Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 06, 2015 | Jun. 30, 2014 | |
Document And Entity Information [Abstract] | |||
Entity Registrant Name | FINJAN HOLDINGS, INC. | ||
Entity Central Index Key | 1366340 | ||
Document Type | 10-K | ||
Amendment Flag | FALSE | ||
Document Period End Date | 31-Dec-14 | ||
Trading Symbol | FNJN | ||
Current Fiscal Year End Date | -19 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 22,500,035 | ||
Entity Public Float | $51,545,041 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $17,505 | $24,580 |
Accounts receivable, net | 2,016 | 13 |
Prepaid expenses and other current assets | 112 | 99 |
Current assets related to discontinued operations | 0 | 140 |
Total current assets | 19,633 | 24,832 |
Property and equipment, net | 66 | 60 |
Investments | 1,000 | 500 |
Non-current assets related to discontinued operations | 0 | 2,555 |
Total Assets | 20,699 | 27,947 |
Current Liabilities | ||
Accounts payable | 1,675 | 416 |
Accounts payable - related parties | 100 | 15 |
Accrued expenses | 800 | 282 |
Accrued income taxes | 0 | 4 |
Current liabilities related to discontinued operations | 0 | 168 |
Total current liabilities | 2,575 | 885 |
Deferred tax liabilities related to discontined operations | 0 | 39 |
Total Liabilities | 2,575 | 924 |
Commitments and contingencies | ||
Stockholders' Equity | ||
Preferred stock - $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2014 and 2013 | 0 | 0 |
Common stock - $0.0001 par value; 80,000,000 shares authorized; 22,448,098 and 22,368,453 shares issued and outstanding at December 31, 2014 and 2013 | 2 | 2 |
Additional paid-in capital | 23,126 | 21,546 |
(Accumulated deficit) Retained earnings | -5,004 | 5,475 |
Total Stockholders' Equity | 18,124 | 27,023 |
Total Liabilities and Stockholders' Equity | $20,699 | $27,947 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 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 | 22,448,098 | 22,368,453 |
Common stock, shares outstanding | 22,448,098 | 22,368,453 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 12 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Statement [Abstract] | |||
Revenues | $4,998 | $0 | $0 |
Cost of revenues | 800 | 0 | 0 |
Gross profit | 4,198 | 0 | 0 |
Operating Expenses: | |||
Selling, general and administrative | 13,813 | 6,225 | 2,759 |
Transaction costs | 0 | 790 | 0 |
Total operating expenses | 13,813 | 7,015 | 2,759 |
Loss from operations | -9,615 | -7,015 | -2,759 |
Other Income | |||
Gain on settlements, net of legal costs | 1,000 | 1,000 | 77,353 |
Settlement proceeds for modification of licensing agreement | 0 | 0 | 3,116 |
Other income | 0 | 9 | 0 |
Interest income | 90 | 153 | 164 |
Total Other Income | 1,090 | 1,162 | 80,633 |
(Loss) income from continuing operations before provision for income taxes | -8,525 | -5,853 | 77,874 |
Income tax provision (benefit) | 5 | -260 | 26,889 |
(Loss) income from continuing operations | -8,530 | -5,593 | 50,985 |
Discontinued Operations: | |||
Loss from discontinued operations net of tax | -323 | -479 | 0 |
Loss on disposal of Converted Organics net of tax | -1,626 | 0 | 0 |
Loss from discontinued operations | -1,949 | -479 | 0 |
Net (Loss) Income | ($10,479) | ($6,072) | $50,985 |
Net (loss) income per share from continuing operations | ($0.38) | ($0.26) | $2.48 |
Net Loss per share from Discontinued Operations: | |||
Net (loss) income per share from discontinued operations | ($0.02) | ($0.02) | $0 |
Net (loss) per share from disposal of Converted Organics | ($0.07) | $0 | $0 |
Net (loss) income per share from discontinued operations- basic and diluted | ($0.09) | ($0.02) | $0 |
Net (Loss) Income Per Share: | |||
Basic and Diluted | ($0.47) | ($0.28) | $2.48 |
Weighted Average Number of Common Shares Outstanding: | |||
Basic and Diluted | 22,403,601 | 21,601,974 | 20,590,596 |
Consolidated_Statement_of_Stoc
Consolidated Statement of Stockholdersb Equity (USD $) | Common Stock | Additional Paid-In Capital | (Accumulated Deficit) Retained Earnings | Total |
In Thousands, except Share data | ||||
Balance, beginning amount at Dec. 31, 2011 | $2 | $16,257 | ($26,391) | ($10,132) |
Balance, beginning shares at Dec. 31, 2011 | 20,590,596 | |||
Tax provision (benefit) contributed by former parent | 1,564 | 1,564 | ||
Net income (loss) | 50,985 | -50,985 | ||
Balance, ending amount at Dec. 31, 2012 | 2 | 17,821 | 24,594 | 42,417 |
Balance, ending shares at Dec. 31, 2012 | 20,590,596 | |||
Repurchase and retirement of common stock, amount | -205 | -205 | ||
Repurchase and retirement of common stock, shares | -123,544 | |||
Outstanding common stock of Converted Organics at time of exchange, amount | 131 | 131 | ||
Outstanding common stock of Converted Organics at time of exchange, shares | 89,473 | |||
Common stock issued in exchange for convertible notes, preferred stock and warrants, amount | 2,610 | 2,610 | ||
Common stock issued in exchange for convertible notes, preferred stock and warrants, shares | 1,789,469 | |||
Amortization of stock option costs | 1,156 | 1,156 | ||
Restricted stock awards granted, amount | 33 | 33 | ||
Restricted stock awards granted, shares | 22,368 | |||
Dividend issued to former parent | -12,784 | -12,784 | ||
Tax provision (benefit) contributed by former parent | -263 | -263 | ||
Impact of share rounding as result of reverse stock split | 91 | |||
Net income (loss) | -6,072 | -6,072 | ||
Balance, ending amount at Dec. 31, 2013 | 2 | 21,546 | 5,475 | 27,023 |
Balance, ending shares at Dec. 31, 2013 | 22,368,453 | 22,368,453 | ||
Amortization of stock option costs | 1,448 | 1,448 | ||
Stock compensation plan, amount | 132 | 132 | ||
Stock compensation plan, shares | 79,645 | |||
Net income (loss) | -10,479 | -10,479 | ||
Balance, ending amount at Dec. 31, 2014 | $2 | $23,126 | ($5,004) | $18,124 |
Balance, ending shares at Dec. 31, 2014 | 22,448,098 | 22,448,098 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Cash Flows From Operating Activities | |||
Net (loss) income | ($10,479) | ($6,072) | $50,985 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||
Loss on sale of subsidiary | 1,626 | 0 | 0 |
Depreciation and amortization | 14 | 241 | 0 |
Stock-based compensation expense | 1,448 | 1,189 | 0 |
Shares received in settlement of litigation | 0 | 0 | -8,353 |
Shares received in exchange for modification of license agreement | 0 | 0 | -3,116 |
Tax provision contributed by Former Parent | 0 | -263 | 1,564 |
Deferred tax liability related to discontinued operations | -39 | -4 | 0 |
Changes in operating assets and (liabilities): | |||
Accounts receivable | -2,003 | 152 | 0 |
Prepaid expenses and other current assets | -13 | -82 | -3 |
Other non-current assets | 0 | -23 | 0 |
Accrued expenses | 518 | -346 | 68 |
Accounts payable | 1,259 | -2,331 | 1,740 |
Accounts payable - related parties | 85 | -2 | 2 |
Accrued income taxes | -4 | -25,321 | 24,633 |
Net assets related to discontinued operations | 227 | 76 | 0 |
Net Cash Provided By Operating Activities related to discontinued operations | 1,814 | 72 | 0 |
Net Cash Provided by (Used in) continuing activities | 1,304 | -26,786 | 16,535 |
Net Cash (Used in) Provided By Operating Activities | -7,361 | -32,786 | 67,520 |
Cash Flows From Investing Activities | |||
Purchases of shares in investee | -500 | -500 | -1,601 |
Proceeds from sale of shares in investee | 0 | 0 | 286 |
Cash acquired through merger with Converted Organics | 0 | 63 | 0 |
Proceeds of notes receivable acquired through merger with Converted Organics | 0 | 517 | 0 |
Purchases of property and equipment | -21 | -111 | 0 |
Proceeds from sale of Converted Organics | 675 | 0 | 0 |
Net Cash (Used in) Provided by Investing Activities | 154 | -31 | -1,315 |
Cash Flows From Financing Activities | |||
Repayment of loan from former parent | 0 | -33,943 | -2,470 |
Repurchase and retirement of common stock | 0 | -205 | 0 |
Proceeds from exercise of stock options | 132 | 0 | 0 |
Net Cash Provided by (Used in) Financing Activities | 132 | -34,148 | -2,470 |
Net (Decrease) Increase in Cash and Cash Equivalents | -7,075 | -66,965 | 63,735 |
Cash and Cash Equivalents - Beginning | 24,580 | 91,545 | 27,810 |
Cash and Cash Equivalents - Ending | 17,505 | 24,580 | 91,545 |
Cash paid during the year for: | |||
Income Taxes | 25,331 | ||
Non-cash Investing and Financing activities: | |||
Distribution of investments as dividend | 12,784 | ||
Leasehold improvements financed | 35 | ||
Total fair value of net assets acquired | $2,741 |
1_Organization_and_Operations
1. Organization and Operations | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Accounting Policies [Abstract] | ||||||||||||
Organization and Operations | ORGANIZATION | |||||||||||
Finjan Holdings, Inc. (the “Company” or “Finjan Holdings”), a Delaware corporation (formerly Converted Organics, Inc.), operates a web and cybersecurity technology business focused on licensing and enforcing its technology patent portfolio, through its wholly-owned subsidiary Finjan, Inc. (“Finjan”). Until December 4, 2014, the Company also operated an organic fertilizer business through its then wholly-owned subsidiary, Converted Organics of California, LLC (“Converted Organics”). The Company sold all its membership interest in Converted Organics on December 4, 2014 and no longer operates an organic fertilizer business. | ||||||||||||
Finjan was founded in 1997 as a wholly-owned subsidiary of Finjan Software Ltd. (“FSL”). FSL, together with its subsidiaries, sold enterprise web security solutions, including real-time and behavior-based malware prevention. In October 2003, FSL transferred all of its shares in Finjan to Finjan Software, Inc. (“FSI”). As a result of this transfer, Finjan became a wholly-owned subsidiary of FSI (the “Former Parent”). On December 8, 2010, Finjan, Inc. changed its name to FI Delaware, Inc. On October 22, 2012, FI Delaware, Inc. changed its name back to Finjan, Inc. | ||||||||||||
In October 2009, the Former Parent sold its portfolio of intellectual property to Finjan. In November 2009, the Former Parent sold certain assets, (including assets belonging to Finjan), and Finjan granted a patent license to M86 Security Inc. (“M86”) for 7,075,629 shares of M86 common stock, of which 1,548,148 were issued to Finjan and the balance of which were issued to the Former Parent. In connection with that transaction, and subsequent to November 2009, the Former Parent and its remaining subsidiaries ceased the development, marketing and sale of its products, but retained all patents and related rights. In March 2012, M86 entered into a business combination with Trustwave Holdings, Inc. (“Trustwave”) and Finjan exchanged its interest in M86 for shares of the common stock of Trustwave. In conjunction with that transaction, in March 2012, Finjan granted Trustwave a non-exclusive license to use certain of Finjan’s technology, which license is fully paid unless certain conditions are satisfied, in which case Finjan may be entitled to receive additional payments from Trustwave. In exchange for modifying the license received from M86, Finjan received 224,000 additional shares of Trustwave Class A common stock. | ||||||||||||
