Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 05, 2014 | |
Document And Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'FINJAN HOLDINGS, INC. | ' |
Entity Central Index Key | '0001366340 | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Sep-14 | ' |
Trading Symbol | 'FNJN | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 22,443,552 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2014 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $20,390 | $24,598 |
Accounts receivable, net | 2,134 | 50 |
Inventories | 138 | 34 |
Prepaid expenses and other current assets | 195 | 150 |
Total current assets | 22,857 | 24,832 |
Property and equipment, net | 806 | 953 |
Intangible assets, net | 1,132 | 1,333 |
Goodwill | 306 | 306 |
Investments | 1,000 | 500 |
Other non-current assets | 23 | 23 |
Total Assets | 26,124 | 27,947 |
Current Liabilities | ' | ' |
Accounts payable | 1,733 | 495 |
Accounts payable - related parties | 13 | 15 |
Accrued expenses | 908 | 336 |
Accrued income taxes | 4 | 4 |
Other current liabilities | 13 | 35 |
Total current liabilities | 2,671 | 885 |
Deferred tax liabilities | 33 | 39 |
Total Liabilities | 2,704 | 924 |
Stockholders' Equity | ' | ' |
Preferred stock - $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2014 and December 31, 2013 | 0 | 0 |
Common stock - $0.0001 par value; 80,000,000 shares authorized; 22,443,152 and 22,368,453 shares issued and outstanding at September 30, 2014 and December 31, 2013 | 2 | 2 |
Additional paid-in capital | 22,641 | 21,546 |
Retained earnings | 777 | 5,475 |
Total Stockholders' Equity | 23,420 | 27,023 |
Total Liabilities and Stockholders' Equity | $26,124 | $27,947 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 80,000,000 | 80,000,000 |
Common stock, shares issued | 22,443,152 | 22,368,453 |
Common stock, shares outstanding | 22,443,152 | 22,368,453 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Income Statement [Abstract] | ' | ' | ' | ' |
Revenues | $5,375 | $394 | $6,185 | $592 |
Cost of revenues | 1,037 | 324 | 1,503 | 472 |
Gross profit | 4,338 | 70 | 4,682 | 120 |
Operating Expenses: | ' | ' | ' | ' |
Selling, general and administrative | 3,794 | 1,449 | 10,481 | 3,788 |
Transaction costs | ' | ' | ' | 790 |
Total operating expenses | 3,794 | 1,449 | 10,481 | 4,578 |
Income (loss) from operations | 544 | -1,379 | -5,799 | -4,458 |
Other Income | ' | ' | ' | ' |
Gain on settlement, net of legal costs | ' | ' | 1,000 | 1,000 |
Interest income | 8 | 7 | 82 | 118 |
Other income (expense) | -1 | -4 | 16 | 13 |
Total Other Income | 7 | 3 | 1,098 | 1,131 |
Income (loss) before provision for income taxes | 551 | -1,376 | -4,701 | -3,327 |
Provision (benefit) for income taxes | -2 | ' | -3 | 7 |
Net Income (loss) | $553 | ($1,376) | ($4,698) | ($3,334) |
Net Income (Loss) Per Share: | ' | ' | ' | ' |
Basic and Diluted | $0.02 | ($0.06) | ($0.21) | ($0.16) |
Weighted Average Number of Common Shares Outstanding: | ' | ' | ' | ' |
Basic | 22,421,749 | 22,348,201 | 22,389,811 | 21,350,498 |
Diluted | 23,035,720 | 22,348,201 | 22,389,811 | 21,350,498 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash Flows From Operating Activities | ' | ' |
Net Loss | ($4,698) | ($3,334) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 368 | 149 |
Stock-based compensation | 971 | 529 |
Deferred tax liability | -6 | 0 |
Changes in operating assets and (liabilities): | ' | ' |
Accounts receivable | -2,084 | 95 |
Inventories | -104 | -1 |
Prepaid expenses and other current assets | -45 | -179 |
Other assets | 0 | -93 |
Accrued expenses | 572 | -309 |
Accounts payable | 1,238 | -2,338 |
Accounts payable - related parties | -2 | 0 |
Other current liabilities | -22 | 0 |
Accrued income taxes | 0 | -25,325 |
Total Adjustments | 886 | -27,472 |
Net Cash Used in Operating Activities | -3,812 | -30,806 |
Cash Flows From Investing Activities | ' | ' |
Investment in limited partnership venture capital fund | -500 | 0 |
Cash acquired through merger with Converted Organics | 0 | 63 |
Proceeds of notes receivable acquired through merger with Converted Organics | 0 | 517 |
Purchases of property and equipment | -20 | -20 |
Net Cash (Used in) Provided by Investing Activities | -520 | 560 |
Cash Flows From Financing Activities | ' | ' |
Proceeds from exercise of stock options | 124 | 0 |
Repayment of loan from former parent | 0 | -33,943 |
Repurchase of common stock | 0 | -204 |
Net Cash Provided by (Used in) Financing Activities | 124 | -34,147 |
Net Decrease in Cash and Cash Equivalents | -4,208 | -64,393 |
Cash and Cash Equivalents - Beginning | 24,598 | 91,545 |
Cash and Cash Equivalents - Ending | 20,390 | 27,152 |
Cash paid during the quarter for: | ' | ' |
Income Taxes | 3 | 25,325 |
Non-cash Investing and Financing activities: | ' | ' |
Dividend of investments to parent | $0 | $12,784 |
1_The_Company_and_Summary_of_S
1. The Company and Summary of Significant Accounting Policies | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
The Company and Summary of Significant Accounting Policies | ' | ||||||||||||||||
Finjan Holdings, Inc. (the “Company”, or “Finjan Holdings”), a Delaware corporation (formerly Converted Organics, Inc.), has two reportable business segments: a web and network security technology segment focused on licensing and enforcing its technology patent portfolio, operated by its wholly-owned subsidiary Finjan, Inc. (“Finjan”), and an organic fertilizer segment operated by another wholly-owned subsidiary, Converted Organics of California, LLC (“Converted Organics”). | |||||||||||||||||
On June 3, 2013, Converted Organics, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Finjan. Effective June 3, 2013 and pursuant to the Merger Agreement, a wholly owned subsidiary merged with and into Finjan and Finjan became a wholly-owned subsidiary of Converted Organics, Inc. (the “Merger”). The transaction was accounted for as a reverse acquisition under the acquisition method of accounting for business combinations, with Finjan being treated as the acquiring company in the Merger for accounting purposes. Accordingly, the assets and liabilities and the historical operations that are reflected in the Finjan Holdings condensed consolidated financial statements are those of Finjan and are recorded at the historical cost basis of Finjan. The results of operations of the acquired Converted Organics business have been included in the condensed consolidated statements of operations since the date of the Merger. | |||||||||||||||||
Unless otherwise indicated or the context otherwise requires, references to “Finjan Holdings,” or “the Company” refer to Finjan Holdings, Inc., and its consolidated subsidiaries. Disclosures relating to the pre-merger business of Finjan Holdings, Inc., unless noted as being the business of Converted Organics prior to the Merger, pertain to the business of Finjan prior to the Merger. | |||||||||||||||||
BASIS OF PRESENTATION | |||||||||||||||||
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”), for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) can be condensed or omitted. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended December 31, 2013 which were included in the annual report on Form 10-K filed by the Company on March 14, 2014. | |||||||||||||||||
