| Significant Accounting Policies [Text Block] | 3. Principles of Consolidation The accompanying condensed consolidated financial statements are prepared in conformity with GAAP. All intercompany accounts and transactions have been eliminated. Revenue Recognition Nature of Our Products and Services We earn revenue by delivering the following software products and services:
·
Perpetual software licenses under which customers install our products in their information systems environment on computers they manage and either own or otherwise procure from a cloud services provider, including deploying our products at a cloud services provider in a bring-your-own-license environment.
·
Cloud-based, hosted SaaS solutions that we sell on an ongoing subscription basis resulting in our earning recurring, monthly subscription and usage fees to access the service.
·
Maintenance and support services (“M&S”) that generally consist of telephone support and access to unspecified future software upgrades.
·
Professional services for product integration and configuration that generally do not significantly modify our software products. We earn the majority of our revenue from the sale of perpetual software licenses and associated contracts for M&S. We recognize revenue when we have satisfied a performance obligation by transferring control over a product or delivering a service to a customer. We measure revenue based upon the consideration set forth in an arrangement or contract with a customer. The revenue recognition criteria we apply to each of our software products and services are as follows:
·
Perpetual software licenses – These licenses grant a right to use our functional intellectual property. We recognize revenue at the point in time when we electronically deliver to our customer the software license key that provides the ability to access and use our product. If our customer is a reseller who will further transfer the ability to access and use our product to a third party under a separate arrangement that the reseller has with that third party, we recognize revenue at the time we deliver the software license key to the reseller since our contract is with the reseller.
·
Cloud-based, hosted SaaS solutions – These solutions grant a right to access our functional intellectual property. We recognize revenue over time on a monthly basis as we deliver the services to which our customers subscribe. This revenue can include basic monthly fees to access the software and usage fees based upon the volume of certain resources the customer consumes (such as volumes of storage or bandwidth). We are generally paid for these services on a month-to-month basis, but if a customer pays us in advance for services we will deliver in the future, we record as deferred revenue the amount of such payment related to services we have not yet delivered.
·
M&S – We provide these services to purchasers of perpetual software licenses under agreements with terms generally ranging from one to three years. We require up-front payment of our M&S fee in an amount that covers the entire term of the agreement. We record as deferred revenue amounts paid that relate to future periods during which we will provide the M&S service. We reduce deferred revenue and recognize revenue ratably in future periods as we deliver the M&S service.
·
Professional services – We recognize revenue from these services when the services are completed. If we are paid in advance for these services, we record such payment as deferred revenue until we complete the services. The delivery of our software products and services generally does not involve any variable consideration, financing components or consideration payable to a customer such as rebates or other incentives that reduce amounts owed us by customers. Deferred Revenue Classification and Activity Deferred revenue related to services we will deliver within one year is presented as a current liability. Deferred revenue related to services that we will deliver more than one year into the future is presented as a non-current liability. The activity in our deferred revenue balances has been as follows ($in thousands):
Three Months Ended March 31,
2018
2017
Deferred revenue, beginning of period
$
17,050
$
17,445
Deferred revenue resulting from new contracts with customers
3,898
4,216
Deferred revenue at the beginning of the period that was amortized to revenue
(4,786
)
(4,919
)
Deferred revenue arising during the period that was amortized to revenue
(429
)
(420
)
Deferred revenue, end of period
$
15,733
$
16,322 Multi-Element Transactions At the time our customers purchase perpetual software licenses, they typically also purchase M&S although it is not mandatory that they do so to use the software. We do not sell separate M&S to subscribers to our SaaS solutions as M&S is provided as part of their SaaS subscription. Our customers may also purchase professional services at the time they purchase perpetual software licenses or a SaaS subscription. Each of the components of these multi-element transactions is a separately identifiable performance obligation. For multi-element transactions, we allocate the transaction price to each performance obligation on a relative stand-alone selling price basis. We determine that stand-alone selling price for each item at the inception of the transaction involving these multiple elements. We sell, as stand-alone transactions, renewals of pre-existing M&S contracts, professional services to customers seeking assistance with products they have previously purchased from us, or SaaS subscriptions to customers not requiring any of our other products or services. Accordingly, we are able to estimate the stand-alone selling price of these items based upon our observation of those transactions. Since most of our sales of perpetual software licenses are part of multi-element transactions that also involve M&S and/or professional services, and because the selling price of those licenses can vary significantly among customers, we use the residual approach under ASC 606 to estimate the selling price of perpetual software licenses in a multi-element transaction by reference to the total transaction price less the sum of the observable stand-alone selling prices of M&S and/or professional services. We allocate discounts proportionally to all of the components of a multi-element transaction. Sales Tax We collect sales tax on many of our transactions with customers as required under applicable law. We do not include sales tax collected in our revenue. We record it as a liability payable to taxing authorities. Allowance for Sales Returns We provide an allowance for sales returns. We estimate this allowance based upon our historical experience and the nature of recent transactions with customers. This amount is included in accrued liabilities in our condensed consolidated balance sheet. Contract Assets We generally bill our customers for professional services when we have fully delivered the services specified in the contract with the customer. We may incur costs in delivering the services prior to that time. Such costs are generally not material. Accordingly, we do not record a contract asset for professional service engagements in process but not yet billed. Incremental Costs of Obtaining a Contract to Deliver Goods and Services We incur incremental costs in the form of sales commissions paid to our sales personnel and royalties on certain of our products paid to third parties. These are costs that we would not incur if we did not obtain a contract to deliver our goods and services. We account for these costs as follows:
·
If these costs are associated with products and services for which we recognize revenue at a fixed point in time (primarily sales of perpetual software licenses and professional services), we expense these costs in full at the time we recognize that revenue.
