ImageWare Systems (IWSY) 10-Q 9 May 19 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 08, 2019
Document And Entity Information
Entity Registrant Name	IMAGEWARE SYSTEMS INC
Entity Central Index Key	0000941685
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding		105,219,259
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019
Trading symbol	IWSY

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current Assets:
Cash and cash equivalents	$ 2,925	$ 5,694
Accounts receivable, net of allowance for doubtful accounts of $0 at March 31, 2019 and December 31, 2018	1,119	968
Inventory, net	105	29
Other current assets	209	233
Total Current Assets	4,358	6,924
Property and equipment, net	236	244
Other assets	284	332
Operating lease right-of-use assets	2,157	0
Intangible assets, net of accumulated amortization	79	82
Goodwill	3,416	3,416
Total Assets	10,530	10,998
Current Liabilities:
Accounts payable	449	678
Deferred revenue	1,490	1,215
Accrued expenses	1,074	888
Operating lease liabilities, current portion	185	0
Derivative liabilities	1,489	1,065
Total Current Liabilities	4,687	3,846
Other long-term liabilities	118	147
Lease liabilities, net of current portion	2,032	0
Pension obligation	1,889	1,876
Total Liabilities	8,726	5,869
Mezzanine Equity:
Series C Convertible Redeemable Preferred Stock, $0.01 par value, designated 1,000 shares, 1,000 shares issued and outstanding at March 31, 2019 and December 31, 2018; liquidation preference $10,000 at March 31, 2019 and December 31, 2018.	8,342	8,156
Shareholders' Equity (Deficit):
Common Stock, $0.01 par value, 175,000,000 shares authorized; 99,266,918 and 98,230,336 shares issued at March 31, 2019 and December 31, 2018, respectively, and 99,260,214 and 98,223,632 shares outstanding at March 31, 2019 and December 31, 2018, respectively.	992	981
Additional paid in capital	185,300	184,130
Treasury stock, at cost 6,704 shares	(64)	(64)
Accumulated other comprehensive loss	(1,413)	(1,428)
Accumulated deficit	(191,355)	(186,648)
Total Shareholders' Deficit	(6,538)	(3,027)
Total Liabilities, Mezzanine Equity and Shareholders' Deficit	10,530	10,998
Series A Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock	0	0
Series B Preferred Stock [Member]
Shareholders' Equity (Deficit):
Preferred stock	$ 2	$ 2

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current Assets:
Accounts receivable, net of allowance for doubtful accounts	$ 0	$ 0
Shareholders' deficit:
Preferred stock, shares authorized	4,000,000	4,000,000
Common stock, par value	$ .01	$ 0.01
Common stock, shares authorized	175,000,000	175,000,000
Common stock, shares issued	99,266,918	98,230,336
Common stock, shares outstanding	99,260,214	98,223,632
Treasury stock, shares	6,704	6,704
Mezzanine Preferred Stock [Member]
Shareholders' deficit:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	1,000	1,000
Preferred stock, shares outstanding	1,000	1,000
Preferred stock, liquidation preference	$ 10,000	$ 10,000
Series A Preferred Stock [Member]
Shareholders' deficit:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	38,000	38,000
Preferred stock, shares issued	37,467	37,467
Preferred stock, shares outstanding	37,467	37,467
Preferred stock, liquidation preference	$ 37,467	$ 37,467
Series B Preferred Stock [Member]
Shareholders' deficit:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	750,000	750,000
Preferred stock, shares issued	389,400	389,400
Preferred stock, shares outstanding	239,400	239,400
Preferred stock, liquidation preference	$ 620	$ 607

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenue:
Product	$ 278	$ 97
Maintenance	653	619
Revenues	931	716
Cost of revenue:
Product	84	26
Maintenance	120	222
Gross profit	727	468
Operating expense:
General and administrative	1,107	1,175
Sales and marketing	1,005	861
Research and development	1,774	1,799
Depreciation and amortization	19	12
Total	3,905	3,847
Loss from operations	(3,178)	(3,379)
Interest expense (income), net	(22)	173
Change in fair value of derivative liabilities	424	0
Other components of net periodic pension expense	32	31
Loss before income taxes	(3,612)	(3,583)
Income tax expense
Net loss	(3,612)	(3,583)
Preferred dividends and preferred stock discount accretion	(1,294)	(769)
Net loss available to common shareholders	$ (4,906)	$ (4,352)
Basic income and diluted loss per common share - see Note 3:
Net loss	$ (0.04)	$ (0.04)
Preferred dividends and preferred stock discount accretion	(0.01)	(0.01)
Basic and diluted loss per share available to common shareholders	$ (0.05)	$ (0.05)
Basic and diluted weighted-average shares outstanding	98,398,239	94,333,663

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Other Comprehensive Income [Abstract]
Net loss	$ (3,612)	$ (3,583)
Other comprehensive income (loss):
Foreign currency translation adjustment	15	(27)
Comprehensive loss	$ (3,597)	$ (3,610)

CONSOLIDATED STATEMENTS OF SHAR

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Series A Convertible Redeemable Preferred	Series B Convertible Redeemable Preferred	Common Stock	Treasury Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Beginning, Shares at Dec. 31, 2017	31,021	239,400	94,174,540	(6,704)
Beginning, Amount at Dec. 31, 2017	$ 0	$ 2	$ 941	$ (64)	$ 172,414	$ (1,664)	$ (170,481)	$ 1,148
Issuance of common stock pursuant to Series A Preferred Stock conversions, Shares	(450)		391,304
Issuance of common stock pursuant to Series A Preferred Stock conversions, Amount			$ 4		(4)			0
Cumulative effect of ASC 606 adoption							96	96
Accretion of Series A Preferred Stock discount								0
Issuance of common stock pursuant to option exercises, Shares			83,169
Issuance of common stock pursuant to option exercises, Amount			$ 1		87			88
Recognition of beneficial conversion feature on convertible related party lines of credit					12			12
Stock-based compensation expense					335			335
Foreign currency translation adjustment						(27)		(27)
Dividends on preferred stock, Shares			472,562
Dividends on preferred stock, Amount			$ 4		750		(754)	0
Net loss							(3,583)	(3,583)
Ending, Shares at Mar. 31, 2018	30,571	239,400	95,121,575	(6,704)
Ending, Amount at Mar. 31, 2018	$ 0	$ 2	$ 950	$ (64)	173,594	(1,691)	(174,722)	(1,931)
Beginning, Shares at Dec. 31, 2018	37,467	239,400	98,230,336	(6,704)
Beginning, Amount at Dec. 31, 2018	$ 0	$ 2	$ 981	$ (64)	184,130	(1,428)	(186,648)	(3,027)
Accretion of Series A Preferred Stock discount					(186)			(186)
Issuance of common stock pursuant to option exercises, Shares			286,834
Issuance of common stock pursuant to option exercises, Amount			$ 3		103			106
Stock-based compensation expense					166			166
Foreign currency translation adjustment						15		15
Dividends on preferred stock, Shares			749,748
Dividends on preferred stock, Amount			$ 8		1,087		(1,095)	0
Net loss							(3,612)	(3,612)
Ending, Shares at Mar. 31, 2019	37,467	239,400	99,266,918	(6,704)
Ending, Amount at Mar. 31, 2019	$ 0	$ 2	$ 992	$ (64)	$ 185,300	$ (1,413)	$ (191,355)	$ (6,538)

