10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2018

OR

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

For the transition period from ______ to ______

Commission File Number: 000-29440

IDENTIV, INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE	77-0444317
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2201 Walnut Avenue, Suite 100 Fremont, California	94538
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 250-8888

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	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  ☑

As of November 2, 2018, the registrant had 15,453,916 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2018 and 2017	5
	Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2018	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	41
SIGNATURES		42

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value)

	September 30,			December 31,
	2018			2017
ASSETS
Current assets:
Cash	$	14,240		$	19,052
Accounts receivable, net of allowances of $386 and $306 as of September 30, 2018    and December 31, 2017, respectively		14,129			12,282
Inventories		11,973			11,126
Prepaid expenses and other current assets		2,383			1,779
Total current assets		42,725			44,239
Property and equipment, net		2,135			2,043
Intangible assets, net		9,155			4,365
Goodwill		5,781			—
Other assets		1,146			715
Total assets	$	60,942		$	51,362
LIABILITIES AND STOCKHOLDERS´ EQUITY
Current liabilities:
Accounts payable	$	5,584		$	5,863
Current portion - payment obligation		989			888
Current portion - financial liabilities, net of discount and debt issuance costs of $76    and $404, respectively		11,245			9,829
Notes payable		2,000			—
Deferred revenue		2,265			900
Accrued compensation and related benefits		1,819			1,515
Other accrued expenses and liabilities		2,997			2,020
Total current liabilities		26,899			21,015
Long-term payment obligation		2,157			2,998
Long-term financial liabilities, net of discount and debt issuance costs of $0 and $582, respectively		—			2,921
Long-term deferred revenue		1,226			190
Other long-term liabilities		625			385
Total liabilities		30,907			27,509
Commitments and contingencies (see Note 13)
Stockholders´ equity:
Identiv, Inc. stockholders' equity:
Series B Preferred stock, $0.001 par value: 5,000 shares authorized; 5,000 and 3,000 shares    issued and outstanding as of September 30, 2018 and December 31, 2017, respectively		5			3
Common stock, $0.001 par value: 50,000 shares authorized; 16,464 and 15,341 shares    issued and 15,449 and 14,436 shares outstanding as of September 30, 2018 and    December 31, 2017, respectively		16			15
Additional paid-in capital		441,008			428,470
Treasury stock, 1,015 and 905 shares as of September 30, 2018 and December 31, 2017,    respectively		(7,987	)		(7,485	)
Accumulated deficit		(404,983	)		(399,647	)
Accumulated other comprehensive income		2,146			2,675
Total Identiv, Inc. stockholders' equity		30,205			24,031
Noncontrolling interest		(170	)		(178	)
Total stockholders´ equity		30,035			23,853
Total liabilities and stockholders' equity	$	60,942		$	51,362

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

3

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net revenue	$	20,022		$	15,432		$	56,844		$	43,664
Cost of revenue		11,538			9,571			33,699			26,423
Gross profit		8,484			5,861			23,145			17,241
Operating expenses:
Research and development		1,860			1,597			5,384			4,584
Selling and marketing		3,915			3,448			12,176			10,142
General and administrative		2,641			1,247			7,952			5,119
Restructuring and severance		223			(49	)		591			(49	)
Total operating expenses		8,639			6,243			26,103			19,796
Loss from operations		(155	)		(382	)		(2,958	)		(2,555	)
Non-operating income (expense):
Interest expense, net		(291	)		(643	)		(1,239	)		(1,995	)
(Loss) gain on extinguishment of debt, net		—			—			(1,369	)		977
Foreign currency gains (losses), net		200			(51	)		354			(202	)
Loss before income taxes and noncontrolling interest		(246	)		(1,076	)		(5,212	)		(3,775	)
Income tax (provision) benefit		(41	)		42			(121	)		161
Loss before noncontrolling interest		(287	)		(1,034	)		(5,333	)		(3,614	)
Less: Income (loss) attributable to noncontrolling    interest		—			2			(5	)		(8	)
Net loss attributable to Identiv, Inc.	$	(287	)	$	(1,032	)	$	(5,338	)	$	(3,622	)
Basic and diluted net loss per share attributable to    Identiv, Inc.	$	(0.02	)	$	(0.07	)	$	(0.34	)	$	(0.28	)
Weighted average shares used to compute basic and    diluted net loss per share		15,750			14,409			15,484			12,806

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

4

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net loss	$	(287	)	$	(1,034	)	$	(5,333	)	$	(3,614	)
Other comprehensive income (loss), net of    income taxes:
Foreign currency translation adjustment		(226	)		378			(526	)		518
Total other comprehensive (loss) income, net of    income taxes		(226	)		378			(526	)		518
Comprehensive loss		(513	)		(656	)		(5,859	)		(3,096	)
Less: Comprehensive income attributable to    noncontrolling interest		—			(16	)		(8	)		(23	)
Comprehensive loss attributable to Identiv, Inc.    common stockholders	$	(513	)	$	(672	)	$	(5,867	)	$	(3,119	)

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

5

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

	Series B Preferred Stock				Common Stock					Additional Paid-in		Treasury			Accumulated			Accumulated Other Comprehensive			Noncontrolling			Total
	Shares		Amount		Shares			Amount		Capital		Stock			Deficit			Income			Interest			Equity
Balances, December 31, 2017		3,000	$	3		14,436		$	15	$	428,470	$	(7,485	)	$	(399,647	)	$	2,675		$	(178	)	$	23,853
Net loss		—		—		—			—		—		—			(5,338	)		—			5			(5,333	)
Other comprehensive loss		—		—		—			—		—		—			—			(529	)		3			(526	)
Impact of adoption of Topic    606 (Note 2)		—		—		—			—		—		—			2									2
Issuance of Series B    preferred stock, net    of issuance costs		2,000		2		—			—		7,893		—			—			—			—			7,895
Issuance of common stock in    connection with acquisition    of business		—		—		723			1		2,634		—			—			—			—			2,635
Issuance of common stock    in connection with    vesting of stock awards		—		—		394			—		—		—			—			—			—			—
Proceeds from exercise of    stock options		—		—		3			—		13		—			—			—			—			13
Stock-based compensation		—		—		—			—		1,987		—			—			—			—			1,987
Shares withheld in payment    of taxes in connection with    net share settlement of    restricted stock units		—		—		(110	)		—		—		(502	)		—			—			—			(502	)
Issuance of shares to non-    employees		—		—		3			—		11		—			—			—			—			11
Balances, September 30,    2018		5,000	$	5		15,449		$	16	$	441,008	$	(7,987	)	$	(404,983	)	$	2,146		$	(170	)	$	30,035

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

6

IDENTIV, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended
	September 30,
	2018			2017
Cash flows from operating activities:
Net loss	$	(5,333	)	$	(3,614	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,362			2,081
Loss (gain) on extinguishment of debt, net		1,369			(977	)
Accretion of interest on long-term payment obligation		180			277
Amortization of debt issuance costs		280			617
Stock-based compensation expense		1,987			1,916
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable		202			(1,197	)
Inventories		(614	)		(1,785	)
Prepaid expenses and other assets		(866	)		(992	)
Accounts payable		(1,871	)		1,531
Payment obligation liability		(920	)		(892	)
Deferred revenue		(525	)		58
Accrued expenses and other liabilities		738			(2,087	)
Net cash used in operating activities		(3,011	)		(5,064	)
Cash flows from investing activities:
Capital expenditures		(634	)		(686	)
Acquisition of business, net of cash acquired		(1,384	)		—
Net cash used in investing activities		(2,018	)		(686	)
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs		16,941			42,735
Repayments of debt		(23,612	)		(42,805	)
Proceeds from issuance of common stock, net of issuance costs		—			12,560
Taxes paid related to net share settlement of restricted stock units		(502	)		(594	)
Proceeds from issuance of Series B preferred stock, net of issuance costs		7,895			—
Proceeds from exercise of stock options		13			—
Net cash provided by financing activities		735			11,896
Effect of exchange rates on cash		(518	)		479
Net (decrease) increase in cash		(4,812	)		6,625
Cash at beginning of period		19,052			9,116
Cash at end of period	$	14,240		$	15,741
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	1,571		$	1,379
Taxes paid, net	$	109		$	96
Non-cash investing and financing activities:
Warrants issued as debt issuance costs in connection with debt agreements	$	—		$	2,319
Liability to be settled in common stock	$	—		$	250
Issuance of shares to non-employees	$	11		$	—
Common stock issued for acquisition of business, net	$	2,635		$	—
Promissory notes issued in acquisition of business	$	2,000		$	—

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

7

IDENTIV, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018

1. Organization and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Identiv, Inc. (“Identiv” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and the audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The preparation of unaudited condensed consolidated financial statements necessarily requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. The Company may experience significant variations in demand for its products quarter to quarter and typically experiences a stronger demand cycle in the second half of its fiscal year. As a result, the quarterly results may not be indicative of the full year results. The December 31, 2017 balance sheet was derived from the audited financial statements as of that date.

Reclassifications — Certain reclassifications have been made to the fiscal year 2017 financial statements to conform to the fiscal year 2018 presentation. The reclassifications had no impact on net loss, total assets, or stockholders’ equity.

Concentration of Credit Risk — No customer represented more than 10% of net revenue for either of the three or nine months ended September 30, 2018 or 2017.No customer represented 10% or more of the Company’s accounts receivable balance at September 30, 2018 or December 31, 2017.

Business Combinations— Business combinations are accounted for at fair value under the purchase method of accounting. Acquisition costs are expensed as incurred and recorded in general and administrative expenses and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the condensed consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, or require acceleration of the amortization expense of finite-lived intangible assets.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.

Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.

Intangible Assets—Amortizable intangible assets include trademarks, developed technology and customer relationships acquired as part of business combinations. Intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from four to twelve years and are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.

8

Goodwill—In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. In testing for goodwill impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

Research and Development — Costs to research, design, and develop the Company’s products are expensed as incurred and consist primarily of employee compensation and fees for the development of prototype products. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, the Company’s products are released soon after technological feasibility has been established. Costs incurred subsequent to achieving technological feasibility have not been significant and generally have been expensed as incurred. At September 30, 2018, the amount of capitalized software development costs totaled $386,000 and is included in other assets in the accompanying condensed consolidated balance sheet. Software development costs capitalized in 2017 totaled $401,000. No software development costs were capitalized in 2018.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016. The Company adopted this guidance effective January 1, 2017. The Company's adoption of this standard did not have a significant impact on its condensed consolidated financial statements. No excess income tax benefit or tax deficiencies were recorded as a result of the adoption and there was no change to accumulated deficit with respect to previously unrecognized excess tax benefits. The Company elected to continue to account for forfeitures on an estimated basis. The Company has elected to present the condensed consolidated statements of cash flows on a prospective transition method and no prior periods have been adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients.In January 2018, the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. The Company will adopt the standard on the effective date, but has not yet selected a transition method. The Company is reviewing its leased assets to determine the potential impact on its consolidated financial statements. Though its evaluation is ongoing, the Company expects changes to its balance sheet due to the recognition of right-of-use assets and lease liabilities related to its real estate leases, but it does not anticipate a material impact to its results of operations or liquidity.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The standard is effective for fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company is currently in the process of evaluating when it will adopt ASU 2017-04 and its impact on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605)” and Subtopic 985-605 “Software - Revenue Recognition.” Topic 605 and Subtopic 985-605 are collectively referred to as “Topic 605” or “prior GAAP.” Under Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures, including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

9

The Company adopted Topic 606 on January 1, 2018 using the modified retrospective transition method. Under this method, the Company evaluated contracts that were in effect at the beginning of fiscal 2018 as if those contracts had been accounted for under Topic 606. Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical, pre-Topic 606 accounting.

On the adoption date, a cumulative catch up adjustment was recorded to beginning retained earnings to reflect the impact of all existing arrangements under Topic 606. The Company increased retained earnings and decreased deferred revenue by approximately $2,000 for an uncompleted software development and technical support services contract with a customer. Under Topic 605 accounting, since the Company was unable to establish vendor-specific objective evidence (“VSOE”) of fair value for the product development and technical support services components in the contract, the Company was required to defer the revenue and recognize it over the term of the contract. Under Topic 606, the Company would have been required to establish the standalone selling price of each of the performance obligations in the contract and recognize the product development services revenue upon delivery, and recognize the technical support services revenue ratably over the term of the contract.

The Company does not expect the impact of the adoption of Topic 606 to be material to its annual revenue and net income on an ongoing basis. Revenue generated under Topic 606 is expected to be materially comparable to revenue recognized under Topic 605 in fiscal 2018 primarily due to the elimination of deferred revenue associated with the product development services discussed above that, under Topic 605, would have continued to be recognized into revenue in 2018 and 2019, offset by an increase in the revenue recognized related to the amount and timing of technical support services provided in the contract discussed above. The actual effects on revenue recognized for the nine months ended September 30, 2018 are reported in the table below.

No incremental sales commission costs or other costs related to obtaining customer contracts were capitalized at the adoption date as they were immaterial.

The timing of revenue recognition for hardware and professional services is expected to remain substantially unchanged. The Company’s overall mix of revenue recognized at a point in time versus over time is expected to increase in the future due to the intended growth and expansion of its services offerings. For the three and nine months ended September 30, 2018, approximately 94% and 95%, respectively, of the Company’s revenue was recognizable on delivery and 6% and 5%, respectively, over time.

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated balance sheet as of September 30, 2018 (in thousands):

	Balance at December 31, 2017			Adjustments			Balance at January 1, 2018
Deferred revenue	$	1,090		$	(2	)	$	1,088
Accumulated deficit		(399,647	)		2			(399,645	)

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2018 (in thousands, except per share amounts):

	As Reported Under Topic 606			Adjustments		Balance Under Prior GAAP
Net revenue	$	56,844		$	1	$	56,845
Cost of revenue		33,699			—		33,699
Operating expenses		26,103			—		26,103
Provision for income taxes		(121	)		—		(121	)
Net loss		(5,338	)		1		(5,337	)
Basic and diluted net loss per share		(0.34	)		—		(0.34	)

The adoption of Topic 606 had no impact on the Company’s net cash provided by operating activities, net cash used in investing activities or net cash used in financing activities.

10

2. Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of its products, software licenses, and services, which are generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price. The stated contract value is generally the transaction price to be allocated to the separate performance obligations. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.

Nature of Products and Services

The Company derives revenues primarily from sales of hardware products, software licenses, professional services, software maintenance and support, and extended hardware warranties.

Hardware Product Revenues — The Company generally has two performance obligations in arrangements involving the sale of hardware products. The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product). The second performance obligation is to provide assurance that the product complies with its agreed-upon specifications and is free from defects in material and workmanship for a period of one to three years (i.e. assurance warranty). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. The Company has concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. None of the transaction price is allocated to the assurance warranty component, as the Company accounts for these product warranty costs in accordance with ASC 460, Guarantees. Payments for hardware contracts are generally due 30 to 60 days after shipment of the hardware product.