In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and nine months ended September 30, 2014 are not necessarily indicative of the operating results for the year ending December 31, 2014, for any other interim period or for any future period. | |||||||||||||||||
REVENUE RECOGNITION | |||||||||||||||||
Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, all obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and collectability is reasonably assured. | |||||||||||||||||
Revenue from the Company’s web and network security technology business results from grants of licenses to its patented cybersecurity technology and settlements reached from legal enforcement of the Company’s patent rights. The Company does not grant, at this time, technology or software end-user licenses. Revenue is recognized when the arrangement with the licensee has been signed and the license has been delivered and made effective, provided license fees are fixed or determinable and collectability is reasonably assured. The fair value of licenses achieved is recognized as revenue. | |||||||||||||||||
The amount of consideration received upon any settlement or judgment is allocated to each element of the settlement based on the fair value of each element. Elements related to licensing agreements and royalty revenues, is recognized as revenue in the consolidated statement of operations. Elements that are not related to license agreements and royalty revenue in nature will be reflected as a separate line item within the Other Income section of the consolidated statements of operations. Elements provided in either settlement agreements or judgments include, the value of a license, legal release, and interest. When settlements or judgments are achieved at discounts to the fair value of a license, the Company allocates the full settlement or judgment, excluding specifically named elements as mentioned above, to the value of the license agreement or royalty revenue under the residual method relative to full license fair value prior to the discount. Legal release as part of a settlement agreement is recognized as a separate line item in the consolidated statements of operations when value can be allocated to the legal release. When the Company reaches a settlement with a defendant, no value is allocated to the legal release since the existence of a settlement removes legal standing to bring a claim of infringement, and without a legal claim, the legal release has no economic value. The element that is applicable to interest income will be recorded as a separate line item in Other Income. | |||||||||||||||||
The Company’s organic fertilizer operation generates revenues from two sources, namely, product sales and tip fees. Product sales revenue comes from the sale of fertilizer products and is recognized upon delivery. Tip fee revenue is derived from waste haulers who pay the Company “tip” fees for accepting food waste generated by food distributors, such as grocery stores, produce docks and fish markets, and food processors and hospitality venues, such as hotels, restaurants, convention centers and airports. Tip fee revenue is recognized straight-line over the period the fees are earned. | |||||||||||||||||
USE OF ESTIMATES | |||||||||||||||||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to stock-based compensation expense, impairment of intangible assets, the determination of the economic useful life of property and equipment and intangible assets, income taxes and valuation allowances against net deferred tax assets, and the application of the acquisition method of accounting for business combinations. Management bases its estimates on historical experience or on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates. | |||||||||||||||||
PRINCIPLES OF CONSOLIDATION | |||||||||||||||||
The accompanying condensed consolidated financial statements include the accounts of Finjan Holdings and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. | |||||||||||||||||
CONCENTRATIONS OF CREDIT RISK | |||||||||||||||||
The Company maintains its cash and cash equivalents in financial institutions located in the United States. At times, the Company’s cash and cash equivalent balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in such accounts. As of September 30, 2014 and December 31, 2013, substantially all of the Company’s cash and cash equivalents are uninsured. | |||||||||||||||||
Revenue generated by the Company's largest customers were as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Customer A | 93% | - | 81% | - | |||||||||||||
Customer B | - | 25% | - | 30% | |||||||||||||
Customer C | - | 16% | - | 10% | |||||||||||||
Customer D | - | 22% | - | 14% | |||||||||||||
The Company had a balance of $2 million in accounts receivable due from Customer A as of September 30, 2014. Accounts receivable from these customers as of December 31, 2013 was not material to the condensed consolidated balance sheet. | |||||||||||||||||
NET INCOME (LOSS) PER COMMON SHARE | |||||||||||||||||
Basic net income (loss) per common share is based upon the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding. Basic and diluted net income (loss) per common share were computed as follows: | |||||||||||||||||
Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net income (loss) | $ | 553 | $ | (1,376 | ) | $ | (4,698 | ) | $ | (3,334 | ) | ||||||
Denominator: | |||||||||||||||||
Weighted-average common shares, basic | 22,421,749 | 22,348,201 | 22,389,811 | 21,350,498 | |||||||||||||
Weighted-average common shares, diluted* | 23,035,720 | 22,348,201 | 22,389,811 | 21,350,498 | |||||||||||||
Net income per common share: | |||||||||||||||||
Basic: | $ | 0.02 | $ | (0.06 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||||
Diluted: | $ | 0.02 | $ | (0.06 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||||
* | The diluted earnings per common share included the effect of 613,972 stock options that are potentially dilutive to earnings per share for the three months ended September 30, 2014 because the exercise price of such options was less than the average market price during the period. There were no stock options that were potentially dilutive for the three months ended September 30, 2013, and the nine months ended September 30, 2014 and 2013 because the Company was in a net loss position. | ||||||||||||||||
Potentially dilutive common shares from employee equity plans and warrants are determined by applying the treasury stock method to the assumed exercise of warrants and share options and consist of the following: | |||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Stock options | 1,481,833 | 1,585,476 | |||||||||||||||
Restricted stock units | 244,504 | - | |||||||||||||||
Warrants* | - | - | |||||||||||||||
Total | 1,726,337 | 1,585,476 | |||||||||||||||
