Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 29, 2016 | Jun. 30, 2015 | |
Document and Entity Information Abstract | |||
Entity Registrant Name | INTRUSION INC | ||
Entity Central Index Key | 736,012 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 17,088,000 | ||
Entity Common Stock, Shares Outstanding | 12,747,836 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash and cash equivalents | $ 102 | $ 1,006 |
Accounts receivable | 580 | 737 |
Inventories, net | 45 | 12 |
Prepaid expenses | 69 | 105 |
Total current assets | 796 | 1,860 |
Property and Equipment: | ||
Equipment | 1,602 | 1,207 |
Furniture and fixtures | 43 | 43 |
Leasehold improvements | 42 | 42 |
Total property and equipment, gross | 1,687 | 1,292 |
Accumulated depreciation and amortization | (1,201) | (901) |
Property, Plant and Equipment, Net, Total | 486 | 391 |
Other assets | 43 | 61 |
TOTAL ASSETS | 1,325 | 2,312 |
Current Liabilities: | ||
Accounts payable, trade | 220 | 193 |
Accrued expenses | 620 | 669 |
Dividends payable | 160 | 20 |
Obligations under capital lease, current portion | 197 | 145 |
Deferred revenue | 386 | 442 |
Total current liabilities | 1,583 | 1,469 |
Loan payable to officer | 1,530 | 1,530 |
Obligations under capital lease, noncurrent portion | $ 139 | $ 130 |
Commitments and contingencies | ||
Stockholders' Deficit: | ||
Common stock, $0.01 par value: Authorized shares - 80,000; Issued shares - 12,622 in 2015 and 12,471 in 2014; Outstanding shares - 12,612 in 2015 and 12,461 in 2014 | $ 126 | $ 125 |
Common stock held in treasury, at cost - 10 shares | (362) | (362) |
Additional paid-in-capital | 56,520 | 56,382 |
Accumulated deficit | (59,947) | (58,698) |
Accumulated other comprehensive loss | (107) | (107) |
Total stockholders' deficit | (1,927) | (817) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 1,325 | 2,312 |
Series 1 | ||
Stockholders' Deficit: | ||
Preferred stock | 707 | 707 |
Series 2 | ||
Stockholders' Deficit: | ||
Preferred stock | 724 | 724 |
Series 3 | ||
Stockholders' Deficit: | ||
Preferred stock | $ 412 | $ 412 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, Authorized shares | 5,000,000 | 5,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, Authorized shares | 80,000,000 | 80,000,000 |
Common stock, Issued shares | 12,622,000 | 12,471,000 |
Common stock, Outstanding shares | 12,612,000 | 12,461,000 |
Common stock held in treasury, shares | 10,000 | 10,000 |
Series 1 | ||
Preferred stock, shares issued | 200,000 | 200,000 |
Preferred stock, shares outstanding | 200,000 | 200,000 |
Preferred stock, Liquidation preference (in dollars per share) | $ 1,063 | $ 1,013 |
Series 2 | ||
Preferred stock, shares issued | 460,000 | 460,000 |
Preferred stock, shares outstanding | 460,000 | 460,000 |
Preferred stock, Liquidation preference (in dollars per share) | $ 1,212 | $ 1,155 |
Series 3 | ||
Preferred stock, shares issued | 289,000 | 289,000 |
Preferred stock, shares outstanding | 289,000 | 289,000 |
Preferred stock, Liquidation preference (in dollars per share) | $ 665 | $ 634 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Net product revenue | $ 6,795 | $ 7,150 |
Net customer support and maintenance revenue | 29 | 69 |
Total revenue | 6,824 | 7,219 |
Cost of product revenue | 2,517 | 2,521 |
Cost of customer support and maintenance revenue | 13 | 11 |
Total cost of revenue | 2,530 | 2,532 |
Gross profit | 4,294 | 4,687 |
Operating expenses: | ||
Sales and marketing | 1,894 | 1,735 |
Research and development | 2,315 | 1,941 |
General and administrative | 1,227 | 1,232 |
Operating loss | (1,142) | (221) |
Interest expense, net | (107) | (107) |
Other income | 54 | |
Loss from operations before income taxes | (1,249) | (274) |
Income tax provision | 0 | 0 |
Net loss | (1,249) | (274) |
Preferred stock dividends accrued | (139) | (141) |
Net loss attributable to common stockholders | $ (1,388) | $ (415) |
Net loss per share attributable to common stockholders: | ||
Net loss per share attributable to common stockholders, basic (in dollars per share) | $ (0.11) | $ (0.03) |
Net loss per share attributable to common stockholders, diluted (in dollars per share) | $ (0.11) | $ (0.03) |
Weighted average common shares outstanding: | ||
Basic (in shares) | 12,598 | 12,393 |
Diluted (in shares) | 12,598 | 12,393 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) shares in Thousands, $ in Thousands | PREFERRED STOCK | COMMON STOCK | TREASURY SHARES | ADDITIONAL PAID-IN-CAPITAL | ACCUMULATED DEFICIT | ACCUMULATED OTHER COMPREHENSIVE LOSS | Total |
Balance (in shares) at Dec. 31, 2013 | 1,034 | 12,182 | (362) | ||||
Balance at Dec. 31, 2013 | $ 2,006 | $ 122 | $ 55,905 | $ (58,424) | $ (107) | ||
Increase (decrease) in stockholders' equity | |||||||
Exercise of stock options | $ 2 | 75 | |||||
Exercise of stock options (in shares) | 193 | 193 | |||||
Conversion of preferred stock to common | $ (163) | $ 1 | 162 | ||||
Conversion of preferred stock to common (in shares) | (85) | 96 | |||||
Stock-based compensation | 375 | ||||||
Preferred stock dividends declared, net of waived penalties by shareholders | (135) | $ (141) | |||||
Net loss | (274) | (274) | |||||
Balance (in shares) at Dec. 31, 2014 | 949 | 12,471 | (362) | ||||
Balance at Dec. 31, 2014 | $ 1,843 | $ 125 | 56,382 | (58,698) | (107) | $ (817) | |
Increase (decrease) in stockholders' equity | |||||||
Exercise of stock options | $ 1 | 66 | |||||
Exercise of stock options (in shares) | 151 | 150 | |||||
Stock-based compensation | 206 | ||||||
Preferred stock dividends declared, net of waived penalties by shareholders | (134) | $ (160) | |||||
Net loss | (1,249) | (1,249) | |||||
Balance (in shares) at Dec. 31, 2015 | 949 | 12,622 | (362) | ||||
Balance at Dec. 31, 2015 | $ 1,843 | $ 126 | $ 56,520 | $ (59,947) | $ (107) | $ (1,927) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Operating Activities: | ||
Net loss | $ (1,249) | $ (274) |
Adjustments to reconcile net loss to net cash provided by (used) operating activities: | ||
Depreciation and amortization | 305 | 236 |
Stock-based compensation | 206 | 375 |
Penalties and waived penalties on dividends | 6 | 6 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 157 | 79 |
Inventories | (33) | 7 |
Prepaid expenses and other assets | 48 | (25) |
Accounts payable and accrued expenses | (22) | (136) |
Deferred revenue | (56) | 303 |
Net cash provided by (used in) operating activities | (638) | 571 |
Investing Activities: | ||
Purchases of property and equipment | (121) | (55) |
Financing Activities: | ||
Proceeds from line of credit | 453 | |
Payments on line of credit | (453) | |
Payments of dividends | (558) | |
Principal payments on capital lease equipment | (211) | (168) |
Proceeds from stock options exercised | 66 | 77 |
Net cash used in financing activities | (145) | (649) |
Net decrease in cash and cash equivalents | (904) | (133) |
Cash and cash equivalents at beginning of year | 1,006 | 1,139 |
Cash and cash equivalents at end of year | 102 | 1,006 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Interest paid on leased assets | 24 | 23 |
SUPPLEMENTAL DISCLOSURE OF NON CASH FINANCING ACTIVITIES: | ||
Preferred stock dividends accrued | 160 | 141 |
Purchase of equipment through capital lease | $ 273 | 270 |
Conversion of preferred shares to common stock | $ 163 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2015 | |
Description of Business Abstract | |
Description of Business | 1. Description of Business We develop, market, and support a family of entity identification, data mining, regulated information compliance and data privacy protection. Our product families include: TraceCop for identity identification, Savant for data mining and advanced persistent threat detection and Compliance Commander for regulated information and data privacy protection. Intrusion’s products help protect critical information assets by quickly detecting, protecting, analyzing and reporting attacks or misuse of classified, private and regulated information for government and enterprise networks. We market and distribute our products through a direct sales force to end-users, distributors and numerous system integrators, managed service providers and value-added resellers. Our end-user customers include banks, credit unions, other financial institutions, U.S. federal government entities, foreign government entities, hospitals and other healthcare providers. Essentially, our end-users can be defined as end-users requiring network security solutions for protecting their mission critical data. We were organized in Texas in September 1983 and reincorporated in Delaware in October 1995. For more than 15 years, we provided local area networking equipment and were known as Optical Data Systems or ODS Networks. On April 17, 2000, we sold, or otherwise disposed of, our networking divisions, which included our Essential Communications division and our local area networking assets. On June 1, 2000, we changed our name from ODS Networks, Inc. to Intrusion.com, Inc., and our ticker symbol from ODSI to INTZ to reflect our focus on intrusion prevention and detection solutions, along with information compliance and data privacy protection products. On November 1, 2001, we changed our name from Intrusion.com, Inc. to Intrusion Inc. Our principal executive offices are located at 1101 East Arapaho Road, Suite 200, Richardson, Texas 75081, and our telephone number is (972) 234-6400. Our website URL is www.intrusion.com. References to the “Company”, “we”, “us”, “our”, “Intrusion” or “Intrusion Inc.” refer to Intrusion Inc. and its subsidiaries. Compliance Commander™ and TraceCop™ are registered trademarks of Intrusion Inc. As of December 31, 2015, we had cash and cash equivalents of approximately $102,000, down from approximately $1,006,000 as of December 31, 2014. We generated a net loss of $1,249,000 for the year ended December 31, 2015 compared to net loss of $274,000 for the year ended December 31, 2014. As of December 31, 2015, in addition to cash and cash equivalents of $102,000, we had $380,000 in funding available under our $625,000 line of credit at Silicon Valley Bank (“SVB”) and $670,000 funding available from a promissory note to borrow up to $2.2 million from G. Ward Paxton, the Company’s Chief Executive Officer . We are obligated to make payments of accrued dividends on all our outstanding shares of preferred stock that will reduce our available cash resources. Based on projections of growth in revenue and net income in the coming quarters, and the borrowings available previously mentioned, we believe that we will have sufficient cash resources to finance our operations and expected capital expenditures for the next twelve months. We expect to fund our operations through anticipated Company profits, our line of credit, borrowings from the Company’s CEO, and possibly additional investments of private equity and debt, which, if we are able to obtain, will have the effect of diluting our existing common stockholders, perhaps significantly. Any equity or debt financings, if available at all, may be on terms which are not favorable to us and, in the case of equity financings, may result in dilution to our stockholders. If our operations do not generate positive cash flow in the upcoming year, or if we are not able to obtain additional debt or equity financing on terms and conditions acceptable to us, if at all, we may be unable to implement our business plan, fund our liquidity needs or even continue our operations. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation Our consolidated financial statements include our accounts and those of our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents Cash and all highly liquid investments purchased with an original maturity of less than three months are considered to be cash and cash equivalents. Risk Concentration Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, investments and accounts receivable. Cash and cash equivalent deposits are at risk to the extent that they exceed Federal Deposit Insurance Corporation insured amounts. To minimize risk, we place our investments in U.S. government obligations, corporate securities and money market funds. Substantially all of our cash, cash equivalents and investments are maintained with two major U.S. financial institutions. We do not believe that we are subject to any unusual financial risk with our banking arrangements. We have not experienced any significant losses on our cash and cash equivalents. We sell our products to customers in diversified industries worldwide and periodically have receivables from customers, primarily in North America, Europe and Asia. Fluctuations in currency exchange rates and adverse economic developments in foreign countries could adversely affect the Company’s operating results. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral. We maintain reserves for potential credit losses, and such losses, in the aggregate, have historically been minimal. While we believe that many of the materials used in the production of our products are generally readily available from a variety of sources, certain components may be available from one or a limited number of suppliers. The inability of any supplier or manufacturer to fulfill supply requirements of the Company could impact future results. Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are stated at the amount we expect to collect. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, we provide for estimated uncollectible amounts through a charge to earnings and an increase to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance. There was no allowance at December 31, 2015 and 2014. Inventories Inventories are stated at the lower of cost or market. We value our inventories using average cost, which approximates actual cost on a first-in, first-out basis. Our management estimates the allowance required to state inventory at the lower of cost or market. There is a risk that we will forecast demand for our products and market conditions incorrectly and maintain excess inventories. Therefore, there can be no assurance that we will not maintain excess inventory and incur inventory lower of cost or market charges in the future. All inventory on hand at December 31, 2015 and 2014 is finished goods inventory. Property and Equipment Equipment and furniture and fixtures are stated at cost less accumulated depreciation and depreciated on a straight-line basis over the estimated useful lives of the assets. Such lives vary from 1 to 5 years. Leasehold improvements are stated at cost less accumulated amortization and are amortized on a straight-line basis over the shorter of estimated useful lives of the assets or the remaining terms of the leases. Such lives vary from 2 to 5 years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Repair and maintenance costs are expensed as incurred. Depreciation and amortization expense totaled approximately $305,000 and $236,000 for the years ended December 31, 2015 and 2014, respectively. Long-Lived Assets We review long-lived assets, including property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows to be generated by the asset. If the carrying value exceeds the future undiscounted cash flows, the assets are written down to fair value. During the years ended December 31, 2015 and 2014, there was no impairment of long-lived assets. Foreign Currency All assets and liabilities in the balance sheets of foreign subsidiaries whose functional currency is other than the U.S. dollar are translated at year-end exchange rates. All revenues and expenses in the statement of operations of these foreign subsidiaries are translated at average exchange rates for the year. Translation gains and losses are not included in determining net income but are shown in accumulated other comprehensive loss in the stockholders’ deficit section of the consolidated balance sheet. Foreign currency transaction gains and losses are included in determining net loss and were not significant. Accounting for Stock Options We account for stock options using the guidance in Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. FASB ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Stock-based compensation expense recognized in the statements of operations for the years ended 2015 and 2014 is based on awards ultimately expected to vest, reduced by estimated forfeitures. FASB ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Valuation Assumptions The fair values of option awards were estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for fiscal years ended December 31, 2015 and 2014, respectively: 2015 2014 Weighted average grant date fair value $ $ Weighted average assumptions used: Expected dividend yield % % Risk-free interest rate % % Expected volatility % % Expected life (in years) Expected volatility is based on historical volatility and in part on implied volatility. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award. Net Loss Per Share We report two separate net loss per share numbers, basic and diluted. Basic net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders for the year by the weighted average number of common shares outstanding for the year. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders for the year by the weighted average number of common shares and dilutive common stock equivalents outstanding for the year. Our common stock equivalents include all common stock issuable upon conversion of convertible preferred stock and the exercise of outstanding options. Common stock equivalents are included in the diluted loss per share for the years ended December 31, 2015 and 2014 except in cases where the issuance would be anti-dilutive. The aggregate number of common stock equivalents excluded from the diluted loss per share calculation at December 31, 2015 and 2014 totaled 3,765,959 and 3,132,330, respectively. Revenue Recognition We generally recognize product revenue upon shipment. These products include both hardware and perpetual software licenses, as we do not currently offer software on a subscription basis. We accrue for estimated warranty costs and sales returns at the time of shipment based on our experience. There is a risk that technical issues on new products could result in unexpected warranty costs and returns. To the extent that our warranty costs exceed our expectations, we will increase our warranty reserve to compensate for the additional expense expected to be incurred. We review these estimates periodically and determine the appropriate reserve percentage. However, to date, warranty costs and sales returns have not been material. The customer may return a product only under very limited circumstances during the first thirty days from delivery for a replacement if the product is damaged or for a full refund if the product does not perform as intended. Historically, most or our sales returns were related to hardware-based products. As we continue to migrate away from such hardware-based products, these returns have declined. We recognize software revenue from the licensing of our software products in accordance with FASB ASC Topic 605 whereby revenue from the licensing of our products is not recognized until all four of the following have been met: i) execution of a written agreement; ii) delivery of the product has occurred; iii) the fee is fixed and determinable; and iv) collectability is probable. Bundled hardware and software product revenue is recognized at time of delivery, as our licenses are not sold on a subscription basis. Product sales which include maintenance and customer support allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy using the relative selling price method. All of our product offering and service offering market values are readily determined based on current and prior stand-alone sales. We defer and recognize maintenance and support revenue over the term of the contract period, which is generally one year. Deferred revenue represents deposits on licensing for software products. Service revenue, primarily including maintenance, training and installation are recognized upon delivery of the service and typically are unrelated to product sales. To date, training and installation revenue has not been material. These revenues are included in net customer support and maintenance revenues in the statement of operations. Our normal payment terms offered to customers, distributors and resellers are net 30 days domestically and net 45 days internationally. We do not offer payment terms that extend beyond one year and rarely do we extend payment terms beyond our normal terms. If certain customers do not meet our credit standards, we do require payment in advance to limit our credit exposure. Shipping and handling costs are billed to the customer and included in product revenue. Our costs of shipping and handling are included in cost of product revenue. Research and Development Costs We incur research and development costs that relate primarily to the development of new security software, appliances and integrated solutions, and major enhancements to existing services and products. Research and development costs are comprised primarily of salaries and related benefits expenses, contract labor and prototype and other related expenses. Software development costs are included in research and development and are expensed as incurred. FASB ASC Topic 350 Intangibles—Goodwill and Other requires that software development costs incurred subsequent to reaching technological feasibility be capitalized, if material. If the process of developing a new product or major enhancement does not include a detailed program design, technological feasibility is determined only after completion of a working model. To date, the period between achieving technological feasibility and the general availability of such software has been short, and the software development costs qualifying for capitalization have been insignificant. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates are used for, but not limited to, the accounting for doubtful accounts, sales discounts, sales returns, revenue recognition, warranty costs, inventory obsolescence, depreciation and income taxes. Actual results could differ from these estimates. Fair Value of Financial Instruments We calculate the fair value of our assets and liabilities which qualify as financial instruments and include additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of accounts receivable, accounts payable and accrued expenses, and dividends payable approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of the line of credit payable approximates fair value since this instrument bears market interest rates. Loans payable to officer are with a related party and as a result do not bear market rates of interest. Management believes based on its current financial position that it could not obtain comparable amounts of third party financing, and as such cannot estimate the fair value of the loans payable to officer. None of these instruments are held for trading purposes. Income Taxes Deferred income taxes are determined using the liability method in accordance with FASB ASC 740, Accounting for Income Taxes . Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized. FASB ASC 740 creates a single model to address accounting for uncertainty in tax positions by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. FASB ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. There are no unrecognized tax benefits to disclose in the notes to the consolidated financial statements. We file income tax returns in the United States federal jurisdiction. At December 31, 2015, tax returns related to fiscal years ended December 31, 2010 through December 31, 2014 remain open to possible examination by the tax authorities. No tax returns are currently under examination by any tax authorities. We did not incur any penalties or interest during the years ended December 31, 2015 and 2014. Recent Accounting Pronouncements Revenue Recognition In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most current revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for us beginning 2018, and requires using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018. In November 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which eliminates the current requirement to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be classified as noncurrent. The new standard will be effective for us beginning with the first quarter of 2017. Early adoption is permitted. We are evaluating the impact that this new standard will have on our Consolidated Financial Statements. On February 25, 2016, the FASB issued Accounting Standards Update (ASU) 2016-02 Leases (Topic 842), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its Consolidated Financial Statements. |
Balance Sheet Detail (in thousa
Balance Sheet Detail (in thousands) | 12 Months Ended |
Dec. 31, 2015 | |
Balance Sheet Detail (in thousands) | |
Balance Sheet Detail (in thousands) | 3. Balance Sheet Detail (in thousands) Inventories December 31, 2015 2014 Finished products $ $ Accrued Expenses December 31, 2015 2014 Accrued payroll $ $ Accrued vacation Rent payable Accrued interest, related party Accrued bonus — — Other $ $ |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 4. Commitments and Contingencies Leases We lease office space for our corporate headquarters in Richardson, Texas under an operating lease, the base term of which expires in December 2017. We lease office space in San Diego and San Marcos, California for a portion of our security software research and development staff under two separate operating leases. The California leases normally renew for one to two year terms. The Company’s lease for the headquarters facility contains escalation provisions. The Company records rent expense on facility leases on a straight-line basis. Rent expense totaled approximately $384,000 and $394,000 for the years ended December 31, 2015 and 2014, respectively. Future minimum rental payments under these leases as of December 31, 2015 are as follows (in thousands): Year ending December 31, Minimum Lease Payments 2016 $ 2017 2018 and thereafter — $ We have other capital lease obligations that consist primarily of obligations to purchase goods that are enforceable and legally binding. Our obligations primarily relate to computer equipment. Future minimum payments under these leases as of December 31, 2015 are as follows (in thousands): Year ending December 31, Capital Lease Obligations 2016 $ 2017 2018 2019 and thereafter — Less amounts representing interest ) $ Legal Proceedings We are subject to legal proceedings and claims that arise in the ordinary course of business. We do not believe that the outcome of those matters will have a material adverse effect on our consolidated financial position, operating results or cash flows. However, there can be no assurance such legal proceedings will not have a material impact. We are not aware of any material claims outstanding or pending against Intrusion Inc. at December 31, 2015. |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2015 | |
Employee Benefit Plan | |
Employee Benefit Plan | 5. Employee Benefit Plan Employee 401(k) Plan We have a plan known as the Intrusion Inc. 401(k) Savings Plan (the “Plan”) to provide retirement and incidental benefits for our employees. The Plan covers substantially all employees who meet minimum age and service requirements. As allowed under Section 401(k) of the Internal Revenue Code, the Plan provides tax deferred salary deductions for eligible employees. Employees may contribute from 1% to 25% of their annual compensation to the Plan, limited to a maximum amount as set by the Internal Revenue Service. Participants who are over the age of 50 may contribute an additional amount of their salary per year, as defined annually by the Internal Revenue Service. We match employee contributions at the rate of $0.25 per each $1.00 of contribution on the first 4% of compensation. Matching contributions to the Plan were approximately $31,000 and $29,000, respectively, for the years ended December 31, 2015 and 2014. |
Line of Credit
Line of Credit | 12 Months Ended |
Dec. 31, 2015 | |
Line of Credit | |
Line of Credit | 6. Line of Credit On March 29, 2006, we entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) to establish a $1.0 million line of credit (the “2006 Credit Line”). On June 30, 2008, we entered into an Amended and Restated Loan and Security Agreement with SVB to, among other things, replace the 2006 Credit Line with a $2.5 million line of credit (the “2008 Credit Line”). On June 23, 2015, we entered into the Seventh Amendment to the Amended and Restated Loan and Security Agreement (as amended, the “Loan Agreement”) with SVB to replace our expiring line with a $0.625 million line of credit (the “Current Line of Credit”). Our obligations under the Loan Agreement are secured by substantially all of our assets, including all of our intellectual property. In addition, G. Ward Paxton, the Company’s Chairman, President and Chief Executive Officer, has established a Guaranty Agreement with SVB securing all outstanding balances under the Current Line of Credit. Borrowings under the Current Line of Credit are based on advances (each an “Advance”) against certain of our accounts receivable that are approved by SVB (each an “Eligible Account”). SVB may make an Advance of up to eighty percent (80%) of each Eligible Account, or such other percentage SVB may determine in its sole discretion. As of December 31, 2015, the borrowing base was $380,000. Each Advance is subject to a finance charge calculated as a daily rate that is based on a 360-day annual rate of the greater of the prime rate plus 2.0% or 7.0%. Finance charges are payable at the same time its related Advance is due. Each Advance is also subject to a monthly collateral handling fee of 0.5% of all outstanding Advances, depending on certain qualifying financial factors specified in the Loan Agreement. The collateral handling fee is payable at the same time its related Advance is due. Each Advance must be repaid at the earliest of (a) the date that the Eligible Account related to the Advance is paid, (b) the date the Eligible Account is no longer eligible under the Loan Agreement, or (c) the date on which any “Adjustment” (as defined in the Loan Agreement) is asserted to the Eligible Account. We have certain non-financial and financial covenants, including a liquidity coverage ratio and a rolling EBITDA computation, as defined in the Loan Agreement. On June 21, 2016, the Loan Agreement terminates and all outstanding Advances, accrued but unpaid finance charges, outstanding collateral handing fees, and other amounts become due under the Loan Agreement and related documents. As of December 31, 2015 and 2014 we had no borrowings outstanding under the Current Line of Credit and are within limits of all debt covenants. |
Borrowings from Officer
Borrowings from Officer | 12 Months Ended |
Dec. 31, 2015 | |
Borrowings from Officer | |
Borrowings from Officer | 7. Borrowings from Officer On February 5, 2015, the Company entered into an unsecured revolving promissory note to borrow up to $2,200,000 from G. Ward Paxton, the Company’s Chief Executive Officer. Under the terms of the note, the Company may borrow, repay and reborrow on the loan as needed up to an outstanding principal balance due of $2,200,000 at any given time through March 2016. On February 4, 2016, the Company renewed the CEO note described above on the same terms, with the Company being able to borrow, repay and reborrow on the note as needed up to an outstanding principal balance due of $2,200,000 at any given time through March 2018. Amounts borrowed from this officer accrue interest at a floating rate per annum equal to SVB’s prime rate plus 1% (5% at December 31, 2015). All outstanding borrowings and accrued but unpaid interest is due on March 31, 2018. As of December 31, 2015, the borrowings outstanding totaled $1,530,000 and accrued interest totaled $76,500. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes | |
Income Taxes | 8. Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets (liabilities) as of December 31, 2015 and 2014 are as follows (in thousands): December 31 2015 2014 Net operating loss carryforwards $ $ Net operating loss carryforwards of foreign subsidiaries Book over tax depreciation ) ) Stock-based compensation expense Other Deferred tax assets Valuation allowance for deferred tax assets ) ) Deferred tax assets, net of allowance $ — $ — Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the future benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the near to medium term. Management has considered these factors in determining the valuation allowance for 2015 and 2014. The differences between the provision for income taxes and income taxes computed using the federal statutory rate for the years ended December 31, 2015 and 2014 are as follows (in thousands): 2015 2014 Reconciliation of income tax benefit to statutory rate: Income benefit at statutory rate $ ) $ ) State income taxes (benefit), net of federal income tax benefit ) RTP (ISO expense) Permanent differences Change in valuation allowance ) ) Change in state tax rate Other — $ — $ — At December 31, 2015, we had federal net operating loss carryforwards of approximately $86.6 million for income tax purposes that begin to expire in 2022 and are subject to the ownership change limitations under Internal Revenue Code Section 382. We also have approximately $6 million of state net operating loss carryforwards that begin to expire in 2017. |
Stock Options
Stock Options | 12 Months Ended |
Dec. 31, 2015 | |
Stock Options | |
Stock Options | 9. Stock Options At December 31, 2015, we had two stock-based compensation plans, which are described below. These plans were developed to retain and attract key employees and directors. On March 17, 2005, the Board approved the 2005 Stock Incentive Plan (the “2005 Plan”), which was approved by the stockholders on June 14, 2005. The 2005 Plan provided for the issuance of up to 750,000 shares of common stock upon exercise of options granted pursuant to the 2005 Plan. On May 30, 2007, the stockholders approved an Amendment to the 2005 Plan that increased this amount by 750,000 for a total of 1,500,000 shares of common stock that may be issued upon the exercise of options granted pursuant to the 2005 Plan. On May 29, 2008 and May 21, 2009, the stockholders approved an increase of 500,000 shares, respectively, of common stock that may be issued pursuant to the 2005 Plan for a total of 2,500,000 shares. On May 20, 2010, the stockholders approved an additional increase of 500,000 shares of common stock that may be issued pursuant to the 2005 Plan for a total of 3,000,000 shares. On May 19, 2011, the stockholders approved an additional increase of 400,000 shares of common stock that may be issued pursuant to the 2005 Plan for a total of 3,400,000 shares. Finally, on May 17, 2012, the stockholders approved an additional increase of 300,000 shares of common stock that may be issued pursuant to the 2005 Plan for a total of 3,700,000 shares. At December 31, 2015, 632,835 had been exercised and options to purchase a total of 2,595,334 shares of common stock were outstanding. A total of 3,892,000 options had been granted under the 2005 Plan, of which 663,831 have been cancelled. The 2015 Plan expired on December 31, 2015 and no shares remain for grant. On March 19, 2015, the Board approved the 2015 Stock Incentive Plan (the “2015 Plan”), which was approved by the stockholders on May 14, 2015. The 2015 Plan serves as a replacement for the 2005 Plan which expired by its terms on June 14, 2015. The approval of the 2015 Plan had no effect on the 2005 Plan or any options granted pursuant to the plan. All options will continue with their existing terms and will be subject to the 2005 Plan. Further, the Company will not be able to re-issue any option which is cancelled or terminated under the 2005 Plan. The 2015 Plan provided for the issuance of up to 600,000 shares of common stock upon exercise of options granted pursuant to the 2015 Plan. The 2015 Plan consists of three separate equity incentive programs: the Discretionary Option Grant Program; the Stock Issuance Program; and the Automatic Option Grant Program for non-employee Board members. Officers and employees, non-employee Board members and independent contractors are eligible to participate in the Discretionary Option Grant and Stock Issuance Programs. Participation in the Automatic Option Grant Program is limited to non-employee members of the Board. Each non-employee Board member will receive an option grant for 10,000 shares of common stock upon initial election or appointment to the Board, provided that such individual has not previously been employed by the Company in the preceding three (3) months. In addition, on the date of each annual stockholders meeting, each Board member will automatically be granted an option to purchase 8,000 shares of common stock, provided he or she has served as a non-employee Board member for at least three months. At December 31, 2015, no options had been exercised and options to purchase a total of 3,000 shares of common stock were outstanding. A total of 3,000 options had been granted under the 2015 Plan, of which no shares have been cancelled and options for 597,000 shares remained available for future grant. No shares have been issued pursuant to the Stock Issuance Program. Common shares reserved for future issuance, including conversions of preferred stock, outstanding options and options available for future grant under all of the stock option plans totaled 4,262,776 shares at December 31, 2015 as follows, in thousands: (In thousands) Common Shares Reserved for Future Issuance Preferred Stock 2015 Plan 2005 Plan Total The Compensation Committee of our Board of Directors determines for all employee options, the term of each option, option exercise price within limits set forth in the plans, number of shares for which each option is granted and the rate at which each option is exercisable (generally ratably over one, three or five years from grant date). However, the exercise price of any incentive stock option may not be less than the fair market value of the shares on the date granted (or less than 110% of the fair market value in the case of optionees holding more than 10% of our voting stock of the Company), and the term cannot exceed ten years (five years for incentive stock options granted to holders of more than 10% of our voting stock). Stock Incentive Plan Summary A summary of our stock option activity and related information for the years ended December 31, 2015 and 2014 is as follows: 2015 2014 Number of Options (in thousands) Weighted Average Exercise Price Number of Options (in thousands) Weighted Average Exercise Price Outstanding at beginning of year $ $ Granted at price = market value Granted at price > market value — — Exercised ) ) Forfeited ) ) Expired ) ) Outstanding at end of year $ $ Options exercisable at end of year $ $ Stock Options Outstanding and Exercisable Information related to stock options outstanding at December 31, 2015, is summarized below: Options Outstanding Options Exercisable Range of Exercise Prices Outstanding at 12/31/15 (in thousands) Weighted Average Remaining Contractual Life Weighted Average Exercise Price Exercisable at 12/31/15 (in thousands) Weighted Average Exercise Price $ 0.20-$0.50 3.10 years $ $ $ 0.51-$1.00 3.72 years $ $ $ 1.01-$2.87 6.99 years $ $ 3.76 years $ $ Summarized information about outstanding stock options as of December 31, 2015, that are fully vested and those that are expected to vest in the future as well as stock options that are fully vested and currently exercisable, are as follows: Outstanding Stock Options (Fully Vested and Expected to Vest)* Options that are Exercisable As of December 31, 2015 Number of outstanding options (in thousands) Weighted average remaining contractual life Weighted average exercise price per share $ $ .51 Intrinsic value (in thousands) $ $ * Includes effects of expected forfeitures As of December 31, 2015, the total unrecognized compensation cost related to non-vested options not yet recognized in the statement of operations totaled approximately $117 thousand (including expected forfeitures) and the weighted average period over which these awards are expected to vest was .58 years. |
Preferred Stock
Preferred Stock | 12 Months Ended |
Dec. 31, 2015 | |
Preferred Stock | |
Preferred Stock | 10. Preferred Stock 5% Preferred Stock On March 25, 2004, we completed a $5.0 million private placement of our 5% convertible preferred stock and warrants. In the private placement, we sold 1,000,000 shares of our 5% preferred stock at a price of $5.00 per share for gross proceeds of $5.0 million, less $275,000 of issuance costs. The 5% preferred shares were initially convertible into 1,590,331 shares of common stock at a conversion price of $3.144 per share. Holders of the 5% convertible preferred stock include 140,000 shares purchased by our CEO and 60,000 shares purchased by a director of the Company. The 5% dividends related to the 5% preferred stock are paid semi-annually on the last business day in March and September of each year, beginning with September 2004. Preferred stockholders vote together with common stockholders on an as converted to common stock basis. Based on the conversion rate of the preferred stock, holders of our 5% preferred stock will receive 1.5903 votes per share rounded to the nearest whole number. The liquidation preference for the 5% preferred stock is an amount equal to $5.00 per share plus any accrued and unpaid dividends. Holders of our 5% preferred stock have liquidation preference rights over common stockholders. All warrants previously issued to 5% convertible preferred stock holders have expired. We have the right to redeem any or all of the outstanding 5% preferred stock at a price of $5.00 per share plus accrued dividends at any time if certain conditions are met. At December 31, 2015, there were 200,000 shares of the Series 1 Preferred Stock outstanding, representing approximately 318,065 shares of common stock upon conversion. Series 2 5% Preferred Stock On March 28, 2005, we completed a $2.7 million private placement of Series 2 5% convertible preferred stock and warrants. In the private placement, we sold 1,065,200 shares of preferred stock at a price of $2.50 per share for gross proceeds of $2.7 million, less $173,000 of issuance costs. The shares of Series 2 5% preferred stock are convertible into 1,065,200 shares of common stock at an initial conversion price of $2.50 per share. Holders of the Series 2 5% preferred stock include 260,000 shares by our CEO, 100,000 shares by our CFO and 60,000 shares by a director of the Company. The 5% dividends accruing on the Series 2 5% preferred stock are required to be paid quarterly on the first business day in March, June, September and December of each year, beginning with June 2005. The liquidation preference for the preferred stock is an amount equal to $2.50 per share plus any accrued and unpaid dividends. Holders of our Series 2 5% preferred stock have liquidation preference rights over our 5% preferred stock holders as well as our common stockholders. The holders of the Series 2 5% preferred stock are not entitled to vote on any matter, except as otherwise required by law or with respect to certain limited matters