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows from operating activities
Net loss	$ (3,612)	$ (3,583)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	19	12
Amortization of debt issuance costs and beneficial conversion feature	0	59
Stock-based compensation	166	335
Change in fair value of derivative liabilities	424	0
Change in assets and liabilities
Accounts receivable	(151)	269
Inventory	(75)	(10)
Other assets	71	(56)
Operating lease right-of-use assets	46	0
Accounts payable	(230)	(22)
Deferred revenue	275	(138)
Accrued expense	201	285
Contract costs	(29)	0
Pension obligation	13	35
Total adjustments	730	769
Net cash used in operating activities	(2,882)	(2,814)
Cash flows from investing activities
Purchase of property and equipment	(8)	(7)
Net cash used in investing activities	(8)	(7)
Cash flows from financing activities
Proceeds from exercised stock options	106	88
Net cash provided by financing activities	106	88
Effect of exchange rate changes on cash	15	(26)
Net decrease in cash and cash equivalents	(2,769)	(2,759)
Cash and cash equivalents at beginning of period	5,694	7,317
Cash and cash equivalents at end of period	2,925	4,558
Supplemental disclosure of cash flow information:
Cash paid for interest	0	0
Cash paid for income taxes	0	0
Summary of non-cash investing and financing activities:
Beneficial conversion feature of convertible related party lines of credit	0	12
Stock dividends on Series A Convertible Preferred Stock	864	754
Stock dividends on Series C Convertible Redeemable Preferred Stock	231	0
Accretion of discount on Series C Convertible Redeemable Preferred Stock	186	0
Recognition of operating lease right-of-use assets from adoption of ASC 842	2,265	0
Recognition of lease liabilities from adoption of ASC 842	(2,280)	0
Conversion of Convertible Preferred Stock into Common Stock	$ 0	$ 4

ORGANIZATION AND DESCRIPTION OF

ORGANIZATION AND DESCRIPTION OF BUSINESS	3 Months Ended
	Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
ORGANIZATION AND DESCRIPTION OF BUSINESS	Overview As used in this Quarterly 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 the products are integrated into the IWS Biometric Engine. Recent Developments In May 2019, the Company completed a registered direct offering of 5,954,545 shares of its Common Stock at a price of $1.10 per share, resulting in gross proceeds to the Company of approximately $6.55 million. Net proceeds to the Company were approximately $6.125 million after payment of offering expenses. The Company intends to use the net proceeds received from the sale of the common stock for general corporate purposes. The shares of common stock described above were offered by the Company pursuant to a shelf registration statement previously filed with the Securities and Exchange Commission (“ SEC 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. 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 Going Concern At March 31, 2019, we had negative working capital of approximately $329,000. Our principal sources of liquidity at March 31, 2019 consisted of approximately $2,925,000 of cash and cash equivalents. Considering the common stock financing completed in May 2019, as well as 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. These condensed 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.

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION	Basis of Presentation The accompanying condensed consolidated balance sheet as of December 31, 2018, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“ GAAP Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019, or any other future periods. Certain prior period amounts have been reclassified to conform with current period presentation. Pursuant to the Company’s adoption of Accounting Standards Update 2017-07 - Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ASU 2017-07 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, 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. All significant intercompany transactions and balances have been eliminated. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include the evaluation of our ability to continue as a going concern, the allowance for doubtful accounts receivable, deferred tax asset valuation allowances, recoverability of goodwill, assumptions used in the Black-Scholes model to calculate the fair value of share based payments, fair value of financial instruments issued with and affected by the Series C Preferred Financing, assumptions used in the application of revenue recognition policies, assumptions used in the derivation of the Company’s incremental borrowing rate used in the computation of the Company’s operating lease liabilities and assumptions used in the application of fair value methodologies to calculate the fair value of pension assets and obligations. Actual results could differ from estimates. 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 4, “ Inventory 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 expense, and deferred revenue, the carrying amounts approximate fair value due to their relatively short maturities. Lease Liabilities and Operating Lease Right-of-Use Assets The Company is a party to certain contractual arrangements for office space which meet the definition of leases under Accounting Standards Codification (“ASC”) Topic 842 – Leases (“ ASC 842 A package of practical expedient to not reassess: ● Whether a contract is or contains a lease ● Lease classification ● Initial direct costs Revenue Recognition Effective January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ ASC 606 In accordance with ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The core principle of the standard is that we should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve that core principle, we apply the following five step model: 1. Identify the contract with the customer; 2. Identify the performance obligation in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) each performance obligation is satisfied. At contract inception, we assess the goods and services promised in a contract with a customer and identify as a performance obligation each promise to transfer to the customer either: (i) a good or service (or a bundle of goods or services) that is distinct, or (ii) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. We recognize revenue only when we satisfy a performance obligation by transferring a promised good or service to a customer. Determining the timing of the satisfaction of performance obligations as well as the transaction price and the amounts allocated to performance obligations requires judgement. We disclose disaggregation of our customer revenue by classes of similar products and services as follows: ● Software licensing and royalties; ● Sales of computer hardware and identification media; ● Services; and ● Post-contract customer support. Software Licensing and Royalties Software licenses consist of revenue from the sale of software for identity management applications. Our software licenses are functional intellectual property and typically provide customers with the right to use our software in perpetuity as it exists when made available to the customer. We recognize revenue from software licensing at a point in time upon delivery, provided all other revenue recognition criteria are met. Royalties consist of revenue from usage-based arrangements and guaranteed minimum-based arrangements. We recognize revenue for royalty arrangements at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. Computer Hardware and Identification Media We generate revenue from the sale of computer hardware and identification media. Revenue for these items is recognized upon delivery of these products to the customer, provided all other revenue recognition criteria are met. Services Services revenue is comprised primarily of software customization services, software integration services, system installation services and customer training. Revenue is generally recognized upon completion of services and customer acceptance provided all other revenue recognition criteria are met. Post-Contract Customer Support (“PCS”) Post contract customer support consists of maintenance on software and hardware for our identity management solutions. Arrangements with Multiple Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. In addition to selling software licenses, hardware and identification media, services and post-contract customer support on a standalone basis, certain contracts include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on our best estimate of the relative standalone selling price. The standalone selling price for a performance obligation is the price at which we would sell a promised good or service separately to a customer. The primary methods used to estimate standalone selling price are as follows: (i) the expected cost-plus margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service, and (ii) the percent discount off of list price approach. Contract Costs We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We apply a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. Other Items We do not offer rights of return for our products and services in the normal course of business. Sales tax collected from customers is excluded from revenue. The adoption of ASC 606 as of January 1, 2018 resulted in a cumulative positive adjustment to beginning accumulated deficit and accounts receivable of approximately $96,000. The following table sets forth our disaggregated revenue for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, Net Revenue 2019 2018 (dollars in thousands) Software and royalties $ 111 $ 84 Hardware and consumables 11 1 Services 156 12 Maintenance 653 619 Total revenue $ 931 $ 716 Customer Concentration For the three months ended March 31, 2019, two customers accounted for approximately 46% or $424,000 of our total revenue and had trade receivables at March 31, 2019 of $651,000. For the three months ended March 31, 2018, two customers accounted for approximately 38% or $275,000 of our total revenue and had trade receivables at March 31, 2018 of $74,000. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“ FASB FASB ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. 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 adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements. FASB ASU No. 2018-07. Shared-Based Payment Arrangements with Nonemployees (Topic 505) FASB ASU No. 2018-13 “Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement” ASU 2018-13 FASB ASU No. 2018-14 “Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans” ASU 2018-14 FASB ASU No. 2018-15 “Intangibles —Goodwill and Other —Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” ASU 2018-15