In February 2013, Finjan distributed its interests in securities issued by two unaffiliated entities which it previously held to the Former Parent, and made a payment of cash in an amount sufficient to repay and satisfy in full an intercompany loan from the Former Parent to Finjan. Following that distribution, the Board of Directors and stockholders of the Former Parent approved the dissolution of, and plan of liquidation for FSI that resulted in, among other things, the distribution of all outstanding Finjan common stock to certain of the Former Parent ’s stockholders, whereby Finjan ceased to be a subsidiary of the Former Parent. | ||||||||||||
REVERSE MERGER | ||||||||||||
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”). Concurrent with the Merger, Converted Organics, Inc.’s name was changed to Finjan Holdings, Inc. | ||||||||||||
At the effective time of the Merger, each issued and outstanding shares of common stock of Finjan immediately prior to the Merger was converted into 247,087.147 shares (the “Exchange Ratio”) of Finjan Holdings common stock. In addition, each option to purchase shares of Finjan common stock that was outstanding immediately prior to the Merger was converted into an option to purchase the number of shares of Finjan Holdings common stock determined by multiplying the number of shares of Finjan common stock subject to the Finjan option by the Exchange Ratio on the same terms and conditions as were applicable to such Finjan option. The exercise price per share of each Finjan Holdings option was determined by dividing the exercise price of each Finjan option by the Exchange Ratio. | ||||||||||||
On June 3, 2013, as a condition to the closing of the Merger, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with each of Hudson Bay Master Fund Ltd. (“Hudson Bay”) and Iroquois Master Fund Ltd. (“Iroquois”). Pursuant to the Exchange Agreement, immediately following the effectiveness of the Merger, Hudson Bay and Iroquois exchanged an aggregate of $1,192,500 principal amount of Converted Organics convertible notes, 13,281 shares of its 1% Series A Convertible Preferred Stock and warrants to purchase an aggregate of 105,554 shares of its common stock for an aggregate of 1,789,469 shares of Finjan Holdings common stock, or 8.0% of outstanding common stock immediately following the Merger on a fully-diluted basis. | ||||||||||||
Unless otherwise indicated or the context otherwise requires, references to “Finjan Holdings,” or “the Company” refer to Finjan Holdings, Inc.,and its consolidated subsidiaries. | ||||||||||||
Upon completion of the Merger, the former stockholders of Finjan held approximately 91.5% of the outstanding shares of capital stock of Finjan Holdings on a fully-diluted basis, after giving effect to the Merger, the Exchange Agreement and assuming the exercise or conversion of all outstanding class C, D and H warrants and options (but excluding shares underlying options to purchase Finjan common stock which were converted into options to purchase Company common stock pursuant to the Merger Agreement). Accordingly, the Merger represents a change in control of the Company. Upon completion of the Merger, the stockholders and former debt holders of the Company prior to the Merger owned approximately 8.5% of the outstanding shares of capital stock of Finjan Holdings on a fully-diluted basis, without giving effect to the Finjan stock options that were converted into Company options upon the closing of the Merger. | ||||||||||||
Under generally accepted accounting principles in the United States (“U.S. GAAP”), because Finjan’s former stockholders received the greater portion of the voting rights in the combined entity and Finjan’s senior management represents all of the senior management of the combined entity, the Merger was accounted for as a reverse acquisition under the acquisition method of accounting for business combinations, with Finjan treated as the acquiring company in the Merger for accounting purposes. Accordingly, the assets and liabilities and the historical operations that are reflected in Finjan Holdings 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 consolidated statement of operations since the date of Merger. For additional information regarding the Merger, see Note 4. | ||||||||||||
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. | ||||||||||||
At the effective time of the Merger, shares of Finjan stock were converted into a total of 20,467,052 shares of Finjan Holdings common stock. The stockholders of the Company prior to the effective time of the Merger continued to hold 89,473 shares of Company common stock. In addition, certain Company indebtedness was exchanged for an aggregate of 1,789,469 shares of Company common stock in connection with the Merger. Finally, an aggregate of 22,368 shares of Company common stock were issued to the former chief executive officer and former chief financial officer of Converted Organics, Inc. in connection with the termination of their severance agreements. During the year ended December, 2013, the Company incurred $790,000 in transaction costs related to the Merger, which primarily consisted of legal and accounting expenses. These expenses were recorded as transaction costs in the accompanying consolidated statements of operations. | ||||||||||||
Assets acquired and liabilities assumed in the Merger had the following estimated fair values (in thousands): | ||||||||||||
Cash and cash equivalents | $ | 63 | ||||||||||
Accounts receivable | 202 | |||||||||||
Inventory | 128 | |||||||||||
Note receivable | 517 | |||||||||||
Other current assets | 65 | |||||||||||
Property and equipment | 928 | |||||||||||
Intangible asset – customer relationships | 1,453 | |||||||||||
Goodwill | 306 | |||||||||||
Accounts payable and accrued liabilities | (878 | ) | ||||||||||
Deferred tax liability | (43 | ) | ||||||||||
Fair value of shares issued as acquisition consideration | $ | 2,741 | ||||||||||
The intangible asset related to customer relationships reflects the estimated net present value of the future cash flows associated with the stable and recurring customer base acquired in the Merger. The fair value was determined using an income approach, which recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs for each product line. Indications of value are developed by discounting these benefits to their present worth at a discount rate that reflects the current return requirements of the market. Acquired customer relationships are finite-lived intangible assets and are amortized over their estimated life of six years using the straight-line method, which approximates the customer attrition rate, reflecting the pattern of economic benefits associated with these assets. | ||||||||||||
The excess of purchase price over the fair value amounts assigned to the identifiable assets acquired and liabilities assumed represents goodwill from the acquisition. The Company believes the factors that contributed to goodwill include the acquisition of a talented workforce and administrative synergies. The Company does not expect any portion of this goodwill to be deductible for tax purposes. | ||||||||||||
REVERSE STOCK SPLITS | ||||||||||||
Effective on June 3, 2013, prior to the consummation of the Merger, the Company effected a 1-for-500 reverse stock split of its issued and outstanding shares of common stock. On July 5, 2013, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation that provides for a 1-for-12 reverse stock split that became effective August 22, 2013. | ||||||||||||
All references in these consolidated financial statements to the number of shares, options and other common stock equivalents, price per share and weighted average number of shares outstanding of common stock have been adjusted to retroactively reflect the effect of the 1-for-500 and the 1-for-12 reverse stock splits. | ||||||||||||
DISCONTINUED OPERATIONS | ||||||||||||
On December 4, 2014, the Company sold all its membership interest in Converted Organics, a wholly-owned subsidiary through which the Company operated its organic fertilizer business, to Converted Organics, LLC (the “CO Purchaser”). The sale was effected pursuant to a Membership Interest Purchase Agreement (the "Purchase Agreement"), dated December 4, 2014. | ||||||||||||
In accordance with the Purchase Agreement, at the closing, the CO Purchaser paid the Company $675,000 in cash. As a result of the sale of Converted Organics, the Company no longer operates an organic fertilizer business. The Company continues to operate its web and cybersecurity technology as its only line of business. | ||||||||||||
The acting manager of Converted Organics prior to the sale owns a minority interest in the CO Purchaser. Except for the Company's previous relationship with the acting manager, none of the Company, its officers, directors or affiliates has any relationship with the CO Purchaser, and the amount of consideration paid to the Company in connection with the transaction was determined by arms-length negotiations between the Company and the CO Purchaser, and not pursuant to any specific formula or principle. | ||||||||||||
The Company reclassified the operations applicable for Converted Organics to discontinued operations for all periods presented. The transaction resulted in a pre-tax and after tax loss of $1.6 million on the disposal of Converted Organics in the last quarter of 2014, which was included in loss from discontinued operations. | ||||||||||||
The Company's board of directors approved the sale of, and the Company sold, its subsidiary Converted Organics on December 4, 2014. Results from the sale have been reported as discontinued operations because the Company has taken a strategic shift to move forward without Converted Organics and the Company no longer has any continuing involvement with, or cash flows from, this segment. | ||||||||||||
Loss from the discontinued operations was as per the following table: | ||||||||||||
For the Years Ended | ||||||||||||
December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
(In thousands) | ||||||||||||
Revenue | $ | 1,300 | $ | 744 | $ | - | ||||||
Expenses | (1,623 | ) | (1,223 | ) | - | |||||||
Loss from discontiued operations | (323 | ) | (479 | ) | $ | - | ||||||
Loss on disposal | (1,626 | ) | - | - | ||||||||
Net Loss from discontinued operations | $ | (1,949 | ) | $ | (479 | ) | $ | - | ||||
The assets and liabilities related to discontinued operations for the year ended December 31, 2013 were as follows: | ||||||||||||
31-Dec-13 | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 18 | ||||||||||
Accounts receivable, net | 37 | |||||||||||
Inventories | 34 | |||||||||||
Prepaid expenses and other current assets | 51 | |||||||||||
Total current assets | 140 | |||||||||||
Non-Current Assets: | ||||||||||||
Property and equipment, net | $ | 893 | ||||||||||
Intangible assets, net | 1,333 | |||||||||||
Goodwill | 306 | |||||||||||
Other non-current assets | 23 | |||||||||||
Total Non-Current Assets | $ | 2,555 | ||||||||||
Current Liabilities: | ||||||||||||
Accounts payable | $ | 79 | ||||||||||
Accrued expenses | 54 | |||||||||||
Other current liabilities | 35 | |||||||||||
Total current liabilities | $ | 168 | ||||||||||
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Text Block [Abstract] | |||||||||
Summary of Significant Accounting Policies | BASIS OF PRESENTATION | ||||||||
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. | |||||||||
The results of the acquired Converted Organics business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the consolidated financial statements of the Company since the date of the Merger. | |||||||||
RECLASSIFICATIONS | |||||||||
