ImageWare Systems (IWSY) 10-K 19 Mar 18 2017 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Mar. 13, 2018	Jun. 30, 2017
Document And Entity Information
Entity Registrant Name	IMAGEWARE SYSTEMS INC
Entity Central Index Key	941,685
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 57,178,319
Entity Common Stock, Shares Outstanding		94,229,505
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,017

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current Assets:
Cash	$ 7,317	$ 1,586
Accounts receivable, net of allowance for doubtful accounts of $15 and $1 at December 31, 2017 and 2016, respectively.	458	287
Inventory, net	79	23
Other current assets	163	135
Total Current Assets	8,017	2,031
Property and equipment, net	43	93
Other assets	35	34
Intangible assets, net of accumulated amortization	93	106
Goodwill	3,416	3,416
Total Assets	11,604	5,680
Current Liabilities:
Accounts payable	457	425
Deferred revenue	1,016	1,045
Accrued expenses	658	945
Accrued interest payable to related parties	527	102
Convertible lines of credit to related parties, net of discount	5,774	2,528
Total Current Liabilities	8,432	5,045
Pension obligation	2,024	1,895
Total Liabilities	10,456	6,940
Shareholders' Equity (Deficit):
Common Stock, $0.01 par value, 150,000,000 shares authorized; 94,174,540 and 91,853,499 shares issued at December 31, 2017 and 2016, respectively, and 94,167,836 and 91,846,795 shares outstanding at December 31, 2017 and 2016, respectively.	941	917
Additional paid-in capital	172,414	156,195
Treasury stock, at cost 6,704 shares	(64)	(64)
Accumulated other comprehensive loss	(1,664)	(1,543)
Accumulated deficit	(170,481)	(156,767)
Total Shareholders' Equity (Deficit)	1,148	(1,260)
Total Liabilities and Shareholders' Equity (Deficit)	11,604	5,680
Series A Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock, authorized 4,000,000 shares	0	0
Series B Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock, authorized 4,000,000 shares	2	2
Series E Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock, authorized 4,000,000 shares	0	0
Series F Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock, authorized 4,000,000 shares	0	0
Series G Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock, authorized 4,000,000 shares	$ 0	$ 0

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current Assets:
Accounts receivable, net of allowance for doubtful accounts	$ 15,000	$ 1,000
Shareholders' equity:
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	94,174,540	91,853,499
Common stock, shares outstanding	94,167,836	91,846,795
Treasury stock, shares	6,704	6,704
Series A Preferred Stock [Member]
Shareholders' equity:
Preferred stock, shares authorized	31,021	0
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares issued	31,021	0
Preferred stock, shares outstanding	31,021	0
Liquidation preference	$ 31,021	$ 0
Series B Preferred Stock [Member]
Shareholders' equity:
Preferred stock, shares authorized	750,000	750,000
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares issued	389,400	389,400
Preferred stock, shares outstanding	239,400	239,400
Liquidation preference	$ 620	$ 620
Series E Preferred Stock [Member]
Shareholders' equity:
Preferred stock, shares authorized	12,000	12,000
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares issued	0	12,000
Preferred stock, shares outstanding	0	12,000
Liquidation preference	$ 0	$ 12,000
Series F Preferred Stock [Member]
Shareholders' equity:
Preferred stock, shares authorized	2,000	2,000
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares issued	0	2,000
Preferred stock, shares outstanding	0	2,000
Liquidation preference	$ 0	$ 2,000
Series G Preferred Stock [Member]
Shareholders' equity:
Preferred stock, shares authorized	6,120	6,120
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares issued	0	6,021
Preferred stock, shares outstanding	0	6,021
Liquidation preference	$ 0	$ 6,021

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenues:
Product	$ 1,614	$ 1,249	$ 2,192
Maintenance	2,679	2,563	2,577
Total	4,293	3,812	4,769
Cost of revenues:
Product	152	243	1,117
Maintenance	839	827	827
Gross profit	3,302	2,742	2,825
Operating expenses:
General and administrative	4,192	3,722	3,437
Sales and marketing	2,816	3,021	2,791
Research and development	5,953	5,332	4,643
Depreciation and amortization	68	129	164
Total	13,029	12,204	11,035
Loss from operations	(9,727)	(9,462)	(8,210)
Interest expense	591	245	447
Other income, net	(125)	(201)	(145)
Loss before income taxes	(10,193)	(9,506)	(8,512)
Income tax expense (benefit)	(124)	21	22
Net loss	(10,069)	(9,527)	(8,534)
Preferred dividends	(2,400)	(1,347)	(1,065)
Preferred stock exchange	(1,245)	0	0
Net loss available to common shareholders	$ (13,714)	$ (10,874)	$ (9,599)
Basic and diluted loss per common share - see Note 2:
Net loss	$ (0.11)	$ (0.10)	$ (0.09)
Preferred dividends	(0.03)	(0.02)	(0.01)
Preferred stock exchange	(0.01)	0	0
Basic and diluted loss per share available to common shareholders	$ (0.15)	$ (0.12)	$ (0.10)
Basic and diluted weighted-average shares outstanding	92,816,723	94,426,783	93,786,079

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Consolidated Statements Of Comprehensive Income Loss
Net loss	$ (10,069)	$ (9,527)	$ (8,534)
Other comprehensive income (loss):
Reduction (increase) in additional minimum pension liability	(15)	(347)	332
Foreign currency translation adjustment	(106)	(1)	67
Comprehensive loss	$ (10,190)	$ (9,875)	$ (8,135)

CONSOLIDATED STATEMENTS OF SHAR

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Series A Convertible Redeemable Preferred	Series B Convertible Redeemable Preferred	Series E Convertible Redeemable Preferred	Series F Convertible Redeemable Preferred	Series G Convertible Redeemable Preferred	Common Stock	Treasury Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Beginning, shares at Dec. 31, 2014	0	239,400	0	0	0	93,513,854	(6,074)
Beginning, amount at Dec. 31, 2014	$ 0	$ 2	$ 0	$ 0	$ 0	$ 934	$ (64)	$ 135,982	$ (1,594)	$ (136,294)	$ (1,034)
Issuance of Series E Convertible Redeemable Preferred Stock for cash, net of issuance costs, Shares			10,022					9,955			9,955
Conversion of related party debt into Series E Convertible Redeemable Preferred Stock, Shares			1,978					1,978			1,978
Issuance of Common Stock in payment of Series E Preferred dividends, Shares						478,664
Issuance of Common Stock in payment of Series E Preferred dividends, Amount						$ 5		$ 769		774
Issuance of common stock pursuant to cashless warrant exercises, Shares						45,376
Issuance of common stock pursuant to cashless warrant exercises, Amount						$ 1		(1)
Issuance of common stock pursuant to option exercises, Shares						39,705
Issuance of common stock pursuant to option exercises, Amount								33			$ 33
Recognition of beneficial conversion feature on convertible debt								146			146
Warrants modified in lieu of cash as compensation								80			80
Stock-based compensation expense, amount								960			960
Addition/reduction in minimum pension liability									332		332
Foreign currency translation adjustment									67		67
Dividends on preferred stock, Amount										(291)	(291)
Net loss										(8,534)	(8,534)
Ending, shares at Dec. 31, 2015	0	239,400	12,000	0	0	944,077,599	(6,704)
Ending, amount at Dec. 31, 2015	$ 0	$ 2	$ 0	$ 0	$ 0	$ 940	$ (64)	149,902	(1,195)	(145,893)	3,692
Issuance of common stock pursuant to cashless warrant exercises, Shares						144,459
Issuance of common stock pursuant to cashless warrant exercises, Amount						$ 1		(1)
Issuance of common stock pursuant to option exercises, Shares						12,626
Issuance of common stock pursuant to option exercises, Amount								3			(3)
Recognition of beneficial conversion feature on convertible debt								219			219
Stock-based compensation expense, amount								1,161			1,161
Addition/reduction in minimum pension liability									(347)
Foreign currency translation adjustment									(1)		1
Dividends on preferred stock. Shares						1,002,645
Dividends on preferred stock, Amount						$ 10		1,286		(1,347)	(51)
Issuance of Series F Convertible Redeemable Preferred Stock for cash, net of issuance costs, Shares				2,000
Issuance of Series F Convertible Redeemable Preferred Stock for cash, net of issuance costs, Amount								1,979			1,979
Issuance of Series G Convertible Redeemable Preferred Stock for cash, net of issuance costs, Shares					1,625
Issuance of Series G Convertible Redeemable Preferred Stock for cash, net of issuance costs, Amount					$ 4,396	$ (3,383,830)		$ 1,614			$ 1,614
Issuance of Series G Convertible Redeemable Preferred Stock in exchange for Common Stock, Shares						(34)		31			(3)
Net loss										(9,527)	$ (9,527)
Ending, shares at Dec. 31, 2016	0	239,400	12,000	2,000	6,021	91,853,499	(6,704)
Ending, amount at Dec. 31, 2016	$ 0	$ 2	$ 0	$ 0	$ 0	$ 917	$ (64)	$ (156,195)	(1,543)	(156,707)	(1,260)
Issuance of Series A Convertible Redeemable Preferred Stock for cash, net of issuance costs, Shares	11,000
Issuance of Series A Convertible Redeemable Preferred Stock for cash, net of issuance costs, Amount	$ 0							10,937			10,937
Issuance of Series A Convertible Redeemable Preferred Stock in exchange for preferred shares, Shares	20,021	(12,000)	(12,000)	(2,000)
Issuance of Series A Convertible Redeemable Preferred Stock in exchange for preferred shares, Amount	$ 0							1,245			(1,245)
Issuance of common stock pursuant to option exercises, Shares						369,004
Issuance of common stock pursuant to option exercises, Amount						$ 4		255			259
Recognition of beneficial conversion feature on convertible debt								302			302
Warrants issued to consultants as compensation								57			57
Stock-based compensation expense, amount								1,094			1,094
Addition/reduction in minimum pension liability									(15)		(15)
Foreign currency translation adjustment									(106)		(106)
Dividends on preferred stock. Shares						1,952,037
Dividends on preferred stock, Amount						$ 20		2,329		(2,400)	(51)
Issuance of Series G Convertible Redeemable Preferred Stock in exchange for Common Stock, Shares				(2,000)	(6,021)
Net loss										(10,069)	(10,069)
Ending, shares at Dec. 31, 2017	31,021	239,400	0	0	0	94,174,540	(6,704)
Ending, amount at Dec. 31, 2017	$ 0	$ 2	$ 0	$ 0	$ 0	$ 941	$ (64)	$ 172,414	$ (1,664)	$ (170,481)	$ 1,148

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities
Net loss	$ (10,069)	$ (9,527)	$ (8,534)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation and amortization	68	129	164
Amortization of debt discounts and debt issuance costs	209	145	438
Stock-based compensation	1,094	1,162	960
Write down of capitalized labor inventory to net realizable value	0	0	281
Provision for losses on accounts receivable	15	0	0
Gain from sale of trademark	(50)	0	0
Reduction in accrued expenses from expiration of statute of limitations	(222)	(200)	0
Warrants modified/issued in lieu of cash as compensation for services	57	0	80
Change in assets and liabilities
Accounts receivable	(186)	62	(83)
Inventory	(56)	23	589
Other assets	(40)	(50)	17
Accounts payable	32	227	(261)
Accrued expenses	359	94	(76)
Deferred revenue	(29)	(13)	(768)
Pension obligation	115	37	10
Total adjustments	1,366	1,616	1,351
Net cash used by operating activities	(8,703)	(7,911)	(7,183)
Cash flows from investing activities
Purchase of property and equipment	(5)	(49)	(87)
Proceeds from sale of trademark	50	0	0
Net cash used by investing activities	45	(49)	(87)
Cash flows from financing activities
Proceeds from line of credit	3,350	2,650	400
Proceeds from exercise of stock options	259	3	33
Proceeds from issuance of preferred stock, net of issuance costs	10,937	3,593	9,955
Dividends paid to preferred stockholders	(51)	(51)	(51)
Net cash provided by financing activities	14,495	6,195	10,337
Effect of exchange rate changes on cash	(106)	(1)	67
Net increase (decrease in cash)	5,731	(1,766)	3,134
Cash at beginning of year	1,586	3,352	218
Cash at end of year	7,317	1,586	3,352
Supplemental disclosure of cash flow information:
Cash paid for interest	0	0	1
Cash paid for income taxes	0	0	0
Summary of non-cash investing and financing activities:
Conversion of related party notes payable into Series E Preferred	0	0	1,978
Beneficial conversion feature of convertible debt	302	219	146
Accrued unpaid dividends on Series E Preferred	0	0	240
Stock dividends on Convertible Preferred Stock	2,349	1,296	1,014
Issuance of Common Stock pursuant to cashless warrant exercises	0	1	1
Exchange of Common Stock for Series G Preferred	0	34	0
Reduction (increase) in additional minimum pension liability	(15)	(347)	332
Preferred stock exchange	$ 1,245	$ 0	$ 0

