified during the six months ended June 30, 2020 and 2019.

Intangible Assets

The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands):

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12
Gross carrying amount as of June 30, 2020	$	755		$	9,073		$	15,726		$	25,554
Accumulated amortization		(302	)		(5,317	)		(11,184	)		(16,803	)
Intangible assets, net as of June 30, 2020	$	453		$	3,756		$	4,542		$	8,751
Gross carrying amount as of December 31, 2019	$	763		$	9,109		$	15,763		$	25,635
Accumulated amortization		(229	)		(4,873	)		(10,429	)		(15,531	)
Intangible assets, net as of December 31, 2019	$	534		$	4,236		$	5,334		$	10,104

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 on a straight-line basis over their useful lives as shown in the table above. The Company performs an evaluation of it its amortizable intangible assets for impairment at the end of each reporting period. No impairment of intangible assets were identified during the six months ended June 30, 2020.

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The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019, respectively (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	222	$	224	$	446	$	445
Selling and marketing		417		419		835		838
Total	$	639	$	643	$	1,281	$	1,283

The estimated annual future amortization expense for purchased intangible assets with definite lives as of June 30, 2020 was as follows (in thousands):

2020 (remaining six months)	$	1,282
2021		1,107
2022		1,107
2023		1,030
2024		956
Thereafter		3,269
Total	$	8,751

7. Balance Sheet Components

The Company’s inventories are stated at the lower of cost or net realizable value. Inventories consists of (in thousands):

	June 30,		December 31,
	2020		2019
Raw materials	$	7,578	$	4,612
Work-in-progress		130		100
Finished goods		11,039		11,433
Total	$	18,747	$	16,145

Property and equipment, net consists of (in thousands):

	June 30,			December 31,
	2020			2019
Building and leasehold improvements	$	1,232		$	1,200
Furniture, fixtures and office equipment		1,265			1,276
Plant and machinery		10,908			10,364
Purchased software		2,176			2,161
Total		15,581			15,001
Accumulated depreciation		(13,312	)		(12,959	)
Property and equipment, net	$	2,269		$	2,042

The Company recorded depreciation expense of $0.2 million and $0.3 million during the three months ended June 30, 2020 and 2019, respectively, and $0.4 million and $0.5 million during the six months ended June 30, 2020 and 2019, respectively.

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Other accrued expenses and liabilities consist of (in thousands):

	June 30,		December 31,
	2020		2019
Accrued professional fees	$	391	$	1,511
Customer deposits		67		137
Accrued warranties		401		407
Earnout liability		—		750
Other accrued expenses		1,437		1,693
Total	$	2,296	$	4,498

8. Contractual Payment Obligation

Hirsch Electronics Corporation (“Hirsch”) Acquisition – Secure Keyboards and Secure Networks. Prior to the Company’s acquisition of Hirsch in 2009, in 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”). On April 8, 2009, the 1994 Settlement Agreement was amended and restated to replace the royalty-based payment arrangement with an installment payment schedule with contractual payments to be made in future periods through 2021 (the “2009 Settlement Agreement”). On April 30, 2009, as part of the acquisition of Hirsch, the Company provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligation under the 2009 Settlement Agreement.

On April 13, 2020, the Company, Secure Keyboards, and Secure Networks, amended the 2009 Settlement Agreement. The amendment reduced the amount of quarterly payments due under the obligation in 2020, and requires three additional quarterly payments in 2021, increasing the total amount due under the obligation by approximately $90,000. The Company’s remaining payment obligation under the 2009 Settlement Agreement, as amended, was extended through October 31, 2021. The Company included approximately $55,000 and $87,000 of interest expense during the three and six months ended June 30, 2020, respectively, and approximately $38,000 and $82,000 during the three and six months ended June 30, 2019, respectively, in its condensed consolidated statements of operations for interest accreted on the payment obligation.

The payment obligation under the 2009 Settlement Agreement, as amended, as of June 30, 2020, was as follows (in thousands):

2020 (remaining six months)	$	361
2021		1,083
Present value discount factor		(96	)
Total	$	1,348
Less: Current portion - contractual payment obligation		(862	)
Long-term contractual payment obligation	$	486

9. Financial Liabilities

Financial liabilities consist of (in thousands):

	June 30,			December 31,
	2020			2019
Revolving loan facility	$	12,728		$	14,230
EWB term loan		3,750			—
April 21 Funds promissory notes		4,000			—
Paycheck Protection Program promissory note		2,915			—
Total		23,393			14,230
Less: Current maturities of financial liabilities		(22,983	)		(14,189	)
Less: Unamortized debt issuance costs		(410	)		(41	)
Long-term financial liabilities	$	—		$	—

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On February 8, 2017, the Company entered into Loan and Security Agreements with East West Bank (“EWB”) and Venture Lending & Leasing VII, Inc. and Venture Lending VIII, Inc. (collectively referred to as “VLL7 and VLL8”). The Loan and Security agreement, as amended, with EWB provided a $16.0 million revolving loan facility (“Revolving Loan Facility”), and the Loan and Security Agreement with VLL7 and VLL8 provided a $10.0 million term loan facility (“Term Loan”). All amounts due under the Term Loan were paid in full in May 2018.

On February 6, 2019, the Company entered into an amendment (the “Tenth Amendment”) to its Loan and Security Agreement, as amended, with EWB which increased the Revolving Loan Facility from $16.0 million to $20.0 million, lowered the interest rate from prime rate plus 1.0% to prime rate plus 0.75%, extended the maturity date to February 8, 2021, and amended certain financial covenants, including covenants with respect to minimum EBITDA levels. On March 27, 2019, the Company entered into an amendment (the “Eleventh Amendment”) which modified certain financial covenants.

On January 28, 2020, the Company entered into an amendment (the “Twelfth Amendment”) to its Loan and Security Agreement with EWB, which provided a new term loan facility (“EWB Term Loan”) in a principal amount of $4.5 million, which was received on January 28, 2020, and reduced the Revolving Loan Facility under the Loan and Security Agreement from $20.0 million to $15.5 million. The EWB Term Loan has an interest rate equal to the prime rate plus 2.25%, began to amortize on February 1, 2020, with principal in the amount of $250,000 due monthly through the first anniversary of the Term Loan, and the remainder due on such first anniversary. In addition, certain definitions in the Loan and Security Agreement were amended pursuant to the Twelfth Amendment, including the definition of EBITDA and Borrowing Base, and a new fixed charge coverage ratio financial covenant was added. Upon repayment of the EWB Term Loan in full, the Revolving Loan Facility will be increased to $20.0 million and the fixed charge coverage ratio financial covenant will no longer apply. Legal and administrative costs of $90,000 were recorded as a direct reduction from the carrying amount of the EWB Term Loan and are being amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.

On May 5, 2020, the Company entered into an amendment (the “Thirteenth Amendment”) to its Loan and Security Agreement with EWB. Under the Thirteenth Amendment, certain definitions were amended, including the definitions of Permitted Indebtedness and EBITDA, and certain financial covenants were amended, including reducing from $4.0 million to $3.0 million the amount of unrestricted cash that must be held in the Company’s accounts with EWB during the period from May 1, 2020 through September 30, 2020 and providing for minimum trailing six-month EBITDA of at least $0.6 million during such period and of $0.3 million thereafter. In addition, the Company is not required to make monthly principal payments on the EWB Term Loan for the three payment dates of May 1, 2020, June 1, 2020 and July 1, 2020. In addition, as discussed in Note 11, Stockholders’ Equity, the Company amended the EWB Warrant. The Company calculated the fair value of the amended EWB Warrant using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years. The fair value of the amended EWB Warrant of $42,000, as well as legal and administrative costs of $92,000, were recorded as a direct reduction from the carrying amount of the Revolving Loan Facility and are being amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.

The Company may voluntarily prepay amounts outstanding under the Revolving Loan Facility, without prepayment charges. In the event the Revolving Loan Facility is terminated prior to its maturity, the Company would be required to pay an early termination fee in the amount of 1.0% of the revolving line. Additional borrowing requests under the Revolving Loan Facility are subject to various customary conditions precedent, including satisfaction of a borrowing base test as more fully described in the Revolving Loan Facility.

The Revolving Loan Facility contains customary representations and warranties, 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, and various financial and liquidity covenants.In addition, the Revolving Loan Facility contains customary events of default that entitle EWB to cause any or all of the Company's indebtedness under the Revolving Loan Facility to become immediately due and payable. The events of default (some of which are subject to applicable grace or cure periods), 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, EWB may terminate its lending commitment and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan and Security Agreement to be immediately due and payable.

As of June 30, 2020, the Company was in compliance with all financial covenants under the Revolving Loan Facility.

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On May 5, 2020, the Company issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to 21 April Fund, LP and 21 April Fund, Ltd. (collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”). The Notes are secured by the Company’s assets, but subordinate to the Company’s obligations to EWB under its Loan and Security Agreement.  Proceeds from the sale of the Notes must be used for expenses incurred by the Company in connection with its provisions of goods and services under a statement of work with a third party.  The Notes have an initial term of nine months and do not bear interest during this period. However, if the Notes are not repaid on or before the nine-month anniversary of issuance, (a) the Notes will thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid, as further detailed in the Note Purchase Agreement.  In the event the Notes are not paid in full by the first anniversary of their issuance, May 5, 2021, they shall thereafter bear interest of 12% per annum, payable quarterly, and additional warrants would be issuable to the April 21 Funds. As discussed in Note 11, Stockholders’ Equity, the fair value of the warrants issued to April 21 Funds was  calculated using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years. The relative fair value of the warrants of $290,000 was recorded as a direct reduction from the carrying amount of the Notes and is being amortized as interest expense over the term of the April 21 Funds promissory notes.

On April 9, 2020, the Company entered into a promissory note (the “Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The Note is dated April 8, 2020 with EWB. The Company borrowed a principal amount of approximately $2.9 million. The interest on the Note is 1.00% per annum. The Note is payable two years from the date of the Note, and there is no prepayment penalty. All interest which accrues during the initial six months of the loan period is deferred and payable on the maturity date of the Note. Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with Small Business Administration rules established for the Paycheck Protection Program.

10. 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 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 2015. However, if loss carryforwards of tax years prior to 2015 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.

The CARES Act, which was enacted on March 27, 2020, includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits. Several foreign (non-U.S.) jurisdictions in which we operate have taken similar economic stimulus measures. The Company analyzed the provisions of the CARES Act and determined there was no effect on its provision for the current period and will continue to evaluate the impact, if any, the CARES Act may have on the Company’s condensed consolidated financial statements and disclosures.

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11. Stockholders’ Equity

Series B Convertible Preferred Stock Dividend Accretion

The following tables summarize Series B convertible preferred stock and the accretion of dividend activity for the six months ended June 30, 2020 (in thousands):

	Tranche 1		Tranche 2		Total
Series B Convertible Preferred Stock
Balance as of December 31, 2019	$	13,230	$	8,645	$	21,875
Cumulative dividends on Series B convertible preferred stock		331		212		543
Balance as of June 30, 2020	$	13,561	$	8,857	$	22,418
Number of Common Shares Issuable Upon Conversion
Balance as of December 31, 2019		3,308		2,161		5,469
Cumulative dividends on Series B convertible preferred stock		82		53		135
Balance as of June 30, 2020		3,390		2,214		5,604

Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of June 30,2020 would be convertible into 5,604,375 shares of the Company’s common stock. However, the conversion rate will be subject to adjustment in the event of certain instances, such as if the Company issues shares of its common stock at a price less than $4.00 per common share, subject to a minimum conversion price of $3.27 per share. As of June 30,2020, none of the contingent conditions to adjust the conversion rate had occurred.

Each share of Series B convertible preferred stock is entitled to a cumulative annual dividend of 5% for the first six (6) years following the issuance of such share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10^th) year in cash. The dividends accrue and are payable in kind upon such time as the shares convert into the Company’s common stock. In general, the shares are not entitled to vote except in certain limited cases, including in change of control transactions where the expected price per share distributable to the Company’s stockholders is expected to be less than $4.00 per share. The Certificate of Designation with respect to the Series B convertible preferred stock further provides that in the event of, among other things, any change of control, liquidation or dissolution of the Company, the holders of the Series B convertible preferred stock will be entitled to receive, on a pari passu basis with the holders of the common stock, the same amount and form of consideration that the holders of the Company’s common stock receive (on an as-if-converted-to-common-stock basis and without regard to the Ownership Limitation applicable to the Series B convertible preferred stock).

Common Stock Warrants

On February 8, 2017, the Company entered into Loan and Security Agreements with each of EWB and VLL7 and VLL8 as discussed in Note 9, Financial Liabilities. In connection with the Company’s Revolving Loan Facility, the Company issued to EWB a warrant (the "EWB Warrant") to purchase up to 40,000 shares of the Company's common stock at a per share exercise price of $3.64, and in connection with the Company’s Term Loan Facility, issued to each of VLL7 and VLL8 a warrant to purchase 290,000 shares of the Company's common stock at a per share exercise price of $2.00 (the “VLL7 Warrant” and the “VLL8 Warrant,” respectively). Each of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant was immediately exercisable for cash or by net exercise and expire on February 8, 2022. On January 30, 2020, each of VLL7 and VLL8 exercised their warrant on a cashless net exercise basis, with each receiving 193,494 shares of the Company’s common stock.

On May 5, 2020, the Company entered into the Thirteenth Amendment to its Loan and Security Agreement with EWB, as discussed in Note 9, Financial Liabilities. In connection with the Thirteenth Amendment, the Company amended the EWB Warrant reducing its exercise price from $3.64 to $3.50 per share and extending the expiration date of the EWB Warrant from February 8, 2022 to February 8, 2023.

On May 5, 2020, the Company entered into a Note and Warrant Purchase Agreement with the April 21 Funds, as discussed in Note 9, Financial Liabilities, in which the Company issued warrants (“April 21 Funds Warrants”) to purchase 275,000 shares of common stock of the Company. The April 21 Funds Warrants have a term of three years (subject to early termination upon the closing of an acquisition); provided, that in the event that the Note is not paid in full by the nine-month anniversary of issuance, the term of the April 21 Funds Warrants shall be extended for a period of time equal to the period of time from such nine-month anniversary until the date the Note is fully paid (“Extension Warrants”). The Extension Warrants have a term of three years from the date of issuance of the latest Extension Warrant to be issued (subject to early termination upon an acquisition). The shares of common stock issuable upon exercise of the April 21 Fund Warrants and any Extension Warrants that may be issued are entitled to the same resale registration rights granted to the April 21 Funds Warrants under the Stockholders Agreement dated December 21, 2017 in connection with the April 21 Funds previous purchase of certain securities of the Company.  

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Below is the summary of outstanding warrants issued by the Company as of June 30, 2020:

Warrant Type	Number of Shares Issuable Upon Exercise		Exercise Price		Issue Date	Expiration Date
EWB Warrant		40,000	$	3.50	February 8, 2017	February 8, 2023
April 21 Funds Warrants		275,000	$	3.50	May 5, 2020	May 5, 2023
Total		315,000

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of June 30, 2020 was as follows:

Exercise of outstanding stock options, vesting of restricted stock units ("RSU"), and    issuance of RSUs vested but not released	1,876,028
ESPP	293,888
Shares of common stock available for grant under the 2011 Plan	1,106,558
Warrants to purchase common stock	315,000
Shares of common stock issuable upon conversion of Series B convertible preferred stock	7,541,449
Total	11,132,923

12. Stock-Based Compensation

Stock Incentive Plans

The Company maintains a stock-based compensation plan, the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended, 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.  

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 grant under the 2011 Plan, including shares rolled over from the 2007 Plan and the 2010 Plan. Subsequent to June 6, 2011 through June 30, 2020, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 4,400,000 shares.

Stock Option Plans

A summary of activity for the Company’s stock option plans for the six months ended June 30, 2020 is as follows:

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance as of December 31, 2019		562,102		$	5.60		5.86	$	572,869
Granted		—			—
Cancelled or Expired		(8,333	)		8.18
Exercised		—			—
Balance as of June 30, 2020		553,769		$	5.56		5.39	$	328,900
Vested or expected to vest as of     June 30, 2020		553,769		$	5.56		5.39	$	328,900
Exercisable as of June 30, 2020		553,769		$	5.56		5.39	$	328,900

The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock and the option exercise price of in-the-money options multiplied by the number of such options.

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The following table summarizes information about options outstanding as of June 30, 2020:

	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		462,110		5.82	$	4.44		462,110	$	4.44
$7.50 - $11.25		71,198		3.65		9.94		71,198		9.94
$11.30 - $16.95		13,764		2.19		12.90		13,764		12.90
$17.60 - $26.40		6,697		1.24		21.55		6,697		21.55
$4.36 - $26.40		553,769		5.39	$	5.56		553,769	$	5.56

As of June 30, 2020, there was nounrecognized stock-based compensation expense related to stock options.  

Restricted Stock Units

The following is a summary of RSU activity for the six months ended June 30, 2020:

	Number of RSUs			Weighted Average Fair Value
Unvested as of December 31, 2019		1,148,110		$	4.43
Granted		412,809			3.90
Vested		(360,914	)		3.97
Forfeited		(80,534	)		4.60
Unvested as of June 30, 2020		1,119,471		$	4.37
Shares vested but not released		202,788		$	4.98

The fair value of the Company’s RSUs is calculated based upon the fair market value of the Company’s stock on the date of grant. As of June 30, 2020, there was $4.1 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.2 years.

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 six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	41	$	34	$	81	$	63
Research and development		173		113		347		227
Selling and marketing		118		205		244		385
General and administrative		419		341		719		705
Total	$	751	$	693	$	1,391	$	1,380

Restricted Stock Unit Net Share Settlements

During the six months ended June 30, 2020 and 2019, the Company repurchased 94,134 and 98,939 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.

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13. Net (Loss) Income per Common Share

Basic net (loss) income per common share is computed by dividing net (loss) income available to common stockholders during the period by the weighted average number of common shares outstanding during that period.  Diluted net (loss) income per common share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock or the if-converted method of accounting.

The calculations for basic and diluted net (loss) income per common share for the three and six months ended June 30, 2020 are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Basic net (loss) income per common share:
Numerator:
Net (loss) income	$	(2,749	)	$	416		$	(4,796	)	$	(399	)
Less: Accretion of Series B preferred stock dividends		(272	)		(259	)		(543	)		(517	)
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Denominator:
Weighted average common shares outstanding - basic		17,941			16,953			17,730			16,896
Net (loss) income per common share - basic	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)
Diluted net (loss) income per common share:
Numerator:
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Plus: Accretion of Series B preferred stock dividends, if    dilutive		—			—			—			—
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Denominator:
Weighted average common shares outstanding - basic		17,941			16,953			17,730			16,896
Dilutive securities:
Stock options		—			55			—			—
RSUs		—			429			—			—
Warrants		—			358			—			—
Total dilutive securities		—			842			—			—
Weighted average common shares outstanding - diluted		17,941			17,795			17,730			16,896
Net (loss) income per common share - diluted	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)

The following common stock equivalents have been excluded from diluted net (loss) income per common share for the three and six months ended June 30, 2020 and 2019 because their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Shares of common stock subject to outstanding RSUs		1,119		—		1,119		1,275
Shares of common stock subject to outstanding stock options		554		131		554		576
Shares of common stock subject to outstanding warrants		315		85		315		705
Shares of common stock issuable upon conversion of Series B    convertible preferred stock		5,604		5,338		5,604		5,338
Total		7,592		5,554		7,592		7,894

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14. Segment Reporting, Geographic Information,and Concentration of Credit Risk

Segment Reporting

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 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 Company does not report total assets, capital expenditures or operating expenses by operating segment as such information is not used by the CODM for purposes of assessing performance or allocating resources.

Net revenue and gross profit information by segment for the three and six months ended June 30, 2020 and 2019 are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Premises:
Net revenue	$	7,482		$	10,671		$	15,716		$	20,001
Gross profit		4,093			5,982			8,619			10,361
Gross profit margin		55	%		56	%		55	%		52	%
Identity:
Net revenue		11,623			11,566			21,509			21,758
Gross profit		3,619			3,901			6,593			8,226
Gross profit margin		31	%		34	%		31	%		38	%
Total:
Net revenue		19,105			22,237			37,225			41,759
Gross profit		7,712			9,883			15,212			18,587
Gross profit margin		40	%		44	%		41	%		45	%
Operating expenses:
Research and development		2,422			2,078			5,018			4,104
Selling and marketing		4,236			4,721			8,733			9,219
General and administrative		2,151			2,279			4,342			4,901
Decrease in fair value of earnout liability		(261	)		—			(261	)		—
Restructuring and severance		1,417			(2	)		1,482			(14	)
Total operating expenses:		9,965			9,076			19,314			18,210
Loss (income) from operations		(2,253	)		807			(4,102	)		377
Non-operating income (expense):
Interest expense, net		(407	)		(241	)		(659	)		(520	)
Foreign currency gains (losses), net		(30	)		(70	)		56			(72	)
(Loss) income before income taxes	$	(2,690	)	$	496		$	(4,705	)	$	(215	)

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Geographic Information

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended June 30, 2020 and 2019 is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Americas	$	13,670		$	15,945		$	27,538		$	30,670
Europe and the Middle East		2,630			3,423			5,230			6,353
Asia-Pacific		2,805			2,869			4,457			4,736
Total	$	19,105		$	22,237		$	37,225		$	41,759
Percentage of net revenue:
Americas		71	%		72	%		74	%		74	%
Europe and the Middle East		14	%		15	%		14	%		15	%
Asia-Pacific		15	%		13	%		12	%		11	%
Total		100	%		100	%		100	%		100	%

Concentration of Credit Risk

No customer accounted for 10% or more of net revenue for either of the three or six months ended June 30, 2020 or 2019. Nocustomer accounted for 10% of net accounts receivable at June 30, 2020 or December 31, 2019.

Long-lived assets by geographic location as of June 30, 2020 and December 31, 2019 are as follows (in thousands):

	June 30,		December 31,
	2020		2019
Property and equipment, net:
Americas	$	715	$	839
Europe and the Middle East		50		55
Asia-Pacific		1,504		1,148
Total property and equipment, net	$	2,269	$	2,042
Operating lease ROU assets:
Americas	$	2,547	$	4,265
Europe and the Middle East		83		105
Asia-Pacific		862		259
Total operating lease right-of-use assets	$	3,492	$	4,629

15. Restructuring and Severance

Restructuring expenses incurred in the three and six months ended June 30, 2019 consist primarily of facility rental related costs associated with the sublet 3VR office space in San Francisco, California, offset by sublease income received from a tenant which is subletting the office space over the remaining term of the original lease. The restructuring accrual at June 30, 2019 related to the Company’s future rental payment obligation associated with vacated office space at its Fremont, California facility.  

In the three and six months ended June 30, 2020, the Company incurred restructuring expenses of $1,417,000 and $1,482,000, respectively, consisting of severance related costs of $20,000, and $84,000, respectively, and facility rental related costs associated with the 3VR office space of approximately $1,397,000 and $1,398,000, respectively. The facility rental related costs included a charge of $1,199,000 associated with the impairment of the ROU operating lease asset, which was subleased, but has gone into default due to non-payment of rent beginning April 1, 2020. Sublease income of $198,000 was received in the first quarter of 2020, however, no rental payments were received during the three months ended June 30, 2020.

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16. Leases

The Company’s leases consist primarily of operating leases for administrative office space, research and development facilities, a manufacturing facility, and sales offices in various countries around the world. The Company determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which are accounted for as a single lease component. Total rent expense was approximately $0.4 million and $0.8 million for the three and six months ended June 30, 2020, respectively. Total rent expense was approximately $0.4 million and $0.7 million for the three and six months ended June 30, 2019, respectively. 

Initial lease terms are determined at commencement and may include options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. Remaining lease terms range from one to seven years, some of which include options to extend for up to five years. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. As the Company’s leases do not provide an implicit rate, the present value of future lease payments is determined using the Company’s incremental borrowing rate based on information available at the lease commencement date.

