0001193125-16-568279.txt : 20160429 0001193125-16-568279.hdr.sgml : 20160429 20160429140956 ACCESSION NUMBER: 0001193125-16-568279 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20160331 FILED AS OF DATE: 20160429 DATE AS OF CHANGE: 20160429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH MICRO SOFTWARE INC CENTRAL INDEX KEY: 0000948708 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330029027 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35525 FILM NUMBER: 161605263 BUSINESS ADDRESS: STREET 1: 51 COLUMBIA CITY: ALISO VIEJO STATE: CA ZIP: 92656 BUSINESS PHONE: 9493625800 MAIL ADDRESS: STREET 1: 51 COLUMBIA CITY: ALISO VIEJO STATE: CA ZIP: 92656 10-Q 1 d159844d10q.htm 10-Q 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

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

For the quarterly period ended March 31, 2016

OR

 

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

Commission file number 01-35525

SMITH MICRO SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

 

   DELAWARE                      33-0029027
  

(State or other jurisdiction of

incorporation or organization)

    

(I.R.S. Employer

Identification No.)

51 COLUMBIA

ALISO VIEJO, CA 92656

(Address of principal executive offices, including zip code)

(949) 362-5800

(Registrant’s telephone number, including area code)

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  x    No    ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x    No    ¨

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

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  ¨    Small reporting company  x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes    ¨    No   x

As of April 18, 2016 there were 46,968,272 shares of common stock outstanding.


Table of Contents

SMITH MICRO SOFTWARE, INC.

QUARTERLY REPORT ON FORM 10-Q

March 31, 2016

TABLE OF CONTENTS

 

PART I.

 

FINANCIAL INFORMATION

  

Item 1.

 

Financial Statements (Unaudited)

  
 

Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015

     2   
 

Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2016 and 2015

     3   
 

Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2016

     4   
 

Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015

     5   
 

Notes to the Consolidated Financial Statements

     6   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     14   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     21   

Item 4.

 

Controls and Procedures

     21   

PART II. 

 

OTHER INFORMATION

  

Item 1.

 

Legal Proceedings

     23   

Item 1A.

 

Risk Factors

     23   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     23   

Item 6.

 

Exhibits

     24   

SIGNATURES

     25   

 

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PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

SMITH MICRO SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

 

     March 31,
2016
         December 31,  
2015
 
         (unaudited)          (audited)  

Assets

     

Current assets:

     

Cash and cash equivalents

     $ 11,398              $ 8,819        

Short-term investments

     1,679              4,078        

Accounts receivable, net of allowances for doubtful accounts and other adjustments of $135 (2016) and $201 (2015)

     5,459              8,145        

Income tax receivable

     13              13        

Inventories, net of reserves for excess and obsolete inventory of $145 (2016) and $158 (2015)

     27              39        

Prepaid expenses and other current assets

     899              692        
  

 

 

    

 

 

 

 Total current assets

     19,475              21,786        

Equipment and improvements, net

     2,150              2,492        

Other assets

     196              195        
  

 

 

    

 

 

 

 Total assets

     $ 21,821              $ 24,473        
  

 

 

    

 

 

 

    

     

Liabilities and Stockholders’ Equity

     

Current liabilities:

     

Accounts payable

     $ 1,480              $ 1,708        

Accrued liabilities

     5,539              5,064        

Deferred revenue

     1,107              440        
  

 

 

    

 

 

 

 Total current liabilities

     8,126              7,212        

Non-current liabilities:

     

Deferred rent and other long-term liabilities

     3,110              3,235        
  

 

 

    

 

 

 

 Total non-current liabilities

     3,110              3,235        

Commitments and contingencies

     

Stockholders’ equity:

     

Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; none issued or outstanding

     -                 -           

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 46,968,272 and 45,729,272 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively

     47              46        

Additional paid-in capital

     225,129              224,867        

Accumulated comprehensive deficit

     (214,591)             (210,887)       
  

 

 

    

 

 

 

Total stockholders’ equity

     10,585              14,026        
  

 

 

    

 

 

 

 Total liabilities and stockholders’ equity

     $ 21,821              $ 24,473        
  

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

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SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

 

             Three Months Ended      
March 31,
 
     2016      2015  
     (unaudited)      (unaudited)  

    

     

Revenues

      $ 7,214               $ 10,529         

Cost of revenues

     2,113              2,118         
  

 

 

    

 

 

 

Gross profit

     5,101              8,411         

Operating expenses:

     

Selling and marketing

     2,370              2,191         

Research and development

     3,923              3,341         

General and administrative

     2,486              2,877         
  

 

 

    

 

 

 

Total operating expenses

     8,779              8,409         
  

 

 

    

 

 

 

Operating income (loss)

     (3,678)             2         

Interest and other income (expense), net

     (2)             (1)        
  

 

 

    

 

 

 

Income (loss) before provision for income taxes

     (3,680)             1         

Provision for income tax expense

     26              11         
  

 

 

    

 

 

 

Net loss

     (3,706)             (10)        
  

 

 

    

 

 

 

    

     

Other comprehensive income, before tax:

     

Unrealized holding gains on available-for-sale securities

     2              1         
  

 

 

    

 

 

 

Other comprehensive income, net of tax

     2              1         
  

 

 

    

 

 

 

Comprehensive loss

      $ (3,704)              $ (9)        
  

 

 

    

 

 

 

    

     

Net loss per share:

     

Basic and diluted

      $ (0.08)              $ (0.00)        
  

 

 

    

 

 

 

    

     

Weighted average shares outstanding:

     

Basic and diluted

     46,094              45,501         
  

 

 

    

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

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SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

 

 

                   Additional      Accumulated         
     Common stock      paid-in      comprehensive         
     Shares      Amount      capital      deficit      Total  
  

 

 

 

BALANCE, December 31, 2015 (audited)

     45,729          $ 46           $ 224,867           $ (210,887)          $ 14,026     

Non-cash compensation recognized on stock options and ESPP

     -           -           40           -           40     

Restricted stock grants, net of cancellations

     1,391           1           320           -           321     

Cancellation of shares for payment of withholding tax

     (166)          -           (105)          -           (105)    

Employee stock purchase plan

     14           -           7           -           7     

Comprehensive loss

     -           -           -           (3,704)          (3,704)    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, March 31, 2016 (unaudited)

       46,968          $ 47           $    225,129           $ (214,591)          $    10,585     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

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SMITH MICRO SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

        Three Months Ended March 31,     
     2016        2015  
     (unaudited)        (unaudited)  

Operating activities:

       

Net loss

     $ (3,706)            $ (10)    

Adjustments to reconcile net loss to net cash provided by (used by) operating activities:

       

Depreciation and amortization

     426             495     

Provision for doubtful accounts and other adjustments to accounts receivable

     -                 12     

Provision for excess and obsolete inventory

     3             5     

Non-cash compensation related to stock options, ESPP and restricted stock

     361             576     

Loss on disposal of assets

     2             -         

Change in operating accounts:

       

Accounts receivable

     2,686             606     

Income tax receivable

     -                 673     

Inventories

     9             5     

Prepaid expenses and other assets

     (208)            62     

Accounts payable and accrued liabilities

     17             (522)    

Deferred revenue

     667             (1,167)    
  

 

 

      

 

 

 

Net cash provided by operating activities

     257             735     
  

 

 

      

 

 

 

    

       

Investing activities:

       

Capital expenditures

     (86)            (21)    

Sales (purchases) of short-term investments

     2,401             (919)    
  

 

 

      

 

 

 

Net cash provided by (used in) investing activities

     2,315             (940)    
  

 

 

      

 

 

 

    

       

Financing activities:

       

Cash received from stock sale for employee stock purchase plan

     7             8     

Cash received from exercise of stock options

     -                 9     
  

 

 

      

 

 

 

Net cash provided by financing activities

     7             17     
  

 

 

      

 

 

 

Net increase (decrease) in cash and cash equivalents

     2,579             (188)    

Cash and cash equivalents, beginning of period

     8,819             10,165     
  

 

 

      

 

 

 

Cash and cash equivalents, end of period

     $ 11,398             $ 9,977     
  

 

 

      

 

 

 

    

       

Supplemental disclosures of cash flow information:

       

Cash paid for income taxes

     $ 21             $ 6     
  

 

 

      

 

 

 

 

 

See accompanying notes to the consolidated financial statements.

 

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SMITH MICRO SOFTWARE, INC.

Notes to the Consolidated Financial Statements

 

1.

The Company

Smith Micro Software, Inc. (“we,” “us,” “our,” “Smith Micro,” or the “Company”) provides software solutions to simplify and enhance the mobile experience. As a leader in wireless connectivity, our applications ensure high quality of service for mobile users while optimizing networks for wireless service providers and enterprises. Using our intelligent device software, along with premium voice, video and messaging applications, we create new opportunities to engage consumers and monetize mobile services. In addition to wireless solutions, Smith Micro develops 2D/3D graphics software used by professional artists, animators, illustrators, and designers worldwide.

 

2.

Basis of Presentation

The accompanying interim consolidated balance sheet and statement of stockholders’ equity as of March 31, 2016, and the related statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2016 and 2015 are unaudited. The unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted.

In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on March 9, 2016.

Intercompany balances and transactions have been eliminated in consolidation.

Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2016.

 

3.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued final guidance in Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which will change certain aspects of accounting for share-based payments to employees. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It will also allow an employer to repurchase more of an employee’s shares than it can currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and must be adopted on a modified prospective approach. Due to the Company’s full valuation allowance, the nature of the change on the balance sheet will not be significant.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that adoption will have on the consolidated financial statements.

In November 2015, the FASB issued final guidance in ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and may be adopted on either a prospective or retrospective basis.

The Company has early adopted this standard for the interim and annual period ending December 31, 2015 on a prospective basis. As such, prior periods were not retrospectively adjusted. Due to the Company’s full valuation allowance on its deferred tax assets, the nature of the change on the balance sheet is not significant.

                 In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

 

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In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments to this Update supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We will be evaluating the impact of this guidance on our consolidated financial statements.

4. Net Income (Loss) Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC Topic No. 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

 

         Three Months Ended March 31,      
        

2016

    

2015

     
    (unaudited, in thousands, except per share amounts)

Numerator:

         

Net loss available to common stockholders

       $ (3,706)          $ (10)      
    

 

 

    

 

 

   

    

         

Denominator:

         

Weighted average shares outstanding - basic

       46,094           45,501       

Potential common shares - options (treasury stock method)

       -               -           
    

 

 

    

 

 

   

Weighted average shares outstanding - diluted

       46,094           45,501       
    

 

 

    

 

 

   

    

         

Shares excluded (anti-dilutive)

       -               229       
    

 

 

    

 

 

   

    

         

Shares excluded due to an exercise price greater than weighted average stock price for the period

       1,605           976       
    

 

 

    

 

 

   

    

         

Net loss per common share:

         

Basic

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   

Diluted

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   

 

5.

Stock-Based Compensation

Stock Plans

During the three months ended March 31, 2016, the Company granted 1.4 million shares of restricted stock with a weighted average grant date fair value of $0.68 per share. This cost will be amortized ratably over a period of 12 to 48 months.

As of March 31, 2016, there were 6.8 million shares available for future grants under the 2015 Stock Plan.

 

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Employee Stock Purchase Plan

The Company’s most recent six-month offering period ended March 31, 2016 and resulted in 14,000 shares being purchased/granted at a fair value of $0.50 per share.

Stock Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. Restricted stock is valued using the closing stock price on the date of the grant. Options are valued using a Black-Scholes valuation model.

Stock-based non-cash compensation expense related to stock options, restricted stock grants and the employee stock purchase plan were recorded in the financial statements as follows (in thousands):

 

           Three Months Ended March 31,        
     2016      2015  
     (unaudited)  

Cost of revenues

     $ 2           $ 3     

Selling and marketing

     70           75     

Research and development

     121           169     

General and administrative

     168           329     
  

 

 

    

 

 

 

Total non-cash stock compensation expense

     $ 361           $ 576     
  

 

 

    

 

 

 

Total share-based compensation for each quarter includes cash payment of income taxes related to grants of restricted stock in the amount of $0 and $32,000 for the three months ended March 31, 2016 and 2015, respectively.

 

6.

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

The carrying value of accounts receivable, foreign cash accounts, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

   

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

   

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

   

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

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As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs.

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. As permitted, the Company has elected not to use the fair value option to measure our available-for-sale securities under this Topic and will continue to report as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities. We have made this election because the nature of our financial assets and liabilities are not of such complexity that they would benefit from a change in valuation to fair value.

 

7.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in two financial institutions and are uninsured except for the minimum Federal Deposit Insurance Corporation (“FDIC”) coverage, and have original maturity dates of three months or less. As of March 31, 2016 and December 31, 2015, bank balances totaling approximately $11.1 million and $8.5 million, respectively, were uninsured.

 

8.

Short-Term Investments

Short-term investments consist of U.S. government agency and government sponsored enterprise obligations. The Company accounts for these short-term investments as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities. These debt and equity securities are not classified as either held-to-maturity securities or trading securities. As such, they are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other comprehensive income in stockholders’ equity until realized. Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):

 

    March 31, 2016      December 31, 2015  
    Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

     Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

 

Government securities/money market

    1,680        (1     1,679         4,080        (2     4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

  $ 1,680      $ (1   $ 1,679       $ 4,080      $ (2   $ 4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

There were no realized gains or losses for the three months ended March 31, 2016 and 2015.

 

9.

Accounts Receivable

The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for estimated credit losses, and those losses have been within management’s estimates. Allowances for product returns are included in other adjustments to accounts receivable on the accompanying consolidated balance sheets. Product returns are estimated based on historical experience and management estimations.

 

10.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was no impairment as of March 31, 2016.

 

11.

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.

 

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12.

Segment, Customer Concentration and Geographical Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility. Wireless includes our NetWise®, CommSuite®, and QuickLink® family of products. Graphics includes our consumer-based products: Poser®, Anime Studio®, Manga Studio®, MotionArtist® and StuffIt®.

The Company does not separately allocate operating expenses to these business units, nor does it allocate specific assets. Therefore, business unit information reported includes only revenues.