DESCRIPTION OF BUSINESS AND OPE

DESCRIPTION OF BUSINESS AND OPERATIONS	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
DESCRIPTION OF BUSINESS AND OPERATIONS	Overview As used in this Annual Report, “we,” “us,” “our,” “ImageWare,” “ImageWare Systems,” “Company” or “our Company” refers to ImageWare Systems, Inc. and all of its subsidiaries. ImageWare Systems, Inc. is incorporated in the state of Delaware. The Company is a pioneer and leader in the emerging market for biometrically enabled software-based identity management solutions. Using those human characteristics that are unique to us all, the Company creates software that provides a highly reliable indication of a person’s identity. The Company’s “flagship” product is the patented IWS Biometric Engine®. The Company’s products are used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. The Company’s products also provide law enforcement with integrated mug shot, fingerprint LiveScan and investigative capabilities. The Company also provides comprehensive authentication security software using biometrics to secure physical and logical access to facilities or computer networks or internet sites. Biometric technology is now an integral part of all markets the Company addresses and all of the products are integrated into the IWS Biometric Engine. Recent Developments Creation of Series A Convertible Preferred Stock On September 15, 2017, the Company filed the Certificate of Designations, Preferences, and Rights of the Series A Convertible Preferred Stock with the Delaware Division of Corporations, designating 31,021 shares of the Company’s preferred stock, par value $0.01 per share, as Series A Convertible Preferred Stock (“ Series A Preferred Equity Series A Financing and Preferred Stock Exchange On September 18, 2017, the Company offered and sold a total of 11,000 shares of Series A Preferred at a purchase price of $1,000 per share (the “ Series A Financing Exchanged Preferred Preferred Stock Exchange The Company evaluated the Preferred Stock Exchange and determined that the Exchanged Preferred was both an induced conversion and an extinguishment transaction. Using the guidance in ASC 260-10-S99-2, Earnings Per Share – SEC Materials – SEC Staff Announcement: The Effect on the Calculations of Earnings Per Share for a Period That Includes the Redemption or Induced Conversion of Preferred Stock and ASC 470-50, Debt – Modifications and Extinguishments, the Company recorded the fair value differential of the Exchanged Preferred as adjustments within Shareholders’ Deficit and in the computation of Net Loss Available to Common Shareholders in the computation of basic and diluted loss per share. The Company utilized the services of an independent third-party valuation firm to perform the computation of the fair value of the Exchanged Preferred. Based on the fair value using these methodologies, the Company recorded approximately $1,245,000 in fair value differential as adjustments within Shareholders’ Deficit in the Company’s Consolidated Balance Sheet for the year ended December 31, 2017 and in the computation of basic and diluted loss per share in the Company’s Consolidated Statement of Operations for the year ended December 31, 2017. As a result of the Preferred Stock Exchange, on October 19, 2017, the Company filed Certificates of Elimination with the Delaware Secretary of State to eliminate the Exchanged Preferred. Liquidity, Going Concern and Management’s Plan Historically, our principal sources of cash have included customer payments from the sale of our products, proceeds from the issuance of common and preferred stock and proceeds from the issuance of debt, including our Lines of Credit (defined below). Our principal uses of cash have included cash used in operations, product development and payments relating to purchases of property and equipment. We expect that our principal uses of cash in the future will be for product development including customization of identity management products for enterprise and consumer applications, further development of intellectual property, development of Software-as-a-Service (“ SaaS At December 31, 2017, we had a working capital deficit of approximately $415,000, compared to a working capital deficit of approximately $3,014,000 at December 31, 2016. Our principal sources of liquidity at December 31, 2017 consisted of approximately $7,317,000 of cash, compared to available borrowings under our Lines of Credit of $3,350,000, and approximately $1,586,000 in cash at December 31, 2016. Considering our projected cash requirements, and assuming we are unable to generate incremental revenue, our available cash may be insufficient to satisfy our cash requirements for the next twelve months from the date of this filing. These factors raise substantial doubt about our ability to continue as a going concern. To address our working capital requirements, management may seek additional equity and/or debt financing through the issuance of additional debt and/or equity securities or may seek strategic or other transactions intended to increase shareholder value. There are currently no formal committed financing arrangements to support our projected cash shortfall, including commitments to purchase additional debt and/or equity securities, or other agreements, and no assurances can be given that we will be successful in raising additional debt and/or equity securities, or entering into any other transaction that addresses our ability to continue as a going concern. In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to continue to raise capital and generate positive cash flows from operations. However, the Company operates in markets that are emerging and highly competitive. There is no assurance that the Company will be able to obtain additional capital, operate at a profit or generate positive cash flows in the future. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s wholly-owned subsidiaries are: XImage Corporation, a California Corporation; ImageWare Systems ID Group, Inc. a Delaware corporation (formerly Imaging Technology Corporation); I.W. Systems Canada Company, a Nova Scotia unlimited liability company; ImageWare Digital Photography Systems, Inc., LLC a Nevada limited liability company (formerly Castleworks LLC); Digital Imaging International GmbH, a company formed under German laws; and Image Ware Mexico S de RL de CV, a company formed under Mexican laws. Operating Cycle Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying consolidated balance sheets, although they will be liquidated in the normal course of contract completion which may take more than one operating cycle. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“ U.S. GAAP Accounts Receivable In the normal course of business, the Company extends credit without collateral requirements to its customers that satisfy pre-defined credit criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. Accounts receivable are considered delinquent when the due date on the invoice has passed. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay to determine the level of allowance required. Accounts receivable are written off against the allowance for doubtful accounts when all collection efforts by the Company have been unsuccessful. Inventories Finished goods inventories are stated at the lower of cost, determined using the average cost method, or net realizable value. See Note 6. Property, Equipment and Leasehold Improvements Property and equipment, consisting of furniture and equipment, are stated at cost and are being depreciated on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged to expense as incurred. Major renewals or improvements are capitalized. When assets are sold or abandoned, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized. Expenditures for leasehold improvements are capitalized. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. Fair Value of Financial Instruments For certain of the Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, deferred revenues and lines of credit payable to related parties, the carrying amounts approximate fair value due to their relatively short maturities. Revenue Recognition The Company recognizes revenue from the following major revenue sources: ● Long-term fixed-price contracts involving significant customization; ● Fixed-price contracts involving minimal customization; ● Software licensing; ● Sales of computer hardware and identification media; and ● Post-contract customer support (“ PCS The Company’s revenue recognition policies are consistent with U.S. GAAP including the Financial Accounting Standards Board (“ FASB ASC Software Revenue Recognition Revenue Recognition, Construction-Type and Production-Type Contracts Securities and Exchange Commission Staff Accounting Bulletin 104 Revenue Recognition, Multiple Element Arrangements The Company recognizes revenue and profit as work progresses on long-term, fixed-price contracts involving significant amount of hardware and software customization using the percentage of completion method based on costs incurred to date compared to total estimated costs at completion. The primary components of costs incurred are third party software and direct labor cost including fringe benefits. Revenues recognized in excess of amounts billed are classified as current assets under “Costs and estimated earnings in excess of billings on uncompleted contracts.” Amounts billed to customers in excess of revenues recognized are classified as current liabilities under “Billings in excess of costs and estimated earnings on uncompleted contracts.” Revenue from contracts for which the Company cannot reliably estimate total costs or there are not significant amounts of customization are recognized upon completion. For contracts that require significant amounts of customization that the Company accounts for under the completed contract method of revenue recognition, the Company defers revenue recognition until customer acceptance is received. For contracts containing either extended or dependent payment terms, revenue recognition is deferred until such time as payment has been received by the Company. The Company also generates non-recurring revenue from the licensing of its software. Software license revenue is recognized upon the execution of a license agreement, upon deliverance, when fees are fixed and determinable, when collectability is probable, when all other significant obligations have been fulfilled a nd the Company has obtained vendor specific objective evidence (“ VSOE ”) of the fair value of the undelivered element. VSOE of fair value for customer support services is determined by reference to the price the customer pays for such element when sold separately; that is, the renewal rate offered to customers. In those instances when objective and reliable evidence of fair value exists for the undelivered items but not for the delivered items, the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items Goodwill The Company accounts for its intangible assets under the provisions of ASC 350, “ Intangibles - Goodwill and Other Property, Plant and Equipment The Company did not record any goodwill impairment charges for the years ended December 31, 2017, 2016 or 2015. Intangible and Long-Lived Assets Intangible assets are carried at their cost less any accumulated amortization. Any costs incurred to renew or extend the life of an intangible or long-lived asset are reviewed for capitalization. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high quality financial institutions and at times during the years ended December 31, 2017 and 2016 exceeded the FDIC insurance limits of $250,000. Sales are typically made on credit and the Company generally does not require collateral. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for doubtful accounts. The Company considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay to determine the level of allowance required. Accounts receivable are presented net of an allowance for doubtful accounts of approximately $15,000 and $1,000 at December 31, 2017 and 2016, respectively. For the year ended December 31, 2017 one customer accounted for approximately 25% or $1,089,000 of total revenues and had trade receivables of approximately $201,000 as of the end of the year. For the year ended December 31, 2016 two customers accounted for approximately 30% or $1,162,000 of total revenues and had trade receivables of $78,000 as of the end of the year. For the year ended December 31, 2015, two customers accounted for approximately 37% or $1,753,000 of total revenues and $78,000 trade receivables as of the end of the year. Stock-Based Compensation At December 31, 2017, the Company had one stock-based compensation plan for employees and nonemployee directors, which authorize the granting of various equity-based incentives including stock options and restricted stock. The Company estimates the fair value of its stock options using a Black-Scholes option-pricing model, consistent with the provisions of ASC 718, “ Compensation – Stock Compensation ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life, and interest rates. The Company is required to make various assumptions in the application of the Black-Scholes option-pricing model. The Company has determined that the best measure of expected volatility is based on the historical weekly volatility of the Company’s Common Stock. Historical volatility factors utilized in the Company’s Black-Scholes computations for options granted during the years ended December 31, 2017, 2016 and 2015 ranged from 58% to 103%. The Company has elected to estimate the expected life of an award based upon the SEC approved “simplified method” noted under the provisions of Staff Accounting Bulletin No. 110. The expected term used by the Company during the years ended December 31, 2017, 2016 and 2015 was 5.17 years. The difference between the actual historical expected life and the simplified method was immaterial. The interest rate used is the risk-free interest rate and is based upon U.S. Treasury rates appropriate for the expected term. Interest rates used in the Company’s Black-Scholes calculations for the years ended December 31, 2017, 2016 and 2015 averaged 2.6%. Dividend yield is zero as the Company does not expect to declare any dividends on the Company’s common shares in the foreseeable future. In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation is a critical assumption. The Company has adopted the provisions of ASU 2016-09 and will continue to use an estimated annualized forfeiture rate of approximately 0% for corporate officers, 4.1% for members of the Board of Directors and 6.0% for all other employees. The Company reviews the expected forfeiture rate annually to determine if that percent is still reasonable based on historical experience. Restricted stock units are recorded at the grant date fair value with corresponding compensation expense recorded ratably over the requisite service period. Income Taxes Current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credits and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Foreign Currency Translation The financial position and results of operations of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiaries have been translated into U.S. dollars at weighted-average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. The Company translates foreign currencies of its German, Canadian and Mexican subsidiaries. The cumulative translation adjustment, which is recorded in accumulated other comprehensive loss, decreased approximately $106,000 for the year ended December 31, 2017, decreased approximately $1,000 for the year ended December 31, 2016 and increased approximately $67,000 for the year ended December 31, 2015. Comprehensive Loss Comprehensive loss consists of net gains and losses affecting shareholders’ equity that, under generally accepted accounting principles, are excluded from net loss. For the Company, the only items are the cumulative translation adjustment and the additional minimum liability related to the Company’s defined benefit pension plan, recognized pursuant to ASC 715-30, “ Compensation - Retirement Benefits - Defined Benefit Plans – Pension Advertising Costs The Company expenses advertising costs as incurred. The Company incurred approximately $45,000 in advertising expenses during the year ended December 31, 2017, $24,000 in advertising expenses during the year ended December 31, 2016, and $12,000 during the year ended December 31, 2015. Loss Per Share Basic loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period, adjusted to include, if dilutive, potential dilutive shares consisting of convertible preferred stock, convertible notes payable, stock options and warrants, calculated using the treasury stock and if-converted methods. For diluted loss per share calculation purposes, the net loss available to common shareholders is adjusted to add back any preferred stock dividends in the consolidated statement of operations for the respective periods. (Amounts in thousands, except share and per share amounts) Year Ended December 31, Numerator for basic and diluted loss per share: 2017 2016 2015 Net loss $ (10,069 ) $ (9,527 ) $ (8,534 ) Preferred dividends (2,400 ) (1,347 ) (1,065 ) Preferred stock exchange (1,245 ) — — Net loss available to common shareholders $ (13,714 ) $ (10,874 ) $ (9,599 ) Denominator for basic loss per share — weighted-average shares outstanding 92,816,723 94,426,783 93,786,079 Effect of dilutive securities — — — Denominator for diluted loss per share — weighted-average shares outstanding 92,816,723 94,426,783 93,786,079 Basic and diluted loss per share: Net loss $ (0.11 ) $ (0.10 ) $ (0.09 ) Preferred dividends (0.03 ) (0.02 ) (0.01 ) Preferred stock exchange (0.01 ) — — Net loss available to common shareholders $ (0.15 ) $ (0.12 ) $ (0.10 ) The following potential dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as their effect would have been antidilutive: Potential Dilutive Securities: Common Share Equivalents at December 31, 2017 Common Share Equivalents at December 31, 2016 Common Share Equivalents at December 31, 2015 Convertible lines of credit 5,221,964 2,201,903 — Convertible redeemable preferred stock – Series A 26,974,783 — — Convertible redeemable preferred stock – Series B 46,029 46,029 46,029 Convertible redeemable preferred stock – Series E — 6,315,789 6,442,105 Convertible redeemable preferred stock – Series F — 1,333,333 — Convertible redeemable preferred stock – Series G — 4,014,000 — Stock options 6,093,512 6,506,843 5,376,969 Warrants 230,000 175,000 450,000 Total Potential Dilutive Securities 38,566,288 20,592,897 12,315,103 Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “ FASB FASB ASU No. 2014-09. ASU Revenue from Contracts with Customers In preparation for adoption of the standard, we have analyzed each of our revenue streams: ● ● ● ● ● PCS Analysis of the above revenue streams in preparation for the adoption of the standard resulted in the identification of one of our revenue contracts requiring the customer to make a fixed payment for a one-year minimum royalty. Under current GAAP, we recognized the royalty revenue over the one year. Under the new standard, we will recognize the minimum royalty fee upon contract renewal. Revenue recognition related to our other arrangements for software licenses, hardware and identification media, professional services and maintenance will remain substantially unchanged. The Company is still evaluating the effect the standard will have on its financial statement disclosures. FASB ASU No. 2016-01 Financial Instruments—Overall – Recognition and Measurement of Financial Assets and Financial Liabilities.” FASB ASU No. 2016-02 Leases ” FASB ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers FASB ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers FASB ASU No. 2016-13 inancial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. FASB ASU No. 2016-15. In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be prospectively as of the earliest date practicable. FASB ASU No. 2017-04. Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments of this ASU eliminate step 2 from the goodwill impairment test. The annual, or interim test is performed by comparing the fair value of a reporting unit with its carrying amount. The amendments of this ASU also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and if it fails that qualitative test, to perform step 2 of the goodwill impairment test. ASU No. 2017-04 is effective for fiscal years beginning after December 15, 2019. FASB ASU No. 2017-09. In May 2017, the FASB issued ASU No. 2017-09, “ Scope of Modification Accounting Stock Compensation FASB ASU No. 2017-11. Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral” The Company is currently evaluating the potential impact of this updated guidance on its consolidated financial statements.

FAIR VALUE ACCOUNTING

FAIR VALUE ACCOUNTING	12 Months Ended
	Dec. 31, 2017
Fair Value Disclosures [Abstract]
FAIR VALUE ACCOUNTING	The Company accounts for fair value measurements in accordance with ASC 820, “ Fair Value Measurements and Disclosures ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Fair Value at December 31, 2017 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,806 $ 1,806 $ — $ — Totals $ 1,806 $ 1,806 $ — $ — Fair Value at December 31, 2016 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,645 $ 1,645 $ — $ — Totals $ 1,645 $ 1,645 $ — $ — The Company’s pension assets are classified within Level 1 of the fair value hierarchy because they are valued using market prices. The pension assets are primarily comprised of the cash surrender value of insurance contracts. All plan assets are managed in a policyholder pool in Germany by outside investment managers. The investment objectives for the plan are the preservation of capital, current income and long-term growth of capital. The Company monitors the activity within each level and any changes with the underlying valuation techniques or inputs utilized to recognize if any transfers between levels are necessary. That determination is made, in part, by working with outside valuation experts for Level 3 instruments and monitoring market related data and other valuation inputs for Level 1 and Level 2 instruments.