*As of September 30, 2014 and December 31, 2013, warrants were exercisable for less than one share of common stock, and therefore anti-dilutive, as a result of the 1-for-10 reverse stock split that the Company effected on November 8, 2011, the 1-for-500 reverse stock split that the Company effected on March 5, 2012, the 1-for-500 reverse stock split that the Company effected on June 3, 2013 and the 1-for-12 reverse stock split the Company effected on August 22, 2013. All outstanding warrants as of September 30, 2014 expired on October 14, 2014. | |||||||||||||||||
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED | |||||||||||||||||
On June 19, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that 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. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial position and results of operations. | |||||||||||||||||
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to when products and services are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2017. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting the new revenue standard on its condensed consolidated financial statements. | |||||||||||||||||
In April 2014, the FASB issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) — Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendment changes the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. | |||||||||||||||||
In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The amendments in this ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. The Company is currently evaluating the impact of adopting the new revenue standard on its condensed consolidated financial statements. The Company does not believe the adoption of this new standard will have a material effect on its consolidated financial statements. | |||||||||||||||||
Other recent accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption. |
2_ProForma_Financial_Informati
2. Pro-Forma Financial Information | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Text Block [Abstract] | ' | ||||
Pro-Forma Financial Information | ' | ||||
As described in Note 1, the Company completed the Merger on June 3, 2013. The following unaudited pro-forma information presents the combined results of operations for the nine months ended September 30, 2013 as if the Merger with Converted Organics, Inc. had been completed on January 1, 2013. The pro-forma financial information includes adjustments to reflect one-time charges and amortization of fair value adjustments in the appropriate pro-forma periods as though the companies were combined as of the beginning of 2013. These adjustments include: | |||||
· | An increase in depreciation and amortization expense of $224,000 for the nine months ended September 30, 2013. | ||||
· | The exclusion of transaction-related expenses of $790,000 for the nine months ended September 30, 2013. | ||||
· | The inclusion of stock-based compensation of $29,000 for the nine months ended September 30, 2013, primarily related to restricted stock issued to one of the directors upon closing of the Merger for services as a member of the Board of Directors of the Company. | ||||
The unaudited pro forma results do not reflect operating efficiencies or potential cost savings which may have been implemented after the Merger (in thousands, except per share data): | |||||
Nine Months Ended | |||||
September 30, | |||||
2013 | |||||
Revenue | $ | 2,459 | |||
Net loss | $ | (4,410 | ) | ||
Net loss per common share, basic and diluted | $ | (0.20 | ) | ||
3_Balance_Sheet_Components
3. Balance Sheet Components | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Text Block [Abstract] | ' | ||||||||
Balance Sheet Components | ' | ||||||||
INVENTORIES | |||||||||
The components of inventories were as follows: | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
(In thousands) | |||||||||
Raw materials | $ | 37 | $ | 13 | |||||
Finished goods | 101 | 21 | |||||||
Inventories | $ | 138 | $ | 34 | |||||
ACCRUED EXPENSES | |||||||||
The components of accrued expenses were as follows: | |||||||||
September 30, 2014 | December 31, 2013 | ||||||||
(In thousands) | |||||||||
Legal | $ | 518 | $ | 238 | |||||
Compensation | 203 | 78 | |||||||
Other accrued expenses | 187 | 20 | |||||||
$ | 908 | $ | 336 |
4_Commitments
4. Commitments | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Commitments | ' | ||||
Operating Leases | |||||
The Company leases a fertilizer production facility in California. Under the terms of the lease, the Company owes minimum annual rent of $125,202, payable in monthly installments, unless earlier terminated in accordance with the lease. The annual rental rate is subject to increase on each annual anniversary of the commencement of the immediately preceding rental year by 3% of the rent paid during the immediately preceding year. This lease expires in 2018. | |||||
On September 9, 2013, the Company entered into a lease for its new corporate headquarters for a period of five years beginning October 1, 2013. Under the terms of the lease, the Company owes an initial annual rent of $138,952, payable in monthly installments of $11,579, unless earlier terminated in accordance with the lease. The annual rental rate is subject to an increase on a cumulative basis after the first lease year at the rate of 2.5% per annum compounded annually. | |||||
On March 20, 2014, the Company received the consent of the master landlord for a sublease agreement dated March 10, 2014, pursuant to which the Company subleased office space in Menlo Park, California through November 30, 2017. From the commencement date, the Company owes an initial annual rent of $164,619, payable in equal monthly installments, unless earlier terminated by either party in accordance with the lease. The annual rental rate is subject to an approximately 3.0% increase at each anniversary of the commencement date during the term. | |||||
The following table sets forth the Company’s aggregate future minimum payments under its operating lease commitments as of September 30, 2014 (in thousands): | |||||
Year ending December 31, | |||||
2014 (remainder) | $ | 103 | |||
2015 | 445 | ||||
2016 | 457 | ||||
2017 | 448 | ||||
2018 | 127 | ||||
$ | 1,580 | ||||
The Company accounts for its leases under the straight-line method of accounting. Deferred rent payable was $44,724 as of September 30, 2014 and is included as part of accrued expenses on the condensed consolidated balance sheet. Deferred rent as of December 31, 2013 was not material. | |||||
Rent expense for the three and nine months ended September 30, 2014 was $110,733 and $295,859, respectively, and $43,299 and $76,091 in the comparable periods in 2013. | |||||
Capital Commitments | |||||
On November 21, 2013, the Company made a $5 million commitment to invest in an Israel-based limited partnership venture capital fund seeking to invest in early-stage cyber technology companies. If and when the Company funds the entire amount of the investment, it will be less than a 10% limited partnership interest in which the Company will not be able to exercise control over the fund. Accordingly, the Company has accounted for this investment under the cost method of accounting. As of September 30, 2014, the Company had a $4 million outstanding capital commitment to the venture capital fund, which can be called any time until 2018. |
5_License_Settlement_and_Relea
5. License, Settlement and Release Agreement | 9 Months Ended |