NET LOSS PER COMMON SHARE

NET LOSS PER COMMON SHARE	3 Months Ended
	Mar. 31, 2019
Basic income and diluted loss per common share - see Note 3:
NET LOSS PER COMMON 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 related party lines of credit, 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 and any interest on convertible debt reflected in the condensed consolidated statement of operations for the respective periods. The table below presents the computation of basic and diluted loss per share: (Amounts in thousands except share and per share amounts) Three Months Ended March 31, 2019 2018 Numerator for basic and diluted loss per share: Net loss $ (3,612 ) $ (3,583 ) Preferred dividends and preferred stock discount accretion (1,294 ) (769 ) Net loss available to common shareholders $ (4,906 ) $ (4,352 ) Denominator for basic and dilutive loss per share — weighted-average shares outstanding 98,398,239 94,333,663 Net loss $ (0.04 ) $ (0.04 ) Preferred dividends and preferred stock discount accretion (0.01 ) (0.01 ) Basic and diluted loss per share available to common shareholders $ (0.05 ) $ (0.05 ) 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 Three Months Ended March 31, 2019 2018 Related party lines of credit — 5,325,651 Convertible redeemable preferred stock 42,626,980 26,630,458 Stock options 7,225,421 7,273,431 Warrants 1,813,856 230,000 Total potential dilutive securities 51,666,257 39,459,540

SELECT BALANCE SHEET DETAILS

SELECT BALANCE SHEET DETAILS	3 Months Ended
	Mar. 31, 2019
Balance Sheet Related Disclosures [Abstract]
SELECT BALANCE SHEET DETAILS	Inventory Inventories of $105,000 as of March 31, 2019 were comprised of work in process of $94,000 representing direct labor costs on in-process projects and finished goods of $11,000 net of reserves for obsolete and slow-moving items of $3,000. Inventories of $29,000 as of December 31, 2018 were comprised of work in process of $21,000 representing direct labor costs on in-process projects and finished goods of $8,000 net of reserves for obsolete and slow-moving items of $3,000. Intangible Assets The carrying amounts of the Company’s patent intangible assets were $79,000 and $82,000 as of March 31, 2019 and December 31, 2018, respectively, which includes accumulated amortization of $580,000 and $577,000 as of March 31, 2019 and December 31, 2018, respectively. Amortization expense for patent intangible assets was $3,000 for the three months ended March 31, 2019 and 2018. Patent intangible assets are being amortized on a straight-line basis over their remaining life of approximately 7.25 years. There was no impairment of the Company’s intangible assets during the three months ended March 31, 2019 and 2018. The estimated acquired intangible amortization expense for the next five fiscal years is as follows: Fiscal Year Ended December 31, Estimated Amortization Expense ($ in thousands) 2019 (nine months) $ 9 2020 12 2021 12 2022 12 2023 12 Thereafter 22 Totals $ 79 Goodwill 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. In December 2018, the Company adopted the provisions of ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The provisions of ASU 2017-04 eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. Entities that have reporting units with zero or negative carrying amounts, will no longer be required to perform a qualitative assessment assuming they pass the simplified impairment test. The Company continues to have only one reporting unit, Identity Management which, at March 31, 2019, had a negative carrying amount of approximately $6,574,000. Based on the results of the Company’s impairment testing, the Company determined that its goodwill was not impaired during the three months ended March 31, 2019 and December 31, 2018.

LEASES

LEASES	3 Months Ended
	Mar. 31, 2019
Leases [Abstract]
LEASES	The Company is a party to certain contractual arrangements for office space which meet the definition of leases under ASC 842 – Leases. In accordance with ASC 842, the Company has determined that such arrangements are operating leases and accordingly the Company has, as of January 1, 2019, recorded operating lease right-of-use assets and related lease liability for the present value of the lease payments over the lease terms using the Company’s estimated weighted-average incremental borrowing rate of approximately 14.5%. Such assets and liabilities aggregated approximately $2,265,000 and $2,280,000 as of January 1, 2019, respectively. The Company determined that it had no arrangements representing finance leases. The Company’s operating leasing arrangements are summarized below: ● The Company’s corporate headquarters is located in San Diego, California, where it occupies 8,511 square feet of office space at an average cost of approximately $28,000 per month. This facility’s lease was entered into by the Company in July 2018. This new lease commenced on November 1, 2018 and terminates on April 30, 2025. ● 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; ● 9,720 square feet in Portland, Oregon, at a cost of approximately $23,000 per month until the expiration of the lease on February 28, 2023; and ● 183 square feet of office space in Mexico City, Mexico, at a cost of approximately $2,000 per month until September 30, 2019. The above leases contain no residual value guarantees provided by the Company and there are no options to either extend or terminate the leases. The Company is not a party to any subleasing arrangements. For the three months ended March 31, 2019 the Company recorded approximately $154,000 in lease expense using the straight-line method. Lease expense is comprised of the total lease payments under the lease plus any initial direct costs incurred less any lease incentives received by the lessor amortized ratably using the straight-line method over the lease term. The weighted-average remaining lease term of the Company’s operating leases as of March 31, 2019 is 5.16 years. Cash payments under operating leases aggregated approximately $117,000 for the three months ended March 31, 2019 and are included in operating cash flows. The Company’s lease liability was computed using the present value of future lease payments. The Company has utilized the practical expedient regarding lease and non-lease components and combined such components into a single combined component in the determination of the lease liability. The Company has excluded the lease of its office space in Mexico City, Mexico in the determination of the lease liability as of January 1, 2019 as its term is less than 12 months. At March 31, 2019, future minimum undiscounted lease payments are as follows: ($ in thousands) 2019 (9 months) $ 376 2020 649 2021 642 2022 652 2023 425 Thereafter 519 Total 3,263 Short-term leases not included in lease liability (12 ) Present Value effect on future minimum undiscounted lease payments at March 31, 2019 (1,034 ) Lease liability at March 31, 2019 $ 2,217