INTANGIBLE ASSETS AND GOODWILL

INTANGIBLE ASSETS AND GOODWILL	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
INTANGIBLE ASSETS AND GOODWILL	The Company has intangible assets in the form of trademarks, trade names and patents. The carrying amount of the Company’s trademarks and trade names was $0 as of December 31, 2017 and 2016, respectively, which include accumulated amortization of $347,000 as of December 31, 2017 and 2016. Amortization expense related to trademarks and tradenames was $0, $0 and $15,000 for the years ended December 31, 2017, 2016 and 2015, respectively. All intangible assets are amortized over their estimated useful lives with no estimated residual values. Any costs incurred by the Company to renew or extend the life of intangible assets will be evaluated under ASC No. 350, Intangibles – Goodwill and Other The carrying amounts of the Company’s patent intangible assets were $93,000 and $105,000 as of December 31, 2017 and 2016, respectively, which includes accumulated amortization of $566,000 and $554,000 as of December 31, 2017 and 2016, respectively. Amortization expense for patent intangible assets was $12,000 for the years ended December 31, 2017, 2016 and 2015. Patent intangible assets are being amortized on a straight-line basis over their remaining life of approximately 8.5 years. There was no impairment of the Company’s intangible assets during the years ended December 31, 2017, 2016 and 2015. The Company annually, or more frequently if events or circumstances indicate a need, tests the carrying amount of goodwill for impairment. The Company performs its annual impairment test in the fourth quarter of each year. A two-step impairment test is used to first identify potential goodwill impairment and then measure the amount of goodwill impairment loss, if any. The first step was conducted by determining and comparing the fair value, employing the market approach, of the Company’s reporting unit to the carrying value of the reporting unit. The Company continues to have only one reporting unit, Identity Management. Based on the results of this impairment test, the Company determined that its goodwill was not impaired during the years ended December 31, 2017, 2016 and 2015. The estimated acquired intangible amortization expense for the next five fiscal years is as follows: Fiscal Year Ended December 31, Estimated Amortization Expense ($ in thousands) 2018 $ 12 2019 12 2020 12 2021 12 2022 12 Thereafter 33 Totals $ 93

RELATED PARTIES

RELATED PARTIES	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
RELATED PARTIES	Lines of Credit with Related Parties In March 2013, the Company and Neal Goldman, a member of the Company’s Board of Directors (“ Goldman Goldman Line of Credit Amendment As consideration for the initial Goldman Line of Credit, the Company issued a warrant to Goldman, exercisable for 1,052,632 shares of the Company’s Common Stock (the “ Line of Credit Warrant Amendment Warrant The Company estimated the fair value of the Line of Credit Warrant using the Black-Scholes option pricing model using the following assumptions: term of two years, a risk-free interest rate of 2.58%, a dividend yield of 0%, and volatility of 79%. The Company recorded the fair value of the Line of Credit Warrant as a deferred financing fee of approximately $580,000 to be amortized over the life of the Goldman Line of Credit. The Company estimated the fair value of the Amendment Warrant using the Black-Scholes option pricing model using the following assumptions: term on one year, a risk-free interest rate of 2.58%, a dividend yield of 0% and volatility of 74%. The Company recorded the fair value of the Amendment Warrant as an additional deferred financing fee of approximately $127,000 to be amortized over the life of the Goldman Line of Credit. During the years ended December 31, 2017 and 2016, the Company recorded an aggregate of approximately $11,000 and $48,000, respectively in deferred financing fee amortization expense which is recorded as a component of interest expense in the Company’s consolidated statements of operations. In April 2014, the Company and Goldman entered into a further amendment to the Goldman Line of Credit to decrease the available borrowings to $3.0 million (the “ Second Amendment Crocker Crocker LOC In December 2014, the Company and Goldman entered into a further amendment to the Goldman Line of Credit to increase the available borrowing to $5.0 million and extend the maturity date of the Goldman Line of Credit to March 27, 2017 (the “ Third Amendment Outstanding Balance In February 2015, as a result of the Series E Financing, the Company issued 1,978 shares of Series E Preferred to Goldman to satisfy $1,950,000 in principal borrowings under the Goldman Line of Credit plus approximately $28,000 in accrued interest. As a result of the Series E Financing, the Company’s borrowing capacity under the Goldman Line of Credit was reduced to $3,050,000 with the maturity date unchanged and the Crocker LOC was terminated in accordance with its terms. In March 2016, the Company and Goldman entered into a fourth amendment to the Goldman Line of Credit (the “ Fourth Amendment Contemporaneous with the execution of the Fourth Amendment, the Company entered into a new $500,000 Line of Credit (the “ New Crocker LOC On December 27, 2016, in connection with the consummation of the Series G Financing, the Company and Holder agreed to enter into the Fifth Amendment (the “ Line of Credit Amendment In addition, on January 23, 2017, the Company and Crocker amended the New Crocker LOC to extend the maturity date thereof to December 31, 2017. On May 10, 2017, Goldman and Crocker agreed to further extend the maturity dates of Lines of Credit to December 31, 2018 . As the aforementioned amendments to the Lines of Credit resulted in an increase to the borrowing capacity of the Lines of Credit, the Company adjusted the amortization period of any remaining unamortized deferred costs and note discounts to the term of the new arrangement. The Company evaluated the Lines of Credit and determined that the instruments contain a contingent beneficial conversion feature, i.e. an embedded conversion right that enables the holder to obtain the underlying Common Stock at a price below market value. The beneficial conversion feature is contingent as the terms of the conversion do not permit the Company to compute the number of shares that the holder would receive if the contingent event occurs (i.e. future borrowings under the Line of Credit). The Company has considered the accounting for this contingent beneficial conversion feature using the guidance in ASC 470, Debt. The guidance in ASC 470 states that a contingent beneficial conversion feature in an instrument shall not be recognized in earnings until the contingency is resolved. The beneficial conversion features of future borrowings under the Line of Credit will be measured using the intrinsic value calculated at the date the contingency is resolved using the conversion price and trading value of the Company’s Common Stock at the date the Lines of Credit were issued (commitment date). Pursuant to borrowings made during the 2015 year, the Company recognized approximately $146,000 in beneficial conversion feature as debt discount. As a result of the retirement of all amounts outstanding under the Lines of Credit in 2015, the Company recognized all remaining unamortized debt discount of approximately $385,000 as a component of interest expense during the three months ended March 31, 2015. As a result of $2,650,000 in borrowings under the Lines of Credit during the year ended December 31, 2016, the Company recorded approximately $219,000 in debt discount attributable to the beneficial conversion feature during the year ended December 31, 2016. During the year ended December 31, 2016, the Company accreted approximately $97,000 of debt discount as a component of interest expense. At December 31, 2016, unamortized note discount was approximately $122,000. As a result of an additional $3,350,000 in borrowings under the Lines of Credit during the year ended December 31, 2017, the Company recorded approximately $302,000 in debt discount attributable to the beneficial conversion feature during the year ended December 31, 2017. During the year ended December 31, 2017, the Company accreted approximately $198,000 of debt discount which is classified as a component of interest expense. At December 31, 2017, unamortized note discount was approximately $226,000. The following table sets forth the Company’s activity under its Lines of Credit for the periods indicated: Balance outstanding under Lines of Credit as of December 31, 2015 $ — Borrowing under Lines of Credit 2,650 Repayments — Balance outstanding under Lines of Credit as of December 31, 2016 $ 2,650 Borrowings under Lines of Credit 3,350 Repayments — Balance outstanding under Lines of Credit as of December 31, 2017 $ 6,000 Series A Preferred Stock A member of the Company's Board of Directors and certain members of management participated in the Series A Preferred Stock financing on the same terms as all other participants. Management purchased an aggregate of 125 shares for $125,000 and our Board Members purchased 855 shares for $855,000.

INVENTORY

INVENTORY	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
INVENTORY	Inventories of as of December 31, 2017 were comprised of work in process of representing direct labor costs on in-process projects and finished goods of net of reserves for obsolete and slow-moving items of . Inventories of $23,000 as of December 31, 2016 were comprised of work in process of $19,000 representing direct labor costs on in-process projects and finished goods of $4,000 net of reserves for obsolete and slow-moving items of $3,000. Appropriate consideration is given to obsolescence, excessive levels, deterioration and other factors in evaluating net realizable value and required reserve levels.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
PROPERTY AND EQUIPMENT	Property and equipment at December 31, 2017 and 2016, consists of: ($ in thousands) 2017 2016 Equipment $ 946 $ 935 Leasehold improvements 11 11 Furniture 102 101 1,059 1,047 Less accumulated depreciation (1,016 ) (954 ) $ 43 $ 93 Total depreciation expense for the years ended December 31, 2017, 2016 and 2015 was approximately $56,000, $117,000 and $137,000, respectively.

ACCRUED EXPENSES

ACCRUED EXPENSES	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
ACCRUED EXPENSES	Principal components of accrued expenses consist of: ($ in thousands) December 31, 2017 December 31, 2016 Compensated absences $ 273 $ 313 Wages, payroll taxes and sales commissions 38 28 Customer deposits 40 198 Royalties 72 147 Pension and employee benefit plans 5 7 Professional services 100 — Income and sales taxes 27 161 Dividends 34 27 Other 69 64 $ 658 $ 945

LINES OF CREDIT

LINES OF CREDIT	12 Months Ended
	Dec. 31, 2017
Line of Credit Facility [Abstract]
LINES OF CREDIT	Outstanding lines of credit consist of the following: ($ in thousands) December 31, 2017 December 31, 2016 Lines of Credit with Related Parties 8% convertible lines of credit. Face value of advances under lines of credit $6,000 at December 31, 2017 and $2,650 at December 31, 2016. Discount on advances under lines of credit is $226 at December 31, 2017 and $122 at December 31, 2016. Maturity date is December 31, 2018. $ 5,774 $ 2,528 Total lines of credit to related parties 5,774 2,528 Less current portion (5,774 ) (2,528 ) Long-term lines of credit to related parties $ — $ — For a more detailed discussion of the Company’s Lines of Credit, see Note 5, Related Parties.

INCOME TAXES

INCOME TAXES	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
INCOME TAXES	The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, ASC 740 requires a company to first determine whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. The amount accrued for uncertain tax positions was zero at December 31, 2017, 2016 and 2015, respectively. The Company’s uncertain position relative to unrecognized tax benefits and any potential increase in these liabilities relates primarily to the allocations of revenue and costs among the Company’s global operations and the impact of tax rulings made during the period affecting its tax positions. The Company’s existing tax position could result in liabilities for unrecognized tax benefits. The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. The amount of interest and penalties accrued as of December 31, 2017 and 2016 was approximately $10,000 and $12,000, respectively. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the Company’s provision for income taxes. No assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in the Company’s historical income tax provisions and accruals. The Company adjusts these items in light of changing facts and circumstances. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The significant components of the income tax provision are as follows: ($ in thousands) Year Ended December 31, Current 2017 2016 2015 Federal $ — $ — $ — State — — — Foreign (124 ) 21 22 Deferred Federal — — — State — — — Foreign — — — $ (124 ) $ 21 $ 22 The principal components of the Company’s deferred tax assets at December 31, 2017, 2016 and 2015 are as follows: ($ in thousands) 2017 2016 2015 Net operating loss carryforwards $ 13,734 $ 17,829 $ 15,948 Intangible and fixed assets (28 ) 102 220 Stock based compensation 1,954 2,324 1,861 Reserves and accrued expenses 38 8 8 Other — — — 15,698 20,263 18,037 Less valuation allowance (15,69 ) (20,263 ) (18,037 ) Net deferred tax assets $ — $ — $ — A reconciliation of the provision for income taxes to the amount computed by applying the statutory income tax rates to loss before income taxes is as follows: 2017 2016 2015 Amounts computed at statutory rates $ (3,423 ) $ (3,239 ) $ (2,902 ) State income tax, net of federal benefit (497 ) (462 ) (262 ) Expiration of net operating loss carryforwards 688 1,082 695 Non-deductible interest 250 49 149 Tax Act – federal rate change 7,276 — — Foreign taxes 143 362 413 Other 4 3 5 Net change in valuation allowance on deferred tax assets (4,565 ) 2,226 1,924 $ (124 ) $ 21 $ 22 The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. On December 22, 2017 the 2017 Tax Cuts and Jobs Act (the “ Act At December 31, 2017, 2016 and 2015, the Company had federal and state net operating loss carryforwards, a portion of which may be available to offset future taxable income for tax purposes. The federal net operating loss carryforwards expire at various dates from 2022 through 2037. The state net operating loss carryforwards expire at various dates from 2030 through 2037. The Internal Revenue Code (the “ Code Tax returns for the years 2013 through 2017 are subject to examination by taxing authorities.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
COMMITMENTS AND CONTINGENCIES	Employment Agreements The Company has employment agreements with its Chief Executive Officer and its Chief Technical Officer. The Company may terminate the agreements with or without cause. Subject to the conditions and other limitations set forth in each respective employment agreement, each executive will be entitled to the following severance benefits if the Company terminates the executive’s employment without cause or in the event of an involuntary termination (as defined in the employment agreements) by the Company or by the executive: Under the terms of the agreement, the Chief Executive Officer will be entitled to the following severance benefits if we terminate his employment without cause or in the event of an involuntary termination: (i) a lump sum cash payment equal to twenty-four months’ base salary; (ii) continuation of fringe benefits and medical insurance for a period of three years; and (iii) immediate vesting of 50% of outstanding stock options and restricted stock awards. In the event that the Chief Executive Officer’s employment is terminated within six months prior to or thirteen months following a change of control (as defined in the employment agreements), the Chief Executive Officer is entitled to the severance benefits described above, except that 100% of the Chief Executive Officer’s outstanding stock options and restricted stock awards will immediately vest. Under the terms of the employment agreement with our Chief Technical Officer, this executive will be entitled to the following severance benefits if we terminate his employment without cause or in the event of an involuntary termination: (i) a lump sum cash payment equal to six months of base salary; and (ii) continuation of their fringe benefits and medical insurance for a period of six months. In the event that his employment is terminated within six months prior to or thirteen months following a change of control (as defined in the employment agreements), he is entitled to the severance benefits described above, except that 100% of his outstanding stock options and restricted stock awards will immediately vest. The employment agreements for the Company’s Chief Executive Officer and Chief Technical Officer were amended to extend the term of each executive officer's employment agreement until December 31, 2018. Litigation There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company or any of our subsidiaries, threatened against or affecting the Company, our Common Stock, any of our subsidiaries or of the Company’s or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. Leases The Company’s corporate headquarters are located in San Diego, California where we occupy 9,927 square feet of office space. This facility’s lease was renewed in September 2017 through October 2018 at a cost of approximately $30,000 per month. In addition to our corporate headquarters, we also occupied the following spaces at December 31, 2017: ● 1,508 square feet in Ottawa, Province of Ontario, Canada, at a cost of approximately $3,000 per month until the expiration of the lease on March 31, 2021. This lease was renewed in April 2016 for a five-year period ending on March 31, 2021. Renewal terms were substantially unchanged from the existing lease; ● 9,720 square feet in Portland, Oregon, at a cost of approximately $21,000 per month until the expiration of the lease on December 31, 2021. This lease was renewed in September 2017 resulting in an additional 1,675 feet, an increase from approximately $18,000 to approximately $21,000 per month and the extension of the term from October 2018 to December 2021; and ● 304 square feet of office space in Mexico City, Mexico, at a cost of approximately $3,000 per month until November 30, 2018. At December 31, 2017, future minimum lease payments are as follows: ($ in thousands) 2018 $ 607 2019 284 2020 291 2021 272 2022 270 Thereafter 46 Total $ 1,770 Rental expense incurred under operating leases for the years ended December 31, 2017, 2016 and 2015 was approximately $545,000, $492,000 and $477,000, respectively.