Software License Revenues— The Company’s license arrangements grant customers the perpetual right to access and use the licensed software products at the outset of an arrangement. Technical support and software updates are generally made available throughout the term of the support agreement, which is generally one to three years. The Company accounts for these arrangements as two performance obligations (1) the software licenses, and (2) the related updates and technical support. The software license revenue is recognized upon delivery of the license to the customer, while the software updates and technical support is recognized over the term of the support contract. Payments are generally due 30 to 60 days after delivery of the software licenses.

Professional Services Revenues—Professional services revenues consist primarily of programming customization services performed relating to the integration of the Company’s software products with the customers other systems, such as HR systems. Professional services contracts are generally billed on a time and materials basis and revenue is recognized as the services are performed. For contracts billed on a fixed price basis, revenue is recognized once the contract is complete. Payments for services are generally due when services are performed.

Software Maintenance and Support Revenues— Support and maintenance contract revenues consist of the services provided to support the specialized programming applications performed by our professional services group. Support and maintenance contracts are typically billed at inception of the contract and recognized as revenue over the contract period, typically over a one to three year period.

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Extended Hardware Warranties Revenues— Sales of our hardware products may also include optional extended hardware warranties, which typically provide assurance that the product will continue function as initially intended. Extended hardware warranty contracts are typically billed at inception of the contract and recognized as revenue over the respective contract period, typically over one to two year periods after the expiration of the original assurance warranty.

Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Hardware products	When customer obtains control of the product (point-in-time)	Within 30-60 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)	Within 30-60 days of the beginning of license period	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional services	As services are performed and/or when contract is fulfilled (point-in-time)	Within 30-60 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance    and support services	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions
Extended hardware    warranties	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions

Significant Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the Company allocates revenues to each performance obligation based on its relative standalone selling price (“SSP”).

Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, the Company estimates SSP using historical transaction data. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.

Disaggregation of Revenues

The Company disaggregates revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based on the shipping location of the customer. The geographic regions that are tracked are the Americas, Europe and the Middle East, and Asia-Pacific regions. The Company operates as four operating segments.

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Total net sales based on the disaggregation criteria described above are as follows (in thousands):

	Three Months Ended September 30,
	2018						2017 (1)
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	13,930	$	1,105	$	15,035	$	9,960	$	331	$	10,291
Europe and the Middle East		2,117		44		2,161		1,771		—		1,771
Asia-Pacific		2,803		23		2,826		3,370		—		3,370
Total	$	18,850	$	1,172	$	20,022	$	15,101	$	331	$	15,432
	Nine Months Ended September 30,
	2018						2017 (1)
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	41,150	$	3,022	$	44,172	$	27,893	$	1,001	$	28,894
Europe and the Middle East		6,921		71		6,992		5,741		26		5,767
Asia-Pacific		5,657		23		5,680		9,003		—		9,003
Total	$	53,728	$	3,116	$	56,844	$	42,637	$	1,027	$	43,664
(1)  As discussed in Note 1, prior periods have not been adjusted for the adoption of Topic 606.

Information about Contract Balances

Amounts invoiced in advance of services being provided are accounted for as deferred revenue. Nearly all of the Company’s deferred revenue balance is related software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 90 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from its customers.

Changes in deferred revenue during the nine months ended September 30, 2018 were as follows (in thousands):

	Amount
Deferred revenue at December 31, 2017	$	1,090
Impact of adoption of Topic 606		(2	)
Deferred revenue at January 1, 2018		1,088
Fair value of deferred revenue acquired in acquisition, net of recognition		1,693
Deferral of revenue billed in current period, net of recognition		1,557
Recognition of revenue deferred in prior periods		(847	)
Balance as of September 30, 2018	$	3,491

Unsatisfied Performance Obligations

Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $2.1 million as of September 30, 2018. Since the Company typically invoices customers at contract inception, this amount is included in deferred revenue balance. As of September 30, 2018, the Company expects to recognize approximately 19% of the revenue related to these unsatisfied performance obligations during the remainder of 2018, 56% during 2019, and 25% thereafter.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs (i.e. commissions) meet the requirements to be capitalized. Capitalized incremental costs related to contracts are amortized over the respective contract periods. For the three and nine months ended September 30, 2018, total capitalized costs to obtain contracts were immaterial.

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Practical Expedients

As discussed in Note 1, Organization and Summary of Significant Accounting Policies, and Note 2, Revenue, the Company has elected the following practical expedients in accordance with Topic 606:

• The Company expenses costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs include internal sales force compensation programs and certain partner sales incentive programs as the Company has determined annual compensation is commensurate with annual sales activities.

• The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expense.

• The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

• The Company does not consider the time value of money for contracts with original durations of one year or less.

3. Business Combinations

On February 14, 2018, the Company acquired 3VR Security, Inc. (“3VR”), a video technology and analytics company, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Eagle Acquisition, Inc., a California corporation and a wholly owned subsidiary of the Company (“Merger Sub”), 3VR, and Fortis Advisors LLC, a Delaware limited liability company, acting as Security Holder Representative. Pursuant to the Merger Agreement, at the effective time, Merger Sub merged with and into 3VR and 3VR became a wholly-owned subsidiary of the Company (the “Acquisition”).

Under the terms of the Merger Agreement, at the closing of the Acquisition, the Company acquired all of the outstanding shares of 3VR for total purchase consideration of $6.2 million, consisting of:

(i) payment in cash of approximately $1.6 million;  

(ii) issuance of subordinated unsecured promissory notes in an aggregate principal amount of $2.0 million;

(iii) issuance of 609,830 shares of the Company’s common stock with a value of approximately $2.3 million.  

An aggregate of up to $1.0 million, or 294,927 shares, of the Company’s common stock issuable at the closing of the transaction were held back for a period of up to 12 months following the closing for the satisfaction of certain indemnification claims. On May 9, 2018, the Company and the Security Holder Representative reached agreement as to the satisfaction of certain of the indemnification claims asserted by the Company at the closing of the Acquisition. As a result, the purchase consideration, and the amount of goodwill recorded, were reduced by $660,000. Of the 294,927 shares that were held back at closing, 181,319 shares were canceled. The remaining 93,406 shares, with a value of approximately $0.3 million, continue to be subject to the terms of the Merger Agreement.

Additionally, in the event that the Company’s subsidiary, 3VR, achieves $24.1 million in product shipments in 2018, the Company will be obligated to issue further earn-out consideration of $3.5 million payable in shares of the Company’s common stock (subject to certain conditions) with a potential maximum earn-out value of $7.0 million in the event that such shipments exceed $48.2 million.  Further, in calendar year 2019, the Company may also be obligated to pay, in cash, and subject to certain conditions, contingent consideration equal to the lesser of (a) 35% of the gross margin of certain products sold and services rendered by 3VR in 2018 pursuant to a supply arrangement and (b) $25.0 million, each subject to adjustments. Management has assessed the probability of the issuance of shares related to the earn-out consideration, and the payment of the contingent consideration noted above, and determined it as remote. Accordingly, no value was ascribed to the earn-out as of September 30, 2018.

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Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. Such estimates and assumptions are subject to change within the measurement period (up to one year from the Acquisition). The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash	$	195
Accounts receivable		2,029
Inventory		257
Prepaid expenses and other current assets		169
Property and equipment		334
Trademarks		400
Customer relationships		2,900
Developed technology		3,000
Total identifiable assets acquired		9,284
Accounts payable		(1,590	)
Accrued expenses and liabilities		(711	)
Deferred revenue		(2,928	)
Debt		(3,622	)
Total liabilities assumed		(8,851	)
Net identifiable assets acquired		433
Goodwill		5,781
Purchase price	$	6,214

In June 2018, the Company recorded an adjustment to its accounting for the amount recorded as accounts receivable at acquisition. Accordingly, the fair value of accounts receivable was decreased by $561,000, with a corresponding increase to goodwill and reflected in the Company’s purchase price allocation.

Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	400		5
Customer relationships		2,900		10
Developed technology		3,000		10
	$	6,300

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of 3VR resulted in $5.8 million of goodwill. With the addition of the 3VR video security and analytics platform, the Company believes this goodwill largely reflects the expansion of its Hirsch product and service offerings through the complementary offerings of 3VR. In accordance with ASC 350, goodwill will not be amortized but will be tested for impairment at least annually in the fourth quarter.

The results of operations of 3VR for the period from the acquisition date through September 30, 2018 are included in the accompanying condensed consolidated statements of operations. Pursuant to ASC 805, Business Combinations, the Company incurred and expensed approximately $212,000 and $548,000 in acquisition and transitional costs associated with the acquisition of 3VR during the year ended December 31, 2017 and the nine months ended September 30, 2018, respectively which were primarily general and administrative expenses.

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4. Fair Value Measurements

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

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

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

• Level 3 – Unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2018 and December 31, 2017, there were no assets that are measured and recognized at fair value on a recurring basis. There were no cash equivalents as of September 30, 2018 and December 31, 2017.

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

Certain of the Company's assets, including intangible assets, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections. For additional discussion of measurement criteria used in evaluating potential impairment involving goodwill and intangible assets, refer to Note 5, Goodwill and Intangible Assets.  

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

As of September 30, 2018 and December 31, 2017, the Company had $0.3 million of privately-held investments measured at fair value on a nonrecurring basis which were classified as Level 3 assets due to the absence of quoted market prices and inherent lack of liquidity. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. The amount of privately-held investments is included in other assets in the accompanying condensed consolidated balance sheets.

Assets and Liabilities Not Measured at Fair Value

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

5. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, 40,000 of which have been designated as Series A Participating Preferred Stock, par value $0.001 per share, and 5,000,000 of which have been designated as Series B Non-Voting Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). No shares of the Company’s Series A Participating Preferred Stock were outstanding as of September 30, 2018 and December 31, 2017. During 2017, the Company’s board of directors (the “Board”) authorized the issuance of up to 5,000,000 shares of the Series B Preferred Stock, 5,000,000 of which were outstanding as of September 30, 2018.

The Board may from time to time, without further action by the Company’s stockholders, direct the issuance of shares of preferred stock in other series and may, at the time of issuance, determine the rights, preferences and limitations of each series, including voting rights, dividend rights and redemption and liquidation preferences. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of the Company’s common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of shares of the Company’s common stock. Upon the affirmative vote of the Board, without stockholder approval, the Company may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of its common stock.

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Series B Preferred Stock and Private Placement

On December 20, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of 21 April Fund, Ltd. and 21 April Fund, LP (collectively, the “Purchasers”), pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers an aggregate of up to 5,000,000 shares of the Series B Preferred Stock, $0.001 par value per share (collectively referred to as the “Shares”). The Purchasers agreed to purchase an aggregate of 3,000,000 Shares at a price of $4.00 per share in cash at the initial closing of the transaction, and at the sole option of the Company, an additional 2,000,000 Shares at a price of $4.00 per share in cash at a second closing, if any (the “Private Placement”). The total purchase price payable to the Company is $20,000,000, of which $12,000,000 was paid at the initial closing.

On May 30, 2018, the Company issued 2,000,000 Shares, at a price of $4.00 per share in the second closing of the Private Placement. Gross proceeds to the Company from the second closing were approximately $8.0 million, before deducting fees and certain expenses payable by the Company.

The proceeds from the issuance of the Shares are required to be used to pay off existing debt obligations of the Company and to fund future acquisitions of technology, business and other assets by the Company.

Each Share shall be convertible into the Company’s common stock (i) following the sixth (6th) anniversary of the initial closing of the Private Placement or (ii) if earlier, during the thirty (30) day period following the last trading day of any period of three (3) or more consecutive trading days that the closing market price of the Company’s common stock exceeds $10.00. Each Share is convertible at the option of the holder of shares of Series B Preferred Stock into such number of shares of the Company’s common stock determined by taking the accreted value of such Share (purchase price plus accrued but unpaid dividends) and dividing such value by the stated value of such Share ($4.00 per share, subject to adjustment for dilutive issuances, stock splits, stock dividends and the like); provided, however, that the Company shall not convert any Shares if doing so would cause the holder thereof, along with its affiliates, to beneficially own in excess of 19.9% of the outstanding common stock immediately after giving effect to the applicable conversion (the “Ownership Limitation”), unless waiver of this restriction has been effected by the holder requesting conversion of Shares.

Based on the current conversion price, the outstanding shares of Series B Preferred Stock as of September 30, 2018 would be convertible into 5,000,000 shares of the Company’s common stock.  However, the conversion rate will be subject to adjustment in the event of certain instances, such as if the Company issues shares of its common stock at a price less than $4.00 per common share, subject to a minimum conversion price of $3.27 per share.  As of September 30, 2018, none of the contingent conditions to adjust the total common shares to convert the Shares had been met.

Each Share is entitled to an annual dividend of 5% for the first six (6) years following the issuance of such Share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10^th) year in cash. The dividends accrue and are payable in kind upon such time as the Shares convert into the Company’s common stock. In general, the Shares are not entitled to vote except in certain limited cases, including in change of control transactions where the price per share distributable to the Company’s stockholders is expected to be less than $4.00 per share. The Certificate of Designation with respect to the Series B Preferred Stock further provides that in the event of, among other things, any change of control, liquidation or dissolution of the Company, the holders of the Series B Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the common stock, the same amount and form of consideration that the holders of the Company’s common stock receive (on an as-if-converted-to-common-stock basis and without regard to the Ownership Limitation).

Sale of Common Stock

In May 2017, the Company sold an aggregate of 2,845,360 shares of its common stock at a public offering price of $4.85 per share in an underwritten public offering. The Company received net proceeds of approximately $12.6 million from the sale of the common stock in the public offering, after deducting the underwriting discount and other offering related expenses of $1.2 million.

Common Stock Warrants

On August 13, 2014, in connection with the Company’s entry into a consulting agreement, the Company issued a consultant a warrant to purchase up to 85,000 shares of the Company’s common stock at a per share exercise price of $10.70 (the “2014 Consultant Warrant”). One fourth of the shares under the warrant are exercisable for cash three months from the date the 2014 Consultant Warrant was issued and quarterly thereafter. The 2014 Consultant Warrant expires on August 13, 2019. In the event of an acquisition of the Company, the 2014 Consultant Warrant shall terminate and no longer be exercisable as of the closing of the acquisition. As of September 30, 2018, the 2014 Consultant Warrant had not been exercised.

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On February 8, 2017, the Company entered into Loan and Security Agreements (each, a “Loan and Security Agreement”) with each of East West Bank ("EWB") and Venture Lending & Leasing VII, Inc. and Venture Lending & Leasing VIII, Inc. (collectively referred to as “VLL7 and VLL8”) as discussed in Note 7, Financial Liabilities. The Loan and Security Agreement with EWB, as amended, provides for a $16.0 million revolving loan facility (the “Revolving Loan Facility”), and the Loan and Security Agreement with VLL7 and VLL8 provides for a term loan (the “Term Loan”) in an aggregate principal amount of $10.0 million (the “Term Loan Facility”). In connection with the Revolving Loan Facility, the Company issued to EWB a warrant (the "EWB Warrant") to purchase up to 40,000 shares of the Company's common stock at a per share exercise price of $3.64, and in connection with the Company’s Term Loan Facility, issued to each of VLL7 and VLL8 a warrant to purchase 290,000 shares of the Company's common stock at a per share exercise price of $2.00 (the “VLL7 Warrant” and the “VLL8 Warrant,” respectively). The Company calculated the fair value of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant using the Black-Scholes pricing model using the following assumptions: estimated volatility of 78.8%, risk-free interest rate of 1.94%, no dividend yield, and an expected life of five years. The fair values of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant of $125,000, $1,037,500 and $1,037,500, respectively, were classified as equity as the settlement of the warrants will be in shares and is within the control of the Company. Each of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant is immediately exercisable for cash or by net exercise and will expire five years after its issuance, or on February 8, 2022. In connection with entering into the Loan and Security Agreements with EWB and VLL7 and VLL8, warrants to purchase an aggregate of 400,000 shares of common stock issued to the Company’s previous lender were cancelled.