·
If these costs are associated with services for which we recognize revenue over time (primarily sales of M&S and SaaS subscriptions) for which we believe it is likely that the contract for those services will be renewed for additional terms in the future, provided we deem these costs to be recoverable, we record these costs as a deferred expense asset and amortize that cost to expense as follows:
o
For the portion of the cost that we determine benefits us primarily only over the term of the specific underlying contract currently in force (such as the term of an M&S contract), we recognize expense ratably each month over that term.
o
For the portion of the cost that we determine benefits us over an overall customer relationship that is likely to span a period of time that is longer than an initial contract term (for example, an M&S contract renewed for multiple terms in the future), we recognize expense ratably monthly over the estimated life of the customer relationship. Our activity in deferred costs of obtaining a contract to deliver goods and services has been as follows ($in thousands):
Three Months Ended March 31,
2018
Deferred expense, beginning of period
$
1,239
Deferred expense resulting from new contracts with customers
149
Deferred expense amortized to expense
(204
)
Deferred expense, end of period
$
1,184 For the three months ended March 31, 2108, $616,000 is recorded in prepaid and current other assets and $568,000 is recorded in other assets in our condensed consolidated balance sheet. The following tables present our reported results under FASB Accounting Standards Codification Topic 606, or ASC 606 and a reconciliation to results using the historical accounting method:
Condensed Consolidated Balance Sheet
(in thousands)
As of March 31, 2018
(unaudited)
As Reported
Effect of ASC 606
ASC 605 Historical
Assets
Current assets:
Cash and cash equivalents
$
11,653
$
11,653
Certificates of deposit, short term
4,302
4,302
Accounts receivable, net
4,155
(100
)
4,055
Federal income tax receivable
795
12
807
Prepaid and other assets
1,394
(616
)
778
Total current assets
22,299
(704
)
21,595
Certificates of deposit, long term
11,558
11,558
Capitalized software development costs, net
3,654
3,654
Goodwill
12,712
12,712
Deferred tax asset, net
639
260
899
Property and equipment, net
448
448
Other assets
639
(568
)
71
Total assets
$
51,949
$
(1,012
)
$
50,937
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
2,102
2,102
Accrued expenses
1,834
(100
)
1,734
Deferred revenue
12,681
12,681
Total current liabilities
16,617
(100
)
16,517
Deferred revenue, non-current portion
3,052
3,052
Other long term liabilities
176
176
Stockholders' Equity:
Preferred stock
-
-
Common stock
22
22
Additional paid-in capital
24,464
24,464
Treasury stock
(1,452
)
(1,452
)
Retained earnings
9,070
(912
)
8,158
Total stockholders' equity
32,104
(912
)
31,192
Total liabilities and stockholders' equity
$
51,949
$
(1,012
)
$
50,937
Condensed Consolidated Statement of Operations and Comprehensive Income (Loss)
(in thousands, except per share amounts)
For the Three Months Ended March 31, 2018
(unaudited)
As Reported
Effect of ASC 606
ASC 605 Historical
Operating revenues:
Software licenses
$
2,160
$
2,160
Maintenance and support
5,100
5,100
Professional services
451
451
Total revenues
7,711
-
7,711
Costs of revenues
Software licenses
771
(25
)
746
Maintenance and support
522
522
Professional services
325
325
Total costs of revenues
1,618
(25
)
1,593
Gross Profit
6,093
25
6,118
Operating expenses
Sales and marketing
3,113
(31
)
3,082
General and administrative
3,501
3,501
Research and development
722
722
Total operating expenses
7,336
(31
)
7,305
Income (loss) from operations
(1,243
)
56
(1,187
)
Interest income (expense), net
76
76
Income (loss) before income taxes
(1,167
)
56
(1,111
)
Income tax expense (benefit)
(232
)
12
(220
)
Net income (loss)
$
(935
)
$
44
$
(891
)
Comprehensive income (loss)
$
(935
)
$
44
$
(891
)
Net income (loss) per common share - basic
$
(0.04
)
$
0.00
$
(0.04
)
Net income (loss) per common share - diluted
$
(0.04
)
$
0.00
$
(0.04
)
Condensed Consolidated Statements of Cash Flows
(in thousands)
For the Three Months Ended March 31 2018
(unaudited)
As Reported
Effect of ASC 606
ASC 605 Historical
Operating Activities:
Net loss
$
(935
)
44
$
(891
)
Items not involving cash at the time they are recorded in the statement of operations:
Provision for doubtful accounts receivable
(75
)
(75
)
Depreciation and amortization
594
594
Share-based compensation
671
671
Deferred taxes
(248
)
(248
)
Subtotal before changes in operating assets and liabilities
7
44
51
Changes in operating assets and liabilities:
Accounts receivable
1,845
(100
)
1,745
Prepaid expenses
(89
)
(56
)
(145
)
Deferred revenues
(1,317
)
(1,317
)
Accounts payable
202
202
Accrued expenses
163
100
263
Other assets
54
54
Accrued interest receivable
(66
)
(66
)
Other long-term liabilities
-
-
Income tax receivable and payable
27
12
39
Net cash provided by operating activities
826
-
826
Investing Activities:
Software development costs
(402
)
(402
)
Purchase of property and equipment
