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EX-32 - EX-32 - Identiv, Inc.inve-ex32_7.htm
EX-31.2 - EX-31.2 - Identiv, Inc.inve-ex312_6.htm
EX-31.1 - EX-31.1 - Identiv, Inc.inve-ex311_8.htm
EX-10.2 - EX-10.2 - Identiv, Inc.inve-ex102_321.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

COMMISSION FILE NUMBER: 000-29440

 

IDENTIV, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

DELAWARE

 

77-0444317

(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)

 

(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)

2201 Walnut Avenue, Suite 100

Fremont, California 94538

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)

(949) 250-8888

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

N/A

(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ¨

  

Accelerated filer ¨

  

Non-accelerated filer ¨

  

Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

At August 5, 2016, 10,954,811 shares of common stock were outstanding.

 

 

 

 

 


TABLE OF CONTENTS

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements (Unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015

3

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015

4

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2016 and 2015

5

 

 

Condensed Consolidated Statement of Equity for the Six Months Ended June 30, 2016

6

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015

7

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

 

Controls and Procedures

30

 

 

PART II. OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

33

Item 1A.

 

Risk Factors

33

 

 

 

 

Item 6.

 

Exhibits

34

 

 

SIGNATURES

35

EXHIBIT INDEX

36

 

 

 

2


PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value)

 

 

June 30,

 

 

December 31,

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

$

9,402

 

 

$

16,667

 

Accounts receivable, net of allowances of $315 and $346 as of June 30, 2016

   and December 31, 2015, respectively

 

8,984

 

 

 

7,915

 

Inventories

 

13,823

 

 

 

14,726

 

Prepaid expenses and other current assets

 

1,919

 

 

 

1,518

 

Total current assets

 

34,128

 

 

 

40,826

 

Property and equipment, net

 

3,103

 

 

 

4,218

 

Intangible assets, net

 

6,547

 

 

 

7,275

 

Other assets

 

897

 

 

 

1,129

 

Total assets

$

44,675

 

 

$

53,448

 

LIABILITIES AND STOCKHOLDERS´ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

7,481

 

 

$

6,280

 

Current portion -  payment obligation

 

731

 

 

 

681

 

Current portion -  financial liabilities, net of discount of $278 and $0, respectively

 

9,722

 

 

 

 

Deferred revenue

 

1,232

 

 

 

1,515

 

Accrued compensation and related benefits

 

1,639

 

 

 

1,905

 

Other accrued expenses and liabilities

 

6,587

 

 

 

5,835

 

Total current liabilities

 

27,392

 

 

 

16,216

 

Long-term payment obligation

 

4,457

 

 

 

4,878

 

Long-term financial liabilities, net of discount of $0 and $196,

  and debt issuance costs of $95 and $448, respectively (see Note 7)

 

8,205

 

 

 

17,656

 

Other long-term liabilities

 

643

 

 

 

508

 

Total liabilities

 

40,697

 

 

 

39,258

 

Commitments and contingencies (see Note 11)

 

 

 

 

 

 

 

Stockholders´ equity:

 

 

 

 

 

 

 

Identiv, Inc. stockholders' equity:

 

 

 

 

 

 

 

Preferred stock, $0.001 par value: 10,000 shares authorized; none issued and

   outstanding

 

 

 

 

 

Common stock, $0.001 par value: 130,000 shares authorized; 11,666 and 11,365 shares

   issued and 10,996 and 10,747 shares outstanding as of June 30, 2016 and

   December 31, 2015, respectively

 

11

 

 

 

11

 

Additional paid-in capital

 

398,409

 

 

 

396,407

 

Treasury stock, 670 and 618 shares as of June 30, 2016 and December 31, 2015,

   respectively

 

(6,587

)

 

 

(6,487

)

Accumulated deficit

 

(389,702

)

 

 

(377,814

)

Accumulated other comprehensive income

 

2,027

 

 

 

2,229

 

Total Identiv, Inc. stockholders' equity

 

4,158

 

 

 

14,346

 

Noncontrolling interest

 

(180

)

 

 

(156

)