Sep. 30, 2014 | |
License Settlement And Release Agreement | ' |
License, Settlement and Release Agreement | ' |
On September 24, 2014, Finjan entered into a license agreement with a third-party against whom Finjan had filed a patent infringement lawsuit. Pursuant to this agreement, the licensee and Finjan also agreed to dismiss the infringement litigation, and each party gave the other a general release for all claims that it might have against the other, known or unknown, based on the actions of either party on or before the date of the settlement. | |
Under the license agreement, the licensee will pay Finjan a license fee of $8 million payable in four installments. The first installment of $3 million was paid upon execution of the agreement and filing of the dismissal with prejudice, the second installment of $2 million is payable on or before January 16, 2015, the third installment of $2 million is payable on or before January 15, 2016, and the fourth and final installment of $1 million is payable on or before January 13, 2017. The Company recognized approximately $5.0 million of the $8.0 million license as revenues, as such amount was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as described in Note 1. The remaining balance of $3 million under the terms of the agreement will be recognized when payment is due. Each party also agreed to bear its own legal fees and costs. The Company recognized $0.8 million of legal fees related to this settlement as cost of revenue. |
6_Stockholders_Equity
6. Stockholders' Equity | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Stockholders' Equity | ' | ||||||||||||||||
Stockholders' Equity | ' | ||||||||||||||||
Common Stock | |||||||||||||||||
On July 10, 2014 the Company’s Stockholders approved an amendment to the Company’s charter to decrease the number of authorized Shares of common stock from 1,000,000,000 to 80,000,000. | |||||||||||||||||
Stock-based Compensation | |||||||||||||||||
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model. For the three and nine months ended September 30, 2014, and 2013, the assumptions used in the Black-Scholes option-pricing model were as follows: | |||||||||||||||||
Non-Employee Grants | |||||||||||||||||
Employee Grants | Three and Nine Months | ||||||||||||||||
Three and Nine Months | Ended September 30, | ||||||||||||||||
Ended September 30, | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Weighted-average grant date fair value | $ | 1.46 | $ | 1.44 | $ | 1.44 | $ | 1.44 | |||||||||
Weighted-average Black-Scholes option pricing model assumptions: | |||||||||||||||||
Volatility | 49.2 | % | 50.6 | % | 58.1 | % | 50.6 | % | |||||||||
Expected term (in years) | 6 | 6 | 8.6 | 10 | |||||||||||||
Risk-free rate | 1 | % | 1 | % | 2.4 | % | 1.8 | % | |||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||
Forfeiture rate | 8 | % | 0 | % | 0 | % | 0 | % | |||||||||
The risk-free interest rate is the United States Treasury rate for the day of the grant having a term equal to the life of the equity instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate. Since the Company’s common stock was not publicly traded at the time of certain grants to employees in 2013, an average of the historic volatility of comparative companies was used. The dividend yield is 0% as the Company has not made any dividend payment and does not anticipate paying a dividend in the near future. An increase or decrease in the risk-free rate or volatility could increase or decrease the fair value of our equity instruments. | |||||||||||||||||
On July 10, 2014, the Company’s stockholders approved the Finjan Holdings, Inc. 2014 Incentive Compensation Plan (the "2014 Plan") at the annual meeting of stockholders, pursuant to which 2,196,836 shares of common stock are authorized for issuance. Upon shareholder approval of the 2014 Plan, the Company issued a total of 244,504 Restricted Stock Units ("RSUs") and options to purchase an aggregate of 25,000 shares of our common stock that had been previously approved by the Board and the Compensation Committee, subject to stockholder approval of the 2014 Plan, to certain non-executive employees and non-executive directors. For each grant of RSUs, one-third of the RSUs are scheduled to vest on the one-year anniversary of the grant date or employee start date, and an additional 8.33% of the RSUs are scheduled to vest every three calendar months thereafter. For each grant of options, one-fourth of the options are scheduled to vest on the one-year anniversary of the employee start date, and an additional 6.25% of the options are scheduled to vest every three calendar months thereafter. | |||||||||||||||||
Upon shareholder approval of the 2014 Plan, the 2013 Global Share Option Plan and Israeli Sub-Plan (the “2013 Plan”) was terminated, other than respect to options outstanding under such plan. 1,456,833 options remain outstanding as of September 30, 2014 under the 2013 Plan. | |||||||||||||||||
During the nine months ended September 30, 2014, 74,699 options were exercised for cash proceeds of approximately $124,000, and 93,944 options were forfeited. Approximately $0.4 million and $1.0 million of stock-based compensation expense was recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively. Approximately $0.1 million and $0.5 million of stock-based compensation expense was recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and nine months period ended September 30, 2013, respectively. | |||||||||||||||||
The aggregate intrinsic value of RSU and stock options outstanding and exerciseable as of September 30, 2014 and December 31, 2013 was $1.7 million and $2.7 million respectively. | |||||||||||||||||
As of September 30, 2014, total compensation cost not yet recognized related to unvested stock options under the 2013 Plan; and the 2014 Plan was $0.7 million and $1.5 million, respectively, which is expected to be recognized over a weighted-average period of 1.4 years and 2.4 years respectively. |
7_Related_Party_Transactions
7. Related Party Transactions | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
Related Party Transactions | ' |
In the course of business, the Company obtains legal services from a firm in which the Company’s executive chairman is a partner. The Company incurred approximately $38,000 and $119,000 in legal fees payable to the firm during the three and nine months ended September 30, 2014, respectively, and approximately $40,000 and $130,000 during the three and nine months ended September 30, 2013, respectively. As of September 30, 2014 and December 31, 2013, the Company has balances due to this firm amounting to $12,520 and $17,000, respectively. |
8_Segment_Reporting
8. Segment Reporting | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Segment Reporting | ' | ||||||||||||||||
The Company has two operating segments, namely, a web and network security technology segment and an organic fertilizer segment. The Company’s operating segments are each reportable segments because their activities are not economically similar. Presented below are the revenues and net loss for each segment for the three and nine months ended September 30, 2014 and 2013. | |||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(in thousands) | |||||||||||||||||