The table below reconciles the undiscounted cash flows for the first five years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of June 30, 2020 (in thousands):

	June 30,
	2020
2020 (remaining six months)	$	1,257
2021		1,975
2022		1,277
2023		457
2024		221
Thereafter		297
Total minimum lease payments		5,484
Less: amount of lease payments representing interest		(663	)
Present value of future minimum lease payments		4,821
Less: current liabilities under operating leases		(1,832	)
Long-term operating lease liabilities	$	2,989

As of June 30, 2020, the weighted average remaining lease term for the Company’s operating leases was 3.1 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was 6.4%. Sublease rental income due in the future under non-cancelable subleases was $1.4 million.

Cash paid for amounts included in the measurement of operating lease liabilities was $0.4 millionand $1.0 million for the three and six months ended June 30, 2020, respectively. Cash received from sublease rentals was $12,000 and $0.2 million for the three and six months ended June 30, 2020, respectively.The Company does not expect to receive any additional sublease rental income related to the subleased 3VR office space, as the sublease has gone into default due to non-payment a discussed in Note 15, Restructuring and Severance.

17. Commitments and Contingencies

The following table summarizes the Company’s principal contractual commitments, excluding operating leases, as of June 30, 2020 (in thousands):

	Purchase Commitments		Other Contractual Commitments		Total
2020 (remaining six months)	$	14,885	$	480	$	15,365
2021		143		—	$	143
Total	$	15,028	$	480	$	15,508

Purchase commitments 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.

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The following table summarizes the Company’s warranty accrual account activity during the three and six months endedJune 30, 2020 and 2019:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
Balance at beginning of period	$	386	$	433		$	407		$	456
New product warranties		15		83			24			88
Claims activity		—		(11	)		(30	)		(39	)
Balance at end of period	$	401	$	505		$	401		$	505

The Company provides warranties on certain product sales for periods ranging from 12 to 36 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.

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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 reflect 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 I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Risk Factors,” The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019. 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, Inc. is a global provider of physical security and secure identification. Our products, software, systems, and services address the markets for physical and logical access control, video analytics and a wide range of Radio Frequency Identification (“RFID”)-enabled applications. Customers in government, enterprise, consumer, education, healthcare, banking, retail, transportation and other sectors rely on our security and identification solutions. Our mission is to make the physical world digital and secure. Our platform to deliver on our mission can be deployed through Internet of Things (“IoT”) devices, mobile, client/server, cloud, web, dedicated hardware and software-defined architectures.  Our solutions encompass what we believe to be the most complete set of technologies in the industry.  We are a one-stop provider of software delivering physical security management, video surveillance, logical access, analytics and identities; and devices spanning access readers, panels, processing appliances, and identity cards.  We provide services to deliver optimized total solutions, serving as a single-point provider for our customers rather than several separate vendors that the customer would otherwise have to coordinate and manage.

Segments

We have organized our operations into two reportable business segments, principally by solution families: Premises and Identity. Our Premises segment includes our solutions to address the premises security market for government and enterprise, including access control, video surveillance, analytics, customer experience and other applications. Our Identity segment includes products and solutions enabling secure access to information serving the logical access and cyber security market, and protecting assets and objects in the IoT with RFID.

Trends in Our Business

Geographic net revenue based on each customer’s ship-to location is as follows (in thousands):

	Six Months Ended
	June 30,
	2020			2019
Americas	$	27,538		$	30,670
Europe and the Middle East		5,230			6,353
Asia-Pacific		4,457			4,736
Total	$	37,225		$	41,759
Percentage of net revenue:
Americas		74	%		74	%
Europe and the Middle East		14	%		15	%
Asia-Pacific		12	%		11	%
Total		100	%		100	%

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Net Revenue Trends

Net revenue for six months ended June 30, 2020was $37.2 million, a decrease of 11% compared with $41.8 million for the six months ended June 30, 2019. Net revenue in our Premises segment, which accounted for 42% of our net revenue, was $15.7 million for the six months ended June 30, 2020, a decrease of 21% compared with $20.0 million for the six months ended June 30, 2019. Net revenue in our Identity segment, which represented 58% of our net revenue, was $21.5 million for the six months ended June 30, 2020, a decrease of 1% compared with $21.8 million for the six months ended June 30, 2019.

Net Revenue in the Americas

Net revenue in the Americas was approximately $27.5 million for the six months ended June 30, 2020, representing approximately 74% of total net revenue, a decrease of 10% compared to $30.7 million for the six months ended June 30, 2019. Net revenue from our Premises solutions for security programs within various U.S. government agencies and commercial customers for access control and video solutions, as well as reader, controller and appliance products, represented approximately 52% of our net revenue in the Americas region.  

Net revenue in our Premises segment for the six months ended June 30, 2020 decreased 22% compared to the prior year period primarily due to delays associated with the impact of the COVID-19 pandemic on our partners’ ability to access customer site locations, as well as the impact of business closures in retail, hotels and schools. These delays were partially offset by higher Hirsch Velocity software product sales and related support services, particularly in the federal government. Net revenue in our Identity segment for the six months ended June 30, 2020 increased 7% compared to the prior year period primarily due to higher sales of RFID transponder products and smart card readers, partially offset by lower sales of access card products. The primary driver of higher sales of our RFID transponder products was the broad adoption of NFC, and the continued demand of smart card reader products with shelter in place actions driving the need for more work from home technologies.

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 a superior offering to help federal agency customers move towards compliance with federal directives and mandates. To address our sales opportunities in the United States in general and with our U.S. Government customers in particular, we focus on a strong U.S. sales organization and our sales presence in Washington D.C.

More recently, in response to the new needs for health and safety in the physical security market overall, we have released products to address these trends.  During the first half of 2020, we launched our contract tracing downloadable extension for our Velocity access system, our occupancy tracking system based on our 3VR platform, our MobilisID touchless reader and our temperature tracking tag.  In addition, with the economic impact creating more uncertainty for our customers, we have released several products (Cirrus and 3VR Prime) which are subscription based which allow payments over time for our physical access and video solutions as a service.

Net Revenue in Europe, the Middle East, and Asia-Pacific

Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $9.7 million for the six months ended June 30, 2020, accounting for 26% of total net revenue, was down 13% compared to $11.1 million for the six months ended June 30, 2019 primarily as a result of lower sales in both regions. Net revenue in these regions was also impacted by delays of projects associated with the COVID-19 pandemic and shelter in place actions globally. 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 Premises products decreased 14% for the six months ended June 30, 2020 from the prior year period primarily due to lower sales of Hirsch related physical access control solutions in the Asia-Pacific region partially offset by higher sales in the Europe and Middle East region. Net revenue from our Identity products decreased 12% for the six months ended June 30, 2020 compared with the same period of the prior year primarily due to lower sales of smart card readers and access cards in both regions. This decrease was partially offset by higher sales of RFID transponder products in both regions. RFID transponder products comprised approximately 51% of net revenue in both regions for the six months ended June 30, 2020, while Identity smart card readers and access cards comprised approximately 34% of net revenue in both regions in the same period.

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Seasonality and Other Factors

In our business overall, we may experience 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 physical access control solutions and related products to U.S. Government agencies are subject to annual government budget cycles and generally are highest in the third quarter of each year. Sales of our identity readers, many of which are sold to government agencies worldwide, are impacted by project schedules of government agencies, as well as roll-out schedules for application deployments. 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, 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 depend 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 effect on demand for our products due to the significant portion of revenue that are typically sourced from U.S. Government agencies.

In March 2020, the World Health Organization characterized the coronavirus (“COVID-19”) a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy. In view of the rapidly changing business environment created by the uncertainty related to the depth and or duration of the impact resulting from COVID-19, we have experienced delays in our sales in select vertical markets and are currently unable to determine if there will be any continued disruption and the extent to which this may have future impact on our business. We continue to monitor the progression of the pandemic and its effect on our financial position, results of operations, and cash flows.

Operating Expense Trends

Base Operating Expenses  

Our base operating expenses (i.e., research and development, selling and marketing, and general and administrative expense) decreased 3% and 1% for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019. Research and development expenses increased 17% and 22% for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019 primarily due to higher salaries and related costs associated with investments in engineering, including additional headcount, and higher external contractor costs. Selling and marketing expenses decreased 10% and 5% for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019 due to lower sales commissions, offset by an increase in employment recruiting fees in the first and second quarters of 2020. General and administrative expenses decreased 6% and 11% for the three and six months ended June 30, 2020, respectively, compared with the same periods in 2019 primarily due to reductions in headcount and related costs associated with our continued integration efforts across general and administrative functions, and lower professional fees in the first and second quarters of 2020, partially offset by the impact of bad debt reserve reductions recorded in the second quarter of 2019.

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Results of Operations

The following table includes segment net revenue and segment net profit information by business segment and reconciles gross profit to results of operations before income taxes (in thousands):

	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			%Change			2020			2019			% Change
Premises:
Net revenue	$	7,482		$	10,671			(30	%)	$	15,716		$	20,001			(21	%)
Gross profit		4,093			5,982			(32	%)		8,619			10,361			(17	%)
Gross profit margin		55	%		56	%					55	%		52	%
Identity:
Net revenue		11,623			11,566			0	%		21,509			21,758			(1	%)
Gross profit		3,619			3,901			(7	%)		6,593			8,226			(20	%)
Gross profit margin		31	%		34	%					31	%		38	%
Total:
Net revenue		19,105			22,237			(14	%)		37,225			41,759			(11	%)
Gross profit		7,712			9,883			(22	%)		15,212			18,587			(18	%)
Gross profit margin		40	%		44	%					41	%		45	%
Operating expenses:
Research and development		2,422			2,078			17	%		5,018			4,104			22	%
Selling and marketing		4,236			4,721			(10	%)		8,733			9,219			(5	%)
General and administrative		2,151			2,279			(6	%)		4,342			4,901			(11	%)
Decrease in fair value of earnout liability		(261	)		—		N/A				(261	)		—		N/A
Restructuring and severance		1,417			(2	)	N/A				1,482			(14	)	N/A
Total operating expenses:		9,965			9,076			10	%		19,314			18,210			6	%
(Loss) income from operations		(2,253	)		807			(379	%)		(4,102	)		377			(1,188	%)
Non-operating income (expense):
Interest expense, net		(407	)		(241	)		69	%		(659	)		(520	)		27	%
Foreign currency gains (losses), net		(30	)		(70	)	N/A				56			(72	)	N/A
(Loss) income before income taxes	$	(2,690	)	$	496			(642	%)	$	(4,705	)	$	(215	)		2,088	%

Net Revenue

For the three months ended June 30, 2020, net revenue was $19.1million, down 14% compared with $22.2 million for the comparable period in 2019. For the six months ended June 30, 2020, net revenue was $37.2million, down 11% compared with $41.8 million for the comparable period in 2019.

For the three months ended June 30, 2020, net revenue in our Premises segment was $7.5million, a decrease of 30% from $10.7 million for the comparable period in 2019. For the six months ended June 30, 2020, net revenue in our Premises segment was $15.7million, a decrease of 21% from $20.0 million for the comparable period in 2019. The decrease was primarily attributable delays caused by the impact of the COVID-19 pandemic on our partners’ ability to access customer site locations. These decreases were partially offset by higher Hirsch Velocity software product sales and related support services.

For the three and six months ended June 30, 2020, net revenue in our Identity segment was $11.6million and $21.5 million, respectively, which were comparable to the same periods in 2019. Higher sales of RFID transponder products and smart card readers in the three and six months ended June 30, 2020 were offset by lower sales of access card products primarily attributable to the COVID-19 pandemic and its impact on the hospitality and education markets.

Gross Profit

Gross profit in the three months ended June 30, 2020 was $7.7million, or 40% of net revenue, compared with $9.9 million, or 44% of net revenue in the comparable period of 2019. Gross profit in the six months ended June 30, 2020 was $15.2million, or 41% of net revenue, compared with $18.6 million, or 45% of net revenue in the comparable period of 2019. 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.

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In our Premises segment, gross profit was $4.1million in the three months ended June 30, 2020 compared with $6.0 million in the comparable period of 2019, and was $8.6million in the six months ended June 30, 2020 compared with $10.4 million in the comparable period of 2019. Gross profit margins in the Premises segment of 55% in the three months ended June 30, 2020 were comparable to the comparable period in 2019. In the six months ended June 30, 2020, gross profit margins in this segment increased to 55% from 52% compared to the comparable period of 2019 primarily due to adjustments to our inventory reserves in the first quarter of 2019 as a result of management’s assessment of on-hand inventory levels and demand forecasts.

In our Identity segment, gross profit was $3.6million in the three months ended June 30, 2020 compared with $3.9 million in the comparable period of 2019, and was $6.6million in the six months ended June 30, 2020 compared with $8.2 million in the comparable period of 2019. Gross profit margins in the Identity segment of 31% in the three months ended June 30, 2020 decreased from 34% in the comparable period of 2019 primarily due to product mix, with a higher proportion of lower margin RFID transponder product sales. In the six months ended June 30, 2020, gross profit margins in this segment decreased to 31% from 38% in the comparable period of 2019. This decrease was attributable to the change in product mix, with a higher proportion of lower margin RFID transponder product sales, and a large higher margin bulk order of readers to the U.S. Navy Reserve in the first quarter of 2019.

We expect there will be variation in our total gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products. Within each product category, gross margins have tended to be consistent, but over time may 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.

Operating Expenses

Information about our operating expenses for the three and six months ended June 30, 2020 and 2019 is set forth below (dollars in thousands).

Research and Development

	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			% Change			2020			2019			% Change
Research and development	$	2,422		$	2,078			17	%	$	5,018		$	4,104			22	%
as a % of net revenue		13	%		9	%					13	%		10	%

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 for the three and six months ended June 30, 2020 increased compared to the comparable prior year periods primarily due to higher salaries and related costs associated with investments in engineering, including additional headcount, and higher external contractor costs.

Selling and Marketing

	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			% Change			2020			2019			% Change
Selling and marketing	$	4,236		$	4,721			(10	%)	$	8,733		$	9,219			(5	%)
as a % of net revenue		22	%		21	%					23	%		22	%

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.

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Selling and marketing expenses for the three and six months ended June 30, 2020decreased compared to the comparable to the prior year periods due to lower sales commissions, offset by an increase in employment recruiting fees in the first and second quarters of 2020.

General and Administrative

	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			% Change			2020			2019			% Change
General and administrative	$	2,151		$	2,279			(6	%)	$	4,342		$	4,901			(11	%)
as a % of net revenue		11	%		10	%					12	%		12	%

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 expense for the three and six months ended June 30, 2020 decreased compared with the prior year periods primarily due to reductions in headcount and related costs associated with our continued integration efforts across general and administrative functions, and lower professional fees in the first and second quarters of 2020, partially offset by the impact of bad debt reserve reductions recorded in the second quarter of 2019.

Decrease in Fair Value of Earnout Liability

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019		% Change	2020			2019		% Change
Decrease in fair value of earnout liability	$	(261	)	$	—	N/A	$	(261	)	$	—	N/A

The reduction of earnout consideration expense of $261,000 during the three and six months ended June 30, 2020 was attributable to the decrease in the fair value of the earnout liability associated with the Viscount acquisition from $750,000 to $489,000, representing settlement date fair value of the shares issued and the recorded earnout liability.

Restructuring and Severance Charges

	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019			% Change	2020		2019			% Change
Restructuring and severance	$	1,417	$	(2	)	N/A	$	1,482	$	(14	)	N/A

Restructuring expenses incurred in the three and six months ended June 30, 2020 consists of severance related costs of $20,000 and $84,000, respectively, and facility rental related costs associated with the 3VR office space of approximately $1,397,000 and $1,398,000, respectively, which included a charge of $1,199,000 associated with the impairment of the right-of-use operating lease asset, which was subleased, but has gone into default due to non-payment of rent beginning April 1, 2020. Sublease income of $198,000 was received in the first quarter of 2020, however, no rental payments were received during the three months ended June 30, 2020.

Restructuring expenses incurred in the three and six months ended June 30, 2019 consist of facility rental related costs associated with the 3VR office space acquired in 2018, offset by sublease income.

See Note 15, Restructuring and Severance, in the accompanying notes to our condensed consolidated financial statements for more information.

Interest Expense

	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			% Change			2020			2019			% Change
Interest expense, net	$	(407	)	$	(241	)		69	%	$	(659	)	$	(520	)		27	%

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Interest expense, net consists of interest and amortization of debt issuance costs associated with our financial liabilities and interest accretion expense for a liability on a contractual payment obligation arising from our acquisition of Hirsch Electronics Corporation. The increase in net interest expense in the three and six months ended June 30, 2020compared to the comparable periods of 2019 was primarily due to higher amounts outstanding under our revolving loan facility, and the amortization of warrants issued to April 21 Funds in the second quarter of 2020.

See Note 9, Financial Liabilities, in the accompanying notes to our condensed consolidated financial statements for more information.

Foreign Currency Gains (Losses), Net

	Three Months Ended June 30,							Six Months Ended June 30,
	2020			2019			% Change	2020		2019			% Change
Foreign currency gains, net	$	(30	)	$	(70	)	N/A	$	56	$	(72	)		(178	%)

Changes in currency valuation in the periods mainly were the result of exchange rate movements between the U.S. dollar, the Indian Rupee, the Canadian dollar, and the Euro. 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 June 30,									Six Months Ended June 30,
	2020			2019			% Change			2020			2019			% Change
Income tax provision	$	(59	)	$	(80	)		(26	%)	$	(91	)	$	(184	)		(51	%)
Effective tax rate		2	%		16	%					2	%		86	%

As of June 30, 2020, our deferred tax assets are fully offset by a valuation allowance. Accounting Standards Codification (“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 an income tax provision during the three and six months ended June 30, 2020. The effective tax rates for the three and six months ended June 30, 2020 and 2019 differ from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision or benefit in certain foreign jurisdictions, which are subject to higher tax rates. The annual effective tax rate (“AETR”) as calculated under ASC 740 based on annual projected book income (loss) is highly sensitive to changes in such book income (loss) due to marginal projected book income and relatively significant permanent items (state and foreign taxes). The AETR as calculated is deemed highly sensitive to changes in estimates of total ordinary income or loss in periods of marginal statutory net income and actual year-to-date has been determined to be the best estimate of AETR.

Liquidity and Capital Resources

As of June 30, 2020, our working capital, defined as current assets less current liabilities, was $11.2 million, a decrease of $0.5 million compared to $11.7 million as of December 31, 2019. As of June 30, 2020, our cash balance was $13.1 million.

On February 8, 2017, we entered into a Loan and Security Agreement with East West Bank (“EWB”). The Loan and Security Agreement, as amended, provided for a $16.0 million revolving loan facility. In the first quarter of 2019, we amended the Loan and Security Agreement increasing the revolving loan facility from $16.0 million to $20.0 million, lowering the interest rate from prime rate plus 1.0% to prime rate plus 0.75%, extending the maturity date to February 8, 2021, and amending certain financial covenants, including covenants with respect to minimum EBITDA levels.

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On January 28, 2020, we entered into an amendment (the “Twelfth Amendment”) to our Loan and Security Agreement with EWB, which provided a new term loan facility in a principal amount of $4.5 million, which was received on January 28, 2020, and reduced the revolving loan facility under the Loan and Security Agreement from $20.0 million to $15.5 million. The term loan has an interest rate equal to the prime rate plus 2.25%, began to amortize beginning February 1, 2020, with principal in the amount of $250,000 due monthly through the first anniversary of the term loan, and the remainder due on such first anniversary. In addition, certain definitions in the Loan and Security Agreement were amended pursuant to the Twelfth Amendment, including the definition of EBITDA and Borrowing Base, and a new fixed charge coverage ratio financial covenant was added. Upon repayment of the new term loan in full, the revolving loan facility will be increased to $20.0 million and the fixed charge coverage ratio financial covenant will no longer apply. See Note 9, Financial Liabilities, in the accompanying notes to our condensed consolidated financial statements for more information.

On May 5, 2020, we entered into an amendment (the “Thirteenth Amendment”) to our Loan and Security Agreement. Under the Thirteenth Amendment, certain definitions were amended, including the definitions of Permitted Indebtedness and EBITDA, and certain financial covenants were amended, including reducing from $4.0 million to $3.0 million the amount of unrestricted cash that must be held in the our accounts with EWB during the period from May 1, 2020 through September 30, 2020 and providing for minimum trailing six-month EBITDA of at least $0.6 million during such period and of $0.3 million thereafter. In addition, we were not required to make monthly principal payments on the term loan for the three payment dates of May 1, 2020, June 1, 2020 and July 1, 2020. See Note 9, Financial Liabilities and Note 11, Stockholders’ Equity in the accompanying notes to our condensed consolidated financial statements for more information.

On May 5, 2020, we issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to  21 April Fund, LP and 21 April Fund, Ltd. (collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”). The Notes are secured by our assets, but subordinate to our obligations to EWB under the Loan and Security Agreement.  Proceeds from the sale of the Notes must be used for expenses incurred in connection with provisions of goods and services under a statement of work with a third party. The Notes have an initial term of nine months and do not bear interest during this period. However, if the Notes are not repaid on or before the nine-month anniversary of issuance, (a) the Notes will thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid.  In the event the Notes are not paid in full by the first anniversary of their issuance, May 5, 2021, they shall thereafter bear interest of 12% per annum, payable quarterly, and additional extension warrants would be issuable to the April 21 Funds. See Note 9, Financial Liabilities and Note 11, Stockholders’ Equity in the accompanying notes to our condensed consolidated financial statements for more information.

As of June 30, 2020, we were in compliance with all financial covenants under the Revolving Loan Facility.

On April 9, 2020, we entered into a promissory note under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The note is dated April 8, 2020 with EWB, our current lender under our existing Loan and Security Agreement, pursuant to which we borrowed a principal amount of approximately $2.9 million. The interest on the note is 1.00% per annum, and payable two years from the date of the note, and there is no prepayment penalty. All interest which accrues during the initial six months of the loan period is deferred and payable on the maturity date of the Note. Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with SBA rules established for the Paycheck Protection Program.

As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant additional taxes related to such amounts. However, our estimates are provisional and subject to further analysis. Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States. 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 June 30, 2020, the amount of cash included at such subsidiaries was $3.0 million. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

We have historically incurred operating losses and negative cash flows from operating activities, and we may continue to incur losses in the future. As of June 30, 2020, we had a total accumulated deficit of $410.3 million. During the six months ended June 30, 2020, we had a net loss of $4.8 million.

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We believe our existing cash balance, together with cash generated from operations and available credit under our Loan and Security Agreement, will be sufficient to satisfy our working capital needs to fund operations for the next twelve months. We may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements. We may also choose to finance our cash requirements through public or private equity offerings, debt financings or other arrangements. 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. If we raise funds by issuing equity securities, dilution to stockholders could result. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. The terms of debt securities or borrowings could impose significant restrictions on our operations. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business. Our Loan and Security Agreement imposes restrictions on our operations, increases our fixed payment obligations and has restrictive covenants. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. If we are not able to secure additional funding when needed, we may have to curtail or reduce the scope of our business or forgo potential business opportunities.

The following summarizes our cash flows for the six months ended June 30, 2020 and 2019 (in thousands):

	Six Months Ended June 30,
	2020			2019
Net cash (used in) provided by operating activities	$	(4,270	)	$	2,423
Net cash used in investing activities		(614	)		(1,392	)
Net cash provided by (used in) financing activities		8,755			(801	)
Effect of exchange rates on cash		(139	)		21
Net increase in cash		3,732			251
Cash at beginning of period		9,383			10,866
Cash at end of period	$	13,115		$	11,117

Cash flows from operating activities

Cash used in operating activities for the six months ended June 30, 2020 was primarily due to net loss of $4.8 million, a decrease in cash from net changes in operating assets and liabilities of $3.7 million, partially offset by adjustments for certain non-cash items of $4.2 million, consisting primarily of impairment of right-of-use operating lease assets, decrease in fair value of earnout liability, depreciation, amortization, amortization of debt issuance costs, and stock-based compensation. Cash provided by operating activities for the six months ended June 30, 2019 was primarily due to the adjustments for certain non-cash items of $3.2 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, and stock-based compensation, partially offset by the net loss of $0.4 million and a decrease in cash from net changes in operating assets and liabilities of $0.4 million.

Cash flows from investing activities

Cash used in investing activities for the six months ended June 30, 2020 was $0.6 million, which related to capital expenditures. Cash used in investing activities for the six months ended June 30, 2019 was $1.4 million, of which $1.3 million related to the acquisition of Viscount, and $0.1 million related to capital expenditures.