Total stockholders´ equity

 

3,978

 

 

 

14,190

 

Total liabilities and stockholders´equity

$

44,675

 

 

$

53,448

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3


IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net revenue

 

$

13,476

 

 

$

15,587

 

 

$

25,961

 

 

$

30,521

 

Cost of revenue

 

 

8,207

 

 

 

8,941

 

 

 

15,398

 

 

 

17,791

 

Gross profit

 

 

5,269

 

 

 

6,646

 

 

 

10,563

 

 

 

12,730

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,432

 

 

 

2,340

 

 

 

3,517

 

 

 

4,332

 

Selling and marketing

 

 

3,279

 

 

 

5,467

 

 

 

7,495

 

 

 

10,462

 

General and administrative

 

 

2,982

 

 

 

5,536

 

 

 

7,559

 

 

 

8,601

 

Impairment of goodwill

 

 

 

 

 

988

 

 

 

 

 

 

988

 

Restructuring and severance

 

 

201

 

 

 

21

 

 

 

2,940

 

 

 

193

 

Total operating expenses

 

 

7,894

 

 

 

14,352

 

 

 

21,511

 

 

 

24,576

 

Loss from operations

 

 

(2,625

)

 

 

(7,706

)

 

 

(10,948

)

 

 

(11,846

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(519

)

 

 

(465

)

 

 

(1,289

)

 

 

(889

)

Foreign currency gain (loss), net

 

 

45

 

 

 

51

 

 

 

274

 

 

 

(176

)

Loss before income taxes and noncontrolling interest

 

 

(3,099

)

 

 

(8,120

)

 

 

(11,963

)

 

 

(12,911

)

Income tax benefit (provision)

 

 

129

 

 

 

(63

)

 

 

70

 

 

 

(82

)

Loss before noncontrolling interest

 

 

(2,970

)

 

 

(8,183

)

 

 

(11,893

)

 

 

(12,993

)

Less: (Income) loss attributable to noncontrolling interest

 

 

7

 

 

 

(1

)

 

 

5

 

 

 

66

 

Net loss attributable to Identiv, Inc.

 

$

(2,963

)

 

$

(8,184

)

 

$

(11,888

)

 

$

(12,927

)

Basic and diluted net loss per share attributable to Identiv, Inc.

 

$

(0.27

)

 

$

(0.75

)

 

$

(1.10

)

 

$

(1.20

)

Weighted average shares used to compute basic and diluted loss

   per share

 

 

10,790

 

 

 

10,912

 

 

 

10,770

 

 

 

10,804

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

4


IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net loss

 

$

(2,970

)

 

$

(8,183

)

 

$

(11,893

)

 

$

(12,993

)

Other comprehensive loss, net of income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(182

)

 

 

64

 

 

 

(221

)

 

 

(142

)

Foreign currency translation reclassified into net loss upon

   acquisition of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

(444

)

Total other comprehensive (loss) income, net of income taxes

 

 

(182

)

 

 

64

 

 

 

(221

)

 

 

(586

)

Comprehensive loss

 

 

(3,152

)

 

 

(8,119

)

 

 

(12,114

)

 

 

(13,579

)

Less: Comprehensive income attributable to noncontrolling

   interest

 

 

12

 

 

 

 

 

 

24

 

 

 

72

 

Comprehensive loss attributable to Identiv, Inc. common

   stockholders

 

$

(3,140

)

 

$

(8,119

)

 

$

(12,090

)

 

$

(13,507

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

Six Months Ended June 30, 2016

(Unaudited, in thousands)

 

 

 

Identiv, Inc. Stockholders´ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury

 

 

Accumulated

 

 

Comprehensive

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Deficit

 

 

Income

 

 

Interest

 

 

Equity

 

Balances, December 31, 2015

 

 

10,747

 

 

$

11

 

 

$

396,407

 

 

$

(6,487

)

 

$

(377,814

)

 

$

2,229

 

 

$

(156

)

 

$

14,190

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,888

)

 

 

 

 

 

(5

)

 

 

(11,893

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

(19

)

 

 

(221

)