In connection with securing of the new credit facilities and cancelling of all the warrants previously issued to the previous lender, the Company issued a warrant to a consultant to purchase 60,000 shares of its common stock at an exercise price of $4.60 per share (the “2017 Consultant Warrant”).  The Company calculated the fair value of the 2017 Consultant Warrant using the Black Scholes pricing model using the following assumptions: estimated volatility of 78.8%, risk-free interest rate of 1.22%, no dividend yield, and an expected life of two years. The fair value of the 2017 Consultant Warrant of $119,000 was classified as equity as the settlement of the warrant will be in shares and is within the control of the Company.  The 2017 Consultant Warrant is immediately exercisable for cash or by net exercise and will expire two years after its issuance, or on February 8, 2019.

Below is the summary of outstanding warrants issued by the Company as of September 30, 2018:

Warrant Type	Number of Shares Issuable Upon Exercise		Weighted Average Exercise Price		Issue Date	Expiration Date
2014 Consultant Warrant		85,000	$	10.70	August 13, 2014	August 13, 2019
East West Bank Warrant		40,000		3.64	February 8, 2017	February 8, 2022
VLL7 and VLL8 Warrants		580,000		2.00	February 8, 2017	February 8, 2022
2017 Consultant Warrant		60,000		4.60	February 8, 2017	February 8, 2019
Total		765,000

Stock-Based Compensation Plans

The Company has a stock-based compensation plan to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons. The Company’s stock-based compensation plan consists of the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended. Shares are no longer available for issuance under the Company’s 2010 Bonus and Incentive Plan (the “2010 Plan”) and the 2007 Stock Option Plan (the “2007 Plan”).

Stock Incentive Plans

On June 6, 2011, the Company’s stockholders approved the 2011 Plan, which is administered by the Compensation Committee of the Board. The 2011 Plan provides that stock options, stock units, restricted shares, and stock appreciation rights may be granted to executive officers, directors, consultants, and other key employees. The Company reserved 400,000 shares of common stock under the 2011 Plan, plus 459,956 shares of common stock that remained available for delivery under the 2007 Plan and the 2010 Plan as of June 6, 2011. In aggregate, as of June 6, 2011, 859,956 shares were available for future grants under the 2011 Plan, including shares rolled over from 2007 Plan and 2010 Plan. Subsequent to June 6, 2011 through December 31, 2017, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 3,000,000 shares. On May 31, 2018, the Company’s stockholders approved an amendment to the 2011 Plan to increase the number of shares of common stock authorized for issuance by 500,000 shares.

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Stock Option Plans

A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2018 follows:

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Average Intrinsic Value
Balance at December 31, 2017		672,441		$	6.28		—	$	—
Granted		—			—
Cancelled or Expired		(47,970	)		11.56
Exercised		(2,500	)		5.20
Balance at September 30, 2018		621,971		$	5.87		6.93	$	721,856
Vested or expected to vest at     September 30, 2018		618,324		$	5.88		6.93	$	716,020
Exercisable at September 30, 2018		510,856		$	6.20		6.77	$	544,072

The following table summarizes information about options outstanding as of September 30, 2018:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$4.36 - $7.20		472,810		7.50	$	4.47		361,695	$	4.50
$7.50 - $11.30		127,415		5.39		9.42		127,415		9.42
$12.00 - $19.70		17,396		3.73		13.66		17,396		13.66
$21.70 - $24.20		4,350		2.93		23.27		4,350		23.27
$4.36 - $24.20		621,971		6.93	$	5.87		510,856	$	6.20

At September 30, 2018, there was $0.3 million of unrecognized stock-based compensation expense, net of estimated forfeitures related to unvested options, that is expected to be recognized over a weighted-average period of 0.9 years.  

Restricted Stock Units

The following is a summary of restricted stock unit (“RSU”) activity for the nine months ended September 30, 2018:

	Number of RSUs			Weighted Average Fair Value
Unvested at December 31, 2017		1,460,044		$	3.08
Granted		710,763			4.02
Vested		(457,345	)		3.60
Forfeited		(258,417	)		2.67
Unvested at September 30, 2018		1,455,045		$	3.45
Shares vested but not released		372,018		$	3.07

The fair value of the Company’s RSUs is calculated based upon the fair market value of the Company’s stock on the date of grant. As of September 30, 2018, there was $4.6 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.6 years.

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Stock-Based Compensation Expense

The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	22	$	24	$	63	$	71
Research and development		125		130		397		361
Selling and marketing		171		193		519		463
General and administrative		385		317		1,008		1,021
Total	$	703	$	664	$	1,987	$	1,916

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of September 30, 2018 was as follows:

Exercise of outstanding stock options, vesting of RSUs, and issuance of RSUs vested but not released	2,449,034
ESPP	293,888
Shares of common stock available for grant under the 2011 Plan	672,223
Noncontrolling interest in Bluehill ID AG	10,355
Warrants to purchase common stock	765,000
Shares of common stock issuable on conversion of Series B Preferred Stock	5,000,000
Total	9,190,500

Net Loss per Common Share Attributable to Identiv Stockholders’ Equity

Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. The following common stock equivalents have been excluded from diluted net loss per share for the nine months ended September 30, 2018 and 2017 because their inclusion would be anti-dilutive:

	Nine Months Ended September 30,
	2018		2017
Shares of common stock subject to outstanding RSUs		1,455,045		1,698,900
Shares of common stock subject to outstanding options		621,971		675,485
Shares of common stock subject to outstanding warrants		765,000		765,000
Shares of common stock reserved to acquire remaining share of noncontrolling interest		10,355		10,355
Shares of common stock issuable upon conversion of Series B Preferred Stock		5,000,000		—
Total		7,852,371		3,149,740

Accumulated Other Comprehensive Income  

Accumulated other comprehensive income at September 30, 2018 and December 31, 2017 consists of foreign currency translation adjustments totaling $2.1 million and $2.7 million, respectively.

Restricted Stock Unit Net Share Settlements

During the nine months ended September 30, 2018 and 2017, the Company repurchased 109,666 and 121,384 shares, respectively of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.

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6. Balance Sheet Components

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

	September 30,		December 31,
	2018		2017
Raw materials	$	4,530	$	3,700
Work-in-progress		7		22
Finished goods		7,436		7,404
Total	$	11,973	$	11,126

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

	September 30,			December 31,
	2018			2017
Building and leasehold improvements	$	2,050		$	1,917
Furniture, fixtures and office equipment		1,852			1,771
Plant and machinery		9,026			9,411
Purchased software		2,163			2,050
Construction-in-progress		217			-
Total		15,308			15,149
Accumulated depreciation		(13,173	)		(13,106	)
Property and equipment, net	$	2,135		$	2,043

The Company recorded depreciation expense of $0.3 million during each of the three months ended September 30, 2018 and 2017, and $0.9 million and $1.0 million during the nine months ended September 30, 2018 and 2017, respectively.  

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

	September 30,		December 31,
	2018		2017
Accrued professional fees	$	1,205	$	1,065
Accrued warranties		319		75
Income taxes payable		47		19
Other accrued expenses		1,426		861
Total	$	2,997	$	2,020

7. Goodwill and Intangible Assets

Goodwill

The following table summarizes the carrying amount of goodwill resulting from the acquisition of 3VR (in thousands):

	Premises		Credentials		Identity		All Other		Total
Balance at December 31, 2017	$	—	$	—	$	—	$	—	$	—
Acquisition of business		5,781		—		—		—		5,781
Balance at September 30, 2018	$	5,781	$	—	$	—	$	—	$	5,781

In accordance with ASC 350, the Company tests goodwill with indefinite lives annually for impairment and assesses whether there are any indicators of impairment on an interim basis. The Company performs interim goodwill impairment reviews between its annual reviews if certain events and circumstances have occurred, including a deterioration in general economic conditions, an increased competitive environment, a change in management, key personnel, strategy or customers, negative or declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods. The Company believes the methodology that it uses to review impairment of goodwill, which includes a significant amount of judgment and estimates, provides it with a reasonable basis to determine whether impairment has occurred. However, many of the factors employed in determining whether its goodwill is impaired are outside of its control and it is reasonably likely that assumptions and estimates will change in future periods. These changes in assumptions and estimates could result in future impairments. During the quarter ended September 30, 2018, the Company noted no indicators of goodwill impairment and concluded no further testing necessary.

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Intangible Assets

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

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12
Gross carrying amount at December 31, 2017	$	—		$	4,600		$	10,639		$	15,239
Accumulated amortization		—			(3,257	)		(7,617	)		(10,874	)
Intangible assets, net at December 31, 2017	$	—		$	1,343		$	3,022		$	4,365
Gross carrying amount at September 30, 2018	$	400		$	7,600		$	13,539		$	21,539
Accumulated amortization		(50	)		(3,779	)		(8,555	)		(12,384	)
Intangible assets, net at September 30, 2018	$	350		$	3,821		$	4,984		$	9,155

Each period, the Company evaluates the estimated remaining useful lives of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. If a revision to the remaining period of amortization is warranted, amortization is prospectively adjusted over the remaining useful life of the intangible asset. Intangible assets subject to amortization are amortized over their useful lives as shown in the table above. The Company evaluates its amortizable intangible assets for impairment at the end of each reporting period. The Company did not identify any impairment indicators during the three or nine months ended September 30, 2018.

The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	186	$	112	$	522	$	336
Selling and marketing		345		252		988		756
Total	$	531	$	364	$	1,510	$	1,092

The estimated annual future amortization expense for purchased intangible assets with definite lives as of September 30, 2018 is as follows (in thousands):

2018 (remaining three months)	$	532
2019		2,125
2020		2,125
2021		670
2022		670
Thereafter		3,033
Total	$	9,155

8. Long-Term Payment Obligation

Hirsch Acquisition – Secure Keyboards and Secure Networks. Prior to the 2009 acquisition of Hirsch by the Company, effective November 1994, Hirsch had entered into a settlement agreement (the “1994 Settlement Agreement”) with two limited partnerships, Secure Keyboards, Ltd. (“Secure Keyboards”) and Secure Networks, Ltd. (“Secure Networks”). At the time, Secure Keyboards and Secure Networks were related to Hirsch through certain common shareholders and limited partners, including Hirsch’s then President Lawrence Midland, who resigned as President of the Company effective July 31, 2014. Immediately following the acquisition, Mr. Midland owned 30% of Secure Keyboards and 9% of Secure Networks. Secure Networks was dissolved in 2012 and Mr. Midland owned 24.5% of Secure Keyboards upon his resignation effective July 31, 2014.

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On April 8, 2009, Secure Keyboards, Secure Networks and Hirsch amended and restated the 1994 Settlement Agreement to replace the royalty-based payment arrangement under the 1994 Settlement Agreement with a new, definitive installment payment schedule with contractual payments to be made in future periods through 2020 (the “2009 Settlement Agreement”). The Company was not an original party to the 2009 Settlement Agreement as the acquisition of Hirsch occurred subsequent to the 2009 Settlement Agreement being entered into. The Company has, however, provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligations under the 2009 Settlement Agreement (the “Guarantee”). The 2009 Settlement Agreement and the Guarantee became effective upon the acquisition of Hirsch on April 30, 2009. The Company’s annual payment to Secure Keyboards and Secure Networks in any given year under the 2009 Settlement Agreement is subject to an increase based on the percentage increase in the Consumer Price Index during the previous calendar year.

The final payment to Secure Networks was made on January 30, 2012 and the final payment to Secure Keyboards is due on January 30, 2021. The Company’s payment obligations under the 2009 Settlement Agreement will continue through January 30, 2021, unless the Company elects at any time on or after January 1, 2012 to earlier satisfy its obligations by making a lump-sum payment to Secure Keyboards. The Company does not intend to make a lump-sum payment and therefore a portion of the payment obligation amount is classified as a long-term liability.

The Company included $0.1 million and $0.2 million of interest expense during each of the three and nine months ended September 30, 2018, respectively, and $0.1 million and $0.3 million of interest expense during the three and nine months ended September 30, 2017, respectively, in its condensed consolidated statements of operations for interest accreted on the long-term payment obligation.  

The ongoing payment obligation in connection with the Hirsch acquisition as of September 30, 2018 is as follows (in thousands):

2018 (remaining three months)	$	310
2019		1,277
2020		1,422
2021		367
Present value discount factor		(230	)
Total		3,146
Less:  Current portion - payment obligation		(989	)
Long-term payment obligation	$	2,157

9. Financial Liabilities

Financial liabilities consist of (in thousands):

	September 30,			December 31,
	2018			2017
Notes payable	$	2,000		$	—
Term loan		—			5,000
Revolving loan facility		11,321			8,736
Total before discount and debt issuance costs		13,321			13,736
Less: Current portion of notes payable		(2,000	)		—
Less: Current portion of financial liabilities		(11,245	)		(9,829	)
Less: Current portion of unamortized discount and debt issuance costs		(76	)		(404	)
Less: Long-term portion of unamortized discount and debt issuance costs		—			(582	)
Long-term financial liabilities	$	—		$	2,921

Bank Term Loan and Revolving Loan Facility

On February 8, 2017, the Company entered into Loan and Security Agreements with EWB and VLL7 and VLL8, which provide for a $16.0 million Revolving Loan Facility and a $10.0 million Term Loan Facility, respectively. In connection with the closing of such agreements, the Company repaid all outstanding amounts under its credit agreement with its previous lender.

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The Revolving Loan Facility, as amended, bears interest at prime rate plus 1.0%, matures and becomes due and payable on February 8, 2019 and includes a non-formula line of credit sublimit of up to $3.0 million. Interest is payable monthly beginning on March 1, 2017. The Company may voluntarily prepay amounts outstanding under the Revolving Loan Facility, without prepayment charges. In the event the Revolving Loan Facility is terminated prior to its maturity, the Company would be required to pay an early termination fee in the amount of 1.0% of the revolving line. Additional borrowing requests under the Revolving Loan Facility are subject to various customary conditions precedent, including satisfaction of a borrowing base test as more fully described in the Revolving Loan Facility.

