The amendments applynew guidance also requires disclosure of the pre-tax income attributable to all public companiesa disposal of a significant part of an organization that report items of other comprehensive income. Public companies are required to complydoes not qualify for discontinued operations reporting. This disclosure will provide users with these amendments for allinformation about the ongoing trends in a reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public.

organization’s results from continuing operations.

AccountingThe amendments in this update enhance convergence between U.S. GAAP and International Financial Reporting Standards Update 2012-02(IFRS). Part of the new definition of discontinued operation is based on elements of the definition of discontinued operations in IFRS 5,Non-Current Assets Held for Sale and Discontinued Operations.

In July 2012, the Financial Accounting Standards Board issued Accounting Standards Update 2012-02, “Intangibles – Goodwill and Other” (“ASU 2012-02”). In accordance with theThe amendments in ASU 2012-02, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Accounting Standards Codification 350-30.  An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. In conducting a qualitative assessment, an entity should consider the extent to which relevant events and circumstances, both individually andthis update are effective in the aggregate, could have affected the significant inputs used to determine the fair valuefirst quarter of the indefinite-lived intangible asset since the last assessment.

An entity also should consider whether there have been changes to the carrying amount of the indefinite-lived intangible asset when evaluating whether it is more likely than not that the indefinite-lived intangible asset is impaired. An entity should consider positive and mitigating events and circumstances that could affect its determination of whether it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity has made a recent fair value calculation that indicated a difference between the fair value and the then carrying amount of an indefinite-lived intangible asset, that difference also should be included as a factor in considering whether it is more likely than not that the indefinite-lived intangible asset is impaired. ASU 2012-02 is effective2015 for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.public organizations with calendar year ends. Early adoption is permitted.

OtherThis update is not expected to have a material impact on the Company’s financial statements.

Accounting Standards Update 2014-09

In May 2014, the FASB issued Accounting Standards Update 2014-09,“Revenue from Contracts with Customers” (Topic 606)which supersedes previously issued revenue recognition requirements, including substantially all industry specific revenue recognition guidance. The new guidance utilizes a contract-based approach that places the focus on the assets and liabilities that are created when an entity enters into and performs under a contract. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods, or services, to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (a) Identify the contract(s) with a customer; (b) Identify the performance obligations in the contract; (c) Determine the transaction price; (d) Allocate the transaction price to the performance obligations in the contract; (e) Recognize revenue when (or as) the entity satisfies a performance obligation.

For a public entity, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted.

An entity should apply the amendments in this update using one of the following two methods:

1. Retrospectively to each prior reporting period presented the entity may elect any of the following practical expedients:

For completed contracts, an entity need not restate contracts that begin and end within the same annual reporting period.

For completed contracts that have variable consideration, an entity may use the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods.

For all reporting periods presented before the date of initial application, an entity need not disclose the amount of the transaction price allocated to remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue.

2. Retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. If an entity elects this transition method it also should provide the additional disclosures in reporting periods that include the date of initial application of the amount by which each financial statement line item is affected in the current reporting period by the application of this ASU as compared to the guidance that was in effect before the change.

This update is not expected to have a material impact on the Company’s financial statements.

Accounting Standards Update 2014-12

In June 2014, the FASB issued Accounting Standards Update 2014-12, “Compensation – Stock Compensation” (Topic 718)amended guidance to require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period.

Current U.S. GAAP does not contain explicit guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an award.

For all entities, the amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. Entities may apply the amendments in this update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.

This update is not expected to have a material impact on the Company’s financial statements.

Accounting Standards Update 2014-15

In August 2014 the FASB issued Accounting Standards Update 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.

Under U.S. GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. Financial reporting under this presumption is commonly referred to as the going concern basis of accounting. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities.

Currently, U.S. GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. ASU 2014-15 provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes.

The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued.

U.S. auditing standards and federal securities law require that an auditor evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time not to exceed one year beyond the date of the financial statements being audited. U.S. auditing standards also require an auditor to consider the possible financial statement effects, including footnote disclosures on uncertainties about an entity’s ability to continue as a going concern for a reasonable period of time (Public Company Accounting Oversight Board’s AU Section 341,The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern). The U.S. Securities and Exchange Commission (SEC) also has guidance on disclosures that it expects from an entity when an auditor’s report includes an explanatory paragraph that reflects substantial doubt about an entity’s ability to continue as a going concern for a reasonable period of time. 

The amendments in this update provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures.

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that thefinancial statements are issued(or within one year after the date that thefinancial statements are available to be issuedwhen applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that thefinancial statements are issued(or at the date that thefinancial statements are available to be issuedwhen applicable).

Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued).

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (1) principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans); (2) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (3) management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there issubstantial doubt about the entity’s ability to continue as a going concernwithin one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand (1) the principal conditions giving rise to substantial doubt about the entity’s ability to continue as a going concern; (2) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations; (3) management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

This update is not expected to have a material impact on the Company’s financial statements.

Accounting Standards Update 2014-16

In November 2014, the FASB has issued Accounting Standards Update (ASU) No. 2014-16,Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.The amendments in ASU 2014-16 do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument.

The amendments in ASU 2014-16 also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weight those terms and features. Specifically, the assessment of the substance of the relevant terms and features should incorporate a consideration of: (1) the characteristics of the terms and features themselves (for example, contingent versus non contingent, in-the-money versus out-of-the-money); (2) the circumstances under which the hybrid financial instrument was issued or acquired (e.g., issuer-specific characteristics, such as whether the issuer is thinly capitalized or profitable and well-capitalized); and (3) the potential outcomes of the hybrid financial instrument (e.g., the instrument may be settled by the issuer issuing a fixed number of shares, the

instrument may be settled by the issuer transferring a specified amount of cash, or the instrument may remain legal-form equity), as well as the likelihood of those potential outcomes. The amendments in ASU 2014-16 apply to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share.

The amendments in ASU 2014-16 are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.

The effects of initially adopting the amendments in ASU 2014-16 should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

This update is not expected to have a material impact on the Company’s financial statements.

Accounting Standards Update 2014-17

In November 2014, the FASB has issued Accounting Standards Update (ASU) No. 2014-17,Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU apply to the separate financial statements of an acquired entity and its subsidiaries that are a business or nonprofit activity (either public or nonpublic) upon the occurrence of an event in which an acquirer (an individual or an entity) obtains control of the acquired entity.

The amendments in this ASU provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event. An election to apply pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable.

If an acquired entity elects the option to apply pushdown accounting in its separate financial statements, it should disclose information in the current reporting period that enables users of financial statements to evaluate the effect of pushdown accounting.

The amendments in this ASU are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or proposed bymade available to be issued, the FASB or other standards-setting bodies that doapplication of this guidance would be a change in accounting principle.