Where applicable, certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2014 presentation. These reclassifications have no impact on the previously reported net (loss) income. | |||||||||
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 long-lived 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. | |||||||||
CASH AND CASH EQUIVALENTS | |||||||||
For purposes of the statement of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less when purchased to be cash equivalents. Included in cash and cash equivalents are demand deposits and money market accounts. | |||||||||
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 (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts. As of December 31, 2014 and 2013, substantially all of the Company’s cash and cash equivalents are uninsured. | |||||||||
As of December 31, 2014, a single licensee of Finjan accounted for principally all of the Company’s accounts receivable balance. Accounts receivable balance at December 31, 2013 was deminimis. | |||||||||
During 2014, principally all of the revenues generated by the Company were from a single license agreement. The Company did not have revenue for the year ended December 31, 2013. | |||||||||
ALLOWANCE FOR DOUBTFUL ACCOUNTS | |||||||||
The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company does not currently require any collateral for accounts receivable. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. Bad debt expense for the three years ended December 31, 2014, 2013 and 2012 was not material. The allowance for doubtful accounts as of December 31, 2014 and 2013 was also not material. | |||||||||
PROPERTY AND EQUIPMENT, NET | |||||||||
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the related assets, which range from 3 to 10 years. Leasehold improvements are amortized on the straight-line method over the shorter of the remaining lease term or the estimated useful economic lives of the related assets using the straight-line method. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income. | |||||||||
PATENTS | |||||||||
The Company owns or possesses licenses to use its patents. The Company’s patent costs were fully amortized prior to January 1, 2012. The costs of maintaining patents are expensed as incurred. Patents as of December 31, 2014 and 2013 are as follows: | |||||||||
As of December 31, | |||||||||
(In thousands) | |||||||||
2014 | 2013 | ||||||||
Patents | $ | 18,052 | $ | 18,052 | |||||
Less: accumulated amortization | (18,052 | ) | (18,052 | ) | |||||
Total | $ | — | $ | — | |||||
INVESTMENTS | |||||||||
Investments in common and preferred stock in which the Company has significant influence, but less than a controlling voting interest, are accounted for using the equity method and are classified as non-current assets. Significant influence is presumed to exist when the Company holds more than 20% of the investee’s voting instruments. Other investments that are not controlled, and over which the Company does not have the ability to exercise significant influence are accounted for under the cost method. All of the Company’s investments as of December 31, 2014 and 2013 are accounted for under the cost method. | |||||||||
IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER ACQUIRED INTANGIBLE ASSETS | |||||||||
Long-lived assets, such as property and equipment and intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long lived asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value. Fair value is estimated based on the best information available and by making necessary estimates, judgments and projections. For purposes of these tests, long-lived assets must be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As of December 31, 2014, the Company has not identified any such impairments. | |||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||||
The reported amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair value due to their short maturities. | |||||||||
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These fair value measurements apply to all financial instruments that are measured and reported on a fair value basis. | |||||||||
Where available, fair value is based on observable market prices or is derived from such prices. The Company uses the market approach valuation technique to value its investments. The market approach uses prices and other pertinent information generated from market transactions involving identical or comparable assets or liabilities. The types of factors that the Company may take into account in fair value pricing the investments include available current market data, including relevant and applicable market quotes. | |||||||||
Based on the observability of the inputs used in the valuation techniques, financial instruments are categorized according to the fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values. | |||||||||
Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: | |||||||||
Level 1 - Observable inputs such as quoted prices in active markets. | |||||||||
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. | |||||||||
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. | |||||||||
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 results from grants of licenses to its patented cyber-security 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. | |||||||||
STOCK-BASED COMPENSATION | |||||||||
The Company measures compensation cost for all employee stock-based awards at their fair values on the date of grant. Stock-based awards issued to non-employees are measured at their fair values on the date of grant, and are re-measured at each reporting period through their vesting dates. When a non-employee becomes an employee and continues to vest in the award, the fair value of the individual’s award is re-measured on the date that he becomes an employee, and then is not subsequently re-measured at future reporting dates. The fair value of stock based awards is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method for stock options and restricted stock. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock-based awards. | |||||||||
NET (LOSS) INCOME PER COMMON SHARE | |||||||||
Basic net (loss) income per common share is based upon the weighted-average number of common shares outstanding. Diluted net (loss) income per common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding. Basic and diluted net (loss) income per common share were computed as follows: | |||||||||
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 were excluded from the computation of diluted net loss per share because their inclusion would be anti-dilutive and consist of the following: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Stock Options | 1,430,559 | 1,625,476 | |||||||
Restricted Stock Units | 374,504 | - | |||||||
Warrants* | - | - | |||||||
Total | 1,805,063 | 1,625,476 | |||||||
* | As of December 31, 2014, all warrants have expired and none are outstanding or exercisable. Warrants were exercisable for less than one share of common stock at December 31, 2013 and were therefore anti-dilutive, as a result of the 1-for-10 reverse stock split that we effected on November 8, 2011, the 1-for-500 reverse stock split that we effected on March 5, 2012, the 1-for-500 reverse stock split that we effected on June 3, 2013 and the 1-for-12 reverse stock split we effected on August 22, 2013. The warrants were subject to further adjustments in the, which may have the effect of increasing or decreasing the exercise price and the number of shares issuable upon exercise of the warrants. | ||||||||
The company did not have potentially dilutive common shares from employee equity plans and warrants as of December 31, 2012. | |||||||||
INCOME TAXES | |||||||||
The Former Parent files its consolidated income tax returns in the U.S. federal jurisdiction and has filed consolidated income tax returns in the state of California through 2010. The Former Parent’s federal income tax returns for tax years after 2009 remain subject to examination by the federal tax authorities. The Former Parent did not file separate income returns for its wholly-owned subsidiary. The Former Parent’s state income tax returns for tax years after 2009 remain subject to examination by the state tax authorities. Since 2013, the Company files consolidated income tax returns in the U.S federal jurisdiction and has operations in New York and California. The federal and state income tax returns for the tax years 2013 and 2014 remain subject to examination for federal and state taxes. | |||||||||
The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or benefit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. | |||||||||
The benefit of tax positions taken or expected to be taken in income tax returns are recognized in the financial statements if such positions are more likely than not of being sustained. As of December 31, 2014 and 2013, no liability for unrecognized tax benefits was required to be reported. The Company does not expect its unrecognized tax benefit position to change during the next twelve months. | |||||||||
The Company’s policy is to classify assessments, if any, for tax-related interest as interest expense and penalties as general and administrative expenses. There were no amounts accrued for penalties or interest as of, or during the years ended December 31, 2014, 2013 and 2012. | |||||||||
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |||||||||
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. | |||||||||
On June 19, 2014, 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 expected not to have a material impact on the Company’s consolidated financial position and results of operations. | |||||||||
In May 2014, the Financial Accounting Standards Board issued ASU 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 2018. 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 consolidated financial statements. | |||||||||
In April 2014, the FASB issued ASU 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. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. This ASU is effective in the first quarter of 2015 however, the Company is currently early adopting the standard on its consolidated financial statements for the year ended December 31, 2014. | |||||||||
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 consolidated financial statements upon adoption. |
3_Property_and_Equipment
3. Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Text Block [Abstract] | |||||||||
Property and Equipment | The components of property and equipment at were as follows (in thousands): | ||||||||
For the Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
(In thousands) | |||||||||
Office equipment and furniture | 84 | 63 | |||||||
Less accumulated depreciation | (18 | ) | (3 | ) | |||||
Property and equipment | $ | 66 | $ | 60 | |||||
Depreciation expense for the years ended December 31, 2014 and 2013 was approximately $15,000 and $3,000 per year, respectively. The Company did not have fixed assets or depreciation expense for the year ended December 31, 2012. |
4_Investments
4. Investments | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Investments [Abstract] | |||||||||||||||||
Investments | 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. As of December 31, 2014, $4 million remains outstanding in this commitment. If and when the Company funds the entire amount of the investment, the investment 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. | ||||||||||||||||