The following table shows the revenues generated by each business unit (in thousands):

 

     Three Months Ended March 31,    

    

     2016      2015    
     (unaudited)    
  

 

 

    

 

 

   

Wireless

     $ 5,973           $ 9,219       

Graphics

     1,241           1,310       
  

 

 

    

 

 

   

Total revenues

     $             7,214           $           10,529       
  

 

 

    

 

 

   

Customer Concentration Information

A summary of the Company’s customers that represent 10% or more of the Company’s net revenues is as follows:

 

       Three Months Ended March 31,  
     2016         2015   

Wireless:

       

Sprint (& affiliates)

     65.0%                            64.7%    

Comcast

     5.6%            10.8%    

    

       

Graphics:

       

FastSpring

                     13.6%            9.5%    

The three customers listed above comprised 84% and 90% our accounts receivable as of March 31, 2016 and 2015, respectively.

Geographical Information

During the three months ended March 31, 2016 and 2015, the Company operated in three geographic locations; the Americas, EMEA (Europe, the Middle East, and Africa) and Asia Pacific. Revenues, attributed to the geographic location of the customer’s bill-to address, were as follows (in thousands):

 

     Three Months Ended March 31,  
     2016      2015  
     (unaudited)  
  

 

 

    

 

 

 

Americas

     $ 7,142           $ 10,312     

EMEA

     62           52     

Asia Pacific

     10           165     
  

 

 

    

 

 

 

  Total Revenues

     $                 7,214           $                 10,529     
  

 

 

    

 

 

 

 

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The Company does not separately allocate specific assets to these geographic locations.

13. Commitments and Contingencies

Leases

The Company leases its buildings under operating leases that expire on various dates through 2022. Future minimum annual lease payments under such leases as of March 31, 2016 are as follows (in thousands):

 

Year Ending December 31,

  

Operating

 

2016-9 months remaining

     $ 1,328     

2017

     1,536     

2018

     1,534     

2019

     1,507     

2020

     1,519     

2021

     1,530     

Beyond

     33     
  

 

 

 

Total

     $         8,987     
  

 

 

 

As of March 31, 2016, $4.6 million of the remaining lease commitments expense has been accrued as part of the 2013 Restructuring Plan, partially offset by future estimated sublease income of $2.4 million.

Rent expense under operating leases was $0.3 million for both the three months ended March 31, 2016 and 2015.

As a condition of our Pittsburgh lease that was signed in November 2010, the landlord agreed to incentives of $40.00 per square foot, or a total of $2.2 million, for improvements to the space. These costs have been included in deferred rent in our long-term liabilities and are being amortized over the ten year lease term.

Pennsylvania Opportunity Grant Program

On September 26, 2011, we received $1.0 million from the State of Pennsylvania to help fund our agreement to start-up a new facility. The grant carried with it an obligation, or commitment, to employ at least 232 people within a three-year time period that ended on December 31, 2013. We received an extension of time to meet this employment commitment. The new deadline is April 30, 2016. This grant contains conditions that would require us to return a pro-rata amount of the monies received if we fail to meet these conditions. As such, the monies have been recorded as a liability in the accrued liabilities line item on the balance sheet until we are irrevocably entitled to retain the monies, or until it is determined that we need to return a portion or all of the monies received.

Litigation

The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

 

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Other Contingent Contractual Obligations

During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include: intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products; indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. In addition, the Company has made contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company may also issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees may not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.

 

14.

Income Taxes

We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company has been in a five-year historical cumulative loss as of the end of fiscal year 2015. These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.

After a review of the four sources of taxable income as of December 31, 2015 (as described above), and after consideration of the Company’s continuing cumulative loss position as of December 31, 2015, the Company will continue to reserve its U.S.-based deferred tax amounts, which total $74.9 million, as of March 31, 2016.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2012, 2013 and 2014 tax years. State income tax returns are subject to examination for a period of three to four years after filing. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. It is the Company’s policy to classify any interest and/or penalties in the financial statements as a component of income tax expense.

 

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15.

Restructuring Expenses

2014 Restructuring

On May 6, 2014, the Board of Directors approved a plan of restructuring intended to streamline and flatten the Company’s organization, reduce overall headcount by approximately 20% and reduce its overall cost structure by approximately $2.0 million per quarter. The restructuring plan resulted in special charges totaling $1.8 million recorded during the three month period ended June 30, 2014. These charges were for non-cash stock-based compensation expense of $1.3 million, severance costs for affected employees of $0.4 million, and other related costs of $0.1 million.

2013 Restructuring

On July 25, 2013, the Board of Directors approved a plan of restructuring intended to bring the Company’s operating expenses better in line with revenues. The restructuring plan involved a realignment of organizational structures, facility consolidations/closures and headcount reductions of approximately 26% of the Company’s worldwide workforce. The restructuring plan was implemented primarily during the three month period ended September 30, 2013 and resulted in annualized savings of approximately $16.0 million.

The restructuring plan resulted in special charges totaling $5.6 million recorded in the year ended December 31, 2013. These charges were for lease/rental terminations of $3.3 million, severance costs for affected employees of $1.1 million, equipment and improvements write-offs as a result of our lease/rental terminations of $1.0 million and other related costs of $0.2 million.

In the year ended December 31, 2014, we increased the reserve by $0.6 million due to changes in our assumptions on future sublease income on our lease terminations of $0.8 million, partially offset by adjustments to our one-time employee termination benefits.

Following is the activity in our restructuring liability account for the period ended March 31, 2016 (in thousands):

 

    December 31, 2015                 March 31, 2016  
   

Balance

   

Provision-net

   

Usage

   

Balance

 

Lease/rental terminations

    2,123          -            (83)          2,040     

Relocation, move, transition travel, other

    86          -            -                86     
 

 

 

 

Total (1)

    $ 2,209        $         -            $           (83)         $         2,126     
 

 

 

 

 

(1)

$0.4 million is included in accrued liabilities and $1.7 million is included in deferred rent and other long-term liabilities.

 

16.

Subsequent Events

The Company evaluates and discloses subsequent events as required by ASC Topic No. 855, Subsequent Events. The Topic establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued.

On April 7, 2016, pursuant to the Share Purchase Agreement, dated as of March 8, 2016 , by and between Smith Micro Software, Inc. (the “Company”) and Birdstep Technology ASA (“Birdstep”), the Company completed its previously announced acquisition of 100% of the outstanding capital stock of Birdstep’s wholly owned Swedish subsidiary, Birdstep Technology AB (the “Acquisition”). Pursuant to the terms of the Share Purchase Agreement, the Company paid a net purchase price of $2 million in cash to Birdstep at the closing. Concurrently with the closing of the Acquisition, the Company entered into a Transitional Services Agreement with Birdstep. As a result of the Acquisition, Birdstep Technology AB has become a wholly-owned subsidiary of the Company. Approximately 21 employees will continue as employees of Birdstep Technology AB following the Closing. The Company has evaluated this acquisition and concluded that separate financial statements for Birdstep and pro forma financial information for the transaction are not required to be filed under SEC regulation S-X 8-04 and 8-05.

Subsequent events have been evaluated as of the date of this filing and no further disclosures were required.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this document, the terms “Smith Micro,” “Company,” “we,” “us,” and “our” refer to Smith Micro Software, Inc. and, where appropriate, its subsidiaries.

This report contains forward-looking statements regarding Smith Micro which include, but are not limited to, statements concerning projected revenues, expenses, gross profit and income, the competitive factors affecting our business, market acceptance of products, customer concentration, the success and timing of new product introductions and the protection of our intellectual property. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “estimates,” “should,” “may,” “will” and variations of these words or similar expressions are intended to identify forward-looking statements. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed or implied in any forward-looking statements as a result of various factors. Such factors include, but are not limited to, the following:

 

   

our customer concentration given that the majority of our sales depend on a few large client relationships, including Sprint;

   

our ability to become and remain profitable;

   

the risk of being delisted from NASDAQ if our stock does not trade over $1.00 per share for 10 straight business days or if we fail to meet any of the other listing requirements;

   

our quarterly revenues and operating results are difficult to predict and could fall below analyst or investor expectations, which could cause the price of our common stock to fall;

   

changes in demand for our products from our key customers and their end users;

   

the intensity of the competition and our ability to successfully compete;

   

the pace at which the market for new products develop;

   

our ability to hire and retain key personnel;

   

the availability of third party intellectual property and licenses which may not be on commercially reasonable terms, or not at all;

   

our ability to establish and maintain strategic relationships with our customers;

   

our ability to assimilate acquisitions without diverting management attention and impacting current operations;

   

our ability to protect our intellectual property and our ability to not infringe on the rights of others;

   

our ability to raise additional capital to fund our operations and such capital may not be available to us at commercially reasonable terms or at all;

   

security and privacy breaches in our systems may damage client relations and inhibit our ability to grow;

   

interruptions or delays in the services we provide from our data center hosting facilities could harm our business; and

   

those additional factors which are listed under the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

The forward-looking statements contained in this report are made on the basis of the views and assumptions of management regarding future events and business performance as of the date this report is filed with the Securities and Exchange Commission (the “SEC”). We do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date this report is filed.

Overview

Smith Micro provides software solutions to simplify and enhance the mobile experience. As a leader in wireless connectivity, our applications ensure the best Quality of Experience for mobile users while optimizing networks for wireless service providers and enterprises. Using our intelligent policy-on-device platform, along with premium voice, video and content monetization services, we create new opportunities to engage consumers and capitalize on the growth of connected devices. In addition to wireless and mobility software, Smith Micro develops and distributes personal, professional, and educational graphics products and tools for consumers, artists, animators and designers worldwide.

Over the past three decades, the Company has developed deep expertise in embedded software for networked devices, policy-based management platforms, and highly-scalable mobile applications and hosted services. For organizations struggling to reduce costs and complexity in the fragmented, rapidly evolving mobile market, Smith Micro offers proven solutions that increase reliability and efficiency while accelerating delivery and value of mobile services to consumers.

 

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A summary of the Company’s customers that represent 10% or more of the Company’s net revenues is as follows:

 

       Three Months Ended March 31,  
     2016        2015  

Wireless:

       

Sprint (& affiliates)

     65.0%           64.7%   

Comcast

     5.6%           10.8%   

    

       

Graphics:

       

FastSpring

                     13.6%                           9.5%   

The three customers listed above comprised 84% and 90% our accounts receivable as of March 31, 2016 and 2015, respectively.

Results of Operations

The table below sets forth certain statements of operations and comprehensive loss data expressed as a percentage of revenues for the three months ended March 31, 2016 and 2015. Our historical results are not necessarily indicative of the operating results that may be expected in the future.

 

     Three Months Ended
March 31,
 
     2016     2015  

Revenues

     100.0       100.0  

Cost of revenues

     29.3          20.1     
  

 

 

   

 

 

 

Gross profit

     70.7          79.9     

Operating expenses:

    

Selling and marketing

     32.8          20.8     

Research and development

     54.4          31.8     

General and administrative

     34.5          27.3     
  

 

 

   

 

 

 

Total operating expenses

     121.7          79.9     
  

 

 

   

 

 

 

Operating income (loss)

     (51.0)         0.0     

Interest and other income, net

     -            -         
  

 

 

   

 

 

 

Income (loss) before provision for income taxes

     (51.0)         0.0     

Provision for income tax expense

     0.4          0.1     
  

 

 

   

 

 

 

Net loss

     (51.4)      (0.1) 
  

 

 

   

 

 

 

Revenues and Expense Components

The following is a description of the primary components of our revenues and expenses:

Revenues. Revenues are net of sales returns and allowances. Our operations are organized into two business segments:

 

   

Wireless, which includes our NetWise®, CommSuite®, and QuickLink® family of products; and

 

   

Graphics, which includes our consumer-based products: Poser®, Anime Studio®, Manga Studio®, MotionArtist® and StuffIt®.

 

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The following table shows the revenues generated by each business segment (in thousands):

 

     Three Months Ended March 31,  
     2016      2015  

Wireless

     $ 5,973           $ 9,219     

Graphics

     1,241           1,310     
  

 

 

    

 

 

 

Total revenues

     7,214           10,529     
  

 

 

    

 

 

 

Cost of revenues

     2,113           2,118     
  

 

 

    

 

 

 

Gross profit

     $             5,101           $             8,411     
  

 

 

    

 

 

 

Cost of revenues. Cost of revenues consists of direct product and assembly, maintenance, data center, royalties and technical support expenses.

Selling and marketing. Selling and marketing expenses consist primarily of personnel costs, advertising costs, sales commissions and trade show expenses. These expenses vary significantly from quarter to quarter based on the timing of trade shows and product introductions.

Research and development. Research and development expenses consist primarily of personnel and equipment costs required to conduct our software development efforts.

General and administrative. General and administrative expenses consist primarily of personnel costs, professional services and fees paid for external service providers, space and occupancy costs, and legal and other public company costs.    

Interest and other income (expense), net. Interest and other income are primarily related to our average cash and short term investment balances during the period and vary among periods. Our other excess cash is invested in short term marketable equity and debt securities classified as cash equivalents. Interest and other expense are primarily related to the credit-adjusted risk-free interest rate used to measure our operating lease termination liabilities in restructuring.

Provision for income tax expense. The Company accounts for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This statement requires the recognition of deferred tax assets and liabilities for the future consequences of events that have been recognized in the Company’s financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company’s assets and liabilities result in a deferred tax asset, we are required to evaluate the probability of being able to realize the future benefits indicated by such asset. The deferred tax assets are reduced by a valuation allowance if, based upon all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Establishing, reducing or increasing a valuation allowance in an accounting period generally results in an increase or decrease in tax expense in the statement of operations. We must make significant judgments to determine the provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits and any valuation allowance to be recorded against deferred tax assets. The current provision for income tax expense consists of state income tax minimums, foreign tax withholdings and foreign income taxes.

Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015

Revenues. Revenues were $7.2 million and $10.5 million for the three months ended March 31, 2016 and 2015, respectively, representing a decrease of $3.3 million, or 31.5%. Wireless revenues decreased $3.2 million, or 35.2%, primarily due to decreases in our NetWise product line of $2.0 million, primarily sold to Sprint and Comcast. QuickLink decreased $0.8 million as the legacy connection manager business continues to decline and CommSuite decreased $0.4 million. Graphics revenues decreased $0.1 million, or 5.3%. While we have launched new wireless products, the volume and timing of future revenues are difficult to predict.

Cost of revenues. Cost of revenues were flat at $2.1 million for the three months ended March 31, 2016 and 2015, respectively.

Gross profit. Gross profit was $5.1 million, or 70.7% of revenues for the three months ended March 31, 2016, a decrease of $3.3 million, or 39.4%, from $8.4 million, or 79.9% of revenues for the three months ended March 31, 2015. The 9.2 percentage point decrease was primarily due to lower revenues and product mix.