This update is not require adoption untilexpected to have a future date are not applicable to the Company's consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not applicable tomaterial impact on the Company’s consolidated financial statements.

Results of Operations

The following table summarizes our results of operations for the years ended December 31, 2012, 20112014, 2013 and 2010:2012:

The following table sets forth, for the annual periods indicated, certain results of operations data as a percentage of revenue for the years ended December 31, 2012, 20112014, 2013 and 2010:2012:

The following table sets forth, for the annual periods indicated, revenue generated by country:

Year Ended December 31, 20122014 Compared to Year Ended December 31, 20112013

Revenue.Revenue

Total revenue increased from $124.5 million in 2013 to $172.9 million in 2014.

Revenue generated in the Netherlands was $69.7 million in 2014 compared to $56.6 million in 2013. The increase in revenue generated in the Netherlands was primarily a result of additional services provided to Schiphol Airport. The effect of the exchange rates on 2014 revenue compared to 2013 was not significant.

In June 2013, the Company acquired an entity in Germany that provides aviation security services. Revenue generated in Germany was $49.8 million in 2014 compared to $13.0 million in 2013 (since date of acquisition until December 31, 2013).

Revenue in the United States decreased from $41.6 million in 2013 to $40.0 million in 2014 due to decreased services provided as well as the loss of certain contracts. In addition revenues are expected to be lower in the United States in 2015 due to a loss of a significant contract.

Revenue outside the United States, the Netherlands and Germany totaled to $13.5 million in 2014 compared to $13.3 in 2013.

Cost of Revenue

Cost of revenue increased from $109 million or 87.5% in 2013 to $152.2 million or 88.0% in 2014. Cost of revenue was fairly consistent at 87.5% of revenue in 2013 compared to 88.0% in 2014. Increases from $109 million in 2013 to $152.2 million in 2014 relates primarily to an increase in revenues in the Netherlands and Germany.

Research and Development expenses (“R&D”)

R&D expenses were fairly consistent at $2.2 million both in 2014 and 2013.

Selling, General and Administrative Expenses (“SG&A”)

SG&A expenses increased from $16.9 million or 13.6% in 2013 to $17.3 million or 10.0% in 2014. SG&A was fairly consistent at $17.0 million in 2013 compared to $17.3 million in 2014. Decrease from 13.6% of revenue in 2013 to 10.0% of revenue in 2014 is a result of increases in revenues primarily in the Netherlands and Germany.

Forgiveness of debt

During the year ended December 31, 2013, the Company reversed certain accounts payable in the amount of $1.3 million as the Company believes it is no longer obligated for these accounts payable.

Other income (expense), net

Other income (expense), net totaled $0.4 million in 2014 compared to $(4.0) million in 2013.

Interest expense to related party was fairly consistent from $2.3 million in 2014 compared to $2.2 million in 2013. Borrowings from related party, including accrued interest, increased from $36.6 million in 2013 to $38.5 million in 2014. Interest related to the related party debt is expected to increase in the future as borrowings from the related party are expected to increase.

Interest expense and bank charges were fairly consistent at $1.1 million both in 2014 and 2013.

Interest income related to uncertain tax positions totaled $0 million in 2014 compared to income of $0.3 million in 2013. Interest income in 2013 resulted from the Company’s debt settlement with the IRS.

Foreign currency gain (loss) in 2014 totaled $3.7 million compared to $(1.0) million in 2013. During 2014 the exchange rate between the Dollar and the Euro dropped from 1.38 Dollar per Euro as of December 31, 2013 to 1.21 Dollar per Euro, a decrease of approximately 12%. As substantial balances of the Company’s liabilities are in Euros, the Company recorded a foreign currency gain in 2014. In 2013 the exchange rate between the Dollar and the Euro increased from 1.32 Dollar per Euro to 1.38, which created a foreign currency loss.

Income Tax Benefit (Expense)

The Company had income tax expense of $(0.1) million in 2014 compared to income tax benefit of $1.0 million in 2013. The income tax benefit in 2013 relates primarily to the settlement of the debt to the IRS, creating an income tax benefit of $1.1 million. This tax benefit was offset with $(0.1) million tax expense which relates primarily to certain profitable subsidiaries in Europe and the Far East, similar to the income tax expense of $(0.1) in 2014.

Income (Loss) from Discontinued Operations

Loss from discontinued operations in 2014 of $0.1 million relates primarily to discontinued operations of European subsidiaries. Income from discontinued operations in 2013 of $1.9 million relates primarily to the settlement of certain income tax assessments with the IRS related to the discontinued entertainment segment.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

Revenue

Revenue increased from $100.3$96.3 million in 20112012 to $103.0$124.5 million in 2012. 2013.

Revenue in the United States increased from $35.8 million in 2011 to $36.9 million in 2012. 2012 to $41.6 million in 2013 as a result of new business and new bids won during the year.

Revenue generated in the Netherlands was $48.3$56.6 million in 20122013 compared to $47.5 million in 2011. Revenue outside the United States and the Netherlands increased from $17.0 million in 2011 to $17.8$48.3 million in 2012. Revenue generated in the Netherlands in 2012 based on the 20112013 exchange rates would have totaled $52.4$49.7 million. IncreaseThe increase in revenue generated in the Netherlands was primarily a result of provision of additional services provided to Schiphol Airport, our main customerAirport.

In June 2013, the Company acquired an entity in the Netherlands. The increaseGermany that provides aviation security services. This acquisition resulted in additional revenue generatedof $13.0 million (since date of acquisition until December 31, 2013).

Increase in revenue outside the United States, and the Netherlands and Germany relates primarily to an increase in revenue generated in JapanItaly as a result of providingadditional services at additional airports.provided in that country.

Cost of Revenue.Revenue

Cost of revenue increased from $87.0$84.5 million or 87.7% in 20112012 to $109.0 million or 86.8%87.5% in 2013. Cost of revenue to $90.3 million orwas fairly consistent at 87.7% of revenue in 2012.2012 compared to 87.5% in 2013. Increase is attributable mostlyfrom $84.5 million in 2012 to $109.0 million in 2013 relates to increase in payrollrevenues in the United States, the Netherlands, Germany and related costs. As a result, our gross profit decreased from $13.3 million in 2011 to $12.6 million in 2012. Gross margin decreased from 13.2% in 2011 to 12.3% in 2012.other locations.

Research and Development expenses (“R&D”).

R&D expenses decreased from $2.8were fairly consistent at $2.2 million in 20112013 compared to $2.3 million in 2012. The decrease relates primarily to the reduction in the number of employees within the Technology segment.

Selling, General and Administrative Expenses (“SG&A”).

SG&A expenses were fairly consistent at $15.0increased from $14.0 million for eachor 14.7% in 2012 to $16.9 million or 13.6% in 2013. The increase in SG&A expenses relates primarily to the new operations in Germany.