(27
)
(27
)
Net cash (used in) investing activities
(429
)
-
(429
)
Financing Activities:
Proceeds from exercise of stock options
-
-
Dividends paid
(327
)
(327
)
Net cash (used in) financing activities
(327
)
-
(327
)
Net increase in cash
70
70
Cash at beginning of period
11,583
-
11,583
Cash at end of period
$
11,653
$
-
$
11,653
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
$
-
$
-
Income taxes
$
18
$
18
Cash and cash equivalents Cash and cash equivalents includes all cash and highly liquid investments with original maturities of three months or less. Property and Equipment Property and equipment is comprised of furniture and fixtures, software, computer equipment and leasehold improvements which are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Furniture, fixtures and equipment have a useful life of five to seven years, computer equipment and software have a useful life of three years and leasehold improvements have a useful life that is the shorter of the term of the lease under which the improvements were made or the estimated useful life of the asset. Expenditures for maintenance and repairs are expensed as incurred. Goodwill Goodwill is not amortized. On at least an annual basis, we test goodwill for impairment at the reporting unit level using December 31 as the measurement date. We operate as a single reporting unit. When testing goodwill, we first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of our reporting unit is less than its carrying amount, including goodwill. In performing this qualitative assessment, we assess events and circumstances relevant to us including, but not limited to:
•
Macroeconomic conditions.
•
Industry and market considerations.
•
Cost factors and trends for labor and other expenses of operating our business.
•
Our overall financial performance and outlook for the future.
•
Trends in the quoted market value and trading of our common stock. In considering these and other factors, we consider the extent to which any adverse events and circumstances identified could affect the comparison of our reporting unit’s fair value with its carrying amount. We place more weight on events and circumstances that most affect our reporting unit’s fair value or the carrying amount of our net assets. We consider positive and mitigating events and circumstances that may affect our determination of whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. We evaluate, on the basis of the weight of the evidence, the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If, after assessing the totality of these qualitative events and circumstances, we determine it is not more likely than not that the fair value of our reporting unit is less than its carrying amount, we conclude there is no impairment of goodwill and perform no further testing, in accordance with GAAP. If we conclude otherwise, we proceed with performing the first step, and if necessary, the second step, of the two-step goodwill impairment test prescribed by GAAP. As of December 31, 2017, after assessing the totality of the relevant events and circumstances, we determined it not more likely than not that the fair value of our reporting unit was less than its carrying amount. Accordingly, we concluded there was no impairment of goodwill as of that date. There have been no material events or changes in circumstances since that time indicating that the carrying amount of goodwill may exceed its fair market value and that interim testing needed to be performed. Capitalized Software Development Costs When we complete research and development for a software product and have in place a program plan and a detailed program design or a working model of that software product, we capitalize production costs incurred for that software product from that point forward until it is ready for general release to the public. Thereafter, we amortize capitalized software production costs to expense using the straight-line method over the estimated useful life of that product, which is generally three years. We periodically assess the carrying value of capitalized software development costs and our method of amortizing them relative to our estimates of realizability through sales of products in the marketplace. Research and Development We expense research and development costs as incurred. Advertising Expense We expense advertising costs as incurred as a component of our sales and marketing expenses. Advertising expense was approximately $324,000 and $420,000 in the 2018 quarter and the 2017 quarter, respectively. Share-Based Compensation We measure the cost of share-based payment transactions at the grant date based on the calculated fair value of the award. We recognize this cost as an expense ratably over the recipient’s requisite service period during which that award vests or becomes unrestricted. For stock option awards, we estimate their fair value at the grant date using the Black-Scholes option-pricing model considering the following factors:
•
We estimate expected volatility based on historical volatility of our common stock.