The Term Loan matures on August 8, 2020. Payments under the Term Loan Facility are interest-only for the first twelve months at a per annum rate of 12.5%, followed by principal and interest payments amortized over the remaining term of the Term Loan. If the Company elects to prepay the Term Loan before its maturity, all accrued and unpaid interest outstanding at the prepayment date will be due and payable, together with all the scheduled interest that would have accrued and been payable through the stated maturity of the Term Loan, provided that at any time after the Company has made at least twelve scheduled amortization payments of principal and interest on the Term Loan, the Company shall only be required to pay 80% of the scheduled interest that would have accrued and been payable through the stated maturity of the Term Loan. On December 28, 2017, the Company paid down an aggregate principal amount of $5.0 million of the $10.0 million outstanding principal balance of its Term Loan Facility. The Company paid to VLL7 and VLL8 approximately $5.9 million, consisting of $5.0 million in outstanding principal, and $0.9 million of accrued and unpaid interest outstanding at the prepayment date, together with all scheduled interest that would have accrued and been payable through the stated maturity of the Term Loan. As a result, the Company recorded a loss on extinguishment of debt totaling $1.8 million, representing the difference between the reacquisition price of the repaid portion of the Term Loan and the its net carrying amount.

On May 31, 2018, the Company paid off the remaining amounts payable under its $10.0 million principal amount term loan under the Loan and Security Agreement with VLL7 and VLL8. The Company paid to VLL7 and VLL8 approximately $5.2 million, consisting of $4.6 million in outstanding principal, and $0.6 million of accrued and unpaid interest outstanding at the prepayment date together with all the scheduled interest that would have accrued and been payable through the stated maturity of the term loan. As a result, the Company recorded a loss on extinguishment of debt totaling $1.4 million, representing the difference between the reacquisition price of the repaid portion of the Term Loan and its carrying amount.

The Company was obligated to pay customary fees and expenses, including customary facility fees for credit facilities of this size and type, in the aggregate amount of approximately $120,000, in connection with the closing of the two facilities. An additional facility fee of $40,000 was paid in connection with the Revolving Loan Facility on February 8, 2018.

Each of the Revolving Loan Facility and the Term Loan Facility contain customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the Company's ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and dispose of assets. The Revolving Loan Facility also contains various financial covenants, including but not limited to a liquidity covenant requiring the Company to maintain at least $4.0 million of cash. In addition, each of the Revolving Loan Facility and the Term Loan Facility contains customary events of default that entitle EWB or VLL7 and VLL8, as appropriate, to cause any or all of the Company's indebtedness under the Revolving Loan Facility or the Term Loan Facility, respectively, to become immediately due and payable. The events of default (some of which are subject to applicable grace or cure periods), include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. Upon the occurrence and during the continuance of an event of default, EWB and VLL7 and VLL8 may terminate their lending commitments and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan and Security Agreements to be immediately due and payable.

As of September 30, 2018, the Company was in compliance with all financial covenants under the Revolving Loan Facility.

The proceeds of the Term Loan and the initial draw under the Revolving Loan Facility, after payment of fees and expenses, were used to repay all outstanding amounts under the credit agreement with the Company’s previous lender. In connection with the repayment, warrants to purchase an aggregate of 400,000 shares of common stock issued to the Company’s previous lender were cancelled. The proceeds of any additional draws under the Revolving Loan Facility will be used for working capital and other general corporate purposes.

On February 14, 2018, the Company completed the acquisition of 3VR. As part of the purchase price consideration paid in the acquisition of 3VR, the Company issued subordinated unsecured promissory notes (“notes payable”) in the aggregate principal amount of $2.0 million, with an annual interest rate of 3.0%, payable on the one year anniversary of the closing date. On February 21, 2018, the Company paid 3VR’s lender $3.6 million in full repayment of all indebtedness outstanding of 3VR.

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10. Income Taxes

The Company conducts business globally and, as a result, files federal, state and foreign tax returns.  The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the probable outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the condensed consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal.

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code.  Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings, as of December 31, 2017.

As the Company’s previously unremitted earnings have now been subjected to U.S. federal income tax, any repatriation of these earnings to the U.S. would not be expected to incur significant additional taxes related to such amounts. The Company continues to assert that its foreign earnings are indefinitely reinvested in its overseas operations, but in light of the Act, the Company continues to evaluate its position on that assertion.

The Company applies the provisions of, and accounted for uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company generally is no longer subject to tax examinations for years prior to 2013. However, if loss carryforwards of tax years prior to 2013 are utilized in the U.S., these tax years may become subject to investigation by the tax authorities. While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits would materially change in the next 12 months.

11. Segment Reporting and Geographic Information

ASC 280, Segment Reporting (“ASC 280”) establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses and about which separate financial information is available to its chief operating decision makers (“CODM”). The Company’s CODM is its CEO.

The Company is organized into four reportable operating segments: Premises, Identity, Credentials and All Other.

The CODM reviews financial information and business performance for each operating segment. The Company evaluates the performance of its operating segments at the revenue and gross profit levels. The Company does not report total assets, capital expenditures or operating expenses by operating segment as such information is not used by the CODM for purposes of assessing performance or allocating resources.

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Net revenue and gross profit information by segment for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Premises:
Net revenue	$	9,364		$	5,916		$	25,691		$	17,058
Gross profit		5,363			3,399			14,336			9,543
Gross profit margin		57	%		57	%		56	%		56	%
Identity:
Net revenue		3,826			3,421			9,760			10,568
Gross profit		1,337			1,229			3,369			3,667
Gross profit margin		35	%		36	%		35	%		35	%
Credentials:
Net revenue		6,832			6,095			21,393			16,035
Gross profit		1,784			1,233			5,440			4,026
Gross profit margin		26	%		20	%		25	%		25	%
All Other:
Net revenue		—			—			—			3
Gross profit		—			—			—			5
Gross profit margin		—			—			—			167	%
Total:
Net revenue		20,022			15,432			56,844			43,664
Gross profit		8,484			5,861			23,145			17,241
Gross profit margin		42	%		38	%		41	%		39	%
Operating expenses:
Research and development		1,860			1,597			5,384			4,584
Selling and marketing		3,915			3,448			12,176			10,142
General and administrative		2,641			1,247			7,952			5,119
Restructuring and severance		223			(49	)		591			(49	)
Total operating expenses:		8,639			6,243			26,103			19,796
Loss from operations		(155	)		(382	)		(2,958	)		(2,555	)
Non-operating income (expense):
Interest expense, net		(291	)		(643	)		(1,239	)		(1,995	)
(Loss) gain on extinguishment of debt, net		—			—			(1,369	)		977
Foreign currency gains (losses), net		200			(51	)		354			(202	)
Loss before income taxes and noncontrolling    interest	$	(246	)	$	(1,076	)	$	(5,212	)	$	(3,775	)

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Americas	$	15,035		$	10,291		$	44,172		$	28,894
Europe and the Middle East		2,161			1,771			6,992			5,767
Asia-Pacific		2,826			3,370			5,680			9,003
Total	$	20,022		$	15,432		$	56,844		$	43,664
Revenues:
Americas		75	%		67	%		78	%		66	%
Europe and the Middle East		11	%		11	%		12	%		13	%
Asia-Pacific		14	%		22	%		10	%		21	%
Total		100	%		100	%		100	%		100	%

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Long-lived assets by geographic location as of September 30, 2018 and December 31, 2017 are as follows (in thousands):

	September 30,		December 31,
	2018		2017
Property and equipment, net:
Americas	$	1,106	$	868
Europe and the Middle East		50		89
Asia-Pacific		979		1,086
Total property and equipment, net	$	2,135	$	2,043

12. Restructuring and Severance

On February 14, 2018, the Company acquired 3VR. As a result of the acquisition, in the three and nine months ended September 30, 2018, the Company incurred restructuring and severance expenses of $0.2 million and $0.6 million, respectively, consisting of facility rental related costs of $0.1 million and $0.3 million, respectively, and severance related costs of $0.1 million and $0.3 million, respectively. In the first quarter of 2018, the Company engaged a property management firm to actively market and search for a tenant to sublease the newly acquired 3VR office facility in San Francisco, California. In the third quarter of 2018, the Company entered into an agreement with a tenant to sublease the entire facility over the remaining term of the original lease.

In the three and nine months ended September 30, 2017, the Company recorded a credit resulting from actual expenditures being less than originally accrued associated with the worldwide restructuring plan implemented in the first quarter of 2016.

Restructuring and severance activities during the nine months ended September 30, 2018 and 2017 were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Balance at beginning of period	$	—					$	—		$	237
Restructuring expense incurred for the period		223			(49	)		591			(49	)
Payments and non-cash item adjustment during    the period		(223	)		49			(591	)		(188	)
Balance at end of period	$	—		$	—		$	—		$	—

13. Commitments and Contingencies

The following table summarizes the Company’s principal contractual commitments as of September 30, 2018 (in thousands):

	Operating Leases (a)		Purchase Commitments		Other Contractual Commitments		Total
2018 (remaining three months)	$	498	$	10,535	$	91	$	11,124
2019		1,979		4,035		33		6,047
2020		1,782		450		—		2,232
2021		1,357		450		—		1,807
2022		1,133		450		—		1,583
Thereafter		—		—		—		—
Total	$	6,749	$	15,920	$	124	$	22,793

(a) Operating lease payments have not been reduced by sublease rentals of $2.8 million due in the future under noncancelable subleases.

Purchase commitments for inventories are highly dependent upon forecasts of customer demand. Due to the uncertainty in demand from its customers, the Company may have to change, reschedule, or cancel purchases or purchase orders from its suppliers. These changes may lead to vendor cancellation charges on these purchases or contractual commitments.

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The Company provides warranties on certain product sales for periods ranging from 12 to 24 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be required in future periods.

14. Subsequent Event

On November 1, 2018, the Company completed the acquisition of Thursby Software Systems, Inc.(“TSS”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, at the closing of the acquisition, the Company was obligated to pay aggregate consideration of approximately $3.1 million, consisting of (i) approximately $0.6 million in cash, net of cash acquired, and (ii) the issuance of shares of the Company’s common stock with a value of approximately $2.5 million. An aggregate of $0.5 million of the Company’s common stock issuable at the closing of the transaction will be held back for 12 months following the closing for the satisfaction of certain indemnification claims.

Additionally, in the event that revenue from TSS products is greater than $8.0 million, $11.0 million, or $15.0 million in product shipments in 2019, the Company will be obligated to issue earn-out consideration of up to a maximum of $7.5 million payable in shares of the Company’s common stock, subject to certain conditions.  In the event that such revenue is less than $15.0 million in 2019, but 2020 revenue from TSS products exceeds $15.0 million, the Company will be obligated to issue an additional $2.5 million in earn-out consideration payable in shares of the Company’s common stock. The maximum total earn-out consideration payable for all periods is $7.5 million in the aggregate, payable in shares of the Company’s common stock.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) contain forward-looking statements, within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements reflect current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017 under the heading “Risk Factors,” The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2017. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Each of the terms the “Company,” “Identiv,” “we” and “us” as used herein refers collectively to Identiv, Inc. and its wholly-owned subsidiaries, unless otherwise stated.

Overview

Identiv is a global security technology company that secures and manages access to physical places, things and information. Global organizations in government, education, retail, transportation, healthcare and other markets rely upon our solutions. We empower them to create secure and convenient experiences in schools, government offices, factories, critical infrastructure, transportation, hospitals and virtually every type of facility and for a wide range of products.

Our operating segments focus on the following solutions:

• Physical security and customer insight solutions, securing buildings via an integrated access control system, included in our Premises segment.

• Information security solutions, securing enterprise information access and secure transactions across PCs, networks, email, login, secure payments and printers via delivery of smart card reader products, included in our Identity segment.

• Radio frequency identification (“RFID”) based solutions for use in a wide range of applications from asset tracking to product authenticity, customer engagement, product instrumentation, transportation access and other applications sometimes included in the Internet of Things (“IoT”). The RFID devices are embedded into access cards, transponders and other embedded devices that enable frictionless access to and interaction with the physical world.

The foundation of our business is our deep technical expertise in RFID, smart card technology, and physical security technologies. Our close customer relationships and analytics platforms allow us to develop customer-relevant products and applications. This is underpinned by our core value of uncompromising quality.

To deliver these solutions, we have organized our operations into four reportable business segments, principally by product families: Premises, Identity, Credentials, and All Other.

Premises

The foundation of our physical security platform has been the Hirsch line of controllers including the advanced MX line, Hirsch's Velocity management software and a wide range of integrations that provide Velocity/MX’s unique flexibility across a wide range of industries and implementations.  We have further extended our physical access platform with our Identiv Connected Physical Access Manager (“ICPAM”) software, derived from Cisco’s Physical Access Manager (“CPAM”) system and available in partnership with Cisco. Additionally, we sell either individual components or complete bundled solutions which can include any or all among software, edge controllers, multi-door panels, access readers, access cards and other components.

In February 2018, we acquired 3VR Security, Inc. (“3VR”), a video technology and analytics company. With the acquisition, we added the 3VR video security and analytics platform, which is a natural complement to our Hirsch line.  Nearly all customers for access control are customers for video security, and vice versa.  Additionally, the events and data generated by both platforms combine to create what we believe to be uniquely valuable information for our customers to provide frictionless yet robust security.  3VR’s platform is architected as an analytics system, proven across applications in the retail, banking, and other vertical markets, and valuable to our traditional Hirsch and ICPAM markets in government, education, critical infrastructure, transportation and others.  Additionally, we sell either individual components or complete bundled solutions which can include any or all among software, edge controllers, multi-door panels, access readers, access cards, 3VR appliances and other components.

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Our modular Hirsch MX controllers are designed to be scalable, allowing customers to start with a small system and expand over time. Hirsch MX controllers can operate autonomously, whether as a single controller or as part of a networked system with Velocity software. The Hirsch Velocity software platform enables centralized management of access and security operations across an organization, including control of doors, gates, turnstiles, elevators and other building equipment, monitoring users as they move around a facility, preventing unwanted access, maintaining compliance and providing a robust audit trail.

To our price/performance/quality-leading commercial offerings, we have added what we believe to be the highest performance, lowest per-door cost access control system for the U.S. federal government security mandate known as the Federal Identity, Credential and Access Management (“FICAM”) architecture.  This brings all of the advantages above into the next generation of physical security for the U.S. government departments and agencies to achieve Federal Information Processing Standard (“FIPS”) 201 compliance.

Our TouchSecure (“TS”) door readers provide unique features to support a wide range of security standards. We support the majority of legacy card credentials with a robust next-generation platform that can help companies migrate to more secure credentials and technologies, including smart cards, near field communication ("NFC") and government-issued credentials including Common Access Card (“CAC”), Personal Verification Identification (“PIV”), Personal Verification Identification – Interoperable (“PIV-I”) and others. Additionally, our Scramblepad readers employ numerical scrambling on the keypad to protect access codes from being stolen as they are entered, and providing both secure two-factor authentication and convenient alternative-factor access.

In addition to this solution offering, in 2017, we launched Identiv Global Services (“IGS”), a service offering with a comprehensive catalog of end-to-end services that facilitates customer success and drives deeper adoption of the Identiv product portfolio. IGS supports customers throughout their premises security lifecycle from system design, to deployment to managed services.  IGS experts enable customers to address today’s complex security and IT systems interoperability requirements, and help them achieve a tailor-made set-up.