Forgiveness of debt

During the yearsyear ended December 31, 2012 or 14.6% and 14.9%2013, the Company reversed certain accounts payable in the amount of revenue, respectively.$1.3 million as the Company believes it is no longer obligated for these accounts payable.

Other Expense, net.net

Other expense, net increased to $4.0 million in 2013 compared to $3.1 million in 2012 compared to $0.7 million in 2011. Increase relates primarily due to the following: (a) interest2012.

Interest expense to related party increased from $1.1 million in 2011 to $1.6 million in 2012 to $2.2 million in 2013 as a result of an increase in borrowings, which increased from $20.8 million in 2011 to $28.1 million in 2012.2012 to $36.6 million in 2013. Interest expense related to related party debt is expected to increase in the future (b) interest expenseas borrowings from the related party are expected to uncertain tax positions totaled $0.1 million in 2012 compared to income of $0.7 million in 2011, which resulted from our settlement with the IRS in 2011, (c) interest expense increased from $0.8 million in 2011 to $0.9 million in 2012 as a result of an increase in the average balance outstanding on our line of credit in the United States, (d) amortization expense related to deferred financing costs increased from $0.2 million in 2011 to $0.3 million in 2012 and (e) foreign currency loss in 2012 totaled $0.3 million compared to foreign currency gain of $0.6 million in 2011.

increase.

Interest expense and bank charges to non-related parties increased from $0.9 million in 2012 to of $1.1 million in 2013 primarily as a result of new lines of credit in Europe.

Interest income related to uncertain tax positions totaled $0.3 million in 2013 compared to an expense of $0.1 million in 2012. Interest income in 2013 resulted from the Company’s debt settlement with the IRS during 2013.

Foreign currency loss in 2013 totaled $1.0 million compared to $0.3 million in 2012.

Amortization expense related to deferred financing cost decreased from $0.3 million in 2012 to $0.1 million in 2013 as the deferred costs were fully amortized in 2013.

Income Tax Benefit (Expense).

The Company had an income tax benefit of $1.0 million in 2013 compared to income tax expense of $0.2$(0.2) million in 2012,2012. The income tax benefit in 2013 relates primarily to the settlement of a tax assessment to the IRS, creating an income tax benefit of $1.1 million. This tax benefit was offset with $(0.1) million tax expense, which relates primarily to certain profitable subsidiaries in Europe and the Far East. In 2011 the Company had an income tax benefit of $0.3 million, which resulted from the reversal of $0.6 million of income taxes payable from our settlement of certain income tax assessments in the United States with the IRS.

Income (Loss) From(loss) from Discontinued Operations.Operations Loss

Income from discontinued operations in 20122013 of $1.0$1.8 million consists of $0.1 million expense relatedprimarily relates to the settlement of certain income tax assessments withto the IRS in 2011 and a loss of $0.9 million generated in France, Romania and Hungary related to the discontinuation of services in these countries. Income from discontinued operations in 2011 consists of income of $5.8 million from our settlement of certain income tax assessments in the United States with the IRS, offset by a loss $3.0 million related to the discontinued entertainment segment. Loss from discontinued operations in France, Romania and Hungary.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Revenue. Revenue increased from $92.4of $1.2 million in 20102012 consists of income tax expenses of $0.1 million and losses related to $100.3 million in 2011. Revenue in the United States was fairly consistent at $35.8 million in 2011 and $35.7 million in 2010. Revenue generated in the Netherlands was $47.5 million in 2011 compared to $42.2 million in 2010. Revenue generated in the Netherlands in 2011 based on the 2010 exchange rates would have totaled $45.3 million. Increase in revenue generated in the Netherlands was a resultdiscontinued operations of the provision of additional services to Schiphol Airport, our main customer in the Netherlands. Revenue outside the United States and the Netherlands increased from $14.4 million in 2010 to $17.0 million in 2011. The 2011 revenue generated outside the Unites States and the Netherlands based on the 2010 exchange rates would have totaled $16.2 million. The increase in revenue generated outside of the United States and the Netherlands relates primarily to the increase in revenue generated in the Far East.

Cost of Revenue. Cost of revenue increased from $78.7 million in 2010 or 85.2% of revenue to $87.0 million or 86.8% of revenue in 2011. The increase is attributable mostly to a larger-than-expected increase in payroll and related costs due to procurement of several new contracts. As a result, our gross profit decreased from $13.7 million in 2010 to $13.3 million in 2011 and gross margin decreased from 14.8% in 2010 compared to 13.2% in 2011.

Research and Development Expenses (“R&D”). R&D expenses increased from $1.7 million in 2010 to $2.8 million in 2011. The increase relates primarily to salary and related expenses resulting from the expansion of our R&D efforts.

Selling, General and Administrative Expenses (“SG&A”). SG&A expenses were $15.0 million in 2011 or 14.9% of revenue, compared to $13.5 million or 14.6% of revenue in 2010. SG&A expenses increased as a result of a charge for a management bonus of $0.7 million to the manager of one of our European subsidiaries and the expansion of our operations in Europe to new locations.

Settlement Loss, net. The settlement loss in 2010 represented the net effects of the Company’s settlements with the TSA and DOL, which resulted in the write-off of $3.0 million in receivables from the TSA and reduction of $1.5 million in liabilities to the DOL. There were no such settlements in 2011.

subsidiaries.

Other Expenses, net. We had net other expense of $0.7 million in 2011 compared to net other expense of $2.2 million in 2010. The decrease in other expenses resulted primarily from the recognition of $0.7 million of interest income related to uncertain income tax positions following a settlement with the IRS during the year ended December 31, 2011. In addition, we recognized a foreign currency transaction gain of $0.6 million in 2011 compared to a foreign currency transaction loss of $0.3 million in 2010. This other income was offset by an increase in interest expense. The increase in interest expense in 2011 compared to 2010 is due to: (a) an increase in the average balance outstanding on our convertible notes payable to a related party (interest expense of $1.1 million in 2011 compared to $0.8 million in 2010), (b) an increase in the average balance outstanding on our line of credit in the United States (interest expense of $1.0 million in 2011 compared to $0.7 million in 2010) and (c) amortization expense related to deferred financing costs of $0.2 million.

Equity Loss From Investment in Affiliate.In March 2010, we purchased 5,400,000 shares of common stock in Inksure Technologies, Inc. (“Inksure”) for $0.7 million pursuant to a private placement of Inksure’s securities. Despite the additional investment, our ownership interest decreased from 27.4% to 23.9% as a result of the participation of other investors in the private placement. Inksure develops, markets and sells customized authentication systems designed to enhance the security of documents and branded products. There were no such additional investments in 2011 and we did not recognize equity income (loss) from our investment in Inksure as a result of the suspension of the use of the equity method due to the presence of cumulative losses.