MEZZANINE EQUITY

MEZZANINE EQUITY	3 Months Ended
	Mar. 31, 2019
Mezzanine Equity:
MEZZANINE EQUITY	Series C Convertible Redeemable Preferred Stock On September 10, 2018, the Company filed the Certificate of Designations, Preferences, and Rights of Series C Convertible Redeemable Preferred stock (the “ Series C COD Stated Value accrue dividends cumulatively and are payable quarterly at a rate of 8% per annum if paid in cash, or 10% per annum if paid by the issuance of shares of Common Stock. Each share of Series C Preferred has a liquidation preference Conversion Shares On September 10, 2018, the Company offered and sold a total of 890 shares of Series C Preferred at a purchase price of $10,000 per share, and on September 21, 2018, the Company offered and sold an additional 110 shares of Series C Preferred at a purchase price of $10,000 per share (the “ Series C Financing The Company had 1,000 shares of Series C Preferred outstanding as of March 31, 2019 and December 31, 2018. The Company issued the holders of Series C Preferred shares of common stock on March 31, 2019, as payment of dividends due on that date. Guidance for accounting for freestanding financial instruments that contain characteristics of both liabilities and equity are contained in ASC 480, Distinguishing Liabilities From Equity ASR 268 Redeemable Preferred Stocks. Liquidation Preference Amount The Company noted that the Series C Preferred Stock instrument was a hybrid instrument that contains several embedded features. In November 2014, the FASB issued ASU 2014-16 to amend ASC 815, “ Derivatives and Hedging ASC 815 The whole instrument approach requires an issuer or investor to consider the economic characteristics and risks of the entire hybrid instrument, including all of its stated and implied substantive terms and features. Under this approach, all stated and implied features, including the embedded feature being evaluated for bifurcation, must be considered. Each term and feature should be weighed based on the relevant facts and circumstances to determine the nature of the host contract. This approach results in a single, consistent determination of the nature of the host contract, which is then used to evaluate each embedded feature for bifurcation. That is, the host contract does not change as each feature is evaluated. The revised guidance further clarifies that the existence or omission of any single feature, including an investor-held, fixed-price, noncontingent redemption option, does not determine the economic characteristics and risks of the host contract. Instead, an entity must base that determination on an evaluation of the entire hybrid instrument, including all substantive terms and features. However, an individual term or feature may be weighed more heavily in the evaluation based on facts and circumstances. An evaluation of all relevant terms and features, including the circumstances surrounding the issuance or acquisition of the equity share, as well as the likelihood that an issuer or investor is expected to exercise any options within the host contract, to determine the nature of the host contract, requires judgement. Using the whole instrument approach, the Company concluded that the host instrument is more akin to debt than equity as the majority of identified features contain more characteristics of debt. The Company evaluated the identified embedded features of the Series C Preferred host instrument and determined that certain features meet the definition of and contained the characteristics of derivative financial instruments requiring bifurcation at fair value from the host instrument. Accordingly, the Company has bifurcated from the Series C Preferred host instrument the conversion options, redemption option and participating dividend feature in accordance with the guidance in ASC 815. These bifurcated features aggregated approximately $833,000 at issuance and have been recorded as a discount to the Series C Preferred. Such amount will be accreted to the point of earliest redemption which is the third anniversary of the Series C Financing or September 10, 2021 using the effective interest rate method. The accretion of these features is recorded as a deemed dividend. For the three months ended March 31, 2019, the Company recorded the accretion of debt issuance costs and derivative liabilities aggregating approximately $186,000 using the effective interest rate method. There was no Series C Preferred outstanding at any time during the three months ended March 31, 2018. The Company reflected the following in Mezzanine Equity for the Series C Preferred Stock as of December 31, 2018 and March 31, 2019: Series C Convertible, Redeemable Preferred (amounts in thousands, except share amounts) Shares Amount Total Total Series C Preferred Stock as of December 31, 2018 1,000 $ 8,156 $ 8,156 Accretion of discount – deemed dividend (186 ) (186 ) Total Series C Preferred Stock as of March 31, 2019 1,000 $ 8,342 $ 8,342

DERIVATIVE LIABILITIES

DERIVATIVE LIABILITIES	3 Months Ended
	Mar. 31, 2019
Derivative Liability [Abstract]
DERIVATIVE LIABILITIES	The Company accounts for its derivative instruments under the provisions of ASC 815, “ Derivatives and Hedging The Company determined that the conversion option, redemption option and participating dividend feature contained in the Series C Preferred host instrument required bifurcation. The Company valued the bifurcatable features at fair value. Such liabilities aggregated approximately $833,000 at inception and are classified as current liabilities on the Company’s condensed consolidated balance sheet under the caption “Derivative liabilities.” The Company revalued these features at each balance sheet date and has recorded any change in fair value in the determination of period net income or loss. Such amounts are recorded in the caption “Change in fair value of derivative liabilities” in the Company’s condensed consolidated statements of operations. During the three months ended March 31, 2019, the Company recorded an increase to these derivative liabilities using fair value methodologies of approximately $424,000. See Note 9 to these condensed consolidated financial statements for a reconciliation of amounts recorded at March 31, 2019.