Issuance of warrants

 

 

 

 

 

 

 

 

233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

233

 

Issuance of common stock in

   connection with vesting of

   stock awards

 

 

301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,769

 

Repurchase of common stock

 

 

(52

)

 

 

 

 

 

 

 

 

(100

)

 

 

 

 

 

 

 

 

 

 

 

(100

)

Balances, June 30, 2016

 

 

10,996

 

 

$

11

 

 

$

398,409

 

 

$

(6,587

)

 

$

(389,702

)

 

$

2,027

 

 

$

(180

)

 

$

3,978

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6


IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,893

)

 

$

(12,993

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,640

 

 

 

1,468

 

Impairment of goodwill and long-lived assets

 

 

 

 

 

988

 

Accretion of interest on long-term payment obligation

 

 

207

 

 

 

265

 

Amortization of debt issuance costs

 

 

503

 

 

 

324

 

Stock-based compensation expense

 

 

1,382

 

 

 

2,571

 

Loss on disposal of fixed assets

 

 

326

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(991

)

 

 

3,744

 

Inventories

 

 

1,058

 

 

 

(3,513

)

Prepaid expenses and other assets

 

 

(137

)

 

 

(2,566

)

Accounts payable

 

 

1,266

 

 

 

512

 

Payment obligation liability

 

 

(578

)

 

 

(568

)

Deferred revenue

 

 

(283

)

 

 

406

 

Accrued expenses and other liabilities

 

 

1,279

 

 

 

529

 

Net cash used in operating activities

 

 

(6,221

)

 

 

(8,833

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(341

)

 

 

(410

)

Net cash used in investing activities

 

 

(341

)

 

 

(410

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of debt, net of issuance costs

 

 

 

 

 

4,000

 

Proceeds from issuance of common stock under stock plans

 

 

 

 

 

46

 

Repurchase of common stock

 

 

(100

)

 

 

(650

)

Net cash (used in) provided by financing activities

 

 

(100

)

 

 

3,396

 

Effect of exchange rates on cash

 

 

(603

)

 

 

146

 

Net decrease in cash

 

 

(7,265

)

 

 

(5,701

)

Cash at beginning of period

 

 

16,667

 

 

 

36,547

 

Cash at end of period

 

$

9,402

 

 

$

30,846

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Warrants issued as debt issuance costs in connection with debt modification

 

$

232

 

 

$

 

Common stock issued to acquire share of noncontrolling interest

 

$

 

 

$

1,216

 

Property and equipment included in accounts payable

 

$

128

 

 

$

27

 

Restricted stock units issued to fulfill liability

 

$

387

 

 

$

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

7


IDENTIV, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2016

 

1. Organization and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Identiv, Inc. (“Identiv” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included. The results of operations for the six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Quantitative and Qualitative Disclosures About Market Risk,” and the audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The preparation of unaudited condensed consolidated financial statements necessarily requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. The Company may experience significant variations in demand for its products quarter to quarter and typically experiences a stronger demand cycle in the second half of its fiscal year. As a result, the quarterly results may not be indicative of the full year results. The December 31, 2015 balance sheet was derived from the audited financial statements as of that date.

Certain reclassifications, such as the accounting for debt issuance costs consistent with Accounting Standards Update (“ASU”), Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), have been made to the fiscal year 2015 financial statements to conform to the fiscal year 2016 presentation.

Concentration of Credit Risk — One customer represented 11% and 10% of net revenue for the three and six months ended June 30, 2016, respectively.  One customer represented 13% of net revenue for the three months ended June 30, 2015, and one customer represented 17% of net revenue for the six months ended June 30, 2015.  One customer represented more than 10% of the Company’s accounts receivable balance at June 30, 2016.  No customers accounted for more than 10% of the Company’s accounts receivable balance as of December 31, 2015.  

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016; however, early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently evaluating the impact of the adoption of this guidance will have on its condensed consolidated financial statements.