 

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Selling and marketing. Selling and marketing expenses were $2.4 million and $2.2 million for the three months ended March 31, 2016 and 2015, respectively, representing an increase of $0.2 million, or 8.2%. This increase was primarily due to higher consulting and advertising expenses. Stock-based compensation remained flat at $0.1 million for both three months ended March 31, 2016 and 2015.

Research and development. Research and development expenses were $3.9 million and $3.3 million for the three months ended March 31, 2016 and 2015, respectively, representing an increase of $0.6 million, or 17.4%. This increase was primarily due to increased headcount to support all of our new projects. Stock-based compensation was $0.1 million and $0.2 million for the three months ended March 31, 2016 and 2015, respectively, a decrease of $0.1 million.

General and administrative. General and administrative expenses were $2.5 million and $2.9 million for the three months ended March 31, 2016 and 2015, respectively, representing a decrease of $0.4 million, or 13.6%. This decrease was primarily due to lower space and occupancy costs of $0.1 million and other reduced spending of $0.1 million. Stock-based compensation was $0.2 million and $0.4 million for the three months ended March 31, 2016 and 2015, respectively, a decrease of $0.2 million.

Liquidity and Capital Resources

At March 31, 2016, we had $13.1 million in cash and cash equivalents and short-term investments and $11.3 million of working capital.

Based on the Company’s current financial revenue and profit projections, management believes that the Company’s existing cash, cash equivalents and short-term investments will be sufficient to fund its operations through at least the next twelve months. If market acceptance of our strategy and products is slower than anticipated, then we will need to:

 

   

raise additional funds to support the Company’s operations. There is no assurance that the Company will be able to raise such additional funds on acceptable terms, if at all. If the Company raises additional funds by issuing securities, existing stockholders may be diluted;

   

undertake additional restructuring to lower costs to bring them in line with actual revenues; and

   

review strategic alternatives for one or more of our product lines.

If adequate funds are not available, we may be required to curtail our operations or other business activities or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain technologies or potential markets.

Operating activities

Net cash provided by operating activities was $0.3 million for the three months ended March 31, 2016. We received $2.7 million from accounts receivable, $0.7 million from deferred revenue, and non-cash expenses including stock-based compensation of $0.4 million and depreciation and amortization of $0.4 million. This was partially offset by our net loss of $3.7 million and increases in prepaid expenses and other assets of $0.2 million.

Net cash provided by operating activities was $0.7 million for the three months ended March 31, 2015. We received $0.7 million from a state income tax refund, $0.6 million from accounts receivable, and non-cash expenses including stock-based compensation of $0.6 million and depreciation and amortization of $0.5 million. This was partially offset by decreases in deferred revenue of $1.2 million and accounts payable and other accrued liabilities of $0.5 million.

Investing activities

During the three months ended March 31, 2016, we had sales of short-term investments of $2.4 million.

During the three months ended March 31, 2015, we had purchases of short-term investments of $0.9 million.

 

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Financing activities

During the three months ended March 31, 2016 and 2015, we received a de minimis amount from the stock sale for our employee stock purchase plan and the exercise of stock options.

Contractual obligations and commercial commitments

As of March 31, 2016, we had no debt. The following table summarizes our contractual obligations as of March 31, 2016 (in thousands):

 

     Payments due by period  

Contractual obligations:

  

Total

    

1 year

or less

    

1-3 years

    

3-5 years

    

More than

5 years

 

Operating Lease Obligations

     $ 8,987           $ 1,711           $ 3,063           $ 3,032           $ 1,181     

Purchase Obligations

     1,295           1,295           -           -           -     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     $       10,282           $       3,006           $       3,063           $       3,032           $       1,181     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

During our normal course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These include: intellectual property indemnities to our customers and licensees in connection with the use, sale and/or license of our products; indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. We may also issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees may not provide for any limitation of the maximum potential for future payments we could be obligated to make. We have not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.

Real Property Leases

Our corporate headquarters, including our principal administrative, sales and marketing, customer support and research and development facility, is located in Aliso Viejo, California, where we currently lease and occupy approximately 33,600 square feet of space pursuant to lease that expires on May 31, 2016. We lease approximately 55,600 square feet in Pittsburgh, Pennsylvania under a lease that expires December 31, 2021. Internationally, we lease space in Belgrade, Serbia that expires December 30, 2016.

In February 2015, we signed an addendum to sublease approximately 19,965 square feet of our Pittsburgh, Pennsylvania facility for a term that expires on December 31, 2021 which is concurrent with our current lease.

We lease an additional 19,100 square feet in Aliso Viejo, California under a lease that expires January 31, 2022. In August 2014, we signed an addendum to sublease all of the space commencing on September 15, 2014 for a three year period, with two, two-year renewal options. The remaining lease expense, net of sublease income, has been accrued for in our 2013 restructuring liability account.

We lease approximately 15,300 square feet in Watsonville, California under a lease that expires September 30, 2018. In March 2014, we signed an addendum to sublease all of the space commencing on May 1, 2014. We are paying the landlord a minimum amount of rent, with annual escalations, through the end of the lease. This lease expense has been accrued for in our 2013 restructuring liability account. We have moved into a significantly smaller facility in Santa Cruz, California and are paying month-to-month rent.

Critical Accounting Policies and Estimates

Our discussion and analysis of results of operations, financial condition and liquidity are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the

 

18


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reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions. On an on-going basis, we review our estimates to ensure that they appropriately reflect changes in our business or new information as it becomes available.

We believe the following critical accounting policies affect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

Revenue Recognition

We currently report our net revenues under two operating groups: Wireless and Graphics. Within each of these groups software revenue is recognized based on the customer and contract type. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectability is probable as required by FASB ASC Topic No. 985-605, Software-Revenue Recognition. We recognize revenues from sales of our software to our customers or end users as completed products are shipped and title passes; or from royalties generated as authorized customers duplicate our software, if the other requirements are met. If the requirements are not met at the date of shipment, revenue is not recognized until these elements are known or resolved. For Wireless sales, returns from customers are limited to defective goods or goods shipped in error. Historically, customer returns have not exceeded the very nominal estimates and reserves. We also provide some technical support to our customers. Such costs have historically been insignificant.

We have a few multiple element agreements for which we have contracted to provide a perpetual license for use of proprietary software, to provide non-recurring engineering, and in some cases to provide software maintenance (post contract support). For these software and software-related multiple element arrangements, we must: (1) determine whether and when each element has been delivered; (2) determine whether undelivered products or services are essential to the functionality of the delivered products and services; (3) determine the fair value of each undelivered element using vendor-specific objective evidence (“VSOE”), and (4) allocate the total price among the various elements. VSOE of fair value is used to allocate a portion of the price to the undelivered elements and the residual method is used to allocate the remaining portion to the delivered elements. Absent VSOE, revenue is deferred until the earlier of the point at which VSOE of fair value exists for any undelivered element or until all elements of the arrangement have been delivered. However, if the only undelivered element is post contract support, the entire arrangement fee is recognized ratably over the performance period. We determine VSOE for each element based on historical stand-alone sales to third parties or from the stated renewal rate for the elements contained in the initial arrangement. In determining VSOE, we require that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range. We have established VSOE for our post contract support services and non-recurring engineering.

On occasion, we enter into fixed fee arrangements, i.e. for trials, in which customer payments are tied to the achievement of specific milestones. Revenue for these contracts is recognized based on customer acceptance of certain milestones as they are achieved. We also enter hosting arrangements that sometimes include up-front, non-refundable set-up fees. Revenue is recognized for these fees over the term of the agreement.

For Graphics sales, management reviews available retail channel information and makes a determination of a return provision for sales made to distributors and retailers based on current channel inventory levels and historical return patterns. Certain sales to distributors or retailers are made on a consignment basis. Revenue for consignment sales are not recognized until sell through to the final customer is established. Certain revenues are booked net of revenue sharing payments. Sales directly to end-users are recognized upon shipment. End users have a thirty day right of return, but such returns are reasonably estimable and have historically been immaterial. We also provide technical support to our customers. Such costs have historically been insignificant.

Accounts Receivable and Allowance for Doubtful Accounts

We sell our products worldwide. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history, the customer’s current credit worthiness and various other factors, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers. We estimate credit

 

19


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losses and maintain an allowance for doubtful accounts reserve based upon these estimates. While such credit losses have historically been within our estimated reserves, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. If not, this could have an adverse effect on our consolidated financial statements.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was no impairment as of March 31, 2016.

Income Taxes

We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued final guidance in Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which will change certain aspects of accounting for share-based payments to employees. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It will also allow an employer to repurchase more of an employee’s shares than it can currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and must be adopted on a modified prospective approach. Due to the Company’s full valuation allowance, the nature of the change on the balance sheet is not significant.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that adoption will have on the consolidated financial statements.

In November 2015, the FASB issued final guidance in ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and may be adopted on either a prospective or retrospective basis.

The Company has early adopted this standard for the interim and annual period ending December 31, 2015 on a prospective basis. As such, prior periods were not retrospectively adjusted. Due to the Company’s full valuation allowance on its deferred tax assets, the nature of the change on the balance sheet is not significant.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments to this Update supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We will be evaluating the impact of this guidance on our consolidated financial statements.

 

20


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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our financial instruments include cash and cash equivalents and short-term investments. At March 31, 2016, the carrying values of our financial instruments approximated fair values based on current market prices and rates.

Foreign Currency Risk

While a majority of our business is denominated in U.S. dollars, we do invoice in foreign currencies. For both the three months ended March 31, 2016 and 2015, our revenues denominated in foreign currencies were de minimis. Fluctuations in the rate of exchange between the U.S. dollar and certain other currencies may affect our results of operations and period-to-period comparisons of our operating results. We do not currently engage in hedging or similar transactions to reduce these risks. The operational expenses of our foreign entities reduce the currency exposure we have because our foreign currency revenues are offset in part by expenses payable in foreign currencies. As such, we do not believe we have a material exposure to foreign currency rate fluctuations at this time.

 

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of March 31, 2016. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have determined that as of March 31, 2016, our disclosure controls and procedures were effective to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s 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 the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s responsibility for financial statements

Our management is responsible for the integrity and objectivity of all information presented in this report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations for the periods and as of the dates stated therein.

The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with our independent registered public accounting firm, SingerLewak LLP, and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors have free access to the Audit Committee.

 

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Changes in internal control over financial reporting

There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2016 that have materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

22


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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

 

Item 1A. Risk Factors

You should carefully consider and evaluate all of the information in this Quarterly Report and the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the SEC on March 9, 2016 (the “Form 10-K”). The risks set forth in our Form 10-K are not the only ones that we face. Additional risks that are not known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occur, our business could be materially harmed and the trading price of our common stock could decline. Please also refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report for a discussion of certain factors that may affect our future performance.

The risk factors associated with our business have not materially changed compared to the risk factors disclosed in the Form 10-K.

 

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

The table set forth below shows all repurchases of securities by us during the three months ended March 31, 2016:

 

 

ISSUER PURCHASES OF EQUITY SECURITIES

 

Period    

 

 

Total  

Number of  

Shares (or  

Units)  

Purchased  

 

 

Average   

Price   

Paid per   

Share (or   

Unit)   

 

 

Total Number  

of Shares (or  

Units)  

Purchased as  

Part of Publicly  
Announced  
Plans or  
Programs  

 

 

 

Maximum
Number (or

Approximate
Dollar Value) of

Shares (or Units)

that May Yet Be

Purchased Under

the Plans or
Programs

 

 

January 1-31, 2016

 

               

 

February 1-29, 2016

 

               

 

March 1-31, 2016

 

  165,666 (a)      $0.63           

 

Total

 

  165,666      $0.63           

The above table includes:

(a)          Acquisition of stock by the Company as payment of withholding taxes in connection with the vesting of restricted stock awards, in an aggregate amount of 165,666 shares during the periods set forth in the table.

 

23


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Item 6. Exhibits

 

2.1

  

Share Purchase Agreement, dated March 8, 2016, by and between Smith Micro Software, Inc. and Birdstep Technology ASA. (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on March 10, 2016, and incorporated herein by reference).

31.1

  

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

  

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

  

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

  

XBRL Instance Document

101.SCH

  

XBRL Taxonomy Extension Schema Document

101.CAL

  

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

  

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

  

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

  

XBRL Taxonomy Extension Presentation Linkbase Document

 

24


Table of Contents

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.

 

   

SMITH MICRO SOFTWARE, INC.

April 29, 2016

   

By /s/ William W. Smith, Jr.

   

William W. Smith, Jr.

   

Chairman of the Board, President and Chief Executive Officer

   

(Principal Executive Officer)

April 29, 2016

   

By /s/ Steven M. Yasbek

   

Steven M. Yasbek

   

Vice President and Chief Financial Officer

   

(Principal Financial and Accounting Officer)

 

25

EX-31.1 2 d159844dex311.htm EX-31.1 EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, William W. Smith, Jr., certify that:

 

  1.

I have reviewed this quarterly report on Form 10-Q of Smith Micro Software, 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(s) 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(s) 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: April 29, 2016

   

/s/ William W. Smith, Jr.

   

William W. Smith, Jr.

   

Chairman of the Board, President and Chief Executive Officer

   

(Principal Executive Officer)

EX-31.2 3 d159844dex312.htm EX-31.2 EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Steven M. Yasbek, certify that:

 

  1.

I have reviewed this quarterly report on Form 10-Q of Smith Micro Software, 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(s) 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(s) 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: April 29, 2016

   

/s/ Steven M. Yasbek

   

Steven M. Yasbek

   

Vice President and Chief Financial Officer

   

(Principal Financial and Accounting Officer)

EX-32.1 4 d159844dex321.htm EX-32.1 EX-32.1

EXHIBIT 32.1    

CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Smith Micro Software, Inc., that, to his knowledge, the Quarterly Report of Smith Micro Software, Inc. on Form 10-Q for the period ended March 31, 2016 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the company.