EQUITY

EQUITY	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
EQUITY	The Company’s Certificate of Incorporation, as amended, authorize the issuance of two classes of stock to be designated “Common Stock” and “Preferred Stock”. The Preferred Stock may be divided into such number of series and with the rights, preferences, privileges and restrictions as the Board of Directors may determine. Series A Convertible Preferred Stock On September 15, 2017, the Company filed the Certificate of Designations of the Series A Preferred with the Delaware Secretary of State, designating 31,021 shares of the Company’s preferred stock, par value $0.01 per share, as Series A Preferred. Shares of Series A Preferred accrue dividends at a rate of 8% per annum if the Company chooses to pay accrued dividends in cash, and 10% per annum if the Company chooses to pay accrued dividends in shares of Common Stock. Each share of Series A Preferred has a liquidation preference of $1,000 per share and is convertible, at the option of the holder, into that number of shares of the Company’s Common Stock equal to the Liquidation Preference, divided by $1.15. Each holder of the Series A Preferred is entitled to vote on all matters, together with the holders of Common Stock, on an as converted basis. Holders of Series A Preferred may elect to convert shares of Series A Preferred into Conversion Shares at any time. In the event the volume-weighted average price (“ VWAP On September 18, 2017, the Company offered and sold a total of 11,000 shares of Series A Preferred at a purchase price of $1,000 per share. The total net proceeds to the Company from the Series A Financing were approximately $10.9 million. Concurrently with the Series A Financing, the Company entered into Exchange Agreements with holders of all outstanding shares of the Company's Series E Convertible Preferred Stock, all outstanding shares of the Company's Series F Convertible Preferred Stock and all outstanding shares of the Company's Series G Convertible Preferred Stock (collectively " Exchanged Preferred The Company evaluated the Preferred Stock Exchange and determined that the Preferred Stock Exchange was both an induced conversion and an extinguishment transaction. Using the guidance in ASC 260-10-S99-2, Earnings Per Share – SEC Materials – SEC Staff Announcement: The Effect on the Calculations of Earnings Per Share for a Period That Includes the Redemption or Induced Conversion of Preferred Stock and Debt – Modifications and Extinguishments, The Company had 31,021 shares and 0 shares of Series A Preferred outstanding as of December 31, 2017 and December 31, 2016, respectively. At December 31, 2017, the Company had cumulative undeclared dividends of $0. There were no conversions of Series A Preferred into Common Stock during the year ended December 31, 2017. During the year ended December 31, 2017, t he Company issued the holders of Series A Preferred 585,058 shares of Common Stock as payment of dividends due. Series B Convertible Redeemable Preferred Stock The Company had 239,400 shares of Series B Convertible Redeemable Preferred Stock (“ Series B Preferred Series E Convertible Preferred Stock On January 29, 2015, the Company filed the Certificate of Designations of the Series E Preferred Stock with the Delaware Secretary of State, designating 12,000 shares of the Company’s preferred stock, par value $0.01 per share, as Series E Preferred. Shares of Series E Preferred accrue dividends at a rate of 8% per annum if the Company chooses to pay accrued dividends in cash, and 10% per annum if the Company chooses to pay accrued dividends in shares of Common Stock. Each share of Series E Preferred has a liquidation preference of $1,000 per share and is convertible, at the option of the holder, into that number of shares of the Company’s Common Stock equal to the Liquidation Preference, divided by $1.90. The Series E Preferred shall be subordinate to and rank junior to the Company's Series A Preferred, Series B Preferred and all indebtedness of the Company. Each holder of the Series E Preferred is entitled to vote on all matters, together with the holders of Common Stock, on an as converted basis. Any time after the six-month period following the issuance date, in the event the arithmetic average of the closing sales price of the Company’s Common Stock is or was at least $2.85 for twenty (20) consecutive trading days, the Company may redeem all or a portion of the Series E Preferred outstanding upon thirty (30) calendar day's prior written notice (the “ Company's Redemption Notice In February 2015, the Company consummated a registered direct offering conducted without an underwriter or placement agent. In connection therewith, the Company issued 12,000 shares of Series E Preferred to certain investors at a price of $1,000 per share, with each share convertible into 526.32 shares of the Company’s Common Stock at $1.90 per share. On December 29, 2016, the Company filed Amendment No. 1 to the Certificate of Designations, Preferences and Rights of the Series E Convertible Preferred Stock (the “ Series E Amendment Director Appointment Provision The Company had 0 shares of Series E Preferred outstanding as of December 31, 2017 as a result of the Preferred Stock Exchange, and 12,000 shares of Series E Preferred outstanding at December 31, 2016. At December 31, 2017 and December 31, 2016, the Company had cumulative undeclared dividends of $0. There were no conversions of Series E Preferred into Common Stock during the years ended December 31, 2017 and 2016. For the year ended December 31, 2017, the Company has issued the holders of Series E Preferred 822,122 shares of Common Stock as payment of dividends due. With the payment of the quarterly dividends due September 30, 2017 to the holders of Series E Preferred in shares of Common Stock, the Director Appointment Provision became effective as of that date resulting in the Company adding two Board members as of September 15, 2017. Series F Convertible Preferred Stock In September 2016, we filed the Certificate of Designations, Preferences, and Rights of the Series F Convertible Preferred Stock (the “ Certificate of Designations Series F Preferred Each share of Series F Preferred has a liquidation preference of $1,000 per share (“ Liquidation Preferenc Series F Conversion Shares Any time after the six-month period following the issuance date, in the event the arithmetic average of the closing sales price of the Company’s Common Stock is or was at least $2.50 for twenty (20) consecutive trading days, the Company may redeem all or a portion of the Series F Preferred outstanding upon thirty (30) calendar days prior written notice in cash at a price per share of Series F Preferred equal to 110% of the Series F Liquidation Preference, plus all accrued and unpaid dividends. Also, simultaneous with the occurrence of a Change of Control transaction (as defined in the Certificate of Designations), the Company, at its option, shall have the right to redeem all or a portion of the outstanding Series F Preferred in cash at a price per share of Series F Preferred equal to 110% of the Liquidation Preference Amount plus all accrued and unpaid dividends. In September 2016, the Company offered and sold 2,000 shares of Series F Preferred for $1,000 per share (the “ Series F Financing The Company had 0 shares of Series F Preferred outstanding as of December 31, 2017 as a result of the Preferred Stock Exchange, and 2,000 shares of Series F Preferred at December 31, 2016 Series G Convertible Preferred Stock In December 27, 2016, the Company filed the Certificate of Designations, Preferences, and Rights of the Series G Convertible Preferred Stock with the Delaware Division of Corporations, designating 6,120 shares of the Company’s preferred stock, par value $0.01 per share, as Series G Convertible Preferred Stock (“ Series G Preferred Series G Liquidation Preferenc Any time after the six-month period following the issuance date, in the event the arithmetic average of the closing sales price of the Company’s Common Stock is or was at least $2.50 for twenty (20) consecutive trading days, the Company may redeem all or a portion of the Series G Preferred outstanding upon thirty (30) calendar days prior written notice in cash at a price per share of Series G Preferred equal to 110% of the Series G Liquidation Preference, plus all accrued and unpaid dividends. Also, simultaneous with the occurrence of a Change of Control transaction (as defined in the Certificate of Designations), the Company, at its option, shall have the right to redeem all or a portion of the outstanding Series G Preferred in cash at a price per share of Series G Preferred equal to 110% of the Liquidation Preference Amount plus all accrued and unpaid dividends. On December 29, 2016, the Company accepted subscription forms from certain accredited investors to purchase a total of 1,625 shares of Series G Preferred for $1,000 per share (the “ Series G Financing The Company had 0 shares of Series G Preferred outstanding as of December 31, 2017 as a result of the Preferred Stock Exchange, and 6,021 shares of Series G Preferred at December 31, 2016. At December 31, 2017 and December 31, 2016, the Company had cumulative undeclared dividends of $0. There were no conversions of Series G Preferred into Common Stock during the years ended December 31, 2017 and 2016. For the year ended December 31, 2017, the Company has issued the holders of Series G Preferred 409,002 shares of Common Stock as payment of dividends due. Common Stock The following table summarizes outstanding Common Stock activity for the following periods: Common Stock Shares outstanding at December 31, 2014 93,507,150 Shares issued pursuant to payment of stock dividend on Series E Preferred 478,664 Shares issued pursuant to cashless warrants exercised 45,376 Shares issued pursuant to option exercises 39,705 Shares outstanding at December 31, 2015 94,070,895 Shares issued pursuant to payment of stock dividend on Series E Preferred 950,362 Shares issued pursuant to payment of stock dividend on Series F Preferred 48,513 Shares issued pursuant to payment of stock dividend on Series G Preferred 3,770 Shares issued pursuant to cashless warrants exercised 144,459 Shares issued pursuant to option exercises 12,626 Exchange of common shares for Series G Preferred (3,383,830 ) Shares outstanding at December 31, 2016 91,846,795 Shares issued pursuant to payment of stock dividend on Series A Preferred 585,058 Shares issued pursuant to payment of stock dividend on Series E Preferred 822,122 Shares issued pursuant to payment of stock dividend on Series F Preferred 135,855 Shares issued pursuant to payment of stock dividend on Series G Preferred 409,002 Shares issued pursuant to option exercises 369,004 Shares outstanding at December 31, 2017 94,167,836 Warrants As of December 31, 2017, warrants to purchase 230,000 The following table summarizes warrant activity for the following periods: Warrants Weighted- Average Exercise Price Balance at December 31, 2014 977,778 $ 1.22 Granted — $ 0.00 Expired / Canceled (419,444 ) $ 1.86 Exercised (108,334 ) $ 1.01 Balance at December 31, 2015 450,000 $ 0.67 Exercised (275,000 ) $ 0.55 Balance at December 31, 2016 175,000 $ 0.84 Granted 80,000 $ 1.13 Expired / Canceled (25,000 ) $ 1.10 Exercised — $ — Balance at December 31, 2017 230,000 $ 0.91 During the year ended December 31, 2017, the Company issued an aggregate of 80,000 warrants to certain members of the Company’s advisory board. The Company determined the grant date fair value of these warrants using the Black-Scholes option valuation model and recorded approximately $57,000 in expense for the year ended December 31, 2017. The Company used the following assumptions in the application of the Black-Scholes option valuation model: an exercise price ranging between $1.09 and $1.17, a term of 2.0 years, a risk-free interest rate of 2.58%, a dividend yield of 0% and volatility of 59%. Such expense is recorded in the Company’s consolidated statement of operations as a component of general and administrative expense. There were no warrants exercised during the twelve months ended December 31, 2017 and 25,000 warrants expired unexercised during the 2017 year. The intrinsic value of warrants outstanding as of December 31, 2017 was approximately $155,000.