In April 2015, the FASB issued 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (“ASU 2015-05”), which clarifies the circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. ASU 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The adoption of ASU 2015-05 did not have a material impact on the Company’s condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company adopted

8


this guidance as of January 1, 2016. The new guidance has been applied on a retrospective basis, wherein the consolidated balance sheet of December 31, 2015 has been retrospectively adjusted to reflect the effects of applying the new guidance.  As a result of the change to the December 31, 2015 consolidated balance sheet, deferred debt issuance costs included in other assets and long-term financial liabilities decreased by $0.4 million.  After the retrospective application to December 31, 2015, subsequent amortization of the deferred debt issuance costs results in an increase to long-term debt.

In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). Under ASU 2015-01, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. ASU 2015-01 is effective for interim and annual reporting periods beginning after December 15, 2015 with early adoption permitted. Upon adoption, the Company may elect prospective or retrospective application. The adoption of ASU 2015-01 did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, (“ASU 2014-15”), which requires management to perform interim and annual assessments on whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year of the date the financial statements are issued and to provide related disclosures, if required.  The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter.  Early adoption is permitted. The Company is currently evaluating the impact of the adoption will have on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606) (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to annual periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance is effective for the Company beginning January 1, 2018 and will provide the Company additional time to evaluate the method and impact that ASU 2014-09 will have on its condensed consolidated financial statements.

 

 

2. Fair Value Measurements

The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. Under the Accounting Standards Codification (“ASC”), ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1 – Quoted prices (unadjusted) for identical assets and liabilities in active markets;

 

Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly; and

 

Level 3 – Unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of June 30, 2016 and December 31, 2015, there were no assets that are measured and recognized at fair value on a recurring basis. There were no cash equivalents as of June 30, 2016 and December 31, 2015.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain of the Company's assets, including intangible assets, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections. During the three and six months ended June 30, 2016, the Company noted no indicators of impairment. During the three and six months ended June 30, 2015, the Company noted certain indicators of impairment, including a sustained decline in its stock price and continued reduced performance in its Identity reporting unit. Based on the results of step one of the goodwill impairment analysis, it was determined that the Company’s net adjusted carrying value exceeded its estimated fair value for the Identity reporting unit. As a result, goodwill relating to the Identity segment was determined to be fully impaired resulting in an

9


impairment charge of $1.0 million which was recorded in the condensed consolidated statements of operations for the period. For additional discussion of measurement criteria used in evaluating potential impairment involving intangible assets, refer to Note 5, Intangible Assets.

Privately-held investments, which are normally carried at cost, are measured at fair value due to events and circumstances that the Company identified as significantly impacting the fair value of investments. The Company estimates the fair value of its privately-held investments using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and the investee's capital structure.

As of June 30, 2016 and December 31, 2015, the Company had $0.3 million of privately-held investments measured at fair value on a nonrecurring basis which were classified as a Level 3 asset due to the absence of quoted market prices and inherent lack of liquidity. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. During the three and six months ended June 30, 2016, the Company determined that no privately-held investments were impaired. The amount of privately-held investments is included in other assets in the condensed consolidated balance sheets.

As of June 30, 2016 and December 31, 2015, there were no liabilities that are measured and recognized at fair value on a non-recurring basis.

Assets and Liabilities Not Measured at Fair Value

The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, financial liabilities and other accrued liabilities approximate fair value due to their short maturities.

 

 

3. Stockholders’ Equity

Common Stock Warrants

In connection with the Company’s entry into a consulting agreement in August 2014, the Company issued a consultant a warrant to purchase up to 85,000 shares of the Company’s common stock at a per share exercise price of $10.70 (the “Consultant Warrant”). One fourth of the shares under the warrant are exercisable for cash three months from the date the Consultant Warrant was issued and quarterly thereafter. The Consultant Warrant expires on August 13, 2019. In the event of an acquisition of the Company, the Consultant Warrant shall terminate and no longer be exercisable as of the closing of the acquisition. As of June 30, 2016, the Consultant Warrant has not been exercised.

