0001144204-18-022918.txt : 20180427 0001144204-18-022918.hdr.sgml : 20180427 20180427101154 ACCESSION NUMBER: 0001144204-18-022918 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 56 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180427 DATE AS OF CHANGE: 20180427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AWARE INC /MA/ CENTRAL INDEX KEY: 0001015739 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042911026 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21129 FILM NUMBER: 18781451 BUSINESS ADDRESS: STREET 1: 40 MIDDLESEX TURNPIKE CITY: BEDFORD STATE: MA ZIP: 01730 BUSINESS PHONE: 6172764000 MAIL ADDRESS: STREET 1: 40 MIDDLESEX TURNPIKE CITY: BEDFORD STATE: MA ZIP: 01730 10-Q 1 tv491825_10q.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant To Section 13 Or 15(d) Of The

Securities Exchange Act of 1934

For the quarter ended March 31, 2018

Commission file number 000-21129

AWARE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Massachusetts	04-2911026
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

40 Middlesex Turnpike, Bedford, Massachusetts, 01730

(Address of Principal Executive Offices)

(Zip Code)

(781) 276-4000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check 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 x 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 x NO ¨

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

Large Accelerated Filer¨	Accelerated Filer x
Non-Accelerated Filer ¨ (Do not check if a smaller reporting company)	Smaller Reporting Company ¨
Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

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

Indicate the number of shares outstanding of the issuer’s common stock as of April 23, 2018:

Class	Number of Shares Outstanding
Common Stock, par value $0.01 per share	21,546,818 shares

AWARE, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2018

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION

Item 1.	Unaudited Consolidated Financial Statements

	Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	3

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2018 and March 31, 2017	4

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and March 31, 2017	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

Item 4.	Controls and Procedures	23

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 4.	Mine Safety Disclosures	24

Item 6.	Exhibits	25

	Signatures	25

PART 1. FINANCIAL INFORMATION

ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

AWARE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

	March 31, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	50,648		$	51,608
Accounts receivable, net		2,265			2,389
Unbilled receivables		1,233			1,429
Prepaid expenses and other current assets		324			216
Total current assets		54,470			55,642

Property and equipment, net		4,295			4,304
Deferred tax assets		5,163			5,071
Other assets		-			18
Total assets	$	63,928		$	65,035

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	234		$	166
Accrued expenses		1,281			1,401
Accrued income taxes		16			2
Deferred revenue		2,285			2,805
Total current liabilities		3,816			4,374

Long-term deferred revenue		111			127

Commitments and contingent liabilities

Stockholders’ equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized, none outstanding		-			-
Common stock, $.01 par value; 70,000,000 shares authorized; issued and outstanding 21,546,818 as of March, 31, 2018 and 21,493,440 as of December 31, 2017		215			215
Additional paid-in capital		96,209			96,246
Accumulated deficit		(36,423	)		(35,927	)
Total stockholders’ equity		60,001			60,534

Total liabilities and stockholders’ equity	$	63,928		$	65,035

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

AWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

(unaudited)

	Three Months Ended March 31,
	2018			2017
Revenue:
Software licenses	$	1,473		$	2,486
Software maintenance		1,294			1,253
Services		144			374
Royalties		-			43
Total revenue		2,911			4,156

Costs and expenses:
Cost of software licenses		-			247
Cost of services		50			216
Research and development		1,875			1,857
Selling and marketing		924			915
General and administrative		785			790
Total costs and expenses		3,634			4,025

Patent related income		-			91

Operating income (loss)		(723	)		222
Interest income		162			84
Income (loss) before provision for (benefit from) income taxes		(561	)		306
Provision for (benefit from) income taxes		(66	)		5
Net income (loss)	$	(495	)	$	301

Net income (loss) per share – basic	$	(0.02	)	$	0.01
Net income (loss) per share – diluted	$	(0.02	)	$	0.01

Weighted-average shares – basic		21,547			22,255
Weighted-average shares - diluted		21,573			22,321

Comprehensive income:
Net income (loss)	$	(495	)	$	301
Other comprehensive income (loss) (net of tax):
Unrealized gains on available for sale securities		-			28
Comprehensive income (loss)	$	(495	)	$	329

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

AWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended
	March 31,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	(495	)	$	301
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		122			133
Stock-based compensation		24			71
Deferred tax benefit on other comprehensive income		-			(14	)
Amortization of discount on investments		-			(3	)
Changes in assets and liabilities:
Accounts receivable		124			(400	)
Unbilled receivables		196			216
Prepaid expenses and other current assets		(108	)		(29	)
Deferred tax assets		(92	)		(25	)
Accounts payable		68			270
Accrued expenses		(120	)		(25	)
Accrued income taxes		14			36
Deferred revenue		(536	)		(512	)
Net cash provided by (used in) operating activities		(803	)		19

Cash flows from investing activities:
Purchases of property and equipment		(96	)		(5	)
Net cash used in investing activities		(96	)		(5	)

Cash flows from financing activities:
Proceeds from issuance of common stock		-			13
Payments made for taxes of employees who surrendered shares related to unrestricted stock		(61	)		(119	)
Repurchase of common stock		-			(2,827	)
Net cash used in financing activities		(61	)		(2,933	)

Decrease in cash and cash equivalents		(960	)		(2,919	)
Cash and cash equivalents, beginning of period		51,608			51,913

Cash and cash equivalents, end of period	$	50,648		$	48,994

Supplemental disclosure:
Cash paid for income taxes	$	8		$	12

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

AWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Nature of Business. We are a leading provider of software and services to the biometrics industry. Our software products are used in government and commercial biometrics systems, which are capable of determining or verifying an individual’s identity. We also offer engineering services related to software customization, integration, and installation, as well as complete systems development. We sell our biometrics software products and services globally through systems integrators, OEMs, and directly to end user customers. We also derive a portion of our revenue from the sale of imaging software.

Basis of Presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and notes necessary for a complete presentation of our financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. We filed audited financial statements which included all information and notes necessary for such presentation for the three years ended December 31, 2017 in conjunction with our 2017 Annual Report on Form 10-K. This Form 10-Q should be read in conjunction with that Form 10-K.

The accompanying unaudited consolidated balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of financial position at March 31, 2018, and of operations and cash flows for the interim periods ended March 31, 2018 and 2017.

The results of operations for the interim period ended March 31, 2018 are not necessarily indicative of the results to be expected for the year.

Revenue Recognition. Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the full retrospective transition method. Adoption of the standard using the full retrospective method required us to restate certain previously reported results.

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services. In addition, ASC 606 requires disclosures of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

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 should apply the following five step model:

Identify the contract with the customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract; and

Recognize revenue when (or as) each performance obligation is satisfied.

1) Identify the contract with the customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s intent and ability to pay, which is based on a variety of factors including the customer’s historical payment experience, or in the case of a new customer, published credit and financial information pertaining to the customer.

We evaluate contract modifications for the impact on revenue recognition if they have been approved by both parties such that the enforceable rights and obligations under the contract have changed. Contract modifications are either accounted for using a cumulative effect adjustment or prospectively over the remaining term of the arrangement. The determination of which method is more appropriate depends on the nature of the modification, which we evaluate on a case-by-case basis.

We combine two or more contracts entered into at or near the same time with the same customer and account for them as a single contract if (i) the contracts are negotiated as a package with a common commercial objective, (ii) the amount of consideration to be paid in one contract depends on the price or performance of the other contract, or (iii) some or all of the goods or services in one contract would be combined with some or all of the goods and services in the other contract into a single performance obligation. If two or more contracts are combined, the consideration to be paid is aggregated and allocated to the individual performance obligations without regard to the consideration specified in the individual contracts.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, we apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation. To identify performance obligations, we consider all of the goods or services promised in a contract regardless of whether they are explicitly stated or are implied by customary business practices.

3) Determine the transaction price

The transaction price is determined based on the consideration we expect to be entitled in exchange for transferring promised goods and services to the customer. Determining the transaction price requires significant judgment. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period. The amount of consideration is not adjusted for a significant financing component if the time between payment and the transfer of the related good or service is expected to be one year or less under the practical expedient in ASC 606-10-32-18. Our revenue arrangements are typically accounted for under such expedient, as payment is typically due within 30 to 60 days. As of March 31, 2018, none of our contracts contained a significant financing component.

4) Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”) basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative SSPs. The SSP is the price at which we would sell a promised good or service separately to a customer. The best estimate of SSP is the observable price of a good or service when we sell that good or service separately. A contractually stated price or a list price for a good or service may be the SSP of that good or service. We use a range of amounts to estimate SSP when we sell each of the goods and services separately and need to determine whether there is a discount that needs to be allocated based on the relative SSP of the various goods and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we typically determine the SSP using an adjusted market assessment approach using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual goods and services due to the stratification of those goods and services by customers and circumstances. In these instances, we may use information such as the nature of the customer and distribution channel in determining the SSP.

5) Recognize revenue when or as we satisfy a performance obligation

We satisfy performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized over time if 1) the customer simultaneously receives and consumes the benefits provided by our performance, 2) our performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date. If we do not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.

We categorize revenue as software licenses, software maintenance, services, or royalties. In addition to the general revenue recognition policies described above, specific revenue recognition policies apply to each category of revenue.

Software licenses

Software licenses consist of revenue from the sale of software licenses for biometrics and imaging 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 licenses at a point in time upon delivery, provided all other revenue recognition criteria are met.

Software maintenance

Software maintenance consists of revenue from the sale of software maintenance contracts for biometrics and imaging software. Software maintenance contracts entitle customers to receive software support and software updates, if and when they become available, during the term of the maintenance contract. Software support and software updates are considered distinct services. However, these distinct services are considered a single performance obligation consisting of a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. We recognize software maintenance revenue over time on a straight-line basis over the contract period.

Services

Service revenue consists of fees from biometrics customers for software engineering services we provide to them. We recognize services revenue over time as the services are delivered using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted), provided all other revenue recognition criteria are met.

Royalties

Royalties consist primarily of royalty payments we receive under DSL silicon contracts with two customers that incorporate our silicon intellectual property (“IP”) in their DSL chipsets. We sold the assets of our DSL IP business in 2009, but we continued to receive royalty payments from these customers. Royalties are reported in continuing operations in accordance with ASC 205, Reporting Discontinued Operations, because we have continuing ongoing cash flows from this business.

We recognize revenue from sales-based royalties 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 (or partially satisfied).

Refer to Note G – Business Segments for further information on the disaggregation of revenue, including revenue by geography and category.

Arrangements with multiple performance obligations

In addition to selling software licenses, software maintenance and software services on a standalone basis, a significant portion of our contracts include multiple performance obligations. The various combinations of multiple performance obligations and our revenue recognition for each are described as follows:

•

Software licenses and software maintenance. When software licenses and software maintenance contracts are sold together, the software licenses and software maintenance are generally considered distinct performance obligations. The transaction price is allocated to the software licenses and the software maintenance based on relative SSP. Revenue allocated to the software licenses is recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. Revenue allocated to the software maintenance is recognized over time on a straight-line basis over the contract period.

•

Software licenses and services. When software licenses and significant customization engineering services are sold together, they are accounted for as a combined performance obligation, as the software licenses are generally highly dependent on, and interrelated with, the associated services and therefore are not distinct performance obligations. Revenue for the combined performance obligation is recognized over time as the services are delivered using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted). When software licenses and standard implementation or consulting-type services are sold together, they are generally considered distinct performance obligations as the software licenses are not dependent on or interrelated with the associated services. The transaction price in these arrangements is allocated to the software licenses and services based on relative SSP. Revenue allocated to the software licenses is recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. Revenue allocated to the services is recognized over time using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted). In arrangements with both software licenses and services, the software license portion of the arrangement is classified as software license revenue and the services portion is classified as services revenue in our consolidated statements of income and comprehensive income.

•

Software licenses, software maintenance and services. When we sell software licenses, software maintenance and software services together, we account for the individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations based on relative SSP. Revenue allocated to the software licenses is recognized at a point in time upon delivery. Revenue allocated to the services is recognized over time using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted). Revenue for the software maintenance is recognized over time on a straight-line basis over the contract period. However, if the software services are significant customization engineering services, they are accounted for with the software licenses as a combined performance obligation, as stated above. Revenue for the combined performance obligation is recognized over time using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted).

Returns

We do not offer rights of return for our products and services in the normal course of business.

Customer Acceptance

Our contracts with customers generally do not include customer acceptance clauses.

Contract Balances

When the timing of our delivery of goods or services is different from the timing of payments made by customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Customers that prepay are represented by the deferred revenue below until the performance obligation is satisfied. Contract assets represent arrangements in which the good or service has been delivered but payment is not yet due. Our contract assets consist of unbilled receivables. Our contract liabilities consisted of deferred (unearned) revenue, which is generally related to software maintenance contracts. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue.

The following table presents changes in our contract assets and liabilities during the three months ended March 31, 2017 and 2018 (in thousands):

	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Three months ended March 31, 2017
Contract assets:
Unbilled receivables	$	2,259	$	43	$	(259	)	$	2,043

Three months ended March 31, 2018
Contract assets:
Unbilled receivables	$	1,429	$	33	$	(229	)	$	1,233

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Three months ended March 31, 2017
Contract liabilities:
Deferred revenue	$	2,933	$	750	$	(1,262	)	$	2,421

Three months ended March 31, 2018
Contract liabilities:
Deferred revenue	$	2,932	$	758	$	(1,294	)	$	2,396

Remaining Performance Obligations

Remaining performance obligations represent the transaction price from contracts for which work has not been performed or goods and services have not been delivered. We expect to recognize revenue on approximately 95% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. As of March 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations for software maintenance contracts with a duration greater than one year was $111,000. This does not include revenue related to performance obligations that are part of a contract whose original expected duration is one year or less.

Contract Costs

We recognize an other 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 have determined that certain sales commissions meet the requirements to be capitalized, and we amortize these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets.

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. These costs include sales commissions on software maintenance contracts with a contract period of one year or less as sales commissions paid on contract renewals are commensurate with those paid on the initial contract.

Fair Value Measurements. The Financial Accounting Standards Board (“FASB”) Codification defines fair value, and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to the 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 the FASB Codification are: i) Level 1 – valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date; ii) Level 2 – valuations that are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; and iii) Level 3 – valuations that require inputs that are both significant to the fair value measurement and unobservable.