Revenue: | |||||||||||||||||
Web and network security technology | $ | 4,998 | $ | - | $ | 4,998 | $ | - | |||||||||
Organic fertilizer | 377 | 394 | 1,187 | 592 | |||||||||||||
Total Revenue | $ | 5,375 | $ | 394 | $ | 6,185 | $ | 592 | |||||||||
Net Income (Loss): | |||||||||||||||||
Web and network security technology | $ | 673 | $ | (1,243 | ) | $ | (4,441 | ) | $ | (3,236 | ) | ||||||
Organic fertilizer | (120 | ) | (133 | ) | (257 | ) | (98 | ) | |||||||||
Total Net Income (Loss): | $ | 553 | $ | (1,376 | ) | $ | (4,698 | ) | $ | (3,334 | ) | ||||||
Other Income: | |||||||||||||||||
Web and network security technology | $ | - | $ | (4 | ) | $ | 1,005 | $ | 1,013 | ||||||||
Organic fertilizer | (1 | ) | - | 11 | - | ||||||||||||
Total Other Income | $ | (1 | ) | $ | (4 | ) | $ | 1,016 | $ | 1,013 | |||||||
Interest Income: | |||||||||||||||||
Web and network security technology | $ | 8 | $ | 7 | $ | 82 | $ | 119 | |||||||||
Organic fertilizer | - | - | - | (1 | ) | ||||||||||||
Total Interest Income | $ | 8 | $ | 7 | $ | 82 | $ | 118 | |||||||||
Depreciation and Amortization: | |||||||||||||||||
Web and network security technology | $ | 4 | $ | - | $ | 11 | $ | - | |||||||||
Organic fertilizer | 111 | 71 | 357 | 149 | |||||||||||||
Total Depreciation and Amortization: | $ | 115 | $ | 71 | $ | 368 | $ | 149 | |||||||||
As of September 30, 2014, total assets held by the web and network security technology segment and organic fertilizer segment were $25.3 million and $0.8 million, respectively. |
9_Contingencies
9. Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Contingencies | ' |
Finjan filed a patent infringement lawsuit against FireEye, Inc. in the United States District Court for the Northern District of California on July 8, 2013, as amended on August 16, 2013. Finjan is asserting that FireEye, Inc. is infringing U.S. Patent Nos. 6,154,844, 6,804,780, 7,058,822, 7,647,633, 7,975,305, 8,079,086, and 8,225,408. | |
Finjan filed a patent infringement lawsuit against Blue Coat Systems, Inc., in the United States District Court for the Northern District of California on August 28, 2013. Finjan is asserting that Blue Coat Systems, Inc. is infringing U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, 7,058,822, 7,418,731, and 7,647,633. | |
Finjan filed a patent infringement lawsuit against Proofpoint, Inc. and Armorize Technologies, Inc. in the United States District Court for the Northern District of California on December 16, 2013. Finjan is asserting that Proofpoint, Inc. and Armorize Technologies, Inc. are infringing U.S. Patent Nos. 6,154,844, 7,058,822, 7,613,918, 7,647,633, 7,975,305, 8,079,086, 8,141,154, and 8,225,408. | |
Finjan filed a patent infringement lawsuit against Sophos Inc. in the United States District Court for the Northern District of California on March 14, 2014, as amended on April 8, 2014. Finjan is asserting that Sophos Inc. is infringing U.S. Patent Nos. 6,154,844, 6,804,780, 7,613,918, 7,613,926, 7,757,289, 8,141,154, 8,566,580, and 8,677,494. | |
Finjan filed a patent infringement lawsuit against Symantec Corp. in the United States District Court for the Northern District of California on June 30, 2014, as amended on September 11, 2014. Finjan is asserting that Symantec Corp. is infringing U.S. Patent Nos.6,154,844, 7,613,926, 7,756,996, 7,930,299, 8,015,182, 8,141,154, and 8,677,494. | |
Patent litigation is inherently subject to uncertainties. As such, there can be no assurance that the Company will be successful with its oral arguments in front of the court or in litigating and /or settling all these claims. | |
The Company is not currently aware of any threatened litigation, inbound cases filed against the Company, or counterclaims that could result in any material adverse impact to the condensed consolidated financial statements as of September 30, 2014. |
10_Subsequent_Events
10. Subsequent Events | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
Subsequent to September 30, 2014, following discussions among the Board of Directors and management regarding various alternatives with respect to our organic fertilizer business, management recommended to the Board of Directors that the Company sell the organic fertilizer business in order to better focus on the Company’s principal line of business, web and network security. On October 6, 2014, the Board of Directors adopted a resolution authorizing management to pursue the sale of Converted Organics. The Company is pursuing the sale of our fertilizer business and Converted Organics will be held for sale until a sale is finalized. | |
On October 27, 2014 the Board of Directors approved a grant of 130,000 RSUs to an employee of the Company valued at approximately $0.3 million in the aggregate on the grant date under the 2014 Incentive Compensation Plan. The RSU’s vest over a three year period, with one-third of the RSUs vesting on the one year anniversary of the grant date, and the remaining vesting at the rate of 8.33% every three calendar months thereafter. | |
On October 30, 2014, the Company entered into an Amended and Restated Employment Agreement (the "Agreement") with Shimon Steinmetz (the "Executive"), the Company's Chief Financial Officer and Treasurer. The Agreement provides that Mr. Steinmetz will continue as the Company's Chief Financial Officer and Treasurer through an initial term ending on November 30, 2014 (the "Initial Term"), subject to extension on a monthly or other basis as mutually agreed between the Company and the Executive, unless earlier terminated. The Agreement provides for a base salary of $200,000, an annual target bonus of $50,000 and eligibility for participation in the Company's equity incentive plans and benefits programs. The Company may terminate the Executive at any time, and if such termination is without cause or results from the failure by the Company and the Executive to renew the Executive's employment beyond the Initial Term, the Executive will be entitled to a two-month transition period ending on January 31, 2015. Following such transition period, the Executive will be entitled, in addition to any accrued obligations (including base salary and the 2014 annual target bonus), to a severance payment that includes, among other things, six months of base salary, 50% of the 2015 annual target bonus, accelerated vesting of up to 57,911 options to purchase shares of common stock, which options will remain exercisable until June 30, 2016, and payment of certain expenses. | |
Subsequent to September 30, 2014, the Company received approximately $700 in cash proceeds from the exercise of 400 options to purchase the Company’s stock. | |
On November 4, Finjan filed a patent infringement lawsuit against Palo Alto Networks, Inc. in the United States District Court for Northern District of California. Finjan is asserting that Palo Alto Networks, Inc. is infringing upon several of Finjan’s patents. | |
Management has evaluated subsequent events or transactions occuring through the date on which the financial statements were issued. |
1_The_Company_and_Summary_of_S1