Cash flows from financing activities

Cash provided by financing activities during the six months ended June 30, 2020 was due to net borrowings under our revolving loan facility of $2.1 million, the issuance of promissory notes to April 21 Funds of $4.0 million, and proceeds received under the Payment Protection Program of $2.9 million, partially offset by taxes paid related to net share settlement of restricted stock units of $0.4 million. Cash used in financing activities during the six months ended June 30, 2019 was due to repayment of notes payable of $2.0 million associated with the acquisition of 3VR, taxes paid related to net share settlement of restricted stock units of $0.5 million, partially offset by net borrowings under our revolving loan facility of $1.7 million.

Off-Balance Sheet Arrangements

We have not entered into off-balance sheet arrangements, or issued guarantees to third parties.

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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 June 30, 2020, 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, 2019.

Recent Accounting Pronouncements

See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the accompanying notes to our condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report for a description of recent accounting pronouncements, which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls over Financial Reporting

We have made no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended June 30, 2020, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

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-CRB, alleging breach of fiduciary duty and waste 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 had under Section 220 of the Delaware General Corporation Law.  On or around November 30, 2016, the plaintiff purported to serve a books and records demand under Section 220 of the Delaware General Corporation Law. We responded to that demand. On March 21, 2017, we and the plaintiff in the Oswald lawsuit filed a stipulation and proposed order lifting the stay of the case, granting the plaintiff leave to amend, and setting a briefing schedule. The plaintiff in the Oswald lawsuit filed his second amended complaint on April 10, 2017. We then filed a motion to dismiss that second amended complaint on May 12, 2017. After further briefing and argument, on October 22, 2017, the court issued its written order denying the motion to dismiss on the basis of demand futility. On January 3, 2018, the court entered a stipulated order setting a response and briefing schedule for defendants to the second amended complaint.  

Defendants filed motions to dismiss the second amended complaint in the Oswald action under Rule 12(b)(6) on January 16, 2018.  After further briefing and argument, on April 13, 2018, the court entered an order granting defendants’ motions to dismiss. On April 19, 2018, plaintiff Oswald filed a motion for leave to file a third amended complaint. On that same date, plaintiff Chopra, a plaintiff in a related and stayed derivative action in state court, filed a motion to intervene in the Oswald action. After further briefing and argument, on July 16, 2018, the court entered an order granting the Chopra motion to intervene and denying the Oswald motion for leave to file a third amended complaint. After the filing of an unopposed administrative motion for entry of judgment by defendants, on October 1, 2018, the court entered an order granting administrative motion for entry of final judgment and entered final judgment in favor of all named defendants and against plaintiffs Oswald and Chopra. On October 23, 2018, plaintiff Oswald filed a notice of appeal with the Ninth Circuit. After the appeal was fully-briefed, the matter was argued before the Ninth Circuit on March 5, 2020. On April 2, 2020, the Ninth Circuit issued a memorandum decision affirming final judgment in favor of defendants. In the interim, the state court Chopra and Wollnik actions remained stayed with periodic status conferences. Following the Ninth Circuit’s affirmance of the Oswald judgment in favor of defendants, the parties to the Wollnik action stipulated to its dismissal without prejudice, which was entered by the Court on May 21, 2020.  The parties to the Chopra action similarly stipulated to its dismissal without prejudice, which was entered by the Court on June 10, 2020.

From time to time, we may become subject to claims arising in the ordinary course of business or could be named a defendant in additional lawsuits. The outcome of such claims or other proceedings cannot be predicted with certainty and may have a material effect on our financial condition, results of operations or cash flows.

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Item 1A. Risk Factors

Our business and results of operations are subject to numerous risks, uncertainties, and other factors that you should be aware of. You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Part I - Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. There have been no material changes from the risk factors disclosed in our 2019 Annual Report on Form 10-K, except for the risk factor below.The risks, uncertainties and other factors described in the 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.

The impact of the COVID-19 outbreak, or similar global health concerns, could negatively impact our operations, supply chain and customer base.

The COVID-19 outbreak has severely restricted the level of economic activity around the world, which has and may continue to impact timing of demand for our products and services. Our operations and supply chains for certain of our products or services may be negatively impacted by the regional or global outbreak of illnesses, including COVID-19. Any quarantines, labor shortages or other disruptions to our operations, or those of our suppliers or customers, have and may continue to adversely impact our sales and operating results, including additional expenses and strain on the business as well as our supply chain. In addition, the COVID-19 pandemic has resulted in a widespread health crisis that has and may continue to adversely affect some of the market verticals that we participate in as well as the general economies and financial markets of many countries, including those in which we operate, resulting in an economic downturn that could affect the supply or demand for our products and services, and has and may continue to result in delayed sales and extended payment cycles for our products and services. We are unable to accurately fully predict the possible future effect on the Company, which could be material to our 2020 results, which is highly dependent on the breadth and duration of the outbreak and could be affected by other factors we are not currently able to predict, including new information which may emerge concerning the severity of COVID-19, the success of actions taken to contain or treat COVID-19, and reactions by consumers, companies, governmental entities and capital markets.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the six months ended June, 30, 2020 and 2019, we repurchased 94,134 shares and 98,939 shares, respectively, of common stock surrendered to us to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.

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Item 6. Exhibits

Exhibit Number	Description
3.1	Amended and Restated Bylaws of the Company, as amended May 16, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 19, 2020).
10.1	Promissory Note dated April 8, 2020 between the Company and East West Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 15, 2020).
10.2^*	2011 Incentive Compensation Plan, as amended through March 10, 2020.
10.3	Thirteenth Amendment to Loan and Security Agreement between the Company, Thursby Software LLC and East West Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 7, 2020).
10.4	Note and Warrant Purchase Agreement between the Company and the purchasers named therein (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 7, 2020).
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.
99.1	Paycheck Protection Program (PPP) Information sheet(incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on April 15, 2020).
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 (the “Exchange Act”). Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference.

^ Filed herewith.

*    Denotes management compensatory contract or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	IDENTIV, INC.
August 10, 2020	By:	/S/ Steven Humphreys
		Steven Humphreys
		Chief Executive Officer
		(Principal Executive Officer)
August 10, 2020	By:	/S/ Sandra Wallach
		Sandra Wallach
		Chief Financial Officer and Secretary
		(Principal Financial and Accounting Officer)

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EX-10.2

Exhibit 10.2

IDENTIV, INC.
2011 INCENTIVE COMPENSATION PLAN
(AS AMENDED THROUGH MARCH 10, 2020)

IDENTIV, INC.2011 INCENTIVE COMPENSATION PLAN(AS AMENDED THROUGH MARCH 10, 2020)

1.	Purpose	1
2.	Definitions	1
3.	Administration	4
4.	Shares Subject to Plan	5
5.	Eligibility; Per-Person Award Limitations	6
6.	Specific Terms of Awards	6
7.	Certain Provisions Applicable to Awards	11
8.	Change in Control	13
9.	General Provisions	14

IDENTIV, INC.
2011 INCENTIVE COMPENSATION PLAN
(AS AMENDED THROUGH MARCH 10, 2020)

1.Purpose. The purpose of this 2011 INCENTIVE COMPENSATION PLAN (the “Plan”) is to assist Identiv, Inc., a Delaware corporation (the “Company”) and its Related Entities (as hereinafter defined) in attracting, motivating, retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and providing such persons with annual and long term performance incentives to expend their maximum efforts in the creation of stockholder value.

2.Definitions. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof and elsewhere herein.

(a) “2007 Plan” means the Company’s 2007 Stock Option Plan, as amended.

(b) “2010 Plan” means the Company’s 2010 Bonus and Incentive Plan, as amended.

(c) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Share granted as a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based Award or Performance Award, together with any other right or interest, granted to a Participant under the Plan.

(d) “Award Agreement” means any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder.

(e) “Beneficiary” means the person, persons, trust or trusts that have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant’s death or to which Awards or other rights are transferred if and to the extent permitted under Section 9(b) hereof. If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

(f) “Beneficial Owner” and “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.

(g) “Board” means the Company’s Board of Directors.

(h) “Cause” shall, with respect to any Participant, have the meaning specified in the Award Agreement. In the absence of any definition in the Award Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the failure by the Participant to perform, in a reasonable manner, his or her duties as assigned by the Company or a Related Entity, (ii) any violation or breach by the Participant of his or her employment, consulting or other similar agreement with the Company or a Related Entity, if any, (iii) any violation or breach by the Participant of any non-competition, non-solicitation, non-disclosure and/or other similar agreement with the Company or a Related Entity, (iv) any act by the Participant of dishonesty or bad faith with respect to the Company or a Related Entity, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects the Participant’s work performance, or (vi) the commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participant or the Company or any Related Entity. The good faith determination by the Committee of whether the Participant’s Continuous Service was terminated by the Company for “Cause” shall be final and binding for all purposes hereunder.

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(i) “Change in Control” means a Change in Control as defined in Section 8(b) of the Plan.

(j) “Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.

(k) “Committee” means a committee designated by the Board to administer the Plan; provided, however, that if the Board fails to designate a committee or if there are no longer any members on the committee so designated by the Board, or for any other reason determined by the Board, then the Board shall serve as the Committee. While it is intended that the Committee shall consist of at least two directors, each of whom shall be (i) a “non-employee director” within the meaning of Rule 16b-3 (or any successor rule) under the Exchange Act, unless administration of the Plan by “non-employee directors” is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an “outside director” within the meaning of Section 162(m) of the Code, and (iii) “Independent”, the failure of the Committee to be so comprised shall not invalidate any Award that otherwise satisfies the terms of the Plan.

(l) “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’s capacity as a director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

(m) “Continuous Service” means the uninterrupted provision of services to the Company or any Related Entity in any capacity of Employee, Director, Consultant or other service provider. Continuous Service shall not be considered to be interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entities, or any successor entities, in any capacity of Employee, Director, Consultant or other service provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director, Consultant or other service provider (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

(n) “Director” means a member of the Board or the board of directors of any Related Entity.

(o) “Disability” means a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medical doctor satisfactory to the Committee.

(p) “Dividend Equivalent” means a right, granted to a Participant under Section 6(f) hereof, to receive cash, Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.

(q) “Effective Date” means the effective date of the Plan, which shall be April 7, 2011.

(r) “Eligible Person” means each officer, Director, Employee, Consultant and other person who provides services to the Company or any Related Entity. The foregoing notwithstanding, only Employees of the Company, or any parent corporation or subsidiary corporation of the Company (as those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible Persons for purposes of receiving any Incentive Stock Options. An Employee on leave of absence may, in the discretion of the Committee, be considered as still in the employ of the Company or a Related Entity for purposes of eligibility for participation in the Plan.

(s) “Employee” means any person, including an officer or Director, who is an employee of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

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(u) “Fair Market Value” means the fair market value of Shares, Awards or other property as determined by the Committee, or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of a Share as of any given date shall be the closing sale price per Share reported on a consolidated basis for stock listed on the principal stock exchange or market on which Shares are traded on the date as of which such value is being determined (or as of such later measurement date as determined by the Committee on the date the Award is authorized by the Committee), or, if there is no sale on that date, then on the last previous day on which a sale was reported.

(v) “Good Reason” shall, with respect to any Participant, have the meaning specified in the Award Agreement. In the absence of any definition in the Award Agreement, “Good Reason” shall have the equivalent meaning or the same meaning as “good reason” or “for good reason” set forth in any employment, consulting or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of any duties inconsistent in any material respect with the Participant’s duties or responsibilities as assigned by the Company or a Related Entity, or any other action by the Company or a Related Entity which results in a material diminution in such duties or responsibilities, excluding for this purpose an action which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; (ii) any material failure by the Company or a Related Entity to comply with its obligations to the Participant as agreed upon, other than a failure which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; or (iii) the Company’s or Related Entity’s requiring the Participant to be based at any office or location outside of fifty miles from the location of employment or service as of the date of Award, except for travel reasonably required in the performance of the Participant’s responsibilities.

(w) “Incentive Stock Option” means any Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code or any successor provision thereto.

(x) “Independent”, when referring to either the Board or members of the Committee, shall have the same meaning as used in the rules of the Listing Market.

(y) “Incumbent Board” means the Incumbent Board as defined in Section 8(b)(ii) hereof.

(z) “Listing Market” means the NASDAQ Stock Market or any other national securities exchange on which any securities of the Company are listed for trading or, if not so listed, any automated dealer quotation system on which the securities are quoted.

(aa) “Option” means a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other Awards at a specified price during specified time periods.

(bb) “Optionee” means a person to whom an Option is granted under this Plan or any person who succeeds to the rights of such person under this Plan.

(cc) “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(h) hereof.

(dd) “Participant” means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.

(ee) “Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Section 6(g) hereof.

(ff) “Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.

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(gg) “Performance Share” means any grant pursuant to Section 6(g) hereof of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

(hh) “Performance Unit” means any grant pursuant to Section 6(g) hereof of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

(ii) “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.

(jj) “Related Entity” means any Subsidiary, and any business, corporation, partnership, limited liability company or other entity designated by the Board, in which the Company or a Subsidiary holds a substantial ownership interest, directly or indirectly.

(kk) “Restricted Stock” means any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such risks of forfeiture and other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

(ll) “Restricted Stock Award” means an Award granted to a Participant under Section 6(d) hereof.

(mm) “Restricted Stock Unit” means a right to receive Shares, including Restricted Stock, cash measured based upon the value of Shares or a combination thereof, at the end of a specified deferral period.

(nn) “Restricted Stock Unit Award” means an Award of Restricted Stock Unit granted to a Participant under Section 6(e) hereof.

(oo) “Restriction Period” means the period of time specified by the Committee that Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose.

(pp) “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

(qq) “Shares” means the shares of common stock of the Company, par value $0.001 per share, and such other securities as may be substituted (or resubstituted) for Shares pursuant to Section 9(c) hereof.

(rr) “Stock Appreciation Right” means a right granted to a Participant under Section 6(c) hereof.

(ss) “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.

(tt) “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, Awards previously granted, or the right or obligation to make future Awards, by a company (i) acquired by the Company or any Related Entity, (ii) which becomes a Related Entity after the date hereof, or (iii) with which the Company or any Related Entity combines.

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3.Administration.

(a) Authority of the Committee. The Plan shall be administered by the Committee, except to the extent (and subject to the limitations imposed by Section 3(b) hereof) the Board elects to administer the Plan, in which case the Plan shall be administered by only those members of the Board who are Independent members of the Board, in which case references herein to the “Committee” shall be deemed to include references to the Independent members of the Board. The Committee shall have full and final authority, subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be required to follow past practices, act in a manner consistent with past practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of any other Eligible Persons or Participants.

(b) Manner of Exercise of Committee Authority. The Committee, and not the Board, shall exercise sole and exclusive discretion (i) on any matter relating to a Participant then subject to Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act, and (ii) with respect to any Award to an Independent Director. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, its Related Entities, Eligible Persons, Participants, Beneficiaries, transferees under Section 9(b) hereof or other persons claiming rights from or through a Participant, and stockholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any Related Entity, or committees thereof, the authority, subject to such terms and limitations as the Committee shall determine, to perform such functions, including administrative functions as the Committee may determine to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company. The Committee may appoint agents to assist it in administering the Plan.

(c) Limitation of Liability. The Committee and the Board, and each member thereof, shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or Employee, the Company’s independent auditors, Consultants or any other agents assisting in the administration of the Plan. Members of the Committee and the Board, and any officer or Employee acting at the direction or on behalf of the Committee or the Board, shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

4.Shares Subject to Plan.

(a) Limitation on Overall Number of Shares Available for Delivery Under Plan. Subject to adjustment as provided in Section 9(c) hereof, the total number of Shares reserved and available for delivery under the Plan shall be 5,259,956, consisting of an initial fixed authorization of 400,000 Shares, plus the 210,660 Shares and 249,296 Shares that remained available for delivery under the 2007 Plan and the 2010 Plan, respectively, on June 6, 2011 (the “Initial Stockholder Approval Date”), plus the additional 1,000,000 Shares authorized for issuance under the Plan at the Company’s 2014 Annual Meeting of Stockholders, plus an additional 2,000,000 Shares authorized for issuance under the Plan at the Company’s 2016 Annual Meeting of Stockholders, plus an additional 500,000 Shares authorized for issuance under the Plan at the Company’s 2018 Annual Meeting of Stockholders, plus the additional 900,000 Shares proposed for approval at the Company’s 2020 Annual Meeting of Stockholders. Any Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.

(b) Application of Limitation to Grants of Awards. No Award may be granted if the number of Shares to be delivered in connection with such an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of Shares deliverable in settlement of or relating to then outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.

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(c) Availability of Shares Not Delivered under Awards and Adjustments to Limits.

(i) If any Awards are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares to which those Awards were subject, shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for delivery with respect to Awards under the Plan, subject to Section 4(c)(iv) below.

(ii) In the event that any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or withholding tax liabilities arising from such option or other award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then only the number of Shares issued net of the Shares tendered or withheld shall be counted for purposes of determining the maximum number of Shares available for grant under the Plan.

(iii) Substitute Awards shall not reduce the Shares authorized for delivery under the Plan or authorized for delivery to a Participant in any period. Additionally, in the event that a company acquired by the Company or any Related Entity or with which the Company or any Related Entity combines has shares available under a pre-existing plan approved by its stockholders, the shares available for delivery pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery under the Plan; if and to the extent that the use of such Shares would not require approval of the Company’s stockholders under the rules of the Listing Market.

(iv) Any Share that again becomes available for delivery pursuant to this Section 4(c) shall be added back as one (1) Share.

(v) Notwithstanding anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 9(c) hereof, the maximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be 5,259,956 Shares.

(d) Awards Under the 2007 Plan and the 2010 Plan. This Plan will serve as the successor to the 2007 Plan. Awards granted under the 2007 Plan prior to the Initial Stockholder Approval Date shall continue to be governed by the terms of the 2007 Plan; however, no further awards shall be made under the 2007 Plan after the Initial Stockholder Approval Date. For the avoidance of doubt, securities issuable in connection with awards granted under the 2010 Plan after the Initial Stockholder Approval Date shall be issued in accordance with and governed by the terms of the 2011 Plan.

5.Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to Eligible Persons. Subject to adjustment as provided in Section 9(c), in any fiscal year of the Company during any part of which the Plan is in effect, no Participant may be granted (i) Options or Stock Appreciation Rights with respect to more than 500,000 Shares or (ii) Restricted Stock, Restricted Stock Units, Performance Shares and/or Other Stock-Based Awards with respect to more than 500,000 Shares. In addition, the maximum dollar value payable to any one Participant with respect to Performance Units is (x) $3,000,000 with respect to any 12 month Performance Period (pro-rated for any Performance Period that is less than 12 months based upon the ratio of the number of days in the Performance Period as compared to 365), and (y) with respect to any Performance Period that is more than 12 months, $3,000,000 multiplied by the number of full 12 month periods that are in the Performance Period.

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6.Specific Terms of Awards.

(a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 9(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of the Participant’s Continuous Service and terms permitting a Participant to make elections relating to his or her Award. Except as otherwise expressly provided herein, the Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the requirements of Delaware law, no consideration other than services may be required for the grant (as opposed to the exercise) of any Award.

(b) Options. The Committee is authorized to grant Options to any Eligible Person on the following terms and conditions:

(i) Exercise Price. Other than in connection with Substitute Awards, the exercise price per Share purchasable under an Option shall be determined by the Committee, provided that such exercise price shall not, in the case of Incentive Stock Options, be less than 100% of the Fair Market Value of a Share on the date of grant of the Option and shall not, in any event, be less than the par value of a Share on the date of grant of the Option. If an Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option is granted.

(ii) Time and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Options shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the methods by which the exercise price may be paid or deemed to be paid (including in the discretion of the Committee a cashless exercise procedure), the form of such payment, including, without limitation, cash, Shares (including without limitation the withholding of Shares otherwise deliverable pursuant to the Award), other Awards or awards granted under other plans of the Company or a Related Entity, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis provided that such deferred payments are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law), and the methods by or forms in which Shares will be delivered or deemed to be delivered to Participants.

(iii) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options (including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code, unless the Participant has first requested, or consents to, the change that will result in such disqualification. Thus, if and to the extent required to comply with Section 422 of the Code, Options granted as Incentive Stock Options shall be subject to the following special terms and conditions:

(A) the Option shall not be exercisable for more than ten years after the date such Incentive Stock Option is granted; provided, however, that if a Participant owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant, the term of the Incentive Stock Option shall be (to the extent required by the Code at the time of the grant) for no more than five years from the date of grant; and

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(B) The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted under the Plan and all other option plans of the Company (and any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) that become exercisable for the first time by the Participant during any calendar year shall not (to the extent required by the Code at the time of the grant) exceed $100,000.

(iv) Non-Discretionary Options for Certain Directors. For Board years ending prior to the Board year ending on May 31, 2016, in addition to any other Options that any Director who is not an Employee may be granted on a discretionary basis under the Plan, each Director who is not an Employee shall be automatically granted without the necessity of action by the Board or the Committee, Options subject to the following terms and conditions:

(A) Initial Grant. On the date that a Director who is not an Employee commences service on the Board, an initial grant of Options that are not intended to be designated as Incentive Stock Options (“Non-Qualified Stock Options), shall automatically be made to that Director who is not an Employee (the “Initial Option Grant”). The number of Shares subject to this Initial Option Grant and other terms governing this Initial Option Grant shall be as determined by the Board in its sole discretion. If the Board does not establish the number of Shares subject to the Initial Option Grant for a given newly-elected Director who is not an Employee prior to the date of grant for such Initial Option Grant, then the number shall be one thousand (1,000) Shares. If at the time a Director who is also an Employee or does not otherwise qualify as an outside director within the meaning of Section 162(m) of the Code (an “Outside Director”), commences service on the Board, such Director shall be entitled to an Initial Option Grant at such time as such Director subsequently is no longer an Employee or qualifies as an Outside Director and if such Director remains a Director.

(B) Annual Option Grant. An Annual Option Grant of Non-Qualified Stock Options (the “Annual Option Grant”) shall automatically be made to each Director who (i) is re-elected to the Board or who otherwise continues as a Director, (ii) qualifies as an Outside Director on the relevant grant date and (iii) has served as a Director for at least six months. The number of Shares subject to this Annual Option Grant and other terms governing this Annual Option Grant shall be as determined by the Board in its sole discretion. If the Board does not establish the number of Shares subject to the Annual Option Grant, then the number shall be five hundred (500) Shares. The date and time of grant of an Annual Option Grant is the date of the annual meeting of the Company’s stockholders and the time shall be immediately upon the adjournment of the annual meeting of the Company’s stockholders.

(C) Vesting. Non-Qualified Stock Options received by the Participant as an Initial Option Grant or an Annual Option Grant (collectively the “Director Non-Discretionary Options”) shall vest and become exercisable in twelve (12) equal monthly installments on each monthly anniversary of the grant date, such that the Award is fully vested after one year of Continuous Service on the Board from the grant date.

(D) Termination of Continuous Service as a Director. In the event a Participant’s Continuous Service as a Director terminates for any reason other than death, the Participant may exercise his or her Director Non-Discretionary Options to the extent that the Participant was entitled to exercise such Director Non-Discretionary Options as of the date of termination of the Participant’s Continuous Service as a Director, but only within ninety (90) calendar days following the date of such termination of the Participant’s Continuous Service as a Director (and in no event later than the expiration of the term of such Director Non-Discretionary Options as set forth in the applicable Award Agreement(s)). This period may be adjusted by the Board in its discretion, provided that the affected Participant shall be recused from such decision of the Board. If Participant’s Continuous Service as a Director terminates due to death, the Participant’s estate, a person who acquired the right to exercise the Director Non-Discretionary Options by bequest or inheritance, or a person designated to exercise the Director Non-Discretionary Options upon the Participant’s death pursuant to Section 9(b) of the Plan must exercise the Director Non-Discretionary Options to the extent that the Participant was entitled to exercise such Director Non-Discretionary Options as of the date of termination of the Participant’s Continuous Service as a Director, but only within twelve (12) months following the date of such termination of the Participant’s Continuous Service as a Director (and in no event later than the expiration of the term of such Director Non-Discretionary Options as set forth in the applicable Award Agreement(s)). This period may be adjusted by the Board in its discretion. If, after termination of the Participant’s Continuous Service as a Director, the Director Non-Discretionary Options are not exercised within ninety (90) calendar days or twelve months, as applicable, following the date of such termination of the Participant’s Continuous Service as a Director, the Director Non-Discretionary Options shall terminate.