Cash and cash equivalents, which primarily include money market mutual funds, were $50.6 million and $51.6 million as of March 31, 2018 and December 31, 2017, respectively. We classified our cash equivalents of $50.1 million and $50.0 million as of March 31, 2018 and December 31, 2017 within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

As of March 31, 2018, our assets that are measured at fair value on a recurring basis and whose carrying values approximate their respective fair values include the following (in thousands):

	Fair Value Measurement at March 31, 2018 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	50,148
Total	$	50,148	$	-	$	-

As of December 31, 2017, our assets that are measured at fair value on a recurring basis and whose carrying values approximate their respective fair values include the following (in thousands):

	Fair Value Measurement at December 31, 2017 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	49,986
Total	$	49,986	$	-	$	-

Computation of Earnings per Share. Basic earnings per share is computed by dividing net income or loss by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income or loss by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the purposes of this calculation, stock options are considered common stock equivalents in periods in which they have a dilutive effect. Stock options that are anti-dilutive are excluded from the calculation.

Net income (loss) per share is calculated as follows (in thousands, except per share data):

	Three Months Ended March 31,
	2018			2017

Net income (loss)	$	(495	)	$	301

Shares outstanding:
Weighted-average common shares outstanding		21,547			22,255
Additional dilutive common stock equivalents		26			66
Diluted shares outstanding		21,573			22,321

Net income (loss) per share – basic	$	(0.02	)	$	0.01
Net income (loss) per share - diluted	$	(0.02	)	$	0.01

For the three month period ended March 31, 2017, options to purchase 20,834 shares of common stock were outstanding, but were not included in the computation of diluted EPS because the options’ exercise prices were greater than the average market price of the common stock and thus would be anti-dilutive.

Stock-Based Compensation. The following table presents stock-based employee compensation expenses included in our unaudited consolidated statements of comprehensive income (in thousands):

	Three Months Ended March 31,
	2018		2017

Cost of services	$	-	$	2
Research and development		5		12
Selling and marketing		1		1
General and administrative		18		56
Stock-based compensation expense	$	24	$	71

Stock Option Grants. We may grant stock options under our 2001 Nonqualified Stock Plan although we have not granted any stock options since the first quarter of 2012. When we grant stock options, we estimate their fair value using the Black-Scholes valuation model. This valuation model takes into account the exercise price of the award, as well as a variety of significant assumptions. The assumptions used to estimate the fair value of stock options include the expected term, the expected volatility of our stock over the expected term, the risk-free interest rate over the expected term, and our expected annual dividend yield. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

Unrestricted Stock Grants. We also grant unrestricted shares of stock under our 2001 Nonqualified Stock Plan. Stock-based compensation expense for stock grants is determined based on the fair market value of our stock on the date of grant, provided the number of shares in the grant is fixed on the grant date.

We granted shares of unrestricted stock in 2018 and 2017 that affected financial results for the three month periods ended March 31, 2018 and 2017. These grants are described below.

2018 Grant. On March 20, 2018, we granted 138,000 shares of unrestricted stock to directors, officers and employees. The shares will be issued in two equal installments shortly after June 30, 2018 and December 31, 2018, provided each grantee is serving as a director, officer or employee on those dates. The total stock-based compensation expense related to this grant is $580,000, of which $24,000 was charged to expense in the three months ended March 31, 2018 and we anticipate the remaining $556,000 will be charged to expense ratably over the remaining three quarters of 2018.

2017 Grant. In February 2017, we granted 134,000 shares of unrestricted stock to directors, officers and employees. The shares were issued in two equal installments shortly after June 30, 2017 and December 31, 2017. We expensed the entire $663,000 stock-based compensation expense related to this grant in 2017. We issued shares of common stock related to this grant as follows: i) 54,014 net shares of common stock were issued in early July 2017 after employees surrendered 12,986 shares for which we paid $67,000 of withholding taxes on their behalf; and ii) 53,378 net shares of common stock were issued in early January 2018 after employees surrendered 13,622 shares for which we paid $64,000 of withholding taxes on their behalf.

Business Segments. We organize ourselves into a single segment that reports to the chief operating decision maker.

We conduct our operations in the United States and sell our products and services to domestic and international customers. Revenues were generated from the following geographic regions for the three months ended March 31, 2018 and 2017 (in thousands):

	Three Months Ended
	March 31,
	2018		2017

United States	$	2,069	$	3,252
Rest of World		842		904
	$	2,911	$	4,156

Revenue by product group for the three months ended March 31, 2018 and 2017 was (in thousands):

	Three Months Ended
	March 31,
	2018		2017

Biometrics	$	2,485	$	3,803
Imaging		426		310
DSL royalties		-		43
	$	2,911	$	4,156

Revenue by timing of transfer of goods or services for the three months ended March 31, 2018 and 2017 was (in thousands):

	Three Months Ended
	March 31,
	2018		2017

Goods or services transferred at a point in time		1,474		2,529
Goods or services transferred over time		1,437		1,627
	$	2,911	$	4,156

Recently Adopted Accounting Pronouncements.

FASB ASU No. 2014-09. In May 2014, the FASB issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is the result of a joint project by the FASB and the International Accounting Standards Board (“IASB”) to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”) that would: remove inconsistencies and weaknesses, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices across entities, jurisdictions, industries, and capital markets, improve disclosure requirements and resulting financial statements, and simplify the presentation of financial statements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted the standard on January 1, 2018 utilizing the full retrospective method.

We implemented new internal controls for the implementation and modified and augmented our existing internal controls to enable the preparation of financial information on adoption. The most significant impacts of adopting the new standard related to the following:

2015 imaging software license contract. We consummated a $4.625 million license contract in October 2015 that included a $4.5 million license fee plus a $125,000 software maintenance fee. We delivered the licensed software and the customer paid us in the fourth quarter of 2015. Under legacy GAAP, we were unable to establish vendor specific objective evidence (“VSOE”) for the maintenance element and, as a result we recognized the total fee ratably over the twelve-month period that ran from October 2015 to October 2016. Under the new standard, license revenue of $4.5 million from that contract is recognized in 2015 when control over the software was transferred to the customer and software maintenance revenue of $125,000 is recognized ratably over the twelve-month period that ran from October 2015 to October 2016. This change resulted in a decrease in revenue of $3.6 million for fiscal year 2016. This change had no impact to our reported results for the three months ended March 31, 2017.

ii)

DSL royalty contracts. Under our legacy revenue recognition policy, we recognized DSL royalty revenue in the period in which we received royalty reports, which was typically in the quarter immediately following the quarter in which sales of royalty-bearing products occurred. Under the new standard, we recognize DSL royalty revenue in the quarter in which sales of royalty-bearing products occur. Therefore, we make estimates of royalties earned in the current period and record royalty revenue based on those estimates. This change resulted in a decrease in revenue of $17,000 and $39,000 for fiscal years 2017 and 2016, respectively. This change resulted in an increase in revenue of $9,000 for the three months ended March 31, 2017.

iii)

Minimum license/royalty payment contract. One of our revenue contracts required the customer to make a fixed payment for professional services as well as minimum license/royalty payments for software to be distributed to end-users. Under legacy GAAP, we recognized the professional services fee over the period that the services were performed and revenue for the minimum license/royalty payments when those minimum payments became due. Under the new standard we recognized the estimated amount of total consideration, including the professional services fee and our estimate of variable consideration related to the minimum license/royalty payments, in the contract that we expect to be entitled to and recognized revenue in the period(s) that the related licenses and services were transferred to the customer. This change resulted in a decrease in revenue of $800,000 for fiscal year 2017, $200,000 of which related to the three months ended March 31, 2017, an increase in revenue of $860,000 for fiscal year 2016, an increase in unbilled receivables of $1.4 million in fiscal year 2017, an increase in unbilled receivables of $2.2 million in fiscal year 2016 and an increase in stockholders’ equity of $2.2 million in fiscal year 2016.

iv)

Sales commissions and other third-party acquisition costs. Under legacy GAAP, sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers were expensed as incurred. ASC 340 requires these costs to be recognized as an asset when incurred and expensed over a period consistent with the period of transfer to the customer of goods or services to which the asset relates. We adopted the practical expedient that if the amortization period of the asset that we otherwise would have recognized is one year or less, we expense the sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers when incurred. The adoption of the new standard resulted in a decrease in expense of approximately $114,000 for fiscal year 2017, $27,000 of which related to the three months ended March 31, 2017, and $294,000 for fiscal year 2016 and a decrease in stockholders’ equity of $0.3 million in fiscal year 2016. For fiscal year 2017, the decrease in expense primarily relates to lower sales commissions due to lower revenue on our minimum license/royalty payment contract as noted above. For fiscal year 2016, the decrease primarily relates to lower sales commissions due to lower revenue from our 2015 imaging software license contract and lower revenue on our minimum license/royalty payment contract as noted above.

Revenue recognition related to our other arrangements for software licenses, software maintenance, services, and hardware remained substantially unchanged.

As a practical expedient, for contracts that were modified before the earliest reporting period of application of the standard, we have not retrospectively restated the contracts for those contract modifications. Instead we have reflected the aggregate effect of all modifications that occurred before the earliest reporting period of application when (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations.

We have not restated contracts that began and were completed within the same annual reporting periods. For completed contracts that have variable consideration, we have used the transaction price at the date the contract was completed rather than estimating variable consideration amounts in comparative reporting periods.

For fiscal years 2017 and 2016, adoption of the standard resulted in an aggregate decrease in revenue of $0.8 million and $2.8 million, respectively, a decrease in costs and expenses of $0.1 million and $0.3 million, respectively, a decrease in the provision for income taxes of $0.4 million and $1.0 million, respectively, and an increase in stockholders’ equity of $0.9 million and $1.2 million respectively, primarily due to the changes noted above. In addition, adoption of the standard resulted in an increase in accounts receivable of $1.4 million and $2.2 million as of December 31, 2017 and 2016, respectively, driven by unbilled receivables from recognition of revenue from the estimate of variable consideration related to the minimum license/royalty payments in one of our contracts; a decrease in deferred tax assets of $0.3 million and $0.8 million as of December 31, 2017 and 2016, respectively, driven primarily by a difference in timing of revenue recognition and expenses for book and tax purposes; and an increase in accrued expenses of $0.2 million and $0.3 million as of December 31, 2017 and 2016, respectively, driven by sales commissions related to recognition of revenue from the estimate of variable consideration related to the minimum license/royalty payments in one of our contracts.

For the three months ended March 31, 2017, adoption of the standard resulted in an aggregate decrease in revenue of $191,000, a decrease in costs and expenses of $27,000, and a decrease in the provision for income taxes of $59,000 primarily due to the same reasons noted above.

See Impacts of Topic 606 Adoption to Reported Results below for the impact of the adoption of the new standard on our consolidated financial statements.

Impacts of Topic 606 Adoption to Reported Results

Adoption of the new revenue standard impacted our reported results as follows:

(In thousands, except per share data)	Three Months Ended March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	4,347	$	(191	)	$	4,156
Costs and expenses		4,052		(27	)		4,025
Provision for income taxes		64		(59	)		5
Net income		405		(104	)		301
Net income per share - basic and diluted		0.02		(0.01	)		0.01

(In thousands, except per share data)	Year ended December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	16,282	$	(817	)	$	15,465
Costs and expenses		16,054		(114	)		15,940
Provision for income taxes		965		(421	)		544
Net income		1,282		(282	)		1,000
Net income per share - basic and diluted		0.06		(0.01	)		0.05

(In thousands, except per share data)	Year ended December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	21,566	$	(2,804	)	$	18,762
Costs and expenses		16,467		(294	)		16,173
Provision for income taxes		2,085		(986	)		1,099
Net income		4,103		(1,524	)		2,579
Net income per share - basic and diluted		0.18		(0.07	)		0.11

(In thousands)	March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,391	$	2,043		$	5,434
Prepaid expenses and other current assets		299		20			319
Deferred tax assets		5,802		(693	)		5,109
Accrued expenses		1,080		311			1,391
Stockholders’ equity		60,169		1,059			61,228

(In thousands)	December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	2,401	$	1,417		$	3,818
Prepaid expenses and other current assets		203		13			216
Deferred tax assets		5,402		(331	)		5,071
Accrued expenses		1,184		217			1,401
Stockholders’ equity		59,652		882			60,534

(In thousands)	December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,016	$	2,234		$	5,250
Prepaid expenses and other current assets		268		22			290
Deferred tax assets		1,078		(752	)		326
Accrued expenses		1,075		341			1,416
Stockholders’ equity		57,841		1,163			59,004

Adoption of the new revenue standard had no impact on total cash provided from or used in operating, financing, or investing in our consolidated statements of cash flows.

Recent Accounting Pronouncements Not Yet Adopted.

FASB ASU No. 2016-13. In June 2016, the FASB issued Accounting Standard Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This new standard replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, entities will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This standard is effective for fiscal years beginning after December 15, 2019 with early adoption permitted in fiscal years beginning after December 15, 2018. We are currently evaluating the effect this standard will have on our consolidated financial statements and related disclosures.

With the exception of the standard discussed above, there have been no other recently issued accounting pronouncements that are of significance or potential significance to us that we have not adopted as of March 31, 2018.

Income Taxes. Income tax benefit was $66,000 for the three months ended March 31, 2018. Income tax benefit in the three month period ended March 31, 2018 was based on the U.S. statutory rate of 21%, increased by state income taxes, and reduced by permanent adjustments and research tax credits. Income tax expense was $5,000 for the three months ended March 31, 2017. Income tax expense in the three month period ended 2017 was based on the U.S. statutory rate of 34%, increased by state income taxes, and reduced by permanent adjustments and research tax credits.

As of March 31, 2018, we had a total of $5.2 million of deferred tax assets for which we had recorded no valuation allowance. We have assessed the need for a valuation allowance on our deferred tax assets. Based on our assessment of future sources of income, including reversing deferred tax liabilities, and future earnings, we have determined that it is more likely than not that the deferred tax assets will be realized, and therefore there is no valuation allowance required for the deferred tax assets. We will continue to assess the level of valuation allowance in future periods. Should evidence regarding the realizability of tax assets change at a future point in time, the valuation allowance will be adjusted accordingly.

In the second quarter of 2017, the Internal Revenue Service commenced an examination of our tax return for the year ended December 31, 2015. In February 2018, the IRS notified us that it had completed its examination and that it had no changes to our reported tax.