specified in the certificate of designations. All warrants previously issued to Series 2 5% convertible preferred stock holders have expired. Holders of Series 2 5% preferred stock have the right to require us to redeem any or all of the their shares upon the occurrence of certain events within the Company’s control that are defined in Certificate of Designation at a price equal the sum of (1) the greater of $3.25 and the product of the volume weighted average price of our common stock on the trading day immediately preceding the event multiplied by $2.50 divided by the conversion price then in effect plus (2) any accrued but unpaid dividends on the Series 2 5% preferred stock plus (3) all liquidated damages or other amounts payable to the holders of Series 2 5% preferred stock. At December 31, 2015 there were 460,000 shares of the Series 2 Preferred Stock outstanding, representing 460,000 shares of common stock upon conversion. Series 3 5% Preferred Stock On December 2, 2005, we completed a $1.2 million private placement of Series 3 5% convertible preferred stock and warrants. In the private placement, we sold 564,607 shares of preferred stock at a price of $2.18 per share for gross proceeds of $1.2 million, less $100,000 of issuance costs. The shares of Series 3 5% preferred stock are convertible into 564,607 shares of common stock at an initial conversion price of $2.18 per share. Holders of the Series 3 5% preferred stock include 123,853 shares by our CEO, 68,808 shares by our CFO and 27,523 shares purchased by a director of the Company. The 5% dividends accruing on the Series 3 5% preferred stock are required to be paid quarterly on the first business day in March, June, September and December of each year, beginning with March 1, 2006. The liquidation preference for the preferred stock is an amount equal to $2.18 per share plus any accrued and unpaid dividends. Holders of our Series 3 5% preferred stock have liquidation preference rights over holders of our 5% preferred, Series 2 5% preferred stock and common stock. The holders of the Series 3 5% preferred stock are not entitled to vote on any matter, except as otherwise required by law or with respect to certain limited matters specified in the certificate of designations. All warrants previously issued to Series 3 5% convertible preferred stock holders have expired. Holders of Series 3 5% preferred stock have the right to require us to redeem any or all of their shares upon the occurrence of certain events within the Company’s control that are defined in the certificate of designation at a price equal the sum of (1) the greater of $2.834 and the product of the volume weighted average price of our common stock on the trading day immediately preceding the event multiplied by $2.18 divided by the conversion price then in effect plus (2) any accrued but unpaid dividends on the Series 3 5% preferred stock plus (3) all liquidated damages or other amounts payable to the holders of Series 3 5% preferred stock. At December 31, 2015 there were 289,377 shares of Series 3 Preferred Stock outstanding, representing 289,377 shares of common stock upon conversion. Dividends Payable During the fiscal year ended December 31, 2015, we accrued $50,000 in dividends to the holders of our 5% Preferred Stock, $58,000 in dividends to the holders of our Series 2 5% Preferred Stock and $32,000 in dividends to the holders of our Series 3 5% Preferred Stock. As of December 31, 2015, we have $160,000 in accrued and unpaid dividends included in other current liabilities. Delaware law provides that we may only pay dividends out of our capital surplus or, if no surplus is available, out of our net profits for the fiscal year the dividend is declared and/or the preceding fiscal year. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2015 | |
Concentrations | |
Concentrations | 11. Concentrations Our operations are concentrated in one area—security software/entity identification. Sales to the U.S. Government through direct and indirect channels totaled 54.7% of total revenues for 2015 and 51.4% of total revenues for 2014. During 2015 approximately 43.9% of total revenues were attributable to three government customers. During 2014 approximately 41.8% of total revenues are attributable to four government customers. No individual commercial customer in 2015 exceeded 30% of total revenues for the year; while 2014 had one individual commercial customer that exceeded 30% of total revenues for the year. Our similar product and service offerings are not viewed as individual segments, as our management analyzes the business as a whole and expenses are not allocated to each product offering. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events | |
Subsequent Events | 12. Subsequent Events On February 4, 2016, the Company entered into an unsecured revolving promissory note to borrow up to $2,200,000 from G. Ward Paxton, the Company’s Chief Executive Officer. Under the terms of the note, the Company may borrow, repay and reborrow on the loan as needed up to an outstanding principal balance due of $2,200,000 at any given time through March 2018. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation Our consolidated financial statements include our accounts and those of our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and all highly liquid investments purchased with an original maturity of less than three months are considered to be cash and cash equivalents. |
Risk Concentration | Risk Concentration Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, investments and accounts receivable. Cash and cash equivalent deposits are at risk to the extent that they exceed Federal Deposit Insurance Corporation insured amounts. To minimize risk, we place our investments in U.S. government obligations, corporate securities and money market funds. Substantially all of our cash, cash equivalents and investments are maintained with two major U.S. financial institutions. We do not believe that we are subject to any unusual financial risk with our banking arrangements. We have not experienced any significant losses on our cash and cash equivalents. We sell our products to customers in diversified industries worldwide and periodically have receivables from customers, primarily in North America, Europe and Asia. Fluctuations in currency exchange rates and adverse economic developments in foreign countries could adversely affect the Company’s operating results. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral. We maintain reserves for potential credit losses, and such losses, in the aggregate, have historically been minimal. While we believe that many of the materials used in the production of our products are generally readily available from a variety of sources, certain components may be available from one or a limited number of suppliers. The inability of any supplier or manufacturer to fulfill supply requirements of the Company could impact future results. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are stated at the amount we expect to collect. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, we provide for estimated uncollectible amounts through a charge to earnings and an increase to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance. There was no allowance at December 31, 2015 and 2014. |
Inventories | Inventories Inventories are stated at the lower of cost or market. We value our inventories using average cost, which approximates actual cost on a first-in, first-out basis. Our management estimates the allowance required to state inventory at the lower of cost or market. There is a risk that we will forecast demand for our products and market conditions incorrectly and maintain excess inventories. Therefore, there can be no assurance that we will not maintain excess inventory and incur inventory lower of cost or market charges in the future. All inventory on hand at December 31, 2015 and 2014 is finished goods inventory. |
Property and Equipment | Property and Equipment Equipment and furniture and fixtures are stated at cost less accumulated depreciation and depreciated on a straight-line basis over the estimated useful lives of the assets. Such lives vary from 1 to 5 years. Leasehold improvements are stated at cost less accumulated amortization and are amortized on a straight-line basis over the shorter of estimated useful lives of the assets or the remaining terms of the leases. Such lives vary from 2 to 5 years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Repair and maintenance costs are expensed as incurred. Depreciation and amortization expense totaled approximately $305,000 and $236,000 for the years ended December 31, 2015 and 2014, respectively. |
Long-Lived Assets | Long-Lived Assets We review long-lived assets, including property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows to be generated by the asset. If the carrying value exceeds the future undiscounted cash flows, the assets are written down to fair value. During the years ended December 31, 2015 and 2014, there was no impairment of long-lived assets. |
Foreign Currency | Foreign Currency All assets and liabilities in the balance sheets of foreign subsidiaries whose functional currency is other than the U.S. dollar are translated at year-end exchange rates. All revenues and expenses in the statement of operations of these foreign subsidiaries are translated at average exchange rates for the year. Translation gains and losses are not included in determining net income but are shown in accumulated other comprehensive loss in the stockholders’ deficit section of the consolidated balance sheet. Foreign currency transaction gains and losses are included in determining net loss and were not significant. |
Accounting for Stock Options | Accounting for Stock Options We account for stock options using the guidance in Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. FASB ASC Topic 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Stock-based compensation expense recognized in the statements of operations for the years ended 2015 and 2014 is based on awards ultimately expected to vest, reduced by estimated forfeitures. FASB ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Valuation Assumptions The fair values of option awards were estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for fiscal years ended December 31, 2015 and 2014, respectively: 2015 2014 Weighted average grant date fair value $ $ Weighted average assumptions used: Expected dividend yield % % Risk-free interest rate % % Expected volatility % % Expected life (in years) Expected volatility is based on historical volatility and in part on implied volatility. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award. |