In addition to our core products, we have a range of product initiatives to leverage leading technology advances across mobile, biometric, machine-learning and other areas, to provide convenient, frictionless, low-cost yet highly secure physical access.   We invest independently and in partnership with other leading technology companies in these emerging aspects of physical security and analytics platforms.

Identity

Our Identity products include smart card readers, which includes a broad range of contact, contactless, portable and mobile smart card readers, tokens and terminals that are utilized around the world to enable logical access (i.e., PC, network or data access) and security and identification applications, such as national ID, payment, e-Health and e-Government.

With over 20 years of smart card reader, application and token experience, we are known for our expertise in this complex ecosystem.  We combine our deep technical expertise with an optimized supply chain, to provide what we believe to be the most optimal, cost-effective and high-quality smart card-based products.  Whether Identiv branded products, original equipment manufacturers (“OEM”) branded, or embedded chips or modules, our position is as the trusted business solution provider for users and issuers of smart cards and embedded-chip applications.

Credentials

Our Credentials segment includes NFC and RFID products, including inlays, inlay­based and other cards, labels, tags and stickers, as well as other radio frequency (“RF”) and integrated circuits (“IC”) components and are generally grouped into access cards and transponders. Our TS Cards product line, we believe, is the first complete solution to allow customers to pay only for the most basic low-frequency proximity access technology while having the ability to evolve to the higher-security high-frequency and highest-security public key infrastructure (“PKI”) based access credentials.  This product line exemplifies our values:  we place no burden on our customers, instead providing the most cost-effective solution to their basic needs; and then deliver within this platform the ability for them to move to higher-level needs and capabilities, when they want, when they are ready and when they will realize economic and experience benefits.

Our transponder products span the full range of high frequency (“HF”) and ultra-high frequency (“UHF”) technologies.  Our differentiation is analogous to application-specific integrated circuits (“ASICS”) in the semiconductor market.  We leverage our flexible platform, our deep technical expertise and our infrastructure and supply chain to deliver solutions optimized for our customers’ business goals.  We believe we are more responsive, more flexible, more experienced in business-optimized solutions and have a better track record of sustained delivery of solution-specific, high-quality RFID devices than our competitors. Our credentials products are manufactured in our state-of-the-art facility in Singapore and are used in a diverse range of physical applications, including electronic entertainment such as virtual reality (“VR”), games, loyalty cards, mobile payment systems, transit and event ticketing, brand authenticity from pharmaceuticals to consumer goods, hospital resource management, cold-chain management and many others.  

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Leveraging our expertise in RFID, physical access and physical authentication, we are developing new solutions to extend our platforms across a wide variety of physical use cases.  The next major opportunity in our connected world is the IoT, which fundamentally is about physical things.  We believe our core strength in physical access and physical instrumentation markets, our well-established platforms and our deep knowledge of the relevant technologies, position us well in this growth market. 

All Other 

The All Other segment included legacy product lines, such as Chipdrive and Digital Media readers. No revenues from this segment were generated in 2018 and nominal revenues were generated in 2017. No revenues are expected to be generated in future periods. In the fourth quarter of 2016, we phased out our Digital Media product lines and discontinued our Chipdrive product line.  

We primarily conduct sales and marketing activities in each of the markets in which we compete, utilizing our own sales and marketing organization to solicit prospective channel partners and customers, provide technical advice and support with respect to products, systems and services, and manage relationships with customers, distributors and/or OEMs. We utilize indirect sales channels that may include OEMs, dealers, systems integrators, value added resellers, resellers or Internet sales, although we also sell directly to end users. In support of our sales efforts, we participate in industry events and conduct sales training courses, targeted marketing programs, and ongoing customer, channel partner and third-party communications programs.

For a discussion of our net revenue by segment and geographic location, see Note 11, Segment Reporting and Geographic Information, in the accompanying notes to our unaudited condensed consolidated financial statements.

Trends in Our Business

Geographic net revenue based on each customer’s ship-to location is as follows (in thousands):

	Nine Months Ended
	September 30,
	2018			2017
Americas	$	44,172		$	28,894
Europe and the Middle East		6,992			5,767
Asia-Pacific		5,680			9,003
Total	$	56,844		$	43,664
Revenues:
Americas		78	%		66	%
Europe and the Middle East		12	%		13	%
Asia-Pacific		10	%		21	%
Total		100	%		100	%

Net Revenue Trends

Net revenue in the nine months ended September 30, 2018 increased 30% compared with the nine months ended September 30, 2017. Approximately 45% of our net revenue in the nine months ended September 30, 2018 came from our Premises segment. Net revenue in the Premises segment was $25.7 million and $17.1 million for the nine months ended September 30, 2018 and 2017, respectively. Net revenue in the Identity segment, which represented approximately 17% of total net revenue, was $9.8 million in the nine months ended September 30, 2018 compared to $10.6 million in the prior year period. Net revenue in our Credentials segment represented approximately 38% of our net revenue. Net revenue in the Credentials segment was $21.4 million in the nine months ended September 30, 2018 compared to $16.0 million in the comparable period in 2017.  

Net Revenue in the Americas

Net revenue in the Americas was approximately $44.2 million in the nine months ended September 30, 2018, accounting for 78% of total net revenue, and was up 53% compared to $28.9 million in the nine months of 2017.  Net revenue from our Premises solutions for security programs within various U.S. government agencies and commercial customers for access control and video solutions, as well as reader, controller and appliance products, represented approximately 52% of our net revenue in the Americas region.  

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Net revenue in our Premises segment for the nine months ended September 30, 2018 increased 49% compared to the prior year period primarily due to additional sales of video technology and analytics hardware and software products and related support services  following the acquisition of 3VR in February 2018, as well as higher sales of physical access control solutions and products, higher sales through our channel partners, and higher software product sales. Net revenue in our Identity segment increased 71% in the nine months ended September 30, 2018 compared to the comparable period of the previous year primarily due to higher smart card reader sales. Net revenue in our Credentials segment increased 52% in the nine months ended September 30, 2018 compared with the same period of the prior year primarily due to higher access card sales, and higher sales of RFID and NFC transponder products.

As a general trend, U.S. Federal agencies continue to be subject to security improvement mandates under programs such as Homeland Security Presidential Directive-12 (“HSPD-12”) and reiterated in memoranda from the Office of Management and Budget (“OMB M-11-11”). We believe that our solution for trusted physical access is an attractive offering to help federal agency customers move towards compliance with federal directives and mandates. To address our sales opportunities in the United States in general and with our U.S. Government customers in particular, we focus on a strong U.S. sales organization and our sales presence in Washington D.C.

Net Revenue in Europe, the Middle East, and Asia-Pacific

Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $12.7 million in the nine months ended September 30, 2018, accounting for 22% of total net revenue and was down 14% compared to $14.8 million in the nine months ended September 30, 2017 primarily as a result of lower sales in our Asia-Pacific region, partially offset by higher sales in our Europe and the Middle East region. Net revenue in these regions are very dependent on the completion of large projects and the timing of orders placed by some of our customers. Sales of Identity readers and RFID and NFC products and tags comprise a significant proportion of our net revenue in these regions.

Net revenue from our Premises products increased 60% in the nine months ended September 30, 2018 from the prior year period due to higher sales of physical access control solutions in both the Europe and the Middle East and Asia-Pacific regions. Net revenue from our Identity products decreased by approximately 41% in the nine months ended September 30, 2018 compared with the same period of the prior year primarily due to sales of smart card readers for a government project in the Asia-Pacific region in the nine months ended September 30, 2017. Identity readers comprised approximately 34% of the net revenue in both the Europe and the Middle East and the Asia-Pacific regions in the first nine months of 2018. Net revenue from our Credentials products, which comprised approximately 43% of sales in both the Europe and the Middle East and the Asia-Pacific regions in the first nine months of 2018, decreased 2% compared to the same period of the prior year primarily as a result of lower transponder product sales in the Asia-Pacific region, offset by higher transponder and access card product sales in the Europe and the Middle-East region.

Seasonality and Other Factors

In our business overall, we may experience significant variations in demand for our offerings from quarter to quarter, and typically experience a stronger demand cycle in the second half of our fiscal year. Sales of our physical access control solutions and related products to U.S. Government agencies are subject to annual government budget cycles and generally are highest in the third quarter of each year. However, the usual seasonal trend can be negatively impacted by actions such as government shutdowns and the passing of continuing resolutions which can act to delay the completion of certain projects. Sales of our identity reader chips, many of which are sold to government agencies worldwide, are impacted by testing and compliance schedules of government bodies as well as roll-out schedules for application deployments, both of which contribute to variability in demand from quarter to quarter. Further, this business is typically subject to seasonality based on differing commercial and global government budget cycles.  Lower sales are expected in the U.S. in the first half, and in particular the first quarter of the year, with higher sales typically in the second half of each year. In Asia-Pacific, with fiscal year-ends in March and June, order demand can be higher in the first quarter as customers attempt to complete projects before the end of the fiscal year. Accordingly, our net revenue levels in the first quarter each year often depends on the relative strength of project completions and sales mix between our U.S. customer base and our international customer base.

In addition to the general seasonality of demand, overall U.S. Government expenditure patterns have a significant impact on demand for our products due to the significant portion of revenues that are typically sourced from U.S. Government agencies. Therefore, any significant reduction in U.S. Government spending could adversely impact our financial results and could cause our operating results to fall below any guidance we provide to the market or below the expectations of investors or security analysts.

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Operating Expense Trends

Base Operating Expenses  

Our base operating expenses (i.e., research and development, selling and marketing, and general and administrative spending) increased 29% in the nine months of 2018 compared with the same period of 2017. Research and development spending increased by 17% in the nine months ended September 30, 2018 compared with the same period of 2017 resulting from additional headcount and external contractor costs associated with the acquisition of 3VR in the first quarter of 2018. Selling and marketing spending in the nine months ended September 30, 2018 increased by 20% compared with the same period of 2017, due to the additional headcount and related costs, higher external services and contractor costs, and the amortization of acquired intangibles associated with the acquisition of 3VR in the first quarter of 2018. General and administrative spending in the nine months ended September 30, 2018 increased 55% from the same period in the prior year primarily due to higher transaction related costs associated with the acquisition of 3VR in February of 2018, and the effect of reimbursements received in 2017 from our insurance provider for legal fees incurred in connection with matters related to a complaint by a former employee, related investigations, the class and derivative litigation and related proceedings.

Results of Operations

The following table includes segment net revenue and segment net profit information for our Premises, Identity, Credentials and All Other segments and reconciles gross profit to results of continuing operations before income taxes and noncontrolling interest      (in thousands):

	Three Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			%Change			2018			2017			% Change
Premises:
Net revenue	$	9,364		$	5,916			58	%	$	25,691		$	17,058			51	%
Gross profit		5,363			3,399			58	%		14,336			9,543			50	%
Gross profit margin		57	%		57	%					56	%		56	%
Identity:
Net revenue		3,826			3,421			12	%		9,760			10,568			(8	%)
Gross profit		1,337			1,229			9	%		3,369			3,667			(8	%)
Gross profit margin		35	%		36	%					35	%		35	%
Credentials:
Net revenue		6,832			6,095			12	%		21,393			16,035			33	%
Gross profit		1,784			1,233			45	%		5,440			4,026			35	%
Gross profit margin		26	%		20	%					25	%		25	%
All Other:
Net revenue		—			—		N/A				—			3		N/A
Gross profit		—			—		N/A				—			5		N/A
Gross profit margin		—			—						—			167	%
Total:
Net revenue		20,022			15,432			30	%		56,844			43,664			30	%
Gross profit		8,484			5,861			45	%		23,145			17,241			34	%
Gross profit margin		42	%		38	%					41	%		39	%
Operating expenses:
Research and development		1,860			1,597			16	%		5,384			4,584			17	%
Selling and marketing		3,915			3,448			14	%		12,176			10,142			20	%
General and administrative		2,641			1,247			112	%		7,952			5,119			55	%
Restructuring and severance		223			(49	)	N/A				591			(49	)	N/A
Total operating expenses:		8,639			6,243			38	%		26,103			19,796			32	%
Loss from operations		(155	)		(382	)		(59	%)		(2,958	)		(2,555	)		16	%
Non-operating income (expense):
Interest expense, net		(291	)		(643	)		(55	%)		(1,239	)		(1,995	)		(38	%)
(Loss) gain on extinguishment of debt, net		—			—		N/A				(1,369	)		977		N/A
Foreign currency gains (losses), net		200			(51	)	N/A				354			(202	)	N/A
Loss before income taxes and noncontrolling    interest	$	(246	)	$	(1,076	)		(77	%)	$	(5,212	)	$	(3,775	)		38	%

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Net Revenue

Total net revenue in the third quarter of 2018 was $20.0 million, up 30% compared with $15.4 million in the third quarter of 2017.  For the nine months ended September 30, 2018, total net revenue was $56.8 million, up 30% compared with $43.7 million for the comparable period for 2017.  Total net revenue was higher in the third quarter of 2018 and the nine months of 2018, mainly driven by higher sales in our Premises and Credentials segments. A more detailed discussion of net revenue by segment follows below.

Net revenue in our Premises segment was $9.4 million in the third quarter of 2018, an increase of 58% from $5.9 million in the third quarter of 2017. In the nine months ended September 30, 2018, net revenue in our Premises segment was $25.7 million, an increase of 51% from $17.1 million in the nine months ended September 30, 2017.  The increases were primarily due to additional sales of video technology and analytics hardware and software products and related support services following the acquisition of 3VR in February 2018, as well as higher sales of physical access control solutions, higher sales through our channel partners, and higher software licensing sales.

Net revenue in our Identity segment of $3.8 million in the third quarter of 2018 increased 12% from $3.4 million in the third quarter of 2017. In the nine months ended September 30, 2018, net revenue in our Identity segment was $9.8 million, a decrease of 8% from $10.6 million in the nine months ended September 30, 2017.  The increase in the third quarter of 2018 compared to the prior year comparable period was primarily due to higher sales of smart card readers in the Americas region. The decrease in the nine months ended September 30, 2018 were primarily due to sales of smart card readers for a government project in the Asia-Pacific region in the first nine months of 2017, partially offset by higher smart card reader sales in the Americas region.

Net revenue in our Credentials segment was $6.8 million in the third quarter of 2018, an increase of 12% from $6.1 million in the third quarter of 2017. In the nine months ended September 30, 2018, net revenue in our Credentials segment was $21.4 million, an increase of 33% from $16.0 million in the nine months ended September 30, 2017. The increases were primarily a result of higher access card product sales across all regions, and higher RFID and NFC transponder product sales in the Americas and the Europe and the Middle East  regions.

Gross Profit

Gross profit for the third quarter of 2018 was $8.5 million, or 42% of net revenue, compared with $5.9 million or 38% of net revenue in the third quarter of 2017. In the nine months ended September 30, 2018, gross profit was $23.1 million, or 41% of net revenue, compared with $17.2 million, or 39% of net revenue in the nine months ended September 30, 2017. Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, inventory adjustments and amortization, where applicable.