Income Tax Benefit (Expense). We had an income tax benefit of $0.3 million in 2011 compared to an income tax expense of $0.7 million in 2010. The income tax benefit resulted from the reversal of $0.6 million of income taxes payable from our settlement of certain income tax assessments in the United States with the IRS.

Income (Loss) from Discontinued Operations. Income from discontinued operations in 2011 consists of income of $5.8 million from our settlement of certain income tax assessments in the United States with the IRS, offset by a loss $3.0 million related to the discontinued operations in France, Romania and Hungary. Loss from discontinued operations in 2010 of $1.5 million consists of losses generated by our subsidiaries in France, Romania and Hungary, where we have discontinued provision of services.

The following table sets forth, for the annual periods indicated, certain financial data related to the Company’s reportable segments.

Corporate Segment

OurThe Company’s loss from continuing operations increasedin the corporate segment decreased from $0.5$3.9 million in 20112013 to $3.3$0.1 million in 2012.2014. The increasedecrease is primarily due to the following: (a) interest expense to related party increased from $1.1 million in 2011 to $1.6 million in 2012 as a result of an increase in borrowings, which increased from $20.8 million in 2011 to $28.1 million in 2012, (b) interest expense related to uncertain tax positions totaled $0.1 million in 2012 compared to income of $0.7 million in 2011, which resulted from our settlement with the IRS in 2011, (c) foreign currency lossgain in 20122014 totaled $0.3$3.7 million compared to foreign currency gainloss of $0.6$1.0 million in 2011. In addition, included in the loss from continuing operations in 2011 was2013 and (b) income of $2.0$0 in 2014 compared to $0.7 million related to the settlement of uncertain income tax positions with the IRS.

Our loss from continuing operations decreasedincreased from $3.7$3.3 million in 20102012 to $0.5$3.9 million in 2011.2013. The decreaseincrease is primarily due to the following: (a) interest expense to related party increased from $1.6 million in 2012 to $2.2 million in 2013 as a result of an increase in borrowings, which increased from $28.1 million in 2012 to $36.6 million in 2013, (b) foreign currency loss in 2013 totaled $0.9 million compared to foreign currency loss of $0.3 million in 2012. In addition, included in the loss from continuing operations is primarily due to the recognition ofin 2013 was income of $2.0$0.7 million related to the settlement of uncertain income tax positions with the IRS, offset by the increase in interest expense relatedcompared to the convertible notes to related party, which increased to $1.1income of $1.0 million in 2011 compared to $0.8 million in 2010. In addition, we recognized a foreign currency transaction gain of $0.6 million in 2011 compared to a foreign currency transaction loss of $0.3 million in 2010. Moreover, loss from continuing operations in 2010 was affected by a one-time equity loss of $0.7 incurred in connection with an additional investment in Inksure.

2012.

Airport Security and Other Aviation Services Segment

Increase in revenue from $124.1 million in 2012 of $2.72013 to $172.1 million compared to 2011in 2014 relates primarily to: (a) an increase in the provision of services in the United States, which increased from $35.8 million in 2011 to 36.9 million in 2012. (b) an increase of revenues in the Netherlands from $47.5$56.6 million in 20112013 to $48.3$69.7 million in 2012.2014. Revenue generated in the Netherlands increased primarily due to increases in services provided to customers (b) following an acquisition of a German company in the aviation security field, revenues in Germany were $49.8 million in 2014 compared to $13.0 in 2013 (since date of acquisition until December 31, 2013). In 2014, the Company’s income from continuing operations related to aviation services was materially$5.1 million compared to $2.4 million in 2013. The 2013 figures include a one-time income of $1.3 million related to forgiveness of debt as a result of the Company reversing certain accounts payable. The effect of the exchange rates on 2014 revenue compared to 2013 was not significant.

Increase in revenue from $95.9 million in 2012 to $124.1 million in 2013 relates primarily to: (a) an increase in services provided in the United States, which increased from $36.9 million in 2012 to $41.6 million in 2013. (b) Increase of revenues in the Netherlands from $48.3 million in 2012 to $56.6 million in 2013. Revenue generated in the Netherlands was affected by exchange rate fluctuations as the average rate of the Euro-Dollar decreasedincreased by 7.6%3.0% in 2013 compared to 2012. (c) Following an acquisition of a German company in the aviation security field, revenues in Germany were $13.0 million in 2013 (since date of acquisition until December 31, 2013) compared to $0 in 2012 compared to 2011. (c)(d) an increase of revenue from Aviation Services provided in other locations increased from $16.5$11.2 million in 2012 to $17.3 million.$13.3 million in 2013. In 20112013, the Company’s income from continuing operations related to aviation services was $2.4 million compared to a loss from Aviation Services increased from $0.4 million in 2011 to $1.4of $1.3 million in 2012. The increase is primarily attributable to (a) larger payroll and related costs at our European subsidiaries and increaseIn addition, the 2013 figures include a one-time income of costs$1.3 million related to forgiveness of debt as a result of the establishment of new subsidiaries and expansion of current operations.

Increase in revenue in 2011 of $8.1 million compared to 2010 relates primarily to (a) an increase in the provision of services in the Netherlands (b) new contracts in new locations such as Portugal and Denmark and (c) exchange rates effect of $1.6 million. Loss from Aviation Services in 2011 was $0.4 million compared to profit of $1.4 million in 2010. Change in results is primarily attributable to:(a) larger payroll and related costs at our European subsidiaries (b) decrease of profitability following pricing discounts provided to a number of our customers and (c) an increase in foreign currency transaction losses.Company reversing certain accounts payable.

Technology Segment

Revenue in 2014 was $0.8 million compared to $0.4 million in 2013. The loss from continuing operations was fairly consistent and amounted to $3.5 million in 2014 compared to $3.7 million in 2013.

Revenue in 2013 and 2012 was $0.4 million. The loss from continuing operations was fairly consistent and amounted to $3.7 million in 2013 compared to $0.5$3.3 million in 2011. The decrease in our loss of $0.7 million is mainly due to the reduction in the number of employees within the Technology segment compared to 2011.

Decrease in revenue in 2011 of $0.1 million compared to 2010 relates primarily to expiration of a contract with one of our customers. The decrease in our loss in 2011 compared to 2010 is primarily attributable to the decrease in the selling, general and administrative expenses as a result of reductions in travel and entertainment expenses.2012.

Liquidity and Capital Resources

OurThe Company’s most significant expenditures consist of payroll, and related costs and professional fees. We haveThe Company has historically financed such expenditures through cash flows from operations, funding received from a linelines of credit with a lenderlenders in the United States and Europe and borrowings from a convertible note arrangement with a related party.