EQUITY

EQUITY	3 Months Ended
	Mar. 31, 2019
Equity [Abstract]
EQUITY	The Company’s Certificate of Incorporation, as amended, authorizes 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 The Company had 37,467 shares of Series A Preferred outstanding as of March 31, 2019 and December 31, 2018. At March 31, 2019 and December 31, 2018, the Company had cumulative undeclared dividends of $0. The Company issued the holders of Series A Preferred shares of common stock on March 31, 2019 as payment of dividends due on that date. Series B Convertible Preferred Stock The Company had 239,400 shares of Series B Preferred stock, par value $0.01 per share (“ Series B Preferred Warrants The following table summarizes warrant activity for the following periods: Warrants Weighted- Average Exercise Price Balance at December 31, 2018 1,813,856 $ 0.19 Granted — — Expired/Canceled — — Exercised — — Balance at March 31, 2019 1,813,856 $ 0.19 As of March 31, 2019, warrants to purchase 1,813,856 shares of common stock at exercise prices ranging from $0.01 to $1.46 were outstanding. All warrants are exercisable as of March 31, 2019 except for an aggregate of 1,643,856 warrants, which become exercisable only upon the attainment of specified events, and 20,000 warrants that become exercisable on June 7, 2019. Such warrants expire at various dates through September 2028. The intrinsic value of warrants outstanding at March 31, 2019 was approximately $141,000. The Company has excluded from this computation any intrinsic value of the 1,493,856 warrants issued to the Series A Preferred stockholders due to such warrants becoming exercisable only upon conversion of Series A Preferred into shares of Common Stock. Stock-Based Compensation The Company’s 1999 Stock Award Plan (the “ 1999 Plan The Company estimates the fair value of its stock options using a Black-Scholes option-valuation model, consistent with the provisions of ASC No. 718 , Compensation – Stock Compensation ASC No. 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-valuation 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-valuation 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 the three months ended March 31, 2019 and 2018 ranged from 57% to 84%. 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 Topic 14. The expected term used by the Company during the three months ended March 31, 2019 and 2018 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. The interest rate used in the Company’s Black-Scholes calculations for the three months ended March 31, 2019 and 2018 was %. Dividend yield is zero, as the Company does not expect to declare any dividends on the Company’s common stock 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 estimated an 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. A summary of the activity under the Company’s stock option plans is as follows: Options Weighted-Average Exercise Price Balance at December 31, 2018 7,227,248 $ 1.34 Granted 345,000 $ 0.92 Expired/Cancelled (59,993 ) $ 1.44 Exercised (286,834 ) $ 0.37 Balance at March 31, 2019 7,225,421 $ 1.36 The intrinsic value of options exercisable at March 31, 2019 was approximately $1,483,000. The aggregate intrinsic value for all options outstanding as of March 31, 2019 was approximately $1,739,000. The weighted-average grant-date per share fair value of options granted during the three months ended March 31, 2019 was $0.47. The weighted-average grant-date per share fair value of options granted during the three months ended March 31, 2018 was $0.99. At March 31, 2019, the total remaining unrecognized compensation cost related to unvested stock options amounted to approximately $980,000, which will be recognized over a weighted-average period of 2.0 years. Stock-based compensation related to equity options, including options granted to certain members of the Company’s Board of Directors, has been classified as follows in the accompanying condensed consolidated statements of operations (in thousands): Three Months Ended March 31, 2019 2018 Cost of revenue $ 3 $ 5 General and administrative 93 216 Sales and marketing 39 60 Research and development 31 54 Total $ 166 $ 335

FAIR VALUE ACCOUNTING

FAIR VALUE ACCOUNTING	3 Months Ended
	Mar. 31, 2019
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 March 31, 2019 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,699 $ — $ — $ 1,699 Totals $ 1,699 $ — $ — $ 1,699 Liabilities: Derivative liabilities $ 1,489 $ — $ — $ 1,489 Totals $ 1,489 $ — $ — $ 1,489 Fair Value at December 31, 2018 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,733 $ — $ — $ 1,733 Totals $ 1,733 $ — $ — $ 1,733 Liabilities: Derivative liabilities $ 1,065 $ — $ — $ 1,065 Totals $ 1,065 $ — $ — $ 1,065 The Company’s German pension plan is funded by insurance contract policies whereby the insurance company guarantees a fixed minimum return. The Company has determined that the pension assets are more appropriately classified within Level 3 of the fair value hierarchy because they are valued using actuarial valuation methodologies which approximate cash surrender value that cannot be corroborated with observable market data. All plan assets are managed in a policyholder pool in Germany by outside investment managers. The investment manager is responsible for the investment strategy of the insurance premiums that Company submits and does not hold individual assets per participating employer. The German Federal Financial Supervisory oversees and supervises the insurance contracts. The Series C Preferred host instrument (issued in September 2018) had embedded features contained in the host instrument that qualified for derivative liability treatment. The recorded fair market value of these features at March 31, 2019 and December 31, 2018 was approximately $1,489,000 and $1,065,000, respectively which is reflected as a current liability in the condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018. The fair value of the Company’s derivative liabilities is classified within Level 3 of the fair value hierarchy because they are valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The Company uses the lattice framework, Monte-Carlo simulations and other fair value methodologies in the determination of the fair value of derivative liabilities. Some of the aforementioned fair value methodologies are affected by the Company’s stock price as well as assumptions regarding the expected stock price volatility over the term of the derivative liabilities in addition to the probability of future events. The Company monitors the activity within each level and any changes with the underlying valuation techniques or inputs utilized to recognize if any transfers between levels are necessary. That determination is made, in part, by working with outside valuation experts for Level 3 instruments and monitoring market related data and other valuation inputs for Level 1 and Level 2 instruments. A reconciliation of the Company’s pension assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2019: ($ in thousands) Pension Assets Balance at December 31, 2018 $ 1,733 Return on plan assets 15 Company contributions and benefits paid, net (11 ) Effect of rate changes (38 ) Balance at March 31, 2019 $ 1,699 A reconciliation of the Company’s pension assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2018: ($ in thousands) Pension Assets Balance at December 31, 2017 $ 1,806 Return on plan assets 11 Company contributions and benefits paid, net (21 ) Effect of rate changes 56 Balance at March 31, 2018 $ 1,852 A reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2019: ($ in thousands) Derivative Liabilities Balance at December 31, 2018 $ 1,065 Change in fair value included in earnings 424 Balance at March 31, 2019 $ 1,489 There were no derivative liabilities at either December 31, 2017 nor at any time during the three months ended March 31, 2018. The Company is not a party to any hedge arrangements, commodity swap agreement or any other derivative financial instruments.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Mar. 31, 2019
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	During the year ended December 31, 2018, the Company entered into a professional services agreement with a firm whose managing director is also a member of the Company’s Board of Directors. During the three months ended March 31, 2019, the Company recorded and paid the remaining one-half of the aggregate fee of $50,000 related to this professional services agreement. During the three months ended March 31, 2018, the Company had Convertible Lines of Credit outstanding with two members of the Company’s Board of Directors. At March 31, 2018, aggregate borrowing under the Lines of Credit were approximately $5,821,000 net of discount. Such Lines of Credit and all accrued unpaid interest were converted into shares of the Company’s Series A Preferred in September 2018, at which times the Lines of Credit were deemed satisfied in full and terminated.