 

April 29, 2016     By /s/ William W. Smith, Jr.
    William W. Smith, Jr.
    Chairman of the Board, President and Chief Executive Officer
    (Principal Executive Officer)
April 29, 2016     By /s/ Steven M. Yasbek
    Steven M. Yasbek
    Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Smith Micro Software, Inc. and will be retained by Smith Micro Software, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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(&#x201C;we,&#x201D; &#x201C;us,&#x201D; &#x201C;our,&#x201D; &#x201C;Smith Micro,&#x201D; or the &#x201C;Company&#x201D;) provides software solutions to simplify and enhance the mobile experience. As a leader in wireless connectivity, our applications ensure high quality of service for mobile users while optimizing networks for wireless service providers and enterprises.&#xA0;Using our intelligent device software, along with premium voice, video and messaging applications, we create new opportunities to engage consumers and monetize mobile services. 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Allowances for product returns are included in other adjustments to accounts receivable on the accompanying consolidated balance sheets. Product returns are estimated based on historical experience and management estimations.</p> </div> 2 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <div align="right"> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="96%" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="10" align="center"><b>March 31, 2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="10" align="center"><b>December 31, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized</b><br /> <b>cost&#xA0;basis</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Gross&#xA0;unrealized</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 36.5pt" align="center"><b>gain(loss)</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.25pt" align="center"><b>Fair&#xA0;value</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized</b><br /> <b>cost&#xA0;basis</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Gross&#xA0;unrealized</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 36.5pt" align="center"><b>gain(loss)</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.25pt" align="center"><b>Fair&#xA0;value</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#BACCE5" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities/money market</p> </td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">1,680</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">(1</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap">)&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">1,679</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">4,080</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">(2</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap">)&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">4,078</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,680</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,679</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,080</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,078</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> </div> 2016 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"><b>3.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Recent Accounting Pronouncements</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In March 2016, the Financial Accounting Standards Board (&#x201C;FASB&#x201D;) issued final guidance in Accounting Standards Update (&#x201C;ASU&#x201D;) No. 2016-09, <i>Improvements to Employee Share-Based Payment Accounting,</i> which will change certain aspects of accounting for share-based payments to employees.&#xA0;The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled.&#xA0;It will also allow an employer to repurchase more of an employee&#x2019;s shares than it can currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur.&#xA0;The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016.&#xA0;Early adoption is permitted for all companies in any interim or annual period, and must be adopted on a modified prospective approach. Due to the Company&#x2019;s full valuation allowance, the nature of the change on the balance sheet will not be significant.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In February 2016, the FASB issued ASU No.&#xA0;2016-02, <i>Leases,</i> to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December&#xA0;15, 2018, including interim periods within those fiscal years, with earlier application permitted.&#xA0;Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that adoption will have on the consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In November 2015, the FASB issued final guidance in ASU No. 2015-17, <i>Balance Sheet Classification of Deferred Taxes,</i> which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts.&#xA0;The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016.&#xA0;Early adoption is permitted for all companies in any interim or annual period, and may be adopted on either a prospective or retrospective basis.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company has early adopted this standard for the interim and annual period ending December 31, 2015 on a prospective basis. As such, prior periods were not retrospectively adjusted. Due to the Company&#x2019;s full valuation allowance on its deferred tax assets, the nature of the change on the balance sheet is not significant.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In August 2014, the FASB issued ASU No. 2014-15, <i>Presentation of Financial Statements-Going Concern (Subtopic 205-40</i>). The Update provides U.S. GAAP guidance on management&#x2019;s responsibility in evaluating whether there is substantial doubt about a company&#x2019;s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company&#x2019;s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company&#x2019;s consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 7%" align="justify">In May 2014, the FASB issued ASU No. 2014-09, <i>Revenue from Contracts with Customers (Topic 606).</i><i>&#xA0;</i>The amendments to this Update supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We will be evaluating the impact of this guidance on our consolidated financial statements.</p> </div> false <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>8.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Short-Term Investments</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">Short-term investments consist of U.S. government agency and government sponsored enterprise obligations.&#xA0;The Company accounts for these short-term investments as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities.&#xA0;These debt and equity securities are not classified as either held-to-maturity securities or trading securities.&#xA0;As such, they are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other comprehensive income in stockholders&#x2019; equity until realized. Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <div align="right"> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="96%" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="10" align="center"><b>March 31, 2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="10" align="center"><b>December 31, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized</b><br /> <b>cost&#xA0;basis</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Gross&#xA0;unrealized</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 36.5pt" align="center"><b>gain(loss)</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.25pt" align="center"><b>Fair&#xA0;value</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized</b><br /> <b>cost&#xA0;basis</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Gross&#xA0;unrealized</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 36.5pt" align="center"><b>gain(loss)</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.25pt" align="center"><b>Fair&#xA0;value</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#BACCE5" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities/money market</p> </td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">1,680</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">(1</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap">)&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">1,679</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">4,080</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">(2</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap">)&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">4,078</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,680</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,679</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,080</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,078</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 24pt; TEXT-INDENT: 7%" align="justify">There were no realized gains or losses for the three months ended March 31, 2016 and 2015.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">Future minimum annual lease payments under such leases as of March 31, 2016 are as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="89%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom" nowrap="nowrap"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 106.25pt"> <b>Year Ending December 31,</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.5pt" align="center"><b>Operating</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2016-9 months remaining</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 1,328&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,536&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2018</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 1,534&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2019</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,507&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2020</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 1,519&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2021</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,530&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Beyond</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 33&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;8,987&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">Revenues, attributed to the geographic location of the customer&#x2019;s bill-to address, were as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="71%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>Three Months Ended March 31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>(unaudited)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Americas</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 7,142&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 10,312&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> EMEA</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">62&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">52&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Asia Pacific</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 10&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 165&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;Total Revenues</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;7,214&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;10,529&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Accounts Receivable</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for estimated credit losses, and those losses have been within management&#x2019;s estimates. Allowances for product returns are included in other adjustments to accounts receivable on the accompanying consolidated balance sheets. Product returns are estimated based on historical experience and management estimations.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 16pt"> <i>Segment Information</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 16pt; TEXT-INDENT: 7%" align="justify">Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility. Wireless includes our NetWise&#xAE;, CommSuite&#xAE;, and QuickLink&#xAE; family of products.&#xA0;Graphics includes our consumer-based products: Poser&#xAE;, Anime Studio&#xAE;, Manga Studio&#xAE;, MotionArtist&#xAE; and StuffIt&#xAE;.</p> </div> -0.08 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-TOP: 0pt" align="justify"><b>Equipment and Improvements</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 7%; -webkit-text-stroke-width: 0px" align="justify">Equipment and improvements are stated at cost.&#xA0;Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to seven years.&#xA0;Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.</p> </div> 10-Q 0000948708 Smaller Reporting Company <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>10.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Impairment or Disposal of Long Lived Assets</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable.&#xA0;They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment.&#xA0;The Company determined there was no impairment as of March 31, 2016.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Basis of Presentation</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The accompanying interim consolidated balance sheet and statement of stockholders&#x2019; equity as of March 31, 2016, and the related statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2016 and 2015 are unaudited. The unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (&#x201C;SEC&#x201D;) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December&#xA0;31, 2015 filed with the SEC on March 9, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Intercompany balances and transactions have been eliminated in consolidation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may&#xA0;be expected for any other interim period or for the fiscal year ending December&#xA0;31, 2016.</p> </div> Through 2022 Three months or less <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Fair Value of Financial Instruments</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The carrying value of accounts receivable, foreign cash accounts, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="7%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x25CF;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.</p> </td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="7%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x25CF;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.</p> </td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="7%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x25CF;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">Level 3 - Unobservable inputs which are supported by little or no market activity.</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 7%" align="justify">As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">As required by FASB ASC Topic No. 825, Financial Instruments, an entity can choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value.&#xA0;As permitted, the Company has elected not to use the fair value option to measure our available-for-sale securities under this Topic and will continue to report as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities.&#xA0;We have made this election because the nature of our financial assets and liabilities are not of such complexity that they would benefit from a change in valuation to fair value.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"><b>2.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Basis of Presentation</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The accompanying interim consolidated balance sheet and statement of stockholders&#x2019; equity as of March 31, 2016, and the related statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2016 and 2015 are unaudited. The unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (&#x201C;SEC&#x201D;) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December&#xA0;31, 2015 filed with the SEC on March 9, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Intercompany balances and transactions have been eliminated in consolidation.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may&#xA0;be expected for any other interim period or for the fiscal year ending December&#xA0;31, 2016.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>11.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Equipment and Improvements</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Equipment and improvements are stated at cost.&#xA0;Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to seven years.&#xA0;Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"><b>6.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Fair Value of Financial Instruments</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The carrying value of accounts receivable, foreign cash accounts, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="7%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x25CF;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.</p> </td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="7%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x25CF;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.</p> </td> </tr> </table> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td width="7%">&#xA0;</td> <td valign="top" width="2%" align="left">&#x25CF;</td> <td valign="top" width="1%">&#xA0;</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">Level 3 - Unobservable inputs which are supported by little or no market activity.</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 7%" align="justify">As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">As required by FASB ASC Topic No. 825, Financial Instruments, an entity can choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value.&#xA0;As permitted, the Company has elected not to use the fair value option to measure our available-for-sale securities under this Topic and will continue to report as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities.&#xA0;We have made this election because the nature of our financial assets and liabilities are not of such complexity that they would benefit from a change in valuation to fair value.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>12.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Segment, Customer Concentration and Geographical Information</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 16pt"> <i>Segment Information</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 16pt; TEXT-INDENT: 7%" align="justify">Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility. Wireless includes our NetWise&#xAE;, CommSuite&#xAE;, and QuickLink&#xAE; family of products.&#xA0;Graphics includes our consumer-based products: Poser&#xAE;, Anime Studio&#xAE;, Manga Studio&#xAE;, MotionArtist&#xAE; and StuffIt&#xAE;.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The Company does not separately allocate operating expenses to these business units, nor does it allocate specific assets. Therefore, business unit information reported includes only revenues.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">The following table shows the revenues generated by each business unit (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 14pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="77%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td width="1%"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>Three Months Ended March 31,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" rowspan="9" align="center"> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>&#xA0;&#xA0;&#xA0;&#xA0;</b></p> </td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>(unaudited)</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#C7D6EA" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Wireless</p> </td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> 5,973&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> 9,219&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Graphics</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,241&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,310&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#C7D6EA" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total revenues</p> </td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;7,214&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;10,529&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>Customer Concentration Information</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">A summary of the Company&#x2019;s customers that represent 10% or more of the Company&#x2019;s net revenues is as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 14pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="71%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6"><b>&#xA0;&#xA0;Three Months Ended March 31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="right"><b>2016&#xA0;</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="right"><b>2015&#xA0;</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Wireless:</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Sprint (&amp; affiliates)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">65.0%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;64.7%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Comcast</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right">5.6%&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 10.8%&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Graphics:</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> FastSpring</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;13.6%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9.5%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The three customers listed above comprised 84% and 90% our accounts receivable as of March 31, 2016 and 2015, respectively.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>Geographical Information</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">During the three months ended March 31, 2016 and 2015, the Company operated in three geographic locations; the Americas, EMEA (Europe, the Middle East, and Africa) and Asia Pacific. Revenues, attributed to the geographic location of the customer&#x2019;s bill-to address, were as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="71%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>Three Months Ended March 31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>(unaudited)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Americas</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 7,142&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 10,312&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> EMEA</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">62&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">52&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Asia Pacific</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 10&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 165&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;Total Revenues</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;7,214&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;10,529&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 7%" align="justify">The Company does not separately allocate specific assets to these geographic locations.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Short-Term Investments</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">Short-term investments consist of U.S. government agency and government sponsored enterprise obligations.&#xA0;The Company accounts for these short-term investments as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities.&#xA0;These debt and equity securities are not classified as either held-to-maturity securities or trading securities.&#xA0;As such, they are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other comprehensive income in stockholders&#x2019; equity until realized. Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <div align="right"> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="96%" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="10" align="center"><b>March 31, 2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="10" align="center"><b>December 31, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized</b><br /> <b>cost&#xA0;basis</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Gross&#xA0;unrealized</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 36.5pt" align="center"><b>gain(loss)</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.25pt" align="center"><b>Fair&#xA0;value</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Amortized</b><br /> <b>cost&#xA0;basis</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" nowrap="nowrap" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>Gross&#xA0;unrealized</b></p> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 36.5pt" align="center"><b>gain(loss)</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.25pt" align="center"><b>Fair&#xA0;value</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#BACCE5" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Government securities/money market</p> </td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">1,680</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">(1</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap">)&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">1,679</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">4,080</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">(2</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap">)&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom">&#xA0;</td> <td bgcolor="#BACCE5" valign="bottom" align="right">4,078</td> <td bgcolor="#BACCE5" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,680</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,679</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,080</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,078</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="70%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="1%"></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 16pt" align="center"><b>2016</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 16pt" align="center"><b>2015</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="11" align="center"> <b>(unaudited,&#xA0;in&#xA0;thousands,&#xA0;except&#xA0;per&#xA0;share&#xA0;amounts)</b></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> <b>Numerator:</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net loss available to common stockholders</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">(3,706)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">(10)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> <b>Denominator:</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares outstanding - basic</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46,094&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">45,501&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Potential common shares - options (treasury stock method)</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares outstanding - diluted</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46,094&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">45,501&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Shares excluded (anti-dilutive)</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">229&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Shares excluded due to an exercise price greater than weighted average stock price for the period</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,605&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">976&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net loss per common share:</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.08)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.00)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.08)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.00)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt; TEXT-INDENT: 7%" align="justify">Stock-based non-cash compensation expense related to stock options, restricted stock grants and the employee stock purchase plan were recorded in the financial statements as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 22pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="70%" align="center" border="0"> <tr> <td width="94%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>(unaudited)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Cost of revenues</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">2&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">3&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Selling and marketing</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">70&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">75&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Research and development</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">121&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">169&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> General and administrative</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">329&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total non-cash stock compensation expense</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">361&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">576&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> --12-31 SMITH MICRO SOFTWARE INC <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">The following table shows the revenues generated by each business unit (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 14pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="77%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td width="1%"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>Three Months Ended March 31,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" rowspan="9" align="center"> <p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>&#xA0;&#xA0;&#xA0;&#xA0;</b></p> </td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>(unaudited)</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#C7D6EA" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Wireless</p> </td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> 5,973&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> 9,219&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Graphics</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,241&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,310&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#C7D6EA" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total revenues</p> </td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;7,214&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#C7D6EA" valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;10,529&#xA0;&#xA0;</td> <td bgcolor="#C7D6EA" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> </table> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>7.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Cash and Cash Equivalents</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in two financial institutions and are uninsured except for the minimum Federal Deposit Insurance Corporation (&#x201C;FDIC&#x201D;) coverage, and have original maturity dates of three months or less. As of March 31, 2016 and December 31, 2015, bank balances totaling approximately $11.1 million and $8.5 million, respectively, were uninsured.</p> </div> 46094000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>14.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Income Taxes</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#x2019;s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a &#x201C;more likely than not&#x201D; realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company&#x2019;s assessment is that the Company has been in a five-year historical cumulative loss as of the end of fiscal year 2015. These facts, combined with uncertain near-term market and economic conditions, reduced the Company&#x2019;s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">After a review of the four sources of taxable income as of December 31, 2015 (as described above), and after consideration of the Company&#x2019;s continuing cumulative loss position as of December 31, 2015, the Company will continue to reserve its U.S.-based deferred tax amounts, which total $74.9 million, as of March 31, 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2012, 2013 and 2014 tax years. State income tax returns are subject to examination for a period of three to four years after filing.