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
STOCK-BASED COMPENSATION	Stock Options As of December 31, 2017, the Company had one active stock-based compensation plan: the 1999 Stock Option Plan (the “ 1999 Plan 1999 Plan The 1999 Plan was adopted by the Company’s Board of Directors on December 17, 1999. Under the terms of the 1999 Plan, the Company could, originally, issue up to 350,000 non-qualified or incentive stock options to purchase Common Stock of the Company. During the year ended December 31, 2014, the Company subsequently amended and restated the 1999 Plan whereby it increased the share reserve for issuance to approximately 7.0 million shares of the Company’s Common Stock. The 1999 Plan prohibits the grant of stock option or stock appreciation right awards with an exercise price less than fair market value of Common Stock on the date of grant. The 1999 Plan also generally prohibits the “re-pricing” of stock options or stock appreciation rights, although awards may be bought-out for a payment in cash or the Company’s stock. The 1999 Plan permits the grant of stock-based awards other than stock options, including the grant of “full value” awards such as restricted stock, stock units and performance shares. The 1999 Plan permits the qualification of awards under the plan (payable in either stock or cash) as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code. The number of options issued and outstanding and the number of options remaining available for future issuance are shown in the table below. On July 1, 2014, the Company began soliciting written consents from its shareholders to approve an amendment to the Company’s 1999 Stock Option Plan to increase the number of shares authorized for issuance thereunder from approximately 4.0 million to approximately 7.0 million (the “ Amendment A summary of the activity under the Company’s stock option plans is as follows: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Balance at December 31, 2014 4,057,296 $ 1.06 6.8 Granted 2,110,000 $ 1.63 - Expired/Cancelled (750,622 ) $ 1.86 - Exercised (39,705 ) $ 0.87 - Balance at December 31, 2015 5,376,969 $ 1.17 6.9 Granted 1,264,000 $ 1.34 - Expired/Cancelled (121,500 ) $ 1.29 - Exercised (12,626 ) $ 0.21 - Balance at December 31, 2016 6,506,843 $ 1.21 6.6 Granted 112,500 $ 1.39 - Expired/Cancelled (156,827 ) $ 1.67 - Exercised (369,004 ) $ 0.70 - Balance at December 31, 2017 6,093,512 $ 1.23 5.8 At December 31, 2017, a total of 6,093,512 options were outstanding of which 5,051,016 were exercisable at a weighted average price of $1.19 per share with a remaining weighted average contractual term of approximately 5.3 years. The Company expects that, in addition to the 5,051,016 options that were exercisable as of December 31, 2017, another 1,042,496 will ultimately vest resulting in a combined total of 6,093,512. Those 6,093,512 shares have a weighted average exercise price of $1.23 and an aggregate intrinsic value of approximately $2,595,000 as of December 31, 2017. Stock-based compensation expense related to equity options was approximately $1,094,000, $1,162,000 and $744,000 for the years ended December 31, 2017, 2016 and 2015, respectively. The weighted-average grant-date fair value per share of options granted to employees during the years ended December 31, 2017, 2016 and 2015 was , $0.82 and $1.18, respectively. At December 31, 2017, the total remaining unrecognized compensation cost related to unvested stock options amounted to approximately , which will be amortized over the weighted-average remaining requisite service period of 1.3 years. During the year ended December 31, 2017, there were 369,004 options exercised for cash resulting in the issuance of 369,004 shares of the Company’s Common Stock and proceeds of approximately $259,000. During the year ended December 31, 2016, there were 12,626 options exercised for cash resulting in the issuance of 12,626 shares of the Company’s Common Stock and proceeds of approximately $3,000. The intrinsic value of options exercised during the years ended December 31, 2017 and 2016 was approximately $177,000 and $11,000, respectively. The intrinsic value of options exercisable at December 31, 2017 and 2016 was approximately $2,388,000 and $1,679,000, respectively. The intrinsic value of options that vested during 2017 was approximately $207,000. The aggregate intrinsic value for all options outstanding as of December 31, 2017 and 2016 was approximately $2,595,000 and $1,744,000, respectively. In September 2015, the Company issued an aggregate of 144,000 options to purchase shares of the Company’s Common Stock to certain members of the Company’s Board of Directors in return for their service from January 1, 2016 through December 31, 2016. Such options vest at the rate of 12,000 options per month on the last day of each month during the 2016 year. The options have an exercise price of $1.73 per share and a term of 10 years. Pursuant to this issuance, the Company recorded compensation expense of approximately $178,000 the twelve months ended December 31, 2016 based on the grant-date fair value of the options determined using the Black-Scholes option-valuation model. In May 2016, the Company issued an aggregate of 16,000 options to purchase shares of the Company’s Common Stock to a new member of the Company’s Board of Directors in return for their service from May 2016 through December 31, 2016. Such options vest at the rate of 2,000 options per month on the last day of each month during the 2016 year. The options have an exercise price of $1.29 per share and a term of 10 years. Pursuant to this issuance, the Company recorded compensation expense of approximately $12,000 for the twelve months ended December 31, 2016 based on the grant-date fair value of the options determined using the Black-Scholes option-valuation model. In September 2016, the Company issued an aggregate of 168,000 options to purchase shares of the Company’s Common Stock to certain members of the Company’s Board of Directors in return for their service from January 1, 2017 through December 31, 2017. Such options vested at the rate of 14,000 options per month on the last day of each month during the 2017 year. The options have an exercise price of $1.37 per share and a term of 10 years. The Company began recognition of compensation based on the grant-date fair value ratably over the 2017 requisite service period and recorded approximately $140,000 in expense. Such expense is recorded in the Company’s consolidated statement of operations as a component of general and administrative expense. Restricted Stock Awards There were no restricted stock awards issued during the years ended December 31, 2017 and 2016. In December 2014, the Company issued 94,116 shares of its Common Stock to certain members of the Company’s Board of Directors as compensation for services to be rendered through December 2015. Such shares vested monthly over the 12 months of 2015 with any unvested shares being forfeitable should the Board members’ service be terminated during 2015. For the year ended December 31, 2015, the Company recorded approximately $216,000 as compensation expense related to this stock issuance. Stock-based Compensation Stock-based compensation related to equity options and restricted stock has been classified as follows in the accompanying consolidated statements of operations (in thousands): Year Ended December 31, 2017 2016 2015 Cost of revenues $ 19 $ 20 $ 15 General and administrative 655 714 618 Sales and marketing 220 224 171 Research and development 200 204 156 Total $ 1,094 $ 1,162 $ 960 Common Stock Reserved for Future Issuance The following table summarizes the Common Stock reserved for future issuance as of December 31, 2017: Common Stock Convertible preferred stock – Series A and Series B 27,020,812 Convertible lines of credit 5,221,964 Stock options outstanding 6,093,512 Warrants outstanding 230,000 Authorized for future grant under stock option plans 100,265

EMPLOYEE BENEFIT PLAN

EMPLOYEE BENEFIT PLAN	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
EMPLOYEE BENEFIT PLAN	During 1995, the Company adopted a defined contribution 401(k) retirement plan (the “ Plan Employees are fully vested in their share of the Company’s contributions after the completion of five years of service. In 2015, the Company authorized contributions of approximately $119,000 for the 2015 plan year of which $83,000 were paid prior to December 31, 2015. In 2016, the Company authorized contributions of approximately $150,000 for the 2016 plan year of which $111,000 were paid prior to December 31, 2016. In 2017, the Company authorized contributions of approximately $154,000 for the 2017 plan year of which $115,000 were paid prior to December 31, 2017.

PENSION PLAN

PENSION PLAN	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
PENSION PLAN	One of the Company’s dormant foreign subsidiaries maintains a defined benefit pension plan that provides benefits based on length of service and final average earnings. The following table sets forth the benefit obligation, fair value of plan assets, and the funded status of the Company’s plan; amounts recognized in the Company’s consolidated financial statements; and the assumptions used in determining the actuarial present value of the benefit obligations as of December 31: ($ in thousands) 2017 2016 2015 Change in benefit obligation: Benefit obligation at beginning of year $ 3,540 $ 3,068 $ 3,488 Service cost — — — Interest cost 64 75 70 Actuarial (gain) loss (167 ) 542 (123 ) Effect of exchange rate changes 473 (114 ) (356 ) Effect of curtailment — — — Benefits paid (80 ) (31 ) (11 ) Benefit obligation at end of year 3,830 3,540 3,068 Change in plan assets: Fair value of plan assets at beginning of year 1,645 1,557 1,654 Actual return of plan assets 7 142 40 Company contributions 12 28 34 Benefits paid (80 ) (31 ) — Effect of exchange rate changes 222 (51 ) (171 ) Fair value of plan assets at end of year 1,806 1,645 1,557 Funded status (2,024 ) (1,895 ) (1,511 ) Unrecognized actuarial loss (gain) 1,629 1,831 1,413 Unrecognized prior service (benefit) cost — — — Additional minimum liability (1,629 ) (1,831 ) (1,413 ) Unrecognized transition (asset) liability — — — Net amount recognized $ (2,024 ) $ (1,895 ) $ (1,511 ) Plan Assets Pension plan assets were comprised of the following asset categories at December 31, Equity securities 5.7 % 5.7 % 5.0 % Debt securities 86.7 % 87.2 % 89.3 % Other 7.6 % 7.1 % 5.7 % Total 100 % 100 % 100 % Components of net periodic benefit cost are as follows: Service cost $ — $ — $ — Interest cost on projected benefit obligations 64 75 70 Expected return on plan assets (70) (63 ) (61 ) Amortization of prior service costs — — — Amortization of actuarial loss 104 73 80 Net periodic benefit costs $ 98 $ 85 $ 89 The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, were Discount rate 1.9 % 1.7 % 2.4 % Expected return on plan assets 3.2 % 4.0 % 4.0 % Rate of pension increases 2.0 % 2.0 % 2.0 % Rate of compensation increase N/A N/A N/A The following discloses information about the Company’s defined benefit pension plan that had an accumulated benefit obligation in excess of plan assets as of December 31, Projected benefit obligation $ 3,830 $ 3,540 $ 3,068 Accumulated benefit obligation $ 3,830 $ 3,540 $ 3,068 Fair value of plan assets $ 1,806 $ 1,645 $ 1,557 As of December 31, 2017, the following benefit payments are expected to be paid as follows (in thousands): 2018 $ 86 2019 $ 87 2020 $ 88 2021 $ 103 2022 $ 105 2023 — 2027 $ 676 The Company made contributions to the plan of approximately $12,000 during year 2017, $28,000 during year 2016 and approximately $34,000 during 2015. The investment objectives for the plan are the preservation of capital, current income and long-term growth of capital. The Company’s pension assets are classified within Level 1 of the fair value hierarchy, as defined under ASC 820, because they are valued using market prices. The pension assets are primarily comprised of the cash surrender value of insurance contracts. All plan assets are managed in a policyholder pool in Germany by outside investment managers. The measurement date used to determine the benefit information of the plan was January 1, 2018.

ACCUMULATED OTHER COMPREHENSIVE

ACCUMULATED OTHER COMPREHENSIVE LOSS	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
ACCUMULATED OTHER COMPREHENSIVE LOSS	Accumulated other comprehensive income is the combination of the additional minimum liability related to the Company’s defined benefit pension plan, recognized pursuant to ASC 715-30, “ Compensation - Retirement Benefits - Defined Benefit Plans – Pension As of December 31, 2017, 2016 and 2015, the components of accumulated other comprehensive loss were as follows: ($ in thousands) 2017 2016 2015 Additional minimum pension liability $ (1,353 ) $ (1,338 ) $ (991 ) Foreign currency translation adjustment (311 ) (205 ) (204 ) Ending balance $ (1,664 ) $ (1,543 ) $ (1,195 )

QUARTERLY INFORMATION (UNAUDITE

QUARTERLY INFORMATION (UNAUDITED)	12 Months Ended
	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
QUARTERLY INFORMATION (UNAUDITED)	The following table sets forth selected quarterly financial data for 2017, 2016 and 2015 (in thousands, except share and per share data): 2017 (by quarter) 1 2 3 4 Revenues $ 928 $ 1,060 $ 1,084 $ 1,221 Cost of Sales 262 250 231 248 Operating expenses 3,290 3,240 3,136 3,363 Loss from Operations (2,624 ) (2,430 ) (2,283 ) (2,390 ) Interest expense (income), net 100 164 178 149 Other expense (income), net - (50 ) (75 ) - Income tax expense (benefit) 3 3 4 (134 ) Net loss $ (2,727 ) $ (2,547 ) $ (2,390 ) $ (2,405 ) Net loss per share: Net loss (0.03 ) (0.03 ) (0.03 ) (0.03 ) Preferred dividends (0.01 ) - - - Preferred stock exchange - - (0.01 ) - Basic loss per share to common shareholders (0.04 ) (0.03 ) (0.04 ) (0.03 ) Basic weighted-average shares outstanding 91,864,174 92,539,230 93,197,689 93,642,074 2016 (by quarter) 1 2 3 4 Revenues $ 1,043 $ 996 $ 848 $ 925 Cost of Sales 279 275 232 284 Operating expenses 3,028 2,995 2,955 3,226 Loss from Operations (2,264 ) (2,274 ) (2,339 ) (2,585 ) Interest expense (income), net 11 36 89 109 Other expense (income), net (1 ) (200 ) - - Income tax expense (benefit) 3 4 3 11 Net loss $ (2,277 ) $ (2,114 ) $ (2,431 ) $ (2,705 ) Net loss per share: Net loss $ (0.03 ) $ (0.02 ) $ (0.03 ) $ (0.03 ) Preferred dividends $ (0.00 ) $ (0.01 ) $ (0.00 ) $ (0.00 ) Basic loss per share to common shareholders $ (0.03 ) $ (0.03 ) $ (0.03 ) $ (0.03 ) Basic weighted-average shares outstanding 94,073,367 94,298,567 94,550,721 94,779,243 2015 (by quarter) 1 2 3 4 Revenues $ 991 $ 1,695 $ 1,181 $ 902 Cost of Sales 286 798 321 539 Operating expenses 2,641 2,660 2,813 2,921 Loss from Operations (1,936 ) (1,763 ) (1,953 ) (2,558 ) Interest expense (income), net 437 (2 ) 1 11 Other expense (income), net (46 ) — (99 ) — Income tax expense (benefit) 3 6 3 10 Net loss $ (2,330 ) $ (1,767 ) $ (1,858 ) $ (2,579 ) Net loss per share: Net loss $ (0.03 ) $ (0.02 ) $ (0.02 ) $ (0.03 ) Preferred dividends $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) Basic loss per share to common shareholders $ (0.03 ) $ (0.02 ) $ (0.02 ) $ (0.03 ) Basic weighted-average shares outstanding 93,515,640 93,674,349 93,876,339 94,070,895

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
SUBSEQUENT EVENTS	On February 8, 2018, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation, as amended, to increase the authorized number of shares of its Common Stock to 175,000,000 from 150,000,000 shares. On January 4, 2018, the Company amended its 1999 Stock Option Plan to increase the number of shares authorized for issuance thereunder from approximately 6.2 million to 8.2 million Subsequent to December 31, 2017, the Company issued an aggregate of 1,289,000 options to purchase Common Stock at an exercise price of $1.75 per share as follows: (i) 414,000 options issued to certain members of the Board of Directors, (ii) 650,000 options issued to certain members of senior management and (iii) 225,000 options issued to certain employees. In addition, the Company issued 61,669 shares of Common Stock pursuant to the exercise of 61,669 options resulting in cash proceeds to the Company of approximately $65,000.