In our Premises segment, gross profit on sales of physical access control solutions, including panels, controllers, and access readers, and sales of video technology and analytics hardware and software products, and related support services, was $5.4 million in the third quarter of 2018 and $3.4 million in the third quarter of 2017, and $14.3 million and $9.5 million in the nine months ended September 30, 2018 and 2017, respectively. Gross profit margins in the Premises segment of 56% in the third quarter of 2018 were comparable to the same period in the prior year. Gross profit margins in the nine months ended September 30, 2018 of 57% were comparable to the same period in the prior year.

In our Identity segment, gross profit on sales of information security readers, smart card reader modules and reader chipsets was $1.3 million in the third quarter of 2018 compared to $1.2 million in the third quarter of 2017, and $3.4 million and $3.7 million in the nine months ended September 30, 2018 and 2017, respectively. Gross profit margins in the Identity segment in the third quarter of 2018 of 35% were comparable to 36% in the third quarter of 2017. Gross profit margins in the nine months ended September 30, 2018 were comparable to the same period in the prior year.

In our Credentials segment, gross profit on sales of physical access cards and transponder related products for identification, authenticity and tracking applications was $1.8 million in the third quarter of 2018 compared to $1.2 million in the third quarter of 2017, and $5.4 million and $4.0 million in the nine months ended September 30, 2018 and 2017, respectively. Gross profit margins in this segment in the third quarter of 2018 were higher compared to the same period in the prior year due to the impact of a higher proportion of lower margin sales in the third quarter of 2017. Gross profit margins in the nine months ended September 30, 2018 of 25% were comparable to the nine months ended September 30, 2017.

We expect there will be variation in our gross profit from period to period, as our gross profit has been and will continue to be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, software and services, risk of inventory write-downs and the cost and availability of components.

Operating Expenses

Information about our operating expenses for the three and nine months ended September 30, 2018 and 2017 is set forth below (dollars in thousands).

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Research and Development

	Three Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			% Change			2018			2017			% Change
Research and development	$	1,860		$	1,597			16	%	$	5,384		$	4,584			17	%
as a % of net revenue		9	%		10	%					9	%		10	%

Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.

Research and development expenses in the three and nine months ended September 30, 2018 increased compared to the comparable prior year periods primarily attributable to the additional headcount and external contractor costs associated with the acquisition of 3VR in the first quarter of 2018.

Selling and Marketing

	Three Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			% Change			2018			2017			% Change
Selling and marketing	$	3,915		$	3,448			14	%	$	12,176		$	10,142			20	%
as a % of net revenue		20	%		22	%					21	%		23	%

Selling and marketing expenses consist primarily of employee compensation as well as amortization expense of certain intangible assets, customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs.

Selling and marketing expenses in the three and nine months ended September 30, 2018 increased compared to the prior year periods primarily due to the additional headcount and related costs, higher external service provider and contractor costs, and the amortization of acquired intangibles associated with the acquisition of 3VR in the first quarter of 2018.

General and Administrative

	Three Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			% Change			2018			2017			% Change
General and administrative	$	2,641		$	1,247			112	%	$	7,952		$	5,119			55	%
as a % of net revenue		13	%		8	%					14	%		12	%

General and administrative expenses consist primarily of compensation expense for employees performing administrative functions as well as professional fees arising from legal, auditing and other professional services.

General and administrative expenses in the three and nine months ended September 30, 2018 were higher compared to the same periods of the prior year due to $0.6 million in transaction related costs associated primarily with the acquisition of 3VR in February of 2018, the impact of reimbursements received of $0.8 million and $1.0 million in the three and nine months ended September 30, 2017, respectively, from our insurance provider for legal fees incurred in connection with matters related to a complaint by a former employee, related investigations, the class and derivative litigation and related proceedings.

Restructuring and Severance Charges

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017			% Change	2018		2017			% Change
Restructuring and severance	$	223	$	(49	)	N/A	$	591	$	(49	)	N/A

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Restructuring and severance expenses in the three and nine months ended September 30, 2018 consist primarily of facility rental related costs of $0.1 million and $0.3 million, respectively, and severance related costs of $0.1 million and $0.3 million, respectively, associated with the acquisition of 3VR. In the first quarter of 2018, we engaged a property management firm to actively market and search for a tenant to sublease the newly acquired 3VR office facility in San Francisco, California. In the third quarter of 2018, we entered into an agreement with a tenant to sublease the entire facility over the remaining term of the original lease.  

In the three and nine months ended September 30, 2017, we recorded a credit resulting from actual expenditures being less than originally accrued associated with the worldwide restructuring plan implemented in the first quarter of 2016.

See Note 12, Restructuring and Severance, in the accompanying notes to our unaudited condensed consolidated financial statements for more information.

Interest Expense, Net and (Loss) Gain on Extinguishment of Debt

	Three Months Ended September 30,									Nine Months Ended September 30,
	2018			2017			% Change			2018			2017			% Change
Interest expense, net	$	(291	)	$	(643	)		(55	%)	$	(1,239	)	$	(1,995	)		(38	%)
(Loss) gain on extinguishment of debt	$	—		$	—		N/A			$	(1,369	)	$	977		N/A

Interest expense, net consists of interest on financial liabilities and interest accretion expense for a liability on a long-term payment obligation arising from our acquisition of Hirsch Electronics Corporation. The lower net interest expense in the third quarter of 2018 and the nine months of 2018 is primarily attributable to the $5.0 million principal pay down of our $10.0 million term loan in December 2017, and the subsequent payment of the remaining principal amounts outstanding of $5.0 million in May 2018.

For the nine months ended September 30, 2018, the loss on extinguishment of debt represents the difference between the reacquisition price of the remaining amounts outstanding under our term loan and its net carrying amount. See Note 9, Financial Liabilities, in the accompanying notes to our unaudited condensed consolidated financial statements for more information.

Foreign Currency Gains (Losses), Net

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017			% Change	2018		2017			% Change
Foreign currency gains (losses), net	$	200	$	(51	)	N/A	$	354	$	(202	)	N/A

Changes in currency valuation in the periods mainly were the result of exchange rate movements between the U.S. dollar, the Indian Rupee, and the Euro. Accordingly, they are predominantly non-cash items. Our foreign currency gains and losses primarily result from the valuation of current assets and liabilities denominated in a currency other than the functional currency of the respective entity in the local financial statements.

Income Taxes

	Three Months Ended September 30,							Nine Months Ended September 30,
	2018			2017			% Change	2018			2017			% Change
Income tax (provision) benefit	$	(41	)	$	42		N/A	$	(121	)	$	161		N/A
Effective tax rate		(17	%)		4	%			2	%		(4	%)

As of September 30, 2018, our deferred tax assets are fully offset by a valuation allowance. Accounting Standards Codification, or ASC, 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against all of our net U.S. and foreign deferred tax assets. We reassess the need for our valuation allowance on a quarterly basis. If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made.

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We recorded an income tax provision during the three and nine months ended September 30, 2018. The effective tax rates for the nine months ended September 30, 2018 and 2017 differ from the federal statutory rate of 21% (34% for September 30, 2017) primarily due to a change in valuation allowance, a true-up of prior taxes, changes to uncertain tax positions, and the provision or benefit in certain foreign jurisdictions, which are subject to lower tax rates.

Liquidity and Capital Resources

As of September 30, 2018, our working capital, which we define as current assets less current liabilities, was $15.8 million, a decrease of $7.2 million compared to $23.0 million as of December 31, 2017. As of September 30, 2018, our cash balance was $14.2 million.

On February 8, 2017, we entered into Loan and Security Agreements (each, a “Loan and Security Agreement”) with EWB and VLL7 and VLL8. The Loan and Security Agreement with EWB provides for a $10.0 million revolving loan facility, and the Loan and Security Agreement with VLL7 and VLL8 provides for a term loan in an aggregate principal amount of $10.0 million. In connection with the closing of both Loan and Security Agreements, we repaid all outstanding amounts under our credit agreement with our previous lender. See Note 9, Financial Liabilities, in the accompanying notes to our condensed consolidated financial statements for more information.  

On December 28, 2017, we paid down an aggregate principal amount of $5.0 million of the $10.0 million outstanding principal balance of the term loan under the Loan and Security Agreement with VLL7 and VLL8, and $0.9 million of accrued and unpaid interest outstanding at the prepayment date, together with all the scheduled interest that would have accrued and been payable through the stated maturity of the term loan. On May 31, 2018, we repaid the remaining amounts payable under the term loan of approximately $5.2 million, consisting of $4.6 million in outstanding principal, and $0.6 million of accrued and unpaid interest outstanding at the prepayment date together with all the scheduled interest that would have accrued and been payable through the stated maturity of the term loan. See Note 9, Financial Liabilities, in the accompanying notes to our condensed consolidated financial statements for more information.

On December 20, 2017, we entered into a Securities Purchase Agreement with each of 21 April Fund, Ltd. and 21 April Fund, LP (collectively, the “Purchasers”), in which we, through a private placement, agreed to issue and sell an aggregate of up to 5,000,000 shares of Series B non-voting convertible preferred stock. The Purchasers purchased an aggregate of 3,000,000 preferred shares at a price of $4.00 per share in cash at the initial closing of the transaction. On May 30, 2018, we completed the second closing of the private placement of 2,000,000 preferred shares at a price of $4.00 per share. The total purchase price paid to us was $20,000,000, of which $12,000,000 was paid at the initial closing and $8,000,000 at the second closing. We are required to use the proceeds from the issuance of the preferred shares to pay off existing debt obligations and to fund future acquisitions of technology, business and other assets. See Note 5, Stockholders’ Equity, in the accompanying notes to our condensed consolidated financial statements for more information.

As our previously unremitted earnings have been subjected to U.S. federal income tax, we expect any repatriation of these earnings to the U.S. would not incur significant additional taxes related to such amounts. However, our estimates are provisional and subject to further analysis. Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States. We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences. As of September 30, 2018, the amount of cash included at such subsidiaries was $1.5 million. We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

We have historically incurred operating losses and negative cash flows from operating activities, and we may continue to incur losses in the future. As of September 30, 2018, we had a total accumulated deficit of $405.0 million. During the nine months ended September 30, 2018, we incurred a consolidated net loss of $5.3 million.

We believe our existing cash balance, together with cash generated from operations and available credit under our Loan and Security Agreement, will be sufficient to satisfy our working capital needs to fund operations for the next twelve months. We may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements. We may also chose to finance our cash requirements through public or private equity offerings, debt financings or other arrangements. However, there can be no assurance that additional capital, if required, will be available to us or that such capital will be available to us on acceptable terms. If we raise funds by issuing equity securities, dilution to stockholders could result. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. The terms of debt securities issued or borrowings could impose significant restrictions on our operations. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or

37

license intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business. Our Loan and Security Agreement imposes restrictions on our operations, increases our fixed payment obligations and has restrictive covenants. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. If we are not able to secure additional funding when needed, we may have to curtail or reduce the scope of our business or forgo potential business opportunities.

The following summarizes our cash flows for the nine months ended September 30, 2018 and 2017 (in thousands):

	Nine Months Ended September 30,
	2018			2017
Net cash used in operating activities	$	(3,011	)	$	(5,064	)
Net cash used in investing activities		(2,018	)		(686	)
Net cash provided by financing activities		735			11,896
Effect of exchange rates on cash		(518	)		479
Net (decrease) increase in cash		(4,812	)		6,625
Cash, beginning of period		19,052			9,116
Cash, end of period	$	14,240		$	15,741

Cash flows from operating activities

Cash used in operating activities for the nine months ended September 30, 2018 was primarily due to the net loss of $5.3 million and  a decrease in cash from net changes in operating assets and liabilities of $3.9 million, partially offset by adjustments for certain non-cash items of $6.2 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, loss on extinguishment of debt, and stock-based compensation. For the nine months ended September 30, 2017, cash used in operating activities was primarily due to the net loss of $3.6 million and a decrease in cash from net changes in operating assets and liabilities of $5.4 million, partially offset by adjustments for certain non-cash items of $3.9 million.

Cash flows from investing activities

Cash used in investing activities for the nine months ended September 30, 2018 was $2.0 million, of which $1.4 million related to the acquisition of 3VR net of cash acquired, and $0.6 million related to capital expenditures. Cash used in investing activities for the nine months ended September 30, 2017 was $0.7 million and related to capital expenditures.

Cash flows from financing activities

Cash provided by financing activities during the nine months ended September 30, 2018 related primarily to borrowings of debt, net of issuance costs, of $16.9 million, and issuance of $7.9 million of Series B preferred stock, net of issuance costs, offset by repayments of debt of $23.6 million and taxes paid related to net share settlement of restricted stock units of $0.5 million. Cash provided by financing activities during the nine months ended September 30, 2017 was attributable borrowings of debt, net of issuance costs, of $42.7 million, proceeds from the sale of our common stock, net of issuance costs of $12.6 million, offset by repayments of debt of $42.8 million and taxes paid related to net share settlement of restricted stock units of $0.6 million.

Contractual Obligations

Significant commitments that will require the use of cash in future periods include obligations under operating leases, our contractual payment obligation assumed upon our acquisition of Hirsch, debt obligations, purchase commitments and other obligations. Gross committed operating lease obligations are $6.7 million, our contractual payment obligation assumed upon our acquisition of Hirsch is $3.0 million, the revolving loan facility and interest related obligation is $11.3 million, notes payable of $2.0 million, and purchase commitments and other obligations are $16.0 million at September 30, 2018. Total commitments due within one year are $25.6 million and due thereafter are $13.5 million at September 30, 2018. These commitment levels are based on existing terms of our operating leases, obligation with suppliers, our contractual payment obligation and our existing loan agreements as of September 30, 2018.

Off-Balance Sheet Arrangements

We have not entered into off-balance sheet arrangements, or issued guarantees to third parties.

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to establish accounting policies that contain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These policies relate to revenue recognition, inventory, income taxes, goodwill, intangible and long-lived assets and stock-based compensation. We have other important accounting policies and practices; however, once adopted, these other policies either generally do not require us to make significant estimates or assumptions or otherwise only require implementation of the adopted policy and not a judgment as to the policy itself. Management bases its estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Despite our intention to establish accurate estimates and assumptions, actual results may differ from these estimates under different assumptions or conditions.

As a result of adopting ASC 606 as of January 1, 2018, and the acquisition of 3VR in the first quarter of 2018, there were material changes in our critical accounting policies during the nine months ended September 30, 2018, as described in Note 1, Organization and Summary of Significant Accounting Policies, Note 2, Revenue, and Note 3, Business Combinations, to our condensed consolidated financial statements included in Part I, Item I of this Form 10-Q. With the exception of these changes, during the three months ended September 30, 2018, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2017.