There were no identified events or changes in circumstances that are believed to have had a significant adverse effect on the fair value of the investments as of December 31, 2014 and 2013. | |||||||||||||||||
The following is a summary of the Company’s investments: | |||||||||||||||||
Trustwave | Settlement | Venture Capital | Total | ||||||||||||||
Shares | Investment | Fund | Investments | ||||||||||||||
(in thousands) | |||||||||||||||||
Balance - January 31, 2013 | $ | 4,431 | $ | 8,353 | $ | — | $ | 12,784 | |||||||||
Dividend issued to Former Parent | (4,431 | ) | (8,353 | ) | — | (12,784 | ) | ||||||||||
Investment made during 2013 | — | — | 500 | 500 | |||||||||||||
Balance - December 31, 2013 | — | — | 500 | 500 | |||||||||||||
Investment made during 2014 | 500 | 500 | |||||||||||||||
Balance - December 31, 2014 | $ | — | $ | — | $ | 1,000 | $ | 1,000 |
5_Commitments_and_Contingencie
5. Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
Commitments | LEASES | ||||
On September 9, 2013, the Company entered into a lease for its former corporate headquarters in New York for a period of five years beginning October 1, 2013. Under the terms of the lease, the Company owes an initial annual rent of approximately $139,000, payable in monthly installments of approximately $12,000, unless earlier terminated in accordance with the lease. The annual rental rate, beginning after the first year, is subject to an increase, on a cumulative basis, at a rate of 2.5% per annum compounded annually. Rent is recorded on a straight-line basis. Deferred rent as of December 31, 2014 and 2013 was not material. | |||||
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 approximately $165,000, 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 December 31, 2014 (in thousands): | |||||
Years ending December 31, | |||||
2015 | $ | 630 | |||
2016 | 754 | ||||
2017 | 753 | ||||
2018 | 459 | ||||
Total | $ | 2,596 | |||
Rent expense for the year ended December 31, 2014 and 2013 was approximately $261,000 and $149,000, respectively. The Company did not have any rent expense for the years ended December 31, 2012 or 2011. As of December 31, 2014, and 2013 the Company had a $4.0 million and $4.5 million outstanding Capital Commitment to the venture capital fund respectively. | |||||
LITIGATION, CLAIMS AND ASSESSMENTS | |||||
On November 4, 2014, Finjan filed a patent infringement lawsuit against Palo Alto Networks, Inc., a Delaware corporation, alleging infringement of Finjan patents relating to endpoint, web, and network security technologies. Finjan is asserting infringement of U.S. Patent Nos. 6,804,780; 6,965,968; 7,058,822; 7,418,731; 7,613,918; 7,613,926; 7,647,633; 8,141,154; 8,225,408; and 8,677,494. | |||||
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, 7,757,289, 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 consolidated financial statements as of December 31, 2014. | |||||
6_License_Settlement_and_Relea
6. License, Settlement and Release Agreement | 12 Months Ended |
Dec. 31, 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 is obligated to 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 was received on 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 becomes collectible. 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. |
7_Stockholders_Equity
7. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2014 | |
Stockholders' Equity | |
Stockholders' Equity | AUTHORIZED CAPITALIZATION |
The Company’s capital structure is comprised of preferred stock and common stock. The Company’s authorized capitalization consists of (i) 80,000,000 shares of common stock, par value $0.0001 per share, and (ii) 10,000,000 shares of Preferred Stock, $0.0001 par value per share. | |
The Company’s certificate of incorporation authorizes the Board of Directors to establish one or more classes or series of preferred stock. Unless required by law or by any stock exchange on which our common stock is listed in the future, the authorized shares of preferred stock will be available for issuance at the discretion of our Board of Directors without further action by our stockholders. The Board of Directors is able to determine, with respect to any class or series of preferred stock, the terms and rights of that series. | |
COMMON STOCK | |
Holders of the Company’s common stock are entitled to one vote on each matter submitted to a vote at a meeting of stockholders. The Company’s common stock does not have cumulative voting rights, which means that the holders of a majority of voting shares voting for the election of directors can elect all of the members of the Board of Directors. The Company’s common stock has no preemptive rights and no redemption or conversion privileges. The holders of the outstanding shares of the Company’s common stock are entitled to receive dividends out of assets legally available at such times and in such amounts as the Board of Directors may, from time to time, determine, and upon liquidation and dissolution are entitled to receive all assets available for distribution to the stockholders. A majority vote of shares represented at a meeting at which a quorum is present is sufficient for all actions that require the vote of stockholders. | |
COMMON STOCK WARRANTS | |
The Company had certain Class C, D and H warrants outstanding to purchase an aggregate of approximately 1 share of common stock (post reverse splits) as of December 31, 2013. The warrants had an average exercise price of $2.7 million per share. The Class C and D warrants expired in May 2014 and the Class H warrants expired in October 2014. These warrants were classified as liabilities in the consolidated balance sheet as of December 31, 2013, due to anti-dilution adjustment provisions that could have resulted in the reduction of their exercise prices and an increase in the number of shares issuable upon exercise. The fair value of these warrants was nil and de minimis at December 31, 2013 and upon expiration. | |
CLASS C WARRANTS AND CLASS D WARRANTS | |
In connection with the Company’s financing completed in May 2009, the Company issued Class C warrants to purchase an aggregate of 885,000 shares of common stock and Class D warrants to purchase an aggregate of 415,000 shares of common stock. The Class C warrants and Class D warrants both expired in May 2014. The fair value of these warrants was nil and de minimis at December 31, 2014 and 2013 respectively. | |
CLASS H WARRANTS | |
In connection with the Company’s public offering completed in October 2009, the Company issued Class H warrants to purchase an aggregate of 17,250,000 shares of common stock at an initial exercise price of $1.30 per share, subject to adjustment. The Class H warrants expired on October 14, 2014. The fair value of these warrants was nil and de minimis at December 31, 2014 and 2013 respectively. | |
8_StockBased_Compensation
8. Stock-Based Compensation | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Stock-Based Compensation | |||||||||||||||||
Stock-Based Compensation | The Company’s stockholders approved the 2014 Plan at the annual meeting of stockholders held on July 10, 2014, 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 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. These equity grants include 24,390 RSUs to each of Messrs. Daniel, Kellogg and Southworth, who were newly appointed to the Board and Audit Committee in April, and Mr. Benhamou, who was newly appointed as Chair of the Audit Committee in April. The equity grants also include 146,944 RSUs and 25,000 options granted to non-executive employees. 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. | ||||||||||||||||
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 Plan. The RSUs 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. | |||||||||||||||||
Upon shareholder approval of the 2014 Plan, the 2013 Global Share Option Plan and Israeli Sub-Plan were terminated, other than respect to the 1,489,532 shares of common stock underlying options outstanding under such plan. | |||||||||||||||||
As of December 31, 2014, the remaining number of shares available for issuance under the 2014 Plan is 2,158,836. | |||||||||||||||||
Total stock-based compensation stock options and restricted stock awards, expense of $1.4 and $1.2 million was recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations for the year ended December 31, 2014 and 2013 respectively. The stock-based compensation expenses was for options and restricted stock awards granted to certain employees, consultants, and members of the Board of Directors. No stock-based compensation expense was recorded for the years ended December 31, 2012. | |||||||||||||||||
STOCK OPTIONS | |||||||||||||||||
The following is a summary of stock option activity during the years ended December 31, 2014 and 2013: | |||||||||||||||||
Average | Aggregate | ||||||||||||||||
Number of | Weighted | Remaining | Intrinsic | ||||||||||||||
Options | Average | Contractual | Value | ||||||||||||||
Outstanding | Exercise Price | Life (in years) | (thousands) | ||||||||||||||
Outstanding – December 31, 2013 | 1,625,476 | $ | 1.76 | ||||||||||||||
Options granted | 25,000 | 5.68 | |||||||||||||||
Options exercised | 79,645 | 1.66 | |||||||||||||||
Options forfeited | 140,272 | — | |||||||||||||||
Options expired | — | — | |||||||||||||||
Outstanding – December 31, 2014 | 1,430,559 | $ | 1.84 | 9.38 | $ | 1,426 | |||||||||||
Exercisable – December 31, 2014 | 945,012 | $ | 1.66 | 9.38 | $ | 974 | |||||||||||
Exercisable – December 31, 2013 | 591,812 | $ | 1.66 | 9.35 | $ | 2,825 | |||||||||||
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. For the years ended December 31, 2014 and 2013, the assumptions used in the Black-Scholes option pricing model, which was used to estimate the grant date fair value per option, were as follows, | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Employee | Non-Employee | Employee | |||||||||||||||
Non-Employee | |||||||||||||||||
Grants | Grants | Grants | Grants | ||||||||||||||
Weighted-average Black-Scholes option pricing model assumptions: | |||||||||||||||||
Volatility | 50.7 | % | 57.78 | % | 50.7 | % | 50.6 | % | |||||||||
Expected term (in years) | 5 | 10 | 6 | 10 | |||||||||||||
Risk-free rate | 1 | % | 2.9 | % | 1.0 | % | 2.9 | % | |||||||||
Expected dividend yield | 0 | % | 0 | % | 0.0 | % | 0.0 | % | |||||||||
Weighted average grant date fair value per share | $ | 0.82 | $ | 0.84 | $ | 0.78 | $ | 0.84 | % | ||||||||
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, or was not publicly traded for an extended duration at the time of the grant, an average of the historic volatilities of comparative companies was used. The dividend yield is zero percent as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future. Due to the lack of historical information, the Company determines the expected term of its stock option awards by using the simplified method, which assumes each vesting tranche of the award has a term equal to average of the contractual term and the vesting period. | |||||||||||||||||
As of December 31, 2014, total compensation cost not yet recognized related to unvested stock options was approximately $2.0 million, which is expected to be recognized over a weighted-average period of 2.3 years. | |||||||||||||||||
RESTRICTED STOCK UNITS | |||||||||||||||||