In connection with the Company’s entry into a credit agreement with Opus Bank (“Opus”) as discussed in Note 7, Financial Liabilities, the Company issued Opus a warrant to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $9.90 (the “Opus Warrant”). On March 31, 2016, the Company entered into a third amendment to its Credit Agreement increasing the number of shares of common stock underlying the warrant from 100,000 to 200,000 shares and decreased the exercise price from $9.90 to $2.19 per share subject to modification. The Company also agreed to issue new warrants to purchase 100,000 shares of common stock in the event that the outstanding principal balance of the Company’s loans with Opus exceeds specified thresholds on each date of September 30, 2016, December 31, 2016 and March 31, 2017 (“New Warrants”). The terms of the New Warrants, if issued, will be identical to those of the existing warrant, except that each new warrant issued will be exercisable for 100,000 shares and have an exercise price equal to the average closing price of the Company’s common stock for the five trading days ending on the last day of the quarter with respect to which the new warrant is issued. In addition, the existing registration rights agreement was amended to include the New Warrants and change the circumstances under which the Company must register shares underlying the warrants issued to Opus (the “Amended Rights Agreement”). The Opus Warrant is immediately exercisable for cash or by net exercise and expires on March 31, 2019. The shares issuable upon exercise of the Opus Warrant and New Warrants, if any, are to be registered at the request of Opus pursuant to the Registration Rights Agreement, dated March 31, 2014, as amended by Amendment No. 1 to Registration Rights Agreement, dated March 31, 2016, between the Company and Opus. As of June 30, 2016, the Opus Warrant had not been exercised.

On August 14, 2013, in a private placement, the Company issued 834,847 shares of its common stock at a price of $8.50 per share and warrants to purchase an additional 834,847 shares of its common stock at an exercise price of $10.00 per share (the “2013 Private Placement Warrants”) to accredited and other qualified investors (the “Investors”). The 2013 Private Placement Warrants have a term of four years and are exercisable beginning six months following the date of issuance. The number of shares issuable upon exercise of the 2013 Private Placement Warrants is subject to adjustment for any stock dividends, stock splits or distributions by the Company, or upon any merger or consolidation or sale of assets of the Company, tender or exchange offer for the Company’s common stock, or a reclassification of the Company’s common stock.

10


Below is the summary of outstanding warrants issued by the Company as of June 30, 2016:

 

Warrant Type

 

Number of Shares Issuable Upon Exercise

 

 

Weighted Average Exercise Price

 

 

Issue Date

 

Expiration Date

Consultant Warrant

 

 

85,000

 

 

$

10.70

 

 

August 13, 2014

 

August 13, 2019

Opus Warrant

 

 

200,000

 

 

 

2.19

 

 

March 31, 2014

 

March 31, 2019

2013 Private Placement Warrants

 

 

186,878

 

 

 

10.00

 

 

August 14, 2013

 

August 14, 2017

Total

 

 

471,878

 

 

 

 

 

 

 

 

 

 

Stock-Based Compensation Plans

The Company has various stock-based compensation plans to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons. The Company’s stock-based compensation plans consist of the Director Option Plan, 1997 Stock Option Plan, 2000 Stock Option Plan, 2007 Stock Option Plan (the “2007 Plan”), the 2010 Bonus and Incentive Plan (the “2010 Plan”) and the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended.

Stock Bonus and Incentive Plans

In June 2010, the Company’s stockholders approved the 2010 Plan which granted cash and equity-based awards to executive officers, directors and other key employees as designated by the Compensation Committee of the Board. An aggregate of 300,000 shares of the Company’s common stock was reserved for issuance under the 2010 Plan as equity-based awards, including shares, nonqualified stock options, restricted stock or deferred stock awards. These awards provide the Company´s executives, directors and other key employees the opportunity to earn shares of common stock depending on the extent to which certain performance goals are met. Since the adoption of the 2011 Plan (described below), the Company utilizes shares from the 2010 Plan only for performance-based awards and all equity awards granted under the 2010 Plan are issued pursuant to the 2011 Plan.  