1. The Company and Summary of Significant Accounting Policies (Policies) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Basis of Presentation | ' | ||||||||||||||||
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”), for interim reporting. As permitted under those rules, certain footnotes and other financial information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) can be condensed or omitted. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto of the Company for the year ended December 31, 2013 which were included in the annual report on Form 10-K filed by the Company on March 14, 2014. | |||||||||||||||||
In the opinion of management, these condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments, considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the three and nine months ended September 30, 2014 are not necessarily indicative of the operating results for the year ending December 31, 2014, for any other interim period or for any future period. | |||||||||||||||||
Revenue Recognition | ' | ||||||||||||||||
Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, all obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and collectability is reasonably assured. | |||||||||||||||||
Revenue from the Company’s web and network security technology business results from grants of licenses to its patented cybersecurity technology and settlements reached from legal enforcement of the Company’s patent rights. The Company does not grant, at this time, technology or software end-user licenses. Revenue is recognized when the arrangement with the licensee has been signed and the license has been delivered and made effective, provided license fees are fixed or determinable and collectability is reasonably assured. The fair value of licenses achieved is recognized as revenue. | |||||||||||||||||
The amount of consideration received upon any settlement or judgment is allocated to each element of the settlement based on the fair value of each element. Elements related to licensing agreements and royalty revenues, is recognized as revenue in the consolidated statement of operations. Elements that are not related to license agreements and royalty revenue in nature will be reflected as a separate line item within the Other Income section of the consolidated statements of operations. Elements provided in either settlement agreements or judgments include, the value of a license, legal release, and interest. When settlements or judgments are achieved at discounts to the fair value of a license, the Company allocates the full settlement or judgment, excluding specifically named elements as mentioned above, to the value of the license agreement or royalty revenue under the residual method relative to full license fair value prior to the discount. Legal release as part of a settlement agreement is recognized as a separate line item in the consolidated statements of operations when value can be allocated to the legal release. When the Company reaches a settlement with a defendant, no value is allocated to the legal release since the existence of a settlement removes legal standing to bring a claim of infringement, and without a legal claim, the legal release has no economic value. The element that is applicable to interest income will be recorded as a separate line item in Other Income. | |||||||||||||||||
The Company’s organic fertilizer operation generates revenues from two sources, namely, product sales and tip fees. Product sales revenue comes from the sale of fertilizer products and is recognized upon delivery. Tip fee revenue is derived from waste haulers who pay the Company “tip” fees for accepting food waste generated by food distributors, such as grocery stores, produce docks and fish markets, and food processors and hospitality venues, such as hotels, restaurants, convention centers and airports. Tip fee revenue is recognized straight-line over the period the fees are earned. | |||||||||||||||||
Use of Estimates | ' | ||||||||||||||||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to stock-based compensation expense, impairment of intangible assets, the determination of the economic useful life of property and equipment and intangible assets, income taxes and valuation allowances against net deferred tax assets, and the application of the acquisition method of accounting for business combinations. Management bases its estimates on historical experience or on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates. | |||||||||||||||||
Principles of Consolidation | ' | ||||||||||||||||
The accompanying condensed consolidated financial statements include the accounts of Finjan Holdings and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. | |||||||||||||||||
Concentrations Of Credit Risk | ' | ||||||||||||||||
The Company maintains its cash and cash equivalents in financial institutions located in the United States. At times, the Company’s cash and cash equivalent balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in such accounts. As of September 30, 2014 and December 31, 2013, substantially all of the Company’s cash and cash equivalents are uninsured. | |||||||||||||||||
Revenue generated by the Company's largest customers were as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Customer A | 93% | - | 81% | - | |||||||||||||
Customer B | - | 25% | - | 30% | |||||||||||||
Customer C | - | 16% | - | 10% | |||||||||||||
Customer D | - | 22% | - | 14% | |||||||||||||
The Company had a balance of $2 million in accounts receivable due from Customer A as of September 30, 2014. Accounts receivable from these customers as of December 31, 2013 was not material to the condensed consolidated balance sheet. | |||||||||||||||||
Net Income (Loss) per Common Share | ' | ||||||||||||||||
Basic net income (loss) per common share is based upon the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding. Basic and diluted net income (loss) per common share were computed as follows: | |||||||||||||||||
Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net income (loss) | $ | 553 | $ | (1,376 | ) | $ | (4,698 | ) | $ | (3,334 | ) | ||||||
Denominator: | |||||||||||||||||
Weighted-average common shares, basic | 22,421,749 | 22,348,201 | 22,389,811 | 21,350,498 | |||||||||||||
Weighted-average common shares, diluted* | 23,035,720 | 22,348,201 | 22,389,811 | 21,350,498 | |||||||||||||
Net income per common share: | |||||||||||||||||
Basic: | $ | 0.02 | $ | (0.06 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||||
Diluted: | $ | 0.02 | $ | (0.06 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||||
* | The diluted earnings per common share included the effect of 613,972 stock options that are potentially dilutive to earnings per share for the three months ended September 30, 2014 because the exercise price of such options was less than the average market price during the period. There were no stock options that were potentially dilutive for the three months ended September 30, 2013, and the nine months ended September 30, 2014 and 2013 because the Company was in a net loss position. | ||||||||||||||||