Income from patent arrangement. We entered into an arrangement with an unaffiliated third party in 2010 under which we assigned certain patents in return for royalties on proceeds from patent monetization efforts by the third party. The third party has engaged in various patent monetization activities, including enforcement, litigation and licensing. In the three months ended March 31, 2017, the third party reported and we recorded $91,000 of income from this arrangement. In the three months ended March 31, 2018, there was no income was from this arrangement.

ITEM 2:

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

Some of the information in this Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” and similar words. You should read statements that contain these words carefully because they: (1) discuss our future expectations; (2) contain projections of our future operating results or financial condition; or (3) state other “forward-looking” information. However, we may not be able to predict future events accurately. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2017, as well as any cautionary language in this Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this Form 10-Q could materially and adversely affect our business.

Summary of Operations

We are primarily engaged in the development and sale of biometrics products and services. Our software products are used in government and commercial biometrics systems to identify or authenticate people. Principal government applications of biometrics systems include border control, visitor screening, law enforcement, national defense, intelligence, secure credentialing, access control, and background checks. Principal commercial applications include: i) user authentication for login and access to mobile devices, computers, networks, and software programs; ii) user authentication for financial transactions and purchases (online and in-person); iii) physical access control to buildings, and iv) screening and background checks of prospective employees and customers. We sell our software and services globally through systems integrators and OEMs, and directly to end user customers. We also derive a portion of our revenue from the sale of imaging software licenses to OEMs and systems integrators that incorporate our software into medical imaging products and medical systems.

Effective January 1, 2018, we adopted ASC 606 using the full retrospective transition method. Adoption of the standard using the full retrospective method required us to restate certain previously reported results. Refer to Note H – Recently Adopted Accounting Pronouncements for further information on the impacts of adopting ASC 606.

Summary of Financial Results

We use revenue and operating income to summarize financial results as we believe these measurements are the most meaningful way to understand our operating performance.

Revenue and operating loss for the three months ended March 31, 2018 were $2.9 million and $0.7 million, respectively. These results compared to revenue of $4.2 million and operating income of $0.2 million in the three months ended March 31, 2017. Lower revenue and operating income in the current three month period were primarily due to: i) lower biometrics software license sales, ii) lower services revenue, and iii) no income from a patent arrangement. This was partially offset by: i) no cost of software licenses; and ii) lower cost of services.

These and all other financial results are discussed in more detail in the results of operations section that follows.

Results of Operations

Software licenses. Software licenses consist of revenue from the sale of biometrics and imaging software products. Sales of software products depend on our ability to win proposals to supply software for biometrics systems projects either directly to end user customers or indirectly through channel partners.

Software license revenue decreased 41% from $2.5 million in the three months ended March 31, 2017 to $1.5 million in the same three month period in 2018. As a percentage of total revenue, software license revenue decreased from 60% in the first quarter of 2017 to 51% in the current year quarter. The $1.0 million decrease in software license revenue was primarily due to a $1.1 million decrease in biometrics software license sales, which was partially offset by a $0.1 million increase in imaging software license sales. The reasons for the changes in imaging and biometrics software licenses were:

Biometrics software licenses – Biometrics software license sales were $1.1 million in the first quarter of 2018 versus $2.2 million in the same quarter last year. The dollar decrease was primarily due to a decrease in license sales to direct government customers. In particular, we had a large software license sale to the U.S. Marines in the first quarter of 2017 whereas we had no such license in the first quarter of 2018. We are unable to predict whether the U.S. Marines will purchase this software again in the future.

ii)

Imaging software licenses – Imaging software license sales were $0.4 million in the first quarter of 2018 versus $0.3 million in the same quarter last year. The dollar increase was due to slightly higher license sales in the first three months of 2018 versus the same month period in 2017.

As described in the strategy section of our Form 10-K for the year ended December 31, 2017, our market strategy is to continue to focus on our legacy government biometrics markets and expand into new commercial biometrics markets. We are unable to predict future revenue from commercial markets as these are emerging markets.

Software maintenance. Software maintenance consists of revenue from the sale of software maintenance contracts. Software maintenance contracts entitle customers to receive software support and software updates, if and when they become available, during the term of the contract.

Software maintenance revenue increased 3% from $1.25 million in the three months ended March 31, 2017 to $1.29 million in the same three month period in 2018. As a percentage of total revenue, software maintenance revenue increased from 30% in the first quarter of 2017 to 44% in the current year quarter. The dollar increase in software maintenance revenue was primarily due to higher retention of maintenance renewals during the quarter.

Services. Services consist of fees we charge to perform software development, integration, installation, and customization services. Similar to software license revenue, services revenue depends on our ability to win biometrics systems projects either directly with end user customers or in conjunction with channel partners. Services revenue will fluctuate when we commence new projects and/or when we complete projects that were started in previous periods.

Services decreased 62% from $0.4 million in the three months ended March 31, 2017 to $0.1 million in the same three month period in 2018. As a percentage of total revenue, services decreased from 9% in the first quarter of 2017 to 5% in the current year quarter.

For the three month period ended March 31, 2018, the dollar decrease in services revenue was primarily due to lower revenue from our direct U.S government customers and our other customers.

Services backlog was minimal as of March 31, 2018.

Royalties. Royalties consist primarily of royalty payments we receive under DSL silicon contracts with two customers that incorporate our silicon intellectual property (“IP”) in their DSL chipsets. We sold our DSL IP business in 2009, but we continued to receive royalty payments from these customers. Royalties are reported in continuing operations in accordance with ASC 205-20, Reporting Discontinued Operations, because we have continuing ongoing cash flows from this business.

Royalties decreased 100% from $43,000 in the three months ended March 31, 2017 to zero in the same three month period in 2018.

We do not consider DSL royalties to be a key element of our strategy and we believe that it is unlikely we will receive DSL royalties in future periods.

Cost of software licenses. Cost of software licenses consists primarily of the cost of third party software included in certain software products delivered to the Navy and USMC.

Cost of software licenses decreased 100% from $247,000 in the three months ended March 31, 2017 to zero in the same three month period in 2018. The dollar decrease in cost of software licenses was primarily due to the delivery of software to the Navy that included third party software in the first quarter of 2017, whereas we had no such order in the first quarter of 2018.

Cost of Services. Cost of services consists of engineering costs to perform customer services projects. Such costs primarily include: i) engineering salaries, stock-based compensation, fringe benefits, and facilities; and ii) engineering consultants and contractors.

Cost of services decreased 77% from $216,000 in the three months ended March 31, 2017 to $50,000 in the same three month period in 2018. Cost of services as a percentage of services decreased from 58% in the first quarter of 2017 to 35% in the current year quarter, which means that gross margins increased from 42% to 65%. The dollar decrease in cost of services was primarily due to lower service revenue in the first quarter of 2018.

Research and development expense. Research and development expense consists of costs for: i) engineering personnel, including salaries, stock-based compensation, fringe benefits, and facilities; ii) engineering consultants and contractors, and iii) other engineering expenses such as supplies, equipment depreciation, dues and memberships and travel. Engineering costs incurred to develop our technology and products are classified as research and development expense. As described in the cost of services section, engineering costs incurred to provide engineering services for customer projects are classified as cost of services, and are not included in research and development expense.

The classification of total engineering costs to research and development expense and cost of services was (in thousands):

	Three Months Ended March 31,
	2018		2017

Research and development expense	$	1,875	$	1,857
Cost of services		50		216
Total engineering costs	$	1,925	$	2,073

Research and development expense was essentially unchanged at $1.9 million in the three months ended March 31, 2018 and 2017. As a percentage of total revenue, research and development expense increased from 45% in the first quarter of 2017 to 64% in the corresponding period of 2018.

As the table immediately above indicates, total engineering costs in the first quarter of 2018 decreased by $148,000 compared to the same period last year. The spending decrease was primarily due to lower spending on third-party development costs that were partially offset by higher employee costs. Lower spending on third-party development costs was due to the completion of a development project in the third quarter of 2017. There was no such project in the first quarter of 2018.

We anticipate that we will continue to focus our future research and development activities on enhancing our existing products and developing new products.

Selling and marketing expense. Selling and marketing expense primarily consists of costs for: i) sales and marketing personnel, including salaries, sales commissions, stock-based compensation, fringe benefits, travel, and facilities; and ii) advertising and promotion expenses.

Sales and marketing expense increased 1% from $915,000 in the three months ended March 31, 2017 to $924,000 in the same three month period of 2018. As a percentage of total revenue, sales and marketing expense increased from 22% in the first three months of 2017 to 32% in the corresponding period in 2018. The dollar increase in sales and marketing expense was primarily due to higher salary, advertising and tradeshows and travel expenses, which was partially offset by lower spending on sales agents and sales commissions.

General and administrative expense. General and administrative expense consists primarily of costs for: i) officers, directors and administrative personnel, including salaries, bonuses, director compensation, stock-based compensation, fringe benefits, and facilities; ii) professional fees, including legal and audit fees; iii) public company expenses; and iv) other administrative expenses, such as insurance costs and bad debt provisions.

General and administrative expense decreased 1% from $790,000 in the three months ended March 31, 2017 to $785,000 in the same three month period in 2018. As a percentage of total revenue, general and administrative expense increased from 19% in the first three months of 2017 to 27% in the corresponding period in 2018. The decrease in general and administrative expense was primarily due to lower stock-based compensation costs that were partially offset by higher professional fees.

Patent related income. We entered into an arrangement with an unaffiliated third party in 2010 under which we assigned certain patents in return for royalties on proceeds from patent monetization efforts by the third party. The third party has engaged in various patent monetization activities, including enforcement, litigation and licensing. In the first quarter of 2017, the third party reported and we recorded $91,000 of income from this arrangement. There was no such income in the three month period ended March 31, 2018. We continue to have a contractual relationship with this third party. However, we are unable to predict how much more income we might receive from this arrangement, if any, because we do not know whether any patent monetization efforts by the third party will be successful.

Interest income. Interest income increased 93% from $84,000 in the three months ended March 31, 2017 to $162,000 in the same three month period in 2018. For the three month period, the dollar increase in interest income was primarily due to higher interest rates within our money market accounts.

Income taxes. Income tax benefit was $66,000 for the three months ended March 31, 2018. Income tax benefit in the three month period ended March 31, 2018 was based on the U.S. statutory rate of 21%, increased by state income taxes, and reduced by permanent adjustments and research tax credits. Income tax expense was $5,000 for the three months ended March 31, 2017. Income tax expense in the three month period ended March 31, 2017 was based on the U.S. statutory rate of 34%, increased by state income taxes, and reduced by permanent adjustments and research tax credits.

Liquidity and Capital Resources

At March 31, 2018, we had cash and cash equivalents of $50.6 million, which represented a decrease of $1.0 million from December 31, 2017. The decrease in cash and cash equivalents was primarily due to the following factors:

Cash used in operations was $803,000 in the first three months of 2018. Cash used in operations was primarily the result of $495,000 of net loss and $454,000 of changes in assets and liabilities. Cash from these sources was partially offset by the add back of $146,000 of non-cash items primarily for depreciation, amortization, and stock-based compensation.

Cash used in investing activities was $96,000 in the first three months of 2018. This cash usage consisted of purchases of property and equipment.

Cash used in financing activities was $61,000 in the first three months of 2018. Financing activity cash usage was the result of $61,000 used to pay income taxes for employees who surrendered shares in connection with stock grants.

While we cannot assure you that we will not require additional financing, or that such financing will be available to us, we believe that our cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months.

Recently Adopted Accounting Pronouncements

See Note H to our Consolidated Financial Statements in Item 1.

ITEM 3:

Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk relates primarily to our investment portfolio, and the effect that changes in interest rates would have on that portfolio. Our investment portfolio at March 31, 2018 consisted of one element:

Cash and cash equivalents. As of March 31, 2018, our cash and cash equivalents of $50.6 million were primarily invested in money market funds. The money market funds were invested in high quality, short term financial instruments. Due to the nature, short duration, and professional management of these funds, we do not expect that a general increase in interest rates would result in any material loss.

We do not use derivative financial instruments for speculative or trading purposes.

ITEM 4:

Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standard related to revenue recognition on our financial statements to facilitate their adoption on January 1, 2018. There were no significant changes to our internal control over financial reporting due to the adoption of the new standard.

PART II. OTHER INFORMATION

ITEM 1:

Legal Proceedings

From time to time we are involved in litigation incidental to the conduct of our business. We are not party to any lawsuit or proceeding that, in our opinion, is likely to seriously harm our business.

ITEM 1A:

Risk Factors

The risks described in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2017, could materially and adversely affect our business, financial condition and results of operations. The risk factors discussed in that Form 10-K do not identify all risks that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. No material change in the risk factors discussed in that Form 10-K has occurred.

ITEM 4:

Mine Safety Disclosures

Not applicable.

ITEM 6:

Exhibits

(a)

Exhibits

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101		The following financial statements from Aware, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language), as follows: (i) Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017, (ii) Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2018 and March 31, 2017, (iii) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and March 31, 2017, and (iv) Notes to Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AWARE, INC.

Date: April 27, 2018	By:	/s/ Kevin T. Russell
		Kevin T. Russell
		Chief Executive Officer & President
		General Counsel

Date: April 27, 2018	By:	/s/ David J. Martin
		David J. Martin
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-31.1 2 tv491825_ex31-1.htm EXHIBIT 31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Kevin T. Russell, Chief Executive Officer & President of Aware, Inc., certify that:

I have reviewed this quarterly report on Form 10-Q of Aware, Inc.;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 27, 2018	/s/ Kevin T. Russell
	Kevin T. Russell
	Chief Executive Officer & President

EX-31.2 3 tv491825_ex31-2.htm EXHIBIT 31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, David J. Martin, Chief Financial Officer of Aware, Inc., certify that:

I have reviewed this quarterly report on Form 10-Q of Aware, Inc.;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 27, 2018	/s/ David J. Martin
	David J. Martin
	Chief Financial Officer

EX-32.1 4 tv491825_ex32-1.htm EXHIBIT 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report on Form 10-Q of Aware, Inc. (the “Company”) for the quarter ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned Chief Executive Officer and Chief Financial Officer of the Company, certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin T. Russell		/s/ David J. Martin
Chief Executive Officer & President		Chief Financial Officer

Date: April 27, 2018		Date: April 27, 2018

The certification set forth above is being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Form 10-Q or as a separate disclosure document of the Company or the certifying officers.