Recent Accounting Pronouncements

See Note 1, Organization and Summary of Significant Accounting Policies, in the accompanying notes to our unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report for a description of recent accounting pronouncements, which is incorporated herein by reference.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls over Financial Reporting

We have made no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended September 30, 2018 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

On January 1, 2016, certain of our present and former officers and directors were named as defendants, and we were named as nominal defendant, in a shareholder derivative lawsuit filed in the United States District Court for the Northern District of California, entitled Oswald v. Humphreys, et al., Case No. 16-cv-00241-CRB, alleging breach of fiduciary duty and waste claims.  On January 25, 2016, certain of our present and former officers and directors were named as defendants, and we were named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Chopra v. Hart, et al., Case No. RG16801379, alleging breach of fiduciary duty claims.  On February 9, 2016, certain of our present and former officers and directors were named as defendants, and we were named as nominal defendant, in a shareholder derivative lawsuit filed in the Superior Court of the State of California, County of Alameda, entitled Wollnik v. Wenzel, et al., Case No. HG16803342, alleging breach of fiduciary duty, corporate waste, gross mismanagement, and unjust enrichment claims.  These lawsuits generally allege that we made false and/or misleading statements and/or failed to disclose information in certain public filings and disclosures between 2013 and 2015.  Each of the lawsuits seeks one or more of the following remedies: unspecified compensatory damages, unspecified exemplary or punitive damages, restitution, declaratory relief, equitable and injunctive relief, and reasonable costs and attorneys’ fees.  On May 2, 2016, the court in the Chopra lawsuit entered an order staying proceedings in the Chopra lawsuit in favor of the Oswald lawsuit, based on a stipulation to that effect filed by the parties in the Chopra lawsuit on April 28, 2016.  Similarly, on June 28, 2016, the court in the Wollnik lawsuit entered a stipulated order staying proceedings in the Wollnik lawsuit in favor of the Oswald lawsuit.  On June 17, 2016, the plaintiff in the Oswald lawsuit filed an amended complaint.  On August 1, 2016, we filed a motion to dismiss for failure by plaintiff to make a pre-lawsuit demand on our board of directors, which motion was heard on October 14, 2016. The judge in the Oswald lawsuit issued an order on November 7, 2016 granting our motion to dismiss, without prejudice.  In addition, the court stayed the case so that plaintiff could exercise whatever rights he had under Section 220 of the Delaware General Corporation Law.  On or around November 30, 2016, the plaintiff purported to serve a books and records demand under Section 220 of the Delaware General Corporation Law.  We responded to that demand. On March 21, 2017, we and the plaintiff in the Oswald lawsuit filed a stipulation and proposed order lifting the stay of the case, granting the plaintiff leave to amend, and setting a briefing schedule.  The plaintiff in the Oswald lawsuit filed his second amended complaint on April 10, 2017. We then filed a motion to dismiss that second amended complaint on May 12, 2017.  After further briefing and argument, on October 22, 2017, the court issued its written order denying the motion to dismiss on the basis of demand futility.  On January 3, 2018, the court entered a stipulated order setting a response and briefing schedule for defendants to the second amended complaint.  

Defendants filed motions to dismiss the second amended complaint in the Oswald action under Rule 12(b)(6) on January 16, 2018.  After further briefing and argument, on April 13, 2018, the court entered an order granting defendants’ motions to dismiss.  On April 19, 2018, plaintiff Oswald filed a motion for leave to file a third amended complaint.  On that same date, plaintiff Chopra, a plaintiff in a related and stayed derivative action in state court, filed a motion to intervene in the Oswald action.  After further briefing and argument, on July 16, 2018, the court entered an order granting the Chopra motion to intervene and denying the Oswald motion for leave to file a third amended complaint.  After the filing of an unopposed administrative motion for entry of judgment by defendants, on October 1, 2018, the court entered an order granting administrative motion for entry of final judgment and entered final judgment in favor of all named defendants and against plaintiffs Oswald and Chopra.  On October 23, 2018, plaintiff Oswald filed a notice of appeal with the Ninth Circuit. In the interim, the state court Chopra and Wollnik actions have remained stayed with periodic status conferences.  The next status conferences have been scheduled in the Chopra and Wollnik cases on January 8, 2019 before Judge Seligman. We intend to vigorously defend against these lawsuits.  We cannot currently predict the impact or resolution of each of these lawsuits or reasonably estimate a range of possible loss, if any, which could be material, and the resolution of these lawsuits may harm our business and have a material adverse impact on our financial condition.

From time to time, we could become subject to claims arising in the ordinary course of business or could be named a defendant in additional lawsuits. The outcome of such claims or other proceedings cannot be predicted with certainty and may have a material effect on our financial condition, results of operations or cash flows.

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Item 1A. Risk Factors

Our business and results of operations are subject to numerous risks, uncertainties, and other factors that you should be aware of. The risks, uncertainties and other factors described in these risk factors are not the only ones facing our company. Additional risks, uncertainties and other factors not presently known to us or that we currently deem immaterial may also impair our business operations. Any of the risks, uncertainties and other factors could have a materially adverse effect on our business, financial condition, results of operations, cash flows or product market share and could cause the trading price of our common stock to decline substantially.

Impairment in the value of our goodwill or other intangible assets could have a material adverse effect on our operating results and financial condition.

We record goodwill and intangible assets at fair value upon the acquisition of a business. Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired. Goodwill and indefinite-lived intangible assets are evaluated for impairment annually, or more frequently if conditions warrant, by comparing the carrying value of a reporting unit to its estimated fair value. Intangible assets with definite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable. Declines in operating results, divestitures, sustained market declines and other factors that impact the fair value of a reporting unit could result in an impairment of goodwill or intangible assets and, in turn, a charge to net income. Any such charges could have a material adverse effect on our results of operations or financial condition.

In addition to the above and other information set forth in this Quarterly Report, you should carefully consider the risk factors previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the nine months ended September 30, 2018 and 2017, we repurchased 109,666 shares and 121,384 shares, respectively, of common stock surrendered to us to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.

Item 6. Exhibits

Exhibit Number	Description
10.1^	Seventh Amendment to Loan and Security Agreement dated July 17, 2018 between the Company, 3VR Security, Inc. and East West Bank.
10.2^	Eighth Amendment to Loan and Security Agreement dated November 1, 2018 between the Company, 3VR Security, Inc., Thursby Software Systems and East West Bank.
31.1^	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2^	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32#	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

^# Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference.

^ Filed herewith.

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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.

	IDENTIV, INC.
November 9, 2018	By:	/S/ Steven Humphreys
		Steven Humphreys
		Chief Executive Officer
		(Principal Executive Officer)
November 9, 2018	By:	/S/ Sandra Wallach
		Sandra Wallach
		Chief Financial Officer and Secretary
		(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

SEVENTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

This Seventh Amendment to Loan and Security Agreement is entered into as of July 17, 2018 (the “Amendment”), by and between EAST WEST BANK (“Bank”) and IDENTIV, INC. (“Parent”) and 3VR Security, Inc. (“Target”). Parent and Target are each referred to herein as a “Borrower” and collectively as the “Borrowers”.

RECITALS

Borrowers and Bank are parties to that certain Loan and Security Agreement dated as of February 8, 2017, as amended from time to time, including pursuant to that certain First Amendment to Loan and Security Agreement dated as of March 27, 2017, that certain Second Amendment to Loan and Security Agreement dated as of December 19, 2017, that certain Third Amendment to Loan and Security Agreement dated as of January 30, 2018, that certain Fourth Amendment to Loan and Security Agreement dated as of February 5, 2018, that certain Fifth Amendment to Loan and Security Agreement dated as of March 6, 2018 and that certain Sixth Amendment to Loan and Security Agreement dated as of April 14, 2018 (collectively, the “Loan Agreement”).  The parties desire to amend the Loan Agreement in accordance with the terms of this Amendment.  

NOW, THEREFORE, the parties agree as follows:

1.Bank hereby consents to the subleasing of Target’s leased location at 814 Mission Street, San Francisco, California, which shall constitute a “Permitted Investment” under the Loan Agreement, subject Bank’s receipt of the fully executed sublease agreement and the limited guaranty of sublease executed by the parent entity of the sublessee.

2.The following is added as a new clause (j) to the end of the definition of “Permitted Indebtedness” set forth in Section 1.1 of the Agreement:

(j) Indebtedness consisting of the Contingent Obligations of Parent with respect to a Guaranty of Lease entered into by Parent in favor of Bulletin Building Owner, LLC, the landlord of Target’s leased property at 814 Mission Street, San Francisco, California.

3.Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement.  The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.  Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

4.Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

5.This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original hereof.  Notwithstanding the foregoing, Borrowers shall deliver all original signed documents requested by Bank no later than five (5) Business Days following the date of execution.

6.As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

(a)this Amendment, duly executed by Borrowers;

(b)payment of all Bank Expenses incurred through the date of this Amendment; and

(c)such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

[remainder of this page intentionally left blank]

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

IDENTIV, INC.
By:	/s/ Sandra Wallach
Name:	Sandra Wallach
Title:	CFO

3VR SECURITY, INC.
By:	/s/ Sandra Wallach
Name:	Sandra Wallach
Title:	CFO

EAST WEST BANK
By:	/s/ Kelvin Chan
Name:	Kelvin Chan
Title:	Managing Director

EX-10.2

Exhibit 10.2

EIGHTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT AND JOINDER

This Eighth Amendment to Loan and Security Agreement and Joinder is entered into as of November 1, 2018 (the “Amendment”), by and between EAST WEST BANK (“Bank”), IDENTIV, INC. (“Parent”), 3VR SECURITY, INC. (“3VR”) and Thursby Software Systems, LLC (“TSS”).

RECITALS

Parent, 3VR and Bank are parties to that certain Loan and Security Agreement dated as of February 8, 2017, as amended from time to time, including pursuant to that certain First Amendment to Loan and Security Agreement dated as of March 27, 2017, that certain Second Amendment to Loan and Security Agreement dated as of December 19, 2017, that certain Third Amendment to Loan and Security Agreement dated as of January 30, 2018, and that certain Fourth Amendment to Loan and Security Agreement dated as of February 5, 2018, that certain Fifth Amendment to Loan and Security Agreement dated as of March 6, 2018, that certain Sixth Amendment to Loan and Security Agreement dated as of April 14, 2018  and that certain Seventh Amendment to Loan and Security Agreement dated as of July 17, 2018 (collectively, the “Loan Agreement”).  The parties desire to amend the Loan Agreement to join TSS as a co-Borrower thereunder and make such other  modifications to the Loan Agreement as set forth herein.  

NOW, THEREFORE, the parties agree as follows:

1.TSS is hereby added to the Loan Agreement as a “Borrower” thereunder, and each reference to “Borrower” in the Loan Agreement and any other Loan Document shall mean and refer to each of Parent, 3VR and TSS thereunder, individually and collectively.  TSS assumes, as a joint and several obligor thereunder, all of the Obligations, liabilities and indemnities of a Borrower under the Loan Agreement and all other Loan Documents; and covenants and agrees to be bound by and adhere to all of the terms, covenants, waivers, releases, agreements and conditions of or respecting a Borrower with respect to the Loan Agreement and the other Loan Documents and all of the representations and warranties contained in the Loan Agreement and the other Loan Documents with respect to a Borrower. Without limiting the generality of the foregoing, TSS grants Bank a security interest in the Collateral described on Exhibit A to the Loan Agreement to secure performance and payment of all Obligations under the Loan Agreement, and authorizes Bank to file financing statements or other instruments with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder and under the Loan Documents.

2.Each Borrower acknowledges and agrees that no Accounts or Inventory of TSS shall be included in the Borrowing Base.

3.The following definitions are added to Section 1.1 of the Loan Agreement:

“TSS Closing” means the “Closing” as defined in that certain Agreement and Plan of Merger dated as of October 25, 2018 by and among Parent, Thursby Software Systems, Inc., a Texas corporation and the other parties named therein.

“TSS” means Thursby Software Systems, LLC., a Texas limited liability company.

4.TSS acknowledges and agrees that Sections 6.3(b)(i) and 6.3(b)(ii) of the Loan Agreement shall apply to TSS; and TSS shall deliver to Bank its aged listings of accounts receivable and accounts payable by invoice date and an inventory report in accordance with the timeframe set forth in Sections 6.3(b) of the Loan Agreement.

5.The following is added as a new Section 6.14 to the end of Section 6 of the Loan Agreement:

6.14TSS Covenants.  Borrowers shall deliver to Bank the following, each in form and substance satisfactory to Bank: (a) within thirty (30) days following the TSS Closing, (i) insurance certificates and endorsements evidencing the addition of Bank as an additional insured and lose payee under TSS’s insurance policies; and (b) account control agreements with respect to TSS’s bank accounts maintained outside of Bank.  

6.Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement.  The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects.  Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.  Each Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

7.Each Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

8.This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original hereof.  Notwithstanding the foregoing, Borrowers shall deliver all original signed documents requested by Bank no later than five (5) Business Days following the date of execution.

9.As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

(a)this Amendment, duly executed by Borrowers;

(b)corporate resolutions and incumbency certificate duly executed by TSS, with certified copies of its certificate of formation and operating agreement;

(c)intellectual property security agreement duly executed by TSS;

(d)filed copies of all of the Certificates of Merger filed in connection with the TSS Closing; and

(e)payment of all Bank Expenses incurred through the date of this Amendment; and

(f)such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

[remainder of this page intentionally left blank]

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

IDENTIV, INC.
By:	/s/ Sandra Wallach
Name:	Sandra Wallach
Title:	CFO

3VR SECURITY, INC.
By:	/s/ Sandra Wallach
Name:	Sandra Wallach
Title:	CFO

THURSBY SOFTWARE SYSTEMS, LLC
By:	/s/ Sandra Wallach
Name:	Sandra Wallach
Title:	Manager

EAST WEST BANK
By:	/s/ Kelvin Chan
Name:	Kelvin Chan
Title:	Managing Director

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Steven Humphreys, certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. 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 have:

a) 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 report is being prepared;

b) 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;

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

d) Disclosed in this 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

5. 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 the registrant's board of directors (or persons performing the equivalent functions):

(a) 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

(b) 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:  November 9, 2018	/s/ Steven Humphreys
	Steven Humphreys
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Sandra Wallach, certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. 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 have:

a) 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 report is being prepared;

b) 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;

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

d) Disclosed in this 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

5. 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 the registrant's board of directors (or persons performing the equivalent functions):

(a) 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

(b) 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:  November 9, 2018	/s/ Sandra Wallach
	Sandra Wallach
	Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Humphreys, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) the Quarterly Report of Identiv, Inc. on Form 10-Q for the quarterly period ended September 30, 2018 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 such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Identiv, Inc.  

Date:  November 9, 2018	/s/ Steven Humphreys
	Steven Humphreys
	Chief Executive Officer
	(Principal Executive Officer)

I, Sandra Wallach, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) the Quarterly Report of Identiv, Inc. on Form 10-Q for the quarterly period ended September 30, 2018 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 such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Identiv, Inc.  