As of December 31, 20122014 and 2011, we2013, the Company had cash on hand of $1.2$6.0 million and $2.7$3.1 million, respectively, (notnot including restricted cash of $5.4$4.8 million and $4.9$7.0 million as of December 31, 20122014 and 2011, respectively, which serve2013, respectively. As of December 31, 2014 and 2013 the restricted cash serves as collateral for our line of credit, letters of credit in the United States and restricted bank accounts in the Netherlands, which are restricted for payments to local tax authorities).

authorities. As of December 31, 2013 it also served as collateral for the Company’s line of credit in the United States.

We haveThe Company has a working capital deficitand shareholders’ deficits and a history of recurring losses from continuing operations and negative cash flows from operations. As of December 31, 20122014 and 2011, we2013, the Company had a working capital deficit of $10.3$2.5 million and $9.0$5.2 million, respectively and shareholders’ deficit of $39.1 million and $40.4 million, respectively. During the years ended December 31, 2014, 2013 and 2012, 2011 and 2010, wethe Company incurred lossesincome (loss) from continuing operations of $8.0$1.5 million, $4.9$(5.3) million and $6.6$(7.9) million, respectively, and negativeprovided (used) cash flows from operations of $8.1$2.6 million,, $6.4 $(8.0) million and $5.3$(7.9) million, respectively. In addition, we are also in default on our line of credit arrangement in the United States as a result of the violation of certain financial and non-financial covenants. Collectively, these factors raise substantial doubt about our ability to continue as a going concern.

The report of our independent registered public accounting firm on our 20122014 consolidated financial statements includes an explanatory paragraph stating that there is substantial doubt with respect to our ability to continue as a going concern.

Management believes that our operating cash flows and related party / third party financing activities will provide it with sufficient funds to meet its obligations and execute its business plan for the next twelve months. However, there are no assurances that management's plans to generate sufficient cash flows from operations and obtain additional financing from related parties or third parties will be successful. In December 2012, weMay 2014, the Company increased ourits borrowing capacity under the convertible notes payable to related party to $27.0$37.0 million. In addition, subsequent to December 31, 2014, the Company entered into a new line of credit arrangements in Europe to provide it with up to €5.5 million in borrowing capacity.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

Cash Flows from Operating Activities

Our cash flows from operating activities vary significantly from year to year, depending on our operating results and timing of cash receipts and disbursementdisbursements on accounts receivable, accounts payable, and accrued expenses and other current liabilities.

Net cash provided by operating activities in 2014 was $2.6 million. This provided cash resulted primarily from net income from continuing operations of $1.5 million and a non-cash charge of $0.8 million for depreciation and amortization. Net cash provided by continuing operating assets and liabilities of $0.4 million is primarily attributable to an increase in accounts receivable, net of $6.9 million, payments made to the U.S. Department of Labor of $0.3 million and decrease in other liabilities of $0.4 million. This was offset by an increase in accrued expenses and other current liabilities of $7.4 million and increase of accounts payable of $0.7 million. Net cash used in discontinued operations in 2014 was $0.1 million.

Net cash used in operating activities in 2013 was $8.0 million. This use of cash resulted primarily from a net loss from continuing operations of $5.3 million and non-cash gain related to forgiveness of debt of $1.3 million. This amount was partially offset by:(a) a non-cash charge of $0.8 million for depreciation and amortization, , and (b) amortization of deferred financing costs of $0.1 million. Net cash used by continuing operating assets and liabilities of $2.4 million is primarily attributable to an increase in accounts receivable, net of $3.5 million, decrease of accounts payable of $0.3 million, decrease in income taxes payable of $1.7 million following the 2013 debt settlement with the IRS and payments made to the U.S. Department of Labor of $0.3 million. This was offset by an increase in accrued

expenses and other current liabilities of $3.0 million and increase of $0.5 million in other liabilities. Net cash provided by discontinued operations in 2013 was $0.1 million.

Net cash used in operating activities in 2012 was $8.1$7.9 million. This use of cash resulted mainlyprimarily from a net loss from continuing operations of $8.0$7.8 million. This amount was partially offset by:(a) a noncash charge of $0.7 million for depreciation and amortization and (b) the amortization of deferred financing costs of $0.3 million. Net cash used by continuing operating assets and liabilities of $0.04$0.2 million is primarily attributable to a decreasean increase in accounts receivable, net of $1.2$1.0 million and payments made to the U.S. Department of Labor of $0.3 million. This was offset by an increase in accounts payable of $0.5$0.4 million and an increase in accrued expenses and other current liabilities of $1.2$1.1 million. Net cash used in discontinued operations in 2012 was $1.3 million.

Net cash used in operating activities in 2011 was $6.4 million. This use of cash resulted mainly from a net loss from continuing operations of $4.9 million and net cash used in continuing operating assets and liabilities of $0.1 million. This amount was partially offset by:(a) a noncash charge of $0.6 million for depreciation and amortization, (b) the amortization of deferred financing costs of $0.2 million and (c) bad debt expense of $0.2 million. Net cash used in continuing operating assets and liabilities of $0.1 million is primarily attributable to a decrease in income taxes payable of $1.8 million as part of our settlement agreement with the IRS, payment to the United States Department of Labor of $0.3 million and decrease of prepaid expenses and other current assets of 0.2 million. This was offset mainly by an increase in accounts payable of $1.0 million, and an increase in accrued expenses and other current liabilities of $1.0 million. Net cash used in discontinued operations in 2011 was $2.3 million.

Net cash used in operating activities in 2010 was $5.3 million. This use of cash resulted mainly from a net loss from continuing operations of $6.6 million and net cash provided by continuing operating assets and liabilities of $0.9 million. This amount was partially offset by: (a) a noncash loss of $1.5 million related to settlements with the DOL and TSA, (b) a noncash charge of $0.7 million for depreciation and amortization and (c) an equity loss from investment in affiliate of $0.7 million. Net cash provided by continuing operating assets and liabilities of $0.9 million is primarily attributable to an increase accrued expenses and other current liabilities of $2.4 million and prepaid expenses and other current assets of $0.3 million, offset by a decrease in accounts receivable of $1.1 million and decreases in other assets and income taxes payable of $0.2 million and $0.3 million, respectively. Net cash used in discontinued operations in 2011 was $2.5$1.4 million.

Cash Flows from Investing Activities

Net cash provided by investing activities for the year ended December 31, 2014 was $1.2 million and consisted primarily of a decrease in restricted cash of $1.9 million, offset by capital expenditures of $ 0.6 million.

Net cash used in investing activities for the year ended December 31, 2013 was $2.1 million and consisted primarily of an increase in restricted cash of $1.5 million and capital expenditures of $0.7 million.

Net cash used in investing activities for the year ended December 31, 2012 was $1.1 million and consisted primarily of capital expenditures of $0.6 million and a $0.5 million increase in restricted cash.