On July 10, 2014, the Company granted an aggregate of 244,504 shares of RSU’s to certain employees and Board members in connection with their employment (or appointment in the case of directors) and service to the Company. | |||||||||||||||||
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 Plan. The RSUs 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. | |||||||||||||||||
Shares underlying grants pursuant to the 2014 Plan and 2013 Plan had an aggregate grant date value of approximately $1,903,000 and $32,630 respectively. None of the 2014 Plan grants had vested at December 31, 2014. All of the 2013 Plan grants had vested by December 31, 2013. The following is a summary of non-vested RSUs award activity for the year ended December 31, 2014 and 2013: | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Weighted Average | Weighted Average | ||||||||||||||||
Number of | Grant Date | Number of | Grant Date | ||||||||||||||
Shares | Fair Value | Shares | Fair Value | ||||||||||||||
Non-vested | — | $ | — | — | $ | — | |||||||||||
Shares granted | 374,504 | 5.08 | 22,368 | 1.46 | |||||||||||||
Shares vested | — | — | (22,368 | ) | 1.46 | ||||||||||||
Shares forfeited | — | — | — | — | |||||||||||||
Non-vested | 374,504 | $ | 5.08 | — | $ | — | |||||||||||
The Company estimates the fair value of the granted shares using the market price of the Company’s stock price at the grant date. For the years ended December 31, 2014 and 2013, the Company recognized $229,000 and $32,657, respectively of stock-based compensation expense related to the RSUs. |
9_Other_Income
9. Other Income | 12 Months Ended |
Dec. 31, 2014 | |
Component of Operating Income [Abstract] | |
Other Income | GAIN ON SETTLEMENTS |
In July 2010, the Company filed a patent infringement lawsuit against five software technology companies (the “2010 Litigation”). The Company asserted that defendants had willfully infringed the Company’s U.S. patents and sought an injunction and damages for such infringement. In April 2012, a Memorandum of Understanding was signed between the Company and one of the parties in the 2010 Litigation granting such party a worldwide, perpetual, non-exclusive, non-sublicenseable license to the patents-in-suit and all other patents owned by, or exclusively licensed to, FI Delaware or its direct or indirect wholly-owned subsidiaries. The license is fully paid up unless the holder of the license has aggregate annual net sales to third party distributors or re-sellers in excess of $10.0 million (which has not been achieved to date). In exchange for such license, the third party issued 2,951,786 shares of its common stock (representing 3.765% of such party’s outstanding shares of common stock) (the “Settlement Investment”) with a fair value of $8.3 million on the date of the agreement and agreed to pay Finjan $3.0 million in cash, which was payable over an 18 month period in the form of three payments in the amount of $1.0 million each. On March 5, 2013, the Company issued a dividend to the Former Parent, which included its entire ownership of the Settlement Investment. The Company has received all the four installment payments, and recognized such amount as gain on settlements. The last installment payment of $1.0 million was received in January 2014. | |
In November 2012, Finjan signed a Confidential Settlement, Release and License Agreement with one of the other parties to the 2010 Litigation, a large, multinational software and technology company. Pursuant to the agreement, the counter-party paid a one-time fully paid up license fee to Finjan in the amount of $85 million, which was recognized as gain on settlements, net of legal costs of $8.5 million. Such fee was paid in exchange for a release and perpetual, non-exclusive worldwide license to all of the Company’s and its affiliates’ patents, including patent rights owned or controlled by the Company or its affiliates as of the date of such agreement and patents with a first effective priority date occurring at any time prior to November 2022 that the Company or its affiliates may own or control after the date of such agreement. Following the signing of the agreement, Finjan dismissed all claims against the counter-party (including its affiliates). |
10_Related_Party_Transactions
10. Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | In the course of business, the Company obtains legal services from a firm in which an executive of Finjan and member of the Company’s board is a member. The Company incurred approximately $258,000, $290,000 and $245,000 in legal fees to the firm during the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014 and 2013 the Company had balances due to this firm amounting to approximately $113,000 and $15,000, respectively. |
Prior to the separation from the Former Parent, Finjan periodically received non-interest bearing advances from the Former Parent to support its operations. During the year ended December 31, 2012 the Company had net transfers to the Former Parent amounting to approximately $2,470,000. As of December 31, 2012, the Company had a net amounts due to the Former Parent aggregating approximately $33,943,000. In February 2013, the Company repaid the outstanding balance due to the Former Parent in full and there are no amounts due to the Former Parent as of December 31, 2013. |
11_Income_Tax
11. Income Tax | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Income Tax | |||||||||||||
Income Tax | The provisions for income tax for the years ended December 31, 2014, 2013 and 2012 consist of the following: | ||||||||||||
For the Years Ended December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
(in thousands) | |||||||||||||
Federal: | |||||||||||||
Current | $ | - | $ | (264 | ) | $ | 26,889 | ||||||
Deferred | (3,045 | ) | (1,225 | ) | 422 | ||||||||
State: | |||||||||||||
Current | 5 | 4 | - | ||||||||||
Deferred | (738 | ) | (823 | ) | - | ||||||||
(3,778 | ) | (2,308 | ) | 27,311 | |||||||||
Change in valuation allowance | 3,783 | 2,048 | (422 | ) | |||||||||
Income tax provision | $ | 5 | $ | (260 | ) | $ | 26,889 | ||||||
The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense (benefit) as follows: | |||||||||||||
For the Years Ended December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
U.S. Federal statutory rate | 34 | % | 34 | % | 35 | % | |||||||
State rate, net of federal benefit | 5.8 | % | 3.2 | % | - | ||||||||
Permanent differences: | |||||||||||||
Benefit of NOL carry back | 0 | % | (5.4 | )% | 0 | % | |||||||
Other | (0.1 | )% | (0.6 | )% | 0 | % | |||||||
Change in valuation allowance | (39.8 | )% | (26.8 | )% | (0.5 | )% | |||||||
Income tax provision | (0.1 | )% | 4.4 | % | 34.5 | % | |||||||
Under ASC 805, “Business Combinations”, an acquirer should recognize and measure deferred taxes arising from assets acquired and liabilities assumed in a business combination in accordance with ASC 740. For 2013, the financial statement loss includes losses that will not result in future deferred tax assets and therefore these losses are excluded. | |||||||||||||
The approximate tax effects of temporary differences, which give rise to significant deferred tax assets and liabilities, are as follows: | |||||||||||||
As of December 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Deferred tax assets | |||||||||||||
Net operating losses | $ | 5,050 | $ | 1,691 | |||||||||
Stock-based compensation | 984 | 307 | |||||||||||
Intangible assets | 4,718 | 5,038 | |||||||||||
Other | 67 | - | |||||||||||
Total deferred tax assets | 10,819 | 7,036 | |||||||||||
Valuation allowance | (10,819 | ) | (7,036 | ) | |||||||||
Deferred tax asset, net of valuation allowance | - | - | |||||||||||
Net deferred tax liability | $ | - | $ | - | |||||||||
During the year ended December 31, 2011, Finjan, Inc. utilized the benefit of certain prior net operating loss carryforwards (“NOLs”). As of December 31, 2014 and 2013, the Company had NOL carryforwards of approximately $12.7 million and $4.4 million, respectively. | |||||||||||||
The valuation allowance associated with discontinued operations which are not reflected in the above table are approximately $418,000 and $183,000 for the years ended December 31, 2014 and 2013 respectively. | |||||||||||||
Utilization of the Company’s NOLs may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the NOLs before utilization. During the years ended December 31, 2014, 2013 and 2012, the Company recorded a tax benefit of $0, $263,623 and $808,799, respectively. The 2013 tax benefit is related to utilization of NOLs contributed to the Former Parent, and such benefit was recorded as a dividend in the period. The 2012 tax benefit is related to the utilization of NOLs contributed by the Former Parent. Such benefit was recorded as a contribution to capital during the period. | |||||||||||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary difference become deductible. | |||||||||||||
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. Based on this assessment, management has established a full valuation allowance against all of the deferred tax assets in excess of the deferred tax liabilities for each period, since it is more likely than not that the deferred tax assets will not be realized. The change in valuation allowance for the years ended December 31, 2014, 2013 and 2012 is $3.8 million, $2.0 million and $(0.4) million, respectively. The valuation allowance as of December 31, 2012 and 2011 was $5.0 million and $5.4 million, respectively. |
12_Quarterly_Data
12. Quarterly Data | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||
Quarterly Data | (In thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
2014 (1) | 2014 | 2014 | 2014 | ||||||||||||||
Revenues | $ | - | $ | - | $ | 4,998 | $ | - | |||||||||
Gross profit | - | - | 4,198 | - | |||||||||||||
(Loss) Income from continuing operations | (2,860 | ) | (3,333 | ) | 665 | (4,092 | ) | ||||||||||
(Loss) Income from discontinued operations | (211 | ) | 75 | (120 | ) | (1,693 | ) | ||||||||||
Other Income | 1,068 | 11 | 8 | 3 | |||||||||||||
Net (Loss ) Income | (2,003 | ) | (3,247 | ) | 553 | (5,782 | ) | ||||||||||
Net Loss Per Share from continuing operationss - Basic and Diluted | $ | (0.08 | ) | $ | (0.15 | ) | $ | 0.03 | $ | (0.18 | ) | ||||||
Net Loss Per Share from discontinued operations- Basic and Diluted | $ | (0.01 | ) | $ | 0 | $ | (0.01 | ) | $ | (0.08 | ) | ||||||
Net Loss Per Share | $ | (0.09 | ) | $ | (0.15 | ) | $ | 0.02 | $ | (0.26 | ) | ||||||
(In thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
2013 | 2013(2) | 2013 | 2013 | ||||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Gross profit | - | - | - | - | |||||||||||||
Loss from operations | (847 | ) | (1,804 | ) | (1,246 | ) | (2,855 | ) | |||||||||
Loss from discontinued operations | - | (435 | ) | (133 | ) | 86 | |||||||||||
Other Income(4) | 80 | 1,047 | 3 | 32 | |||||||||||||
Net Loss | (767 | ) | (1,192 | ) | (1,376 | ) | (2,737 | ) | |||||||||
Net Loss Per Share from continuing operationss - Basic and Diluted | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.12 | ) | |||||
Net Loss Per Share from discontinued operations- Basic and Diluted | $ | - | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0 | |||||||
Net Loss Per Share | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.12 | ) | |||||
-1 | Other income for this period includes the third installment payment of $1.0 million associated with a licensing agreement. | ||||||||||||||||