Net Loss Per Share | Net Loss Per Share We report two separate net loss per share numbers, basic and diluted. Basic net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders for the year by the weighted average number of common shares outstanding for the year. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders for the year by the weighted average number of common shares and dilutive common stock equivalents outstanding for the year. Our common stock equivalents include all common stock issuable upon conversion of convertible preferred stock and the exercise of outstanding options. Common stock equivalents are included in the diluted loss per share for the years ended December 31, 2015 and 2014 except in cases where the issuance would be anti-dilutive. The aggregate number of common stock equivalents excluded from the diluted loss per share calculation at December 31, 2015 and 2014 totaled 3,765,959 and 3,132,330, respectively. |
Revenue Recognition | Revenue Recognition We generally recognize product revenue upon shipment. These products include both hardware and perpetual software licenses, as we do not currently offer software on a subscription basis. We accrue for estimated warranty costs and sales returns at the time of shipment based on our experience. There is a risk that technical issues on new products could result in unexpected warranty costs and returns. To the extent that our warranty costs exceed our expectations, we will increase our warranty reserve to compensate for the additional expense expected to be incurred. We review these estimates periodically and determine the appropriate reserve percentage. However, to date, warranty costs and sales returns have not been material. The customer may return a product only under very limited circumstances during the first thirty days from delivery for a replacement if the product is damaged or for a full refund if the product does not perform as intended. Historically, most or our sales returns were related to hardware-based products. As we continue to migrate away from such hardware-based products, these returns have declined. We recognize software revenue from the licensing of our software products in accordance with FASB ASC Topic 605 whereby revenue from the licensing of our products is not recognized until all four of the following have been met: i) execution of a written agreement; ii) delivery of the product has occurred; iii) the fee is fixed and determinable; and iv) collectability is probable. Bundled hardware and software product revenue is recognized at time of delivery, as our licenses are not sold on a subscription basis. Product sales which include maintenance and customer support allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy using the relative selling price method. All of our product offering and service offering market values are readily determined based on current and prior stand-alone sales. We defer and recognize maintenance and support revenue over the term of the contract period, which is generally one year. Deferred revenue represents deposits on licensing for software products. Service revenue, primarily including maintenance, training and installation are recognized upon delivery of the service and typically are unrelated to product sales. To date, training and installation revenue has not been material. These revenues are included in net customer support and maintenance revenues in the statement of operations. Our normal payment terms offered to customers, distributors and resellers are net 30 days domestically and net 45 days internationally. We do not offer payment terms that extend beyond one year and rarely do we extend payment terms beyond our normal terms. If certain customers do not meet our credit standards, we do require payment in advance to limit our credit exposure. Shipping and handling costs are billed to the customer and included in product revenue. Our costs of shipping and handling are included in cost of product revenue. |
Research and Development Costs | Research and Development Costs We incur research and development costs that relate primarily to the development of new security software, appliances and integrated solutions, and major enhancements to existing services and products. Research and development costs are comprised primarily of salaries and related benefits expenses, contract labor and prototype and other related expenses. Software development costs are included in research and development and are expensed as incurred. FASB ASC Topic 350 Intangibles—Goodwill and Other requires that software development costs incurred subsequent to reaching technological feasibility be capitalized, if material. If the process of developing a new product or major enhancement does not include a detailed program design, technological feasibility is determined only after completion of a working model. To date, the period between achieving technological feasibility and the general availability of such software has been short, and the software development costs qualifying for capitalization have been insignificant. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates are used for, but not limited to, the accounting for doubtful accounts, sales discounts, sales returns, revenue recognition, warranty costs, inventory obsolescence, depreciation and income taxes. Actual results could differ from these estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments We calculate the fair value of our assets and liabilities which qualify as financial instruments and include additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of accounts receivable, accounts payable and accrued expenses, and dividends payable approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of the line of credit payable approximates fair value since this instrument bears market interest rates. Loans payable to officer are with a related party and as a result do not bear market rates of interest. Management believes based on its current financial position that it could not obtain comparable amounts of third party financing, and as such cannot estimate the fair value of the loans payable to officer. None of these instruments are held for trading purposes. |
Income Taxes | Income Taxes Deferred income taxes are determined using the liability method in accordance with FASB ASC 740, Accounting for Income Taxes . Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized. FASB ASC 740 creates a single model to address accounting for uncertainty in tax positions by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. FASB ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. There are no unrecognized tax benefits to disclose in the notes to the consolidated financial statements. We file income tax returns in the United States federal jurisdiction. At December 31, 2015, tax returns related to fiscal years ended December 31, 2010 through December 31, 2014 remain open to possible examination by the tax authorities. No tax returns are currently under examination by any tax authorities. We did not incur any penalties or interest during the years ended December 31, 2015 and 2014. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Revenue Recognition In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most current revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for us beginning 2018, and requires using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018. In November 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which eliminates the current requirement to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be classified as noncurrent. The new standard will be effective for us beginning with the first quarter of 2017. Early adoption is permitted. We are evaluating the impact that this new standard will have on our Consolidated Financial Statements. On February 25, 2016, the FASB issued Accounting Standards Update (ASU) 2016-02 Leases (Topic 842), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its Consolidated Financial Statements. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies | |
Schedule of fair value option awards | 2015 2014 Weighted average grant date fair value $ $ Weighted average assumptions used: Expected dividend yield % % Risk-free interest rate % % Expected volatility % % Expected life (in years) |
Balance Sheet Detail (in thou21
Balance Sheet Detail (in thousands) (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Balance Sheet Detail (in thousands) | |
Schedule of inventories | December 31, 2015 2014 Finished products $ $ |
Schedule of accrued expenses | December 31, 2015 2014 Accrued payroll $ $ Accrued vacation Rent payable Accrued interest, related party Accrued bonus — — Other $ $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies. | |
Schedule of future minimum lease obligations under operating leases | Future minimum rental payments under these leases as of December 31, 2015 are as follows (in thousands): Year ending December 31, Minimum Lease Payments 2016 $ 2017 2018 and thereafter — $ |
Schedule of future minimum lease obligations under capital leases | Future minimum payments under these leases as of December 31, 2015 are as follows (in thousands): Year ending December 31, Capital Lease Obligations 2016 $ 2017 2018 2019 and thereafter — Less amounts representing interest ) $ |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes | |
Schedule of significant components of deferred tax assets (liabilities) | Significant components of our deferred tax assets (liabilities) as of December 31, 2015 and 2014 are as follows (in thousands): December 31 2015 2014 Net operating loss carryforwards $ $ Net operating loss carryforwards of foreign subsidiaries Book over tax depreciation ) ) Stock-based compensation expense Other Deferred tax assets Valuation allowance for deferred tax assets ) ) Deferred tax assets, net of allowance $ — $ — |
Reconciliation of income tax benefit to statutory tax rate | The differences between the provision for income taxes and income taxes computed using the federal statutory rate for the years ended December 31, 2015 and 2014 are as follows (in thousands): 2015 2014 Reconciliation of income tax benefit to statutory rate: Income benefit at statutory rate $ ) $ ) State income taxes (benefit), net of federal income tax benefit ) RTP (ISO expense) Permanent differences Change in valuation allowance ) ) Change in state tax rate Other — $ — $ — |
Stock Options (Tables)
Stock Options (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Stock Options | |
Schedule of common shares reserved for future issuance | Common shares reserved for future issuance, including conversions of preferred stock, outstanding options and options available for future grant under all of the stock option plans totaled 4,262,776 shares at December 31, 2015 as follows, in thousands: (In thousands) Common Shares Reserved for Future Issuance Preferred Stock 2015 Plan 2005 Plan Total |