Net cash used in investing activities for the year ended December 31, 2011 was $0.7 million and consisted primarily of capital expenditures of $0.8 million, partially offset by $0.1 million decrease in restricted cash.

Net cash used in investing activities in 2010 was $0.8 million and consisted primarily of our investment in Inksure of $0.7 million and capital expenditures of $0.6 million, partially offset by proceeds from sale of property and equipment of $0.2 million and $0.3 million decrease in restricted cash.

Cash Flows from Financing Activities

Net cash provided by financing activities in 2014 was $3.5 million, which consisted primarily of an increase of $5.7 million of proceeds from our convertible note arrangement with a related party and a decrease in net borrowings on our lines of credit in Europe and the United States of $2.2 million.

Net cash provided by financing activities in 2013 was $11.3 million, which consisted primarily of an increase of $7.3 million of net proceeds from our convertible note arrangement with a related party and an increase in net borrowings on our lines of credit in Europe and the United States of $4.1 million.

Net cash provided by financing activities in 2012 was $7.4 million, which consisted primarily of $6.9 million of net proceeds from our convertible note arrangement with a related party and an increase in net borrowings on our line of credit in the United States of $0.5 million and $6.9 million of net proceeds from our convertible note arrangement with a related party.million.

Net cash provided by financing activities in 2011 was $7.8 million, which consisted primarily of an increase in net borrowings on our lines of credit in the United States of $1.5 million and $6.7 million of net proceeds from our convertible note arrangement with a related party. Those amounts were offset by the payment of $0.5 million of financing costs associated with obtaining our new line of credit arrangement in the United States.

Net cash provided by financing activities in 2010 was $5.9 million, which consisted primarily in increase in net borrowings on our line of credit with a commercial bank in the United States of $0.5 million and $5.4 million of net proceeds from our convertible note arrangement with a related party.

We expect to continue to draw down from our convertible note arrangement with a related party as necessary to meet our short-term cash needs. In addition, we entered into several lines of credit arrangements in Europe and expect to use the available funds pursuant to these arrangements.

Borrowings

United States

The Company had an arrangement withwas a commercial bank through May 2011, which provided it with upparty to $8.0 million in borrowings and letters of credit subject to a borrowing base limitation. The borrowing base limitation was equivalent to: (i) 85% of eligible accounts receivable, as defined, plus (ii) 95% of the Company's certificate of deposit, plus (iii) $0.8 million representing a standby letter of credit that was provided to the commercial bank by an entity related to the Company’s main shareholder, minus (iv) letter of credit obligations, minus (v) $0.5 million representing a discretionary reserve established by the commercial bank. Borrowings under the arrangement were secured by the Company's accounts receivable of one of the Company’s subsidiaries in the United States, a $3.5 million certificate of deposit and the $0.8 million letter of credit that was provided to the commercial bank by an entity related to the Company’s main shareholder.

In May 2011, the Company entered into a new credit facility with an independent lender, to replace its previous line of credit arrangement and repay all amounts owed to the commercial bank. The new credit facilitywhich provides the Companyit with up to $9.0$10.5 million in borrowings subject to a borrowing base limitation. The borrowing base limitation is equivalent to: (i) 80% of eligible accounts receivable, as defined, plus (ii) 70% of eligible unbilled receivables, as defined, plus (iii) 100% of the Company’s $3.5 million in cash collateral plus (iv) 95% of a $1.0 million standby letter of credit that was provided to the lender by an entity related to the Company’s main shareholder. Borrowings under the credit facility were secured by the Company’s accounts receivable, unbilled receivables, equipment, cash, a $3.5 million certificate of deposit, and the $1.0 million letter of credit that was provided to the lender by an entity related to the Company’s main shareholder.

Borrowings made under the credit facility bore interest, which is payable monthly, at LIBOR (subject to a floor of 1.75%) plus 4.5% per annum (6.25% as of December 31, 2014).

In June 2014, the Company amended the credit facility to decrease the maximum borrowing capacity to $6.5 million and amend existing financial and non-financial covenants, including the maintenance of a specified fixed charge coverage ratio. The borrowing base limitation was also amended and is equivalent to: (i) 85% of eligible accounts receivable, as defined, plus (ii) 75% of eligible unbilled receivables, as defined, plus (iii) 95% of the Company's $3.5 million in cash collateral plus (iv) 95% of a $0.8$1.0 million standby letter of credit that was provided to the lender by an entity related to the Company’s main shareholder. BorrowingsIn addition, as part of the amendment, the Company’s $3.5 million cash collateral was released and used to reduce outstanding borrowings under the new credit facility are secured by certain assets of one of the Company’s subsidiaries in the United States, including accounts receivable and unbilled receivables ($5.4 million as of December 31, 2012), equipment, cash and cash equivalents, a $3.5 million certificate of deposit, and the $0.8 million letter of credit that was provided to the lender by an entity related to the Company’s main shareholder.facility. The new credit facility expires on May 25, 2013.in June 2016.

Borrowings made under the commercial bank arrangement were designated as either prime rate or LIBOR loans at the option of the Company. Prime rate loans bear interest, which is payable monthly, at the bank's prime rate plus 1% per annum. LIBOR loans bear interest, which is payable monthly, at LIBOR plus 350 basis points, per annum.

Borrowings made under the newamended credit facility bear interest, which is payable monthly, at LIBOR (subject to a floor of 1.75%1.375%) plus 4.5% per annum (6.25% as of(5.875% at December 31, 2012)2014).

The Company'sCompany’s weighted average interest rate during the years ended December 31, 2014, 2013 and 2012 2011is 6.02%, 6.25% and 2010 is 6.25%, 6.35% and 6.08%, respectively.

The Company capitalized $0.7 million in costs associated with obtaining the new credit facility, including a success fee to the independent lender of $0.3 million. The success fee is payable in twenty-four monthly installments of approximately $0.01 million commencing in June 2011 through May 2013.

In July 2011, the Company amended the new credit facility to increase the maximum borrowing amount to $10.0 million and permit the Company to include 100% of its $3.5 million in cash collateral into the borrowing base limitation.

In October 2011, the Company amended the new credit facility to temporarily increase the maximum borrowing amount to $11.0 million for October 2011 and November 2011.

In December 2011, the Company amended the new credit facility to revise the borrowing base limitation to: (i) 80% of eligible accounts receivable, as defined, plus (ii) 70% of eligible unbilled receivables, as defined, plus (iii) 100% of the Company's $3.5 million in cash collateral plus (iv) 95% of a $0.8 million standby letter of credit that was provided to the lender by an entity related to the Company’s main shareholder.

In June 2012, the Company amended the credit facility to revise existing financial and non-financial covenants, including the maintenance of a specified fixed charge coverage ratio and minimum level of EBITDA.