-2 | Loss from operation for this period includes $525,000 of transaction costs releated to the Merger. Other income for this period includes the second installment payment of $1.0 million associated with a licensing agreement. |
13_Subsequent_Events
13. Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Subsequent Events [Abstract] | |
Subsequent Events | Management has evaluated subsequent events or transactions occurring through the date the financial statements were issued. Management concluded that no additional subsequent events required disclosure in these financial statements other than those disclosed in these notes to these financial statements. |
On January 14, 2015 the Company entered into an Amended and Restated Employment Agreement, effective January 1, 2015 (the "Agreement"), with Philip Hartstein, the Company's President and Chief Executive Officer. The Agreement provides that Mr. Hartstein will continue as the Company's President and Chief Executive Officer at a base salary of $350,000, subject to adjustment. During the term of the Agreement, Mr. Hartstein will also be eligible to receive an annual bonus in the amount of $200,000, subject to adjustment on an annual basis, based upon his individual performance and the overall progress of the Company. Mr. Hartstein will also be eligible to participate in the Company's 2014 Plan and benefit plans maintained by the Company. | |
Pursuant to the Agreement, the Board of Directors awarded Mr. Hartstein 200,000 shares of RSUs on January 14, 2015. The RSUs are scheduled to vest over a four-year period, with one-quarter vesting on January 1, 2016, and the remainder vesting ratably on a quarterly basis for the following three years so that, subject to employee's continued employment, the RSUs granted shall be fully vested on January 1, 2019. The RSUs were awarded pursuant to the 2014 Plan and an award agreement thereunder. | |
The Agreement also provides that in the event the daily trading average price of the Company's shares of common stock has been at least $12.50 for a period of twenty full consecutive trading days during the term of the Agreement, the Company shall recommend to the Compensation Committee and the Board of Directors a grant of an additional 100,000 RSUs. Subject to employee's employment at the time of grant, this grant of RSUs would be fully vested immediately upon grant. The RSUs would be awarded (if at all) pursuant to the 2014 Plan, as amended, or any successor plan that may then be in effect and an award agreement thereunder. | |
Mr. Hartstein's employment may be terminated at any time and for any reason upon at least 90 days advance written notice of such termination. | |
On February 25, 2015, the Company signed a sublease agreement, pursuant to which the Company will sublease office space in Palo Alto, California through September 30, 2018. The office is the Company’s new corporate headquarters as of March 1, 2015. From the commencement date, the Company owes an initial annual rent of $424,536, 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. | |
Subsequent to December 31, 2014, the Company received approximately $12,000 in cash proceeds from the exercise of 19,419 stock options to purchase the Company's common stock. A total of 40,210 RSUs were exercised subsequent to December 31, 2014. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Accounting Policies [Abstract] | |||||||||
Basis of Presentation | The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. | ||||||||
The results of the acquired Converted Organics business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the consolidated financial statements of the Company since the date of the Merger. | |||||||||
Reclassifications | Where applicable, certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2014 presentation. These reclassifications have no impact on the previously reported net (loss) income. | ||||||||
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 long-lived 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. | ||||||||
Cash and Cash Equivalents | For purposes of the statement of cash flows, the Company considers all highly liquid instruments with original maturities of three months or less when purchased to be cash equivalents. Included in cash and cash equivalents are demand deposits and money market accounts. | ||||||||
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 (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts. As of December 31, 2014 and 2013, substantially all of the Company’s cash and cash equivalents are uninsured. | ||||||||
As of December 31, 2014, a single licensee of Finjan accounted for principally all of the Company’s accounts receivable balance. Accounts receivable balance at December 31, 2013 was deminimis. | |||||||||
During 2014, principally all of the revenues generated by the Company were from a single license agreement. The Company did not have revenue for the year ended December 31, 2013. | |||||||||
Allowance for Doubtful Accounts | The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company does not currently require any collateral for accounts receivable. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. Bad debt expense for the three years ended December 31, 2014, 2013 and 2012 was not material. The allowance for doubtful accounts as of December 31, 2014 and 2013 was also not material. | ||||||||
Property and Equipment, Net | Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of the related assets, which range from 3 to 10 years. Leasehold improvements are amortized on the straight-line method over the shorter of the remaining lease term or the estimated useful economic lives of the related assets using the straight-line method. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income. | ||||||||
Patents | The Company owns or possesses licenses to use its patents. The Company’s patent costs were fully amortized prior to January 1, 2012. The costs of maintaining patents are expensed as incurred. Patents as of December 31, 2014 and 2013 are as follows: | ||||||||
As of December 31, | |||||||||
(In thousands) | |||||||||
2014 | 2013 | ||||||||
Patents | $ | 18,052 | $ | 18,052 | |||||
Less: accumulated amortization | (18,052 | ) | (18,052 | ) | |||||
Total | $ | — | $ | — | |||||
Investments | Investments in common and preferred stock in which the Company has significant influence, but less than a controlling voting interest, are accounted for using the equity method and are classified as non-current assets. Significant influence is presumed to exist when the Company holds more than 20% of the investee’s voting instruments. Other investments that are not controlled, and over which the Company does not have the ability to exercise significant influence are accounted for under the cost method. All of the Company’s investments as of December 31, 2014 and 2013 are accounted for under the cost method. | ||||||||
Impairment of Long-Lived Assets and other Acquired Intangible Assets | Long-lived assets, such as property and equipment and intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long lived asset is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value. Fair value is estimated based on the best information available and by making necessary estimates, judgments and projections. For purposes of these tests, long-lived assets must be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. As of December 31, 2014, the Company has not identified any such impairments. | ||||||||
Fair Value of Financial Instruments | The reported amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair value due to their short maturities. | ||||||||
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These fair value measurements apply to all financial instruments that are measured and reported on a fair value basis. | |||||||||
Where available, fair value is based on observable market prices or is derived from such prices. The Company uses the market approach valuation technique to value its investments. The market approach uses prices and other pertinent information generated from market transactions involving identical or comparable assets or liabilities. The types of factors that the Company may take into account in fair value pricing the investments include available current market data, including relevant and applicable market quotes. | |||||||||
Based on the observability of the inputs used in the valuation techniques, financial instruments are categorized according to the fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values. | |||||||||
Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: | |||||||||
Level 1 - Observable inputs such as quoted prices in active markets. | |||||||||
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. | |||||||||
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | |||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. | |||||||||
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 results from grants of licenses to its patented cyber-security 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. | |||||||||
Stock-Based Compensation | The Company measures compensation cost for all employee stock-based awards at their fair values on the date of grant. Stock-based awards issued to non-employees are measured at their fair values on the date of grant, and are re-measured at each reporting period through their vesting dates. When a non-employee becomes an employee and continues to vest in the award, the fair value of the individual’s award is re-measured on the date that he becomes an employee, and then is not subsequently re-measured at future reporting dates. The fair value of stock based awards is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method for stock options and restricted stock. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock-based awards. | ||||||||
Net (Loss) Income per Common Share | Basic net (loss) income per common share is based upon the weighted-average number of common shares outstanding. Diluted net (loss) income per common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding. Basic and diluted net (loss) income per common share were computed as follows: | ||||||||
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 were excluded from the computation of diluted net loss per share because their inclusion would be anti-dilutive and consist of the following: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Stock Options | 1,430,559 | 1,625,476 | |||||||
Restricted Stock Units | 374,504 | - | |||||||
Warrants* | - | - | |||||||
Total | 1,805,063 | 1,625,476 | |||||||
* | As of December 31, 2014, all warrants have expired and none are outstanding or exercisable. Warrants were exercisable for less than one share of common stock at December 31, 2013 and were therefore anti-dilutive, as a result of the 1-for-10 reverse stock split that we effected on November 8, 2011, the 1-for-500 reverse stock split that we effected on March 5, 2012, the 1-for-500 reverse stock split that we effected on June 3, 2013 and the 1-for-12 reverse stock split we effected on August 22, 2013. The warrants were subject to further adjustments in the, which may have the effect of increasing or decreasing the exercise price and the number of shares issuable upon exercise of the warrants. | ||||||||
The company did not have potentially dilutive common shares from employee equity plans and warrants as of December 31, 2012. | |||||||||