&#xA0;The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company&#x2019;s tax audits are resolved in a manner not consistent with management&#x2019;s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. It is the Company&#x2019;s policy to classify any interest and/or penalties in the financial statements as a component of income tax expense.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">A summary of the Company&#x2019;s customers that represent 10% or more of the Company&#x2019;s net revenues is as follows:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 14pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="71%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6"><b>&#xA0;&#xA0;Three Months Ended March 31,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="right"><b>2016&#xA0;</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="right"><b>2015&#xA0;</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Wireless:</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Sprint (&amp; affiliates)</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">65.0%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;64.7%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Comcast</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right">5.6%&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 10.8%&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Graphics:</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom"></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> FastSpring</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;13.6%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9.5%&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> </table> </div> 0 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>15.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Restructuring Expenses</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>2014 Restructuring</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">On May 6, 2014, the Board of Directors approved a plan of restructuring intended to streamline and flatten the Company&#x2019;s organization, reduce overall headcount by approximately 20% and reduce its overall cost structure by approximately $2.0 million per quarter. The restructuring plan resulted in special charges totaling $1.8 million recorded during the three month period ended June 30, 2014. These charges were for non-cash stock-based compensation expense of $1.3 million, severance costs for affected employees of $0.4 million, and other related costs of $0.1 million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>2013 Restructuring</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">On July 25, 2013, the Board of Directors approved a plan of restructuring intended to bring the Company&#x2019;s operating expenses better in line with revenues. The restructuring plan involved a realignment of organizational structures, facility consolidations/closures and headcount reductions of approximately 26% of the Company&#x2019;s worldwide workforce. The restructuring plan was implemented primarily during the three month period ended September 30, 2013 and resulted in annualized savings of approximately $16.0 million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The restructuring plan resulted in special charges totaling $5.6 million recorded in the year ended December 31, 2013. These charges were for lease/rental terminations of $3.3 million, severance costs for affected employees of $1.1 million, equipment and improvements write-offs as a result of our lease/rental terminations of $1.0 million and other related costs of $0.2 million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">In the year ended December 31, 2014, we increased the reserve by $0.6 million due to changes in our assumptions on future sublease income on our lease terminations of $0.8 million, partially offset by adjustments to our one-time employee termination benefits.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">Following is the activity in our restructuring liability account for the period ended March 31, 2016 (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 22pt; MARGIN-TOP: 0pt"> &#xA0;</p> <div align="right"> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="93%" border="0"> <tr> <td width="88%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2"> <b>December&#xA0;31,&#xA0;2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>March&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 30.5pt" align="center"><b>Balance</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 51.5pt" align="center"><b>Provision-net</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 23pt" align="center"><b>Usage</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 30.5pt" align="center"><b>Balance</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Lease/rental terminations</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 2,123&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap" align="right">-&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> (83)&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 2,040&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Relocation, move, transition travel, other</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">86&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">86&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom" colspan="13"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total (1)</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 2,209&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap">$</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;-&#xA0;&#xA0;&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;(83)&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;2,126&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td bgcolor="#DBE2F4" valign="bottom"></td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td bgcolor="#DBE2F4" valign="bottom" colspan="13"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">$0.4 million is included in accrued liabilities and $1.7 million is included in deferred rent and other long-term liabilities.</p> </td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable.&#xA0;They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment.&#xA0;The Company determined there was no impairment as of March 31, 2016.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <b>13. Commitments and Contingencies</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>Leases</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The Company leases its buildings under operating leases that expire on various dates through 2022. Future minimum annual lease payments under such leases as of March 31, 2016 are as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0"> <tr> <td width="89%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom" nowrap="nowrap"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 106.25pt"> <b>Year Ending December 31,</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 39.5pt" align="center"><b>Operating</b></p> </td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2016-9 months remaining</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;$</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 1,328&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2017</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,536&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2018</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 1,534&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2019</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,507&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2020</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 1,519&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> 2021</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,530&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td bgcolor="#DBE2F4" valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Beyond</p> </td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom">&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" align="right"> 33&#xA0;&#xA0;</td> <td bgcolor="#DBE2F4" valign="bottom" nowrap="nowrap"> &#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right"> &#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;8,987&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 20pt; TEXT-INDENT: 7%" align="justify">As of March 31, 2016, $4.6 million of the remaining lease commitments expense has been accrued as part of the 2013 Restructuring Plan, partially offset by future estimated sublease income of $2.4 million.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Rent expense under operating leases was $0.3 million for both the three months ended March 31, 2016 and 2015.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">As a condition of our Pittsburgh lease that was signed in November 2010, the landlord agreed to incentives of $40.00 per square foot, or a total of $2.2 million, for improvements to the space.&#xA0;These costs have been included in deferred rent in our long-term liabilities and are being amortized over the ten year lease term.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>Pennsylvania Opportunity Grant Program</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">On September 26, 2011, we received $1.0 million from the State of Pennsylvania to help fund our agreement to start-up a new facility.&#xA0;The grant carried with it an obligation, or commitment, to employ at least 232 people within a three-year time period that ended on December 31, 2013.&#xA0;We received an extension of time to meet this employment commitment.&#xA0;The new deadline is April 30, 2016.&#xA0;This grant contains conditions that would require us to return a pro-rata amount of the monies received if we fail to meet these conditions.&#xA0;As such, the monies have been recorded as a liability in the accrued liabilities line item on the balance sheet until we are irrevocably entitled to retain the monies, or until it is determined that we need to return a portion or all of the monies received.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt"> <i>Litigation</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company&#x2019;s consolidated results of operations, cash flows or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company&#x2019;s future consolidated results of operations, cash flows or financial position in a particular period.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <i>Other Contingent Contractual Obligations</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include: intellectual property indemnities to the Company&#x2019;s customers and licensees in connection with the use, sale and/or license of Company products; indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. In addition, the Company has made contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company may also issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees may not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.</p> </div> 46094000 2016-03-31 <div> <p style="margin-top:14pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"> <i>Stock Compensation</i></p> <p style="margin-top:14pt; margin-bottom:0pt; text-indent:7%; font-size:10pt; font-family:Times New Roman" align="justify">The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. Restricted stock is valued using the closing stock price on the date of the grant.&#xA0;Options are valued using a Black-Scholes valuation model.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Cash and Cash Equivalents</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in two financial institutions and are uninsured except for the minimum Federal Deposit Insurance Corporation (&#x201C;FDIC&#x201D;) coverage, and have original maturity dates of three months or less. As of March 31, 2016 and December 31, 2015, bank balances totaling approximately $11.1 million and $8.5 million, respectively, were uninsured.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"><b>5.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Stock-Based Compensation</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>Stock Plans</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">During the three months ended March 31, 2016, the Company granted 1.4 million shares of restricted stock with a weighted average grant date fair value of $0.68 per share. This cost will be amortized ratably over a period of 12 to 48 months.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">As of March 31, 2016, there were 6.8 million shares available for future grants under the 2015 Stock Plan.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt"> <i>Employee Stock Purchase Plan</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 20pt; TEXT-INDENT: 7%" align="justify">The Company&#x2019;s most recent six-month offering period ended March 31, 2016 and resulted in 14,000 shares being purchased/granted at a fair value of $0.50 per share.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt"> <i>Stock Compensation</i></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 14pt; TEXT-INDENT: 7%" align="justify">The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. Restricted stock is valued using the closing stock price on the date of the grant.&#xA0;Options are valued using a Black-Scholes valuation model.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt; TEXT-INDENT: 7%" align="justify">Stock-based non-cash compensation expense related to stock options, restricted stock grants and the employee stock purchase plan were recorded in the financial statements as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 22pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="70%" align="center" border="0"> <tr> <td width="94%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2016</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>(unaudited)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Cost of revenues</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">2&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">3&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Selling and marketing</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">70&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">75&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Research and development</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">121&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">169&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> General and administrative</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">168&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">329&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Total non-cash stock compensation expense</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">361&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">576&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt; TEXT-INDENT: 7%" align="justify">Total share-based compensation for each quarter includes cash payment of income taxes related to grants of restricted stock in the amount of $0 and $32,000 for the three months ended March 31, 2016 and 2015, respectively.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt"> <b>Net Income (Loss) Per Share</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The Company calculates earnings per share (&#x201C;EPS&#x201D;) as required by FASB ASC Topic No. 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="70%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="1%"></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 16pt" align="center"><b>2016</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 16pt" align="center"><b>2015</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="11" align="center"> <b>(unaudited,&#xA0;in&#xA0;thousands,&#xA0;except&#xA0;per&#xA0;share&#xA0;amounts)</b></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> <b>Numerator:</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net loss available to common stockholders</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">(3,706)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">(10)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> <b>Denominator:</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares outstanding - basic</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46,094&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">45,501&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Potential common shares - options (treasury stock method)</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares outstanding - diluted</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46,094&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">45,501&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Shares excluded (anti-dilutive)</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> -&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">229&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Shares excluded due to an exercise price greater than weighted average stock price for the period</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,605&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">976&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net loss per common share:</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Basic</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.08)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.00)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 2em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Diluted</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.08)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">($0.00)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In March 2016, the Financial Accounting Standards Board (&#x201C;FASB&#x201D;) issued final guidance in Accounting Standards Update (&#x201C;ASU&#x201D;) No. 2016-09, <i>Improvements to Employee Share-Based Payment Accounting,</i> which will change certain aspects of accounting for share-based payments to employees.&#xA0;The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled.&#xA0;It will also allow an employer to repurchase more of an employee&#x2019;s shares than it can currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur.&#xA0;The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016.&#xA0;Early adoption is permitted for all companies in any interim or annual period, and must be adopted on a modified prospective approach. Due to the Company&#x2019;s full valuation allowance, the nature of the change on the balance sheet will not be significant.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In February 2016, the FASB issued ASU No.&#xA0;2016-02, <i>Leases,</i> to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December&#xA0;15, 2018, including interim periods within those fiscal years, with earlier application permitted.&#xA0;Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that adoption will have on the consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In November 2015, the FASB issued final guidance in ASU No. 2015-17, <i>Balance Sheet Classification of Deferred Taxes,</i> which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts.&#xA0;The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016.&#xA0;Early adoption is permitted for all companies in any interim or annual period, and may be adopted on either a prospective or retrospective basis.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company has early adopted this standard for the interim and annual period ending December 31, 2015 on a prospective basis. As such, prior periods were not retrospectively adjusted. Due to the Company&#x2019;s full valuation allowance on its deferred tax assets, the nature of the change on the balance sheet is not significant.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">In August 2014, the FASB issued ASU No. 2014-15, <i>Presentation of Financial Statements-Going Concern (Subtopic 205-40</i>). The Update provides U.S. GAAP guidance on management&#x2019;s responsibility in evaluating whether there is substantial doubt about a company&#x2019;s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company&#x2019;s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company&#x2019;s consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 7%" align="justify">In May 2014, the FASB issued ASU No. 2014-09, <i>Revenue from Contracts with Customers (Topic 606).</i><i>&#xA0;</i>The amendments to this Update supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We will be evaluating the impact of this guidance on our consolidated financial statements.</p> </div> SMSI 46094000 -0.08 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt"> <b>4. Net Income (Loss) Per Share</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">The Company calculates earnings per share (&#x201C;EPS&#x201D;) as required by FASB ASC Topic No. 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="70%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="1%"></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;March&#xA0;31,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 16pt" align="center"><b>2016</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 16pt" align="center"><b>2015</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="11" align="center"> <b>(unaudited,&#xA0;in&#xA0;thousands,&#xA0;except&#xA0;per&#xA0;share&#xA0;amounts)</b></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> <b>Numerator:</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Net loss available to common stockholders</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">(3,706)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;$</td> <td valign="bottom" align="right">(10)&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> &#xA0;&#xA0;&#xA0;&#xA0;</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> <b>Denominator:</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares outstanding - basic</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46,094&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">45,501&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; 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BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#DBE2F4"> <td valign="top"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em"> Weighted average shares outstanding - diluted</p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">46,094&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">45,501&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;</td> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="MARGIN-BOTTOM: 0pt; 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This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#x2019;s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.</p> </div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="3%" align="left"><b>16.</b></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>Subsequent Events</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">The Company evaluates and discloses subsequent events as required by ASC Topic No. 855, Subsequent Events.&#xA0;The Topic establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">On April 7, 2016, pursuant to the Share Purchase Agreement, dated as of March 8, 2016 , by and between Smith Micro Software, Inc. (the &#x201C;Company&#x201D;) and Birdstep Technology ASA (&#x201C;Birdstep&#x201D;), the Company completed its previously announced acquisition of 100% of the outstanding capital stock of Birdstep&#x2019;s wholly owned Swedish subsidiary, Birdstep Technology AB (the &#x201C;Acquisition&#x201D;). Pursuant to the terms of the Share Purchase Agreement, the Company paid a net purchase price of $2 million in cash to Birdstep at the closing. Concurrently with the closing of the Acquisition, the Company entered into a Transitional Services Agreement with Birdstep. As a result of the Acquisition, Birdstep Technology AB has become a wholly-owned subsidiary of the Company. Approximately 21 employees will continue as employees of Birdstep Technology AB following the Closing. The Company has evaluated this acquisition and concluded that separate financial statements for Birdstep and pro forma financial information for the transaction are not required to be filed under SEC regulation S-X 8-04 and 8-05.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Subsequent events have been evaluated as of the date of this filing and no further disclosures were required.</p> </div> -3706000 2000 7214000 40000 208000 7000 -3678000 -9000 21000 5101000 -2000 321000 -2686000 -2000 -2401000 0 86000 2000 -3704000 -3680000 26000 2113000 667000 2370000 300000 2579000 8779000 7000 2315000 7000 3923000 105000 17000 361000 3000 2486000 0 426000 2200000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="2%" align="left"></td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify"><b>The Company</b></p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 7%" align="justify">Smith Micro Software, Inc. (&#x201C;we,&#x201D; &#x201C;us,&#x201D; &#x201C;our,&#x201D; &#x201C;Smith Micro,&#x201D; or the &#x201C;Company&#x201D;) provides software solutions to simplify and enhance the mobile experience. As a leader in wireless connectivity, our applications ensure high quality of service for mobile users while optimizing networks for wireless service providers and enterprises.&#xA0;Using our intelligent device software, along with premium voice, video and messaging applications, we create new opportunities to engage consumers and monetize mobile services. In addition to wireless solutions, Smith Micro develops 2D/3D graphics software used by professional artists, animators, illustrators, and designers worldwide.</p> </div> 3 2 1605000 P10Y 40.00 2016-04-30 83000 0 0 70000 2000 168000 121000 0.136 0.056 0.650 0.84 1241000 5973000 P7Y P48M P3Y P12M <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 7%" align="justify">Following is the activity in our restructuring liability account for the period ended March 31, 2016 (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 22pt; MARGIN-TOP: 0pt"> &#xA0;</p> <div align="right"> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="93%" border="0"> <tr> <td width="88%"></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="1%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2"> <b>December&#xA0;31,&#xA0;2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <b>March&#xA0;31,&#xA0;2016</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 9pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; MARGIN-TOP: 0pt; WIDTH: 30.5pt" align="center"><b>Balance</b></p> </td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" colspan="2" align="center"> <p style="MARGIN-BOTTOM: 0pt; 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BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td bgcolor="#DBE2F4" valign="bottom" colspan="13"> <p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt"> &#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left">(1)</td> <td valign="top" align="left"> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="justify">$0.4 million is included in accrued liabilities and $1.7 million is included in deferred rent and other long-term liabilities.</p> </td> </tr> </table> </div> 83000 0 State income tax returns are subject to examination for a period of three to four years after filing. 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2016
Apr. 18, 2016
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2016  
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q1  
Trading Symbol SMSI  
Entity Registrant Name SMITH MICRO SOFTWARE INC  
Entity Central Index Key 0000948708  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   46,968,272
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Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Current assets:    
Cash and cash equivalents $ 11,398 $ 8,819
Short-term investments 1,679 4,078
Accounts receivable, net of allowances for doubtful accounts and other adjustments of $135 (2016) and $201 (2015) 5,459 8,145
Income tax receivable 13 13
Inventories, net of reserves for excess and obsolete inventory of $145 (2016) and $158 (2015) 27 39
Prepaid expenses and other current assets 899 692
Total current assets 19,475 21,786
Equipment and improvements, net 2,150 2,492
Other assets 196 195
Total assets 21,821 24,473
Current liabilities:    
Accounts payable 1,480 1,708
Accrued liabilities 5,539 5,064
Deferred revenue 1,107 440
Total current liabilities 8,126 7,212
Non-current liabilities:    
Deferred rent and other long-term liabilities 3,110 3,235
Total non-current liabilities $ 3,110 $ 3,235
Commitments and contingencies
Stockholders' equity:    
Preferred stock, par value $0.001 per share; 5,000,000 shares authorized; none issued or outstanding
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 46,968,272 and 45,729,272 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively $ 47 $ 46
Additional paid-in capital 225,129 224,867
Accumulated comprehensive deficit (214,591) (210,887)
Total stockholders' equity 10,585 14,026
Total liabilities and stockholders' equity $ 21,821 $ 24,473
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Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]    
Allowances for doubtful accounts receivable $ 135 $ 201
Reserves for excess and obsolete inventory $ 145 $ 158
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 46,968,272 45,729,272
Common stock, shares outstanding 46,968,272 45,729,272
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Consolidated Statements of Operations and Comprehensive Loss - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Income Statement [Abstract]    
Revenues $ 7,214 $ 10,529
Cost of revenues 2,113 2,118
Gross profit 5,101 8,411
Operating expenses:    
Selling and marketing 2,370 2,191
Research and development 3,923 3,341
General and administrative 2,486 2,877
Total operating expenses 8,779 8,409
Operating income (loss) (3,678) 2
Interest and other income (expense), net (2) (1)
Income (loss) before provision for income taxes (3,680) 1
Provision for income tax expense 26 11
Net loss (3,706) (10)
Other comprehensive income, before tax:    
Unrealized holding gains on available-for-sale securities 2 1
Other comprehensive income, net of tax 2 1
Comprehensive loss $ (3,704) $ (9)
Net loss per share:    
Basic and diluted $ (0.08) $ 0.00
Weighted average shares outstanding:    
Basic and diluted 46,094 45,501
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Consolidated Statement of Stockholders' Equity - 3 months ended Mar. 31, 2016 - USD ($)
$ in Thousands
Total
Common stock [Member]
Additional paid-in capital [Member]
Accumulated comprehensive deficit [Member]
BALANCE at Dec. 31, 2015 $ 14,026 $ 46 $ 224,867 $ (210,887)
BALANCE, Shares at Dec. 31, 2015 45,729,272 45,729,000    
Non-cash compensation recognized on stock options and ESPP $ 40   40  
Restricted stock grants, net of cancellations 321 $ 1 320  
Restricted stock grants, net of cancellations, shares   1,391,000    
Cancellation of shares for payment of withholding tax (105)   (105)  
Cancellation of shares for payment of withholding tax, shares   (166,000)    
Employee stock purchase plan 7   7  
Employee stock purchase plan, shares   14,000    
Comprehensive loss (3,704)     (3,704)
BALANCE at Mar. 31, 2016 $ 10,585 $ 47 $ 225,129 $ (214,591)
BALANCE, Shares at Mar. 31, 2016 46,968,272 46,968,000    
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Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Operating activities:    
Net loss $ (3,706) $ (10)
Adjustments to reconcile net loss to net cash provided by (used by) operating activities:    
Depreciation and amortization 426 495
Provision for doubtful accounts and other adjustments to accounts receivable   12
Provision for excess and obsolete inventory 3 5
Non-cash compensation related to stock options, ESPP and restricted stock 361 576
Loss on disposal of assets 2  
Change in operating accounts:    
Accounts receivable 2,686 606
Income tax receivable   673
Inventories 9 5
Prepaid expenses and other assets (208) 62
Accounts payable and accrued liabilities 17 (522)
Deferred revenue 667 (1,167)
Net cash provided by operating activities 257 735
Investing activities:    
Capital expenditures (86) (21)
Sales (purchases) of short-term investments 2,401 (919)
Net cash provided by (used in) investing activities 2,315 (940)
Financing activities:    
Cash received from stock sale for employee stock purchase plan 7 8
Cash received from exercise of stock options   9
Net cash provided by financing activities 7 17
Net increase (decrease) in cash and cash equivalents 2,579 (188)
Cash and cash equivalents, beginning of period 8,819 10,165
Cash and cash equivalents, end of period 11,398 9,977
Supplemental disclosures of cash flow information:    
Cash paid for income taxes $ 21 $ 6
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The Company
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company
1.

