| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting
Policies Basis of Presentation and Principles
of Consolidation The condensed consolidated
financial statements include the accounts of the Company and all majority owned and controlled domestic and foreign subsidiaries.
All significant intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated
financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do
not include all of the disclosures normally required by accounting principles generally accepted in the United States of America
for annual reporting purposes or those made in the Companys Annual Report on Form 10-K. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys
Annual Report on Form 10-K for the fiscal year-ended December 31, 2015. The condensed consolidated
balance sheet as of December 31, 2015 was derived from the Companys audited consolidated balance sheet as of that date.
All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect
all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of
operations and cash flows for the respective interim periods. The results for interim periods are not necessarily indicative of
trends or results expected for a full year. Use of Management Estimates The preparation
of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results and changes in facts and circumstances may alter such estimates
and affect results of operations and financial position in future periods. Marketable Securities The Companys
marketable securities are comprised of investments in the common stock of a publicly traded company. Changes in fair value, based
on the market price of the investees stock are recognized in other income in the consolidated statement of operations. The
Company has elected the fair value option to account for the investment to more appropriately recognize the value of this investment
in our consolidated financial statements unless the Company exerts significant influence over the investment, in which case the
equity method of accounting would be applied. Marketable securities at fair value were as follows:
June 30, 2016
Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
(in thousands)
Marketable securities $ 2,050 $ $ 238 $ 1,812
Equity Method Investments In December 2015,
the Company acquired 7.8% ownership in RELM Wireless Corporation (RELM) for $4.0 million and increased its ownership
to 8.3% as of June 30, 2016 for an additional $0.3 million. RELM is a publicly traded company that designs, manufactures and markets
two-way land mobile radios, repeaters, base stations, and related components and subsystems. The Companys Chief Executive
Officer is a member of the board of directors of RELM, and controls entities that, when combined with the Companys ownership
in RELM, own greater than 20% of RELM, providing the Company with significant influence over RELM, but not controlling interest.
As a result of this significant influence, the Company accounts for its investment in RELM under the equity method. The Companys
carrying value for RELM was $4.3 million as of June 30, 2016 and the Companys equity method investment income of RELM was
not significant during the quarter ended June 30, 2016. Based on quoted market prices, the market value of the Companys
ownership in RELM was $5.8 million at June 30, 2016. In May 2016, the
Company acquired 31.2% ownership in Itasca Capital Ltd. (Itasca) for $3.5 million. Itasca is a publicly traded Canadian
company that is an investment vehicle seeking transformative strategic investments. The Companys Chief Executive Officer
is a member of the board of directors of Itasca. This board seat, combined with the Companys 31% ownership of Itasca, provide
the Company with significant influence over Itasca, but not controlling interest. As a result of this significant influence, the
Company accounts for its investment in Itasca under the equity method. The Companys carrying value for Itasca was $3.5 million
as of June 30, 2016 and the Companys equity method investment income of Itasca was not significant during the quarter ended
June 30, 2016. Based on quoted market prices, the market value of the Companys ownership in Itasca was $3.5 million at June
30, 2016. Fair Value of Financial Instruments The categorization
within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial
assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
● Level 1 - inputs to the valuation techniques are quoted prices in active markets for identical assets or liabilities
● Level 2 - inputs to the valuation techniques are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly
● Level 3 - inputs to the valuation techniques are unobservable for the assets or liabilities The following tables
present the Companys financial assets and liabilities measured at fair value based upon the level within the fair value
hierarchy in which the fair value measurements fall. Fair Values Measured on a Recurring
Basis at June 30, 2016:
Level 1 Level 2 Level 3 Total
(in thousands)
Cash and cash equivalents $ 12,787 $ $ $ 12,787
Marketable securities $ 1,812 $ $ $ 1,812
Note Receivable $ $ $ 1,669 $ 1,669 Fair values measured on a recurring
basis at December 31, 2015:
Level 1 Level 2 Level 3 Total
(in thousands)
Cash and cash equivalents $ 17,862 $ $ $ 17,862
Marketable securities $ 2,101 $ $ $ 2,101
Notes receivable $ $ $ 1,669 $ 1,669 Quantitative information
about the Companys level 3 fair value measurements at June 30, 2016 is set forth below:
Fair Value at 6/30/2016 (in thousands) Valuation Technique Unobservable input Range
Note Receivable $ 1,669 Discounted cash flow Probability of default 55 %
Discount rate 20 % The notes receivable
are recorded at estimated fair value at June 30, 2016. The significant
unobservable inputs used in the fair value measurement of the Companys note receivable are discount rate and probability
of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher)
fair value measurement. The following table reconciles the beginning
and ending balance of the Companys notes receivable fair value:
Six months ended June 30,
2016 2015
(in thousands)
Notes receivable balance, beginning of period $ 1,669 $ 2,985
Interest income accrued 279
Notes receivable balance, end of period $ 1,669 $ 3,264 The carrying values
of all other financial assets and liabilities including accounts receivable, accounts payable and accrued expenses reported in
the consolidated balance sheets equal or approximate their fair values due to the short-term nature of these instruments. All non-financial
assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis, which includes non-financial
long-lived assets, are measured at fair value in certain circumstances (for example, when there is evidence of impairment). During
the six months ended June 30, 2016, the Company did not have any significant non-recurring measurements of non-financial assets
or liabilities. Recently Issued Accounting Pronouncements In May 2014, the
Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue
from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 requires an entity to recognize the amount
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace
most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The guidance is effective for the Company beginning
January 1, 2018. An entity may adopt this ASU either retrospectively or through a cumulative effect adjustment as of the start
of the first period for which it applies the ASU. Early adoption is not permitted. The Company is currently evaluating the potential
impact of adopting this guidance and has not yet selected a transition method nor has it determined the effect of the standard
on its ongoing financial reporting. In July 2015, the
FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory (ASU 2015-11).
ASU 2015-11 requires an entity utilizing the FIFO inventory method to change their measurement principle for inventory changes
from the lower of cost or market to lower of cost and net realizable value. The guidance is effective for the Company beginning
January 1, 2017. An entity must adopt this ASU prospectively and early adoption is permitted. The Company is currently evaluating
the potential impact of adopting this guidance and has not determined the effect of the standard on its ongoing financial reporting. In January 2016,
the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial
Liabilities (ASU 2016-01). ASU 2016-01 requires equity investments that do not result in consolidation and
are not accounted under the equity method to be measured at fair value with changes in fair value recognized in net income; simplifies
the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment
to identify impairment; requires an entity to present separately in other comprehensive income the portion of the total change
in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to
measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation
of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the
accompanying notes to the financial statements; clarifies that an entity should evaluate the need for a valuation allowance on
a deferred tax asset related to available-for-sale securities in combination with the entitys other deferred tax assets
and modifies certain fair value disclosure requirements. ASU 2016-01 is effective for financial statements issued for fiscal years
beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is not permitted. The adoption
of ASU 2016-01 is not expected to have a material effect on the Companys consolidated financial statements. In
February 2016, the FASB issued ASU 2016-02, Leases In
March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting, (ASU
2016-07). ASU 2016-07 eliminates the requirement for the Company to retroactively apply the equity method when its increase
in ownership interests (or degree of influence) in an investee triggers equity method accounting. This ASU is effective for the
Company on January 1, 2017 with early adoption permitted. The Company has adopted ASU 2016-07 and there was no impact on its consolidated
financial statements. In March 2016,
the FASB issued ASU 2016-09, Compensation Stock Compensation (Topic 718) |