Summary of stock option activity | 2015 2014 Number of Options (in thousands) Weighted Average Exercise Price Number of Options (in thousands) Weighted Average Exercise Price Outstanding at beginning of year $ $ Granted at price = market value Granted at price > market value — — Exercised ) ) Forfeited ) ) Expired ) ) Outstanding at end of year $ $ Options exercisable at end of year $ $ |
Schedule of information related to stock options outstanding and exercisable, by exercise price range | Options Outstanding Options Exercisable Range of Exercise Prices Outstanding at 12/31/15 (in thousands) Weighted Average Remaining Contractual Life Weighted Average Exercise Price Exercisable at 12/31/15 (in thousands) Weighted Average Exercise Price $ 0.20-$0.50 3.10 years $ $ $ 0.51-$1.00 3.72 years $ $ $ 1.01-$2.87 6.99 years $ $ 3.76 years $ $ |
Summary of stock option vesting information | Outstanding Stock Options (Fully Vested and Expected to Vest)* Options that are Exercisable As of December 31, 2015 Number of outstanding options (in thousands) Weighted average remaining contractual life Weighted average exercise price per share $ $ .51 Intrinsic value (in thousands) $ $ * Includes effects of expected forfeitures |
Description of Business (Detail
Description of Business (Details) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2015 | Dec. 31, 2014 | Feb. 05, 2015 | Jun. 24, 2014 | Dec. 31, 2013 | |
Description of Business | |||||
Minimum number of years for which local area networking equipment was provided | 15 years | ||||
Cash and cash equivalents | $ 102,000 | $ 1,006,000 | $ 1,139,000 | ||
Net loss | $ 1,249,000 | $ 274,000 | |||
Period during which the entity expects to have sufficient cash resources to finance its operations and capital expenditures | 12 months | ||||
Current Line of Credit | SVB | |||||
Description of Business | |||||
Funding Available | $ 380,000 | ||||
Maximum borrowing capacity | 625,000 | $ 625,000 | |||
Promissory note | G. Ward Paxton, chief executive officer | |||||
Description of Business | |||||
Funding Available | 670,000 | ||||
Maximum borrowing capacity | $ 2,200,000 | $ 2,200,000 |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Risk Concentration & Allowance for Doubtful Accounts (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015USD ($)item | Dec. 31, 2014USD ($) | |
Risk Concentration | ||
Number of major U.S. financial institutions with whom cash, cash equivalents and investments are maintained | 2 | |
Number of suppliers from whom certain components may be available | 1 | |
Accounts Receivable and Allowance for Doubtful Accounts | ||
Allowance for Doubtful Accounts Receivable | $ | $ 0 | $ 0 |
Summary of Significant Accoun27
Summary of Significant Accounting Policies - PP&E (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property and equipment | ||
Depreciation and amortization | $ 305 | $ 236 |
Equipment and furniture and fixtures | Minimum | ||
Property and equipment | ||
Estimated useful lives | 1 year | |
Equipment and furniture and fixtures | Maximum | ||
Property and equipment | ||
Estimated useful lives | 5 years | |
Leasehold improvements | Minimum | ||
Property and equipment | ||
Estimated useful lives | 2 years | |
Leasehold improvements | Maximum | ||
Property and equipment | ||
Estimated useful lives | 5 years |
Summary of Significant Accoun28
Summary of Significant Accounting Policies - EPS & Revenue Recognition (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Long-Lived Assets | ||
Impairment of long-lived assets | $ 0 | $ 0 |
Valuation Assumptions | ||
Weighted average grant date fair value (in dollars per share) | $ 1.94 | $ 1.80 |
Weighted average assumptions used: | ||
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Risk-free interest rate (as a percent) | 1.51% | 1.46% |
Expected volatility (as a percent) | 229.24% | 227.57% |
Expected life (in years) | 5 years | 4 years 10 months 28 days |
Net Loss Per Share | ||
Number of common stock equivalents excluded from the diluted loss per share calculation (in shares) | 3,765,959 | 3,132,330 |
Revenue Recognition | ||
Number of days available to the customer to return the product from the date of delivery | 30 days | |
Term of the contract period over which maintenance and support revenue is deferred and recognized | 1 year | |
Period of payment terms offered to customers, distributors and resellers domestically | 30 days | |
Period of payment terms offered to customers, distributors and resellers internationally | 45 days | |
Maximum period for which payment terms can be offered | 1 year | |
Income Taxes | ||
Unrecognized tax benefits | $ 0 | $ 0 |
Balance Sheet Detail (in thou29
Balance Sheet Detail (in thousands) (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Inventories | ||
Finished products | $ 45 | $ 12 |
Accrued Expenses | ||
Accrued payroll | 132 | 114 |
Accrued vacation | 281 | 282 |
Rent payable | 51 | 84 |
Accrued interest, related party | 76 | 76 |
Other | 80 | 113 |
Total accrued expenses | $ 620 | $ 669 |
Commitments and Contingencies30
Commitments and Contingencies (Details) | 12 Months Ended | |
Dec. 31, 2015USD ($)item | Dec. 31, 2014USD ($) | |
Operating Leases | ||
Number of operating leases | item | 2 | |
Rent expense | $ 384,000 | $ 394,000 |
Future minimum rental payments | ||
2,016 | 409,000 | |
2,017 | 133,000 | |
Future minimum lease obligations | 542,000 | |
Capital Lease Obligations | ||
2,016 | 211,000 | |
2,017 | 122,000 | |
2,018 | 22,000 | |
Capital Lease Obligations, Total | 355,000 | |
Less amounts representing interest | (19,000) | |
Future minimum lease obligations | $ 336,000 | |
Minimum | ||
Operating Leases | ||
Renewal term | 1 year | |
Maximum | ||
Operating Leases | ||
Renewal term | 2 years |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Employee 401(k) Plan | ||
Minimum age for contribution of an additional amount of salary per year by participants | 50 years | |
Matching contribution by employer per dollar of contribution by participant | 0.25% | |
Maximum contribution by employer (as a percent) | 4.00% | |
Contribution by employer | $ 31,000 | $ 29,000 |
Minimum | ||
Employee 401(k) Plan | ||
Contribution by participating employee (as a percent) | 1.00% | |
Maximum | ||
Employee 401(k) Plan | ||
Contribution by participating employee (as a percent) | 25.00% |
Line of Credit (Details)
Line of Credit (Details) - SVB - USD ($) | 12 Months Ended | ||||
Dec. 31, 2015 | Dec. 31, 2014 | Jun. 24, 2014 | Jun. 30, 2008 | Mar. 29, 2006 | |
2006 Credit Line | |||||
Line of Credit | |||||
Maximum borrowing capacity | $ 1,000,000 | ||||
2008 Credit Line | |||||
Line of Credit | |||||
Maximum borrowing capacity | $ 2,500,000 | ||||
Current Line of Credit | |||||
Line of Credit | |||||
Maximum borrowing capacity | $ 625,000 | $ 625,000 | |||
Borrowing Base | $ 380,000 | ||||
Period of annual rate for calculating daily rate of finance charge on each advance | 360 days | ||||
Finance charge basis | prime rate | ||||
Percentage points added in daily rate of finance charge | 2.00% | ||||
Minimum interest rate (as a percent) | 7.00% | ||||
Monthly collateral handling fee (as a percent) | 0.50% | ||||
Borrowings outstanding | $ 0 | $ 0 | |||
Current Line of Credit | Maximum | |||||
Line of Credit | |||||
Contingent advances as a percentage of each Eligible Account | 80.00% |
Borrowings from Officer (Detail
Borrowings from Officer (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2015 | Feb. 04, 2016 | Feb. 05, 2015 | Dec. 31, 2014 | |
Borrowing from Officer | ||||
Loan payable to officer | $ 1,530,000 | $ 1,530,000 | ||
Accrued interest, related party | 76,000 | $ 76,000 | ||
G. Ward Paxton, chief executive officer | Promissory note | ||||
Borrowing from Officer | ||||
Maximum borrowing capacity | $ 2,200,000 | $ 2,200,000 | ||
Finance charge basis | prime rate | |||
Percentage points added in interest rate | 1.00% | |||
Interest rate (as a percent) | 5.00% | |||
Loan payable to officer | $ 1,530,000 | |||
Accrued interest, related party | $ 76,500 | |||
G. Ward Paxton, chief executive officer | Promissory note | Subsequent event | ||||
Borrowing from Officer | ||||
Maximum borrowing capacity | $ 2,200,000 |
Income Taxes - Deferred Taxes &
Income Taxes - Deferred Taxes & Tax Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Deferred tax assets, net | ||
Net operating loss carryforwards | $ 31,777 | $ 32,103 |
Net operating loss carryforwards of foreign subsidiaries | 374 | 374 |
Book over tax depreciation | (62) | (54) |
Stock-based compensation expense | 25 | 10 |
Other | 128 | 125 |
Deferred tax assets | 32,242 | 32,558 |
Valuation allowance for deferred tax assets | (32,242) | (32,558) |
Deferred tax assets, net of allowance | 0 | 0 |
Reconciliation of income tax benefit to statutory rate: | ||
Income benefit at statutory rate | (425) | (93) |
State income taxes (benefit), net of federal income tax benefit | (28) | 49 |
RTP (ISO expense) | 116 | 508 |
Permanent differences | 65 | 13 |
Change in valuation allowance | (316) | (718) |
Change in state tax rate | 577 | 241 |
Other | 11 | |
Income tax benefit | $ 0 | $ 0 |
Income Taxes - Loss Carryforwar
Income Taxes - Loss Carryforwards (Details) $ in Millions | Dec. 31, 2015USD ($) |
Federal | |
Operating loss carryforwards | |
Net operating loss carryforwards | $ 86.6 |
State | |
Operating loss carryforwards | |
Net operating loss carryforwards | $ 6 |
Stock Options - Summary of Plan
Stock Options - Summary of Plans (Details) | May. 17, 2012shares | May. 19, 2011shares | May. 20, 2010shares | May. 21, 2009shares | May. 29, 2008shares | May. 30, 2007shares | Dec. 31, 2015itemshares | Mar. 19, 2015shares | Dec. 31, 2014shares | Dec. 31, 2013shares | Mar. 17, 2005shares |
Stock Options | |||||||||||
Number of stock-based compensation plans | item | 2 | ||||||||||
Options outstanding (in shares) | 2,598,000 | 3,076,000 | 3,045,000 | ||||||||
2005 Plan | |||||||||||
Stock Options | |||||||||||
Shares available for issuance | 3,700,000 | 3,400,000 | 3,000,000 | 2,500,000 | 1,500,000 | 750,000 | |||||
Additional increase in number of shares available for issuance | 300,000 | 400,000 | 500,000 | 500,000 | 500,000 | 750,000 | |||||
Options exercised (in shares) | 632,835 | ||||||||||
Options outstanding (in shares) | 2,595,334 | ||||||||||
Options granted (in shares) | 3,892,000 | ||||||||||
Options cancelled (in shares) | 663,831 | ||||||||||
2015 Plan | |||||||||||
Stock Options | |||||||||||
Shares available for issuance | 600,000 | ||||||||||
Options outstanding (in shares) | 3,000 | ||||||||||
Options granted (in shares) | 3,000 | ||||||||||
Options cancelled (in shares) | 0 | ||||||||||
Shares available for future grant | 597,000 | ||||||||||
Number of Equity Incentive Programs | item | 3 | ||||||||||
Shares issued pursuant to the Stock Issuance Program | 0 | ||||||||||
2015 Plan | Non-employee Board member | |||||||||||
Stock Options | |||||||||||
Options that will be granted upon initial election or appointment to the Board (in shares) | 10,000 | ||||||||||