•
We use primarily the simplified method to derive an expected term which represents an estimate of the time options are expected to remain outstanding. We use this method because our options are plain-vanilla options, and we believe our historical option exercise experience is not adequately indicative of our future expectations.
•
We base the risk-free rate for periods within the contractual life of the option on the U.S. treasury yield curve in effect at the time of grant.
•
We estimate a dividend yield based on our historical and expected future dividend payments. For restricted stock awards, we use the quoted price of our common stock on the grant date as the fair value of the award. Income Taxes We account for income taxes using the asset and liability method. We record deferred tax assets and liabilities based on the difference between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes, as measured by the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets and liabilities are carried on the balance sheet with the presumption that they will be realizable in future periods in which we generate taxable income. We assess the likelihood that deferred tax assets will be realized from future taxable income. Based on this assessment, we provide any necessary valuation allowance on our balance sheet with a corresponding increase in the tax provision on our statement of operations. Any valuation allowances we establish are determined based upon a number of assumptions, judgments, and estimates, including forecasted earnings, future taxable income, and the relative proportions of revenue and income before taxes in the various domestic jurisdictions in which we operate. We account for uncertainty in income taxes using a two-step process to determine the amount of tax benefit to be recognized. First, we evaluate the tax position to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, we assess the tax position to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit we recognize is the largest amount that we believe has a greater than 50 percent likelihood of being realized upon ultimate settlement. Unrecognized tax benefits represent tax positions for which reserves have been established. Earnings Per Share We compute basic earnings per share using the weighted-average number of common shares outstanding during the periods. We compute diluted earnings per share using the weighted-average number of common shares outstanding plus the number of common shares that would be issued assuming conversion of all potentially dilutive common shares outstanding. Awards of non-vested restricted stock and options are considered potentially dilutive common shares for the purpose of computing earnings per common share. We apply the treasury stock method to non-vested options under which the assumed proceeds include the amount the employee must pay to exercise the option plus the amount of unrecognized cost attributable to future periods less any expected tax benefits. Recent accounting pronouncements The Financial Accounting Standards Board, or FASB, has issued the Accounting Standard Updates (ASU) described below that we believe may be relevant to our business and to the preparation of our financial statements. ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (issued September 2017) ASU 2017-04, Intangibles – Goodwill and Other (issued January 2017) - ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments (issued June 2016) - ASU 2016-13, Financial Instruments – Credit Losses (issued June 2016) ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (issued March 2016) – This standard also permits an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures may be either estimated (as has been the requirement in the past) or recognized when they occur. We elected to continue estimating forfeitures consistent with our existing practices thereby resulting in no change to our application of GAAP for this aspect of computing share-based compensation. ASU 2016-02, Leases (issued February 2016) - ASU 2015-17, Income Tax: Balance Sheet Classification of Deferred Taxes (issued November 2015) ASU 2014-09, Revenue from Contracts with Customers (issued May 2014)
·
If these costs are associated with products and services for which we recognize revenue at a point in time (primarily sales of perpetual software licenses and professional services), we expense these costs in full at the time we recognize that revenue.
·
If these costs are associated with services for which we recognize revenue over time (primarily sales of M&S and SaaS subscriptions) for which we believe it is likely that the contract for those services will be renewed for additional terms in the future, provided we deem these costs to be recoverable, we record these costs as deferred expense asset and amortize that cost to expense as follows:
o
For the portion of the cost that we determine benefits us primarily only over the term of the specific underlying contract currently in force (such as the term of an M&S contract), we will recognize expense ratably each month over that term.
o
For the portion of the cost that we determine benefits us over an overall customer relationship that is likely to span a period of time that is longer than an initial contract term (for example, an M&S contract renewed for multiple terms in the future), we will recognize expense ratably monthly over the estimated life of the customer relationship. |