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(c) Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights to any Eligible Person in conjunction with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (a “Tandem Stock Appreciation Right”), or without regard to any Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms and conditions as the Committee may establish in its sole discretion, not inconsistent with the provisions of the Plan, including the following:

(i) Right to Payment. A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the Stock Appreciation Right as determined by the Committee. The grant price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a Share on the date of grant, in the case of a Freestanding Stock Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem Stock Appreciation Right.

(ii) Other Terms. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Participants, whether or not a Stock Appreciation Right shall be in tandem or in combination with any other Award, and any other terms and conditions of any Stock Appreciation Right.

(iii) Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or, for Options that are not Incentive Stock Options, at any time thereafter before exercise or expiration of such Option. Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the exercise price at which Shares can be acquired pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation Right shall no longer be exercisable to the extent the related Option has been exercised.

(d) Restricted Stock Awards. The Committee is authorized to grant Restricted Stock Awards to any Eligible Person on the following terms and conditions:

(i) Grant and Restrictions. Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, or as otherwise provided in this Plan during the Restriction Period. The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to a Restricted Stock Award, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the period that the Restriction Stock Award is subject to a risk of forfeiture, subject to Section 9(b) below and except as otherwise provided in the Award Agreement, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.

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(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable Restriction Period, the Participant’s Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to Restricted Stock Awards shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.

(iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.

(iv) Dividends and Splits. As a condition to the grant of a Restricted Stock Award, the Committee may require or permit a Participant to elect that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted Stock or applied to the purchase of additional Awards under the Plan. Unless otherwise determined by the Committee, Shares distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Shares or other property have been distributed.

(e) Restricted Stock Unit Award. The Committee is authorized to grant Restricted Stock Unit Awards to any Eligible Person on the following terms and conditions:

(i) Award and Restrictions. Satisfaction of a Restricted Stock Unit Award shall occur upon expiration of the deferral period specified for such Restricted Stock Unit Award by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, a Restricted Stock Unit Award shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. A Restricted Stock Unit Award may be satisfied by delivery of Shares, cash equal to the Fair Market Value of the specified number of Shares covered by the Restricted Stock Unit, or a combination thereof, as determined by the Committee at the date of grant or thereafter. Prior to satisfaction of a Restricted Stock Unit Award, a Restricted Stock Unit Award carries no voting or dividend or other rights associated with Share ownership.

(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Restricted Stock Unit Award), the Participant’s Restricted Stock Unit Award that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Restricted Stock Unit Award shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of any Restricted Stock Unit Award.

(iii) Dividend Equivalents. Unless otherwise determined by the Committee at the date of grant, any Dividend Equivalents that are granted with respect to any Restricted Stock Unit Award shall be either (A) paid with respect to such Restricted Stock Unit Award at the dividend payment date in cash or in Shares of unrestricted stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Restricted Stock Unit Award and the amount or value thereof automatically deemed reinvested in additional Restricted Stock Units, other Awards or other investment vehicles, as the Committee shall determine or permit the Participant to elect. The applicable Award Agreement shall specify whether any Dividend Equivalents shall be paid at the dividend payment date, deferred or deferred at the election of the Participant. If the Participant may elect to defer the Dividend Equivalents, such election shall be made within 30 days after the grant date of the Restricted Stock Unit Award, but in no event later than 12 months before the first date on which any portion of such Restricted Stock Unit Award vests (or at such other times prescribed by the Committee as shall not result in a violation of Section 409A of the Code).

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(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Shares to any Eligible Persons as a bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, including, without limitation, annual Director fees payable to a Director that has elected to receive some or all of such annual Director fees payable to him or her in the form of Shares; provided that, in the case of Eligible Persons subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Shares or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee.

(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to any Eligible Person entitling the Eligible Person to receive cash, Shares, other Awards, or other property equal in value to the dividends paid with respect to a specified number of Shares, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify. Any such determination by the Committee shall be made at the grant date of the applicable Award.

(h) Performance Awards. The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash, Shares, or other Awards, on terms and conditions established by the Committee. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee, in its sole discretion, upon the grant of each Performance Award. Except as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon any criteria that the Committee, in its sole discretion, shall determine should be used for that purpose. The amount of the Award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis in a manner that does not violate the requirements of Section 409A of the Code.

(i) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to any Eligible Person such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan. Other Stock-Based Awards may be granted to Participants either alone or in addition to other Awards granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan. The Committee shall determine the terms and conditions of such Awards. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(i) shall be purchased for such consideration, (including without limitation loans from the Company or a Related Entity provided that such loans are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law) paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards or other property, as the Committee shall determine.

7.Certain Provisions Applicable to Awards.

(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Related Entity, or any business entity to be acquired by the Company or a Related Entity, or any other right of a Participant to receive payment from the Company or any Related Entity. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which the value of Shares subject to the Award is equivalent in value to the cash compensation (for example, Restricted Stock or Restricted Stock Units), or in which the exercise price, grant price or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Shares minus the value of the cash compensation surrendered (for example, Options or Stock Appreciation Right granted with an exercise price or grant price “discounted” by the amount of the cash compensation surrendered), provided that any such determination to grant an Award in lieu of cash compensation must be made in compliance with Section 409A of the Code.

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(b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten years (or in the case of an Incentive Stock Option such shorter term as may be required under Section 422 of the Code).

(c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Related Entity upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Shares, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis, provided that any determination to pay in installments or on a deferred basis shall be made by the Committee at the date of grant. Any installment or deferral provided for in the preceding sentence shall, however, be subject to the Company’s compliance with applicable law and all applicable rules of the Listing Market, and in a manner intended to be exempt from or otherwise satisfy the requirements of Section 409A of the Code. Subject to Section 7(e) hereof, the settlement of any Award may be accelerated, and cash paid in lieu of Shares in connection with such settlement, in the sole discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control). Any such settlement shall be at a value determined by the Committee in its sole discretion, which, without limitation, may in the case of an Option or Stock Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement date exceeds the exercise or grant price. Installment or deferred payments may be required by the Committee (subject to Section 7(e) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee. The Committee may, without limitation, make provision for the payment or crediting of a reasonable interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Shares.

(d) Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

(e) Code Section 409A.

(i) The Award Agreement for any Award that the Committee reasonably determines to constitute a Section 409A Plan, as defined in Section 7(e)(ii) hereof, and the provisions of the Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A, and the Committee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement (and the provisions of the Plan applicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with the requirements of Section 409A of the Code.

(ii) If any Award constitutes a “nonqualified deferred compensation plan” under Section 409A of the Code (a “Section 409A Plan”), then the Award shall be subject to the following additional requirements, if and to the extent required to comply with Section 409A of the Code:

(A) Payments under the Section 409A Plan may not be made earlier than the first to occur of (u) the Participant’s “separation from service”, (v) the date the Participant becomes “disabled”, (w) the Participant’s death, (x) a “specified time (or pursuant to a fixed schedule)” specified in the Award Agreement at the date of the deferral of such compensation, (y) a “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets” of the Company, or (z) the occurrence of an “unforeseeable emergency”;

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(B) The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;

(C) Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of Section 409A(a)(4) of the Code; and

(D) In the case of any Participant who is “specified employee”, a distribution on account of a “separation from service” may not be made before the date which is six months after the date of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death).

For purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award.

(iii) Notwithstanding the foregoing, or any provision of this Plan or any Award Agreement, the Company does not make any representation to any Participant or Beneficiary that any Awards made pursuant to this Plan are exempt from, or satisfy, the requirements of, Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any Beneficiary for any tax, additional tax, interest or penalties that the Participant or any Beneficiary may incur in the event that any provision of this Plan, or any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.

8.Change in Control.

(a) Effect of “Change in Control.” If and only to the extent provided in any employment or other agreement between the Participant and the Company or any Related Entity, or in any Award Agreement, or to the extent otherwise determined by the Committee, as constituted immediately before the Change in Control, in its sole discretion and without any requirement that each Participant be treated consistently, upon the occurrence of a “Change in Control,” as defined in Section 8(b):

(i) Any Option or Stock Appreciation Right that was not previously vested and exercisable as of the time of the Change in Control, shall become immediately vested and exercisable, subject to applicable restrictions set forth in Section 9(a) hereof.

(ii) Any restrictions, deferral of settlement, and forfeiture conditions applicable to a Restricted Stock Award, Restricted Stock Unit Award or an Other Stock-Based Award subject only to future service requirements granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 9(a) hereof.

(iii) With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, the Committee may, in its discretion, deem such performance goals and conditions as having been met as of the date of the Change in Control.

(iv) Notwithstanding the foregoing, in the event of a termination of the Participant’s Continuous Service with the Company (if it is the surviving entity in the Change in Control) or the successor company (other than a termination of the Participant’s Continuous Service for Cause by the Company or the successor company, as applicable, by the Participant without Good Reason, or by reason of the Participant’s death or Disability) within 24 months following such Change in Control, the Participant’s Award(s) shall become immediately vested.

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(b) Definition of “Change in Control”. Unless otherwise specified in any employment agreement between the Participant and the Company or any Related Entity, or in an Award Agreement, a “Change in Control” shall mean the occurrence of any of the following:

(i) The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (A) the value of then outstanding equity securities of the Company (the “Outstanding Company Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided, however, that for purposes of this Section 8(b), the following acquisitions shall not constitute or result in a Change in Control: (v) any acquisition directly from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (z) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below; or

(ii) During any period of two (2) consecutive years (not including any period prior to the Effective Date) individuals who constitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company or any of its Subsidiaries (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the board of directors (or comparable governing body of an entity that does not have such a board), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the value of the then outstanding equity securities of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the Board of Directors or other governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

14

9.General Provisions.

(a) Compliance with Legal and Other Requirements. The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration or qualification of such Shares or other required action under any federal or state law, rule or regulation, listing or other required action with respect to the Listing Market, or compliance with any other obligation of the Company, as the Committee, may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.

(b) Limits on Transferability; Beneficiaries. No Award or other right or interest granted under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than Incentive Stock Options and Stock Appreciation Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award Agreement (subject to any terms and conditions which the Committee may impose thereon). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

(c) Adjustments.

(i) Adjustments to Awards. In the event that any extraordinary dividend or other distribution (whether in the form of cash, Shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Shares and/or such other securities of the Company or any other issuer such that a substitution, exchange, or adjustment is determined by the Committee to be appropriate, then the Committee shall, in such manner as it may deem equitable, substitute, exchange or adjust any or all of (A) the number and kind of Shares which may be delivered in connection with Awards granted thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under Section 4 hereof, (C) the number and kind of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E) any other aspect of any Award that the Committee determines to be appropriate.

(ii) Adjustments in Case of Certain Transactions. In the event of any merger, consolidation or other reorganization in which the Company does not survive, or in the event of any Change in Control, any outstanding Awards may be dealt with in accordance with any of the following approaches, without the requirement of obtaining any consent or agreement of a Participant as such, as determined by the agreement effectuating the transaction or, if and to the extent not so determined, as determined by the Committee: (a) the continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (b) the assumption or substitution for, as those terms are defined below, the outstanding Awards by the surviving entity or its parent or subsidiary, (c) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (d) settlement of the value of the outstanding Awards in cash or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Options or Stock Appreciation Rights, shall be measured by the amount, if any, by which the Fair Market Value of a Share exceeds the exercise or grant price of the Option or Stock Appreciation Right as of the effective date of the transaction). For the purposes of this Agreement, an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award or Other Stock-Based Award shall be considered assumed or substituted for if following the Change in Control the Award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award or Other

15

Stock-Based Award immediately prior to the Change in Control, on substantially the same vesting and other terms and conditions as were applicable to the Award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change in Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the transaction constituting a Change in Control is not solely common stock of the successor company or its parent or subsidiary, the Committee may, with the consent of the successor company or its parent or subsidiary, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award or Other Stock-Based Award, for each Share subject thereto, will be solely common stock of the successor company or its parent or subsidiary substantially equal in fair market value to the per share consideration received by holders of Shares in the transaction constituting a Change in Control. The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding. The Committee shall give written notice of any proposed transaction referred to in this Section 9(c)(ii) at a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that Participants may have a reasonable period of time prior to the closing date of such transaction within which to exercise any Awards that are then exercisable (including any Awards that may become exercisable upon the closing date of such transaction). A Participant may condition his exercise of any Awards upon the consummation of the transaction.

(iii) Other Adjustments. The Committee (and the Board if and only to the extent such authority is not required to be exercised by the Committee to comply with Section 162(m) of the Code) is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards, or performance goals and conditions relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity or any business unit, or the financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Related Entity or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant. Adjustments permitted hereby may include, without limitation, increasing the exercise price of Options and Stock Appreciation Rights, increasing performance goals, or other adjustments that may be adverse to the Participant.

(d) Taxes. The Company and any Related Entity are authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company or any Related Entity and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

(e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the consent of stockholders or Participants (including in a manner adverse to the rights of a Participant under an outstanding Award), except that any amendment or alteration to the Plan shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Board action if such stockholder approval is required by any federal or state law or regulation (including, without limitation, Rule 16b-3) or the rules of the Listing Market, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award Agreement relating thereto. Notwithstanding anything to the contrary, the Committee shall be authorized to amend any outstanding Option and/or Stock Appreciation Right to reduce the exercise price or grant price without the prior approval of the stockholders of the Company. In addition, the Committee shall be authorized to cancel outstanding Options and/or Stock Appreciation Rights replaced with Awards having a lower exercise price without the prior approval of the stockholders of the Company.

16

(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken hereunder or under any Award shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a Related Entity; (ii) interfering in any way with the right of the Company or a Related Entity to terminate any Eligible Person’s or Participant’s Continuous Service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and Employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company including, without limitation, any right to receive dividends or distributions, any right to vote or act by written consent, any right to attend meetings of stockholders or any right to receive any information concerning the Company’s business, financial condition, results of operation or prospects, unless and until such time as the Participant is duly issued Shares on the stock books of the Company in accordance with the terms of an Award. None of the Company, its officers or its directors shall have any fiduciary obligation to the Participant with respect to any Awards unless and until the Participant is duly issued Shares pursuant to the Award on the stock books of the Company in accordance with the terms of an Award. Neither the Company nor any of the Company’s officers, directors, representatives or agents is granting any rights under the Plan to the Participant whatsoever, oral or written, express or implied, other than those rights expressly set forth in this Plan or the Award Agreement.

(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Shares pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Shares, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law.

(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the  Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable including incentive arrangements and awards.

(i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or other consideration. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(j) Governing Law. The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to principles of conflict of laws, and applicable federal law.

(k) Non-U.S. Laws. The Committee shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.

(l) Plan Effective Date and Stockholder Approval; Termination of Plan. The Plan shall become effective on the Effective Date, subject to subsequent approval, within 12 months of its adoption by the Board, by stockholders of the Company eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Section 422, Rule 16b-3 under the Exchange Act (if applicable), applicable requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed or quoted, and other laws, regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject to stockholder approval, but may not be exercised or otherwise settled in the event the stockholder approval is not obtained. The Plan shall terminate at the earliest of (a) such time as no Shares remain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) December 23, 2025.

17

EX-31.1

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:  August 10, 2020	/s/ Steven Humphreys
	Steven Humphreys
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Sandra Wallach, 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:  August 10, 2020	/s/ Sandra Wallach
	Sandra Wallach
	Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)

EX-32

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, to my knowledge: (1) the Quarterly Report of Identiv, Inc. on Form 10-Q for the quarterly period ended June 30, 2020 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:  August 10, 2020	/s/ Steven Humphreys
	Steven Humphreys
	Chief Executive Officer
	(Principal Executive Officer)

I, Sandra Wallach, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) the Quarterly Report of Identiv, Inc. on Form 10-Q for the quarterly period ended June 30, 2020 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:  August 10, 2020	/s/ Sandra Wallach
	Sandra Wallach
	Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 06, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Trading Symbol	INVE
Entity Registrant Name	Identiv, Inc.
Entity Central Index Key	0001036044
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	000-29440
Entity Tax Identification Number	77-0444317
Entity Address, Address Line One	2201 Walnut Avenue
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Fremont
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94538
City Area Code	949
Local Phone Number	250-8888
Entity Common Stock, Shares Outstanding		17,892,629
Security12b Title	Common Stock, $0.001 par value per share
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Document Quarterly Report	true
Document Transition Report	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash	$ 13,115	$ 9,383
Accounts receivable, net of allowances of $465 and $299 as of June 30, 2020 and December 31, 2019, respectively	17,976	18,363
Inventories	18,747	16,145
Prepaid expenses and other current assets	2,957	2,292
Total current assets	52,795	46,183
Property and equipment, net	2,269	2,042
Operating lease right-of-use assets	3,492	4,629
Intangible assets, net	8,751	10,104
Goodwill	10,180	10,238
Other assets	1,011	1,122
Total assets	78,498	74,318
Current liabilities:
Accounts payable	9,216	8,799
Current portion - contractual payment obligation	862	1,311
Current portion - financial liabilities, net of debt issuance costs of $410 and $41 as of June 30, 2020 and December 31, 2019, respectively	22,983	14,189
Operating lease liabilities	1,832	1,814
Deferred revenue	2,280	2,193
Accrued compensation and related benefits	2,144	1,671
Other accrued expenses and liabilities	2,296	4,498
Total current liabilities	41,613	34,475
Long-term contractual payment obligation	486	360
Long-term operating lease liabilities	2,989	3,013
Long-term deferred revenue	512	640
Other long-term liabilities	385	364
Total liabilities	45,985	38,852
Commitments and contingencies (see Note 17)
Stockholders´ equity:
Common stock, $0.001 par value: 50,000 shares authorized; 19,177 and 18,209 shares issued and 17,860 and 16,986 shares outstanding as of June 30, 2020 and December 31, 2019, respectively	19	18
Additional paid-in capital	450,480	447,965
Treasury stock, 1,317 and 1,223 shares as of June 30, 2020 and December 31, 2019, respectively	(9,451)	(9,043)
Accumulated deficit	(410,300)	(405,504)
Accumulated other comprehensive income	1,760	2,025
Total stockholders´ equity	32,513	35,466
Total liabilities and stockholders' equity	78,498	74,318
Series B convertible preferred stock
Stockholders´ equity:
Series B convertible preferred stock, $0.001 par value: 5,000 shares authorized; 5,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019	$ 5	$ 5

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Accounts receivable, allowances	$ 465	$ 299
Debt instrument debt issuance costs, current	$ 410	$ 41
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	19,177,000	18,209,000
Common stock, shares outstanding	17,860,000	16,986,000
Treasury stock, shares	1,317,000	1,223,000
Series B convertible preferred stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, issued	5,000,000	5,000,000
Preferred stock, outstanding	5,000,000	5,000,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Statement [Abstract]
Net revenue	$ 19,105	$ 22,237	$ 37,225	$ 41,759
Cost of revenue	11,393	12,354	22,013	23,172
Gross profit	7,712	9,883	15,212	18,587
Operating expenses:
Research and development	2,422	2,078	5,018	4,104
Selling and marketing	4,236	4,721	8,733	9,219
General and administrative	2,151	2,279	4,342	4,901
Decrease in fair value of earnout liability	(261)		(261)
Restructuring and severance	1,417	(2)	1,482	(14)
Total operating expenses	9,965	9,076	19,314	18,210
(Loss) income from operations	(2,253)	807	(4,102)	377
Non-operating income (expense):
Interest expense, net	(407)	(241)	(659)	(520)
Foreign currency gains (losses), net	(30)	(70)	56	(72)
(Loss) income before income taxes	(2,690)	496	(4,705)	(215)
Income tax provision	(59)	(80)	(91)	(184)
Net (loss) income	(2,749)	416	(4,796)	(399)
Other comprehensive (loss) income:
Foreign currency translation adjustment	215	196	(265)	67
Comprehensive (loss) income	$ (2,534)	$ 612	$ (5,061)	$ (332)
Net (loss) income per common share:
Basic	$ (0.17)	$ 0.01	$ (0.30)	$ (0.05)
Diluted	$ (0.17)	$ 0.01	$ (0.30)	$ (0.05)
Weighted average shares used in computing net (loss) income per common share:
Basic	17,941	16,953	17,730	16,896
Diluted	17,941	17,795	17,730	16,896

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Series B convertible preferred stock	Common Stock	Additional Paid-in Capital	Treasury Stock	Accumulated Deficit	Accumulated Other Comprehensive Income	Noncontrolling Interest
Beginning Balances at Dec. 31, 2018	$ 33,700	$ 5	$ 17	$ 444,145	$ (8,153)	$ (404,353)	$ 2,209	$ (170)
Beginning Balances (in shares) at Dec. 31, 2018		5,000	15,967
Net income (loss)	(815)					(815)
Unrealized income (loss) from foreign currency translation adjustments	(129)						(129)
Issuance of common stock in connection with acquisition of business	1,635		$ 1	1,634
Issuance of common stock in connection with acquisition of business (shares)			419
Issuance of common stock in connection with vesting of stock awards (shares)			126
Stock-based compensation	687			687
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units	(228)				(228)
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units (shares)			(43)
Issuance of common stock in connection with warrant exercise (shares)			10
Ending Balances at Mar. 31, 2019	34,850	$ 5	$ 18	446,466	(8,381)	(405,168)	2,080	(170)
Ending Balances (in shares) at Mar. 31, 2019		5,000	16,479
Beginning Balances at Dec. 31, 2018	33,700	$ 5	$ 17	444,145	(8,153)	(404,353)	2,209	(170)
Beginning Balances (in shares) at Dec. 31, 2018		5,000	15,967
Net income (loss)	(399)
Ending Balances at Jun. 30, 2019	35,540	$ 5	$ 18	446,819	(8,656)	(404,752)	2,276	(170)
Ending Balances (in shares) at Jun. 30, 2019		5,000	16,786
Beginning Balances at Mar. 31, 2019	34,850	$ 5	$ 18	446,466	(8,381)	(405,168)	2,080	(170)
Beginning Balances (in shares) at Mar. 31, 2019		5,000	16,479
Net income (loss)	416					416
Unrealized income (loss) from foreign currency translation adjustments	196						196
Issuance of common stock in connection with acquisition of business (shares)			456
Stock-based compensation	693			693
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units	(275)				(275)
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units (shares)			(56)
Cancellation of holdback shares in connection with acquisition	(340)			(340)
Cancellation of holdback shares in connection with acquisition (shares)			(93)
Ending Balances at Jun. 30, 2019	35,540	$ 5	$ 18	446,819	(8,656)	(404,752)	2,276	$ (170)
Ending Balances (in shares) at Jun. 30, 2019		5,000	16,786
Beginning Balances at Dec. 31, 2019	35,466	$ 5	$ 18	447,965	(9,043)	(405,504)	2,025
Beginning Balances (in shares) at Dec. 31, 2019		5,000	16,986
Net income (loss)	(2,047)					(2,047)
Unrealized income (loss) from foreign currency translation adjustments	(480)						(480)
Issuance of common stock in connection with vesting of stock awards (shares)			150
Stock-based compensation	640			640
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units	(225)				(225)
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units (shares)			(48)
Issuance of common stock in connection with warrant exercise			$ 1	(1)
Issuance of common stock in connection with warrant exercise (shares)			387
Ending Balances at Mar. 31, 2020	33,354	$ 5	$ 19	448,604	(9,268)	(407,551)	1,545
Ending Balances (in shares) at Mar. 31, 2020		5,000	17,475
Beginning Balances at Dec. 31, 2019	35,466	$ 5	$ 18	447,965	(9,043)	(405,504)	2,025
Beginning Balances (in shares) at Dec. 31, 2019		5,000	16,986
Net income (loss)	(4,796)
Ending Balances at Jun. 30, 2020	32,513	$ 5	$ 19	450,480	(9,451)	(410,300)	1,760
Ending Balances (in shares) at Jun. 30, 2020		5,000	17,860
Beginning Balances at Mar. 31, 2020	33,354	$ 5	$ 19	448,604	(9,268)	(407,551)	1,545
Beginning Balances (in shares) at Mar. 31, 2020		5,000	17,475
Net income (loss)	(2,749)					(2,749)
Unrealized income (loss) from foreign currency translation adjustments	215						215
Issuance of common stock in connection with vesting of stock awards (shares)			212
Stock-based compensation	751			751
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units	(183)				(183)
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units (shares)			(46)
Issuance of common stock in connection with Viscount Earnout	489			489
Issuance of common stock in connection with Viscount Earnout, (shares)			157
Issuance of shares to non-employees	304			304
Issuance of shares to non-employees (shares)			62
Issuance of warrants	332			332
Ending Balances at Jun. 30, 2020	$ 32,513	$ 5	$ 19	$ 450,480	$ (9,451)	$ (410,300)	$ 1,760
Ending Balances (in shares) at Jun. 30, 2020		5,000	17,860