SUMMARY OF SIGNIFICANT ACCOUN26

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
Principles of Consolidation	The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s wholly-owned subsidiaries are: XImage Corporation, a California Corporation; ImageWare Systems ID Group, Inc. a Delaware corporation (formerly Imaging Technology Corporation); I.W. Systems Canada Company, a Nova Scotia unlimited liability company; ImageWare Digital Photography Systems, Inc., LLC a Nevada limited liability company (formerly Castleworks LLC); Digital Imaging International GmbH, a company formed under German laws; and Image Ware Mexico S de RL de CV, a company formed under Mexican laws.
Operating Cycle	Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying consolidated balance sheets, although they will be liquidated in the normal course of contract completion which may take more than one operating cycle.
Use of Estimates	The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“ U.S. GAAP
Accounts receivable	In the normal course of business, the Company extends credit without collateral requirements to its customers that satisfy pre-defined credit criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. Accounts receivable are considered delinquent when the due date on the invoice has passed. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay to determine the level of allowance required. Accounts receivable are written off against the allowance for doubtful accounts when all collection efforts by the Company have been unsuccessful.
Inventories	Finished goods inventories are stated at the lower of cost, determined using the average cost method, or net realizable value. See Note 6.
Property, Equipment and Leasehold Improvements	Property and equipment, consisting of furniture and equipment, are stated at cost and are being depreciated on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged to expense as incurred. Major renewals or improvements are capitalized. When assets are sold or abandoned, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized. Expenditures for leasehold improvements are capitalized. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Fair Value of Financial Instruments	For certain of the Company’s financial instruments, including accounts receivable, accounts payable, accrued expenses, deferred revenues and lines of credit payable to related parties, the carrying amounts approximate fair value due to their relatively short maturities.
Derivative Financial Instruments	The Company recognizes revenue from the following major revenue sources: ● Long-term fixed-price contracts involving significant customization; ● Fixed-price contracts involving minimal customization; ● Software licensing; ● Sales of computer hardware and identification media; and ● Post-contract customer support (“ PCS The Company’s revenue recognition policies are consistent with U.S. GAAP including the Financial Accounting Standards Board (“ FASB ASC Software Revenue Recognition Revenue Recognition, Construction-Type and Production-Type Contracts Securities and Exchange Commission Staff Accounting Bulletin 104 Revenue Recognition, Multiple Element Arrangements The Company recognizes revenue and profit as work progresses on long-term, fixed-price contracts involving significant amount of hardware and software customization using the percentage of completion method based on costs incurred to date compared to total estimated costs at completion. The primary components of costs incurred are third party software and direct labor cost including fringe benefits. Revenues recognized in excess of amounts billed are classified as current assets under “Costs and estimated earnings in excess of billings on uncompleted contracts.” Amounts billed to customers in excess of revenues recognized are classified as current liabilities under “Billings in excess of costs and estimated earnings on uncompleted contracts.” Revenue from contracts for which the Company cannot reliably estimate total costs or there are not significant amounts of customization are recognized upon completion. For contracts that require significant amounts of customization that the Company accounts for under the completed contract method of revenue recognition, the Company defers revenue recognition until customer acceptance is received. For contracts containing either extended or dependent payment terms, revenue recognition is deferred until such time as payment has been received by the Company. The Company also generates non-recurring revenue from the licensing of its software. Software license revenue is recognized upon the execution of a license agreement, upon deliverance, when fees are fixed and determinable, when collectability is probable, when all other significant obligations have been fulfilled a nd the Company has obtained vendor specific objective evidence (“ VSOE ”) of the fair value of the undelivered element. VSOE of fair value for customer support services is determined by reference to the price the customer pays for such element when sold separately; that is, the renewal rate offered to customers. In those instances when objective and reliable evidence of fair value exists for the undelivered items but not for the delivered items, the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items
Goodwill	The Company accounts for its intangible assets under the provisions of ASC 350, “ Intangibles - Goodwill and Other Property, Plant and Equipment The Company did not record any goodwill impairment charges for the years ended December 31, 2017, 2016 or 2015.
Intangible and Long Lived Assets	Intangible assets are carried at their cost less any accumulated amortization. Any costs incurred to renew or extend the life of an intangible or long-lived asset are reviewed for capitalization. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company’s products under development will continue. Either of these could result in future impairment of long-lived assets.
Concentration of Credit Risk	Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash with high quality financial institutions and at times during the years ended December 31, 2017 and 2016 exceeded the FDIC insurance limits of $250,000. Sales are typically made on credit and the Company generally does not require collateral. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for doubtful accounts. The Company considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay to determine the level of allowance required. Accounts receivable are presented net of an allowance for doubtful accounts of approximately $15,000 and $1,000 at December 31, 2017 and 2016, respectively. For the year ended December 31, 2017 one customer accounted for approximately 25% or $1,089,000 of total revenues and had trade receivables of approximately $201,000 as of the end of the year. For the year ended December 31, 2016 two customers accounted for approximately 30% or $1,162,000 of total revenues and had trade receivables of $78,000 as of the end of the year. For the year ended December 31, 2015, two customers accounted for approximately 37% or $1,753,000 of total revenues and $78,000 trade receivables as of the end of the year.
Stock-Based Compensation	At December 31, 2017, the Company had one stock-based compensation plan for employees and nonemployee directors, which authorize the granting of various equity-based incentives including stock options and restricted stock. The Company estimates the fair value of its stock options using a Black-Scholes option-pricing model, consistent with the provisions of ASC 718, “ Compensation – Stock Compensation ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life, and interest rates. The Company is required to make various assumptions in the application of the Black-Scholes option-pricing model. The Company has determined that the best measure of expected volatility is based on the historical weekly volatility of the Company’s Common Stock. Historical volatility factors utilized in the Company’s Black-Scholes computations for options granted during the years ended December 31, 2017, 2016 and 2015 ranged from 58% to 103%. The Company has elected to estimate the expected life of an award based upon the SEC approved “simplified method” noted under the provisions of Staff Accounting Bulletin No. 110. The expected term used by the Company during the years ended December 31, 2017, 2016 and 2015 was 5.17 years. The difference between the actual historical expected life and the simplified method was immaterial. The interest rate used is the risk-free interest rate and is based upon U.S. Treasury rates appropriate for the expected term. Interest rates used in the Company’s Black-Scholes calculations for the years ended December 31, 2017, 2016 and 2015 averaged 2.6%. Dividend yield is zero as the Company does not expect to declare any dividends on the Company’s common shares in the foreseeable future. In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation is a critical assumption. The Company has adopted the provisions of ASU 2016-09 and will continue to use an estimated annualized forfeiture rate of approximately 0% for corporate officers, 4.1% for members of the Board of Directors and 6.0% for all other employees. The Company reviews the expected forfeiture rate annually to determine if that percent is still reasonable based on historical experience. Restricted stock units are recorded at the grant date fair value with corresponding compensation expense recorded ratably over the requisite service period.
Income Taxes	Current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credits and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Foreign Currency Translation	The financial position and results of operations of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. Revenues and expenses of such subsidiaries have been translated into U.S. dollars at weighted-average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. The Company translates foreign currencies of its German, Canadian and Mexican subsidiaries. The cumulative translation adjustment, which is recorded in accumulated other comprehensive loss, decreased approximately $106,000 for the year ended December 31, 2017, decreased approximately $1,000 for the year ended December 31, 2016 and increased approximately $67,000 for the year ended December 31, 2015.
Comprehensive Loss	Comprehensive loss consists of net gains and losses affecting shareholders’ equity that, under generally accepted accounting principles, are excluded from net loss. For the Company, the only items are the cumulative translation adjustment and the additional minimum liability related to the Company’s defined benefit pension plan, recognized pursuant to ASC 715-30, “ Compensation - Retirement Benefits - Defined Benefit Plans – Pension
Advertising Costs	The Company expenses advertising costs as incurred. The Company incurred approximately $45,000 in advertising expenses during the year ended December 31, 2017, $24,000 in advertising expenses during the year ended December 31, 2016, and $12,000 during the year ended December 31, 2015.
Loss Per Share	Basic loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period, adjusted to include, if dilutive, potential dilutive shares consisting of convertible preferred stock, convertible notes payable, stock options and warrants, calculated using the treasury stock and if-converted methods. For diluted loss per share calculation purposes, the net loss available to common shareholders is adjusted to add back any preferred stock dividends in the consolidated statement of operations for the respective periods. (Amounts in thousands, except share and per share amounts) Year Ended December 31, Numerator for basic and diluted loss per share: 2017 2016 2015 Net loss $ (10,069 ) $ (9,527 ) $ (8,534 ) Preferred dividends (2,400 ) (1,347 ) (1,065 ) Preferred stock exchange (1,245 ) — — Net loss available to common shareholders $ (13,714 ) $ (10,874 ) $ (9,599 ) Denominator for basic loss per share — weighted-average shares outstanding 92,816,723 94,426,783 93,786,079 Effect of dilutive securities — — — Denominator for diluted loss per share — weighted-average shares outstanding 92,816,723 94,426,783 93,786,079 Basic and diluted loss per share: Net loss $ (0.11 ) $ (0.10 ) $ (0.09 ) Preferred dividends (0.03 ) (0.02 ) (0.01 ) Preferred stock exchange (0.01 ) — — Net loss available to common shareholders $ (0.15 ) $ (0.12 ) $ (0.10 ) The following potential dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as their effect would have been antidilutive: Potential Dilutive Securities: Common Share Equivalents at December 31, 2017 Common Share Equivalents at December 31, 2016 Common Share Equivalents at December 31, 2015 Convertible lines of credit 5,221,964 2,201,903 — Convertible redeemable preferred stock – Series A 26,974,783 — — Convertible redeemable preferred stock – Series B 46,029 46,029 46,029 Convertible redeemable preferred stock – Series E — 6,315,789 6,442,105 Convertible redeemable preferred stock – Series F — 1,333,333 — Convertible redeemable preferred stock – Series G — 4,014,000 — Stock options 6,093,512 6,506,843 5,376,969 Warrants 230,000 175,000 450,000 Total Potential Dilutive Securities 38,566,288 20,592,897 12,315,103
Recently Issued Accounting Standards	From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “ FASB FASB ASU No. 2014-09. ASU Revenue from Contracts with Customers FASB ASU No. 2016-01 Financial Instruments—Overall – Recognition and Measurement of Financial Assets and Financial Liabilities”. FASB ASU No. 2016-02 Leases” FASB ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers FASB ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers FASB ASU No. 2016-13 inancial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. FASB ASU No. 2016-15. In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless it is impracticable for some of the amendments, in which case those amendments would be prospectively as of the earliest date practicable. FASB ASU No. 2017-04. Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments of this ASU eliminate step 2 from the goodwill impairment test. The annual, or interim test is performed by comparing the fair value of a reporting unit with its carrying amount. The amendments of this ASU also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and if it fails that qualitative test, to perform step 2 of the goodwill impairment test. ASU No. 2017-04 is effective for fiscal years beginning after December 15, 2019. FASB ASU No. 2017-09. In May 2017, the FASB issued ASU No. 2017-09, “ Scope of Modification Accounting Stock Compensation FASB ASU No. 2017-11. Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral” The Company is currently evaluating the potential impact of this updated guidance on its consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUN27

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	12 Months Ended
	Dec. 31, 2017
Summary Of Significant Accounting Policies Tables
Computation of basic and diluted loss per share	(Amounts in thousands, except share and per share amounts) Year Ended December 31, Numerator for basic and diluted loss per share: 2017 2016 2015 Net loss $ (10,069 ) $ (9,527 ) $ (8,534 ) Preferred dividends (2,400 ) (1,347 ) (1,065 ) Preferred stock exchange (1,245 ) — — Net loss available to common shareholders $ (13,714 ) $ (10,874 ) $ (9,599 ) Denominator for basic loss per share — weighted-average shares outstanding 92,816,723 94,426,783 93,786,079 Effect of dilutive securities — — — Denominator for diluted loss per share — weighted-average shares outstanding 92,816,723 94,426,783 93,786,079 Basic and diluted loss per share: Net loss $ (0.11 ) $ (0.10 ) $ (0.09 ) Preferred dividends (0.03 ) (0.02 ) (0.01 ) Preferred stock exchange (0.01 ) — — Net loss available to common shareholders $ (0.15 ) $ (0.12 ) $ (0.10 )
Potential Dilutive Securities	Potential Dilutive Securities: Common Share Equivalents at December 31, 2017 Common Share Equivalents at December 31, 2016 Common Share Equivalents at December 31, 2015 Convertible lines of credit 5,221,964 2,201,903 — Convertible redeemable preferred stock – Series A 26,974,783 — — Convertible redeemable preferred stock – Series B 46,029 46,029 46,029 Convertible redeemable preferred stock – Series E — 6,315,789 6,442,105 Convertible redeemable preferred stock – Series F — 1,333,333 — Convertible redeemable preferred stock – Series G — 4,014,000 — Stock options 6,093,512 6,506,843 5,376,969 Warrants 230,000 175,000 450,000 Total Potential Dilutive Securities 38,566,288 20,592,897 12,315,103

FAIR VALUE ACCOUNTING (Tables)

FAIR VALUE ACCOUNTING (Tables)	12 Months Ended
	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Fair value measurement of Assets and liability	Fair Value at December 31, 2017 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,806 $ 1,806 $ — $ — Totals $ 1,806 $ 1,806 $ — $ — Fair Value at December 31, 2016 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,645 $ 1,645 $ — $ — Totals $ 1,645 $ 1,645 $ — $ —

INTANGIBLE ASSETS AND GOODWILL

INTANGIBLE ASSETS AND GOODWILL (Tables)	12 Months Ended
	Dec. 31, 2017
Intangible Assets And Goodwill Tables
Intangible amortization expense	Fiscal Year Ended December 31, Estimated Amortization Expense ($ in thousands) 2018 $ 12 2019 12 2020 12 2021 12 2022 12 Thereafter 33 Totals $ 93

RELATED PARTIES (Tables)

RELATED PARTIES (Tables)	12 Months Ended
	Dec. 31, 2017
Related Parties Tables
Activity Under Lines Of Credit	Balance outstanding under Lines of Credit as of December 31, 2015 $ — Borrowing under Lines of Credit 2,650 Repayments — Balance outstanding under Lines of Credit as of December 31, 2016 $ 2,650 Borrowings under Lines of Credit 3,350 Repayments — Balance outstanding under Lines of Credit as of December 31, 2017 $ 6,000

PROPERTY AND EQUIPMENT (Tables)

PROPERTY AND EQUIPMENT (Tables)	12 Months Ended
	Dec. 31, 2017
Property And Equipment Tables
Property and equipment	($ in thousands) 2017 2016 Equipment $ 946 $ 935 Leasehold improvements 11 11 Furniture 102 101 1,059 1,047 Less accumulated depreciation (1,016 ) (954 ) $ 43 $ 93

ACCRUED EXPENSES (Tables)

ACCRUED EXPENSES (Tables)	12 Months Ended
	Dec. 31, 2017
Condensed Consolidated Statements Of Comprehensive Loss
Accrued expenses	Principal components of accrued expenses consist of: ($ in thousands) December 31, 2017 December 31, 2016 Compensated absences $ 273 $ 313 Wages, payroll taxes and sales commissions 38 28 Customer deposits 40 198 Royalties 72 147 Pension and employee benefit plans 5 7 Professional services 100 — Income and sales taxes 27 161 Dividends 34 27 Other 69 64 $ 658 $ 945

LINE OF CREDIT (Tables)

LINE OF CREDIT (Tables)	12 Months Ended
	Dec. 31, 2017
Line Of Credit Tables
LINE OF CREDIT	($ in thousands) December 31, 2017 December 31, 2016 Lines of Credit with Related Parties 8% convertible lines of credit. Face value of advances under lines of credit $6,000 at December 31, 2017 and $2,650 at December 31, 2016. Discount on advances under lines of credit is $226 at December 31, 2017 and $122 at December 31, 2016. Maturity date is December 31, 2018. $ 5,774 $ 2,528 Total lines of credit to related parties 5,774 2,528 Less current portion (5,774 ) (2,528 ) Long-term lines of credit to related parties $ — $ —

INCOME TAXES (Tables)

INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2017
Income Taxes Tables
Income tax provision	($ in thousands) Year Ended December 31, Current 2017 2016 2015 Federal $ — $ — $ — State — — — Foreign (124 ) 21 22 Deferred Federal — — — State — — — Foreign — — — $ (124 ) $ 21 $ 22
Deferred tax assets	($ in thousands) 2017 2016 2015 Net operating loss carryforwards $ 13,734 $ 17,829 $ 15,948 Intangible and fixed assets (28 ) 102 220 Stock based compensation 1,954 2,324 1,861 Reserves and accrued expenses 38 8 8 Other — — — 15,698 20,263 18,037 Less valuation allowance (15,698 ) (20,263 ) (18,037 ) Net deferred tax assets $ — $ — $ —
Reconciliation Income Tax Rate	2017 2016 2015 Amounts computed at statutory rates $ (3,423 ) $ (3,239 ) $ (2,902 ) State income tax, net of federal benefit (497 ) (462 ) (262 ) Expiration of net operating loss carryforwards 688 1,082 695 Non-deductible interest 250 49 149 Tax Act – federal rate change 7,276 — — Foreign taxes 143 362 413 Other 4 3 5 Net change in valuation allowance on deferred tax assets (4,565 ) 2,226 1,924 $ (124 ) $ 21 $ 22