CONTINGENT LIABILITIES

CONTINGENT LIABILITIES	3 Months Ended
	Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
CONTINGENT LIABILITIES	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. Effective September 15, 2017, 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, and on January 30, 2019 both agreements were amended again to further extend the term of each executive officer’s employment until December 31, 2019. 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.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Mar. 31, 2019
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	In May 2019, the Company completed a registered direct offering of 5,954,545 shares of its common stock at a price of $1.10 per share, resulting in gross proceeds to the Company of approximately $6.55 million. Net proceeds to the Company were approximately $6.125 million after payment of offering expenses. The Company intends to use the net proceeds received from the sale of the common stock for general corporate purposes. The shares of common stock described above were offered by the Company pursuant to a shelf registration statement previously filed with the SEC on June 28, 2018 and declared effective on July 10, 2018. In May 2019, the Company issued 4,500 shares of its common stock pursuant to the exercise of stock options, resulting in proceeds to the Company of approximately $3,000.

SIGNIFICANT ACCOUNTING POLICI_2

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
Basis of Presentation	The accompanying condensed consolidated balance sheet as of December 31, 2018, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“ GAAP Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019, or any other future periods. Certain prior period amounts have been reclassified to conform with current period presentation. Pursuant to the Company’s adoption of Accounting Standards Update 2017-07 - Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ASU 2017-07
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, 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. All significant intercompany transactions and balances have been eliminated.
Use of Estimates	The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include the evaluation of our ability to continue as a going concern, the allowance for doubtful accounts receivable, deferred tax asset valuation allowances, recoverability of goodwill, assumptions used in the Black-Scholes model to calculate the fair value of share based payments, fair value of financial instruments issued with and affected by the Series C Preferred Financing, assumptions used in the application of revenue recognition policies, assumptions used in the derivation of the Company’s incremental borrowing rate used in the computation of the Company’s operating lease liabilities and assumptions used in the application of fair value methodologies to calculate the fair value of pension assets and obligations. Actual results could differ from estimates.
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 4, “ Inventory
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 expense, and deferred revenue, the carrying amounts approximate fair value due to their relatively short maturities.
Lease Liabilities and Operating Lease Right-of-Use Assets	The Company is a party to certain contractual arrangements for office space which meet the definition of leases under Accounting Standards Codification (“ASC”) Topic 842 – Leases (“ ASC 842 A package of practical expedient to not reassess: ● Whether a contract is or contains a lease ● Lease classification ● Initial direct costs
Revenue Recognition	Effective January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ ASC 606 In accordance with ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The core principle of the standard is that we should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve that core principle, we apply the following five step model: 1. Identify the contract with the customer; 2. Identify the performance obligation in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) each performance obligation is satisfied. At contract inception, we assess the goods and services promised in a contract with a customer and identify as a performance obligation each promise to transfer to the customer either: (i) a good or service (or a bundle of goods or services) that is distinct, or (ii) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. We recognize revenue only when we satisfy a performance obligation by transferring a promised good or service to a customer. Determining the timing of the satisfaction of performance obligations as well as the transaction price and the amounts allocated to performance obligations requires judgement. We disclose disaggregation of our customer revenue by classes of similar products and services as follows: ● Software licensing and royalties; ● Sales of computer hardware and identification media; ● Services; and ● Post-contract customer support. Software Licensing and Royalties Software licenses consist of revenue from the sale of software for identity management applications. Our software licenses are functional intellectual property and typically provide customers with the right to use our software in perpetuity as it exists when made available to the customer. We recognize revenue from software licensing at a point in time upon delivery, provided all other revenue recognition criteria are met. Royalties consist of revenue from usage-based arrangements and guaranteed minimum-based arrangements. We recognize revenue for royalty arrangements at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. Computer Hardware and Identification Media We generate revenue from the sale of computer hardware and identification media. Revenue for these items is recognized upon delivery of these products to the customer, provided all other revenue recognition criteria are met. Services Services revenue is comprised primarily of software customization services, software integration services, system installation services and customer training. Revenue is generally recognized upon completion of services and customer acceptance provided all other revenue recognition criteria are met. Post-Contract Customer Support (“PCS”) Post contract customer support consists of maintenance on software and hardware for our identity management solutions. Arrangements with Multiple Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. In addition to selling software licenses, hardware and identification media, services and post-contract customer support on a standalone basis, certain contracts include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on our best estimate of the relative standalone selling price. The standalone selling price for a performance obligation is the price at which we would sell a promised good or service separately to a customer. The primary methods used to estimate standalone selling price are as follows: (i) the expected cost-plus margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service, and (ii) the percent discount off of list price approach. Contract Costs We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We apply a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. Other Items We do not offer rights of return for our products and services in the normal course of business. Sales tax collected from customers is excluded from revenue. The adoption of ASC 606 as of January 1, 2018 resulted in a cumulative positive adjustment to beginning accumulated deficit and accounts receivable of approximately $96,000. The following table sets forth our disaggregated revenue for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, Net Revenue 2019 2018 (dollars in thousands) Software and royalties $ 111 $ 84 Hardware and consumables 11 1 Services 156 12 Maintenance 653 619 Total revenue $ 931 $ 716
Customer Concentration	For the three months ended March 31, 2019, two customers accounted for approximately 46% or $424,000 of our total revenue and had trade receivables at March 31, 2019 of $651,000. For the three months ended March 31, 2018, two customers accounted for approximately 38% or $275,000 of our total revenue and had trade receivables at March 31, 2018 of $74,000.
Recently Issued Accounting Standards	From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“ FASB FASB ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. 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 adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements. FASB ASU No. 2018-07. Shared-Based Payment Arrangements with Nonemployees (Topic 505) FASB ASU No. 2018-13 “Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement” ASU 2018-13 FASB ASU No. 2018-14 “Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans” ASU 2018-14 FASB ASU No. 2018-15 “Intangibles —Goodwill and Other —Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” ASU 2018-15