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<table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: italic 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="text-align: justify; vertical-align: top;"> <td style="width: 0px;"></td> <td style="text-align: left; width: 0.25in;">J)</td> <td style="text-align: justify;">Income Taxes. Income tax benefit was $66,000 for the three months ended March 31, 2018. Income tax benefit in the three month period ended March 31, 2018 was based on the U.S. statutory rate of 21%, increased by state income taxes, and reduced by permanent adjustments and research tax credits. Income tax expense was $5,000 for the three months ended March 31, 2017. Income tax expense in the three month period ended 2017 was based on the U.S. statutory rate of 34%, increased by state income taxes, and reduced by permanent adjustments and research tax credits.</td> </tr> </table> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.25in; font: italic 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: italic 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">As of March 31, 2018, we had a total of $5.2 million of deferred tax assets for which we had recorded no valuation allowance. We have assessed the need for a valuation allowance on our deferred tax assets.  Based on our assessment of future sources of income, including reversing deferred tax liabilities, and future earnings, we have determined that it is more likely than not that the deferred tax assets will be realized, and therefore there is no valuation allowance required for the deferred tax assets. We will continue to assess the level of valuation allowance in future periods. Should evidence regarding the realizability of tax assets change at a future point in time, the valuation allowance will be adjusted accordingly. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: italic 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: red; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">In the second quarter of 2017, the Internal Revenue Service commenced an examination of our tax return for the year ended December 31, 2015. In February 2018, the IRS notified us that it had completed its examination and that it had no changes to our reported tax.

<table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="text-align: justify;">Recently Adopted Accounting Pronouncements.</td> </tr> </table> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">FASB ASU No. 2014-09. In May 2014, the FASB issued Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is the result of a joint project by the FASB and the International Accounting Standards Board (“IASB”) to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”) that would: remove inconsistencies and weaknesses, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices across entities, jurisdictions, industries, and capital markets, improve disclosure requirements and resulting financial statements, and simplify the presentation of financial statements. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted the standard on January 1, 2018 utilizing the full retrospective method. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We implemented new internal controls for the implementation and modified and augmented our existing internal controls to enable the preparation of financial information on adoption. The most significant impacts of adopting the new standard related to the following: <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">i)</td> <td style="text-align: justify;">2015 imaging software license contract. We consummated a $4.625 million license contract in October 2015 that included a $4.5 million license fee plus a $125,000 software maintenance fee. We delivered the licensed software and the customer paid us in the fourth quarter of 2015. Under legacy GAAP, we were unable to establish vendor specific objective evidence (“VSOE”) for the maintenance element and, as a result we recognized the total fee ratably over the twelve-month period that ran from October 2015 to October 2016. Under the new standard, license revenue of $4.5 million from that contract is recognized in 2015 when control over the software was transferred to the customer and software maintenance revenue of $125,000 is recognized ratably over the twelve-month period that ran from October 2015 to October 2016. This change resulted in a decrease in revenue of $3.6 million for fiscal year 2016. This change had no impact to our reported results for the three months ended March 31, 2017.</td> </tr> </table> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">ii)</td> <td style="text-align: justify;">DSL royalty contracts. Under our legacy revenue recognition policy, we recognized DSL royalty revenue in the period in which we received royalty reports, which was typically in the quarter immediately following the quarter in which sales of royalty-bearing products occurred. Under the new standard, we recognize DSL royalty revenue in the quarter in which sales of royalty-bearing products occur. Therefore, we make estimates of royalties earned in the current period and record royalty revenue based on those estimates. This change resulted in a decrease in revenue of $17,000 and $39,000 for fiscal years 2017 and 2016, respectively. This change resulted in an increase in revenue of $9,000 for the three months ended March 31, 2017.</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">iii)</td> <td style="text-align: justify;">Minimum license/royalty payment contract. One of our revenue contracts required the customer to make a fixed payment for professional services as well as minimum license/royalty payments for software to be distributed to end-users. Under legacy GAAP, we recognized the professional services fee over the period that the services were performed and revenue for the minimum license/royalty payments when those minimum payments became due. Under the new standard we recognized the estimated amount of total consideration, including the professional services fee and our estimate of variable consideration related to the minimum license/royalty payments, in the contract that we expect to be entitled to and recognized revenue in the period(s) that the related licenses and services were transferred to the customer. This change resulted in a decrease in revenue of $800,000 for fiscal year 2017, $200,000 of which related to the three months ended March 31, 2017, an increase in revenue of $860,000 for fiscal year 2016, an increase in unbilled receivables of $1.4 million in fiscal year 2017, an increase in unbilled receivables of $2.2 million in fiscal year 2016 and an increase in stockholders’ equity of $2.2 million in fiscal year 2016.</td> </tr> </table> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">iv)</td> <td style="text-align: justify;">Sales commissions and other third-party acquisition costs. Under legacy GAAP, sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers were expensed as incurred. ASC 340 requires these costs to be recognized as an asset when incurred and expensed over a period consistent with the period of transfer to the customer of goods or services to which the asset relates. We adopted the practical expedient that if the amortization period of the asset that we otherwise would have recognized is one year or less, we expense the sales commissions and other third-party acquisition costs resulting directly from securing contracts with customers when incurred. The adoption of the new standard resulted in a decrease in expense of approximately $114,000 for fiscal year 2017, $27,000 of which related to the three months ended March 31, 2017, and $294,000 for fiscal year 2016 and a decrease in stockholders’ equity of $0.3 million in fiscal year 2016. For fiscal year 2017, the decrease in expense primarily relates to lower sales commissions due to lower revenue on our minimum license/royalty payment contract as noted above. For fiscal year 2016, the decrease primarily relates to lower sales commissions due to lower revenue from our 2015 imaging software license contract and lower revenue on our minimum license/royalty payment contract as noted above.</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Revenue recognition related to our other arrangements for software licenses, software maintenance, services, and hardware remained substantially unchanged. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">As a practical expedient, for contracts that were modified before the earliest reporting period of application of the standard, we have not retrospectively restated the contracts for those contract modifications. Instead we have reflected the aggregate effect of all modifications that occurred before the earliest reporting period of application when (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We have not restated contracts that began and were completed within the same annual reporting periods. For completed contracts that have variable consideration, we have used the transaction price at the date the contract was completed rather than estimating variable consideration amounts in comparative reporting periods. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">For fiscal years 2017 and 2016, adoption of the standard resulted in an aggregate decrease in revenue of $0.8 million and $2.8 million, respectively, a decrease in costs and expenses of $0.1 million and $0.3 million, respectively, a decrease in the provision for income taxes of $0.4 million and $1.0 million, respectively, and an increase in stockholders’ equity of $0.9 million and $1.2 million respectively, primarily due to the changes noted above. In addition, adoption of the standard resulted in an increase in accounts receivable of $1.4 million and $2.2 million as of December 31, 2017 and 2016, respectively, driven by unbilled receivables from recognition of revenue from the estimate of variable consideration related to the minimum license/royalty payments in one of our contracts; a decrease in deferred tax assets of $0.3 million and $0.8 million as of December 31, 2017 and 2016, respectively, driven primarily by a difference in timing of revenue recognition and expenses for book and tax purposes; and an increase in accrued expenses of $0.2 million and $0.3 million as of December 31, 2017 and 2016, respectively, driven by sales commissions related to recognition of revenue from the estimate of variable consideration related to the minimum license/royalty payments in one of our contracts. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">For the three months ended March 31, 2017, adoption of the standard resulted in an aggregate decrease in revenue of $191,000, a decrease in costs and expenses of $27,000, and a decrease in the provision for income taxes of $59,000 primarily due to the same reasons noted above. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">See Impacts of Topic 606 Adoption to Reported Results below for the impact of the adoption of the new standard on our consolidated financial statements. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Impacts of Topic 606 Adoption to Reported Results <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Adoption of the new revenue standard impacted our reported results as follows: <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; font-weight: bold;" nowrap="nowrap">(In thousands, except per share data)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; padding-bottom: 1pt;" colspan="10" nowrap="nowrap">Three Months Ended  March 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard  Adjustment</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Statements of Income:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="width: 815px;">Revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">4,347</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(191</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">4,156</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Costs and expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">4,052</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(27</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">4,025</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Provision for income taxes</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">64</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(59</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">405</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(104</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">301</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income per share - basic and diluted</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.02</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(0.01</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.01</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands, except per share data)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; padding-bottom: 1pt;" colspan="10" nowrap="nowrap">Year ended  December 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard  Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Statements of Income:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="width: 815px;">Revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">16,282</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(817</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">15,465</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Costs and expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">16,054</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(114</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">15,940</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Provision for income taxes</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">965</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(421</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">544</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,282</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(282</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,000</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income per share - basic and diluted</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.06</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(0.01</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.05</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands, except per share data)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; padding-bottom: 1pt;" colspan="10" nowrap="nowrap">Year ended  December 31, 2016</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Statements of Income:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="width: 815px;">Revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">21,566</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(2,804</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">18,762</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Costs and expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">16,467</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(294</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">16,173</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Provision for income taxes</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">2,085</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(986</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,099</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">4,103</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(1,524</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">2,579</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income per share - basic and diluted</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.18</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(0.07</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.11</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; font-weight: bold;" nowrap="nowrap">(In thousands)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">March 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard  Adjustment</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Balance Sheets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; width: 815px;">Accounts receivable, net</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">                  3,391</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">                 2,043</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">5,434</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Prepaid expenses and other current assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">299</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">20</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">319</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Deferred tax assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,802</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(693</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,109</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Accrued expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,080</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">311</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,391</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Stockholders’ equity</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">60,169</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,059</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">61,228</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">December 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Balance Sheets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; width: 815px;">Accounts receivable, net</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">2,401</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">1,417</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">3,818</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Prepaid expenses and other current assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">203</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">13</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">216</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Deferred tax assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,402</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(331</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,071</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Accrued expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,184</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">217</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,401</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Stockholders’ equity</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">59,652</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">882</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">60,534</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">December 31, 2016</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Balance Sheets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; width: 815px;">Accounts receivable, net</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">3,016</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">2,234</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">5,250</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Prepaid expenses and other current assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">268</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">22</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">290</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Deferred tax assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,078</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(752</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">326</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Accrued expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,075</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">341</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,416</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Stockholders’ equity</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">57,841</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,163</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">59,004</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Adoption of the new revenue standard had no impact on total cash provided from or used in operating, financing, or investing in our consolidated statements of cash flows.

<table style="widows: 2; text-transform: none; text-indent: 0px; width: 71%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.3in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center; padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended  March 31,</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center; padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2018</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2017</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"> </td> <td> </td> <td colspan="2" nowrap="nowrap"> </td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap"> </td> <td> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; width: 833px;">Net income (loss)</td> <td style="width: 12px;"> </td> <td style="text-align: left; width: 12px;">$</td> <td style="text-align: right; width: 112px;">(495</td> <td style="text-align: left; width: 11px;">)</td> <td style="width: 11px;"> </td> <td style="text-align: left; width: 11px;">$</td> <td style="text-align: right; width: 112px;">301</td> <td style="text-align: left; width: 11px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-decoration: underline;">Shares outstanding:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Weighted-average common shares outstanding</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">21,547</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">22,255</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Additional dilutive common stock equivalents</td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">26</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">66</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="padding-bottom: 2.5pt;">Diluted shares outstanding</td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;"> </td> <td style="border-bottom: black 2.5pt double; text-align: right;">21,573</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;"> </td> <td style="border-bottom: black 2.5pt double; text-align: right;">22,321</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income (loss) per share – basic</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">(0.02</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">0.01</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income (loss) per share - diluted</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">(0.02</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">0.01</td> <td style="text-align: left;"> </td> </tr> </table>

<table style="widows: 2; text-transform: none; text-indent: 0px; width: 65%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2018</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2017</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="width: 729px;">Cost of services</td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 10px;">$</td> <td style="text-align: right; width: 99px;">-</td> <td style="text-align: left; width: 10px;"> </td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 9px;">$</td> <td style="text-align: right; width: 98px;">2</td> <td style="text-align: left; width: 9px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Research and development</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">12</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Selling and marketing</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">General and administrative</td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">18</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">56</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 2.5pt;">Stock-based compensation expense</td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">24</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">71</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> </tr> </table>

<table style="widows: 2; text-transform: none; text-indent: 0px; width: 65%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.75in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended</td> <td style="text-align: center; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">March 31,</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2018</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2017</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; width: 729px;">United States</td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 10px;">$</td> <td style="text-align: right; width: 99px;">2,069</td> <td style="text-align: left; width: 10px;"> </td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 9px;">$</td> <td style="text-align: right; width: 98px;">3,252</td> <td style="text-align: left; width: 9px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="padding-bottom: 1pt;">Rest of World</td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">842</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">904</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">2,911</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">4,156</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> </tr> </table>