Potentially dilutive common shares from employee equity plans and warrants are determined by applying the treasury stock method to the assumed exercise of warrants and share options and consist of the following: | |||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Stock options | 1,481,833 | 1,585,476 | |||||||||||||||
Restricted stock units | 244,504 | - | |||||||||||||||
Warrants* | - | - | |||||||||||||||
Total | 1,726,337 | 1,585,476 | |||||||||||||||
*As of September 30, 2014 and December 31, 2013, warrants were exercisable for less than one share of common stock, and therefore anti-dilutive, as a result of the 1-for-10 reverse stock split that the Company effected on November 8, 2011, the 1-for-500 reverse stock split that the Company effected on March 5, 2012, the 1-for-500 reverse stock split that the Company effected on June 3, 2013 and the 1-for-12 reverse stock split the Company effected on August 22, 2013. All outstanding warrants as of September 30, 2014 expired on October 14, 2014. | |||||||||||||||||
Recently Issued Accounting Pronouncements Not Yet Adopted | ' | ||||||||||||||||
On June 19, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that 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. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s condensed consolidated financial position and results of operations. | |||||||||||||||||
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to when products and services are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2017. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting the new revenue standard on its condensed consolidated financial statements. | |||||||||||||||||
In April 2014, the FASB issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) — Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendment changes the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. | |||||||||||||||||
In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The amendments in this ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. The Company is currently evaluating the impact of adopting the new revenue standard on its condensed consolidated financial statements. The Company does not believe the adoption of this new standard will have a material effect on its consolidated financial statements. | |||||||||||||||||
Other recent accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption. |
1_The_Company_and_Summary_of_S2
1. The Company and Summary of Significant Accounting Policies (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Schedule of major customer concentration | ' | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Customer A | 93% | - | 81% | - | |||||||||||||
Customer B | - | 25% | - | 30% | |||||||||||||
Customer C | - | 16% | - | 10% | |||||||||||||
Customer D | - | 22% | - | 14% | |||||||||||||
Basic and diluted net income (loss) computation | ' | ||||||||||||||||
Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands, except share and per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net income (loss) | $ | 553 | $ | (1,376 | ) | $ | (4,698 | ) | $ | (3,334 | ) | ||||||
Denominator: | |||||||||||||||||
Weighted-average common shares, basic | 22,421,749 | 22,348,201 | 22,389,811 | 21,350,498 | |||||||||||||
Weighted-average common shares, diluted* | 23,035,720 | 22,348,201 | 22,389,811 | 21,350,498 | |||||||||||||
Net income per common share: | |||||||||||||||||
Basic: | $ | 0.02 | $ | (0.06 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||||
Diluted: | $ | 0.02 | $ | (0.06 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||||
* | The diluted earnings per common share included the effect of 613,972 stock options that are potentially dilutive to earnings per share for the three months ended September 30, 2014 because the exercise price of such options was less than the average market price during the period. There were no stock options that were potentially dilutive for the three months ended September 30, 2013, and the nine months ended September 30, 2014 and 2013 because the Company was in a net loss position. | ||||||||||||||||
Summary of Components Excluded from Computation of Diluted Net Loss Per Share | ' | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Stock options | 1,481,833 | 1,585,476 | |||||||||||||||
Restricted stock units | 244,504 | - | |||||||||||||||
Warrants* | - | - | |||||||||||||||
Total | 1,726,337 | 1,585,476 |
2_ProForma_Financial_Informati1
2. Pro-Forma Financial Information (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Text Block [Abstract] | ' | ||||
Pro Forma Information from Operations | ' | ||||
Nine Months Ended | |||||
September 30, | |||||
2013 | |||||
Revenue | $ | 2,459 | |||
Net loss | $ | (4,410 | ) | ||
Net loss per common share, basic and diluted | $ | (0.20 | ) |
3_Balance_Sheet_Components_Tab
3. Balance Sheet Components (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Text Block [Abstract] | ' | ||||||||
Components of Inventories | ' | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
(In thousands) | |||||||||
Raw materials | $ | 37 | $ | 13 | |||||
Finished goods | 101 | 21 | |||||||
Inventories | $ | 138 | $ | 34 | |||||
Components of Accrued Expenses | ' | ||||||||
September 30, 2014 | December 31, 2013 | ||||||||
(In thousands) | |||||||||
Legal | $ | 518 | $ | 238 | |||||
Compensation | 203 | 78 | |||||||
Other accrued expenses | 187 | 20 | |||||||
$ | 908 | $ | 336 |
4_Commitments_Tables
4. Commitments (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Operating Leases | ' | ||||
Year ending December 31, | |||||
2014 (remainder) | $ | 103 | |||
2015 | 445 | ||||
2016 | 457 | ||||
2017 | 448 | ||||
2018 | 127 | ||||
$ | 1,580 |
6_Stockholders_Equity_Tables
6. Stockholders' Equity (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||
Weighted-average Black-Scholes Option Pricing Model Assumptions | ' | ||||||||||||||||
Non-Employee Grants | |||||||||||||||||
Employee Grants | Three and Nine Months | ||||||||||||||||
Three and Nine Months | Ended September 30, | ||||||||||||||||
Ended September 30, | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Weighted-average grant date fair value | $ | 1.46 | $ | 1.44 | $ | 1.44 | $ | 1.44 | |||||||||
Weighted-average Black-Scholes option pricing model assumptions: | |||||||||||||||||
Volatility | 49.2 | % | 50.6 | % | 58.1 | % | 50.6 | % | |||||||||
Expected term (in years) | 6 | 6 | 8.6 | 10 | |||||||||||||
Risk-free rate | 1 | % | 1 | % | 2.4 | % | 1.8 | % | |||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||
Forfeiture rate | 8 | % | 0 | % | 0 | % | 0 | % |
8_Segment_Reporting_Tables
8. Segment Reporting (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Schedule of Revenues and Net Loss for Each Segment | ' | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(in thousands) | |||||||||||||||||
Revenue: | |||||||||||||||||
Web and network security technology | $ | 4,998 | $ | - | $ | 4,998 | $ | - | |||||||||
Organic fertilizer | 377 | 394 | 1,187 | 592 | |||||||||||||
Total Revenue | $ | 5,375 | $ | 394 | $ | 6,185 | $ | 592 | |||||||||
Net Income (Loss): | |||||||||||||||||
Web and network security technology | $ | 673 | $ | (1,243 | ) | $ | (4,441 | ) | $ | (3,236 | ) | ||||||