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Tables)	12 Months Ended
	Dec. 31, 2017
Stock issued in lieu of cash
Future minimum lease payments	($ in thousands) 2018 $ 607 2019 284 2020 291 2021 272 2022 270 Thereafter 46 Total $ 1,770

EQUITY (Tables)

EQUITY (Tables)	12 Months Ended
	Dec. 31, 2017
Equity Tables
Summary of common stock activity	Common Stock Shares outstanding at December 31, 2014 93,507,150 Shares issued pursuant to payment of stock dividend on Series E Preferred 478,664 Shares issued pursuant to cashless warrants exercised 45,376 Shares issued pursuant to option exercises 39,705 Shares outstanding at December 31, 2015 94,070,895 Shares issued pursuant to payment of stock dividend on Series E Preferred 950,362 Shares issued pursuant to payment of stock dividend on Series F Preferred 48,513 Shares issued pursuant to payment of stock dividend on Series G Preferred 3,770 Shares issued pursuant to cashless warrants exercised 144,459 Shares issued pursuant to option exercises 12,626 Exchange of common shares for Series G Preferred (3,383,830 ) Shares outstanding at December 31, 2016 91,846,795 Shares issued pursuant to payment of stock dividend on Series A Preferred 585,058 Shares issued pursuant to payment of stock dividend on Series E Preferred 822,122 Shares issued pursuant to payment of stock dividend on Series F Preferred 135,855 Shares issued pursuant to payment of stock dividend on Series G Preferred 409,002 Shares issued pursuant to option exercises 369,004 Shares outstanding at December 31, 2017 94,167,836
Summary of warrant activity	Warrants Weighted- Average Exercise Price Balance at December 31, 2014 977,778 $ 1.22 Granted — $ 0.00 Expired / Canceled (419,444 ) $ 1.86 Exercised (108,334 ) $ 1.01 Balance at December 31, 2015 450,000 $ 0.67 Exercised (275,000 ) $ 0.55 Balance at December 31, 2016 175,000 $ 0.84 Granted 80,000 $ 1.13 Expired / Canceled (25,000 ) $ 1.10 Exercised — $ — Balance at December 31, 2017 230,000 $ 0.91

STOCK-BASED COMPENSATION (Table

STOCK-BASED COMPENSATION (Tables)	12 Months Ended
	Dec. 31, 2017
Series B convertible preferred, shares outstanding
Stock option plan activity	Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Balance at December 31, 2014 4,057,296 $ 1.06 6.8 Granted 2,110,000 $ 1.63 - Expired/Cancelled (750,622 ) $ 1.86 - Exercised (39,705 ) $ 0.87 - Balance at December 31, 2015 5,376,969 $ 1.17 6.9 Granted 1,264,000 $ 1.34 - Expired/Cancelled (121,500 ) $ 1.29 - Exercised (12,626 ) $ 0.21 - Balance at December 31, 2016 6,506,843 $ 1.21 6.6 Granted 112,500 $ 1.39 - Expired/Cancelled (156,827 ) $ 1.67 - Exercised (369,004 ) $ 0.70 - Balance at December 31, 2017 6,093,512 $ 1.23 5.8
Stock-based compensation related to equity options and restricted stock	Year Ended December 31, 2017 2016 2015 Cost of revenues $ 19 $ 20 $ 15 General and administrative 655 714 618 Sales and marketing 220 224 171 Research and development 200 204 156 Total $ 1,094 $ 1,162 $ 960
Common stock reserved for future issuance	Common Stock Convertible preferred stock – Series A and Series B 27,020,812 Convertible lines of credit 5,221,964 Stock options outstanding 6,093,512 Warrants outstanding 230,000 Authorized for future grant under stock option plans 100,265

PENSION PLAN (Tables)

PENSION PLAN (Tables)	12 Months Ended
	Dec. 31, 2017
Pension Plan Tables
Actuarial present value of the benefit obligations	($ in thousands) 2017 2016 2015 Change in benefit obligation: Benefit obligation at beginning of year $ 3,540 $ 3,068 $ 3,488 Service cost — — — Interest cost 64 75 70 Actuarial (gain) loss (167 ) 542 (123 ) Effect of exchange rate changes 473 (114 ) (356 ) Effect of curtailment — — — Benefits paid (80 ) (31 ) (11 ) Benefit obligation at end of year 3,830 3,540 3,068 Change in plan assets: Fair value of plan assets at beginning of year 1,645 1,557 1,654 Actual return of plan assets 7 142 40 Company contributions 12 28 34 Benefits paid (80 ) (31 ) — Effect of exchange rate changes 222 (51 ) (171 ) Fair value of plan assets at end of year 1,806 1,645 1,557 Funded status (2,024 ) (1,895 ) (1,511 ) Unrecognized actuarial loss (gain) 1,629 1,831 1,413 Unrecognized prior service (benefit) cost — — — Additional minimum liability (1,629 ) (1,831 ) (1,413 ) Unrecognized transition (asset) liability — — — Net amount recognized $ (2,024 ) $ (1,895 ) $ (1,511 ) Plan Assets Pension plan assets were comprised of the following asset categories at December 31, Equity securities 5.7 % 5.7 % 5.0 % Debt securities 86.7 % 87.2 % 89.3 % Other 7.6 % 7.1 % 5.7 % Total 100 % 100 % 100 % Components of net periodic benefit cost are as follows: Service cost $ — $ — $ — Interest cost on projected benefit obligations 64 75 70 Expected return on plan assets (70) (63 ) (61 ) Amortization of prior service costs — — — Amortization of actuarial loss 104 73 80 Net periodic benefit costs $ 98 $ 85 $ 89 The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, were Discount rate 1.9 % 1.7 % 2.4 % Expected return on plan assets 3.2 % 4.0 % 4.0 % Rate of pension increases 2.0 % 2.0 % 2.0 % Rate of compensation increase N/A N/A N/A The following discloses information about the Company’s defined benefit pension plan that had an accumulated benefit obligation in excess of plan assets as of December 31, Projected benefit obligation $ 3,830 $ 3,540 $ 3,068 Accumulated benefit obligation $ 3,830 $ 3,540 $ 3,068 Fair value of plan assets $ 1,806 $ 1,645 $ 1,557
Benefit payments	2018 $ 86 2019 $ 87 2020 $ 88 2021 $ 103 2022 $ 105 2023 — 2027 $ 676

ACCUMULATED OTHER COMPREHENSI39

ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)	12 Months Ended
	Dec. 31, 2017
Notes to Financial Statements
Components of accumulated other comprehensive loss	($ in thousands) 2017 2016 2015 Additional minimum pension liability $ (1,353 ) $ (1,338 ) $ (991 ) Foreign currency translation adjustment (311 ) (205 ) (204 ) Ending balance $ (1,664 ) $ (1,543 ) $ (1,195 )

QUARTERLY INFORMATION (UNAUDI40

QUARTERLY INFORMATION (UNAUDITED) (Tables)	12 Months Ended
	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Schedule of Quarterly Financial Information	2017 (by quarter) 1 2 3 4 Revenues $ 928 $ 1,060 $ 1,084 $ 1,221 Cost of Sales 262 250 231 248 Operating expenses 3,290 3,240 3,136 3,363 Loss from Operations (2,624 ) (2,430 ) (2,283 ) (2,390 ) Interest expense (income), net 100 164 178 149 Other expense (income), net - (50 ) (75 ) - Income tax expense (benefit) 3 3 4 (134 ) Net loss $ (2,727 ) $ (2,547 ) $ (2,390 ) $ (2,405 ) Net loss per share: Net loss (0.03 ) (0.03 ) (0.03 ) (0.03 ) Preferred dividends (0.01 ) - - - Preferred stock exchange - - (0.01 ) - Basic loss per share to common shareholders (0.04 ) (0.03 ) (0.04 ) (0.03 ) Basic weighted-average shares outstanding 91,864,174 92,539,230 93,197,689 93,642,074 2016 (by quarter) 1 2 3 4 Revenues $ 1,043 $ 996 $ 848 $ 925 Cost of Sales 279 275 232 284 Operating expenses 3,028 2,995 2,955 3,226 Loss from Operations (2,264 ) (2,274 ) (2,339 ) (2,585 ) Interest expense (income), net 11 36 89 109 Other expense (income), net (1 ) (200 ) - - Income tax expense (benefit) 3 4 3 11 Net loss $ (2,277 ) $ (2,114 ) $ (2,431 ) $ (2,705 ) Net loss per share: Net loss $ (0.03 ) $ (0.02 ) $ (0.03 ) $ (0.03 ) Preferred dividends $ (0.00 ) $ (0.01 ) $ (0.00 ) $ (0.00 ) Basic loss per share to common shareholders $ (0.03 ) $ (0.03 ) $ (0.03 ) $ (0.03 ) Basic weighted-average shares outstanding 94,073,367 94,298,567 94,550,721 94,779,243 2015 (by quarter) 1 2 3 4 Revenues $ 991 $ 1,695 $ 1,181 $ 902 Cost of Sales 286 798 321 539 Operating expenses 2,641 2,660 2,813 2,921 Loss from Operations (1,936 ) (1,763 ) (1,953 ) (2,558 ) Interest expense (income), net 437 (2 ) 1 11 Other expense (income), net (46 ) — (99 ) — Income tax expense (benefit) 3 6 3 10 Net loss $ (2,330 ) $ (1,767 ) $ (1,858 ) $ (2,579 ) Net loss per share: Net loss $ (0.03 ) $ (0.02 ) $ (0.02 ) $ (0.03 ) Preferred dividends $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) Basic loss per share to common shareholders $ (0.03 ) $ (0.02 ) $ (0.02 ) $ (0.03 ) Basic weighted-average shares outstanding 93,515,640 93,674,349 93,876,339 94,070,895

DESCRIPTION OF BUSINESS AND O41

DESCRIPTION OF BUSINESS AND OPERATIONS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
State of Incorporation	Delaware
Working capital deficit	$ (414)	$ (3,014)
LOC, amount outstanding	$ 5,774	$ 2,528
Common stock par value	$ 0.01	$ 0.01
Common stock shares	94,174,540	91,853,499
Series B Preferred Stock [Member]
Series G Convertible Preferred Stock	389,400	389,400
Preferred stock par value	$ 0.01	$ 0.01
Series E Preferred Stock [Member]
Series G Convertible Preferred Stock	0	12,000
Preferred stock par value	$ 0.01	$ 0.01
Series F Preferred Stock [Member]
Series G Convertible Preferred Stock	0	2,000
Preferred stock par value	$ 0.01	$ 0.01
Series G Preferred Stock [Member]
Series G Convertible Preferred Stock	0	6,021
Preferred stock par value	$ 0.01	$ 0.01

SUMMARY OF SIGNIFICANT ACCOUN42

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Numerator for basic and diluted loss per share:
Net loss	$ (2,405)	$ (2,390)	$ (2,547)	$ (2,727)	$ (2,705)	$ (2,431)	$ (2,114)	$ (2,277)	$ (2,579)	$ (1,858)	$ (1,767)	$ (2,330)	$ (10,069)	$ (9,527)	$ (8,534)
Preferred dividends													(2,400)	(1,347)	(1,065)
Preferred stock exchange													1,245	0	0
Net loss available to common shareholders													$ (13,714)	$ (10,874)	$ (9,599)
Denominator for basic loss per share weighted-average shares outstanding	93,642,074	93,197,689	92,539,230	91,864,174	94,779,243	94,550,721	94,298,567	94,073,367	94,070,895	93,876,339	93,674,349	93,515,640	92,816,723	94,426,783	93,786,079
Effect of dilutive securities													$ 0	$ 0	$ 0
Denominator for diluted loss per share weighted-average shares outstanding													92,816,723	94,426,783	93,786,079
Basic and diluted loss per share:
Net loss													$ (0.11)	$ (0.10)	$ (0.09)
Preferred dividends													(0.03)	(0.02)	(0.01)
Preferred stock exchange	$ 0	$ (0.01)	$ 0	$ 0									(0.01)	0	0
Net loss available to common shareholders													$ (0.15)	$ (0.12)	$ (0.10)

SUMMARY OF SIGNIFICANT ACCOUN43

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
FDIC insurance limits	$ 250	$ 250
Accounts receivable	$ 15,000	$ 1,000
Customer risk revenue percentage	25.00%	30.00%	37.00%
Customer accounted for revenue	$ 1,089	$ 1,162	$ 1,753,000
Trade receivables	201	78	78
Stock based compensation expense	$ 1,094	$ 1,162	$ 744
Expected term	5 years 2 months 1 day	5 years 2 months 1 day	5 years 2 months 1 day
Foreign currency translation adjustment	$ (106)	$ (1)	$ 67
Advertising expense	$ 45	$ 24	$ 12

FAIR VALUE ACCOUNTING (Details)

FAIR VALUE ACCOUNTING (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Assets:
Pension assets	$ 1,806	$ 1,645	$ 1,557
Totals	1,806	0
Level 1
Assets:
Pension assets	1,806	1,645
Totals	1,806	1,645
Level 2
Assets:
Pension assets	0	0
Totals	0	0
Level 3
Assets:
Pension assets	0	0
Totals	$ 0	$ 0

INTANGIBLE ASSETS AND GOODWIL45

INTANGIBLE ASSETS AND GOODWILL (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Notes to Financial Statements
2,018	$ 12
2,019	12
2,020	12
2,021	12
2,022	12
Thereafter	33
Totals	$ 93	$ 106

INTANGIBLE ASSETS AND GOODWIL46

INTANGIBLE ASSETS AND GOODWILL (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Trademarks And Trade Names [Member]
Amortization expense	$ 0	$ 0	$ 15
Carrying amount of acquired trademarks and trade names	0	0
Accumulated amortization	347	347
Patents [Member]
Amortization expense	12	12	$ 12
Accumulated amortization	566	554
Carrying amount of Finite Lived Patents Gross	$ 93	$ 105
Weighted-average remaining life of acquired patents	8 years 6 months

RELATED PARTIES (Details)

RELATED PARTIES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Related Parties Details
Balance outstanding under Lines of Credit as of December 31, 2016	$ 2,650	$ 0
Borrowing under Lines of Credit	3,350	2,650
Repayments	0	0
Balance outstanding under Lines of Credit as of December 31, 2017	$ 6,000	$ 2,650

RELATED PARTIES (Details Narrat

RELATED PARTIES (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
LOC Borrowings	$ 3,350	$ 2,650	$ 400
Repayment of line of credit	$ 0	$ 0
Warrant term	5 years 8 months 12 days	6 years 7 months 6 days	6 years 10 months 24 days
Deferred financing fee amortization expense	$ 11	$ 48
Beneficial conversion feature	302	146
Amortization of debt discount	209	145	$ 438
Unamortized of Note Discount	$ 226	$ 122
Common Stock Exercisable Per Share	$ 0.01	$ 0.01
Accreted	$ 198	$ 97
Line Of Credit [Member]
Advances under line of credit	$ 6,000	$ 2,650