Income Taxes | The Former Parent files its consolidated income tax returns in the U.S. federal jurisdiction and has filed consolidated income tax returns in the state of California through 2010. The Former Parent’s federal income tax returns for tax years after 2009 remain subject to examination by the federal tax authorities. The Former Parent did not file separate income returns for its wholly-owned subsidiary. The Former Parent’s state income tax returns for tax years after 2009 remain subject to examination by the state tax authorities. Since 2013, the Company files consolidated income tax returns in the U.S federal jurisdiction and has operations in New York and California. The federal and state income tax returns for the tax years 2013 and 2014 remain subject to examination for federal and state taxes. | ||||||||
The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and liabilities to be computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The income tax provision or benefit is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. | |||||||||
The benefit of tax positions taken or expected to be taken in income tax returns are recognized in the financial statements if such positions are more likely than not of being sustained. As of December 31, 2014 and 2013, no liability for unrecognized tax benefits was required to be reported. The Company does not expect its unrecognized tax benefit position to change during the next twelve months. | |||||||||
The Company’s policy is to classify assessments, if any, for tax-related interest as interest expense and penalties as general and administrative expenses. There were no amounts accrued for penalties or interest as of, or during the years ended December 31, 2014, 2013 and 2012. | |||||||||
Recently Issued Accounting Pronouncements Not Yet Adopted | On June 19, 2014, 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 expected not to have a material impact on the Company’s consolidated financial position and results of operations. | ||||||||
In May 2014, the Financial Accounting Standards Board issued ASU 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 2018. 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 consolidated financial statements. | |||||||||
In April 2014, the FASB issued ASU 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. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. This ASU is effective in the first quarter of 2015 however, the Company is currently early adopting the standard on its consolidated financial statements for the year ended December 31, 2014. | |||||||||
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 consolidated financial statements upon adoption. |
1_Organization_and_Operations_
1. Organization and Operations (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Organization And Operations Tables | |||||||||||||
Assets acquired and liabilities assumed in the Merger | Cash and cash equivalents | $ | 63 | ||||||||||
Accounts receivable | 202 | ||||||||||||
Inventory | 128 | ||||||||||||
Note receivable | 517 | ||||||||||||
Other current assets | 65 | ||||||||||||
Property and equipment | 928 | ||||||||||||
Intangible asset – customer relationships | 1,453 | ||||||||||||
Goodwill | 306 | ||||||||||||
Accounts payable and accrued liabilities | (878 | ) | |||||||||||
Deferred tax liability | (43 | ) | |||||||||||
Fair value of shares issued as acquisition consideration | $ | 2,741 | |||||||||||
Loss from discontinued operations | Loss from the discontinued operations was as per the following table: | ||||||||||||
For the Years Ended | |||||||||||||
December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
(In thousands) | |||||||||||||
Revenue | $ | 1,300 | $ | 744 | $ | - | |||||||
Expenses | (1,623 | ) | (1,223 | ) | - | ||||||||
Loss from discontiued operations | (323 | ) | (479 | ) | $ | - | |||||||
Loss on disposal | (1,626 | ) | - | - | |||||||||
Net Loss from discontinued operations | $ | (1,949 | ) | $ | (479 | ) | $ | - | |||||
The assets and liabilities related to discontinued operations for the year ended December 31, 2013 were as follows: | |||||||||||||
31-Dec-13 | |||||||||||||
Current Assets: | |||||||||||||
Cash and cash equivalents | $ | 18 | |||||||||||
Accounts receivable, net | 37 | ||||||||||||
Inventories | 34 | ||||||||||||
Prepaid expenses and other current assets | 51 | ||||||||||||
Total current assets | 140 | ||||||||||||
Non-Current Assets: | |||||||||||||
Property and equipment, net | $ | 893 | |||||||||||
Intangible assets, net | 1,333 | ||||||||||||
Goodwill | 306 | ||||||||||||
Other non-current assets | 23 | ||||||||||||
Total Non-Current Assets | $ | 2,555 | |||||||||||
Current Liabilities: | |||||||||||||
Accounts payable | $ | 79 | |||||||||||
Accrued expenses | 54 | ||||||||||||
Other current liabilities | 35 | ||||||||||||
Total current liabilities | $ | 168 | |||||||||||
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Accounting Policies [Abstract] | |||||||||
Schedule of patents | As of December 31, | ||||||||
(In thousands) | |||||||||
2014 | 2013 | ||||||||
Patents | $ | 18,052 | $ | 18,052 | |||||
Less: accumulated amortization | (18,052 | ) | (18,052 | ) | |||||
Total | $ | — | $ | — | |||||
Summary of Components Excluded from Computation of Diluted Net Loss Per Share | December 31, | ||||||||
2014 | 2013 | ||||||||
Stock Options | 1,430,559 | 1,625,476 | |||||||
Restricted Stock Units | 374,504 | - | |||||||
Warrants* | - | - | |||||||
Total | 1,805,063 | 1,625,476 |
3_Property_and_Equipment_Table
3. Property and Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property And Equipment Tables | |||||||||
Schedule of property and equipment | For the Years Ended December 31, | ||||||||
2014 | 2013 | ||||||||
(In thousands) | |||||||||
Office equipment and furniture | 84 | 63 | |||||||
Less accumulated depreciation | (18 | ) | (3 | ) | |||||
Property and equipment | $ | 66 | $ | 60 |
4_Investments_Tables
4. Investments (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Investments Tables | |||||||||||||||||
Schedule of investments | Trustwave | Settlement | Venture Capital | Total | |||||||||||||
Shares | Investment | Fund | Investments | ||||||||||||||
(in thousands) | |||||||||||||||||
Balance - January 31, 2013 | $ | 4,431 | $ | 8,353 | $ | — | $ | 12,784 | |||||||||
Dividend issued to Former Parent | (4,431 | ) | (8,353 | ) | — | (12,784 | ) | ||||||||||
Investment made during 2013 | — | — | 500 | 500 | |||||||||||||
Balance - December 31, 2013 | — | — | 500 | 500 | |||||||||||||
Investment made during 2014 | 500 | 500 | |||||||||||||||
Balance - December 31, 2014 | $ | — | $ | — | $ | 1,000 | $ | 1,000 |
5_Commitments_and_Contingencie1
5. Commitments and Contingencies (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
Operating Leases | Years ending December 31, | ||||
2015 | $ | 630 | |||
2016 | 754 | ||||
2017 | 753 | ||||
2018 | 459 | ||||
Total | $ | 2,596 |
8_StockBased_Compensation_Tabl
8. Stock-Based Compensation (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||
Schedule of stock option activity | Average | Aggregate | |||||||||||||||
Number of | Weighted | Remaining | Intrinsic | ||||||||||||||
Options | Average | Contractual | Value | ||||||||||||||
Outstanding | Exercise Price | Life (in years) | (thousands) | ||||||||||||||
Outstanding – December 31, 2013 | 1,625,476 | $ | 1.76 | ||||||||||||||
Options granted | 25,000 | 5.68 | |||||||||||||||
Options exercised | 79,645 | 1.66 | |||||||||||||||
Options forfeited | 140,272 | — | |||||||||||||||
Options expired | — | — | |||||||||||||||
Outstanding – December 31, 2014 | 1,430,559 | $ | 1.84 | 9.38 | $ | 1,426 | |||||||||||
Exercisable – December 31, 2014 | 945,012 | $ | 1.66 | 9.38 | $ | 974 | |||||||||||
Exercisable – December 31, 2013 | 591,812 | $ | 1.66 | 9.35 | $ | 2,825 | |||||||||||
Weighted-average Black-Scholes Option Pricing Model Assumptions | 2014 | 2013 | |||||||||||||||
Employee | Non-Employee | Employee | |||||||||||||||
Non-Employee | |||||||||||||||||
Grants | Grants | Grants | Grants | ||||||||||||||
Weighted-average Black-Scholes option pricing model assumptions: | |||||||||||||||||
Volatility | 50.7 | % | 57.78 | % | 50.7 | % | 50.6 | % | |||||||||
Expected term (in years) | 5 | 10 | 6 | 10 | |||||||||||||
Risk-free rate | 1 | % | 2.9 | % | 1.0 | % | 2.9 | % | |||||||||
Expected dividend yield | 0 | % | 0 | % | 0.0 | % | 0.0 | % | |||||||||
Weighted average grant date fair value per share | $ | 0.82 | $ | 0.84 | $ | 0.78 | $ | 0.84 | % | ||||||||
Restricted stock units award activity | 2014 | 2013 | |||||||||||||||
Weighted Average | Weighted Average | ||||||||||||||||
Number of | Grant Date | Number of | Grant Date | ||||||||||||||
Shares | Fair Value | Shares | Fair Value | ||||||||||||||
Non-vested | — | $ | — | — | $ | — | |||||||||||
Shares granted | 374,504 | 5.08 | 22,368 | 1.46 | |||||||||||||
Shares vested | — | — | (22,368 | ) | 1.46 | ||||||||||||
Shares forfeited | — | — | — | — | |||||||||||||
Non-vested | 374,504 | $ | 5.08 | — | $ | — |
11_Income_Tax_Tables
11. Income Tax (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Income Tax Tables | |||||||||||||
Provisions for income tax | |||||||||||||
For the Years Ended December 31, | |||||||||||||
2014 | 2013 | 2012 | |||||||||||
(in thousands) | |||||||||||||
Federal: | |||||||||||||
Current | $ | - | $ | (264 | ) | $ | 26,889 | ||||||
Deferred | (3,045 | ) | (1,225 | ) | 422 | ||||||||
State: | |||||||||||||
Current | 5 | 4 | - | ||||||||||
Deferred | (738 | ) | (823 | ) | - | ||||||||
(3,778 | ) | (2,308 | ) | 27,311 | |||||||||
Change in valuation allowance | 3,783 | 2,048 | (422 | ) | |||||||||
Income tax provision | $ | 5 | $ | (260 | ) | $ | 26,889 | ||||||
Effective statutory rate | For the Years Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | |||||||||||
U.S. Federal statutory rate | 34 | % | 34 | % | 35 | % | |||||||
State rate, net of federal benefit | 5.8 | % | 3.2 | % | - | ||||||||
Permanent differences: | |||||||||||||
Benefit of NOL carry back | 0 | % | (5.4 | )% | 0 | % | |||||||
Other | (0.1 | )% | (0.6 | )% | 0 | % | |||||||
Change in valuation allowance | (39.8 | )% | (26.8 | )% | (0.5 | )% | |||||||
Income tax provision | (0.1 | )% | 4.4 | % | 34.5 | % | |||||||
Deferred tax assets and liabilities | |||||||||||||
As of December 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Deferred tax assets | |||||||||||||
Net operating losses | $ | 5,050 | $ | 1,691 | |||||||||
Stock-based compensation | 984 | 307 | |||||||||||
Intangible assets | 4,718 | 5,038 | |||||||||||
Other | 67 | - | |||||||||||
Total deferred tax assets | 10,819 | 7,036 | |||||||||||
Valuation allowance | (10,819 | ) | (7,036 | ) | |||||||||
Deferred tax asset, net of valuation allowance | - | - | |||||||||||
Net deferred tax liability | $ | - | $ | - | |||||||||
12_Quarterly_Data_Tables
12. Quarterly Data (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||
Schedule of Quarterly Financial Information | |||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
2014 (1) | 2014 | 2014 | 2014 | ||||||||||||||
Revenues | $ | - | $ | - | $ | 4,998 | $ | - | |||||||||
Gross profit | - | - | 4,198 | - | |||||||||||||
(Loss) Income from continuing operations | (2,860 | ) | (3,333 | ) | 665 | (4,092 | ) | ||||||||||
(Loss) Income from discontinued operations | (211 | ) | 75 | (120 | ) | (1,693 | ) | ||||||||||