49986000

50148000

49986000

50148000

50000000

50100000

20834

134000

138000

2 2

663000

580000

24000

556000

54014

53378

12986

13622

67000

64000

0.34

2259000

2043000

1429000

1233000

-216000

-196000

<div> <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0px;"></td> <td style="width: 0.25in;">C)</td> <td style="text-align: justify;">Revenue Recognition. Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the full retrospective transition method. Adoption of the standard using the full retrospective method required us to restate certain previously reported results.</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services. In addition, ASC 606 requires disclosures of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">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 should apply the following five step model: <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.5in;"></td> <td style="width: 0.25in;">1.</td> <td>Identify the contract with the customer;</td> </tr> </table> <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.5in;"></td> <td style="width: 0.25in;">2.</td> <td>Identify the performance obligations in the contract;</td> </tr> </table> <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.5in;"></td> <td style="width: 0.25in;">3.</td> <td>Determine the transaction price;</td> </tr> </table> <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.5in;"></td> <td style="width: 0.25in;">4.</td> <td>Allocate the transaction price to the performance obligations in the contract; and</td> </tr> </table> <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.5in;"></td> <td style="width: 0.25in;">5.</td> <td>Recognize revenue when (or as) each performance obligation is satisfied.</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 45.35pt; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">1) Identify the contract with the customer <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s intent and ability to pay, which is based on a variety of factors including the customer’s historical payment experience, or in the case of a new customer, published credit and financial information pertaining to the customer. <div style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  </div> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We evaluate contract modifications for the impact on revenue recognition if they have been approved by both parties such that the enforceable rights and obligations under the contract have changed. Contract modifications are either accounted for using a cumulative effect adjustment or prospectively over the remaining term of the arrangement. The determination of which method is more appropriate depends on the nature of the modification, which we evaluate on a case-by-case basis. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We combine two or more contracts entered into at or near the same time with the same customer and account for them as a single contract if (i) the contracts are negotiated as a package with a common commercial objective, (ii) the amount of consideration to be paid in one contract depends on the price or performance of the other contract, or (iii) some or all of the goods or services in one contract would be combined with some or all of the goods and services in the other contract into a single performance obligation. If two or more contracts are combined, the consideration to be paid is aggregated and allocated to the individual performance obligations without regard to the consideration specified in the individual contracts. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">2) Identify the performance obligations in the contract <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, we apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation. To identify performance obligations, we consider all of the goods or services promised in a contract regardless of whether they are explicitly stated or are implied by customary business practices. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">3) Determine the transaction price <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">The transaction price is determined based on the consideration we expect to be entitled in exchange for transferring promised goods and services to the customer. Determining the transaction price requires significant judgment. To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting period. The amount of consideration is not adjusted for a significant financing component if the time between payment and the transfer of the related good or service is expected to be one year or less under the practical expedient in ASC 606-10-32-18. Our revenue arrangements are typically accounted for under such expedient, as payment is typically due within 30 to 60 days. As of March 31, 2018, none of our contracts contained a significant financing component. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">4) Allocate the transaction price to performance obligations in the contract <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <div style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”) basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The consideration to be received is allocated among the separate performance obligations based on relative SSPs. The SSP is the price at which we would sell a promised good or service separately to a customer. The best estimate of SSP is the observable price of a good or service when we sell that good or service separately. A contractually stated price or a list price for a good or service may be the SSP of that good or service. We use a range of amounts to estimate SSP when we sell each of the goods and services separately and need to determine whether there is a discount that needs to be allocated based on the relative SSP of the various goods and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we typically determine the SSP using an adjusted market assessment approach using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual goods and services due to the stratification of those goods and services by customers and circumstances. In these instances, we may use information such as the nature of the customer and distribution channel in determining the SSP. </div> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <div style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">5) Recognize revenue when or as we satisfy a performance obligation</div> <div style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman',;"> </div> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We satisfy performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized over time if 1) the customer simultaneously receives and consumes the benefits provided by our performance, 2) our performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date. If we do not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 27.35pt; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We categorize revenue as software licenses, software maintenance, services, or royalties. In addition to the general revenue recognition policies described above, specific revenue recognition policies apply to each category of revenue. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Software licenses <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Software licenses consist of revenue from the sale of software licenses for biometrics and imaging 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 licenses at a point in time upon delivery, provided all other revenue recognition criteria are met. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Software maintenance <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Software maintenance consists of revenue from the sale of software maintenance contracts for biometrics and imaging software. Software maintenance contracts entitle customers to receive software support and software updates, if and when they become available, during the term of the maintenance contract. Software support and software updates are considered distinct services. However, these distinct services are considered a single performance obligation consisting of a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. We recognize software maintenance revenue over time on a straight-line basis over the contract period. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Services <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Service revenue consists of fees from biometrics customers for software engineering services we provide to them. We recognize services revenue over time as the services are delivered using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted), provided all other revenue recognition criteria are met. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Royalties <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Royalties consist primarily of royalty payments we receive under DSL silicon contracts with two customers that incorporate our silicon intellectual property (“IP”) in their DSL chipsets. We sold the assets of our DSL IP business in 2009, but we continued to receive royalty payments from these customers. Royalties are reported in continuing operations in accordance with ASC 205, Reporting Discontinued Operations, because we have continuing ongoing cash flows from this business. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We recognize revenue from sales-based royalties 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 (or partially satisfied). <div style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  </div> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Refer to Note G – Business Segments for further information on the disaggregation of revenue, including revenue by geography and category. <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Arrangements with multiple performance obligations <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">In addition to selling software licenses, software maintenance and software services on a standalone basis, a significant portion of our contracts include multiple performance obligations. The various combinations of multiple performance obligations and our revenue recognition for each are described as follows: <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 27pt;"></td> <td style="width: 18pt;">•</td> <td style="text-align: justify;">Software licenses and software maintenance. When software licenses and software maintenance contracts are sold together, the software licenses and software maintenance are generally considered distinct performance obligations. The transaction price is allocated to the software licenses and the software maintenance based on relative SSP. Revenue allocated to the software licenses is recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. Revenue allocated to the software maintenance is recognized over time on a straight-line basis over the contract period.</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 45pt; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 27pt;"></td> <td style="width: 18pt;">•</td> <td style="text-align: justify;">Software licenses and services. When software licenses and significant customization engineering services are sold together, they are accounted for as a combined performance obligation, as the software licenses are generally highly dependent on, and interrelated with, the associated services and therefore are not distinct performance obligations. Revenue for the combined performance obligation is recognized over time as the services are delivered using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted). When software licenses and standard implementation or consulting-type services are sold together, they are generally considered distinct performance obligations as the software licenses are not dependent on or interrelated with the associated services. The transaction price in these arrangements is allocated to the software licenses and services based on relative SSP. Revenue allocated to the software licenses is recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. Revenue allocated to the services is recognized over time using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted). In arrangements with both software licenses and services, the software license portion of the arrangement is classified as software license revenue and the services portion is classified as services revenue in our consolidated statements of income and comprehensive income.</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 45pt; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 27pt;"></td> <td style="width: 18pt;">•</td> <td style="text-align: justify;">Software licenses, software maintenance and services. When we sell software licenses, software maintenance and software services together, we account for the individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations based on relative SSP. Revenue allocated to the software licenses is recognized at a point in time upon delivery. Revenue allocated to the services is recognized over time using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted). Revenue for the software maintenance is recognized over time on a straight-line basis over the contract period. However, if the software services are significant customization engineering services, they are accounted for with the software licenses as a combined performance obligation, as stated above. Revenue for the combined performance obligation is recognized over time using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted).</td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 45pt; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; margin-top: 0px; text-indent: 0px; width: 100%; font: 10pt 'times new roman', times, serif; orphans: 2; margin-bottom: 0px; letter-spacing: normal; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: top;"> <td style="width: 0.25in;"></td> <td style="width: 0.25in;">Returns</td> <td></td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We do not offer rights of return for our products and services in the normal course of business. <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Customer Acceptance <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Our contracts with customers generally do not include customer acceptance clauses. <div style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;"> </div> <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Contract Balances <p style="widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">When the timing of our delivery of goods or services is different from the timing of payments made by customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Customers that prepay are represented by the deferred revenue below until the performance obligation is satisfied. Contract assets represent arrangements in which the good or service has been delivered but payment is not yet due. Our contract assets consist of unbilled receivables. Our contract liabilities consisted of deferred (unearned) revenue, which is generally related to software maintenance contracts. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: -0.25in; margin: 0px 0px 0px 0.5in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">The following table presents changes in our contract assets and liabilities during the three months ended March 31, 2017 and 2018 (in thousands): <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Balance at  Beginning of  Period</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Revenue  Recognized In Advance of  Billings</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Billings</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Balance at End of  Period</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="font-weight: bold;">Three months ended March 31, 2017</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Contract assets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-left: 0.125in; width: 630px;">Unbilled receivables</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">2,259</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 133px;">43</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(259</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">2,043</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="font-weight: bold;">Three months ended March 31, 2018</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Contract assets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-left: 0.125in;">Unbilled receivables</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">1,429</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">33</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">(229</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">1,233</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Balance at  Beginning of  Period</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Billings</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Revenue Recognized</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Balance at End of  Period</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="font-weight: bold;">Three months ended March 31, 2017</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Contract liabilities:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-left: 0.125in; width: 630px;">Deferred revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">2,933</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 133px;">750</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(1,262</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">2,421</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="font-weight: bold;">Three months ended March 31, 2018</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Contract liabilities:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-left: 0.125in;">Deferred revenue</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">2,932</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">758</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">(1,294</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;">$</td> <td style="text-align: right;">2,396</td> <td style="text-align: left;"> </td> </tr> </table> <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Remaining Performance Obligations <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  Remaining performance obligations represent the transaction price from contracts for which work has not been performed or goods and services have not been delivered. We expect to recognize revenue on approximately 95% of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. As of March 31, 2018, the aggregate amount of the transaction price allocated to remaining performance obligations for software maintenance contracts with a duration greater than one year was $111,000. This does not include revenue related to performance obligations that are part of a contract whose original expected duration is one year or less. <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">Contract Costs <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">We recognize an other 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 have determined that certain sales commissions meet the requirements to be capitalized, and we amortize these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets. <p style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <div style="text-align: justify; widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">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. These costs include sales commissions on software maintenance contracts with a contract period of one year or less as sales commissions paid on contract renewals are commensurate with those paid on the initial contract.</div> </div>

<table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; font-weight: bold;" nowrap="nowrap">(In thousands, except per share data)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; padding-bottom: 1pt;" colspan="10" nowrap="nowrap">Three Months Ended  March 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard  Adjustment</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Statements of Income:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="width: 815px;">Revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">4,347</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(191</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">4,156</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Costs and expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">4,052</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(27</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">4,025</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Provision for income taxes</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">64</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(59</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">405</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(104</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">301</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income per share - basic and diluted</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.02</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(0.01</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.01</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands, except per share data)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; padding-bottom: 1pt;" colspan="10" nowrap="nowrap">Year ended  December 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard  Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Statements of Income:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="width: 815px;">Revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">16,282</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(817</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">15,465</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Costs and expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">16,054</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(114</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">15,940</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Provision for income taxes</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">965</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(421</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">544</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,282</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(282</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,000</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income per share - basic and diluted</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.06</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(0.01</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.05</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands, except per share data)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; padding-bottom: 1pt;" colspan="10" nowrap="nowrap">Year ended  December 31, 2016</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Statements of Income:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="width: 815px;">Revenue</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">21,566</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">(2,804</td> <td style="text-align: left; width: 13px;">)</td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">18,762</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Costs and expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">16,467</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(294</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">16,173</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Provision for income taxes</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">2,085</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(986</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,099</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Net income</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">4,103</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(1,524</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">2,579</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Net income per share - basic and diluted</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.18</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(0.07</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">0.11</td> <td style="text-align: left;"> </td> </tr> </table> <div style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  </div> <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; font-weight: bold;" nowrap="nowrap">(In thousands)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">March 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard  Adjustment</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Balance Sheets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; width: 815px;">Accounts receivable, net</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">                  3,391</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">                 2,043</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">5,434</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Prepaid expenses and other current assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">299</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">20</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">319</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Deferred tax assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,802</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(693</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,109</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Accrued expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,080</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">311</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,391</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Stockholders’ equity</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">60,169</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,059</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">61,228</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">December 31, 2017</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Balance Sheets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; width: 815px;">Accounts receivable, net</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">2,401</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">1,417</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">3,818</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Prepaid expenses and other current assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">203</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">13</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">216</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Deferred tax assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,402</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(331</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">5,071</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Accrued expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,184</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">217</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,401</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Stockholders’ equity</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">59,652</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">882</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">60,534</td> <td style="text-align: left;"> </td> </tr> </table> <p style="widows: 2; text-transform: none; text-indent: 0px; margin: 0px 0px 0px 0.25in; font: 10pt 'times new roman', times, serif; white-space: normal; orphans: 2; letter-spacing: normal; color: #000000; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;">  <table style="widows: 2; text-transform: none; text-indent: 0px; width: 85%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.25in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; text-align: left; font-weight: bold;" nowrap="nowrap">(In thousands)</td> <td style="padding-bottom: 1pt;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center;" colspan="10" nowrap="nowrap">December 31, 2016</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Reported</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">New Revenue  Standard Adjustment</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">As Adjusted</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Consolidated Balance Sheets:</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;"> </td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; width: 815px;">Accounts receivable, net</td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 14px;">$</td> <td style="text-align: right; width: 134px;">3,016</td> <td style="text-align: left; width: 14px;"> </td> <td style="width: 14px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">2,234</td> <td style="text-align: left; width: 13px;"> </td> <td style="width: 13px;"> </td> <td style="text-align: left; width: 13px;">$</td> <td style="text-align: right; width: 133px;">5,250</td> <td style="text-align: left; width: 13px;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Prepaid expenses and other current assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">268</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">22</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">290</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Deferred tax assets</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,078</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">(752</td> <td style="text-align: left;">)</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">326</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left;">Accrued expenses</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,075</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">341</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,416</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Stockholders’ equity</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">57,841</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">1,163</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">59,004</td> <td style="text-align: left;"> </td> </tr> </table>

-0.07

0.11

0.18

-0.01

0.01

0.02

-0.01

0.05

0.06

2933000

2421000

2932000

2396000

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1262000

1294000

2200000

1400000

<table style="widows: 2; text-transform: none; text-indent: 0px; width: 65%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.75in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended</td> <td style="text-align: center; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">March 31,</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2018</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2017</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; width: 729px;">Goods or services transferred at a point in time</td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 10px;"> </td> <td style="text-align: right; width: 99px;">1,474</td> <td style="text-align: left; width: 10px;"> </td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 9px;"> </td> <td style="text-align: right; width: 98px;">2,529</td> <td style="text-align: left; width: 9px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Goods or services transferred over time</td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">1,437</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">1,627</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">2,911</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">4,156</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> </tr> </table>

<table style="widows: 2; text-transform: none; text-indent: 0px; width: 65%; border-collapse: collapse; font: 10pt 'times new roman', times, serif; orphans: 2; letter-spacing: normal; margin-left: 0.75in; word-spacing: 0px; -webkit-text-stroke-width: 0px; text-decoration-style: initial; text-decoration-color: initial; font-stretch: normal;" border="0" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended</td> <td style="text-align: center; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">March 31,</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="text-align: center;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2018</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">2017</td> <td style="text-align: center; padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td> </tr> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> <td> </td> <td style="text-align: center;" colspan="2" nowrap="nowrap"> </td> <td> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="width: 729px;">Biometrics</td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 10px;">$</td> <td style="text-align: right; width: 99px;">2,485</td> <td style="text-align: left; width: 10px;"> </td> <td style="width: 10px;"> </td> <td style="text-align: left; width: 9px;">$</td> <td style="text-align: right; width: 98px;">3,803</td> <td style="text-align: left; width: 9px;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>Imaging</td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">426</td> <td style="text-align: left;"> </td> <td> </td> <td style="text-align: left;"> </td> <td style="text-align: right;">310</td> <td style="text-align: left;"> </td> </tr> <tr style="background-color: #cceeff; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">DSL royalties</td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">-</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> <td style="padding-bottom: 1pt;"> </td> <td style="border-bottom: black 1pt solid; text-align: left;"> </td> <td style="border-bottom: black 1pt solid; text-align: right;">43</td> <td style="text-align: left; padding-bottom: 1pt;"> </td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">2,911</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> <td style="padding-bottom: 2.5pt;"> </td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">4,156</td> <td style="text-align: left; padding-bottom: 2.5pt;"> </td> </tr> </table>