The Company evaluated the terms of the amendmentsamendment and concluded that they do not constitute substantive modifications.

As of December 31, 20122014 and 2011,2013, the Company had approximately $8.6$5.3 million and $8.1$8.9 million, respectively, outstanding under line of credit arrangements. AtAs of December 31, 20122014 and 2011,2013, the Company has $0.2 millionhad $0, and $0.3 million, respectively, in unused borrowing capacity under the newline of credit facility.

As of December 31, 2012, the Company is in default of its new credit facility as a result of the violation of certain financial and non-financial covenants. While the independent lender is not waiving these violations and is reserving all rights and remedies available to it under the credit facility and law, it is presently not exercising these rights and remedies.

Europe

The Company was a party to a credit facility with a commercial bank to provide it with up to €0.5 million ($0.6 million as of December 31, 2014) in borrowings. Borrowings under the line of credit arrangement bore interest, which was payable monthly, at 6% per annum. The line of credit arrangement was secured by the accounts receivable and tangible fixed assets of one of the Company’s European subsidiaries. In June 2013, the interest rate on the credit arrangement was amended to LIBOR plus 3.75% (3.98% as of December 31, 2014) per annum, payable quarterly. In addition, the maximum borrowing capacity under the line of credit was increased to €0.8 million ($1.0 million as of December 31, 2014) during the months of April 2014

to September 2011,2014 and the expiration date was extended to December 31, 2014. As of December 31, 2014, the Company didn’t have any outstanding borrowings under the line of credit. The credit facility expired on December 31, 2014.

In June 2013, the Company entered into a new line of credit arrangement with the same commercial bank to provide it with up to €1.1 million ($1.3 million as of December 31, 2014) in borrowings. Borrowings under the line of credit bear interest, which is payable quarterly at LIBOR plus 3.75% (3.98% as of December 31, 2014) per annum. The borrowing capacity under the credit facility is reduced by €0.1 million every quarter, starting December 31, 2013. The line of credit must be repaid in full on a monthly basis before any additional borrowings can be made. The line of credit is secured by the accounts receivable and tangible fixed assets of one of the Company’s European subsidiaries. The line of credit expires on December 31, 2015. As of December 31, 2014, the Company had €0.6 million ($0.7 million as of December 31, 2014) in outstanding borrowings under the line of credit arrangement.

In January 2014, the Company entered into a new line of credit arrangement with the same commercial bank to provide it with up to €0.8 million ($1.0 as of December 31, 2014) in borrowings. Borrowings under the line of credit bear interest, which is payable quarterly at LIBOR plus 3.75% (3.98% as of December 31, 2014) per annum. The borrowing capacity under the credit facility is reduced by €0.1 million every quarter, starting July 1, 2014. The line of credit must be repaid in full on a monthly basis before any additional borrowings can be made. The line of credit is secured by the accounts receivable and tangible fixed assets of one of the Company’s European subsidiaries. The line of credit expires on September 30, 2016. As of December 31, 2014, the Company had €0.6 million ($0.8 million as of December 31, 2014) in outstanding borrowings under the line of credit arrangement.

In February 2014, the Company entered into a new line of credit arrangement with the same commercial bank to provide it with up to €0.6 million ($0.7 million as of December 31, 2014) in borrowings. Borrowings under the line of credit bear interest, which is payable quarterly at LIBOR plus 3.75% (3.98% as of December 31, 2014) per annum. The borrowing capacity under the credit facility is reduced by €0.2 million every quarter, starting June 30, 2014. The line of credit must be repaid in full on a monthly basis before any additional borrowings can be made. The line of credit is secured by the accounts receivable and tangible fixed assets of one of the Company’s European subsidiaries. The credit facility expired on December 31, 2014.

In March 2014, the Company entered into a new line of credit arrangement with the same commercial bank to provide it with up to €1.1 million ($1.3 million as of December 31, 2014) in borrowings. Borrowings under the line of credit bear interest, which is payable quarterly at LIBOR plus 3.75% (3.98% as of December 31, 2014) per annum. The borrowing capacity under the credit facility is reduced by €0.1 million every quarter, starting June 30, 2014. The line of credit must be repaid in full on a monthly basis before any additional borrowings can be made. The line of credit is secured by the accounts receivable and tangible fixed assets of one of the Company’s European subsidiaries. The line of credit expires on December 31, 2016. As of December 31, 2014, the Company had €0.8 million ($1.0 million as of December 31, 2014) in outstanding borrowings under the line of credit arrangement.

In April 2015, the Company entered into a new line of credit arrangement with one of its commercial banks in Europe to replace all the existing lines of credit mentioned above and to provide it with up to €5.5 million in borrowings for two years. Borrowings under the line of credit bear interest, which is payable quarterly at LIBOR plus 3.75% per annum. The line of credit is secured by the accounts receivable and tangible fixed assets of three of the Company’s European subsidiaries. The line of credit replace all other existing lines of credit with that commercial bank.

In August 2013, the Company entered into a line of credit arrangement with a commercial bank to provide it with up to€0.3 €0.5 million ($0.40.6 million as of December 31, 2012)2014) in borrowings and€0.06borrowings. Borrowings under this arrangement bore interest at 3.5% per annum, which was payable on August 1, 2014, the original maturity date of the arrangement. The line of credit is secured by a bank guarantee provided by an entity related to the Company’s main shareholder as well as a guarantee from another bank. In July 2014, the line of credit arrangement was extended until August 1, 2015. As of December 31, 2014 the Company had €0.5 million($0.08 ($0.6 million as of December 31, 2012)2014) in guarantees. In May 2012outstanding borrowings under the line of credit was increasedarrangement.

In November 2013, the Company entered into a line of credit arrangement with a commercial bank to provide it with up to €0.5€1.2 million ($0.71.5 million as of December 31, 2012).

2014) in borrowings. Borrowings under the line of credit arrangement bear interest, which is payable monthly,quarterly, at 6%1.2% per annum both for 2012 and 2011.annum. The line of credit arrangement is secured by the accounts receivable of one ofa guarantee provided by an entity related to the Company’s European subsidiariesmain shareholder. The borrowing capacity under the line of credit expired on May 26, 2014 and was extended until July 31, 2015. In June 2014, the borrowing capacity under the line of credit was increased up to €1.5 million ($4.01.8 million as of December 31, 2012) and expires on January 1, 2014.

2014). As of December 31, 20122014 the Company does not have anyhad €1.4 million ($1.7 million as of December 31, 2014) in outstanding borrowings under the line of credit arrangement. As of

The Company’s weighted average interest rate in Europe during the years ended December 31, 2014, 2013 and 2012 the Company has€0.5 million ($0.7 million as of December 31, 2012) in unused borrowing capacity under the line of credit arrangement.is 3.5%, 3.7% and 6.0% respectively.