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net loss	$ (4,796)	$ (399)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	1,650	1,750
Accretion of interest on contractual payment obligation	87	82
Stock-based compensation expense	1,391	1,380
Amortization of debt issuance costs	146	33
Impairment of right-of-use operating lease asset	1,199
Decrease in fair value of earnout liability	(261)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	405	(1,930)
Inventories	(2,608)	298
Prepaid expenses and other assets	(555)	(123)
Accounts payable	699	2,177
Contractual payment obligation liability	(410)	(629)
Deferred revenue	(41)	868
Accrued expenses and other liabilities	(1,176)	(1,084)
Net cash (used in) provided by operating activities	(4,270)	2,423
Cash flows from investing activities:
Capital expenditures	(614)	(105)
Acquisition of business, net of cash acquired		(1,287)
Net cash used in investing activities	(614)	(1,392)
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs	4,345	3,073
Repayments of debt	(2,097)	(1,371)
Repayments of notes payable		(2,000)
Taxes paid related to net share settlement of restricted stock units	(408)	(503)
Net cash provided by (used in) financing activities	8,755	(801)
Effect of exchange rates on cash	(139)	21
Net increase in cash	3,732	251
Cash at beginning of period	9,383	10,866
Cash at end of period	13,115	11,117
Supplemental Disclosures of Cash Flow Information:
Interest paid	515	476
Taxes paid, net	17	110
Non-cash investing and financing activities:
Common stock issued to settle vendor liability	304
Common stock issued to settle earnout liability	489
Fair value of warrants issued in connection with financial liabilities	332
Cancellation of holdback shares in connection with acquisition		340
Common Stock
Non-cash investing and financing activities:
Common stock issued for acquisition of business, net		$ 1,635
April 21 Funds Promissory Notes
Cash flows from financing activities:
Proceeds from promissory notes	4,000
Paycheck Protection Program Promissory Note
Cash flows from financing activities:
Proceeds from promissory notes	$ 2,915

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Basis of Presentation

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Identiv, Inc. and its wholly and majority owned subsidiaries (“Identiv” or the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements of 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, consisting of 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 three months and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 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,” and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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Significant Accounting Policies and Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Significant Accounting Policies and Recent Accounting Pronouncements

2. Significant Accounting Policies and Recent Accounting Pronouncements

Significant Accounting Policies

No material changes have been made to the Company's significant accounting policies disclosed in Note 1, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts.  ASU No. 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. Subsequent to the issuance of ASU No. 2016-13, the FASB issued ASU No. 2018-19, Codification Improvement to Topic 326, Financial Instruments – Credit Losses, ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU No. 2019-05, Financial Instruments Credit Losses (Topic 326) Targeted Transition Relief, ASU No. 2016-13, the FASB issued ASU No. 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU No. 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The subsequent ASUs do not change the core principle of the guidance in ASU No. 2016-13. Instead these amendments are intended to clarify and improve operability of certain topics included within ASU No. 2016-13.

Additionally, ASU No. 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as a SRC. In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses.  The subsequent amendments will have the same effective date and transition requirements as ASU No. 2016-13.  Early adoption is permitted. Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.  While the Company is currently evaluating the impact of Topic 326, Company does not expect the adoption of the ASU to have a material impact on its condensed consolidated financial statements.

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

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Revenue

6 Months Ended

Jun. 30, 2020

Revenue From Contract With Customer [Abstract]

Revenue

3. Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of its products, software licenses, and services, which are generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price. The stated contract value is generally the transaction price to be allocated to the separate performance obligations. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.

Nature of Products and Services

The Company derives revenue primarily from sales of hardware products, software licenses, professional services, software maintenance and support, and extended hardware warranties.

Hardware Product Revenue —The Company generally has two performance obligations in arrangements involving the sale of hardware products. The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product). The second performance obligation is to provide assurance that the product complies with its agreed-upon specifications and is free from defects in material and workmanship for a period of one to three years (i.e. assurance warranty). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. The Company has concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. None of the transaction price is allocated to the assurance warranty component, as the Company accounts for these product warranty costs in accordance with Accounting Standards Codification ("ASC”) 460, Guarantees (“ASC 460”).  

Software License Revenue— The Company’s license arrangements grant customers the perpetual right to access and use the licensed software products at the outset of an arrangement. Technical support and software updates are generally made available throughout the term of the support agreement, which is generally one to three years. The Company accounts for these arrangements as two performance obligations: (1) the software licenses, and (2) the related updates and technical support. The software license revenue is recognized upon delivery of the license to the customer, while the software updates and technical support revenue is recognized over the term of the support contract.  

Professional Services Revenue—Professional services revenue consists primarily of programming customization services performed relating to the integration of the Company’s software products with the customers other systems, such as human resources systems. Professional services contracts are generally billed on a time and materials basis and revenue is recognized as the services are performed.

Software Maintenance and Support Revenue— Support and maintenance contract revenue consists of the services provided to support the specialized programming applications performed by the Company’s professional services group. Support and maintenance contracts are typically billed at inception of the contract and recognized as revenue over the contract period, typically over a one to three year period.

Extended Hardware Warranties Revenue— Sales of the Company’s hardware products may also include optional extended hardware warranties, which typically provide assurance that the product will continue function as initially intended. Extended hardware warranty contracts are typically billed at inception of the contract and recognized as revenue over the respective contract period, typically over one to two year periods after the expiration of the original assurance warranty.

Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Hardware products	When customer obtains control of the product (point-in-time)	Within 30-60 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)	Within 30-60 days of the beginning of license period	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional services	As services are performed and/or when the contract is fulfilled (point-in-time)	Within 30-60 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance    and support services	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions
Extended hardware    warranties	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions

Significant Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price (“SSP”).

Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, the Company estimates SSP using historical transaction data. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based on the shipping location of the customer. The geographic regions that are tracked are the Americas, Europe and the Middle East, and Asia-Pacific regions. The Company operates as two operating segments.

Total net revenue based on the disaggregation criteria described above is as follows (in thousands):

	Three Months Ended June 30,
	2020						2019
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	12,725	$	945	$	13,670	$	14,760	$	1,185	$	15,945
Europe and the Middle East		2,535		95		2,630		3,332		91		3,423
Asia-Pacific		2,805		—		2,805		2,869		—		2,869
Total	$	18,065	$	1,040	$	19,105	$	20,961	$	1,276	$	22,237

	Six Months Ended June 30,
	2020						2019
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	25,370	$	2,168	$	27,538	$	28,284	$	2,386	$	30,670
Europe and the Middle East		5,038		192		5,230		6,197		156		6,353
Asia-Pacific		4,457		—		4,457		4,736		—		4,736
Total	$	34,865	$	2,360	$	37,225	$	39,217	$	2,542	$	41,759

Contract Balances

Amounts invoiced in advance of services being provided are accounted for as deferred revenue. Nearly all of the Company’s deferred revenue balance is related to software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 60 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from its customers.

Changes in deferred revenue during the six months ended June 30, 2020 were as follows (in thousands):

	Amount
Deferred revenue as of December 31, 2019	$	2,833
Deferral of revenue billed in current period, net of recognition		1,619
Recognition of revenue deferred in prior periods		(1,660	)
Deferred revenue as of June 30, 2020	$	2,792

Unsatisfied Performance Obligations

Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $1.0 million as of June 30, 2020. Since the Company typically invoices customers at contract inception, this amount is included in its deferred revenue balance. As of June 30, 2020, the Company expects to recognize 28% of the revenue related to these unsatisfied performance obligations during the remainder of 2020, 43% during 2021, and 29% thereafter.          

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs (i.e. commissions) meet the requirements to be capitalized. Capitalized incremental costs related to contracts are amortized over the respective contract periods. For the six months ended June 30, 2020 and 2019, total capitalized costs to obtain contracts were immaterial.

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Business Combinations

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Business Combinations

4. Business Combinations

Thursby Software Systems

On November 1, 2018, the Company completed the acquisition of Thursby Software Systems, Inc. (“Thursby”), a provider of security software for mobile devices, pursuant to an Agreement and Plan of Merger (the “Thursby Agreement”), by and among the Company, TSS Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub 1”), TSS Acquisition, LLC., a wholly owned subsidiary of the Company (“Merger Sub 2” and together with Merger Sub 1, the “Merger Subs”), Thursby, and William Thursby as the sole Shareholder of Thursby. Pursuant to the Thursby Agreement, at the effective time, Merger Sub 1 merged with and into Thursby and Thursby became a wholly-owned subsidiary of the Company (“Merger 1”), following which Thursby merged with and into Merger Sub 2, whereupon which the separate corporate existence of Thursby ceased with Merger Sub 2 surviving the merger (“Merger 2”).

Under the terms of the Thursby Agreement, at the closing of the acquisition, the Company acquired all of the outstanding shares of Thursby for total purchase consideration of $3.1 million, consisting of:

(i) $0.6 million in cash, net of cash acquired; and

(ii) the issuance of 426,621 shares of the Company’s common stock with a value of approximately $2.5 million.  

An aggregate of up to $0.5 million, or 85,324 shares, of the Company’s common stock issuable at the closing of the transaction were held back for a period of up to 12 months following the closing for the satisfaction of certain indemnification claims. In the fourth quarter of 2019, the Company and William Thursby reached agreement as to the satisfaction of the indemnification claims, and accordingly, the Company released the 85,324 holdback shares.

Additionally, in the event that revenue from Thursby products was greater than $8.0 million, $11.0 million, or $15.0 million in product shipments in 2019, the Company would have been obligated to issue earnout consideration of up to a maximum of $7.5 million payable in shares of the Company’s common stock, subject to certain conditions. In the event that such revenue was less than $15.0 million in 2019, but 2020 revenue from Thursby products exceeds $15.0 million, the Company will be obligated to issue an additional $2.5 million in earnout consideration payable in shares of the Company’s common stock. The maximum total earnout consideration payable for all periods is $7.5 million in the aggregate, payable in shares of the Company’s common stock. Management has assessed the probability of the issuance of shares related to the earnout consideration and determined it as remote. Accordingly, no value was ascribed to the earnout consideration as of June 30, 2020.

Acquisition related intangibles included in the below table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):  

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	200		5
Customer relationships		1,500		10
Developed technology		700		10
	$	2,400

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Thursby resulted in $3.6 million of goodwill, which is not deductible for tax purposes. With the addition of the Thursby security software for mobile devices, the Company believes this goodwill largely reflects the synergistic strengthening of its Identity offerings providing complete solutions for secure and convenient logical access across smart cards and derived credentials on Apple iOS and Android mobile devices. In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter. See Note 6, Goodwill and Intangible Assets.

Pursuant to ASC 805, the Company incurred and expensed approximately$27,000 in acquisition and transactional costs associated with the acquisition of Thursby in the six months ended June 30, 2019, which were primarily general and administrative expenses. No expenses were incurred in the six months ended June 30, 2020.

Viscount Systems, Inc.

On January 2, 2019, the Company completed the purchase of substantially all the assets of the Freedom, Liberty, and Enterphone™ MESH products and services of Viscount Systems, Inc. (“Viscount”) and the assumption of certain liabilities (the “Asset Purchase”). Under the terms of the Asset Purchase, the Company was obligated to pay at closing aggregate consideration of $2.9 million consisting of:

(i) payment in cash of approximately $1.3 million, and

(ii) the issuance of 419,288 shares of the Company’s common stock with a value of approximately $1.6 million.

An aggregate of approximately 31,447 shares of the Company’s common stock issuable at the closing of the transaction were held back for 12 months following the closing for the satisfaction of certain indemnification claims. In the first quarter of 2020, the Company released the 31,447 holdback shares as the indemnification claims were satisfied.

Additionally, in the event that revenue from the assets purchased under the agreement in 2019 was greater than certain specified revenue targets, the Company would be obligated to issue earnout consideration of up to a maximum of $3.5 million payable in shares of the Company’s common stock (subject to certain conditions).  In the event that such revenue targets were not met in 2019, but 2020 revenue from the assets purchased exceeds certain higher targets for 2020, then the Company will be obligated to issue up to a maximum of $2.25 million in earnout consideration in the form of common stock. The maximum total earnout consideration liability for all periods is $3.5 million in the aggregate, payable in the Company’s common stock. At December 31, 2019, management had assessed the probability of the issuance of shares related to the earnout consideration and determined its fair value to be $750,000. In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the revenue targets were achieved. In the second quarter of 2020, the Company issued to the selling stockholders earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000. The Company recognized a reduction in earnout consideration expense of $261,000 in the statement of comprehensive (loss) income during the quarter ended June 30, 2020, representing the settlement date fair value of the shares issued and the recorded earnout liability.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Accounts receivable	$	636
Inventory		249
Prepaid expenses and other current assets		29
Property and equipment		190
Operating lease ROU assets		550
Trademarks		160
Customer relationships		710
Developed technology		800
Total identifiable assets acquired		3,324
Accounts payable		(372	)
Operating lease liabilities		(61	)
Accrued expenses and liabilities		(120	)
Deferred revenue		(34	)
Earnout consideration liability		(200	)
Other current liabilities		(326	)
Long-term operating lease liabilities		(489	)
Total liabilities assumed		(1,602	)
Net identifiable assets acquired		1,722
Goodwill		1,200
Net purchase price	$	2,922

Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	160		5
Customer relationships		710		10
Developed technology		800		10
	$	1,670

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The Asset Purchase resulted in $1.2 million of goodwill. With the addition of Viscount’s products and services, the Company believes this goodwill largely reflects the expansion of its Premises offerings with advanced, complementary solutions for the commercial and small- and medium-sized business markets, leveraging Freedom’s IT-centric software, defined architecture, and hardware-light platform. In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter. See Note 6, Goodwill and Intangible Assets.

Pursuant to ASC 805, the Company incurred and expensed approximately$27,000 in acquisition and transactional costs associated with the Asset Purchase during the year ended December 31, 2019, which were primarily general and administrative expenses. Nominal transactional costs were incurred in the six months ended June 30, 2020.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. 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 ASC Topic 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 June 30, 2020 and December 31, 2019, therewere nominal cash equivalents.

The Company’s only liabilities measured at fair value on a recurring basis are the contingent consideration associated with the acquisitions of Thursby and Viscount. The fair value of the earnout consideration is based on achieving certain revenue and profit targets as defined under the respective acquisition agreements. The valuation of the earnout consideration is classified as a Level 3 measurement as it is based on significant unobservable inputs and involves management judgment and assumptions about achieving revenue and profit targets and discount rates. The unobservable inputs used in the measurement of the earnout consideration are highly sensitive to fluctuations and any changes in the inputs or the probability weighting thereof could significantly change the measured value of the earnout consideration at each reporting period. As of December 31, 2019, management had assessed the probability of the issuance of shares related to the Viscount earnout consideration and determined its fair value to be $750,000. In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the revenue targets were achieved. Accordingly, in the second quarter of 2020, the Company issued to the selling stockholders the related earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000.

Changes in the fair value of liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):

	Viscount Earnout Consideration
Balance as of December 31, 2019	$	750
Decrease in fair value of earnout liability		(261	)
Issuance of common stock in connection with earnout consideration		(489	)
Balance as of June 30, 2020	$	—

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain of the Company's assets, including goodwill, 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. For additional discussion of measurement criteria used in evaluating potential impairment involving goodwill and intangible assets, refer to Note 6, Goodwill and 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 the 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 June 30, 2020 and December 31, 2019, the Company had $348,000 of privately-held investments measured at fair value on a nonrecurring basis which were classified as Level 3 assets 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 impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. The amount of privately-held investments is included in other assets in the accompanying condensed consolidated balance sheets.

As of June 30, 2020 and December 31, 2019, 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. Based on the borrowing rates currently available to the Company for debt with similar terms, the carrying value of the outstanding debt approximates fair value.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill

The following table summarizes the activity in goodwill (in thousands):

	Premises			Identity		Total
Balance as of December 31, 2019	$	6,684		$	3,554	$	10,238
Currency translation adjustment		(58	)		—		(58	)
Balance as of June 30, 2020	$	6,626		$	3,554	$	10,180

The Company tests goodwill for impairment on an annual basis, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. In testing for goodwill impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. No impairment of goodwill was identified during the six months ended June 30, 2020 and 2019.

Intangible Assets

The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands):

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12
Gross carrying amount as of June 30, 2020	$	755		$	9,073		$	15,726		$	25,554
Accumulated amortization		(302	)		(5,317	)		(11,184	)		(16,803	)
Intangible assets, net as of June 30, 2020	$	453		$	3,756		$	4,542		$	8,751
Gross carrying amount as of December 31, 2019	$	763		$	9,109		$	15,763		$	25,635
Accumulated amortization		(229	)		(4,873	)		(10,429	)		(15,531	)
Intangible assets, net as of December 31, 2019	$	534		$	4,236		$	5,334		$	10,104

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 on a straight-line basis over their useful lives as shown in the table above. The Company performs an evaluation of it its amortizable intangible assets for impairment at the end of each reporting period. No impairment of intangible assets were identified during the six months ended June 30, 2020.

The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019, respectively (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	222	$	224	$	446	$	445
Selling and marketing		417		419		835		838
Total	$	639	$	643	$	1,281	$	1,283

The estimated annual future amortization expense for purchased intangible assets with definite lives as of June 30, 2020 was as follows (in thousands):

2020 (remaining six months)	$	1,282
2021		1,107
2022		1,107
2023		1,030
2024		956
Thereafter		3,269
Total	$	8,751

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Balance Sheet Components

6 Months Ended

Jun. 30, 2020

Statement Of Financial Position [Abstract]

Balance Sheet Components

7. Balance Sheet Components

The Company’s inventories are stated at the lower of cost or net realizable value. Inventories consists of (in thousands):

	June 30,		December 31,
	2020		2019
Raw materials	$	7,578	$	4,612
Work-in-progress		130		100
Finished goods		11,039		11,433
Total	$	18,747	$	16,145

Property and equipment, net consists of (in thousands):

	June 30,			December 31,
	2020			2019
Building and leasehold improvements	$	1,232		$	1,200
Furniture, fixtures and office equipment		1,265			1,276
Plant and machinery		10,908			10,364
Purchased software		2,176			2,161
Total		15,581			15,001
Accumulated depreciation		(13,312	)		(12,959	)
Property and equipment, net	$	2,269		$	2,042

The Company recorded depreciation expense of $0.2 million and $0.3 million during the three months ended June 30, 2020 and 2019, respectively, and $0.4 million and $0.5 million during the six months ended June 30, 2020 and 2019, respectively.

Other accrued expenses and liabilities consist of (in thousands):

	June 30,		December 31,
	2020		2019
Accrued professional fees	$	391	$	1,511
Customer deposits		67		137
Accrued warranties		401		407
Earnout liability		—		750
Other accrued expenses		1,437		1,693
Total	$	2,296	$	4,498

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Contractual Payment Obligation

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Contractual Payment Obligation

8. Contractual Payment Obligation

Hirsch Electronics Corporation (“Hirsch”) Acquisition – Secure Keyboards and Secure Networks. Prior to the Company’s acquisition of Hirsch in 2009, in 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”). On April 8, 2009, the 1994 Settlement Agreement was amended and restated to replace the royalty-based payment arrangement with an installment payment schedule with contractual payments to be made in future periods through 2021 (the “2009 Settlement Agreement”). On April 30, 2009, as part of the acquisition of Hirsch, the Company provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligation under the 2009 Settlement Agreement.

On April 13, 2020, the Company, Secure Keyboards, and Secure Networks, amended the 2009 Settlement Agreement. The amendment reduced the amount of quarterly payments due under the obligation in 2020, and requires three additional quarterly payments in 2021, increasing the total amount due under the obligation by approximately $90,000. The Company’s remaining payment obligation under the 2009 Settlement Agreement, as amended, was extended through October 31, 2021. The Company included approximately $55,000 and $87,000 of interest expense during the three and six months ended June 30, 2020, respectively, and approximately $38,000 and $82,000 during the three and six months ended June 30, 2019, respectively, in its condensed consolidated statements of operations for interest accreted on the payment obligation.

The payment obligation under the 2009 Settlement Agreement, as amended, as of June 30, 2020, was as follows (in thousands):

2020 (remaining six months)	$	361
2021		1,083
Present value discount factor		(96	)
Total	$	1,348
Less: Current portion - contractual payment obligation		(862	)
Long-term contractual payment obligation	$	486

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Financial Liabilities

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Financial Liabilities

9. Financial Liabilities

Financial liabilities consist of (in thousands):

	June 30,			December 31,
	2020			2019
Revolving loan facility	$	12,728		$	14,230
EWB term loan		3,750			—
April 21 Funds promissory notes		4,000			—
Paycheck Protection Program promissory note		2,915			—
Total		23,393			14,230
Less: Current maturities of financial liabilities		(22,983	)		(14,189	)
Less: Unamortized debt issuance costs		(410	)		(41	)
Long-term financial liabilities	$	—		$	—

On February 8, 2017, the Company entered into Loan and Security Agreements with East West Bank (“EWB”) and Venture Lending & Leasing VII, Inc. and Venture Lending VIII, Inc. (collectively referred to as “VLL7 and VLL8”). The Loan and Security agreement, as amended, with EWB provided a $16.0 million revolving loan facility (“Revolving Loan Facility”), and the Loan and Security Agreement with VLL7 and VLL8 provided a $10.0 million term loan facility (“Term Loan”). All amounts due under the Term Loan were paid in full in May 2018.

On February 6, 2019, the Company entered into an amendment (the “Tenth Amendment”) to its Loan and Security Agreement, as amended, with EWB which increased the Revolving Loan Facility from $16.0 million to $20.0 million, lowered the interest rate from prime rate plus 1.0% to prime rate plus 0.75%, extended the maturity date to February 8, 2021, and amended certain financial covenants, including covenants with respect to minimum EBITDA levels. On March 27, 2019, the Company entered into an amendment (the “Eleventh Amendment”) which modified certain financial covenants.

On January 28, 2020, the Company entered into an amendment (the “Twelfth Amendment”) to its Loan and Security Agreement with EWB, which provided a new term loan facility (“EWB Term Loan”) in a principal amount of $4.5 million, which was received on January 28, 2020, and reduced the Revolving Loan Facility under the Loan and Security Agreement from $20.0 million to $15.5 million. The EWB Term Loan has an interest rate equal to the prime rate plus 2.25%, began to amortize on February 1, 2020, with principal in the amount of $250,000 due monthly through the first anniversary of the Term Loan, and the remainder due on such first anniversary. In addition, certain definitions in the Loan and Security Agreement were amended pursuant to the Twelfth Amendment, including the definition of EBITDA and Borrowing Base, and a new fixed charge coverage ratio financial covenant was added. Upon repayment of the EWB Term Loan in full, the Revolving Loan Facility will be increased to $20.0 million and the fixed charge coverage ratio financial covenant will no longer apply. Legal and administrative costs of $90,000 were recorded as a direct reduction from the carrying amount of the EWB Term Loan and are being amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.