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750000

758000

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revenue Costs and Expenses [Abstract] Costs and expenses: Cost of Services, Licenses and Services Cost of software licenses Cost Of Services Cost of services Research and Development Expense Research and development Selling and Marketing Expense Selling and marketing General and Administrative Expense General and administrative Total Costs and Expenses Expenses Costs and expenses Total costs and expenses Income From Intangible Assets Patent related income Income from intangible assets Represents the amount related to gain on sale of intangible assets and income related to intangible assets monetization activities, including enforcement, litigation and licensing. Operating Income (Loss) Operating income (loss) Investment Income, Interest Interest income Interest income Loss Before Income Taxes Loss before income taxes Income (loss) from continuing operations before taxes Income (loss) before provision for (benefit from) income taxes Income from continuing operations before income taxes Income from continuing operations before income taxes Income Tax Expense (Benefit) Income tax expense Provision for (benefit from) income taxes Income taxes Provision for income taxes Provision for income taxes Provision for (benefit from) income taxes Net Income (Loss) Attributable to Parent Net income Net income (loss) Net income (loss) Net income Net income Earnings Per Share, Basic Net income (loss) per share - basic (in dollars per share) Net income per share - basic Earnings Per Share, Diluted Net income (loss) per share - diluted (in dollars per share) Net income (loss) per share - diluted (in dollars per share) Net income per share - diluted Weighted Average Number of Shares Outstanding, Basic Weighted-average common shares outstanding (in shares) Weighted-average shares - basic (in shares) Weighted-average common shares outstanding (in shares) Weighted Average Number of Shares Outstanding, Basic, Total Weighted Average Number Of Shares Outstanding, Diluted Weighted-average shares - diluted (in shares) Diluted shares outstanding (in shares) Diluted shares outstanding (in shares) Comprehensive Income (Loss), Net Of Tax, Attributable To Parent [Abstract] Comprehensive income: Other Comprehensive Income (Loss), Net Of Tax [Abstract] Other comprehensive income (loss) (net of tax): Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) On Securities Arising During Period, Net Of Tax Increase/Decrease Total accumulated other comprehensive loss, net of taxes Unrealized gains on available for sale securities Increase/Decrease Total accumulated other comprehensive loss, net of taxes Comprehensive Income (Loss), Net Of Tax, Attributable To Parent Comprehensive income Comprehensive income (loss) Statement Of Cash Flows [Abstract] Statement of Cash Flows [Abstract] Net Cash Provided by (Used in) Operating Activities, Continuing Operations [Abstract] Cash flows from operating activities: Adjustments To Reconcile Net Income (Loss) To Cash Provided By (Used In) Operating Activities [Abstract] Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, Depletion and Amortization Depreciation and amortization Depreciation and amortization Share-based Compensation, Total Stock-based compensation charge Stock-based compensation expense Stock-based compensation Deferred Tax Benefit Expense On Other Comprehensive Income Loss Deferred tax provision (benefit) on other comprehensive income Deferred tax provision on other comprehensive income Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Deferred tax benefit on other comprehensive income Accretion (Amortization) Of Discounts and Premiums, Investments Amortization of discount on investments Amortization of discount on investments Increase (Decrease) In Operating Capital [Abstract] Changes in assets and liabilities: Increase (Decrease) In Accounts Receivable Accounts receivable Accounts receivable Increase (Decrease) in Unbilled Receivables Unbilled receivables Unbilled receivables Increase (Decrease) In Prepaid Expense and Other Assets Prepaid expenses and other current assets Prepaid expenses and other current assets Prepaid expenses and other current assets Increase (Decrease) in Deferred Income Taxes Deferred tax assets Deferred tax assets Increase (Decrease) In Accounts Payable Accounts payable Accounts payable Increase (Decrease) In Accrued Liabilities Accrued expenses Increase (Decrease) in Accrued Taxes Payable Accrued income taxes Increase (Decrease) In Deferred Revenue Deferred revenue Net Cash Provided by (Used in) Operating Activities, Continuing Operations, Total Net cash provided by (used in) operating activities Net cash provided by (used in) operating activities Net Cash Provided by (Used in) Investing Activities, Continuing Operations [Abstract] Cash flows from investing activities: Payments To Acquire Property, Plant, and Equipment Purchases of property and equipment Purchases of property and equipment Purchases of property and equipment Net Cash Provided by (Used in) Investing Activities, Continuing Operations, Total Net cash provided by (used in) investing activities Net cash used in investing activities Net Cash Provided by (Used in) Financing Activities, Continuing Operations [Abstract] Cash flows from financing activities: Proceeds from Issuance of Common Stock Proceeds from issuance of common stock Payments Related to Tax Withholding for Share-based Compensation Shares surrendered by employees to pay taxes related to unrestricted stock Payments made for taxes of employees who surrendered shares related to unrestricted stock Payments for Repurchase of Common Stock Repurchase of common stock Repurchase of common stock Net Cash Provided by (Used in) Financing Activities, Continuing Operations, Total Net cash provided by (used in) financing activities Net cash used in financing activities Cash and Cash Equivalents, Period Increase (Decrease) Increase (decrease) in cash and cash equivalents Decrease in cash and cash equivalents Supplemental Cash Flow Information [Abstract] Supplemental disclosure: Income Taxes Paid Cash paid for income taxes Organization, Consolidation and Presentation of Financial Statements [Abstract] Nature of Operations [Text Block] Nature of Business Basis of Accounting [Abstract] Basis Of Accounting [Abstract] Basis Of Accounting [Text Block] Basis of Presentation Revenue Recognition [Abstract] Revenue Recognition [Text Block] Revenue Recognition The entire disclosure for revenue recognition. Fair Value Disclosures [Abstract] Fair Value Disclosures [Abstract] Fair Value Disclosures [Text Block] Fair Value Measurements Earnings Per Share [Abstract] Earnings Per Share [Abstract] Earnings Per Share [Text Block] Computation of Earnings per Share Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract] Disclosure of Compensation Related Costs, Share-based Payments [Abstract] Disclosure Of Compensation Related Costs, Share-Based Payments [Text Block] Stock-based compensation Segment Reporting [Abstract] Segment Reporting [Abstract] Segment Reporting Disclosure [Text Block] Business Segments Accounting Changes and Error Corrections [Abstract] Accounting Changes and Error Corrections [Abstract] Accounting Changes and Error Corrections [Text Block] Recently Adopted Accounting Pronouncements New Accounting Pronouncements and Changes in Accounting Principles [Abstract] New Accounting Pronouncements and Changes in Accounting Principles [Text Block] Recent Accounting Pronouncements Not Yet Adopted Income Tax Disclosure [Abstract] Income Tax Disclosure [Abstract] Income Tax Disclosure [Text Block] Income Taxes Income From Patent Arrangement [Abstract] Income From Patent Arrangement [Text Block] Income from patent arrangement Represents the disclosure of income from patent arrangement Accounting Policies [Abstract] Basis of Accounting, Policy [Policy Text Block] Basis of Presentation New Accounting Pronouncements, Policy [Policy Text Block] Recent Accounting Pronouncements Contract with Customer, Asset and Liability [Table Text Block] Schedule of changes in contract assets and liabilities Fair Value, Assets Measured On Recurring Basis [Table Text Block] Schedule of assets measured at fair value on a recurring basis Schedule Of Earnings Per Share, Basic and Diluted [Table Text Block] Schedule of net income (loss) per share Schedule Of Employee Service Share-Based Compensation, Allocation Of Recognized Period Costs [Table Text Block] Schedule of stock-based employee compensation expense included in unaudited consolidated statements of comprehensive income Schedule Of Revenue From External Customers Attributed To Foreign Countries By Geographic Area [Table Text Block] Schedule of revenues generated from geographic regions Revenue from External Customers by Products and Services [Table Text Block] Schedule of revenue by product group Schedule Of Revenue By Transfer Of Goods Or Services [Table Text Block] Schedule of revenue by timing of transfer of goods or services Tabular disclosure of revenue by transfer of goods or services. Schedule of Prospective Adoption of New Accounting Pronouncements [Table Text Block] Schedule of adoption to reported results Movement In Unbilled Receivables Current [Roll Forward] Contract assets: A roll forward is a reconciliation of a concept from the beginning of a period to the end of a period. Unbilled Receivables Current, Revenue Recognized In Advance Of Billings Unbilled receivables, Revenue Recognized In Advance of Billings Represents the amount of revenue recognized in advance of billings under current unbilled receivables. Unbilled Receivables Current, Billings Billings Represents the amount of billings under current unbilled receivables. Unbilled receivables, Billings Movement in Deferred Revenue [Roll Forward] Contract liabilities: Deferred Revenue Deferred revenue Deferred revenue, Balance at Beginning of Period Deferred revenue, Balance at End of Period Deferred Revenue, Additions Deferred revenue, Billings Deferred Revenue, Revenue Recognized Deferred revenue recognized Deferred revenue, Revenue Recognized Percentage Of Remaining Performance Obligations Expected To Be Recognized As Revenue Percentage of remaining performance obligations expected to be recognized as revenue Represents the percentage of remaining performance obligations expected to be recognized as revenue. Minimum Period Of Remaining Performance Obligations Minimum period of remaining performance obligations Represents the minimum period of remaining performance obligations. Fair Value Measurements, Recurring and Nonrecurring [Table] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Table] Measurement Frequency [Axis] Measurement Frequency [Axis] Fair Value, Measurement Frequency [Domain] Fair Value, Measurement Frequency [Domain] Fair Value, Measurements, Recurring [Member] Fair value on recurring basis Fair Value, Hierarchy [Axis] Fair Value, Hierarchy [Axis] Fair Value, Measurements, Fair Value Hierarchy [Domain] Fair Value, Measurements, Fair Value Hierarchy [Domain] Fair Value, Inputs, Level 1 [Member] Fair Value Measurement, Quoted Prices in Active Markets for Identical Assets (Level 1) Fair Value, Inputs, Level 2 [Member] Fair Value Measurement, Significant Other Observable Inputs (Level 2) Fair Value, Inputs, Level 3 [Member] Fair Value Measurement, Significant Unobservable Inputs (Level 3) Major Types of Debt and Equity Securities [Axis] Investment Type [Axis] Major Types of Debt and Equity Securities [Domain] Investment Type Categorization [Domain] Money Market Funds [Member] Money market funds (included in cash and cash equivalents) Fair Value, Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Cash and Cash Equivalents, Fair Value Disclosure Money market funds (included in cash and cash equivalents) Assets, Fair Value Disclosure Total Total assets measured at fair value Total Cash Equivalents, at Carrying Value Cash equivalents, primarily include money market funds Earnings Per Share, Basic and Diluted [Abstract] Shares outstanding: Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements Additional dilutive common stock equivalents (in shares) Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table] Antidilutive Securities [Axis] Antidilutive Securities, Name [Domain] Equity Option [Member] Options Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] Antidilutive Securities Excluded From Computation Of Earnings Per Share, Amount Anti-dilutive common stock share purchase (in shares) Schedule Of Employee Service Share-Based Compensation, Allocation Of Recognized Period Costs [Table] Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table] Income Statement Location [Axis] Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs, by Report Line [Axis] Income Statement Location [Domain] Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Report Line [Domain] Cost Of Services [Member] Cost of services Primary financial statement caption in which reported facts about cost of services have been included. Research and Development Expense [Member] Research and development Selling and Marketing Expense [Member] Selling and marketing General and Administrative Expense [Member] General and administrative Employee Service Share-Based Compensation, Allocation Of Recognized Period Costs [Line Items] Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] Schedule Of Share-Based Compensation Arrangements By Share-Based Payment Award [Table] Schedule of Share-based Compensation Arrangements by Share-based Payment Award [Table] Plan Name [Axis] Plan Name [Domain] Nonqualified Stock Plan 2001 [Member] 2001 Nonqualified Stock Plan Represents 2001 Nonqualified Stock Plan. Award Type [Axis] Award Type [Axis] Award Type [Domain] Award Type [Domain] Unrestricted Stock Member Unrestricted Stock Shares that an entity has not yet issued because the agreed-upon consideration, such as employee services, has not yet been received. Award Date [Axis] Award Date [Domain] Grant Date March 2018 [Member] 2018 Grant Represents Grant Date March 2018. Grant Date February 27, 2017 [Member] 2017 Grant Represents grant date February 27, 2017. Title of Individual [Axis] Relationship to Entity [Domain] Directors Officer And Employees [Member] Directors, officers and employees Executive of the entity that is appointed to the position by the board of directors, officer and employees. EX-101.PRE 10 awre-20180331_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE XML 11 R1.htm IDEA: XBRL DOCUMENT

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2018	Apr. 23, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	AWARE INC /MA/
Entity Central Index Key	0001015739
Trading Symbol	awre
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,546,818
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 50,648	$ 51,608
Accounts receivable, net	2,265	2,389
Unbilled receivables	1,233	1,429
Prepaid expenses and other current assets	324	216
Total current assets	54,470	55,642
Property and equipment, net	4,295	4,304
Deferred tax assets	5,163	5,071
Other assets		18
Total assets	63,928	65,035
Current liabilities:
Accounts payable	234	166
Accrued expenses	1,281	1,401
Accrued income taxes	16	2
Deferred revenue	2,285	2,805
Total current liabilities	3,816	4,374
Long-term deferred revenue	111	127
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized, none outstanding
Common stock, $.01 par value; 70,000,000 shares authorized; issued and outstanding 21,546,818 as of March, 31, 2018 and 21,493,440 as of December 31, 2017	215	215
Additional paid-in capital	96,209	96,246
Accumulated deficit	(36,423)	(35,927)
Total stockholders' equity	60,001	60,534
Total liabilities and stockholders' equity	$ 63,928	$ 65,035