INVENTORY (Details Narrative)

INVENTORY (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Inventory Details Narrative
Inventory	$ 79	$ 23
Work in process	53	19
Direct labor cost, in-process projects	53	19
Reserves for obsolete and slow-moving items	3	3
Inventory write down	$ 0	$ 0	$ 281

PROPERTY AND EQUIPMENT (Details

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Notes to Financial Statements
Equipment	$ 946	$ 935
Leasehold improvements	11	11
Furniture	102	101
Property and equipment total	1,059	1,047
Less accumulated depreciation	(1,016)	(954)
Property and equipment net	$ 43	$ 93

PROPERTY AND EQUIPMENT (Detai51

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Property And Equipment Details Narrative
Depreciation expense	$ 56	$ 117	$ 137

ACCRUED EXPENSES (Details)

ACCRUED EXPENSES (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Notes to Financial Statements
Compensated absences	$ 273	$ 313
Wages, payroll taxes and sales commissions	38	28
Customer deposits	40	198
Royalties	72	147
Pension and employee benefit plans	5	7
Professional services	100	0
Income and sales taxes	27	161
Dividends	34	27
Other	69	64
Accrued liabilities	$ 658	$ 945

LINES OF CREDIT (Details)

LINES OF CREDIT (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Lines of credit to a related party	$ 5,774	$ 2,528
Total lines of credit to related parties	5,774	2,528
Less current portion	(5,774)	(2,528)
Long-term lines of credit to related parties	$ 0	0
Line of credit rate	8.00%
LOC Maturity Date	Dec. 31, 2018
Line Of Credit [Member]
Advances under line of credit	$ 6,000	2,650
Discount on advances	$ 226	$ 122

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Current
Federal	$ 0	$ 0	$ 0
State	0	0	0
Foreign	(124)	21	21
Deferred
Federal	0	0	0
State	0	0	0
Foreign	0	0	0
Total	$ (124)	$ 21	$ 22

INCOME TAXES (Details 1)

INCOME TAXES (Details 1) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Notes to Financial Statements
Net operating loss carryforwards	$ 13,734	$ 17,829	$ 15,948
Intangible and fixed assets	(28)	102	220
Stock based compensation	1,954	2,324	1,861
Reserves and accrued expenses	38	8	8
Other	0	0	0
Deferred tax assets total	15,698	20,263	18,037
Less valuation allowance	(15,698)	(20,263)	(18,037)
Net deferred tax assets	$ 0	$ 0	$ 0

INCOME TAXES (Details 2)

INCOME TAXES (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Notes to Financial Statements
Amounts computed at statutory rates	$ (3,423)	$ (3,239)	$ (2,902)
State income tax, net of federal benefit	(497)	(462)	(262)
Expiration of net operating loss carryforwards	688	1,082	695
Non-deductible interest	$ 250	$ 49	$ 149
Tax Act – federal rate change	727600.00%	0.00%	0.00%
Foreign taxes	$ 143	$ 362	$ 413
Other	4	3	5
Net change in valuation allowance on deferred tax assets	(4,565)	2,226	1,924
Reconciliation of the provision-benefit) for income taxes	$ (124)	$ 21	$ 22

INCOME TAXES (Details Narrative

INCOME TAXES (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Income Taxes Details Narrative
Interest and penalties accrued	$ 10	$ 12

COMMITMENTS AND CONTINGENCIES58

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Dec. 31, 2017USD ($)
Notes to Financial Statements
2,018	$ 607
2,019	284
2,020	291
2,021	272
2,022	270
Thereafter	46
Total	$ 1,770

COMMITMENTS AND CONTINGENCIES59

COMMITMENTS AND CONTINGENCIES (Details Narratives) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Commitments And Contingencies Details Narratives
Rent expense	$ 545	$ 492	$ 477

EQUITY (Details)

EQUITY (Details) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity Details
At beginning of period	91,846,795	94,070,895	93,507,150
Shares issued pursuant to payment of stock dividend on Series A Preferred	585,058
Shares issued pursuant to payment of stock dividend on Series E Preferred	822,122	950,362	478,664
Shares issued pursuant to payment of stock dividend on Series F Preferred	135,855	48,513
Shares issued pursuant to payment of stock dividend on Series G Preferred	409,002	3,770
Shares issued pursuant to cashless warrants exercised		144,459	45,376
Shares issued pursuant to option exercises	369,004	12,626	39,705
Exchange of common shares for Series G Preferred		(3,383,830)
At end of period	94,167,836	91,846,795	94,070,895

EQUITY (Details 1)

EQUITY (Details 1) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Equity Details 1
Begining Balance	175,000	450,000	977,778
Granted	80,000		0
Expired/Cancelled	(25,000)		(419,444)
Exercised	0	(275,000)	(108,334)
Ending Balance	230,000	175,000	450,000
Begining Balance, Weighted-Average Exercise Price	$ 0.84	$ 0.67	$ 1.22
Granted, Weighted-Average Exercise Price	1.13		0
Expired/Cancelled, Weighted-Average Exercise Price	1.10		1.86
Exercised, Weighted-Average Exercise Price	0	0.55	1.01
Ending Balance, Weighted-Average Exercise Price	$ 0.91	$ 0.84	$ 0.67

EQUITY (Details Narratives)

EQUITY (Details Narratives) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Shares issued pursuant to options exercised	369,004	12,626	39,705
Cash proceeds from option exercises	$ 259	$ 3	$ 33
Compensation expense	$ 1,094	$ 1,161	$ 960
Series A Preferred Stock [Member]
Preferred stock outstanding	31,021	0
Preferred par value	$ 0.01	$ 0.01
Cumulative dividends	$ 0
Series B Preferred Stock [Member]
Preferred stock outstanding	239,400	239,400
Preferred par value	$ 0.01	$ 0.01
Cumulative dividends	$ 8,000
Dividend, per share amount	$ 0.03
Series E Preferred Stock [Member]
Preferred stock outstanding	0	12,000
Preferred par value	$ 0.01	$ 0.01
Cumulative dividends	$ 0
Series F Preferred Stock [Member]
Preferred stock outstanding	0	2,000
Preferred par value	$ 0.01	$ 0.01
Cumulative dividends	$ 0

STOCK-BASED COMPENSATION (Detai

STOCK-BASED COMPENSATION (Details) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Summary of the activity Under stock option plans
Begining Balance	6,506,843	5,376,969	4,057,296
Granted, Options	112,500	1,264,000	2,110,000
Expired/Cancelled	(156,827)	(121,500)	(750,622)
Exercised, Options	(369,004)	(12,626)	(39,705)
Ending Balance	6,093,512	6,506,843	5,376,969
Begining Balance, Weighted-Average Exercise Price	$ 1.21	$ 1.17	$ 1.06
Granted, Weighted-Average Exercise Price	1.39	1.34	1.63
Expired/Cancelled, Weighted-Average Exercise Price	1.67	1.29	1.86
Exercised, Weighted-Average Exercise Price	0.7	0.21	0.87
Ending Balance, Weighted-Average Exercise Price	$ 1.23	$ 1.21	$ 1.17
Begining Balance,Weighted-Average Remaining Contractual Term	6 years 7 months 6 days	6 years 10 months 24 days	6 years 9 months 18 days
Ending Balance,Weighted-Average Remaining Contractual Term	5 years 8 months 12 days	6 years 7 months 6 days	6 years 10 months 24 days

STOCK-BASED COMPENSATION (Det64

STOCK-BASED COMPENSATION (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Stock-based compensation	$ 1,094	$ 1,162	$ 960
Cost of Revenues [Member]
Stock-based compensation	19	20	15
Research and Development Expense [Member]
Stock-based compensation	655	714	618
Selling And Marketing Expense [Member]
Stock-based compensation	220	224	171
General and Administrative Expense [Member]
Stock-based compensation	$ 200	$ 204	$ 156

STOCK-BASED COMPENSATION (Det65

STOCK-BASED COMPENSATION (Details 2)	Dec. 31, 2017shares
Authorized Future Grant Under Stock Option Plans [Member]
Common stock reserved for future issuance	100,265
Convertible Preferred Stock [Member] | Common Stock
Common stock reserved for future issuance	27,020,812
Convertible lines of credit [Member] | Common Stock
Common stock reserved for future issuance	5,221,964
Stock options outstanding | Common Stock
Common stock reserved for future issuance	6,093,512
Warrants outstanding
Common stock reserved for future issuance	230,000

STOCK-BASED COMPENSATION (Det66

STOCK-BASED COMPENSATION (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Options outstanding	6,093,512	6,506,843	5,376,969	4,057,296
Weighted average exercise price	$ 1.19
Intrinsic value vested and expected to vest	$ 207
Weighted average remaining contractual life	5 years 4 months
Exercised	(369,004)	(12,626)	(39,705)
Shares issued pursuant to options exercised	369,004	12,626	39,705
Stock-based compensation expense related to equity options	$ 1,094	$ 1,162	$ 744
Exercisable, intrinsic value	2,388	1,679
Outstanding, intrinsic value	$ 2,595	$ 1,744
Options granted exercise price	$ 1.39	$ 1.34	$ 1.63
Stock-based compensation expense related to restricted stock grants			$ 216,000
1999 Plan [Member]
Options authorized under plan	6,193,777
Shares available for issuance	100,265

PENSION PLAN (Details)

PENSION PLAN (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Change in benefit obligation:
Benefit obligation at beginning of year	$ 3,540	$ 3,068	$ 3,830
Service cost	0	0	0
Interest cost	64	75	70
Actuarial (gain) loss	(167)	542	(123)
Effect of exchange rate changes	473	(114)	(356)
Effect of curtailment	0	0	0
Benefits paid	(80)	(31)	(11)
Benefit obligation at end of year	3,830	3,540	3,068
Change in plan assets:
Fair value of plan assets at beginning of year	1,645	1,557	1,806
Actual return of plan assets	7	142	40
Company contributions	12	28	34
Benefits paid	(80)	(31)	0
Effect of exchange rate changes	222	(51)	(171)
Fair value of plan assets at end of year	1,806	1,645	1,557
Funded status	(2,024)	(1,895)	(1,511)
Unrecognized actuarial loss (gain)	1,629	1,831	1,413
Unrecognized prior service (benefit) cost	0	0	0
Additional minimum liability	(1,629)	(1,831)	(1,413)
Unrecognized transition (asset) liability	0	0	0
Net amount recognized	$ (2,024)	$ (1,895)	$ (1,511)
Plan Assets Pension plan assets were comprised of the following asset categories at December 31,
Equity securities	5.70%	5.70%	5.00%
Debt securities	86.70%	87.20%	89.30%
Other	7.60%	7.10%	5.70%
Total	100.00%	100.00%	100.00%
Components of net periodic benefit cost are as follows:
Service cost	$ 0	$ 0	$ 0
Interest cost on projected benefit obligations	64	75	70
Expected return on plan assets	(70)	(63)	(61)
Amortization of prior service costs	0	0	0
Amortization of actuarial loss	104	73	80
Net periodic benefit costs	$ 98	$ 85	$ 89
The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, were
Discount rate	1.90%	1.70%	2.40%
Expected return on plan assets	3.20%	4.00%	4.00%
Rate of pensionincrease	2.00%	2.00%	2.00%
The following discloses information about the Companys defined benefit pension plan that had an accumulated benefit obligation in excess of plan assets as of December 31,
Projected benefit obligation	$ 3,830	$ 3,540	$ 3,068
Accumulated benefit obligation	3,830	3,540	3,068
Fair value of plan assets	$ 1,806	$ 1,645	$ 1,557

PENSION PLAN (Details 1)

PENSION PLAN (Details 1) $ in Thousands	Dec. 31, 2017USD ($)
Notes to Financial Statements
2,018	$ 86
2,019	87
2,020	88
2,021	103
2,022	105
2023-2027	$ 676

PENSION PLAN (Details Narrative

PENSION PLAN (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Pension Plan Details Narrative
Contributions to the plan	$ 12	$ 28	$ 34

ACCUMULATED OTHER COMPREHENSI70

ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Note 8 - FAIR VALUE ACCOUNTING
Additional minimum pension liability	$ (1,353)	$ (1,338)	$ (991)
Foreign currency translation adjustment	(311)	(205)	(204)
Ending Balance	$ (1,664)	$ (1,543)	$ (1,195)

QUARTERLY INFORMATION (UNAUDI71

QUARTERLY INFORMATION (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]
Revenues	$ 1,221	$ 1,084	$ 1,060	$ 928	$ 925	$ 848	$ 996	$ 1,043	$ 902	$ 1,181	$ 1,695	$ 991
Cost of sales	248	231	250	262	284	232	275	279	539	321	798	286
Operating expenses	3,363	3,136	3,240	3,290	3,226	2,955	2,995	3,028	2,921	2,813	2,660	2,641	$ 13,029	$ 12,204	$ 11,035
Loss from operations	(2,390)	(2,283)	(2,430)	(2,624)	(2,585)	(2,339)	(2,274)	(2,264)	(2,558)	(1,953)	(1,763)	(1,936)
Interest expense (income), net	149	178	164	100	109	89	36	11	11	1	(2)	437	591	245	447
Other expense (income), net	0	(75)	(50)	0	0	0	(200)	(1)	0	(99)	0	(46)
Income tax expense (benefit)	(134)	4	3	3	11	3	4	3	10	3	6	3	(124)	21	22
Net loss	$ (2,405)	$ (2,390)	$ (2,547)	$ (2,727)	$ (2,705)	$ (2,431)	$ (2,114)	$ (2,277)	$ (2,579)	$ (1,858)	$ (1,767)	$ (2,330)	$ (10,069)	$ (9,527)	$ (8,534)
Net loss per share:
Net loss	$ (.03)	$ (0.03)	$ (0.03)	$ (0.03)	$ (0.03)	$ (0.03)	$ (0.02)	$ (0.03)	$ (0.03)	$ (0.02)	$ (0.02)	$ (0.03)	$ (0.11)	$ (0.10)	$ (0.09)
Preferred dividends	0	0	0	(0.01)	0	0	(0.01)	0	0	0	0	0	(0.03)	(0.02)	(0.01)
Preferred stock exchange	0	(0.01)	0	0									(0.01)	0	0
Basic loss per share to common shareholders	$ (.03)	$ (0.04)	$ (0.03)	$ (0.04)	$ (0.03)	$ (0.03)	$ (0.03)	$ (0.03)	$ (0.03)	$ (0.02)	$ (0.02)	$ (0.03)	$ (0.15)	$ (0.12)	$ (0.10)
Basic weighted-average shares outstanding	93,642,074	93,197,689	92,539,230	91,864,174	94,779,243	94,550,721	94,298,567	94,073,367	94,070,895	93,876,339	93,674,349	93,515,640	92,816,723	94,426,783	93,786,079