On June 6, 2011, the Company’s stockholders approved the 2011 Plan, which is administered by the Compensation Committee of the Board. The 2011 Plan provides that stock options, stock units, restricted shares, and stock appreciation rights may be granted to executive officers, directors, consultants, and other key employees. The Company reserved 400,000 shares of common stock under the 2011 Plan, plus 459,956 shares of common stock that remained available for delivery under the 2007 Plan and the 2010 Plan as of June 6, 2011. In aggregate, as of June 6, 2011, 859,956 shares were available for future grants under the 2011 Plan, including shares rolled over from the 2007 Plan and 2010 Plan. Subsequent to June 6, 2011, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 3.0 million shares.   

Stock Option Plans

A summary of activity for the Company’s stock option plans for the six months ended June 30, 2016 follows:

 

 

Number

Outstanding

 

 

Average Exercise

Price per Share

 

 

Weighted Average

Remaining

Contractual Term

(Years)

 

 

Average Intrinsic

Value

 

Balance at December 31, 2015

 

781,804

 

 

$

11.48

 

 

 

 

 

 

$

 

Granted

 

444,460

 

 

 

4.36

 

 

 

 

 

 

 

 

 

Cancelled or Expired

 

(254,273

)

 

 

12.92

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2016

 

971,991

 

 

$

7.63

 

 

 

8.31

 

 

$

 

Vested or expected to vest at

   June 30, 2016

 

871,461

 

 

$

7.89

 

 

 

8.18

 

 

$

 

Exercisable at June 30, 2016

 

355,393

 

 

$

11.06

 

 

 

6.57

 

 

$

 

 

11


The following table summarizes information about options outstanding as of June 30, 2016:

 

 

 

Options Outstanding

 

 

Options Exercisable

 

Range of Exercise Prices

 

Number Outstanding

 

 

Weighted Average Remaining Contractual Life (Years)

 

 

Weighted Average Exercise Price

 

 

Number Exercisable

 

 

Weighted Average Exercise Price

 

$4.36 - $8.40

 

 

585,577

 

 

 

9.25

 

 

$

4.83

 

 

 

104,035

 

 

$

6.51

 

$8.41 - $8.80

 

 

166,812

 

 

 

7.35

 

 

 

8.80

 

 

 

97,688

 

 

 

8.80

 

$8.81 - $11.30

 

 

139,034

 

 

 

7.87

 

 

 

10.85

 

 

 

73,789

 

 

 

10.77

 

$11.31 - $24.00

 

 

55,113

 

 

 

5.55

 

 

 

14.25

 

 

 

54,426

 

 

 

14.25

 

$24.01 - $43.40

 

 

25,455

 

 

 

1.56

 

 

 

32.34

 

 

 

25,455

 

 

 

32.34

 

$5.20 - $43.40

 

 

971,991

 

 

 

8.31

 

 

$

7.63

 

 

 

355,393

 

 

$

11.06

 

 

At June 30, 2016, there was $1.6 million of unrecognized stock-based compensation expense, net of estimated forfeitures related to unvested options, that is expected to be recognized over a weighted-average period of 2.78 years.  

Restricted Stock and Restricted Stock Units

The following is a summary of restricted stock and restricted stock unit (“RSU”) activity for the six months ended June 30, 2016:

 

 

Number

Outstanding

 

 

Weighted Average

Fair Value

 

 

Weighted Average Remaining

Contractual Term

(Years)

 

 

Average Intrinsic Value

 

Balance at December 31, 2015

 

721,918

 

 

$

13.32

 

 

 

 

 

 

$

 

Granted

 

673,026

 

 

 

2.17

 

 

 

 

 

 

 

 

 

Vested

 

(301,316

)

 

 

12.90

 

 

 

 

 

 

 

 

 

Forfeited

 

(228,734

)

 

 

15.56

 

 

 

 

 

 

 

 

 

Balance at June 30, 2016

 

864,894

 

 

$

4.20

 

 

 

1.38

 

 

$

1,548,385

 

 

The fair value of the Company’s restricted stock awards and RSUs is calculated based upon the fair market value of the Company’s stock at the date of grant. As of June 30, 2016, there was $2.4 million of unrecognized compensation cost related to unvested RSUs granted, which is expected to be recognized over a weighted average period of  2.95 years. As of June 30, 2016, an aggregate of 864,894 RSUs were outstanding under the 2011 Plan.