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CONSOLIDATED BALANCE SHEETS (unaudited) (Parentheticals) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	70,000,000	70,000,000
Common stock, shares issued	21,546,818	21,493,440
Common stock, shares outstanding	21,546,818	21,493,440

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue:
Software licenses	$ 1,473	$ 2,486
Software maintenance	1,294	1,253
Services	144	374
Royalties		43
Total revenue	2,911	4,156
Costs and expenses:
Cost of software licenses		247
Cost of services	50	216
Research and development	1,875	1,857
Selling and marketing	924	915
General and administrative	785	790
Total costs and expenses	3,634	4,025
Patent related income		91
Operating income (loss)	(723)	222
Interest income	162	84
Income (loss) before provision for (benefit from) income taxes	(561)	306
Provision for (benefit from) income taxes	(66)	5
Net income (loss)	$ (495)	$ 301
Net income (loss) per share - basic (in dollars per share)	$ (0.02)	$ 0.01
Net income (loss) per share - diluted (in dollars per share)	$ (0.02)	$ 0.01
Weighted-average shares - basic (in shares)	21,547	22,255
Weighted-average shares - diluted (in shares)	21,573	22,321
Comprehensive income:
Net income (loss)	$ (495)	$ 301
Other comprehensive income (loss) (net of tax):
Unrealized gains on available for sale securities		28
Comprehensive income (loss)	$ (495)	$ 329

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income (loss)	$ (495)	$ 301
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	122	133
Stock-based compensation	24	71
Deferred tax benefit on other comprehensive income		(14)
Amortization of discount on investments		(3)
Changes in assets and liabilities:
Accounts receivable	124	(400)
Unbilled receivables	196	216
Prepaid expenses and other current assets	(108)	(29)
Deferred tax assets	(92)	(25)
Accounts payable	68	270
Accrued expenses	(120)	(25)
Accrued income taxes	14	36
Deferred revenue	(536)	(512)
Net cash provided by (used in) operating activities	(803)	19
Cash flows from investing activities:
Purchases of property and equipment	(96)	(5)
Net cash used in investing activities	(96)	(5)
Cash flows from financing activities:
Proceeds from issuance of common stock		13
Payments made for taxes of employees who surrendered shares related to unrestricted stock	(61)	(119)
Repurchase of common stock		(2,827)
Net cash used in financing activities	(61)	(2,933)
Decrease in cash and cash equivalents	(960)	(2,919)
Cash and cash equivalents, beginning of period	51,608	51,913
Cash and cash equivalents, end of period	50,648	48,994
Supplemental disclosure:
Cash paid for income taxes	$ 8	$ 12

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Nature of Business

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

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Basis of Presentation

3 Months Ended

Mar. 31, 2018

Basis of Accounting [Abstract]

Basis of Presentation

The results of operations for the interim period ended March 31, 2018 are not necessarily indicative of the results to be expected for the year.

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Revenue Recognition

3 Months Ended

Mar. 31, 2018

Revenue Recognition [Abstract]

Revenue Recognition

Identify the contract with the customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract; and

Recognize revenue when (or as) each performance obligation is satisfied.

1) Identify the contract with the customer

2) Identify the performance obligations in the contract

3) Determine the transaction price

4) Allocate the transaction price to performance obligations in the contract

5) Recognize revenue when or as we satisfy a performance obligation

Software licenses

Software maintenance

Services

Royalties

Refer to Note G – Business Segments for further information on the disaggregation of revenue, including revenue by geography and category.

Arrangements with multiple performance obligations

•

Returns

We do not offer rights of return for our products and services in the normal course of business.

Customer Acceptance

Our contracts with customers generally do not include customer acceptance clauses.

Contract Balances

The following table presents changes in our contract assets and liabilities during the three months ended March 31, 2017 and 2018 (in thousands):

	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Three months ended March 31, 2017
Contract assets:
Unbilled receivables	$	2,259	$	43	$	(259	)	$	2,043

Three months ended March 31, 2018
Contract assets:
Unbilled receivables	$	1,429	$	33	$	(229	)	$	1,233

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Three months ended March 31, 2017
Contract liabilities:
Deferred revenue	$	2,933	$	750	$	(1,262	)	$	2,421

Three months ended March 31, 2018
Contract liabilities:
Deferred revenue	$	2,932	$	758	$	(1,294	)	$	2,396

Remaining Performance Obligations

Contract Costs

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Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

As of March 31, 2018, our assets that are measured at fair value on a recurring basis and whose carrying values approximate their respective fair values include the following (in thousands):

	Fair Value Measurement at March 31, 2018 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	50,148
Total	$	50,148	$	-	$	-

As of December 31, 2017, our assets that are measured at fair value on a recurring basis and whose carrying values approximate their respective fair values include the following (in thousands):

	Fair Value Measurement at December 31, 2017 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	49,986
Total	$	49,986	$	-	$	-

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

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Computation of Earnings per Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Computation of Earnings per Share

Net income (loss) per share is calculated as follows (in thousands, except per share data):

	Three Months Ended March 31,
	2018			2017

Net income (loss)	$	(495	)	$	301

Shares outstanding:
Weighted-average common shares outstanding		21,547			22,255
Additional dilutive common stock equivalents		26			66
Diluted shares outstanding		21,573			22,321

Net income (loss) per share – basic	$	(0.02	)	$	0.01
Net income (loss) per share - diluted	$	(0.02	)	$	0.01

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock-based compensation

Stock-Based Compensation. The following table presents stock-based employee compensation expenses included in our unaudited consolidated statements of comprehensive income (in thousands):

	Three Months Ended March 31,
	2018		2017

Cost of services	$	-	$	2
Research and development		5		12
Selling and marketing		1		1
General and administrative		18		56
Stock-based compensation expense	$	24	$	71

We granted shares of unrestricted stock in 2018 and 2017 that affected financial results for the three month periods ended March 31, 2018 and 2017. These grants are described below.

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Business Segments

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Business Segments

Business Segments. We organize ourselves into a single segment that reports to the chief operating decision maker.

	Three Months Ended
	March 31,
	2018		2017

United States	$	2,069	$	3,252
Rest of World		842		904
	$	2,911	$	4,156

Revenue by product group for the three months ended March 31, 2018 and 2017 was (in thousands):

	Three Months Ended
	March 31,
	2018		2017

Biometrics	$	2,485	$	3,803
Imaging		426		310
DSL royalties		-		43
	$	2,911	$	4,156

Revenue by timing of transfer of goods or services for the three months ended March 31, 2018 and 2017 was (in thousands):

	Three Months Ended
	March 31,
	2018		2017

Goods or services transferred at a point in time		1,474		2,529
Goods or services transferred over time		1,437		1,627
	$	2,911	$	4,156

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Recently Adopted Accounting Pronouncements

3 Months Ended

Mar. 31, 2018

Accounting Changes and Error Corrections [Abstract]

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements.

ii)

iii)

iv)

Revenue recognition related to our other arrangements for software licenses, software maintenance, services, and hardware remained substantially unchanged.

See Impacts of Topic 606 Adoption to Reported Results below for the impact of the adoption of the new standard on our consolidated financial statements.

Impacts of Topic 606 Adoption to Reported Results

Adoption of the new revenue standard impacted our reported results as follows:

(In thousands, except per share data)	Three Months Ended March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	4,347	$	(191	)	$	4,156
Costs and expenses		4,052		(27	)		4,025
Provision for income taxes		64		(59	)		5
Net income		405		(104	)		301
Net income per share - basic and diluted		0.02		(0.01	)		0.01

(In thousands, except per share data)	Year ended December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	16,282	$	(817	)	$	15,465
Costs and expenses		16,054		(114	)		15,940
Provision for income taxes		965		(421	)		544
Net income		1,282		(282	)		1,000
Net income per share - basic and diluted		0.06		(0.01	)		0.05

(In thousands, except per share data)	Year ended December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	21,566	$	(2,804	)	$	18,762
Costs and expenses		16,467		(294	)		16,173
Provision for income taxes		2,085		(986	)		1,099
Net income		4,103		(1,524	)		2,579
Net income per share - basic and diluted		0.18		(0.07	)		0.11

(In thousands)	March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,391	$	2,043		$	5,434
Prepaid expenses and other current assets		299		20			319
Deferred tax assets		5,802		(693	)		5,109
Accrued expenses		1,080		311			1,391
Stockholders’ equity		60,169		1,059			61,228

(In thousands)	December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	2,401	$	1,417		$	3,818
Prepaid expenses and other current assets		203		13			216
Deferred tax assets		5,402		(331	)		5,071
Accrued expenses		1,184		217			1,401
Stockholders’ equity		59,652		882			60,534

(In thousands)	December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,016	$	2,234		$	5,250
Prepaid expenses and other current assets		268		22			290
Deferred tax assets		1,078		(752	)		326
Accrued expenses		1,075		341			1,416
Stockholders’ equity		57,841		1,163			59,004

Adoption of the new revenue standard had no impact on total cash provided from or used in operating, financing, or investing in our consolidated statements of cash flows.

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Recent Accounting Pronouncements Not Yet Adopted

3 Months Ended

Mar. 31, 2018

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Not Yet Adopted.

XML 25 R15.htm IDEA: XBRL DOCUMENT

Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

XML 26 R16.htm IDEA: XBRL DOCUMENT

Income from patent arrangement

3 Months Ended

Mar. 31, 2018

Income From Patent Arrangement [Abstract]

Income from patent arrangement

XML 27 R17.htm IDEA: XBRL DOCUMENT

Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Basis of Presentation

The results of operations for the interim period ended March 31, 2018 are not necessarily indicative of the results to be expected for the year.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements.

ii)

iii)

iv)

Revenue recognition related to our other arrangements for software licenses, software maintenance, services, and hardware remained substantially unchanged.

See Impacts of Topic 606 Adoption to Reported Results below for the impact of the adoption of the new standard on our consolidated financial statements.

Impacts of Topic 606 Adoption to Reported Results

Adoption of the new revenue standard impacted our reported results as follows:

(In thousands, except per share data)	Three Months Ended March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	4,347	$	(191	)	$	4,156
Costs and expenses		4,052		(27	)		4,025
Provision for income taxes		64		(59	)		5
Net income		405		(104	)		301
Net income per share - basic and diluted		0.02		(0.01	)		0.01

(In thousands, except per share data)	Year ended December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	16,282	$	(817	)	$	15,465
Costs and expenses		16,054		(114	)		15,940
Provision for income taxes		965		(421	)		544
Net income		1,282		(282	)		1,000
Net income per share - basic and diluted		0.06		(0.01	)		0.05

(In thousands, except per share data)	Year ended December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	21,566	$	(2,804	)	$	18,762
Costs and expenses		16,467		(294	)		16,173
Provision for income taxes		2,085		(986	)		1,099
Net income		4,103		(1,524	)		2,579
Net income per share - basic and diluted		0.18		(0.07	)		0.11

(In thousands)	March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,391	$	2,043		$	5,434
Prepaid expenses and other current assets		299		20			319
Deferred tax assets		5,802		(693	)		5,109
Accrued expenses		1,080		311			1,391
Stockholders’ equity		60,169		1,059			61,228

(In thousands)	December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	2,401	$	1,417		$	3,818
Prepaid expenses and other current assets		203		13			216
Deferred tax assets		5,402		(331	)		5,071
Accrued expenses		1,184		217			1,401
Stockholders’ equity		59,652		882			60,534

(In thousands)	December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,016	$	2,234		$	5,250
Prepaid expenses and other current assets		268		22			290
Deferred tax assets		1,078		(752	)		326
Accrued expenses		1,075		341			1,416
Stockholders’ equity		57,841		1,163			59,004

Adoption of the new revenue standard had no impact on total cash provided from or used in operating, financing, or investing in our consolidated statements of cash flows.

XML 28 R18.htm IDEA: XBRL DOCUMENT

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2018

Revenue Recognition [Abstract]

Schedule of changes in contract assets and liabilities

	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Three months ended March 31, 2017
Contract assets:
Unbilled receivables	$	2,259	$	43	$	(259	)	$	2,043

Three months ended March 31, 2018
Contract assets:
Unbilled receivables	$	1,429	$	33	$	(229	)	$	1,233

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Three months ended March 31, 2017
Contract liabilities:
Deferred revenue	$	2,933	$	750	$	(1,262	)	$	2,421

Three months ended March 31, 2018
Contract liabilities:
Deferred revenue	$	2,932	$	758	$	(1,294	)	$	2,396

XML 29 R19.htm IDEA: XBRL DOCUMENT

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of assets measured at fair value on a recurring basis

	Fair Value Measurement at March 31, 2018 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	50,148
Total	$	50,148	$	-	$	-

	Fair Value Measurement at December 31, 2017 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Money market funds (included in cash and cash equivalents)	$	49,986
Total	$	49,986	$	-	$	-

XML 30 R20.htm IDEA: XBRL DOCUMENT

Computation of Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Schedule of net income (loss) per share

	Three Months Ended March 31,
	2018			2017

Net income (loss)	$	(495	)	$	301

Shares outstanding:
Weighted-average common shares outstanding		21,547			22,255
Additional dilutive common stock equivalents		26			66
Diluted shares outstanding		21,573			22,321

Net income (loss) per share – basic	$	(0.02	)	$	0.01
Net income (loss) per share - diluted	$	(0.02	)	$	0.01

XML 31 R21.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of stock-based employee compensation expense included in unaudited consolidated statements of comprehensive income

	Three Months Ended March 31,
	2018		2017

Cost of services	$	-	$	2
Research and development		5		12
Selling and marketing		1		1
General and administrative		18		56
Stock-based compensation expense	$	24	$	71

XML 32 R22.htm IDEA: XBRL DOCUMENT

Business Segments (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of revenues generated from geographic regions

	Three Months Ended
	March 31,
	2018		2017

United States	$	2,069	$	3,252
Rest of World		842		904
	$	2,911	$	4,156

Schedule of revenue by product group

	Three Months Ended
	March 31,
	2018		2017

Biometrics	$	2,485	$	3,803
Imaging		426		310
DSL royalties		-		43
	$	2,911	$	4,156

Schedule of revenue by timing of transfer of goods or services

	Three Months Ended
	March 31,
	2018		2017

Goods or services transferred at a point in time		1,474		2,529
Goods or services transferred over time		1,437		1,627
	$	2,911	$	4,156