The Company

Smith Micro Software, Inc. (“we,” “us,” “our,” “Smith Micro,” or the “Company”) provides software solutions to simplify and enhance the mobile experience. As a leader in wireless connectivity, our applications ensure high quality of service for mobile users while optimizing networks for wireless service providers and enterprises. Using our intelligent device software, along with premium voice, video and messaging applications, we create new opportunities to engage consumers and monetize mobile services. In addition to wireless solutions, Smith Micro develops 2D/3D graphics software used by professional artists, animators, illustrators, and designers worldwide.

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Basis of Presentation
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
2.

Basis of Presentation

The accompanying interim consolidated balance sheet and statement of stockholders’ equity as of March 31, 2016, and the related statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2016 and 2015 are unaudited. The unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted.

In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on March 9, 2016.

Intercompany balances and transactions have been eliminated in consolidation.

Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2016.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.4.0.3
Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2016
Accounting Changes and Error Corrections [Abstract]  
Recent Accounting Pronouncements
3.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued final guidance in Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which will change certain aspects of accounting for share-based payments to employees. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It will also allow an employer to repurchase more of an employee’s shares than it can currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and must be adopted on a modified prospective approach. Due to the Company’s full valuation allowance, the nature of the change on the balance sheet will not be significant.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that adoption will have on the consolidated financial statements.

In November 2015, the FASB issued final guidance in ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and may be adopted on either a prospective or retrospective basis.

The Company has early adopted this standard for the interim and annual period ending December 31, 2015 on a prospective basis. As such, prior periods were not retrospectively adjusted. Due to the Company’s full valuation allowance on its deferred tax assets, the nature of the change on the balance sheet is not significant.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments to this Update supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We will be evaluating the impact of this guidance on our consolidated financial statements.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.4.0.3
Net Income (Loss) Per Share
3 Months Ended
Mar. 31, 2016
Earnings Per Share [Abstract]  
Net Income (Loss) Per Share

4. Net Income (Loss) Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC Topic No. 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

 

         Three Months Ended March 31,      
        

2016

    

2015

     
    (unaudited, in thousands, except per share amounts)

Numerator:

         

Net loss available to common stockholders

       $ (3,706)          $ (10)      
    

 

 

    

 

 

   

    

         

Denominator:

         

Weighted average shares outstanding - basic

       46,094           45,501       

Potential common shares - options (treasury stock method)

       -               -           
    

 

 

    

 

 

   

Weighted average shares outstanding - diluted

       46,094           45,501       
    

 

 

    

 

 

   

    

         

Shares excluded (anti-dilutive)

       -               229       
    

 

 

    

 

 

   

    

         

Shares excluded due to an exercise price greater than weighted average stock price for the period

       1,605           976       
    

 

 

    

 

 

   

    

         

Net loss per common share:

         

Basic

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   

Diluted

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   
XML 21 R11.htm IDEA: XBRL DOCUMENT v3.4.0.3
Stock-Based Compensation
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
5.

Stock-Based Compensation

Stock Plans

During the three months ended March 31, 2016, the Company granted 1.4 million shares of restricted stock with a weighted average grant date fair value of $0.68 per share. This cost will be amortized ratably over a period of 12 to 48 months.

As of March 31, 2016, there were 6.8 million shares available for future grants under the 2015 Stock Plan.

 

Employee Stock Purchase Plan

The Company’s most recent six-month offering period ended March 31, 2016 and resulted in 14,000 shares being purchased/granted at a fair value of $0.50 per share.

Stock Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. Restricted stock is valued using the closing stock price on the date of the grant. Options are valued using a Black-Scholes valuation model.

Stock-based non-cash compensation expense related to stock options, restricted stock grants and the employee stock purchase plan were recorded in the financial statements as follows (in thousands):

 

           Three Months Ended March 31,        
     2016      2015  
     (unaudited)  

Cost of revenues

     $ 2           $ 3     

Selling and marketing

     70           75     

Research and development

     121           169     

General and administrative

     168           329     
  

 

 

    

 

 

 

Total non-cash stock compensation expense

     $ 361           $ 576     
  

 

 

    

 

 

 

Total share-based compensation for each quarter includes cash payment of income taxes related to grants of restricted stock in the amount of $0 and $32,000 for the three months ended March 31, 2016 and 2015, respectively.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.4.0.3
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
6.

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

The carrying value of accounts receivable, foreign cash accounts, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

   

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

   

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

   

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs.

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. As permitted, the Company has elected not to use the fair value option to measure our available-for-sale securities under this Topic and will continue to report as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities. We have made this election because the nature of our financial assets and liabilities are not of such complexity that they would benefit from a change in valuation to fair value.

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.4.0.3
Cash and Cash Equivalents
3 Months Ended
Mar. 31, 2016
Cash and Cash Equivalents [Abstract]  
Cash and Cash Equivalents
7.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in two financial institutions and are uninsured except for the minimum Federal Deposit Insurance Corporation (“FDIC”) coverage, and have original maturity dates of three months or less. As of March 31, 2016 and December 31, 2015, bank balances totaling approximately $11.1 million and $8.5 million, respectively, were uninsured.

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.4.0.3
Short-Term Investments
3 Months Ended
Mar. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
Short-Term Investments
8.

Short-Term Investments

Short-term investments consist of U.S. government agency and government sponsored enterprise obligations. The Company accounts for these short-term investments as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities. These debt and equity securities are not classified as either held-to-maturity securities or trading securities. As such, they are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other comprehensive income in stockholders’ equity until realized. Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):

 

    March 31, 2016      December 31, 2015  
    Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

     Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

 

Government securities/money market

    1,680        (1     1,679         4,080        (2     4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

  $ 1,680      $ (1   $ 1,679       $ 4,080      $ (2   $ 4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

There were no realized gains or losses for the three months ended March 31, 2016 and 2015.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.4.0.3
Accounts Receivable
3 Months Ended
Mar. 31, 2016
Receivables [Abstract]  
Accounts Receivable
9.

Accounts Receivable

The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for estimated credit losses, and those losses have been within management’s estimates. Allowances for product returns are included in other adjustments to accounts receivable on the accompanying consolidated balance sheets. Product returns are estimated based on historical experience and management estimations.

XML 26 R16.htm IDEA: XBRL DOCUMENT v3.4.0.3
Impairment or Disposal of Long Lived Assets
3 Months Ended
Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Impairment or Disposal of Long Lived Assets
10.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was no impairment as of March 31, 2016.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.4.0.3
Equipment and Improvements
3 Months Ended
Mar. 31, 2016
Property, Plant and Equipment [Abstract]  
Equipment and Improvements
11.

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.

XML 28 R18.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment, Customer Concentration and Geographical Information
3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Segment, Customer Concentration and Geographical Information
12.

Segment, Customer Concentration and Geographical Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility. Wireless includes our NetWise®, CommSuite®, and QuickLink® family of products. Graphics includes our consumer-based products: Poser®, Anime Studio®, Manga Studio®, MotionArtist® and StuffIt®.

The Company does not separately allocate operating expenses to these business units, nor does it allocate specific assets. Therefore, business unit information reported includes only revenues.

The following table shows the revenues generated by each business unit (in thousands):

 

     Three Months Ended March 31,    

    

     2016      2015    
     (unaudited)    
  

 

 

    

 

 

   

Wireless

     $ 5,973           $ 9,219       

Graphics

     1,241           1,310       
  

 

 

    

 

 

   

Total revenues

     $             7,214           $           10,529       
  

 

 

    

 

 

   

Customer Concentration Information

A summary of the Company’s customers that represent 10% or more of the Company’s net revenues is as follows:

 

       Three Months Ended March 31,  
     2016         2015   

Wireless:

       

Sprint (& affiliates)

     65.0%                            64.7%    

Comcast

     5.6%            10.8%    

    

       

Graphics:

       

FastSpring

                     13.6%            9.5%    

The three customers listed above comprised 84% and 90% our accounts receivable as of March 31, 2016 and 2015, respectively.