Stock-Based Compensation Expense

The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and six months ended June 30, 2016 and 2015 (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Cost of revenue

$

23

 

 

$

35

 

 

$

46

 

 

$

64

 

Research and development

 

52

 

 

 

70

 

 

 

136

 

 

 

139

 

Selling and marketing

 

78

 

 

 

309

 

 

 

285

 

 

 

548

 

General and administrative

 

292

 

 

 

788

 

 

 

915

 

 

 

1,657

 

Total

$

445

 

 

$

1,202

 

 

$

1,382

 

 

$

2,408

 

 

12


Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of June 30, 2016 was as follows:

 

Exercise of outstanding stock options and vesting of RSUs

 

 

1,658,545

 

ESPP

 

 

293,888

 

Shares of common stock available for grant under the 2011 Plan

 

 

1,808,473

 

Noncontrolling interest in Bluehill AG

 

 

10,355

 

Warrants to purchase common stock

 

 

471,878

 

Total

 

 

4,243,139

 

 

Net Loss per Common Share Attributable to Identiv Stockholders’ Equity

Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. For the three and six months ended June 30, 2016 and 2015, common stock equivalents consisting of outstanding stock options, RSUs and warrants were excluded from the calculation of diluted loss per share because these securities were anti-dilutive due to the net loss in the respective periods. The total number of common stock equivalents excluded from diluted loss per share relating to these securities was 2,130,423 common stock equivalents for the three and six months ended June 30, 2016, and 2,313,075 common stock equivalents for the three and six months ended June 30, 2015, respectively.

Accumulated Other Comprehensive Income  

Accumulated other comprehensive income (“AOCI”) at June 30, 2016 and December 31, 2015 consists of foreign currency translation adjustments totaling $2.0 million and $2.2 million, respectively. As a result of the acquisition of the noncontrolling interest in a subsidiary company, $0.5 million was reclassified out of AOCI into net loss during the six months ended June 30, 2015.  

 

 

4. Balance Sheet Components

The Company’s inventories are stated at the lower of cost or market. Inventories consist of (in thousands):

 

 

June 30,

 

 

December 31,

 

 

2016

 

 

2015

 

Raw materials

$

4,419

 

 

$

5,033

 

Work-in-progress

 

484

 

 

 

12

 

Finished goods

 

8,920

 

 

 

9,681

 

Total

$

13,823

 

 

$

14,726

 

Property and equipment, net consists of (in thousands):

 

 

June 30,

 

 

December 31,

 

 

2016

 

 

2015

 

Building and leasehold improvements

$

2,379

 

 

$

2,670

 

Furniture, fixtures and office equipment

 

2,120

 

 

 

2,242

 

Plant and machinery

 

8,897

 

 

 

8,858

 

Purchased software

 

2,465

 

 

 

2,510

 

Total

 

15,861

 

 

 

16,280

 

Accumulated depreciation

 

(12,758

)

 

 

(12,062

)

Property and equipment, net

$

3,103

 

 

$

4,218

 

The Company recorded depreciation expense of $0.4 million and $0.8 million during the three months ended June 30, 2016 and 2015, respectively, and $1.3 million and $0.7 million during the six months ended June 30, 2016 and 2015, respectively.  

13


Other accrued expenses and liabilities consist of (in thousands):

 

 

June 30,

 

 

December 31,

 

 

2016

 

 

2015

 

Accrued restructuring

$

1,086

 

 

$

633

 

Accrued professional fees

 

3,103

 

 

 

1,731

 

Income taxes payable

 

448

 

 

 

282

 

Other accrued expenses

 

1,950

 

 

 

3,189

 

Total

$

6,587

 

 

$

5,835

 

 

 

5. Intangible Assets

Intangible Assets

The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands):  

 

 

 

Existing

 

 

Customer

 

 

 

 

 

 

 

Technology

 

 

Relationship

 

 

Total

 

Amortization period (in years)

 

 

11.75

 

 

4.0 – 11.75