The Company evaluated the terms of the amendments and has concluded that they do not constitute substantive modification.

Related party financing

In May 2010, the Company entered into a new arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $12.0 million in revolving loans through November 2012. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company's European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company's common stock at a price of $2.10 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

In June 2010, the holder of the convertible notes elected to convert $250,000 million in outstanding convertible notes into 119,048 shares of common stock.

In September 2010, the Company entered into a new arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $14.0 million in revolving loans through November 2012. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company's European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company's common stock at a price of $2.10 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

In November 2011, the Company entered into a new arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $19.0 million in revolving loans through November 2013. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company’s European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company’s common stock at a price of $2.10 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

In May 2012, the Company entered into a new arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $21.0 million in revolving loans through November 2013. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBORLIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company's European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company's common stock at a price of $2.10 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

In December 2012, the Company entered into a new arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $27.0 million in revolving loans through November 2015. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company's European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company's common stock at a price of $2.10 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

In November 2013, the Company entered into a new arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $32.0 million in revolving loans through November 2015. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company's European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company's common stock at a price of $1.5 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

In May 2014, the Company entered into a new oral arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $37.0 million in revolving loans through December 2016. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured by a 26% interest in one of the Company's European subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable under the arrangement into the Company's common stock at a price of $1.5 per share. The Company determined that the new arrangement did not represent a substantive modification and, therefore, it was not necessary to evaluate whether the conversion feature qualified as a free-standing derivative instrument or contained any intrinsic value which would be considered beneficial.

The Company’s weighted average interest during the years ended December 31, 2014, 2013 and 2012 2011is 6.06%, 6.18% and 2010 is 6.28%, 6.32% and 6.38%, respectively.

At December 31, 20122014 and 2011,2013, convertible notes payable to related party consist of $24.0$30.2 million and $18.0$29.9 million, respectively, in principal and $5.0$8.3 million and $3.0$6.7 million, respectively, in accrued interest. Interest expense related to these notes is $1.6$2.3 million, $1.1$2.2 million and $0.76$1.6 million for the years ended December 31, 2012, 20112014, 2013 and 2010,2012, respectively.

Research and Development Costs

Research and development costs are expensed as incurred and consist primarily of payroll and related costs. Research and development costs are $2.3$2.2 million, $2.8$2.2 million and $1.7$2.3 million during the years ended December 31, 2014, 2013 and 2012, 2011 and 2010, respectively.

Trend Information

Labor market conditions may require the Company to increase its prices. Cost of labor is the main variable in determining any cost increases.

The Company ismight be affected by the worldwide economic slowdown, which affectsmight affect the aviation industry. As the Company is a service provider to this industry, it affectssuch trends can affect the results of the Company.

Off-Balance Sheet Arrangements

The Company is a party to a consulting arrangement, with a former employee, a servicean agency agreement and various operating lease arrangements. In addition, the Company has no unconsolidated special purpose entities.

Future Contractual Obligations

The following table summarizes our future contractual obligations as of December 31, 2012:2014:

(1) Interest and fees are estimated based on future interest rates expected to be applicable.

The following table summarizes the Company’s other future commercial obligations as of December 31, 2012:2014:

Item 6. Directors, Senior Management and Employees

The following table lists the directors and executive officers of ICTS:

Menachem J. Atzmon is a CPA (Isr). SinceFrom 1996 until 2012 Mr. Atzmon has been the managing director of Albermale Investment Ltd., an investment company. Since January 1998 until 2012 he has served as the chairman of the management board of Seehafen Rostock, Umschlagsgesellschaft GmbH and its Holding Company. Mr. Atzmon acts as a member of the board of Capital Points, Ltd. a listed Company on the Tel Aviv Stock Exchange in Israel. He has been a member of the Supervisory Board of ICTS since 1999. Since July 2010 chairman of the Board of Arrow Ecology & Engineering Overseas (1999) Ltd, an advance recycling company. During 2014 Mr. Atzmon was appointed in addition to his role of Chairman of the Board to CEO of the Arrow Ecology & Engineering Overseas Ltd.

David W. Sass for the past 5052 years has been a practicing attorney in New York City and is currently a senior partner in the law firm of McLaughlin & Stern, LLP. He has been a director of ICTS since 2002. Mr. Sass is a director of Inksure Technologies, Inc., a company which develops, markets2002 and sells customized authentication systems designed to enhance the security of documents and branded products and to meet the growing demand for protection from counterfeiting and diversion. He is also a director of several privately held corporations. He is a director of the Temple University Law Foundation and an Honorary Trustee of Ithaca College.

Gail F. Lieberman age 69, is the founder and Managing Partner of RudderCapital, LLC, which provides financial and strategic advisory services for middle-market companies in the services & technology sectors. She has been a Chief Financial Officer for Thomson Corporation’s Financial & Professional Publishing division, Moody’s Investor Service, Inc. and Scali, McCabe, Sloves, Inc. (Ogilvy Group). Ms. Lieberman is a director of Dara Biosciences (NASDAQ: DARA) since April 2009 and is currently chair of the compensation committee as well as a member of the audit committee;and nominating and governance committees. She is also a director of the South Central Connecticut Regional Water Authority since January 2012. She has served on the board of FTEN, a private financial services technology company and for three public companies in the healthcare and aerospace sectors: I-Trax Inc. (Amex: DMX); TriPath Imaging Inc. (NASDAQ: TPTH); and Breeze-Eastern Corporation (Amex: BZC). Ms. Lieberman has also served as the Audit Committee Chair for I-Trax, Inc. and Breeze-Eastern Corporation. Ms. Lieberman holds a BA in Mathematics and Physics and an MBA in Finance from Temple University.

Elie Housman was a principal at Charterhouse Group International, a privately held merchant bank, from 1989 until June 2001. At Charterhouse, Mr. Housman was involved in the acquisition of a number of companies with total sales of several hundred million dollars. Mr. Housman was the Chairman of Novo Plc. in London, a leading company in the broadcast storage and services industry. He is a director of Top Image System, Ltd. At present, Mr. Housman is a director of a number of privately held companies in the United States. He became a member of the Supervisory Board of ICTS in 2002.

Gordon Hausmann is the senior partner of his own law firm, which he founded in London over 30 years ago. He specializes, amongst other things, in corporate and commercial law, including business finance and banking law.law, litigation and representation of several substantial family offices. He holds office as a Board Memberboard member of numerous companies, including listed companies in the UK subsidiaries of various quotedand abroad. These include an international airline, some Embassies, finance companies Company Secretary of Superstar Holidays Ltd., (a subsidiary of El Al Airlines Ltd.) Director of Dominion Trust Co. (UK) Ltd.,(including a company associated with a private Swiss banking group,group) and other well-known and governmental entities. He also holds office and advises a number of charities, including Governor of the Hebrew University.