On May 5, 2020, the Company entered into an amendment (the “Thirteenth Amendment”) to its Loan and Security Agreement with EWB. Under the Thirteenth Amendment, certain definitions were amended, including the definitions of Permitted Indebtedness and EBITDA, and certain financial covenants were amended, including reducing from $4.0 million to $3.0 million the amount of unrestricted cash that must be held in the Company’s accounts with EWB during the period from May 1, 2020 through September 30, 2020 and providing for minimum trailing six-month EBITDA of at least $0.6 million during such period and of $0.3 million thereafter. In addition, the Company is not required to make monthly principal payments on the EWB Term Loan for the three payment dates of May 1, 2020, June 1, 2020 and July 1, 2020. In addition, as discussed in Note 11, Stockholders’ Equity, the Company amended the EWB Warrant. The Company calculated the fair value of the amended EWB Warrant using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years. The fair value of the amended EWB Warrant of $42,000, as well as legal and administrative costs of $92,000, were recorded as a direct reduction from the carrying amount of the Revolving Loan Facility and are being amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.

The Company may voluntarily prepay amounts outstanding under the Revolving Loan Facility, without prepayment charges. In the event the Revolving Loan Facility is terminated prior to its maturity, the Company would be required to pay an early termination fee in the amount of 1.0% of the revolving line. Additional borrowing requests under the Revolving Loan Facility are subject to various customary conditions precedent, including satisfaction of a borrowing base test as more fully described in the Revolving Loan Facility.

The Revolving Loan Facility contains customary representations and warranties, 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, and various financial and liquidity covenants.In addition, the Revolving Loan Facility contains customary events of default that entitle EWB to cause any or all of the Company's indebtedness under the Revolving Loan Facility to become immediately due and payable. The events of default (some of which are subject to applicable grace or cure periods), 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, EWB may terminate its lending commitment and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan and Security Agreement to be immediately due and payable.

As of June 30, 2020, the Company was in compliance with all financial covenants under the Revolving Loan Facility.

On May 5, 2020, the Company issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to 21 April Fund, LP and 21 April Fund, Ltd. (collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”). The Notes are secured by the Company’s assets, but subordinate to the Company’s obligations to EWB under its Loan and Security Agreement.  Proceeds from the sale of the Notes must be used for expenses incurred by the Company in connection with its provisions of goods and services under a statement of work with a third party.  The Notes have an initial term of nine months and do not bear interest during this period. However, if the Notes are not repaid on or before the nine-month anniversary of issuance, (a) the Notes will thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid, as further detailed in the Note Purchase Agreement.  In the event the Notes are not paid in full by the first anniversary of their issuance, May 5, 2021, they shall thereafter bear interest of 12% per annum, payable quarterly, and additional warrants would be issuable to the April 21 Funds. As discussed in Note 11, Stockholders’ Equity, the fair value of the warrants issued to April 21 Funds was  calculated using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years. The relative fair value of the warrants of $290,000 was recorded as a direct reduction from the carrying amount of the Notes and is being amortized as interest expense over the term of the April 21 Funds promissory notes.

On April 9, 2020, the Company entered into a promissory note (the “Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The Note is dated April 8, 2020 with EWB. The Company borrowed a principal amount of approximately $2.9 million. The interest on the Note is 1.00% per annum. The Note is payable two years from the date of the Note, and there is no prepayment penalty. All interest which accrues during the initial six months of the loan period is deferred and payable on the maturity date of the Note. Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with Small Business Administration rules established for the Paycheck Protection Program.

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

10. 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 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 2015. However, if loss carryforwards of tax years prior to 2015 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.

The CARES Act, which was enacted on March 27, 2020, includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits. Several foreign (non-U.S.) jurisdictions in which we operate have taken similar economic stimulus measures. The Company analyzed the provisions of the CARES Act and determined there was no effect on its provision for the current period and will continue to evaluate the impact, if any, the CARES Act may have on the Company’s condensed consolidated financial statements and disclosures.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Stockholders' Equity

11. Stockholders’ Equity

Series B Convertible Preferred Stock Dividend Accretion

The following tables summarize Series B convertible preferred stock and the accretion of dividend activity for the six months ended June 30, 2020 (in thousands):

	Tranche 1		Tranche 2		Total
Series B Convertible Preferred Stock
Balance as of December 31, 2019	$	13,230	$	8,645	$	21,875
Cumulative dividends on Series B convertible preferred stock		331		212		543
Balance as of June 30, 2020	$	13,561	$	8,857	$	22,418
Number of Common Shares Issuable Upon Conversion
Balance as of December 31, 2019		3,308		2,161		5,469
Cumulative dividends on Series B convertible preferred stock		82		53		135
Balance as of June 30, 2020		3,390		2,214		5,604

Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of June 30,2020 would be convertible into 5,604,375 shares of the Company’s common stock. However, the conversion rate will be subject to adjustment in the event of certain instances, such as if the Company issues shares of its common stock at a price less than $4.00 per common share, subject to a minimum conversion price of $3.27 per share. As of June 30,2020, none of the contingent conditions to adjust the conversion rate had occurred.

Each share of Series B convertible preferred stock is entitled to a cumulative annual dividend of 5% for the first six (6) years following the issuance of such share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10^th) year in cash. The dividends accrue and are payable in kind upon such time as the shares convert into the Company’s common stock. In general, the shares are not entitled to vote except in certain limited cases, including in change of control transactions where the expected price per share distributable to the Company’s stockholders is expected to be less than $4.00 per share. The Certificate of Designation with respect to the Series B convertible preferred stock further provides that in the event of, among other things, any change of control, liquidation or dissolution of the Company, the holders of the Series B convertible preferred stock will be entitled to receive, on a pari passu basis with the holders of the common stock, the same amount and form of consideration that the holders of the Company’s common stock receive (on an as-if-converted-to-common-stock basis and without regard to the Ownership Limitation applicable to the Series B convertible preferred stock).

Common Stock Warrants

On February 8, 2017, the Company entered into Loan and Security Agreements with each of EWB and VLL7 and VLL8 as discussed in Note 9, Financial Liabilities. In connection with the Company’s Revolving Loan Facility, the Company issued to EWB a warrant (the "EWB Warrant") to purchase up to 40,000 shares of the Company's common stock at a per share exercise price of $3.64, and in connection with the Company’s Term Loan Facility, issued to each of VLL7 and VLL8 a warrant to purchase 290,000 shares of the Company's common stock at a per share exercise price of $2.00 (the “VLL7 Warrant” and the “VLL8 Warrant,” respectively). Each of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant was immediately exercisable for cash or by net exercise and expire on February 8, 2022. On January 30, 2020, each of VLL7 and VLL8 exercised their warrant on a cashless net exercise basis, with each receiving 193,494 shares of the Company’s common stock.

On May 5, 2020, the Company entered into the Thirteenth Amendment to its Loan and Security Agreement with EWB, as discussed in Note 9, Financial Liabilities. In connection with the Thirteenth Amendment, the Company amended the EWB Warrant reducing its exercise price from $3.64 to $3.50 per share and extending the expiration date of the EWB Warrant from February 8, 2022 to February 8, 2023.

On May 5, 2020, the Company entered into a Note and Warrant Purchase Agreement with the April 21 Funds, as discussed in Note 9, Financial Liabilities, in which the Company issued warrants (“April 21 Funds Warrants”) to purchase 275,000 shares of common stock of the Company. The April 21 Funds Warrants have a term of three years (subject to early termination upon the closing of an acquisition); provided, that in the event that the Note is not paid in full by the nine-month anniversary of issuance, the term of the April 21 Funds Warrants shall be extended for a period of time equal to the period of time from such nine-month anniversary until the date the Note is fully paid (“Extension Warrants”). The Extension Warrants have a term of three years from the date of issuance of the latest Extension Warrant to be issued (subject to early termination upon an acquisition). The shares of common stock issuable upon exercise of the April 21 Fund Warrants and any Extension Warrants that may be issued are entitled to the same resale registration rights granted to the April 21 Funds Warrants under the Stockholders Agreement dated December 21, 2017 in connection with the April 21 Funds previous purchase of certain securities of the Company.  

Below is the summary of outstanding warrants issued by the Company as of June 30, 2020:

Warrant Type	Number of Shares Issuable Upon Exercise		Exercise Price		Issue Date	Expiration Date
EWB Warrant		40,000	$	3.50	February 8, 2017	February 8, 2023
April 21 Funds Warrants		275,000	$	3.50	May 5, 2020	May 5, 2023
Total		315,000

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of June 30, 2020 was as follows:

Exercise of outstanding stock options, vesting of restricted stock units ("RSU"), and    issuance of RSUs vested but not released	1,876,028
ESPP	293,888
Shares of common stock available for grant under the 2011 Plan	1,106,558
Warrants to purchase common stock	315,000
Shares of common stock issuable upon conversion of Series B convertible preferred stock	7,541,449
Total	11,132,923

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

12. Stock-Based Compensation

Stock Incentive Plans

The Company maintains a stock-based compensation plan, the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended, 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.  

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 grant under the 2011 Plan, including shares rolled over from the 2007 Plan and the 2010 Plan. Subsequent to June 6, 2011 through June 30, 2020, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 4,400,000 shares.

Stock Option Plans

A summary of activity for the Company’s stock option plans for the six months ended June 30, 2020 is as follows:

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance as of December 31, 2019		562,102		$	5.60		5.86	$	572,869
Granted		—			—
Cancelled or Expired		(8,333	)		8.18
Exercised		—			—
Balance as of June 30, 2020		553,769		$	5.56		5.39	$	328,900
Vested or expected to vest as of     June 30, 2020		553,769		$	5.56		5.39	$	328,900
Exercisable as of June 30, 2020		553,769		$	5.56		5.39	$	328,900

The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock and the option exercise price of in-the-money options multiplied by the number of such options.

The following table summarizes information about options outstanding as of June 30, 2020:

	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		462,110		5.82	$	4.44		462,110	$	4.44
$7.50 - $11.25		71,198		3.65		9.94		71,198		9.94
$11.30 - $16.95		13,764		2.19		12.90		13,764		12.90
$17.60 - $26.40		6,697		1.24		21.55		6,697		21.55
$4.36 - $26.40		553,769		5.39	$	5.56		553,769	$	5.56

As of June 30, 2020, there was nounrecognized stock-based compensation expense related to stock options.  

Restricted Stock Units

The following is a summary of RSU activity for the six months ended June 30, 2020:

	Number of RSUs			Weighted Average Fair Value
Unvested as of December 31, 2019		1,148,110		$	4.43
Granted		412,809			3.90
Vested		(360,914	)		3.97
Forfeited		(80,534	)		4.60
Unvested as of June 30, 2020		1,119,471		$	4.37
Shares vested but not released		202,788		$	4.98

The fair value of the Company’s RSUs is calculated based upon the fair market value of the Company’s stock on the date of grant. As of June 30, 2020, there was $4.1 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.2 years.

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 six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	41	$	34	$	81	$	63
Research and development		173		113		347		227
Selling and marketing		118		205		244		385
General and administrative		419		341		719		705
Total	$	751	$	693	$	1,391	$	1,380

Restricted Stock Unit Net Share Settlements

During the six months ended June 30, 2020 and 2019, the Company repurchased 94,134 and 98,939 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.

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Net (Loss) Income per Common Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net (Loss) Income per Common Share

13. Net (Loss) Income per Common Share

Basic net (loss) income per common share is computed by dividing net (loss) income available to common stockholders during the period by the weighted average number of common shares outstanding during that period.  Diluted net (loss) income per common share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock or the if-converted method of accounting.

The calculations for basic and diluted net (loss) income per common share for the three and six months ended June 30, 2020 are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Basic net (loss) income per common share:
Numerator:
Net (loss) income	$	(2,749	)	$	416		$	(4,796	)	$	(399	)
Less: Accretion of Series B preferred stock dividends		(272	)		(259	)		(543	)		(517	)
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Denominator:
Weighted average common shares outstanding - basic		17,941			16,953			17,730			16,896
Net (loss) income per common share - basic	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)
Diluted net (loss) income per common share:
Numerator:
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Plus: Accretion of Series B preferred stock dividends, if    dilutive		—			—			—			—
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Denominator:
Weighted average common shares outstanding - basic		17,941			16,953			17,730			16,896
Dilutive securities:
Stock options		—			55			—			—
RSUs		—			429			—			—
Warrants		—			358			—			—
Total dilutive securities		—			842			—			—
Weighted average common shares outstanding - diluted		17,941			17,795			17,730			16,896
Net (loss) income per common share - diluted	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)

The following common stock equivalents have been excluded from diluted net (loss) income per common share for the three and six months ended June 30, 2020 and 2019 because their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Shares of common stock subject to outstanding RSUs		1,119		—		1,119		1,275
Shares of common stock subject to outstanding stock options		554		131		554		576
Shares of common stock subject to outstanding warrants		315		85		315		705
Shares of common stock issuable upon conversion of Series B    convertible preferred stock		5,604		5,338		5,604		5,338
Total		7,592		5,554		7,592		7,894

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Segment Reporting, Geographic Information, and Concentration of Credit Risk

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Reporting, Geographic Information, and Concentration of Credit Risk

14. Segment Reporting, Geographic Information, and Concentration of Credit Risk

Segment Reporting

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 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 Company does not report total assets, capital expenditures or operating expenses by operating segment as such information is not used by the CODM for purposes of assessing performance or allocating resources.

Net revenue and gross profit information by segment for the three and six months ended June 30, 2020 and 2019 are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Premises:
Net revenue	$	7,482		$	10,671		$	15,716		$	20,001
Gross profit		4,093			5,982			8,619			10,361
Gross profit margin		55	%		56	%		55	%		52	%
Identity:
Net revenue		11,623			11,566			21,509			21,758
Gross profit		3,619			3,901			6,593			8,226
Gross profit margin		31	%		34	%		31	%		38	%
Total:
Net revenue		19,105			22,237			37,225			41,759
Gross profit		7,712			9,883			15,212			18,587
Gross profit margin		40	%		44	%		41	%		45	%
Operating expenses:
Research and development		2,422			2,078			5,018			4,104
Selling and marketing		4,236			4,721			8,733			9,219
General and administrative		2,151			2,279			4,342			4,901
Decrease in fair value of earnout liability		(261	)		—			(261	)		—
Restructuring and severance		1,417			(2	)		1,482			(14	)
Total operating expenses:		9,965			9,076			19,314			18,210
Loss (income) from operations		(2,253	)		807			(4,102	)		377
Non-operating income (expense):
Interest expense, net		(407	)		(241	)		(659	)		(520	)
Foreign currency gains (losses), net		(30	)		(70	)		56			(72	)
(Loss) income before income taxes	$	(2,690	)	$	496		$	(4,705	)	$	(215	)

Geographic Information

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended June 30, 2020 and 2019 is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Americas	$	13,670		$	15,945		$	27,538		$	30,670
Europe and the Middle East		2,630			3,423			5,230			6,353
Asia-Pacific		2,805			2,869			4,457			4,736
Total	$	19,105		$	22,237		$	37,225		$	41,759
Percentage of net revenue:
Americas		71	%		72	%		74	%		74	%
Europe and the Middle East		14	%		15	%		14	%		15	%
Asia-Pacific		15	%		13	%		12	%		11	%
Total		100	%		100	%		100	%		100	%

Concentration of Credit Risk

No customer accounted for 10% or more of net revenue for either of the three or six months ended June 30, 2020 or 2019. Nocustomer accounted for 10% of net accounts receivable at June 30, 2020 or December 31, 2019.

Long-lived assets by geographic location as of June 30, 2020 and December 31, 2019 are as follows (in thousands):

	June 30,		December 31,
	2020		2019
Property and equipment, net:
Americas	$	715	$	839
Europe and the Middle East		50		55
Asia-Pacific		1,504		1,148
Total property and equipment, net	$	2,269	$	2,042
Operating lease ROU assets:
Americas	$	2,547	$	4,265
Europe and the Middle East		83		105
Asia-Pacific		862		259
Total operating lease right-of-use assets	$	3,492	$	4,629

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Restructuring and Severance

6 Months Ended

Jun. 30, 2020

Restructuring And Related Activities [Abstract]

Restructuring and Severance

15. Restructuring and Severance

Restructuring expenses incurred in the three and six months ended June 30, 2019 consist primarily of facility rental related costs associated with the sublet 3VR office space in San Francisco, California, offset by sublease income received from a tenant which is subletting the office space over the remaining term of the original lease. The restructuring accrual at June 30, 2019 related to the Company’s future rental payment obligation associated with vacated office space at its Fremont, California facility.  

In the three and six months ended June 30, 2020, the Company incurred restructuring expenses of $1,417,000 and $1,482,000, respectively, consisting of severance related costs of $20,000, and $84,000, respectively, and facility rental related costs associated with the 3VR office space of approximately $1,397,000 and $1,398,000, respectively. The facility rental related costs included a charge of $1,199,000 associated with the impairment of the ROU operating lease asset, which was subleased, but has gone into default due to non-payment of rent beginning April 1, 2020. Sublease income of $198,000 was received in the first quarter of 2020, however, no rental payments were received during the three months ended June 30, 2020.

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Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

16. Leases

The Company’s leases consist primarily of operating leases for administrative office space, research and development facilities, a manufacturing facility, and sales offices in various countries around the world. The Company determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which are accounted for as a single lease component. Total rent expense was approximately $0.4 million and $0.8 million for the three and six months ended June 30, 2020, respectively. Total rent expense was approximately $0.4 million and $0.7 million for the three and six months ended June 30, 2019, respectively. 

Initial lease terms are determined at commencement and may include options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. Remaining lease terms range from one to seven years, some of which include options to extend for up to five years. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. As the Company’s leases do not provide an implicit rate, the present value of future lease payments is determined using the Company’s incremental borrowing rate based on information available at the lease commencement date.

The table below reconciles the undiscounted cash flows for the first five years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of June 30, 2020 (in thousands):

	June 30,
	2020
2020 (remaining six months)	$	1,257
2021		1,975
2022		1,277
2023		457
2024		221
Thereafter		297
Total minimum lease payments		5,484
Less: amount of lease payments representing interest		(663	)
Present value of future minimum lease payments		4,821
Less: current liabilities under operating leases		(1,832	)
Long-term operating lease liabilities	$	2,989

As of June 30, 2020, the weighted average remaining lease term for the Company’s operating leases was 3.1 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was 6.4%. Sublease rental income due in the future under non-cancelable subleases was $1.4 million.

Cash paid for amounts included in the measurement of operating lease liabilities was $0.4 millionand $1.0 million for the three and six months ended June 30, 2020, respectively. Cash received from sublease rentals was $12,000 and $0.2 million for the three and six months ended June 30, 2020, respectively.The Company does not expect to receive any additional sublease rental income related to the subleased 3VR office space, as the sublease has gone into default due to non-payment a discussed in Note 15, Restructuring and Severance.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

17. Commitments and Contingencies

The following table summarizes the Company’s principal contractual commitments, excluding operating leases, as of June 30, 2020 (in thousands):

	Purchase Commitments		Other Contractual Commitments		Total
2020 (remaining six months)	$	14,885	$	480	$	15,365
2021		143		—	$	143
Total	$	15,028	$	480	$	15,508

Purchase commitments 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 warranty accrual account activity during the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
Balance at beginning of period	$	386	$	433		$	407		$	456
New product warranties		15		83			24			88
Claims activity		—		(11	)		(30	)		(39	)
Balance at end of period	$	401	$	505		$	401		$	505

The Company provides warranties on certain product sales for periods ranging from 12 to 36 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.

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Significant Accounting Policies and Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts.  ASU No. 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. Subsequent to the issuance of ASU No. 2016-13, the FASB issued ASU No. 2018-19, Codification Improvement to Topic 326, Financial Instruments – Credit Losses, ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU No. 2019-05, Financial Instruments Credit Losses (Topic 326) Targeted Transition Relief, ASU No. 2016-13, the FASB issued ASU No. 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU No. 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The subsequent ASUs do not change the core principle of the guidance in ASU No. 2016-13. Instead these amendments are intended to clarify and improve operability of certain topics included within ASU No. 2016-13.

Additionally, ASU No. 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as a SRC. In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses.  The subsequent amendments will have the same effective date and transition requirements as ASU No. 2016-13.  Early adoption is permitted. Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.  While the Company is currently evaluating the impact of Topic 326, Company does not expect the adoption of the ASU to have a material impact on its condensed consolidated financial statements.

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

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Revenue (Tables)

6 Months Ended

Jun. 30, 2020

Revenue From Contract With Customer [Abstract]

Schedule of Performance Obligation

Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Hardware products	When customer obtains control of the product (point-in-time)	Within 30-60 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)	Within 30-60 days of the beginning of license period	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional services	As services are performed and/or when the contract is fulfilled (point-in-time)	Within 30-60 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance    and support services	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions
Extended hardware    warranties	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions

Total Net Revenue Based on Disaggregation Criteria

Total net revenue based on the disaggregation criteria described above is as follows (in thousands):

	Three Months Ended June 30,
	2020						2019
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	12,725	$	945	$	13,670	$	14,760	$	1,185	$	15,945
Europe and the Middle East		2,535		95		2,630		3,332		91		3,423
Asia-Pacific		2,805		—		2,805		2,869		—		2,869
Total	$	18,065	$	1,040	$	19,105	$	20,961	$	1,276	$	22,237

	Six Months Ended June 30,
	2020						2019
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	25,370	$	2,168	$	27,538	$	28,284	$	2,386	$	30,670
Europe and the Middle East		5,038		192		5,230		6,197		156		6,353
Asia-Pacific		4,457		—		4,457		4,736		—		4,736
Total	$	34,865	$	2,360	$	37,225	$	39,217	$	2,542	$	41,759

Changes in Deferred Revenue

Changes in deferred revenue during the six months ended June 30, 2020 were as follows (in thousands):

	Amount
Deferred revenue as of December 31, 2019	$	2,833
Deferral of revenue billed in current period, net of recognition		1,619
Recognition of revenue deferred in prior periods		(1,660	)
Deferred revenue as of June 30, 2020	$	2,792

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Business Combinations (Tables)

6 Months Ended

Jun. 30, 2020

Thursby Software Systems

Summary of Acquisition Related Finite-lived Intangibles and Estimated Lives

Acquisition related intangibles included in the below table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):  

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	200		5
Customer relationships		1,500		10
Developed technology		700		10
	$	2,400

Viscount Systems, Inc.