XML 33 R23.htm IDEA: XBRL DOCUMENT

Recently Adopted Accounting Pronouncements (Tables)

3 Months Ended

Mar. 31, 2018

Accounting Changes and Error Corrections [Abstract]

Schedule of adoption to reported results

(In thousands, except per share data)	Three Months Ended March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	4,347	$	(191	)	$	4,156
Costs and expenses		4,052		(27	)		4,025
Provision for income taxes		64		(59	)		5
Net income		405		(104	)		301
Net income per share - basic and diluted		0.02		(0.01	)		0.01

(In thousands, except per share data)	Year ended December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	16,282	$	(817	)	$	15,465
Costs and expenses		16,054		(114	)		15,940
Provision for income taxes		965		(421	)		544
Net income		1,282		(282	)		1,000
Net income per share - basic and diluted		0.06		(0.01	)		0.05

(In thousands, except per share data)	Year ended December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Statements of Income:
Revenue	$	21,566	$	(2,804	)	$	18,762
Costs and expenses		16,467		(294	)		16,173
Provision for income taxes		2,085		(986	)		1,099
Net income		4,103		(1,524	)		2,579
Net income per share - basic and diluted		0.18		(0.07	)		0.11

(In thousands)	March 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,391	$	2,043		$	5,434
Prepaid expenses and other current assets		299		20			319
Deferred tax assets		5,802		(693	)		5,109
Accrued expenses		1,080		311			1,391
Stockholders’ equity		60,169		1,059			61,228

(In thousands)	December 31, 2017
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	2,401	$	1,417		$	3,818
Prepaid expenses and other current assets		203		13			216
Deferred tax assets		5,402		(331	)		5,071
Accrued expenses		1,184		217			1,401
Stockholders’ equity		59,652		882			60,534

(In thousands)	December 31, 2016
	As Reported		New Revenue Standard Adjustment			As Adjusted
Consolidated Balance Sheets:
Accounts receivable, net	$	3,016	$	2,234		$	5,250
Prepaid expenses and other current assets		268		22			290
Deferred tax assets		1,078		(752	)		326
Accrued expenses		1,075		341			1,416
Stockholders’ equity		57,841		1,163			59,004

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended
Revenue Recognition (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Mar. 31, 2017
Contract assets:
Unbilled receivables, Balance at Beginning of Period	$ 1,429	$ 2,259
Unbilled receivables, Revenue Recognized In Advance of Billings	33	43
Unbilled receivables, Billings	(229)	(259)
Unbilled receivables, Balance at End of Period	$ 1,233	$ 2,043

XML 35 R25.htm IDEA: XBRL DOCUMENT

Revenue Recognition (Details 1) - USD ($) $ in Thousands	3 Months Ended
Revenue Recognition (Details 1) - USD ($) $ in Thousands	Mar. 31, 2018	Mar. 31, 2017
Contract liabilities:
Deferred revenue, Balance at Beginning of Period	$ 2,932	$ 2,933
Deferred revenue, Billings	758	750
Deferred revenue, Revenue Recognized	(1,294)	(1,262)
Deferred revenue, Balance at End of Period	$ 2,396	$ 2,421

XML 36 R26.htm IDEA: XBRL DOCUMENT

Revenue Recognition (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Revenue Recognition [Abstract]
Percentage of remaining performance obligations expected to be recognized as revenue	95.00%
Minimum period of remaining performance obligations	1 year
Long-term deferred revenue	$ 111	$ 127

- Definition

The noncurrent portion of deferred revenue amount as of balance sheet date. Deferred revenue is a liability related to a revenue producing activity for which revenue has not yet been recognized, and is not expected to be recognized in the next twelve months. Generally, an entity records deferred revenue when it receives consideration from a customer before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.

+ References + Details

XML 37 R27.htm IDEA: XBRL DOCUMENT

Fair Value Measurements - Assets measured at fair value on a recurring basis (Details) - Fair value on recurring basis - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair Value Measurement, Quoted Prices in Active Markets for Identical Assets (Level 1)
Schedule of Available-for-sale Securities [Line Items]
Total	$ 50,148	$ 49,986
Fair Value Measurement, Quoted Prices in Active Markets for Identical Assets (Level 1) \| Money market funds (included in cash and cash equivalents)
Schedule of Available-for-sale Securities [Line Items]
Money market funds (included in cash and cash equivalents)	50,148	49,986
Fair Value Measurement, Significant Other Observable Inputs (Level 2)
Schedule of Available-for-sale Securities [Line Items]
Total	0	0
Fair Value Measurement, Significant Other Observable Inputs (Level 2) \| Money market funds (included in cash and cash equivalents)
Schedule of Available-for-sale Securities [Line Items]
Money market funds (included in cash and cash equivalents)	0	0
Fair Value Measurement, Significant Unobservable Inputs (Level 3)
Schedule of Available-for-sale Securities [Line Items]
Total	0	0
Fair Value Measurement, Significant Unobservable Inputs (Level 3) \| Money market funds (included in cash and cash equivalents)
Schedule of Available-for-sale Securities [Line Items]
Money market funds (included in cash and cash equivalents)	$ 0	$ 0

XML 38 R28.htm IDEA: XBRL DOCUMENT

Fair Value Measurements (Detail Textuals) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents, primarily include money market funds	$ 50,648	$ 51,608	$ 48,994	$ 51,913
Fair value on recurring basis \| Money market funds (included in cash and cash equivalents) \| Fair Value Measurement, Quoted Prices in Active Markets for Identical Assets (Level 1)
Schedule of Available-for-sale Securities [Line Items]
Cash equivalents, primarily include money market funds	$ 50,100	$ 50,000

XML 39 R29.htm IDEA: XBRL DOCUMENT

Computation of Earnings per Share - Summary of net income per share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Earnings Per Share [Abstract]
Net income (loss)	$ (495)	$ 301
Shares outstanding:
Weighted-average common shares outstanding (in shares)	21,547	22,255
Additional dilutive common stock equivalents (in shares)	26	66
Diluted shares outstanding (in shares)	21,573	22,321
Net income (loss) per share - basic (in dollars per share)	$ (0.02)	$ 0.01
Net income (loss) per share - diluted (in dollars per share)	$ (0.02)	$ 0.01

XML 40 R30.htm IDEA: XBRL DOCUMENT

Computation of Earnings per Share (Detail Textuals)	3 Months Ended
Computation of Earnings per Share (Detail Textuals)	Mar. 31, 2017 shares
Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive common stock share purchase (in shares)	20,834

XML 41 R31.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation - Summary of stock-based employee compensation expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 24	$ 71
Cost of services
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	0	2
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	5	12
Selling and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	1	1
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 18	$ 56

XML 42 R32.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation (Detail Textuals)	1 Months Ended				3 Months Ended
Stock-Based Compensation (Detail Textuals)	Mar. 20, 2018 Installment shares	Jan. 31, 2018 USD ($) shares	Jul. 31, 2017 USD ($) shares	Feb. 27, 2017 USD ($) Installment shares	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense					$ 24,000	$ 71,000
2001 Nonqualified Stock Plan \| Unrestricted Stock \| 2018 Grant \| Directors, officers and employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted (in shares) \| shares	138,000
Number of installment \| Installment	2
Stock-based compensation expense					580,000
Stock based compensation expense charged					24,000
Remaining stock based compensation expense					$ 556,000
2001 Nonqualified Stock Plan \| Unrestricted Stock \| 2017 Grant \| Directors, officers and employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares granted (in shares) \| shares				134,000
Number of installment \| Installment				2
Stock-based compensation expense				$ 663,000
Number of shares issued (in shares) \| shares		53,378	54,014
Number of common stock shares surrendered by employees withholding taxes \| shares		13,622	12,986
Common stock value surrendered by employees withholding taxes		$ 64,000	$ 67,000

XML 43 R33.htm IDEA: XBRL DOCUMENT

Business Segments - Revenues generated following geographic regions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Reporting Information [Line Items]
Revenue	$ 2,911	$ 4,156
Operating Segments \| United States
Segment Reporting Information [Line Items]
Revenue	2,069	3,252
Operating Segments \| Rest of World
Segment Reporting Information [Line Items]
Revenue	$ 842	$ 904

XML 44 R34.htm IDEA: XBRL DOCUMENT

Business Segments - Summary of revenue by product group (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Reporting Information [Line Items]
Revenue	$ 2,911	$ 4,156
Operating Segments \| Biometrics
Segment Reporting Information [Line Items]
Revenue	2,485	3,803
Operating Segments \| Imaging
Segment Reporting Information [Line Items]
Revenue	426	310
Operating Segments \| DSL royalties
Segment Reporting Information [Line Items]
Revenue	$ 0	$ 43

XML 45 R35.htm IDEA: XBRL DOCUMENT

Business Segments - Revenue by timing of transfer of goods or services (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Reporting Information [Line Items]
Revenue	$ 2,911	$ 4,156
Goods or services transferred at a point in time
Segment Reporting Information [Line Items]
Revenue	1,474	2,529
Goods or services transferred over time
Segment Reporting Information [Line Items]
Revenue	$ 1,437	$ 1,627

XML 46 R36.htm IDEA: XBRL DOCUMENT

Business Segments (Detail Textuals)	3 Months Ended
Business Segments (Detail Textuals)	Mar. 31, 2018 Segment
Segment Reporting [Abstract]
Number of operating segment	1

XML 47 R37.htm IDEA: XBRL DOCUMENT

Recently Adopted Accounting Pronouncements - Adoption of the new revenue standard Income Statement (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue	$ 2,911	$ 4,156
Costs and expenses	3,634	4,025
Provision for income taxes	(66)	5
Net income	$ (495)	301
Accounting Standards Update 2014-09 \| As Reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue		4,347	$ 16,282	$ 21,566
Costs and expenses		4,052	16,054	16,467
Provision for income taxes		64	965	2,085
Net income		$ 405	$ 1,282	$ 4,103
Net income per share - basic and diluted (in dollars per share)		$ 0.02	$ 0.06	$ 0.18
Accounting Standards Update 2014-09 \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue		$ (191)	$ (817)	$ (2,804)
Costs and expenses		(27)	(114)	(294)
Provision for income taxes		(59)	(421)	(986)
Net income		$ (104)	$ (282)	$ (1,524)
Net income per share - basic and diluted (in dollars per share)		$ (0.01)	$ (0.01)	$ (0.07)
Accounting Standards Update 2014-09 \| As Adjusted
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue		$ 4,156	$ 15,465	$ 18,762
Costs and expenses		4,025	15,940	16,173
Provision for income taxes		5	544	1,099
Net income		$ 301	$ 1,000	$ 2,579
Net income per share - basic and diluted (in dollars per share)		$ 0.01	$ 0.05	$ 0.11

XML 48 R38.htm IDEA: XBRL DOCUMENT

Recently Adopted Accounting Pronouncements - Adoption of the new revenue standard Balance Sheet(Details 1) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net	$ 2,265	$ 2,389
Prepaid expenses and other current assets	324	216
Deferred tax assets	5,163	5,071
Accrued expenses	1,281	1,401
Stockholders' equity	$ 60,001	60,534
Accounting Standards Update 2014-09 \| As Reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net		2,401	$ 3,391	$ 3,016
Prepaid expenses and other current assets		203	299	268
Deferred tax assets		5,402	5,802	1,078
Accrued expenses		1,184	1,080	1,075
Stockholders' equity		59,652	60,169	57,841
Accounting Standards Update 2014-09 \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net		1,417	2,043	2,234
Prepaid expenses and other current assets		13	20	22
Deferred tax assets		(331)	(693)	(752)
Accrued expenses		217	311	341
Stockholders' equity		882	1,059	1,163
Accounting Standards Update 2014-09 \| As Adjusted
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net		3,818	5,434	5,250
Prepaid expenses and other current assets		216	319	290
Deferred tax assets		5,071	5,109	326
Accrued expenses		1,401	1,391	1,416
Stockholders' equity		$ 60,534	$ 61,228	$ 59,004

XML 49 R39.htm IDEA: XBRL DOCUMENT

Recently Adopted Accounting Pronouncements (Detail Textuals)	1 Months Ended	3 Months Ended		12 Months Ended
	Oct. 31, 2015 USD ($)	Mar. 31, 2018 USD ($) Segment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of operating segment \| Segment		1
Deferred revenue recognized		$ 1,294,000	$ 1,262,000
Revenue		2,911,000	4,156,000
Stockholders' equity		60,001,000		$ 60,534,000
Costs and expenses		3,634,000	4,025,000
Provision for income taxes		(66,000)	5,000
Deferred tax assets		5,163,000		5,071,000
Accrued expenses		$ 1,281,000		1,401,000
Accounting Standards Update 2014-09 \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Consumated license contract	$ 4,625,000
License fee	4,500,000
Software maintenance fee	125,000
Revenue			(191,000)	(817,000)	$ (2,804,000)
Stockholders' equity			1,059,000	882,000	1,163,000
Costs and expenses			(27,000)	(114,000)	(294,000)
Provision for income taxes			(59,000)	(421,000)	(986,000)
Deferred tax assets			(693,000)	(331,000)	(752,000)
Accrued expenses			311,000	217,000	341,000
Accounting Standards Update 2014-09 \| Software License Arrangement
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue	$ 4,500,000
Accounting Standards Update 2014-09 \| 2015 imaging software license contract \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue					(3,600,000)
Accounting Standards Update 2014-09 \| DSL royalty contracts \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue			9,000	(17,000)	(39,000)
Accounting Standards Update 2014-09 \| Minimum license/royalty payment contract \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue			(200,000)	(800,000)	860,000
Stockholders' equity					2,200,000
Unbilled receivables				1,400,000	2,200,000
Accounting Standards Update 2014-09 \| Sales commissions and other third-party acquisition costs \| New Revenue Standard Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stockholders' equity					(300,000)
Costs and expenses			$ (27,000)	$ (114,000)	$ (294,000)

XML 50 R40.htm IDEA: XBRL DOCUMENT

Income Taxes (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Detail Textuals) - USD ($) $ in Thousands	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Income tax expense	$ (66)	$ 5
U.S. statutory tax rate	21.00%	34.00%
Deferred tax assets	$ 5,163		$ 5,071

XML 51 R41.htm IDEA: XBRL DOCUMENT

Income from patent arrangement (Detail Textuals) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Income From Patent Arrangement [Abstract]
Income from intangible assets	$ 91

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