SIGNIFICANT ACCOUNTING POLICI_3

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Tables)	3 Months Ended
	Mar. 31, 2019
Accounting Policies [Abstract]
Disaggregation of revenue	Three Months Ended March 31, Net Revenue 2019 2018 (dollars in thousands) Software and royalties $ 111 $ 84 Hardware and consumables 11 1 Services 156 12 Maintenance 653 619 Total revenue $ 931 $ 716

NET LOSS PER COMMON SHARE (Tabl

NET LOSS PER COMMON SHARE (Tables)	3 Months Ended
	Mar. 31, 2019
Basic income and diluted loss per common share - see Note 3:
Computation of basic and diluted loss per share	(Amounts in thousands except share and per share amounts) Three Months Ended March 31, 2019 2018 Numerator for basic and diluted loss per share: Net loss $ (3,612 ) $ (3,583 ) Preferred dividends and preferred stock discount accretion (1,294 ) (769 ) Net loss available to common shareholders $ (4,906 ) $ (4,352 ) Denominator for basic and dilutive loss per share — weighted-average shares outstanding 98,398,239 94,333,663 Net loss $ (0.04 ) $ (0.04 ) Preferred dividends and preferred stock discount accretion (0.01 ) (0.01 ) Basic and diluted loss per share available to common shareholders $ (0.05 ) $ (0.05 )
Antidilutive securities excluded from earnings per share	Potential Dilutive securities Three Months Ended March 31, 2019 2018 Related party lines of credit — 5,325,651 Convertible redeemable preferred stock 42,626,980 26,630,458 Stock options 7,225,421 7,273,431 Warrants 1,813,856 230,000 Total potential dilutive securities 51,666,257 39,459,540

SELECT BALANCE SHEET DETAILS (T

SELECT BALANCE SHEET DETAILS (Tables)	3 Months Ended
	Mar. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Estimated acquired intangible amortization expense	Fiscal Year Ended December 31, Estimated Amortization Expense ($ in thousands) 2019 (nine months) $ 9 2020 12 2021 12 2022 12 2023 12 Thereafter 22 Totals $ 79

LEASES (Tables)

LEASES (Tables)	3 Months Ended
	Mar. 31, 2019
Leases [Abstract]
Future minimum undiscounted lease payments	($ in thousands) 2019 (9 months) $ 376 2020 649 2021 642 2022 652 2023 425 Thereafter 519 Total 3,263 Short-term leases not included in lease liability (12 ) Present Value effect on future minimum undiscounted lease payments at March 31, 2019 (1,034 ) Lease liability at March 31, 2019 $ 2,217

MEZZANINE EQUITY (Tables)

MEZZANINE EQUITY (Tables)	3 Months Ended
	Mar. 31, 2019
Mezzanine Equity:
Mezzanine equity	Series C Convertible, Redeemable Preferred (amounts in thousands, except share amounts) Shares Amount Total Total Series C Preferred Stock as of December 31, 2018 1,000 $ 8,156 $ 8,156 Accretion of discount – deemed dividend (186 ) (186 ) Total Series C Preferred Stock as of March 31, 2019 1,000 $ 8,342 $ 8,342

EQUITY (Tables)

EQUITY (Tables)	3 Months Ended
	Mar. 31, 2019
Equity [Abstract]
Summary of warrant activity	Warrants Weighted- Average Exercise Price Balance at December 31, 2018 1,813,856 $ 0.19 Granted — — Expired/Canceled — — Exercised — — Balance at March 31, 2019 1,813,856 $ 0.19
Summary of stock option plans activity	Options Weighted-Average Exercise Price Balance at December 31, 2018 7,227,248 $ 1.34 Granted 345,000 $ 0.92 Expired/Cancelled (59,993 ) $ 1.44 Exercised (286,834 ) $ 0.37 Balance at March 31, 2019 7,225,421 $ 1.36
Stock based compensation expense allocation	Three Months Ended March 31, 2019 2018 Cost of revenue $ 3 $ 5 General and administrative 93 216 Sales and marketing 39 60 Research and development 31 54 Total $ 166 $ 335

FAIR VALUE ACCOUNTING (Tables)

FAIR VALUE ACCOUNTING (Tables)	3 Months Ended
	Mar. 31, 2019
Fair Value Disclosures [Abstract]
Fair value measurement of assets and liabilities	Fair Value at March 31, 2019 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,699 $ — $ — $ 1,699 Totals $ 1,699 $ — $ — $ 1,699 Liabilities: Derivative liabilities $ 1,489 $ — $ — $ 1,489 Totals $ 1,489 $ — $ — $ 1,489 Fair Value at December 31, 2018 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,733 $ — $ — $ 1,733 Totals $ 1,733 $ — $ — $ 1,733 Liabilities: Derivative liabilities $ 1,065 $ — $ — $ 1,065 Totals $ 1,065 $ — $ — $ 1,065
Pension assets measured at fair value on a recurring basis	A reconciliation of the Company’s pension assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2019: ($ in thousands) Pension Assets Balance at December 31, 2018 $ 1,733 Return on plan assets 15 Company contributions and benefits paid, net (11 ) Effect of rate changes (38 ) Balance at March 31, 2019 $ 1,699 A reconciliation of the Company’s pension assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2018: ($ in thousands) Pension Assets Balance at December 31, 2017 $ 1,806 Return on plan assets 11 Company contributions and benefits paid, net (21 ) Effect of rate changes 56 Balance at March 31, 2018 $ 1,852
Schedule of derivative liabilities	A reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2019: ($ in thousands) Derivative Liabilities Balance at December 31, 2018 $ 1,065 Change in fair value included in earnings 424 Balance at March 31, 2019 $ 1,489

ORGANIZATION AND DESCRIPTION _2

ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
State of incorporation	Delaware
Working capital deficit	$ (277)
Cash	$ 2,925	$ 5,694	$ 4,558	$ 7,317

SIGNIFICANT ACCOUNTING POLICI_4

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenue	$ 931	$ 716
Software and royalties
Revenue	111	84
Hardware and consumables
Revenue	11	1
Services
Revenue	156	12
Maintenance
Revenue	$ 653	$ 619

SIGNIFICANT ACCOUNTING POLICI_5

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenue	$ 931	$ 716
Two Customers
Percentage of revenue	46.00%	38.00%
Revenue	$ 424	$ 275
Trade receivables	$ 651	$ 74