Summary of Acquisition Related Finite-lived Intangibles and Estimated Lives

Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	160		5
Customer relationships		710		10
Developed technology		800		10
	$	1,670

Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Accounts receivable	$	636
Inventory		249
Prepaid expenses and other current assets		29
Property and equipment		190
Operating lease ROU assets		550
Trademarks		160
Customer relationships		710
Developed technology		800
Total identifiable assets acquired		3,324
Accounts payable		(372	)
Operating lease liabilities		(61	)
Accrued expenses and liabilities		(120	)
Deferred revenue		(34	)
Earnout consideration liability		(200	)
Other current liabilities		(326	)
Long-term operating lease liabilities		(489	)
Total liabilities assumed		(1,602	)
Net identifiable assets acquired		1,722
Goodwill		1,200
Net purchase price	$	2,922

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Summary of Changes in Fair Value of Liabilities in Level 3 of Fair Value Hierarchy

Changes in the fair value of liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):

	Viscount Earnout Consideration
Balance as of December 31, 2019	$	750
Decrease in fair value of earnout liability		(261	)
Issuance of common stock in connection with earnout consideration		(489	)
Balance as of June 30, 2020	$	—

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Activity in Goodwill

The following table summarizes the activity in goodwill (in thousands):

	Premises			Identity		Total
Balance as of December 31, 2019	$	6,684		$	3,554	$	10,238
Currency translation adjustment		(58	)		—		(58	)
Balance as of June 30, 2020	$	6,626		$	3,554	$	10,180

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):

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12
Gross carrying amount as of June 30, 2020	$	755		$	9,073		$	15,726		$	25,554
Accumulated amortization		(302	)		(5,317	)		(11,184	)		(16,803	)
Intangible assets, net as of June 30, 2020	$	453		$	3,756		$	4,542		$	8,751
Gross carrying amount as of December 31, 2019	$	763		$	9,109		$	15,763		$	25,635
Accumulated amortization		(229	)		(4,873	)		(10,429	)		(15,531	)
Intangible assets, net as of December 31, 2019	$	534		$	4,236		$	5,334		$	10,104

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 six months ended June 30, 2020 and 2019, respectively (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	222	$	224	$	446	$	445
Selling and marketing		417		419		835		838
Total	$	639	$	643	$	1,281	$	1,283

Estimated Future Amortization Expense of Purchased Intangible Assets with Definite Lives

The estimated annual future amortization expense for purchased intangible assets with definite lives as of June 30, 2020 was as follows (in thousands):

2020 (remaining six months)	$	1,282
2021		1,107
2022		1,107
2023		1,030
2024		956
Thereafter		3,269
Total	$	8,751

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2020

Statement Of Financial Position [Abstract]

Inventories

The Company’s inventories are stated at the lower of cost or net realizable value. Inventories consists of (in thousands):

	June 30,		December 31,
	2020		2019
Raw materials	$	7,578	$	4,612
Work-in-progress		130		100
Finished goods		11,039		11,433
Total	$	18,747	$	16,145

Property and Equipment, Net

Property and equipment, net consists of (in thousands):

	June 30,			December 31,
	2020			2019
Building and leasehold improvements	$	1,232		$	1,200
Furniture, fixtures and office equipment		1,265			1,276
Plant and machinery		10,908			10,364
Purchased software		2,176			2,161
Total		15,581			15,001
Accumulated depreciation		(13,312	)		(12,959	)
Property and equipment, net	$	2,269		$	2,042

Other Accrued Expenses and Liabilities

Other accrued expenses and liabilities consist of (in thousands):

	June 30,		December 31,
	2020		2019
Accrued professional fees	$	391	$	1,511
Customer deposits		67		137
Accrued warranties		401		407
Earnout liability		—		750
Other accrued expenses		1,437		1,693
Total	$	2,296	$	4,498

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Contractual Payment Obligation (Tables)

6 Months Ended

Jun. 30, 2020

Related Party Transactions [Abstract]

Payment Obligation Under 2009 Settlement Agreement

The payment obligation under the 2009 Settlement Agreement, as amended, as of June 30, 2020, was as follows (in thousands):

2020 (remaining six months)	$	361
2021		1,083
Present value discount factor		(96	)
Total	$	1,348
Less: Current portion - contractual payment obligation		(862	)
Long-term contractual payment obligation	$	486

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Financial Liabilities (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Summary of Financial Liabilities

Financial liabilities consist of (in thousands):

	June 30,			December 31,
	2020			2019
Revolving loan facility	$	12,728		$	14,230
EWB term loan		3,750			—
April 21 Funds promissory notes		4,000			—
Paycheck Protection Program promissory note		2,915			—
Total		23,393			14,230
Less: Current maturities of financial liabilities		(22,983	)		(14,189	)
Less: Unamortized debt issuance costs		(410	)		(41	)
Long-term financial liabilities	$	—		$	—

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Schedule of Preferred Stock and the Accretion Of Dividend Activity

The following tables summarize Series B convertible preferred stock and the accretion of dividend activity for the six months ended June 30, 2020 (in thousands):

	Tranche 1		Tranche 2		Total
Series B Convertible Preferred Stock
Balance as of December 31, 2019	$	13,230	$	8,645	$	21,875
Cumulative dividends on Series B convertible preferred stock		331		212		543
Balance as of June 30, 2020	$	13,561	$	8,857	$	22,418
Number of Common Shares Issuable Upon Conversion
Balance as of December 31, 2019		3,308		2,161		5,469
Cumulative dividends on Series B convertible preferred stock		82		53		135
Balance as of June 30, 2020		3,390		2,214		5,604

Summary of Outstanding Warrants Issued by Company

Below is the summary of outstanding warrants issued by the Company as of June 30, 2020:

Warrant Type	Number of Shares Issuable Upon Exercise		Exercise Price		Issue Date	Expiration Date
EWB Warrant		40,000	$	3.50	February 8, 2017	February 8, 2023
April 21 Funds Warrants		275,000	$	3.50	May 5, 2020	May 5, 2023
Total		315,000

Schedule of Common Stock Reserved for Future Issuance

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of June 30, 2020 was as follows:

Exercise of outstanding stock options, vesting of restricted stock units ("RSU"), and    issuance of RSUs vested but not released	1,876,028
ESPP	293,888
Shares of common stock available for grant under the 2011 Plan	1,106,558
Warrants to purchase common stock	315,000
Shares of common stock issuable upon conversion of Series B convertible preferred stock	7,541,449
Total	11,132,923

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Activity for Stock Option Plans

A summary of activity for the Company’s stock option plans for the six months ended June 30, 2020 is as follows:

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance as of December 31, 2019		562,102		$	5.60		5.86	$	572,869
Granted		—			—
Cancelled or Expired		(8,333	)		8.18
Exercised		—			—
Balance as of June 30, 2020		553,769		$	5.56		5.39	$	328,900
Vested or expected to vest as of     June 30, 2020		553,769		$	5.56		5.39	$	328,900
Exercisable as of June 30, 2020		553,769		$	5.56		5.39	$	328,900

Summary Information about Options Outstanding

The following table summarizes information about options outstanding as of June 30, 2020:

	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		462,110		5.82	$	4.44		462,110	$	4.44
$7.50 - $11.25		71,198		3.65		9.94		71,198		9.94
$11.30 - $16.95		13,764		2.19		12.90		13,764		12.90
$17.60 - $26.40		6,697		1.24		21.55		6,697		21.55
$4.36 - $26.40		553,769		5.39	$	5.56		553,769	$	5.56

Summary of RSU Activity

The following is a summary of RSU activity for the six months ended June 30, 2020:

	Number of RSUs			Weighted Average Fair Value
Unvested as of December 31, 2019		1,148,110		$	4.43
Granted		412,809			3.90
Vested		(360,914	)		3.97
Forfeited		(80,534	)		4.60
Unvested as of June 30, 2020		1,119,471		$	4.37
Shares vested but not released		202,788		$	4.98

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 six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	41	$	34	$	81	$	63
Research and development		173		113		347		227
Selling and marketing		118		205		244		385
General and administrative		419		341		719		705
Total	$	751	$	693	$	1,391	$	1,380

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Net (Loss) Income per Common Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Calculations for Basic and Diluted Net (Loss) Income Per Common Share

The calculations for basic and diluted net (loss) income per common share for the three and six months ended June 30, 2020 are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Basic net (loss) income per common share:
Numerator:
Net (loss) income	$	(2,749	)	$	416		$	(4,796	)	$	(399	)
Less: Accretion of Series B preferred stock dividends		(272	)		(259	)		(543	)		(517	)
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Denominator:
Weighted average common shares outstanding - basic		17,941			16,953			17,730			16,896
Net (loss) income per common share - basic	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)
Diluted net (loss) income per common share:
Numerator:
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Plus: Accretion of Series B preferred stock dividends, if    dilutive		—			—			—			—
Net (loss) income available to common stockholders	$	(3,021	)	$	157		$	(5,339	)	$	(916	)
Denominator:
Weighted average common shares outstanding - basic		17,941			16,953			17,730			16,896
Dilutive securities:
Stock options		—			55			—			—
RSUs		—			429			—			—
Warrants		—			358			—			—
Total dilutive securities		—			842			—			—
Weighted average common shares outstanding - diluted		17,941			17,795			17,730			16,896
Net (loss) income per common share - diluted	$	(0.17	)	$	0.01		$	(0.30	)	$	(0.05	)

Common Stock Equivalents Excluded From Diluted Net (Loss) Income Per Common Share

The following common stock equivalents have been excluded from diluted net (loss) income per common share for the three and six months ended June 30, 2020 and 2019 because their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Shares of common stock subject to outstanding RSUs		1,119		—		1,119		1,275
Shares of common stock subject to outstanding stock options		554		131		554		576
Shares of common stock subject to outstanding warrants		315		85		315		705
Shares of common stock issuable upon conversion of Series B    convertible preferred stock		5,604		5,338		5,604		5,338
Total		7,592		5,554		7,592		7,894

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Segment Reporting, Geographic Information, and Concentration of Credit Risk (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Information Regarding Net Revenue and Gross Profit by Segment

Net revenue and gross profit information by segment for the three and six months ended June 30, 2020 and 2019 are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Premises:
Net revenue	$	7,482		$	10,671		$	15,716		$	20,001
Gross profit		4,093			5,982			8,619			10,361
Gross profit margin		55	%		56	%		55	%		52	%
Identity:
Net revenue		11,623			11,566			21,509			21,758
Gross profit		3,619			3,901			6,593			8,226
Gross profit margin		31	%		34	%		31	%		38	%
Total:
Net revenue		19,105			22,237			37,225			41,759
Gross profit		7,712			9,883			15,212			18,587
Gross profit margin		40	%		44	%		41	%		45	%
Operating expenses:
Research and development		2,422			2,078			5,018			4,104
Selling and marketing		4,236			4,721			8,733			9,219
General and administrative		2,151			2,279			4,342			4,901
Decrease in fair value of earnout liability		(261	)		—			(261	)		—
Restructuring and severance		1,417			(2	)		1,482			(14	)
Total operating expenses:		9,965			9,076			19,314			18,210
Loss (income) from operations		(2,253	)		807			(4,102	)		377
Non-operating income (expense):
Interest expense, net		(407	)		(241	)		(659	)		(520	)
Foreign currency gains (losses), net		(30	)		(70	)		56			(72	)
(Loss) income before income taxes	$	(2,690	)	$	496		$	(4,705	)	$	(215	)

Information Regarding Net Revenue by Geographic Region

Geographic Information

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and six months ended June 30, 2020 and 2019 is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Americas	$	13,670		$	15,945		$	27,538		$	30,670
Europe and the Middle East		2,630			3,423			5,230			6,353
Asia-Pacific		2,805			2,869			4,457			4,736
Total	$	19,105		$	22,237		$	37,225		$	41,759
Percentage of net revenue:
Americas		71	%		72	%		74	%		74	%
Europe and the Middle East		14	%		15	%		14	%		15	%
Asia-Pacific		15	%		13	%		12	%		11	%
Total		100	%		100	%		100	%		100	%

Long-Lived Assets by Geographic Location

Long-lived assets by geographic location as of June 30, 2020 and December 31, 2019 are as follows (in thousands):

	June 30,		December 31,
	2020		2019
Property and equipment, net:
Americas	$	715	$	839
Europe and the Middle East		50		55
Asia-Pacific		1,504		1,148
Total property and equipment, net	$	2,269	$	2,042
Operating lease ROU assets:
Americas	$	2,547	$	4,265
Europe and the Middle East		83		105
Asia-Pacific		862		259
Total operating lease right-of-use assets	$	3,492	$	4,629

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Schedule of Reconciles Undiscounted Cash flows of Operating Lease Liabilities Recorded on the Condensed Consolidated Balance Sheet

The table below reconciles the undiscounted cash flows for the first five years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of June 30, 2020 (in thousands):

	June 30,
	2020
2020 (remaining six months)	$	1,257
2021		1,975
2022		1,277
2023		457
2024		221
Thereafter		297
Total minimum lease payments		5,484
Less: amount of lease payments representing interest		(663	)
Present value of future minimum lease payments		4,821
Less: current liabilities under operating leases		(1,832	)
Long-term operating lease liabilities	$	2,989

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Summary of Principal Contractual Obligations, Excluding Operating Leases

The following table summarizes the Company’s principal contractual commitments, excluding operating leases, as of June 30, 2020 (in thousands):

	Purchase Commitments		Other Contractual Commitments		Total
2020 (remaining six months)	$	14,885	$	480	$	15,365
2021		143		—	$	143
Total	$	15,028	$	480	$	15,508

Summary of Warranty Accrual Account Activity

The following table summarizes the Company’s warranty accrual account activity during the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019
Balance at beginning of period	$	386	$	433		$	407		$	456
New product warranties		15		83			24			88
Claims activity		—		(11	)		(30	)		(39	)
Balance at end of period	$	401	$	505		$	401		$	505

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Revenue - Additional Information (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2020 USD ($) Segment
Revenue From Contract With Customer [Line Items]
Number of operating segments | Segment	2
Remaining performance obligations | $	$ 1.0
Minimum
Revenue From Contract With Customer [Line Items]
Payment period from contract inception	30 days
Maximum
Revenue From Contract With Customer [Line Items]
Payment period from contract inception	60 days
Software Licenses | Minimum
Revenue From Contract With Customer [Line Items]
Contract period	1 year
Software Licenses | Maximum
Revenue From Contract With Customer [Line Items]
Contract period	3 years
Software Maintenance and Support Services | Minimum
Revenue From Contract With Customer [Line Items]
Contract period	1 year
Software Maintenance and Support Services | Maximum
Revenue From Contract With Customer [Line Items]
Contract period	3 years
Extended Hardware Warranties | Minimum
Revenue From Contract With Customer [Line Items]
Contract period	1 year
Extended Hardware Warranties | Maximum
Revenue From Contract With Customer [Line Items]
Contract period	2 years

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Schedule of Performance Obligation (Detail)	6 Months Ended
	Jun. 30, 2020
Hardware Products
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Hardware products
When Performance Obligation is Typically Satisfied	When customer obtains control of the product (point-in-time)
When Payment is Typically Due	Within 30-60 days of shipment
How Standalone Selling Price is Typically Estimated	Observable in transactions without multiple performance obligations
Software Licenses
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Software licenses
When Performance Obligation is Typically Satisfied	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)
When Payment is Typically Due	Within 30-60 days of the beginning of license period
How Standalone Selling Price is Typically Estimated	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional Services
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Professional services
When Performance Obligation is Typically Satisfied	As services are performed and/or when the contract is fulfilled (point-in-time)
When Payment is Typically Due	Within 30-60 days of delivery
How Standalone Selling Price is Typically Estimated	Observable in transactions without multiple performance obligations
Software Maintenance and Support Services
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Software maintenance and support services
When Performance Obligation is Typically Satisfied	Ratably over the course of the support contract (over time)
When Payment is Typically Due	Within 30-60 days of the beginning of the contract period
How Standalone Selling Price is Typically Estimated	Observable in renewal transactions
Extended Hardware Warranties
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Extended hardware warranties
When Performance Obligation is Typically Satisfied	Ratably over the course of the support contract (over time)
When Payment is Typically Due	Within 30-60 days of the beginning of the contract period
How Standalone Selling Price is Typically Estimated	Observable in renewal transactions

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Schedule of Performance Obligation (Parenthetical) (Detail)	6 Months Ended
	Jun. 30, 2020
Hardware Products | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Hardware Products | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Software Licenses | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Software Licenses | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Professional Services | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Professional Services | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Software Maintenance and Support Services | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Software Maintenance and Support Services | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Extended Hardware Warranties | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Extended Hardware Warranties | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days

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Total Net Revenue Based on Disaggregation Criteria (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 19,105	$ 22,237	$ 37,225	$ 41,759
Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net revenue	18,065	20,961	34,865	39,217
Over Time
Disaggregation Of Revenue [Line Items]
Total net revenue	1,040	1,276	2,360	2,542
Americas
Disaggregation Of Revenue [Line Items]
Total net revenue	13,670	15,945	27,538	30,670
Americas | Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net revenue	12,725	14,760	25,370	28,284
Americas | Over Time
Disaggregation Of Revenue [Line Items]
Total net revenue	945	1,185	2,168	2,386
Europe and the Middle East
Disaggregation Of Revenue [Line Items]
Total net revenue	2,630	3,423	5,230	6,353
Europe and the Middle East | Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net revenue	2,535	3,332	5,038	6,197
Europe and the Middle East | Over Time
Disaggregation Of Revenue [Line Items]
Total net revenue	95	91	192	156
Asia-Pacific
Disaggregation Of Revenue [Line Items]
Total net revenue	2,805	2,869	4,457	4,736
Asia-Pacific | Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net revenue	$ 2,805	$ 2,869	$ 4,457	$ 4,736

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Changes in Deferred Revenue (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Revenue From Contract With Customer [Abstract]
Deferred revenue	$ 2,833
Deferral of revenue billed in current period, net of recognition	1,619
Recognition of revenue deferred in prior periods	(1,660)
Deferred revenue	$ 2,792

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Revenue - Unsatisfied Performance Obligation - Additional Information (Detail)	Jun. 30, 2020
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-07-01
Revenue From Contract With Customer [Line Items]
Unsatisfied performance obligations, expected to recognize	28.00%
Unsatisfied performance obligations, expected to recognize, period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-01-01
Revenue From Contract With Customer [Line Items]
Unsatisfied performance obligations, expected to recognize	43.00%
Unsatisfied performance obligations, expected to recognize, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-01-01
Revenue From Contract With Customer [Line Items]
Unsatisfied performance obligations, expected to recognize	29.00%
Unsatisfied performance obligations, expected to recognize, period

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Business Combinations - Additional Information (Detail) - USD ($)			3 Months Ended			6 Months Ended		12 Months Ended
	Jan. 02, 2019	Nov. 01, 2018	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Business Acquisition [Line Items]
Goodwill			$ 10,180,000		$ 10,238,000	$ 10,180,000		$ 10,238,000
Business combination reduction in earnout consideration expense			261,000			261,000
Thursby Software Systems
Business Acquisition [Line Items]
Date of acquisition completed		Nov. 01, 2018
Business combination, aggregate consideration		$ 3,100,000
Business combination, payment of cash		$ 600,000
Business combination, issuance of common stock, shares		426,621
Business combination, issuance of common stock		$ 2,500,000
Business combination, issuance of common stock shares held back		85,324			85,324
Product revenue to be achieved to obligate earnout consideration		$ 11,000,000
Amount of additional earnout consideration of payable in shares of common stock		2,500,000
Amount of maximum earnout consideration of payable for all periods in shares of common stock		7,500,000
Goodwill		3,600,000
Thursby Software Systems | ASC 805
Business Acquisition [Line Items]
Acquisition and transactional costs						0	$ 27,000
Thursby Software Systems | Maximum
Business Acquisition [Line Items]
Business combination, issuance of common stock value held back		500,000
Product revenue to be achieved to obligate earnout consideration		15,000,000
Amount of earnout consideration of payable in shares of common stock		7,500,000
Product revenue to be achieved to obligate additional earnout consideration		15,000,000
Thursby Software Systems | Minimum
Business Acquisition [Line Items]
Product revenue to be achieved to obligate earnout consideration		8,000,000
Product revenue to be achieved to obligate additional earnout consideration		$ 15,000,000
Viscount Systems, Inc.
Business Acquisition [Line Items]
Date of acquisition completed	Jan. 02, 2019
Business combination, aggregate consideration	$ 2,900,000
Business combination, payment of cash	$ 1,300,000
Business combination, issuance of common stock, shares	419,288
Business combination, issuance of common stock	$ 1,600,000
Business combination, issuance of common stock shares held back	31,447			31,447
Amount of maximum earnout consideration of payable for all periods in shares of common stock	$ 3,500,000
Goodwill	1,200,000
Fair value of earnout consideration	200,000		$ 489,000		$ 750,000	$ 489,000		750,000
Business combination issued to selling stockholder earnout consideration of shares			157,233
Business combination reduction in earnout consideration expense			$ 261,000
Viscount Systems, Inc. | ASC 805
Business Acquisition [Line Items]
Acquisition and transactional costs								$ 27,000
Viscount Systems, Inc. | Maximum
Business Acquisition [Line Items]
Amount of earnout consideration of payable in shares of common stock	3,500,000
Amount of additional earnout consideration of payable in shares of common stock	$ 2,250,000

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Summary of Acquisition Related Finite-lived Intangibles and Estimated Lives (Detail) - USD ($) $ in Thousands	Jan. 02, 2019	Nov. 01, 2018
Thursby Software Systems
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets		$ 2,400
Thursby Software Systems | Trademarks
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets		$ 200
Estimated Useful Life (in Years)		5 years
Thursby Software Systems | Customer Relationships
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets		$ 1,500
Estimated Useful Life (in Years)		10 years
Thursby Software Systems | Developed Technology
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets		$ 700
Estimated Useful Life (in Years)		10 years
Viscount Systems, Inc.
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 1,670
Viscount Systems, Inc. | Trademarks
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 160
Estimated Useful Life (in Years)	5 years
Viscount Systems, Inc. | Customer Relationships
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 710
Estimated Useful Life (in Years)	10 years
Viscount Systems, Inc. | Developed Technology
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 800
Estimated Useful Life (in Years)	10 years

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Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition (Detail) - USD ($)	Jun. 30, 2020	Dec. 31, 2019	Jan. 02, 2019
Business Acquisition [Line Items]
Goodwill	$ 10,180,000	$ 10,238,000
Viscount Systems, Inc.
Business Acquisition [Line Items]
Accounts receivable			$ 636,000
Inventory			249,000
Prepaid expenses and other current assets			29,000
Property and equipment			190,000
Operating lease ROU assets			550,000
Finite-lived intangibles			1,670,000
Total identifiable assets acquired			3,324,000
Accounts payable			(372,000)
Operating lease liabilities			(61,000)
Accrued expenses and liabilities			(120,000)
Deferred revenue			(34,000)
Earnout consideration liability	$ (489,000)	$ (750,000)	(200,000)
Other current liabilities			(326,000)
Long-term operating lease liabilities			(489,000)
Total liabilities assumed			(1,602,000)
Net identifiable assets acquired			1,722,000
Goodwill			1,200,000
Net purchase price			2,922,000
Viscount Systems, Inc. | Trademarks
Business Acquisition [Line Items]
Finite-lived intangibles			160,000
Viscount Systems, Inc. | Customer Relationships
Business Acquisition [Line Items]
Finite-lived intangibles			710,000
Viscount Systems, Inc. | Developed Technology
Business Acquisition [Line Items]
Finite-lived intangibles			$ 800,000

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Fair Value Measurements - Additional Information (Detail) - USD ($)	3 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jan. 02, 2019
Fair Value Measurements, Non-recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Liability measured and recognized at fair value	$ 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	348,000	348,000
Viscount Systems, Inc.
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of earnout consideration	$ 489,000	$ 750,000	$ 200,000
Business combination issued to selling stockholder earnout consideration of shares	157,233

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Summary of Changes in Fair Value of Liabilities in Level 3 of Fair Value Hierarchy (Detail) - Viscount Earnout Consideration $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Fair Value Liabilities Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Balance as of December 31, 2019	$ 750
Decrease in fair value of earnout liability	(261)
Issuance of common stock in connection with earnout consideration	$ (489)

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Summary of Activity in Goodwill (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Goodwill [Line Items]
Beginning Balance	$ 10,238
Currency translation adjustment	(58)
Ending Balance	10,180
Premises
Goodwill [Line Items]
Beginning Balance	6,684
Currency translation adjustment	(58)
Ending Balance	6,626
Identity
Goodwill [Line Items]
Beginning Balance	3,554
Ending Balance	$ 3,554

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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
Impairment of goodwill	$ 0	$ 0
Impairment of intangible assets	$ 0

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Summary of Gross Carrying Amount and Accumulated Amortization for Intangible Assets Resulting from Acquisitions (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Acquired Finite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 25,554	$ 25,635
Accumulated amortization	(16,803)	(15,531)
Intangible assets, net	$ 8,751	10,104
Trademarks
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	5 years
Gross carrying amount	$ 755	763
Accumulated amortization	(302)	(229)
Intangible assets, net	453	534
Developed Technology
Acquired Finite Lived Intangible Assets [Line Items]
Gross carrying amount	9,073	9,109
Accumulated amortization	(5,317)	(4,873)
Intangible assets, net	$ 3,756	4,236
Developed Technology | Minimum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	10 years
Developed Technology | Maximum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	12 years
Customer Relationships
Acquired Finite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 15,726	15,763
Accumulated amortization	(11,184)	(10,429)
Intangible assets, net	$ 4,542	$ 5,334
Customer Relationships | Minimum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	4 years
Customer Relationships | Maximum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	12 years

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Amortization Expense Included in Condensed Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Finite Lived Intangible Assets [Line Items]
Amortization expense	$ 639	$ 643	$ 1,281	$ 1,283
Cost of revenue
Finite Lived Intangible Assets [Line Items]
Amortization expense	222	224	446	445
Selling and Marketing Expense
Finite Lived Intangible Assets [Line Items]
Amortization expense	$ 417	$ 419	$ 835	$ 838