Geographical Information

During the three months ended March 31, 2016 and 2015, the Company operated in three geographic locations; the Americas, EMEA (Europe, the Middle East, and Africa) and Asia Pacific. Revenues, attributed to the geographic location of the customer’s bill-to address, were as follows (in thousands):

 

     Three Months Ended March 31,  
     2016      2015  
     (unaudited)  
  

 

 

    

 

 

 

Americas

     $ 7,142           $ 10,312     

EMEA

     62           52     

Asia Pacific

     10           165     
  

 

 

    

 

 

 

  Total Revenues

     $                 7,214           $                 10,529     
  

 

 

    

 

 

 

 

The Company does not separately allocate specific assets to these geographic locations.

XML 29 R19.htm IDEA: XBRL DOCUMENT v3.4.0.3
Commitments and Contingencies
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

13. Commitments and Contingencies

Leases

The Company leases its buildings under operating leases that expire on various dates through 2022. Future minimum annual lease payments under such leases as of March 31, 2016 are as follows (in thousands):

 

Year Ending December 31,

  

Operating

 

2016-9 months remaining

     $ 1,328     

2017

     1,536     

2018

     1,534     

2019

     1,507     

2020

     1,519     

2021

     1,530     

Beyond

     33     
  

 

 

 

Total

     $         8,987     
  

 

 

 

As of March 31, 2016, $4.6 million of the remaining lease commitments expense has been accrued as part of the 2013 Restructuring Plan, partially offset by future estimated sublease income of $2.4 million.

Rent expense under operating leases was $0.3 million for both the three months ended March 31, 2016 and 2015.

As a condition of our Pittsburgh lease that was signed in November 2010, the landlord agreed to incentives of $40.00 per square foot, or a total of $2.2 million, for improvements to the space. These costs have been included in deferred rent in our long-term liabilities and are being amortized over the ten year lease term.

Pennsylvania Opportunity Grant Program

On September 26, 2011, we received $1.0 million from the State of Pennsylvania to help fund our agreement to start-up a new facility. The grant carried with it an obligation, or commitment, to employ at least 232 people within a three-year time period that ended on December 31, 2013. We received an extension of time to meet this employment commitment. The new deadline is April 30, 2016. This grant contains conditions that would require us to return a pro-rata amount of the monies received if we fail to meet these conditions. As such, the monies have been recorded as a liability in the accrued liabilities line item on the balance sheet until we are irrevocably entitled to retain the monies, or until it is determined that we need to return a portion or all of the monies received.

Litigation

The Company may become involved in various legal proceedings arising from its business activities. While management does not believe the ultimate disposition of these matters will have a material adverse impact on the Company’s consolidated results of operations, cash flows or financial position, litigation is inherently unpredictable, and depending on the nature and timing of these proceedings, an unfavorable resolution could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

 

Other Contingent Contractual Obligations

During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include: intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products; indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease; indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company; indemnities involving the accuracy of representations and warranties in certain contracts; and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. In addition, the Company has made contractual commitments to employees providing for severance payments upon the occurrence of certain prescribed events. The Company may also issue a guarantee in the form of a standby letter of credit as security for contingent liabilities under certain customer contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees may not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.

XML 30 R20.htm IDEA: XBRL DOCUMENT v3.4.0.3
Income Taxes
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
14.

Income Taxes

We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax liabilities against gross deferred tax assets); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards.

In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company has been in a five-year historical cumulative loss as of the end of fiscal year 2015. These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets.

After a review of the four sources of taxable income as of December 31, 2015 (as described above), and after consideration of the Company’s continuing cumulative loss position as of December 31, 2015, the Company will continue to reserve its U.S.-based deferred tax amounts, which total $74.9 million, as of March 31, 2016.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2012, 2013 and 2014 tax years. State income tax returns are subject to examination for a period of three to four years after filing. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. It is the Company’s policy to classify any interest and/or penalties in the financial statements as a component of income tax expense.

XML 31 R21.htm IDEA: XBRL DOCUMENT v3.4.0.3
Restructuring Expenses
3 Months Ended
Mar. 31, 2016
Restructuring and Related Activities [Abstract]  
Restructuring Expenses
15.

Restructuring Expenses

2014 Restructuring

On May 6, 2014, the Board of Directors approved a plan of restructuring intended to streamline and flatten the Company’s organization, reduce overall headcount by approximately 20% and reduce its overall cost structure by approximately $2.0 million per quarter. The restructuring plan resulted in special charges totaling $1.8 million recorded during the three month period ended June 30, 2014. These charges were for non-cash stock-based compensation expense of $1.3 million, severance costs for affected employees of $0.4 million, and other related costs of $0.1 million.

2013 Restructuring

On July 25, 2013, the Board of Directors approved a plan of restructuring intended to bring the Company’s operating expenses better in line with revenues. The restructuring plan involved a realignment of organizational structures, facility consolidations/closures and headcount reductions of approximately 26% of the Company’s worldwide workforce. The restructuring plan was implemented primarily during the three month period ended September 30, 2013 and resulted in annualized savings of approximately $16.0 million.

The restructuring plan resulted in special charges totaling $5.6 million recorded in the year ended December 31, 2013. These charges were for lease/rental terminations of $3.3 million, severance costs for affected employees of $1.1 million, equipment and improvements write-offs as a result of our lease/rental terminations of $1.0 million and other related costs of $0.2 million.

In the year ended December 31, 2014, we increased the reserve by $0.6 million due to changes in our assumptions on future sublease income on our lease terminations of $0.8 million, partially offset by adjustments to our one-time employee termination benefits.

Following is the activity in our restructuring liability account for the period ended March 31, 2016 (in thousands):

 

    December 31, 2015                 March 31, 2016  
   

Balance

   

Provision-net

   

Usage

   

Balance

 

Lease/rental terminations

    2,123          -            (83)          2,040     

Relocation, move, transition travel, other

    86          -            -                86     
 

 

 

 

Total (1)

    $ 2,209        $         -            $           (83)         $         2,126     
 

 

 

 

 

(1)

$0.4 million is included in accrued liabilities and $1.7 million is included in deferred rent and other long-term liabilities.

XML 32 R22.htm IDEA: XBRL DOCUMENT v3.4.0.3
Subsequent Events
3 Months Ended
Mar. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events
16.

Subsequent Events

The Company evaluates and discloses subsequent events as required by ASC Topic No. 855, Subsequent Events. The Topic establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued.

On April 7, 2016, pursuant to the Share Purchase Agreement, dated as of March 8, 2016 , by and between Smith Micro Software, Inc. (the “Company”) and Birdstep Technology ASA (“Birdstep”), the Company completed its previously announced acquisition of 100% of the outstanding capital stock of Birdstep’s wholly owned Swedish subsidiary, Birdstep Technology AB (the “Acquisition”). Pursuant to the terms of the Share Purchase Agreement, the Company paid a net purchase price of $2 million in cash to Birdstep at the closing. Concurrently with the closing of the Acquisition, the Company entered into a Transitional Services Agreement with Birdstep. As a result of the Acquisition, Birdstep Technology AB has become a wholly-owned subsidiary of the Company. Approximately 21 employees will continue as employees of Birdstep Technology AB following the Closing. The Company has evaluated this acquisition and concluded that separate financial statements for Birdstep and pro forma financial information for the transaction are not required to be filed under SEC regulation S-X 8-04 and 8-05.

Subsequent events have been evaluated as of the date of this filing and no further disclosures were required.

XML 33 R23.htm IDEA: XBRL DOCUMENT v3.4.0.3
The Company (Policies)
3 Months Ended
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company

The Company

Smith Micro Software, Inc. (“we,” “us,” “our,” “Smith Micro,” or the “Company”) provides software solutions to simplify and enhance the mobile experience. As a leader in wireless connectivity, our applications ensure high quality of service for mobile users while optimizing networks for wireless service providers and enterprises. Using our intelligent device software, along with premium voice, video and messaging applications, we create new opportunities to engage consumers and monetize mobile services. In addition to wireless solutions, Smith Micro develops 2D/3D graphics software used by professional artists, animators, illustrators, and designers worldwide.

Basis of Presentation

Basis of Presentation

The accompanying interim consolidated balance sheet and statement of stockholders’ equity as of March 31, 2016, and the related statements of operations and comprehensive loss and cash flows for the three months ended March 31, 2016 and 2015 are unaudited. The unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted.

In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on March 9, 2016.

Intercompany balances and transactions have been eliminated in consolidation.

Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2016.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued final guidance in Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which will change certain aspects of accounting for share-based payments to employees. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It will also allow an employer to repurchase more of an employee’s shares than it can currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and must be adopted on a modified prospective approach. Due to the Company’s full valuation allowance, the nature of the change on the balance sheet will not be significant.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that adoption will have on the consolidated financial statements.

In November 2015, the FASB issued final guidance in ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. Early adoption is permitted for all companies in any interim or annual period, and may be adopted on either a prospective or retrospective basis.

The Company has early adopted this standard for the interim and annual period ending December 31, 2015 on a prospective basis. As such, prior periods were not retrospectively adjusted. Due to the Company’s full valuation allowance on its deferred tax assets, the nature of the change on the balance sheet is not significant.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40). The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments to this Update supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of this Topic is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This Topic defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We will be evaluating the impact of this guidance on our consolidated financial statements.

Net Income (Loss) Per Share

Net Income (Loss) Per Share

The Company calculates earnings per share (“EPS”) as required by FASB ASC Topic No. 260, Earnings Per Share. Basic EPS is calculated by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period, excluding common stock equivalents. Diluted EPS is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding for the period plus the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For periods with a net loss, the dilutive common stock equivalents are excluded from the diluted EPS calculation. For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

 

         Three Months Ended March 31,      
        

2016

    

2015

     
    (unaudited, in thousands, except per share amounts)

Numerator:

         

Net loss available to common stockholders

       $ (3,706)          $ (10)      
    

 

 

    

 

 

   

    

         

Denominator:

         

Weighted average shares outstanding - basic

       46,094           45,501       

Potential common shares - options (treasury stock method)

       -               -           
    

 

 

    

 

 

   

Weighted average shares outstanding - diluted

       46,094           45,501       
    

 

 

    

 

 

   

    

         

Shares excluded (anti-dilutive)

       -               229       
    

 

 

    

 

 

   

    

         

Shares excluded due to an exercise price greater than weighted average stock price for the period

       1,605           976       
    

 

 

    

 

 

   

    

         

Net loss per common share:

         

Basic

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   

Diluted

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   
Stock-Based Compensation

Stock Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognized as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. Restricted stock is valued using the closing stock price on the date of the grant. Options are valued using a Black-Scholes valuation model.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company measures and discloses fair value measurements as required by FASB ASC Topic No. 820, Fair Value Measurements and Disclosures.

The carrying value of accounts receivable, foreign cash accounts, prepaid expenses, other current assets, accounts payable, and accrued expenses are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

   

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

   

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

   

Level 3 - Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

As required by FASB ASC Topic No. 820, we measure our cash equivalents and short-term investments at fair value. Our cash equivalents and short-term investments are classified within Level 1 by using quoted market prices utilizing market observable inputs.

As required by FASB ASC Topic No. 825, Financial Instruments, an entity can choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in earnings in the current period. This Topic also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. As permitted, the Company has elected not to use the fair value option to measure our available-for-sale securities under this Topic and will continue to report as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities. We have made this election because the nature of our financial assets and liabilities are not of such complexity that they would benefit from a change in valuation to fair value.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, government securities, mutual funds, and money market funds. These securities are primarily held in two financial institutions and are uninsured except for the minimum Federal Deposit Insurance Corporation (“FDIC”) coverage, and have original maturity dates of three months or less. As of March 31, 2016 and December 31, 2015, bank balances totaling approximately $11.1 million and $8.5 million, respectively, were uninsured.

Short-Term Investments

Short-Term Investments

Short-term investments consist of U.S. government agency and government sponsored enterprise obligations. The Company accounts for these short-term investments as required by FASB ASC Topic No. 320, Investments-Debt and Equity Securities. These debt and equity securities are not classified as either held-to-maturity securities or trading securities. As such, they are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other comprehensive income in stockholders’ equity until realized. Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):

 

    March 31, 2016      December 31, 2015  
    Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

     Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

 

Government securities/money market

    1,680        (1     1,679         4,080        (2     4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

  $ 1,680      $ (1   $ 1,679       $ 4,080      $ (2   $ 4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
Accounts Receivable

Accounts Receivable

The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for estimated credit losses, and those losses have been within management’s estimates. Allowances for product returns are included in other adjustments to accounts receivable on the accompanying consolidated balance sheets. Product returns are estimated based on historical experience and management estimations.

Impairment or Disposal of Long Lived Assets

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by FASB ASC Topic No. 360, Property, Plant, and Equipment. The Company determined there was no impairment as of March 31, 2016.

Equipment and Improvements

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.

Segment Information

Segment Information

Public companies are required to report financial and descriptive information about their reportable operating segments as required by FASB ASC Topic No. 280, Segment Reporting. The Company has two primary business units based on how management internally evaluates separate financial information, business activities and management responsibility. Wireless includes our NetWise®, CommSuite®, and QuickLink® family of products. Graphics includes our consumer-based products: Poser®, Anime Studio®, Manga Studio®, MotionArtist® and StuffIt®.

Income Taxes

We account for income taxes as required by FASB ASC Topic No. 740, Income Taxes. This Topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company has chosen to recognize interest and penalties related to tax uncertainties as income tax expense.

XML 34 R24.htm IDEA: XBRL DOCUMENT v3.4.0.3
Net Income (Loss) Per Share (Tables)
3 Months Ended
Mar. 31, 2016
Earnings Per Share [Abstract]  
Net Income (Loss) Per Share

For purposes of this calculation, common stock subject to repurchase by the Company and options are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.