Organic fertilizer | (120 | ) | (133 | ) | (257 | ) | (98 | ) | |||||||||
Total Net Income (Loss): | $ | 553 | $ | (1,376 | ) | $ | (4,698 | ) | $ | (3,334 | ) | ||||||
Other Income: | |||||||||||||||||
Web and network security technology | $ | - | $ | (4 | ) | $ | 1,005 | $ | 1,013 | ||||||||
Organic fertilizer | (1 | ) | - | 11 | - | ||||||||||||
Total Other Income | $ | (1 | ) | $ | (4 | ) | $ | 1,016 | $ | 1,013 | |||||||
Interest Income: | |||||||||||||||||
Web and network security technology | $ | 8 | $ | 7 | $ | 82 | $ | 119 | |||||||||
Organic fertilizer | - | - | - | (1 | ) | ||||||||||||
Total Interest Income | $ | 8 | $ | 7 | $ | 82 | $ | 118 | |||||||||
Depreciation and Amortization: | |||||||||||||||||
Web and network security technology | $ | 4 | $ | - | $ | 11 | $ | - | |||||||||
Organic fertilizer | 111 | 71 | 357 | 149 | |||||||||||||
Total Depreciation and Amortization: | $ | 115 | $ | 71 | $ | 368 | $ | 149 |
1_The_Company_and_Summary_of_S3
1. The Company and Summary of Significant Accounting Policies (Details) (Sales Revenue Net [Member]) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Customer One [Member] | ' | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' | ' |
Concentration risk percentage | 93.00% | 25.00% | 81.00% | 30.00% |
Customer Two [Member] | ' | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' | ' |
Concentration risk percentage | ' | 16.00% | ' | 10.00% |
Customer Three [Member] | ' | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' | ' |
Concentration risk percentage | ' | 22.00% | ' | 14.00% |
1_The_Company_and_Summary_of_S4
1. The Company and Summary of Significant Accounting Policies (Details 1) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Numerator: | ' | ' | ' | ' |
Net (loss) income | $553 | ($1,376) | ($4,698) | ($3,334) |
Denominator: | ' | ' | ' | ' |
Basic | 22,421,749 | 22,348,201 | 22,389,811 | 21,350,498 |
Diluted | 23,035,720 | 22,348,201 | 22,389,811 | 21,350,498 |
Net (loss) income per common share: | ' | ' | ' | ' |
Basic and Diluted | $0.02 | ($0.06) | ($0.21) | ($0.16) |
1_The_Company_and_Summary_of_S5
1. The Company and Summary of Significant Accounting Policies (Details 2) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Antidilutive securities | 1,726,337 | 1,585,476 |
Stock Option [Member] | ' | ' |
Antidilutive securities | 1,481,833 | 1,585,476 |
Restricted Stock Units | ' | ' |
Antidilutive securities | 244,504 | 0 |
Warrant [Member] | ' | ' |
Antidilutive securities | 0 | 0 |
1_The_Company_and_Summary_of_S6
1. The Company and Summary of Significant Accounting Policies (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Accounts receivable | $2,134 | $50 |
Customer One [Member] | ' | ' |
Accounts receivable | $2,000 | ' |
2_ProForma_Financial_Informati2
2. Pro-Forma Financial Information (Details) (USD $) | 9 Months Ended |
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
Revenue | $2,459 |
Net Loss | ($4,410) |
Net loss per common share, basic and diluted | ($0.20) |
2_ProForma_Financial_Informati3
2. Pro-Forma Financial Information (Details Narrative) (USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
Merger completion date | 3-Jun-13 |
Increase in depreciation and amortization expense | $224 |
3_Balance_Sheet_Components_Det
3. Balance Sheet Components (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Raw materials | $37 | $13 |
Finished goods | 101 | 21 |
Inventories | $138 | $34 |
3_Balance_Sheet_Components_Det1
3. Balance Sheet Components (Details 1) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Payables and Accruals [Abstract] | ' | ' |
Legal | $518 | $238 |
Compensation | 203 | 78 |
Other | 187 | 20 |
Other Accrued expenses | $908 | $336 |
4_Commitments_Details
4. Commitments (Details) (USD $) | Sep. 30, 2014 |
In Thousands, unless otherwise specified | |
Leases [Abstract] | ' |
2014 (remaining) | $103 |
2015 | 445 |
2016 | 457 |
2017 | 448 |
2018 | 127 |
Total | $1,580 |
4_Commitments_Details_Narrativ
4. Commitments (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Deferred rent payable | $44,724 | ' | $44,724 | ' |
Rent expense | 110,733 | 43,299 | 295,859 | 76,091 |
Venture Capital Funds [Member] | ' | ' | ' | ' |
Capital commitment outstanding | $4,000,000 | ' | $4,000,000 | ' |
6_Stockholders_Equity_Details
6. Stockholders' Equity (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Employee Grants [Member] | ' | ' |
Weighted-average grant date fair value | $1.46 | $1.44 |
Weighted-average Black-Scholes option pricing model assumptions: | ' | ' |
Volatility | 49.20% | 50.60% |
Expected term (in years) | '6 years | '6 years |
Risk-free rate | 1.00% | 1.00% |
Expected dividend yield | 0.00% | 0.00% |
Forfeiture rate | 8.00% | 0.00% |
Non Employee Grants [Member] | ' | ' |
Weighted-average grant date fair value | $1.44 | $1.44 |
Weighted-average Black-Scholes option pricing model assumptions: | ' | ' |
Volatility | 58.10% | 50.60% |
Expected term (in years) | '8 years 7 months 6 days | '10 years |
Risk-free rate | 2.40% | 1.80% |
Expected dividend yield | 0.00% | 0.00% |
Forfeiture rate | 0.00% | 0.00% |
6_Stockholders_Equity_Details_
6. Stockholders' Equity (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Number of remaining shares available for issuance | 1,456,833 | ' | 1,456,833 | ' |
Options exercised | ' | ' | 74,699 | ' |
Options cancelled | ' | ' | 93,944 | ' |
Compensation cost expected to be recognized over a weighted-average period | '1 year 4 months 24 days | '2 years 4 months 24 days | ' | ' |
Selling, general and administrative | ' | ' | ' | ' |
Stock-based compensation expense | $400 | $100 | $1,000 | $500 |
2013 Plan [Member] | ' | ' | ' | ' |
Compensation cost not yet recognized | 1,500 | ' | 1,500 | ' |
2014 Plan [Member] | ' | ' | ' | ' |
Compensation cost not yet recognized | ' | $700 | ' | $700 |
7_Related_Party_Transactions_D
7. Related Party Transactions (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' | ' | ' | ' | ' |
Legal fees | $38,000 | $40,000 | $119,000 | $130,000 | ' |
Amounts due to the firm | $12,520 | ' | $12,520 | ' | $17,000 |
8_Segment_Reporting_Details
8. Segment Reporting (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Revenue | $5,375 | $394 | $6,185 | $592 |
Net Income (Loss) | 553 | -1,376 | -4,698 | -3,334 |
Other Income | -1 | -4 | 1,016 | 1,013 |
Interest Income | 8 | 7 | 82 | 118 |
Depreciation and Amortization | 115 | 71 | 368 | 149 |
Web And Network Security Technology [Member] | ' | ' | ' | ' |
Revenue | 4,998 | 0 | 4,998 | 0 |
Net Income (Loss) | 673 | -1,243 | -4,441 | -3,236 |
Other Income | 0 | -4 | 1,005 | 1,013 |
Interest Income | 8 | 7 | 82 | 119 |
Depreciation and Amortization | 4 | 0 | 11 | 0 |
Organic Fertilizer [Member] | ' | ' | ' | ' |
Revenue | 377 | 394 | 1,187 | 592 |
Net Income (Loss) | -120 | -133 | -257 | -98 |
Other Income | -1 | 0 | 11 | 0 |
Interest Income | 0 | 0 | 0 | -1 |
Depreciation and Amortization | $111 | $71 | $357 | $149 |
8_Segment_Reporting_Details_Na
8. Segment Reporting (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets | $26,124 | $27,947 |
Web And Network Security Technology [Member] | ' | ' |
Assets | 25,300 | ' |
Organic Fertilizer [Member] | ' | ' |
Assets | $800 | ' |