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Estimated Future Amortization Expense of Purchased Intangible Assets with Definite Lives (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
2020 (remaining six months)	$ 1,282
2021	1,107
2022	1,107
2023	1,030
2024	956
Thereafter	3,269
Intangible assets, net	$ 8,751	$ 10,104

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Inventories (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 7,578	$ 4,612
Work-in-progress	130	100
Finished goods	11,039	11,433
Total	$ 18,747	$ 16,145

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Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 15,581	$ 15,001
Accumulated depreciation	(13,312)	(12,959)
Property and equipment, net	2,269	2,042
Building and Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,232	1,200
Furniture, Fixtures and Office Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,265	1,276
Plant and Machinery
Property Plant And Equipment [Line Items]
Property and equipment, gross	10,908	10,364
Purchased Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 2,176	$ 2,161

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Balance Sheet Components - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Property Plant And Equipment [Abstract]
Depreciation expense	$ 0.2	$ 0.3	$ 0.4	$ 0.5

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Other Accrued Expenses and Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Accrued Liabilities And Other Liabilities Current [Abstract]
Accrued professional fees	$ 391	$ 1,511
Customer deposits	67	137
Accrued warranties	401	407
Earnout liability		750
Other accrued expenses	1,437	1,693
Total	$ 2,296	$ 4,498

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Contractual Payment Obligation - Additional Information (Detail) - USD ($)		3 Months Ended		6 Months Ended
	Apr. 13, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Related Party Transaction [Line Items]
Interest accreted on payment obligation		$ 55,000	$ 38,000	$ 87,000	$ 82,000
Settlement Agreement
Related Party Transaction [Line Items]
Amended installment payment, contractual payment period	Oct. 31, 2021
Increase in contractual payment obligation	$ 90,000
Settlement Agreement | Maximum
Related Party Transaction [Line Items]
Installment payment, contractual payment year				2021

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Payment Obligation Under 2009 Settlement Agreement (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
2020 (remaining six months)	$ 14,885
2021	143
Total	15,028
Less: Current portion - contractual payment obligation	(862)	$ (1,311)
Long-term contractual payment obligation	486	$ 360
Settlement Agreement
Related Party Transaction [Line Items]
2020 (remaining six months)	361
2021	1,083
Present value discount factor	(96)
Total	1,348
Less: Current portion - contractual payment obligation	(862)
Long-term contractual payment obligation	$ 486

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Summary of Financial Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total	$ 23,393	$ 14,230
Less: Current maturities of financial liabilities	(22,983)	(14,189)
Less: Unamortized debt issuance costs	(410)	(41)
April 21 Funds Promissory Notes
Debt Instrument [Line Items]
Total	4,000
Paycheck Protection Program Promissory Note
Debt Instrument [Line Items]
Total	2,915
EWB Term Loan
Debt Instrument [Line Items]
Total	3,750
Revolving Loan Facility
Debt Instrument [Line Items]
Total	$ 12,728	$ 14,230

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Financial Liabilities - Additional Information (Detail)							5 Months Ended	6 Months Ended
	Oct. 01, 2020 USD ($)	May 05, 2020 USD ($) DividendYield yr	Apr. 09, 2020 USD ($)	Jan. 28, 2020 USD ($)	Feb. 06, 2019 USD ($)	Feb. 08, 2017 USD ($)	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Debt Instrument [Line Items]
Team loan								$ 23,393,000	$ 14,230,000
April 21 Funds Promissory Notes
Debt Instrument [Line Items]
Team loan								4,000,000
Promissory notes principal amount		$ 4,000,000
Interest rate		8.00%
Debt instrument, frequency of periodic payment		quarterly
Paycheck Protection Program Promissory Note
Debt Instrument [Line Items]
Proceeds from lines of credit			$ 2,900,000
Team loan								$ 2,915,000
Interest rate			1.00%
Notes payable, description								The Company borrowed a principal amount of approximately $2.9 million. The interest on the Note is 1.00% per annum. The Note is payable two years from the date of the Note, and there is no prepayment penalty.
Number of years note payable			2 years
April 21 Funds Warrants | April 21 Funds Promissory Notes
Debt Instrument [Line Items]
Fair value of warrants		$ 290,000
Estimated Volatility | Amended EWB Warrant
Debt Instrument [Line Items]
Warrant, measurement input		0.632
Estimated Volatility | April 21 Funds Warrants
Debt Instrument [Line Items]
Warrant, measurement input		0.632
Risk Free Interest Rate | Amended EWB Warrant
Debt Instrument [Line Items]
Warrant, measurement input		0.0024
Risk Free Interest Rate | April 21 Funds Warrants
Debt Instrument [Line Items]
Warrant, measurement input		0.0024
Dividend Yield | Amended EWB Warrant
Debt Instrument [Line Items]
Warrant, measurement input | DividendYield		0
Dividend Yield | April 21 Funds Warrants
Debt Instrument [Line Items]
Warrant, measurement input | DividendYield		0
Expected Life | Amended EWB Warrant
Debt Instrument [Line Items]
Warrant, measurement input | yr		3
Expected Life | April 21 Funds Warrants
Debt Instrument [Line Items]
Warrant, measurement input | yr		3
Period One | April 21 Funds Promissory Notes
Debt Instrument [Line Items]
Interest rate		12.00%
Revolving Loan Facility
Debt Instrument [Line Items]
Team loan								$ 12,728,000	$ 14,230,000
EWB Term Loan
Debt Instrument [Line Items]
Team loan								$ 3,750,000
Loan and Security Agreements | Amended EWB Warrant
Debt Instrument [Line Items]
Legal and administrative costs		$ 92,000
Fair value of warrants		42,000
Loan and Security Agreements | Revolving Loan Facility
Debt Instrument [Line Items]
Loan facility payable date					Feb. 08, 2021
Line of credit facility early termination fee percentage								1.00%
Loan and Security Agreements | Revolving Loan Facility | Prime Rate
Debt Instrument [Line Items]
Percentage of interest rate					0.75%	1.00%
Loan and Security Agreements | EWB Term Loan
Debt Instrument [Line Items]
Borrowing capacity under credit facility				$ 15,500,000	$ 20,000,000
Proceeds from lines of credit				4,500,000
Loan facility, principal payment through first anniversary				250,000
Legal and administrative costs				$ 90,000
Loan and Security Agreements | EWB Term Loan | Prime Rate
Debt Instrument [Line Items]
Percentage of interest rate				2.25%
Loan and Security Agreements | East West Bank
Debt Instrument [Line Items]
Team loan		$ 3,000,000						$ 4,000,000
Loan and Security Agreements | East West Bank | Scenario Forecast
Debt Instrument [Line Items]
Minimum trailing six month EBITDA	$ 300,000						$ 600,000
Loan and Security Agreements | East West Bank | Period One
Debt Instrument [Line Items]
Loan facility payable date		May 01, 2020
Loan and Security Agreements | East West Bank | Period Two
Debt Instrument [Line Items]
Loan facility payable date		Jun. 01, 2020
Loan and Security Agreements | East West Bank | Period Three
Debt Instrument [Line Items]
Loan facility payable date		Jul. 01, 2020
Loan and Security Agreements | East West Bank | Revolving Loan Facility
Debt Instrument [Line Items]
Borrowing capacity under credit facility					$ 20,000,000	$ 16,000,000
Loan and Security Agreements | Venture Lending & Leasing VII and VIII, Inc. | Term Loan
Debt Instrument [Line Items]
Borrowing capacity under credit facility						$ 10,000,000

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Summary of Series B Convertible Preferred Stock and Accretion of Dividend (Detail) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Stockholders Equity [Line Items]
Cumulative dividends on Series B convertible preferred stock	$ 272	$ 259	$ 543	$ 517
Series B convertible preferred stock
Stockholders Equity [Line Items]
Balance as of December 31, 2019			21,875
Cumulative dividends on Series B convertible preferred stock			543
Balance as of June 30, 2020	$ 22,418		$ 22,418
Balance as of December 31, 2019, Shares			5,469
Cumulative dividends on Series B convertible preferred stock			135
Balance as of June 30, 2020, Shares	5,604		5,604
Series B convertible preferred stock | Tranche One
Stockholders Equity [Line Items]
Balance as of December 31, 2019			$ 13,230
Cumulative dividends on Series B convertible preferred stock			331
Balance as of June 30, 2020	$ 13,561		$ 13,561
Balance as of December 31, 2019, Shares			3,308
Cumulative dividends on Series B convertible preferred stock			82
Balance as of June 30, 2020, Shares	3,390		3,390
Series B convertible preferred stock | Tranche two
Stockholders Equity [Line Items]
Balance as of December 31, 2019			$ 8,645
Cumulative dividends on Series B convertible preferred stock			212
Balance as of June 30, 2020	$ 8,857		$ 8,857
Balance as of December 31, 2019, Shares			2,161
Cumulative dividends on Series B convertible preferred stock			53
Balance as of June 30, 2020, Shares	2,214		2,214

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Stockholders' Equity - Additional Information (Detail) - $ / shares			6 Months Ended
	May 05, 2020	Feb. 08, 2017	Jun. 30, 2020
EWB Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock		40,000
Warrant exercise price		$ 3.64	$ 3.50
Warrant expiration date		Feb. 08, 2022
VLL7 Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock		290,000
Warrant exercise price		$ 2.00
Warrant expiration date		Feb. 08, 2022
Warrants or exercised received for common shares		193,494
VLL8 Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock		290,000
Warrant exercise price		$ 2.00
Warrant expiration date		Feb. 08, 2022
April 21 Funds Warrants
Stockholders Equity [Line Items]
Warrants issued to purchase common stock	275,000,000
Warrant exercise price			3.50
Warrants, term	3 years
Series B convertible preferred stock
Stockholders Equity [Line Items]
Minimum conversion price			$ 3.27
Dividend payment terms			Each share of Series B convertible preferred stock is entitled to a cumulative annual dividend of 5% for the first six (6) years following the issuance of such share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10th) year in cash. The dividends accrue and are payable in kind upon such time as the shares convert into the Company’s common stock
Cumulative annual dividend for first six years			5.00%
Cumulative annual dividend for each year after sixth year			3.00%
Price per share distributable to stockholders			$ 4.00
Series B convertible preferred stock | Common Stock
Stockholders Equity [Line Items]
Preferred stock shares convertible into common stock			5,604,375
Maximum | EWB Warrant
Stockholders Equity [Line Items]
Warrant exercise price	$ 3.50
Warrant expiration date	Feb. 08, 2023
Maximum | Common Stock
Stockholders Equity [Line Items]
Shares issued, price per share			$ 4.00
Minimum | EWB Warrant
Stockholders Equity [Line Items]
Warrant exercise price		$ 3.64
Warrant expiration date	Feb. 08, 2022

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Summary of Outstanding Warrants Issued by Company (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2020	Feb. 08, 2017
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	315,000
EWB Warrant
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	40,000
Exercise Price	$ 3.50	$ 3.64
Issue Date	Feb. 08, 2017
Expiration Date	Feb. 08, 2023
April 21 Funds Warrants
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	275,000
Exercise Price	$ 3.50
Issue Date	May 05, 2020
Expiration Date	May 05, 2023

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Summary of Common Stock Reserved for Future Issuance (Detail)	Jun. 30, 2020 shares
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	11,132,923
Exercise of Outstanding Stock Options, Vesting of Restricted Stock Units ("RSU"), and Issuance of RSUs Vested but not Released
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	1,876,028
ESPP
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	293,888
Shares of Common Stock Available for Grant Under the 2011 Plan
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	1,106,558
Warrants to Purchase Common Stock
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	315,000
Shares of Common Stock Issuable Upon Conversion of Series B Convertible Preferred Stock
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	7,541,449

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Stock-Based Compensation - Additional Information (Detail) - USD ($)	6 Months Ended		109 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 06, 2011
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for future issuance	11,132,923		11,132,923
Unrecognized compensation expense related to stock options	$ 0		$ 0
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation expense	$ 4,100,000		$ 4,100,000
Unrecognized stock-based compensation expense, weighted average period of recognition	2 years 2 months 12 days
Repurchase of common stock (in shares)	94,134	98,939
2011 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock reserved for future issuance				400,000
Number of shares available for grant				859,956
Increase in shares of common stock authorized for issuance			4,400,000
2007 Plan and 2010 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares available for grant				459,956

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Summary of Activity for Stock Option Plans (Detail) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Stock Options Number Outstanding
Beginning Balance	562,102
Cancelled or Expired	(8,333)
Ending Balance	553,769	562,102
Vested or expected to vest as of June 30, 2020	553,769
Exercisable as of June 30, 2020	553,769
Stock Options Average Exercise Price per share
Beginning Balance	$ 5.60
Cancelled or Expired	8.18
Ending Balance	5.56	$ 5.60
Vested or expected to vest as of June 30, 2020	5.56
Exercisable as of June 30, 2020	$ 5.56
Stock Options Remaining Contractual Life (in years)
Weighted Average Remaining Contractual Term (Years)	5 years 4 months 20 days	5 years 10 months 9 days
Vested or expected to vest as of June 30, 2020	5 years 4 months 20 days
Exercisable as of June 30, 2020	5 years 4 months 20 days
Stock Options Aggregate Intrinsic Value
Aggregate intrinsic value	$ 328,900	$ 572,869
Vested or expected to vest as of June 30, 2020	328,900
Exercisable as of June 30, 2020	$ 328,900

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Summary Information about Options Outstanding (Detail)	6 Months Ended
	Jun. 30, 2020 $ / shares shares
$4.36 - $7.20
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	$ 4.36
Range of Exercise Prices, upper limit	$ 7.20
Options Number Outstanding | shares	462,110
Options Outstanding Weighted Average Remaining Contractual Life (Years)	5 years 9 months 25 days
Options Outstanding Weighted Average Exercise Price	$ 4.44
Options Number Exercisable | shares	462,110
Options Exercisable Weighted Average Exercise Price	$ 4.44
$7.50 - $11.25
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	7.50
Range of Exercise Prices, upper limit	$ 11.25
Options Number Outstanding | shares	71,198
Options Outstanding Weighted Average Remaining Contractual Life (Years)	3 years 7 months 24 days
Options Outstanding Weighted Average Exercise Price	$ 9.94
Options Number Exercisable | shares	71,198
Options Exercisable Weighted Average Exercise Price	$ 9.94
$11.30 - $16.95
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	11.30
Range of Exercise Prices, upper limit	$ 16.95
Options Number Outstanding | shares	13,764
Options Outstanding Weighted Average Remaining Contractual Life (Years)	2 years 2 months 8 days
Options Outstanding Weighted Average Exercise Price	$ 12.90
Options Number Exercisable | shares	13,764
Options Exercisable Weighted Average Exercise Price	$ 12.90
$17.60 - $26.40
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	17.60
Range of Exercise Prices, upper limit	$ 26.40
Options Number Outstanding | shares	6,697
Options Outstanding Weighted Average Remaining Contractual Life (Years)	1 year 2 months 26 days
Options Outstanding Weighted Average Exercise Price	$ 21.55
Options Number Exercisable | shares	6,697
Options Exercisable Weighted Average Exercise Price	$ 21.55
$4.36 - $26.40
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	4.36
Range of Exercise Prices, upper limit	$ 26.40
Options Number Outstanding | shares	553,769
Options Outstanding Weighted Average Remaining Contractual Life (Years)	5 years 4 months 20 days
Options Outstanding Weighted Average Exercise Price	$ 5.56
Options Number Exercisable | shares	553,769
Options Exercisable Weighted Average Exercise Price	$ 5.56

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Summary of RSU Activity (Detail) - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Beginning Unvested, Number of RSUs | shares	1,148,110
Granted, Number of RSUs | shares	412,809
Vested, Number of RSUs | shares	(360,914)
Forfeited, Number of RSUs | shares	(80,534)
Ending Unvested, Number of RSUs | shares	1,119,471
Shares vested but not released, Number of RSUs | shares	202,788
Beginning Unvested, Weighted Average Fair Value | $ / shares	$ 4.43
Granted, Weighted Average Fair Value | $ / shares	3.90
Vested, Weighted Average Fair Value | $ / shares	3.97
Forfeited, Weighted Average Fair Value | $ / shares	4.60
Ending Unvested, Weighted Average Fair Value | $ / shares	4.37
Shares vested but not released, Weighted Average Fair Value | $ / shares	$ 4.98

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Stock-Based Compensation Expense Related to Stock Options and RSUs (Detail) - Stock Options and Restricted Stock Units - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	$ 751	$ 693	$ 1,391	$ 1,380
Cost of revenue
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	41	34	81	63
Research and Development Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	173	113	347	227
Selling and Marketing Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	118	205	244	385
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	$ 419	$ 341	$ 719	$ 705

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Calculations for Basic and Diluted Net (Loss) Income Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Numerator:
Net (loss) income	$ (2,749)	$ 416	$ (4,796)	$ (399)
Less: Accretion of Series B preferred stock dividends	(272)	(259)	(543)	(517)
Net (loss) income available to common stockholders	$ (3,021)	$ 157	$ (5,339)	$ (916)
Weighted average common shares outstanding - basic	17,941	16,953	17,730	16,896
Net (loss) income per common share - basic	$ (0.17)	$ 0.01	$ (0.30)	$ (0.05)
Dilutive securities:
Stock options		55
RSUs		429
Warrants		358
Total dilutive securities		842
Weighted average common shares outstanding - diluted	17,941	17,795	17,730	16,896
Net (loss) income per common share - diluted	$ (0.17)	$ 0.01	$ (0.30)	$ (0.05)
Diluted net (loss) income per common share:
Net (loss) income available to common stockholders	$ (3,021)	$ 157	$ (5,339)	$ (916)
Net (loss) income available to common stockholders	$ (3,021)	$ 157	$ (5,339)	$ (916)

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Common Stock Equivalents Excluded From Diluted Net (Loss) Income Per Common Share (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net income (loss) per share inclusion anti-dilutive	7,592	5,554	7,592	7,894
RSUs
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net income (loss) per share inclusion anti-dilutive	1,119		1,119	1,275
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net income (loss) per share inclusion anti-dilutive	554	131	554	576
Warrants
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net income (loss) per share inclusion anti-dilutive	315	85	315	705
Shares of Common Stock Issuable Upon Conversion of Series B Convertible Preferred Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net income (loss) per share inclusion anti-dilutive	5,604	5,338	5,604	5,338

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Information Regarding Net Revenue and Gross Profit by Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information [Line Items]
Net revenue	$ 19,105	$ 22,237	$ 37,225	$ 41,759
Gross profit	$ 7,712	$ 9,883	$ 15,212	$ 18,587
Gross profit margin	40.00%	44.00%	41.00%	45.00%
Operating expenses:
Research and development	$ 2,422	$ 2,078	$ 5,018	$ 4,104
Selling and marketing	4,236	4,721	8,733	9,219
General and administrative	2,151	2,279	4,342	4,901
Decrease in fair value of earnout liability	(261)		(261)
Restructuring and severance	1,417	(2)	1,482	(14)
Total operating expenses	9,965	9,076	19,314	18,210
(Loss) income from operations	(2,253)	807	(4,102)	377
Non-operating income (expense):
Interest expense, net	(407)	(241)	(659)	(520)
Foreign currency gains (losses), net	(30)	(70)	56	(72)
(Loss) income before income taxes	(2,690)	496	(4,705)	(215)
Premises
Segment Reporting Information [Line Items]
Net revenue	7,482	10,671	15,716	20,001
Gross profit	$ 4,093	$ 5,982	$ 8,619	$ 10,361
Gross profit margin	55.00%	56.00%	55.00%	52.00%
Identity
Segment Reporting Information [Line Items]
Net revenue	$ 11,623	$ 11,566	$ 21,509	$ 21,758
Gross profit	$ 3,619	$ 3,901	$ 6,593	$ 8,226
Gross profit margin	31.00%	34.00%	31.00%	38.00%

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Information Regarding Net Revenue by Geographic Region (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information [Line Items]
Net revenue	$ 19,105	$ 22,237	$ 37,225	$ 41,759
Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	100.00%	100.00%	100.00%	100.00%
Americas
Segment Reporting Information [Line Items]
Net revenue	$ 13,670	$ 15,945	$ 27,538	$ 30,670
Americas | Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	71.00%	72.00%	74.00%	74.00%
Europe and the Middle East
Segment Reporting Information [Line Items]
Net revenue	$ 2,630	$ 3,423	$ 5,230	$ 6,353
Europe and the Middle East | Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	14.00%	15.00%	14.00%	15.00%
Asia-Pacific
Segment Reporting Information [Line Items]
Net revenue	$ 2,805	$ 2,869	$ 4,457	$ 4,736
Asia-Pacific | Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	15.00%	13.00%	12.00%	11.00%

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Segment Reporting, Geographic Information and Concentration of Credit Risk - Additional Information (Detail) - Customer	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Dec. 31, 2019
Segment Reporting [Abstract]
Concentration Risk, Customer		No customer accounted for 10% or more of net revenue for either of the three or six months ended June 30, 2020 or 2019. No customer accounted for 10% of net accounts receivable at June 30, 2020 or December 31, 2019.
Number of major customer represented stated percentage of total net revenue	0	0
Number of customers who accounted for 10% or more net accounts receivable		0	0

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Long-Lived Assets by Geographic Location (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Segment Reporting Information [Line Items]
Property and equipment, net	$ 2,269	$ 2,042
Operating lease ROU assets	3,492	4,629
Americas
Segment Reporting Information [Line Items]
Property and equipment, net	715	839
Operating lease ROU assets	2,547	4,265
Europe and the Middle East
Segment Reporting Information [Line Items]
Property and equipment, net	50	55
Operating lease ROU assets	83	105
Asia-Pacific
Segment Reporting Information [Line Items]
Property and equipment, net	1,504	1,148
Operating lease ROU assets	$ 862	$ 259

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Restructuring and Severance - Additional Information (Detail) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses	$ 1,417,000		$ (2,000)	$ 1,482,000	$ (14,000)
Sublease income received	12,000			200,000
3VR
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses	1,417,000			1,482,000
Sublease income received	0	$ 198,000
3VR | Facility Rental
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses	1,397,000			1,398,000
3VR | Severance
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses	20,000			84,000
3VR | Impairment of ROU Operating Lease Asset
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses	$ 1,199,000			$ 1,199,000

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Leases - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Lessee Lease Description [Line Items]
Total rent expense	$ 400,000	$ 400,000	$ 800,000	$ 700,000
Lessee, Operating Lease, Existence of Option to Extend [true false]			true
Weighted average remaining operating lease term	3 years 1 month 6 days		3 years 1 month 6 days
Weighted average discount rate of operating lease	6.40%		6.40%
Sublease rental income due in future under non-cancelable subleases	$ 1,400,000		$ 1,400,000
Operating lease liabilities, cash paid	400,000		1,000,000
Sublease rental income	$ 12,000		$ 200,000
Minimum
Lessee Lease Description [Line Items]
Remaining lease term			1 year
Maximum
Lessee Lease Description [Line Items]
Remaining lease term			7 years
Operating leases, options to extend leases term	5 years		5 years

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Leases - Schedule of Reconciles Undiscounted Cash flows of Operating Lease Liabilities Recorded on the Condensed Consolidated Balance Sheet (Detail) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Leases [Abstract]
2020 (remaining six months)	$ 1,257
2021	1,975
2022	1,277
2023	457
2024	221
Thereafter	297
Total minimum lease payments	5,484
Less: amount of lease payments representing interest	(663)
Present value of future minimum lease payments	4,821
Less: current liabilities under operating leases	(1,832)	$ (1,814)
Long-term operating lease liabilities	$ 2,989	$ 3,013

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Summary of Principal Contractual Obligations, Excluding Operating Leases (Detail) $ in Thousands	Jun. 30, 2020 USD ($)
Purchase Commitments
2020 (remaining six months)	$ 14,885
2021	143
Total	15,028
Other Contractual Commitments
2020 (remaining six months)	480
Total	480
Total Commitments
2020 (remaining six months)	15,365
2021	143
Total	$ 15,508

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Summary of Warranty Accrual Account Activity (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Balance at beginning of period	$ 386	$ 433	$ 407	$ 456
New product warranties	15	83	24	88
Claims activity		(11)	(30)	(39)
Balance at end of period	$ 401	$ 505	$ 401	$ 505

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Commitments and Contingencies - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2020
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	36 months