 

         Three Months Ended March 31,      
        

2016

    

2015

     
    (unaudited, in thousands, except per share amounts)

Numerator:

         

Net loss available to common stockholders

       $ (3,706)          $ (10)      
    

 

 

    

 

 

   

    

         

Denominator:

         

Weighted average shares outstanding - basic

       46,094           45,501       

Potential common shares - options (treasury stock method)

       -               -           
    

 

 

    

 

 

   

Weighted average shares outstanding - diluted

       46,094           45,501       
    

 

 

    

 

 

   

    

         

Shares excluded (anti-dilutive)

       -               229       
    

 

 

    

 

 

   

    

         

Shares excluded due to an exercise price greater than weighted average stock price for the period

       1,605           976       
    

 

 

    

 

 

   

    

         

Net loss per common share:

         

Basic

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   

Diluted

       ($0.08)          ($0.00)      
    

 

 

    

 

 

   
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.4.0.3
Stock-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Non-Cash Compensation Expenses

Stock-based non-cash compensation expense related to stock options, restricted stock grants and the employee stock purchase plan were recorded in the financial statements as follows (in thousands):

 

           Three Months Ended March 31,        
     2016      2015  
     (unaudited)  

Cost of revenues

     $ 2           $ 3     

Selling and marketing

     70           75     

Research and development

     121           169     

General and administrative

     168           329     
  

 

 

    

 

 

 

Total non-cash stock compensation expense

     $ 361           $ 576     
  

 

 

    

 

 

 
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.4.0.3
Short-Term Investments (Tables)
3 Months Ended
Mar. 31, 2016
Investments, Debt and Equity Securities [Abstract]  
Available-for-Sale Securities Recorded at Fair Value with Unrealized Gains or Losses

Available-for-sale securities with contractual maturities of less than 12 months were as follows (in thousands):

 

    March 31, 2016      December 31, 2015  
    Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

     Amortized
cost basis
   

Gross unrealized

gain(loss)

   

Fair value

 

Government securities/money market

    1,680        (1     1,679         4,080        (2     4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total

  $ 1,680      $ (1   $ 1,679       $ 4,080      $ (2   $ 4,078   
 

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment, Customer Concentration and Geographical Information (Tables)
3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Revenues Generated by Each Business Unit

The following table shows the revenues generated by each business unit (in thousands):

 

     Three Months Ended March 31,    

    

     2016      2015    
     (unaudited)    
  

 

 

    

 

 

   

Wireless

     $ 5,973           $ 9,219       

Graphics

     1,241           1,310       
  

 

 

    

 

 

   

Total revenues

     $             7,214           $           10,529       
  

 

 

    

 

 

   
Company's Customers that Represent 10% or More of Company's Net Revenues

A summary of the Company’s customers that represent 10% or more of the Company’s net revenues is as follows:

 

       Three Months Ended March 31,  
     2016         2015   

Wireless:

       

Sprint (& affiliates)

     65.0%                            64.7%    

Comcast

     5.6%            10.8%    

    

       

Graphics:

       

FastSpring

                     13.6%            9.5%    
Company Revenue in Different Geographic Locations

Revenues, attributed to the geographic location of the customer’s bill-to address, were as follows (in thousands):

 

     Three Months Ended March 31,  
     2016      2015  
     (unaudited)  
  

 

 

    

 

 

 

Americas

     $ 7,142           $ 10,312     

EMEA

     62           52     

Asia Pacific

     10           165     
  

 

 

    

 

 

 

  Total Revenues

     $                 7,214           $                 10,529     
  

 

 

    

 

 

 
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.4.0.3
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Company Lease of Buildings under Non-Cancellable Operating Leases

Future minimum annual lease payments under such leases as of March 31, 2016 are as follows (in thousands):

 

Year Ending December 31,

  

Operating

 

2016-9 months remaining

     $ 1,328     

2017

     1,536     

2018

     1,534     

2019

     1,507     

2020

     1,519     

2021

     1,530     

Beyond

     33     
  

 

 

 

Total

     $         8,987     
  

 

 

 
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.4.0.3
Restructuring Expenses (Tables)
3 Months Ended
Mar. 31, 2016
2013 Restructuring [Member]  
Activity in Restructuring Liability Account

Following is the activity in our restructuring liability account for the period ended March 31, 2016 (in thousands):

 

    December 31, 2015                 March 31, 2016  
   

Balance

   

Provision-net

   

Usage

   

Balance

 

Lease/rental terminations

    2,123          -            (83)          2,040     

Relocation, move, transition travel, other

    86          -            -                86     
 

 

 

 

Total (1)

    $ 2,209        $         -            $           (83)         $         2,126     
 

 

 

 

 

(1)

$0.4 million is included in accrued liabilities and $1.7 million is included in deferred rent and other long-term liabilities.

XML 40 R30.htm IDEA: XBRL DOCUMENT v3.4.0.3
Net Income (Loss) Per Share - Net Income (Loss) Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Numerator:    
Net loss available to common stockholders $ (3,706) $ (10)
Denominator:    
Weighted average shares outstanding - basic 46,094 45,501
Potential common shares - options (treasury stock method) 0 0
Weighted average shares outstanding - diluted 46,094 45,501
Shares excluded (anti-dilutive)   229
Shares excluded due to an exercise price greater than weighted average stock price for the period 1,605 976
Net loss per common share:    
Basic $ (0.08) $ 0.00
Diluted $ (0.08) $ 0.00
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.4.0.3
Stock-Based Compensation - Additional Information (Detail) - USD ($)
$ / shares in Units, shares in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Common stock [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Employee stock purchase plan (ESPP), shares purchased/granted 14  
Maximum [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Restricted stock vesting period 48 months  
Minimum [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Restricted stock vesting period 12 months  
Restricted stock [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Restricted stock, granted 1,400  
Weighted average grant date fair value $ 0.68  
Cash payment of income taxes related to grants included in share-based compensation $ 0 $ 32,000
Employee Stock Purchase Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Employee stock purchase plan, grant date fair value $ 0.50  
Two Thousand Fifteen Stock Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Number of shares available for future grants 6,800  
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.4.0.3
Stock-Based Compensation - Stock-Based Non-Cash Compensation Expenses (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Total non-cash stock compensation expense $ 361 $ 576
Cost of revenues [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Total non-cash stock compensation expense 2 3
Selling and marketing [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Total non-cash stock compensation expense 70 75
Research and development [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Total non-cash stock compensation expense 121 169
General and administrative [Member]    
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]    
Total non-cash stock compensation expense $ 168 $ 329
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.4.0.3
Cash and Cash Equivalents - Additional Information (Detail)
$ in Millions
3 Months Ended
Mar. 31, 2016
USD ($)
Institution
Dec. 31, 2015
USD ($)
Cash and Cash Equivalents [Abstract]    
Financial institutions to held securities | Institution 2  
Cash and cash equivalents original maturity dates Three months or less  
Bank balances | $ $ 11.1 $ 8.5
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.4.0.3
Short-Term Investments - Available-for-Sale Securities Recorded at Fair Value with Unrealized Gains or Losses (Detail) - USD ($)
$ in Thousands
Mar. 31, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]    
Amortized cost basis $ 1,680 $ 4,080
Gross unrealized gain (loss) (1) (2)
Fair value 1,679 4,078
Government securities/money market [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized cost basis 1,680 4,080
Gross unrealized gain (loss) (1) (2)
Fair value $ 1,679 $ 4,078
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.4.0.3
Short-Term Investments - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Investments, Debt and Equity Securities [Abstract]    
Realized gains (losses) recognized $ 0 $ 0
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.4.0.3
Impairment or Disposal of Long Lived Assets - Additional Information (Detail)
3 Months Ended
Mar. 31, 2016
USD ($)
Asset Impairment Charges [Abstract]  
Asset impairment charges $ 0
XML 47 R37.htm IDEA: XBRL DOCUMENT v3.4.0.3
Equipment and Improvements - Additional Information (Detail)
3 Months Ended
Mar. 31, 2016
Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives of the assets 3 years
Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives of the assets 7 years
XML 48 R38.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment, Customer Concentration and Geographical Information - Additional Information (Detail)
3 Months Ended
Mar. 31, 2016
Location
Business_Unit
Mar. 31, 2015
Location
Revenue, Major Customer [Line Items]    
Number of primary business units | Business_Unit 2  
Number of geographic locations | Location 3 3
Customer Concentration Risk [Member] | Accounts receivable [Member] | Sprint and Fast Spring [Member]    
Revenue, Major Customer [Line Items]    
Concentration percentage 84.00% 90.00%
XML 49 R39.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment, Customer Concentration and Geographical Information - Revenues Generated by Each Business Unit (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue from External Customer [Line Items]    
Total Revenues $ 7,214 $ 10,529
Wireless [Member]    
Revenue from External Customer [Line Items]    
Total Revenues 5,973 9,219
Graphics [Member]    
Revenue from External Customer [Line Items]    
Total Revenues $ 1,241 $ 1,310
XML 50 R40.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment, Customer Concentration and Geographical Information - Company's Customers that Represent 10% or More of Company's Net Revenues (Detail) - Revenues [Member] - Customer Concentration Risk [Member]
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Wireless [Member] | Sprint and affiliates [Member]    
Revenue from External Customer [Line Items]    
Customer concentrating on 10% or more of net revenue 65.00% 64.70%
Wireless [Member] | Comcast [Member]    
Revenue from External Customer [Line Items]    
Customer concentrating on 10% or more of net revenue 5.60% 10.80%
Graphics [Member] | FastSpring [Member]    
Revenue from External Customer [Line Items]    
Customer concentrating on 10% or more of net revenue 13.60% 9.50%
XML 51 R41.htm IDEA: XBRL DOCUMENT v3.4.0.3
Segment, Customer Concentration and Geographical Information - Company Revenue in Different Geographic Locations (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Revenue from External Customer [Line Items]    
Total Revenues $ 7,214 $ 10,529
Americas [Member]    
Revenue from External Customer [Line Items]    
Total Revenues 7,142 10,312
EMEA [Member]    
Revenue from External Customer [Line Items]    
Total Revenues 62 52
Asia Pacific [Member]    
Revenue from External Customer [Line Items]    
Total Revenues $ 10 $ 165
XML 52 R42.htm IDEA: XBRL DOCUMENT v3.4.0.3
Commitments and Contingencies - Additional Information (Detail)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2016
USD ($)
$ / ft²
Mar. 31, 2015
USD ($)
Dec. 31, 2013
People
Sep. 26, 2011
USD ($)
Leases [Abstract]        
Expiration of non-cancellable operating leases Through 2022      
Accrued lease commitments expense $ 4.6      
Estimated sublease income 2.4      
Rent expense under operating leases $ 0.3 $ 0.3    
Incentives per square feet | $ / ft² 40.00      
Incentives for improvements to space $ 2.2      
Lease agreement term 10 years      
Amount received to start-up new facility       $ 1.0
Minimum number of people to be employed | People     232  
Time period to meet employment commitment     3 years  
New deadline to meet employment commitment Apr. 30, 2016      
XML 53 R43.htm IDEA: XBRL DOCUMENT v3.4.0.3
Commitments and Contingencies - Company Lease of Buildings under Non-Cancellable Operating Leases (Detail)
$ in Thousands
Mar. 31, 2016
USD ($)
Leases [Abstract]  
2016-9 months remaining $ 1,328
2017 1,536
2018 1,534
2019 1,507
2020 1,519
2021 1,530
Beyond 33
Total $ 8,987
XML 54 R44.htm IDEA: XBRL DOCUMENT v3.4.0.3
Income Taxes - Additional Information (Detail)
$ in Millions
3 Months Ended
Mar. 31, 2016
USD ($)
Operating Loss Carryforwards [Line Items]  
Valuation allowance $ 74.9
Federal [Member]  
Operating Loss Carryforwards [Line Items]  
Federal income tax returns subject to examination description Federal income tax returns of the Company are subject to IRS examination for the 2012, 2013 and 2014 tax years.
State [Member]  
Operating Loss Carryforwards [Line Items]  
Federal income tax returns subject to examination description State income tax returns are subject to examination for a period of three to four years after filing.
XML 55 R45.htm IDEA: XBRL DOCUMENT v3.4.0.3
Restructuring Expenses - Additional Information (Detail)
$ / qtr in Millions, $ in Millions
3 Months Ended 12 Months Ended
May. 06, 2014
$ / qtr
Jun. 30, 2014
USD ($)
Sep. 30, 2013
USD ($)
Dec. 31, 2014
USD ($)
Dec. 31, 2013
USD ($)
2014 Restructuring [Member]          
Restructuring Cost and Reserve [Line Items]          
Reductions in company's worldwide workforce 20.00%        
Reduction of overall cost structure | $ / qtr 2.0        
Special charges for restructuring plan   $ 1.8      
Severance costs for affected employees   0.4      
Other restructuring related costs   0.1      
Non-cash stock based compensation expense   $ 1.3      
2013 Restructuring [Member]          
Restructuring Cost and Reserve [Line Items]          
Reductions in company's worldwide workforce     26.00%    
Special charges for restructuring plan         $ 5.6
Severance costs for affected employees         1.1
Other restructuring related costs         0.2
Annualized savings     $ 16.0    
Lease/rental termination charges for restructuring       $ 0.8 3.3
Equipment and improvements write-offs due to lease/rental terminations       $ 0.6 $ 1.0
XML 56 R46.htm IDEA: XBRL DOCUMENT v3.4.0.3
Restructuring Expenses - Activity in Restructuring Liability Accounts (Detail) - 2013 Restructuring [Member]
$ in Thousands
3 Months Ended
Mar. 31, 2016
USD ($)
Restructuring Cost and Reserve [Line Items]  
Beginning Balance $ 2,209
Provision-net 0
Usage (83)
Ending Balance 2,126
Lease/rental terminations [Member]  
Restructuring Cost and Reserve [Line Items]  
Beginning Balance 2,123
Provision-net 0
Usage (83)
Ending Balance 2,040
Relocation, move, transition travel, other [Member]  
Restructuring Cost and Reserve [Line Items]  
Beginning Balance 86
Provision-net 0
Ending Balance $ 86
XML 57 R47.htm IDEA: XBRL DOCUMENT v3.4.0.3
Restructuring Expenses - Activity in Restructuring Liability Accounts (Parenthetical) (Detail)
$ in Millions
Mar. 31, 2016
USD ($)
Restructuring and Related Activities [Abstract]  
Restructuring liability is included in deferred rent and other long term liabilities $ 0.4
Restructuring liability included in accrued liabilities $ 1.7
XML 58 R48.htm IDEA: XBRL DOCUMENT v3.4.0.3
Subsequent Events - Additional Information (Detail) - Subsequent Event [Member] - Birdstep Technology's [Member]
$ in Millions
Apr. 07, 2016
USD ($)
Employees
Subsequent Event [Line Items]  
Acquisition agreement date Mar. 08, 2016
Business acquisition, equity interests acquired 100.00%
Number of employees | Employees 21
Cash payment to be made for business acquisition | $ $ 2
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