Preceding period within which individual has not previously been employed by the company | 3 months | ||||||||||
Options that will be granted to purchase shares of common stock on the date of each annual stockholders meeting | 8,000 | ||||||||||
Period for which individual should serve as a non-employee Board member | 3 months |
Stock Options - Common Shares R
Stock Options - Common Shares Reserved for Future Issueance (Details) - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Stock Options | ||
Common shares reserved for future issuance | 4,262,776 | |
Option exercisable period one | 1 year | |
Option exercisable period two | 3 years | |
Option exercisable period three | 5 years | |
Expiration term | 10 years | |
Expiration term for incentive stock options granted to holders of more than 10% of the entity's voting stock | 5 years | |
Maximum | ||
Stock Options | ||
Exercise price as a percentage of the fair market value of common stock in case of optionees holding more than 10% of voting stock | 110.00% | |
Minimum | ||
Stock Options | ||
Voting stock percentage to be held by optionees | 10.00% | |
2015 Plan | ||
Stock Options | ||
Common shares reserved for future issuance | 600,000 | |
2005 Plan | ||
Stock Options | ||
Common shares reserved for future issuance | 2,595,000 | |
PREFERRED STOCK | ||
Stock Options | ||
Common shares reserved for future issuance | 1,067,000 |
Stock Options - Number & Weight
Stock Options - Number & Weighted Average Exercise Price (Details) - $ / shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Options | ||
Outstanding at beginning of year (in shares) | 3,076 | 3,045 |
Granted at price = market value (in shares) | 43 | 224 |
Granted at price > market value (in shares) | 75 | |
Exercised (in shares) | (150) | (193) |
Forfeited (in shares) | (10) | (40) |
Expired (in shares) | (361) | (33) |
Outstanding at end of year (in shares) | 2,598 | 3,076 |
Options exercisable at end of year (in shares) | 2,287 | 2,511 |
Weighted Average Exercise Price | ||
Outstanding at beginning of year (in dollars per share) | $ 0.86 | $ 0.74 |
Granted at price = market value (in dollars per share) | 2.13 | 1.83 |
Granted at price > market value (in dollars per share) | 1.98 | |
Exercised (in dollars per share) | 0.44 | 0.40 |
Forfeited (in dollars per share) | 1.36 | 1.28 |
Expired (in dollars per share) | 2.77 | 1.90 |
Outstanding at end of year (in dollars per share) | 0.63 | 0.86 |
Options exercisable at end of year (in dollars per share) | $ 0.51 | $ 0.78 |
Stock Options - Exercise Price
Stock Options - Exercise Price (Details) shares in Thousands | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Options Outstanding | |
Outstanding at the end of the period (in shares) | shares | 2,598 |
Weighted Average Remaining Contractual Life | 3 years 9 months 4 days |
Weighted Average Exercise Price (in dollars per share) | $ 0.63 |
Options Exercisable | |
Exercisable at the end of the period (in shares) | shares | 2,287 |
Weighted Average Exercise Price (in dollars per share) | $ 0.51 |
$0.20-$0.50 | |
Stock Options Outstanding and Exercisable | |
Exercise price, low end of range (in dollars per share) | 0.20 |
Exercise price, high end of range (in dollars per share) | $ 0.50 |
Options Outstanding | |
Outstanding at the end of the period (in shares) | shares | 1,481 |
Weighted Average Remaining Contractual Life | 3 years 1 month 6 days |
Weighted Average Exercise Price (in dollars per share) | $ 0.34 |
Options Exercisable | |
Exercisable at the end of the period (in shares) | shares | 1,418 |
Weighted Average Exercise Price (in dollars per share) | $ 0.33 |
$0.51-$1.00 | |
Stock Options Outstanding and Exercisable | |
Exercise price, low end of range (in dollars per share) | 0.51 |
Exercise price, high end of range (in dollars per share) | $ 1 |
Options Outstanding | |
Outstanding at the end of the period (in shares) | shares | 803 |
Weighted Average Remaining Contractual Life | 3 years 8 months 19 days |
Weighted Average Exercise Price (in dollars per share) | $ 0.68 |
Options Exercisable | |
Exercisable at the end of the period (in shares) | shares | 778 |
Weighted Average Exercise Price (in dollars per share) | $ 0.69 |
$1.01-$3.00 | |
Stock Options Outstanding and Exercisable | |
Exercise price, low end of range (in dollars per share) | 1.01 |
Exercise price, high end of range (in dollars per share) | $ 2.87 |
Options Outstanding | |
Outstanding at the end of the period (in shares) | shares | 314 |
Weighted Average Remaining Contractual Life | 6 years 11 months 27 days |
Weighted Average Exercise Price (in dollars per share) | $ 1.91 |
Options Exercisable | |
Exercisable at the end of the period (in shares) | shares | 91 |
Weighted Average Exercise Price (in dollars per share) | $ 1.87 |
Stock Options - Outstanding (De
Stock Options - Outstanding (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Outstanding Stock Options (Fully Vested and Expected to Vest) | ||
Number of outstanding options (in shares) | 2,598 | |
Weighted average remaining contractual life | 3 years 8 months 23 days | |
Weighted average exercise price per share (in dollars per share) | $ 0.62 | |
Intrinsic value (in thousands) | $ 1,439 | |
Options that are Exercisable | ||
Number of outstanding options (in shares) | 2,287 | 2,511 |
Weighted average remaining contractual life | 3 years 4 months 10 days | |
Weighted average exercise price per share (in dollars per share) | $ 0.51 | $ 0.78 |
Intrinsic value (in thousands) | $ 1,393 | |
Additional disclosures | ||
Total unrecognized compensation cost related to non-vested options | $ 117 | |
Weighted average recognition period | 6 months 29 days |
Preferred Stock (Details)
Preferred Stock (Details) | Dec. 02, 2005USD ($)$ / sharesshares | Mar. 28, 2005USD ($)$ / sharesshares | Mar. 25, 2004USD ($)item$ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014USD ($)$ / sharesshares |
Dividends Payable | |||||
Preferred stock dividends accrued during the period | $ | $ 139,000 | $ 141,000 | |||
Accrued and unpaid dividends | $ | $ 160,000 | $ 20,000 | |||
Series 1 | |||||
Preferred Stock | |||||
Value of shares issued under private placement | $ | $ 5,000,000 | ||||
Dividend rate (as a percent) | 5.00% | ||||
Shares issued under private placement | 1,000,000 | ||||
Share issued price (in dollars per share) | $ / shares | $ 5 | ||||
Gross proceeds from issuance of preferred stock | $ | $ 5,000,000 | ||||
Issuance costs incurred for shares issued | $ | $ 275,000 | ||||
Shares of common stock issued upon conversion of preferred stock | 1,590,331 | 318,065 | |||
Conversion price per share (in dollars per share) | $ / shares | $ 3.144 | ||||
Number of votes per share that holders of preferred stock will receive | item | 1.5903 | ||||
Liquidation preference value preferred stock price per share | $ / shares | $ 5 | $ 1,063 | $ 1,013 | ||
Redemption price per share (in dollars per share) | $ / shares | $ 5 | ||||
Shares outstanding | 200,000 | 200,000 | |||
Dividends Payable | |||||
Preferred stock dividends accrued during the period | $ | $ 50,000 | ||||
Series 1 | G. Ward Paxton, chief executive officer | |||||
Preferred Stock | |||||
Shares issued under private placement | 140,000 | ||||
Series 1 | Director | |||||
Preferred Stock | |||||
Shares issued under private placement | 60,000 | ||||
Series 2 | |||||
Preferred Stock | |||||
Value of shares issued under private placement | $ | $ 2,700,000 | ||||
Dividend rate (as a percent) | 5.00% | ||||
Shares issued under private placement | 1,065,200 | ||||
Share issued price (in dollars per share) | $ / shares | $ 2.50 | ||||
Gross proceeds from issuance of preferred stock | $ | $ 2,700,000 | ||||
Issuance costs incurred for shares issued | $ | $ 173,000 | ||||
Shares of common stock issued upon conversion of preferred stock | 1,065,200 | 460,000 | |||
Conversion price per share (in dollars per share) | $ / shares | $ 2.50 | ||||
Liquidation preference value preferred stock price per share | $ / shares | 2.50 | $ 1,212 | $ 1,155 | ||
Shares outstanding | 460,000 | 460,000 | |||
Dividends Payable | |||||
Preferred stock dividends accrued during the period | $ | $ 58,000 | ||||
Series 2 | Minimum | |||||
Preferred Stock | |||||
Redemption price per share (in dollars per share) | $ / shares | $ 3.25 | ||||
Series 2 | G. Ward Paxton, chief executive officer | |||||
Preferred Stock | |||||
Shares issued under private placement | 260,000 | ||||
Series 2 | Director | |||||
Preferred Stock | |||||
Shares issued under private placement | 60,000 | ||||
Series 2 | CFO | |||||
Preferred Stock | |||||
Shares issued under private placement | 100,000 | ||||
Series 3 | |||||
Preferred Stock | |||||
Value of shares issued under private placement | $ | $ 1,200,000 | ||||
Dividend rate (as a percent) | 5.00% | ||||
Shares issued under private placement | 564,607 | ||||
Share issued price (in dollars per share) | $ / shares | $ 2.18 | ||||
Gross proceeds from issuance of preferred stock | $ | $ 1,200,000 | ||||
Issuance costs incurred for shares issued | $ | $ 100,000 | ||||
Shares of common stock issued upon conversion of preferred stock | 564,607 | 289,377 | |||
Conversion price per share (in dollars per share) | $ / shares | $ 2.18 | ||||
Liquidation preference value preferred stock price per share | $ / shares | 2.18 | $ 665 | $ 634 | ||
Shares outstanding | 289,000 | 289,000 | |||
Dividends Payable | |||||
Preferred stock dividends accrued during the period | $ | $ 32,000 | ||||
Series 3 | Minimum | |||||
Preferred Stock | |||||
Redemption price per share (in dollars per share) | $ / shares | $ 2.834 | ||||
Series 3 | G. Ward Paxton, chief executive officer | |||||
Preferred Stock | |||||
Shares issued under private placement | 123,853 | ||||
Series 3 | Director | |||||
Preferred Stock | |||||
Shares issued under private placement | 27,523 | ||||
Series 3 | CFO | |||||
Preferred Stock | |||||
Shares issued under private placement | 68,808 |
Concentrations (Details)
Concentrations (Details) | 12 Months Ended | |
Dec. 31, 2015item | Dec. 31, 2014customeritem | |
Concentrations | ||
Number of areas in which operations are concentrated | 1 | |
Total revenues | Customer | U.S. Government | ||
Concentrations | ||
Percentage of revenue | 54.70% | 51.40% |
Total revenues | Customer | Commercial customers | ||
Concentrations | ||
Percentage of revenue | 30.00% | 30.00% |
Number of customers | 0 | 1 |
Total revenues | Customer | Government customers | ||
Concentrations | ||
Percentage of revenue | 43.90% | 41.80% |
Number of customers | 3 | 4 |
Subsequent Events (Details)
Subsequent Events (Details) - G. Ward Paxton, chief executive officer - Promissory note - USD ($) | Feb. 04, 2016 | Dec. 31, 2015 | Feb. 05, 2015 |
Subsequent Events | |||
Maximum borrowing capacity | $ 2,200,000 | $ 2,200,000 | |
Subsequent event | |||
Subsequent Events | |||
Maximum borrowing capacity | $ 2,200,000 |