NET LOSS PER COMMON SHARE (Deta

NET LOSS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Basic income and diluted loss per common share - see Note 3:
Net loss	$ (3,612)	$ (3,583)
Preferred dividends and preferred stock discount accretion	(1,294)	(769)
Net loss available to common shareholders	$ (4,906)	$ (4,352)
Denominator for basic and dilutive loss per share - weighted-average shares outstanding	98,398,239	94,333,663
Net loss	$ (0.04)	$ (0.04)
Preferred dividends and preferred stock discount accretion	(0.01)	(0.01)
Net loss available to common shareholders	$ (0.05)	$ (0.05)

NET LOSS PER COMMON SHARE (De_2

NET LOSS PER COMMON SHARE (Details 1) - shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Total potential dilutive securities	51,666,257	39,459,540
Related party lines of credit [Member]
Total potential dilutive securities	0	5,325,651
Convertible redeemable preferred stock [Member]
Total potential dilutive securities	42,626,980	26,630,458
Stock options [Member]
Total potential dilutive securities	7,225,421	7,273,431
Warrants [Member]
Total potential dilutive securities	1,813,856	230,000

SELECT BALANCE SHEET DETAILS (D

SELECT BALANCE SHEET DETAILS (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Balance Sheet Related Disclosures [Abstract]
2019 (nine months)	$ 9
2020	12
2021	12
2022	12
2023	12
Thereafter	22
Totals	$ 79	$ 82

SELECT BALANCE SHEET DETAILS _2

SELECT BALANCE SHEET DETAILS (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Balance Sheet Related Disclosures [Abstract]
Inventory	$ 105	$ 29	$ 29
Work in process	94	21
Finished goods	11	8
Reserves for obsolete and slow-moving items	3	3
Carrying amounts of patent assets	79	82
Accumulated amortization	580	577
Patent amortization expense	$ 3	$ 3
Weighted-average remaining life of intangible assets	7 years 3 months

LEASES (Details)

LEASES (Details) $ in Thousands	Mar. 31, 2019USD ($)
Leases [Abstract]
2019 (9 months)	$ 376
2020	649
2021	642
2022	652
2023	425
Thereafter	519
Total	3,263
Short-term leases not included in lease liability	(12)
Present value effect on future minimum undiscounted lease payments	(1,034)
Lease liability	$ 2,217

MEZZANINE EQUITY (Details)

MEZZANINE EQUITY (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Accretion of discount - deemed dividend, amount	$ (186)	$ 200
Total Series C Preferred Stock, amount	$ 8,342	$ 8,156
Series C Preferred Stock [Member]
Total Series C Preferred Stock, shares	1,000	1,000
Accretion of discount - deemed dividend, amount	$ (186)	$ 200
Total Series C Preferred Stock, amount	$ 8,342	$ 8,156

EQUITY (Details)

EQUITY (Details) - Warrants [Member]	3 Months Ended
	Mar. 31, 2019$ / sharesshares
Number of warrants, begining balance | shares	1,813,856
Number of warrants, granted | shares	0
Number of warrants, expired/cancelled | shares	0
Number of warrants, exercised | shares	0
Number of warrants, ending balance | shares	1,813,856
Weighted-average exercise price, begining balance | $ / shares	$ .19
Weighted-average exercise price, granted | $ / shares	.00
Weighted-average exercise price, expired/cancelled | $ / shares	.00
Weighted-average exercise price, exercised | $ / shares	.00
Weighted-average exercise price, ending balance | $ / shares	$ .19

EQUITY (Details 1)

EQUITY (Details 1) - Stock Option Plan [Member]	3 Months Ended
	Mar. 31, 2019$ / sharesshares
Number of options, begining balance | shares	7,227,248
Number of options, granted | shares	345,000
Number of options, expired/cancelled | shares	(59,993)
Number of options, exercised | shares	(286,834)
Number of options, ending balance | shares	7,225,421
Weighted-average exercise price, begining balance | $ / shares	$ 1.34
Weighted-average exercise price, granted | $ / shares	.92
Weighted-average exercise price, expired/cancelled | $ / shares	1.44
Weighted-average exercise price, exercised | $ / shares	.37
Weighted-average exercise price, ending balance | $ / shares	$ 1.36

EQUITY (Details 2)

EQUITY (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Stock based compensation	$ 166	$ 335
Cost of Revenue [Member]
Stock based compensation	3	5
General and Administrative Expense [Member]
Stock based compensation	93	216
Sales and marketing [Member]
Stock based compensation	39	60
Research and Development Expense [Member]
Stock based compensation	$ 31	$ 54

EQUITY (Details Narrative)

EQUITY (Details Narrative) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
Shares available for issuance under the 1999 Plan	445,670
Board of Directors compensation	$ 0	$ 62
Intrinsic value of options exercisable	1,483
Intrinsic value of options outstanding	1,739
Unrecognized compensation cost	$ 980
Unrecognized compensation cost, recognition period	2 years
Series A Preferred Stock [Member]
Preferred stock, shares outstanding	37,467		37,467
Series B Preferred Stock [Member]
Preferred stock, shares outstanding	239,400		239,400

FAIR VALUE ACCOUNTING (Details)

FAIR VALUE ACCOUNTING (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Assets:
Pension assets	$ 1,699	$ 1,733
Totals	1,699	1,733
Liabilities:
Derivative liabilities	1,489	1,065
Totals	1,489	1,065
Fair Value, Inputs, Level 1 [Member]
Assets:
Pension assets	0	0
Totals	0	0
Liabilities:
Derivative liabilities	0	0
Totals	0	0
Fair Value, Inputs, Level 2 [Member]
Assets:
Pension assets	0	0
Totals	0	0
Liabilities:
Derivative liabilities	0	0
Totals	0	0
Fair Value, Inputs, Level 3 [Member]
Assets:
Pension assets	1,699	1,733
Totals	1,699	1,733
Liabilities:
Derivative liabilities	1,489	1,065
Totals	$ 1,489	$ 1,065

FAIR VALUE ACCOUNTING (Details

FAIR VALUE ACCOUNTING (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Fair Value Disclosures [Abstract]
Fair value of plan assets, beginning	$ 1,733	$ 1,806
Return on plan assets	15	11
Company contributions and benefits paid, net	(11)	(21)
Effect of rate changes	(38)	56
Fair value of plan assets, ending	$ 1,699	$ 1,852

FAIR VALUE ACCOUNTING (Detail_2

FAIR VALUE ACCOUNTING (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Fair Value Disclosures [Abstract]
Derivative liabilities, beginning	$ 1,065
Change in fair value included in earnings	424	$ 0
Derivative liabilities, ending	$ 1,489

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details Narrative) $ in Thousands	Mar. 31, 2019USD ($)
Related Party Transactions [Abstract]
Line of credit balance	$ 5,821