Other Income | 1,068 | 11 | 8 | 3 | |||||||||||||
Net (Loss ) Income | (2,003 | ) | (3,247 | ) | 553 | (5,782 | ) | ||||||||||
Net Loss Per Share from continuing operationss - Basic and Diluted | $ | (0.08 | ) | $ | (0.15 | ) | $ | 0.03 | $ | (0.18 | ) | ||||||
Net Loss Per Share from discontinued operations- Basic and Diluted | $ | (0.01 | ) | $ | 0 | $ | (0.01 | ) | $ | (0.08 | ) | ||||||
Net Loss Per Share | $ | (0.09 | ) | $ | (0.15 | ) | $ | 0.02 | $ | (0.26 | ) | ||||||
(In thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
2013 | 2013(2) | 2013 | 2013 | ||||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | |||||||||
Gross profit | - | - | - | - | |||||||||||||
Loss from operations | (847 | ) | (1,804 | ) | (1,246 | ) | (2,855 | ) | |||||||||
Loss from discontinued operations | - | (435 | ) | (133 | ) | 86 | |||||||||||
Other Income(4) | 80 | 1,047 | 3 | 32 | |||||||||||||
Net Loss | (767 | ) | (1,192 | ) | (1,376 | ) | (2,737 | ) | |||||||||
Net Loss Per Share from continuing operationss - Basic and Diluted | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.05 | ) | $ | (0.12 | ) | |||||
Net Loss Per Share from discontinued operations- Basic and Diluted | $ | - | $ | (0.02 | ) | $ | (0.01 | ) | $ | 0 | |||||||
Net Loss Per Share | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.12 | ) | |||||
-1 | Other income for this period includes the third installment payment of $1.0 million associated with a licensing agreement. | ||||||||||||||||
-2 | Loss from operation for this period includes $525,000 of transaction costs releated to the Merger. Other income for this period includes the second installment payment of $1.0 million associated with a licensing agreement. |
1_Organization_and_Operations_1
1. Organization and Operations (Details) (Converted Organics, USD $) | 12 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2013 |
Converted Organics | |
Cash and cash equivalents | $63 |
Accounts receivable | 202 |
Inventory | 128 |
Note receivable | 517 |
Other current assets | 65 |
Property and equipment | 928 |
Intangible asset b customer relationships | 1,453 |
Goodwill | 306 |
Accounts payable and accrued liabilities | -878 |
Deferred tax liability | -43 |
Common stock issued to acquire Converted Organics net assets | $2,741 |
1_Organization_and_Operations_2
1. Organization and Operations (Details 1) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Loss from discontiued operations | ($323) | ($479) | $0 | ||||||||
Loss on disposal | -1,626 | 0 | 0 | ||||||||
Net Loss from discontinued operations | -1,693 | -120 | 75 | -211 | 86 | -133 | -435 | 0 | -1,949 | -479 | 0 |
Converted Organics | |||||||||||
Revenue | 1,300 | 744 | 0 | ||||||||
Expenses | -1,623 | -1,223 | 0 | ||||||||
Loss from discontiued operations | -323 | -479 | 0 | ||||||||
Loss on disposal | -1,626 | 0 | |||||||||
Net Loss from discontinued operations | ($1,949) | ($479) | $0 |
Recovered_Sheet1
1. ORGANIZATION AND OPERATIONS (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current Assets: | ||
Total current assets | $0 | $140 |
Non-current assets | ||
Total Non-Current Assets | 0 | 2,555 |
Converted Organics | ||
Current Assets: | ||
Cash and cash equivalents | 18 | |
Accounts receivable, net | 37 | |
Inventories | 34 | |
Prepaid expenses and other current assets | 51 | |
Total current assets | 140 | |
Non-current assets | ||
Property and equipment, net | 893 | |
Intangible assets, net | 1,333 | |
Goodwill | 306 | |
Other non-current assets | 23 | |
Total Non-Current Assets | 2,555 | |
Current Liabilities: | ||
Accounts payable | 79 | |
Accrued expenses | 54 | |
Other current liabilities | 35 | |
Total current liabilities | $168 |
2_Summary_of_Significant_Accou3
2. Summary of Significant Accounting Policies (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Summary Of Significant Accounting Policies Details | ||
Patents | $18,052 | $18,052 |
Less: accumulated amortization | -18,052 | -18,052 |
Total | $0 | $0 |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies (Details 1) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Antidilutive securities | 1,805,063 | 1,625,476 |
Stock Option [Member] | ||
Antidilutive securities | 1,430,559 | 1,625,476 |
Restricted Stock Units | ||
Antidilutive securities | 374,504 | 0 |
Warrant [Member] | ||
Antidilutive securities | 0 | 0 |
3_Property_and_Equipment_Detai
3. Property and Equipment (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Property And Equipment Details | ||
Office equipment and furniture | $84 | $63 |
Less accumulated depreciation | -18 | -3 |
Property and equipment continuing operations, net | $66 | $60 |
4_Investments_Details
4. Investments (Details) (USD $) | 11 Months Ended | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
Beginning Balance | $12,784 | $500 | |
Dividend issued to former parent | -12,784 | -12,784 | |
Investment made during year | 500 | 500 | |
Ending Balance | 500 | 1,000 | 500 |
Trustwave Shares | |||
Beginning Balance | 4,431 | 0 | |
Dividend issued to former parent | -4,431 | ||
Investment made during year | 0 | 0 | |
Ending Balance | 0 | 0 | 0 |
Settlement Investment | |||
Beginning Balance | 8,353 | 0 | |
Dividend issued to former parent | -8,353 | ||
Investment made during year | 0 | 0 | |
Ending Balance | 0 | 0 | 0 |
Venture Capital Fund | |||
Beginning Balance | 0 | 500 | |
Dividend issued to former parent | 0 | ||
Investment made during year | 500 | 500 | |
Ending Balance | $500 | $1,000 | $500 |
5_Commitments_and_Contingencie2
5. Commitments and Contingencies (Details) (USD $) | Dec. 31, 2014 |
In Thousands, unless otherwise specified | |
Leases [Abstract] | |
2015 | $630 |
2016 | 754 |
2017 | 753 |
2018 | 459 |
Total | $2,596 |
5_Commitments_and_Contingencie3
5. Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred rent payable | $165 | |
Rent expense | 261 | 149 |
Capital commitment outstanding | $4,000 | $4,500 |
8_StockBased_Compensation_Deta
8. Stock-Based Compensation (Details) (Stock options, USD $) | 12 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Stock options | ||
Number of Shares Outstanding, Beginning balance | 1,625,476 | |
Options granted | 25,000 | |
Options exercised | 79,645 | |
Options forfeited | 140,272 | |
Options expired | 0 | |
Number of Shares Outstanding, Ending balance | 1,430,559 | 1,625,476 |
Exercisable | 945,012 | 591,812 |
Weighted Average Exercise Price, Beginning balance | $1.76 | |
Weighted Average Exercise Price, Options granted | $5.68 | |
Weighted Average Exercise Price, Options exercised | $1.66 | |
Weighted Average Exercise Price, Options forfeited | ||
Weighted Average Exercise Price, Options expired | ||
Weighted Average Exercise Price, Ending balance | $1.84 | $1.76 |
Weighted Average Exercise Price, Exercisable | $1.66 | |
Average Remaining Contractual Life | 9 years 4 months 17 days | |
Average Remaining Contractual Life, Exercisable | 7 years 4 months 10 days | 9 years 4 months 6 days |
Aggregate Intrinsic Value, Outstanding | $1,426 | |
Aggregate Intrinsic Value, Exercisable | $974 | $2,825 |
8_StockBased_Compensation_Deta1
8. Stock-Based Compensation (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Employee Grants [Member] | ||
Weighted-average Black-Scholes option pricing model assumptions: | ||
Volatility | 50.70% | 50.70% |
Expected term (in years) | 5 years | 6 years |
Risk-free rate | 1.00% | 1.00% |
Expected dividend yield | 1.00% | 0.00% |
Weighted-average grant date fair value | $0.82 | $0.78 |
Non Employee Grants [Member] | ||
Weighted-average Black-Scholes option pricing model assumptions: | ||
Volatility | 57.78% | 50.60% |
Expected term (in years) | 10 years | 10 years |
Risk-free rate | 2.90% | 2.90% |
Expected dividend yield | 0.00% | 0.00% |
Weighted-average grant date fair value | $0.84 | $0.84 |
Recovered_Sheet2
8. STOCK-BASED COMPENSATION (Details 2) (Restricted Stock Units, USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Restricted Stock Units | ||
Non-vested, beginning balance | 0 | 0 |
Shares granted | 374,504 | 22,368 |
Shares vested | 0 | -22,368 |
Shares forfeited | 0 | 0 |
Non-vested, ending balance | 374,504 | 0 |
Weighted average grant date fair value, beginning balance | ||
Weighted average grant date fair value, granted | $5.08 | $1.46 |
Weighted average grant date fair value, vested | $1.46 | |
Weighted average grant date fair value, forfeited | ||
Weighted average grant date fair value, ending balance | $5.08 |
10_Related_Party_Transactions_
10. Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Related Party Transactions [Abstract] | |||
Legal fees | $258 | $290 | $245 |
Amounts due to the firm | $113 | $15 |
11_Income_Tax_Details
11. Income Tax (Details) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Federal: | |||
Current | $0 | ($264) | $26,889 |
Deferred | -3,045 | -1,225 | 422 |
State: | |||
Current | 5 | 4 | 0 |
Deferred | -738 | -823 | 0 |
Federal and State, Total | -3,778 | -2,308 | 27,311 |
Change in valuation allowance | 3,783 | 2,048 | -422 |
Income tax provision | $5 | ($260) | $26,889 |
11_Income_Tax_Details_1
11. Income Tax (Details 1) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Tables | |||
U.S. Federal statutory rate | 34.00% | 34.00% | 35.00% |
State rate, net of federal benefit | 5.80% | 3.20% | 0.00% |
Permanent differences: | |||
Benefit of NOL carryback | 0.00% | -5.40% | 0.00% |
Other | -0.10% | -0.60% | 0.00% |
Change in valuation allowance | -39.80% | -26.80% | -0.50% |
Income tax provision | -0.10% | 4.40% | 34.50% |
11_Income_Tax_Details_2
11. Income Tax (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Deferred tax assets | ||
Net operating losses | $5,050 | $1,691 |
Stock-based compensation | 984 | 307 |
Intangible assets | 4,718 | 5,038 |
Other | 67 | 0 |
Total deferred tax assets | 10,819 | 7,036 |
Valuation allowance | -10,819 | -7,036 |
Deferred tax asset, net of valuation allowance | 0 | 0 |
Net deferred tax liability | $0 | $0 |
11_Income_Tax_Details_Narrativ
11. Income Tax (Details Narrative) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax Details Narrative | |||
Net operating losses carryforwards | $13,900 | $5,300 | |
Change in valuation allowance | $3,783 | $2,048 | ($422) |
12_Quarterly_Data_Details
12. Quarterly Data (Details) (USD $) | 3 Months Ended | 12 Months Ended | |||||||||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Quarterly Data Details | |||||||||||
Revenues | $0 | $4,998 | $0 | $0 | $0 | $0 | $0 | $0 | $4,998 | $0 | $0 |
Gross profit (loss) | 0 | 4,198 | 0 | 0 | 0 | 0 | 0 | 0 | 4,198 | 0 | 0 |
(Loss) Income from continuing operations | -4,092 | 665 | -3,333 | -2,860 | -2,855 | -1,246 | -1,804 | -847 | |||
(Loss) Income from discontinued operations | -1,693 | -120 | 75 | -211 | 86 | -133 | -435 | 0 | -1,949 | -479 | 0 |
Other Income | 3 | 8 | 11 | 1,068 | 32 | 3 | 1,047 | 80 | 1,090 | 1,162 | 80,633 |
Net (Loss) Income | ($5,782) | $553 | ($3,247) | ($2,003) | ($2,737) | ($1,376) | ($1,192) | ($767) | ($10,479) | ($6,072) | $50,985 |
Net loss per share from continuing operations - Basic and Diluted | ($0.18) | $0.03 | ($0.15) | ($0.08) | ($0.12) | ($0.05) | ($0.04) | ($0.04) | ($0.38) | ($0.26) | $2.48 |
Net loss per share from discontinued operations - basic and diluted | ($0.08) | ($0.01) | $0 | ($0.01) | $0 | ($0.01) | ($0.02) | $0 | ($0.09) | ($0.02) | $0 |
Net Loss Per Share - Basic and Diluted | ($0.26) | $0.02 | ($0.15) | ($0.09) | ($0.12) | ($0.06) | ($0.06) | ($0.04) | ($0.47) | ($0.28) | $2.48 |