Date:  November 9, 2018	/s/ Sandra Wallach
	Sandra Wallach
	Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 02, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Trading Symbol	INVE
Entity Registrant Name	Identiv, Inc.
Entity Central Index Key	0001036044
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		15,453,916

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash	$ 14,240	$ 19,052
Accounts receivable, net of allowances of $386 and $306 as of September 30, 2018 and December 31, 2017, respectively	14,129	12,282
Inventories	11,973	11,126
Prepaid expenses and other current assets	2,383	1,779
Total current assets	42,725	44,239
Property and equipment, net	2,135	2,043
Intangible assets, net	9,155	4,365
Goodwill	5,781
Other assets	1,146	715
Total assets	60,942	51,362
Current liabilities:
Accounts payable	5,584	5,863
Current portion - payment obligation	989	888
Current portion - financial liabilities, net of discount and debt issuance costs of $76 and $404, respectively	11,245	9,829
Notes payable	2,000
Deferred revenue	2,265	900
Accrued compensation and related benefits	1,819	1,515
Other accrued expenses and liabilities	2,997	2,020
Total current liabilities	26,899	21,015
Long-term payment obligation	2,157	2,998
Long-term financial liabilities, net of discount and debt issuance costs of $0 and $582, respectively		2,921
Long-term deferred revenue	1,226	190
Other long-term liabilities	625	385
Total liabilities	30,907	27,509
Commitments and contingencies (see Note 13)
Identiv, Inc. stockholders' equity:
Common stock, $0.001 par value: 50,000 shares authorized; 16,464 and 15,341 shares issued and 15,449 and 14,436 shares outstanding as of September 30, 2018 and December 31, 2017, respectively	16	15
Additional paid-in capital	441,008	428,470
Treasury stock, 1,015 and 905 shares as of September 30, 2018 and December 31, 2017, respectively	(7,987)	(7,485)
Accumulated deficit	(404,983)	(399,647)
Accumulated other comprehensive income	2,146	2,675
Total Identiv, Inc. stockholders' equity	30,205	24,031
Noncontrolling interest	(170)	(178)
Total stockholders´ equity	30,035	23,853
Total liabilities and stockholders' equity	60,942	51,362
Series B Preferred Stock
Identiv, Inc. stockholders' equity:
Series B Preferred stock, $0.001 par value: 5,000 shares authorized; 5,000 and 3,000 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	5	3
Total stockholders´ equity	$ 5	$ 3

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accounts receivable, allowances	$ 386	$ 306
Debt instrument unamortized discount and debt issuance costs, current	76	404
Debt instrument unamortized discount and debt issuance costs, non-current	$ 0	$ 582
Preferred stock, par value	$ 0.001
Preferred stock, shares authorized	10,000,000
Preferred stock, outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	16,464,000	15,341,000
Common stock, shares outstanding	15,449,000	14,436,000
Treasury stock, shares	1,015,000	905,000
Series B Preferred Stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, issued	5,000,000	3,000,000
Preferred stock, outstanding	5,000,000	3,000,000

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Income Statement [Abstract]
Net revenue	$ 20,022	$ 15,432	$ 56,844	$ 43,664
Cost of revenue	11,538	9,571	33,699	26,423
Gross profit	8,484	5,861	23,145	17,241
Operating expenses:
Research and development	1,860	1,597	5,384	4,584
Selling and marketing	3,915	3,448	12,176	10,142
General and administrative	2,641	1,247	7,952	5,119
Restructuring and severance	223	(49)	591	(49)
Total operating expenses	8,639	6,243	26,103	19,796
Loss from operations	(155)	(382)	(2,958)	(2,555)
Non-operating income (expense):
Interest expense, net	(291)	(643)	(1,239)	(1,995)
(Loss) gain on extinguishment of debt, net			(1,369)	977
Foreign currency gains (losses), net	200	(51)	354	(202)
Loss before income taxes and noncontrolling interest	(246)	(1,076)	(5,212)	(3,775)
Income tax (provision) benefit	(41)	42	(121)	161
Loss before noncontrolling interest	(287)	(1,034)	(5,333)	(3,614)
Less: Income (loss) attributable to noncontrolling interest		2	(5)	(8)
Net loss attributable to Identiv, Inc.	$ (287)	$ (1,032)	$ (5,338)	$ (3,622)
Basic and diluted net loss per share attributable to Identiv, Inc.	$ (0.02)	$ (0.07)	$ (0.34)	$ (0.28)
Weighted average shares used to compute basic and diluted net loss per share	15,750	14,409	15,484	12,806

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (287)	$ (1,034)	$ (5,333)	$ (3,614)
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustment	(226)	378	(526)	518
Total other comprehensive (loss) income, net of income taxes	(226)	378	(526)	518
Comprehensive loss	(513)	(656)	(5,859)	(3,096)
Less: Comprehensive income attributable to noncontrolling interest		(16)	(8)	(23)
Comprehensive loss attributable to Identiv, Inc. common stockholders	$ (513)	$ (672)	$ (5,867)	$ (3,119)

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CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($) $ in Thousands	Total	Series B Preferred Stock	Common Stock	Additional Paid-in Capital	Treasury Stock	Accumulated Deficit	Accumulated Other Comprehensive Income	Noncontrolling Interest
Beginning Balances at Dec. 31, 2017	$ 23,853	$ 3	$ 15	$ 428,470	$ (7,485)	$ (399,647)	$ 2,675	$ (178)
Beginning Balances (in shares) at Dec. 31, 2017		3,000,000	14,436,000
Net loss	(5,333)					(5,338)		5
Other comprehensive loss	(526)						(529)	3
Impact of adoption of Topic 606 (Note 2) | Topic 606	2					2
Issuance of Series B preferred stock, net of issuance costs	7,895	$ 2		7,893
Issuance of Series B preferred stock, net of issuance costs (shares)		2,000,000
Issuance of common stock in connection with acquisition of business	2,635		$ 1	2,634
Issuance of common stock in connection with acquisition of business (shares)			723,000
Issuance of common stock in connection with vesting of stock awards (shares)			394,000
Proceeds from exercise of stock options	$ 13			13
Proceeds from exercise of stock options (shares)	2,500		3,000
Stock-based compensation	$ 1,987			1,987
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units	(502)				(502)
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units (Shares)			(110,000)
Issuance of shares to non- employees	11			11
Issuance of shares to non-employees (shares)			3,000
Ending Balances at Sep. 30, 2018	$ 30,035	$ 5	$ 16	$ 441,008	$ (7,987)	$ (404,983)	$ 2,146	$ (170)
Ending Balances (in shares) at Sep. 30, 2018		5,000,000	15,449,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net loss	$ (5,333)	$ (3,614)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,362	2,081
Loss (gain) on extinguishment of debt, net	1,369	(977)
Accretion of interest on long-term payment obligation	180	277
Amortization of debt issuance costs	280	617
Stock-based compensation expense	1,987	1,916
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable	202	(1,197)
Inventories	(614)	(1,785)
Prepaid expenses and other assets	(866)	(992)
Accounts payable	(1,871)	1,531
Payment obligation liability	(920)	(892)
Deferred revenue	(525)	58
Accrued expenses and other liabilities	738	(2,087)
Net cash used in operating activities	(3,011)	(5,064)
Cash flows from investing activities:
Capital expenditures	(634)	(686)
Acquisition of business, net of cash acquired	(1,384)
Net cash used in investing activities	(2,018)	(686)
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs	16,941	42,735
Repayments of debt	(23,612)	(42,805)
Proceeds from issuance of common stock, net of issuance costs		12,560
Taxes paid related to net share settlement of restricted stock units	(502)	(594)
Proceeds from issuance of Series B preferred stock, net of issuance costs	7,895
Proceeds from exercise of stock options	13
Net cash provided by financing activities	735	11,896
Effect of exchange rates on cash	(518)	479
Net (decrease) increase in cash	(4,812)	6,625
Cash at beginning of period	19,052	9,116
Cash at end of period	14,240	15,741
Supplemental Disclosures of Cash Flow Information:
Interest paid	1,571	1,379
Taxes paid, net	109	96
Non-cash investing and financing activities:
Warrants issued as debt issuance costs in connection with debt agreements		2,319
Liability to be settled in common stock		$ 250
Issuance of shares to non-employees	11
Promissory notes issued in acquisition of business	2,000
Common Stock
Non-cash investing and financing activities:
Stock issued for acquisition of business, net	$ 2,635

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Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies

1. Organization and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Identiv, Inc. (“Identiv” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any future period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and the audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The preparation of unaudited condensed consolidated financial statements necessarily requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the condensed consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. The Company may experience significant variations in demand for its products quarter to quarter and typically experiences a stronger demand cycle in the second half of its fiscal year. As a result, the quarterly results may not be indicative of the full year results. The December 31, 2017 balance sheet was derived from the audited financial statements as of that date.

Reclassifications — Certain reclassifications have been made to the fiscal year 2017 financial statements to conform to the fiscal year 2018 presentation. The reclassifications had no impact on net loss, total assets, or stockholders’ equity.

Concentration of Credit Risk — No customer represented more than 10% of net revenue for either of the three or nine months ended September 30, 2018 or 2017.No customer represented 10% or more of the Company’s accounts receivable balance at September 30, 2018 or December 31, 2017.

Business Combinations— Business combinations are accounted for at fair value under the purchase method of accounting. Acquisition costs are expensed as incurred and recorded in general and administrative expenses and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the condensed consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, or require acceleration of the amortization expense of finite-lived intangible assets.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.

Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.

Intangible Assets—Amortizable intangible assets include trademarks, developed technology and customer relationships acquired as part of business combinations. Intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from four to twelve years and are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.

Goodwill—In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. In testing for goodwill impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

Research and Development — Costs to research, design, and develop the Company’s products are expensed as incurred and consist primarily of employee compensation and fees for the development of prototype products. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, the Company’s products are released soon after technological feasibility has been established. Costs incurred subsequent to achieving technological feasibility have not been significant and generally have been expensed as incurred. At September 30, 2018, the amount of capitalized software development costs totaled $386,000 and is included in other assets in the accompanying condensed consolidated balance sheet. Software development costs capitalized in 2017 totaled $401,000. No software development costs were capitalized in 2018.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016. The Company adopted this guidance effective January 1, 2017. The Company's adoption of this standard did not have a significant impact on its condensed consolidated financial statements. No excess income tax benefit or tax deficiencies were recorded as a result of the adoption and there was no change to accumulated deficit with respect to previously unrecognized excess tax benefits. The Company elected to continue to account for forfeitures on an estimated basis. The Company has elected to present the condensed consolidated statements of cash flows on a prospective transition method and no prior periods have been adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients.In January 2018, the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. The Company will adopt the standard on the effective date, but has not yet selected a transition method. The Company is reviewing its leased assets to determine the potential impact on its consolidated financial statements. Though its evaluation is ongoing, the Company expects changes to its balance sheet due to the recognition of right-of-use assets and lease liabilities related to its real estate leases, but it does not anticipate a material impact to its results of operations or liquidity.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The standard is effective for fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company is currently in the process of evaluating when it will adopt ASU 2017-04 and its impact on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605)” and Subtopic 985-605 “Software - Revenue Recognition.” Topic 605 and Subtopic 985-605 are collectively referred to as “Topic 605” or “prior GAAP.” Under Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures, including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The Company adopted Topic 606 on January 1, 2018 using the modified retrospective transition method. Under this method, the Company evaluated contracts that were in effect at the beginning of fiscal 2018 as if those contracts had been accounted for under Topic 606. Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical, pre-Topic 606 accounting.

On the adoption date, a cumulative catch up adjustment was recorded to beginning retained earnings to reflect the impact of all existing arrangements under Topic 606. The Company increased retained earnings and decreased deferred revenue by approximately $2,000 for an uncompleted software development and technical support services contract with a customer. Under Topic 605 accounting, since the Company was unable to establish vendor-specific objective evidence (“VSOE”) of fair value for the product development and technical support services components in the contract, the Company was required to defer the revenue and recognize it over the term of the contract. Under Topic 606, the Company would have been required to establish the standalone selling price of each of the performance obligations in the contract and recognize the product development services revenue upon delivery, and recognize the technical support services revenue ratably over the term of the contract.

The Company does not expect the impact of the adoption of Topic 606 to be material to its annual revenue and net income on an ongoing basis. Revenue generated under Topic 606 is expected to be materially comparable to revenue recognized under Topic 605 in fiscal 2018 primarily due to the elimination of deferred revenue associated with the product development services discussed above that, under Topic 605, would have continued to be recognized into revenue in 2018 and 2019, offset by an increase in the revenue recognized related to the amount and timing of technical support services provided in the contract discussed above. The actual effects on revenue recognized for the nine months ended September 30, 2018 are reported in the table below.

No incremental sales commission costs or other costs related to obtaining customer contracts were capitalized at the adoption date as they were immaterial.

The timing of revenue recognition for hardware and professional services is expected to remain substantially unchanged. The Company’s overall mix of revenue recognized at a point in time versus over time is expected to increase in the future due to the intended growth and expansion of its services offerings. For the three and nine months ended September 30, 2018, approximately 94% and 95%, respectively, of the Company’s revenue was recognizable on delivery and 6% and 5%, respectively, over time.

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated balance sheet as of September 30, 2018 (in thousands):

	Balance at December 31, 2017			Adjustments			Balance at January 1, 2018
Deferred revenue	$	1,090		$	(2	)	$	1,088
Accumulated deficit		(399,647	)		2			(399,645	)

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2018 (in thousands, except per share amounts):

	As Reported Under Topic 606			Adjustments		Balance Under Prior GAAP
Net revenue	$	56,844		$	1	$	56,845
Cost of revenue		33,699			—		33,699
Operating expenses		26,103			—		26,103
Provision for income taxes		(121	)		—		(121	)
Net loss		(5,338	)		1		(5,337	)
Basic and diluted net loss per share		(0.34	)		—		(0.34	)

The adoption of Topic 606 had no impact on the Company’s net cash provided by operating activities, net cash used in investing activities or net cash used in financing activities.

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Revenue

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Revenue

2. Revenue

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of its products, software licenses, and services, which are generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its standalone selling price. The stated contract value is generally the transaction price to be allocated to the separate performance obligations. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.

Nature of Products and Services

The Company derives revenues primarily from sales of hardware products, software licenses, professional services, software maintenance and support, and extended hardware warranties.

Hardware Product Revenues — The Company generally has two performance obligations in arrangements involving the sale of hardware products. The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product). The second performance obligation is to provide assurance that the product complies with its agreed-upon specifications and is free from defects in material and workmanship for a period of one to three years (i.e. assurance warranty). The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. The Company has concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. None of the transaction price is allocated to the assurance warranty component, as the Company accounts for these product warranty costs in accordance with ASC 460, Guarantees. Payments for hardware contracts are generally due 30 to 60 days after shipment of the hardware product.

Software License Revenues— The Company’s license arrangements grant customers the perpetual right to access and use the licensed software products at the outset of an arrangement. Technical support and software updates are generally made available throughout the term of the support agreement, which is generally one to three years. The Company accounts for these arrangements as two performance obligations (1) the software licenses, and (2) the related updates and technical support. The software license revenue is recognized upon delivery of the license to the customer, while the software updates and technical support is recognized over the term of the support contract. Payments are generally due 30 to 60 days after delivery of the software licenses.

Professional Services Revenues—Professional services revenues consist primarily of programming customization services performed relating to the integration of the Company’s software products with the customers other systems, such as HR systems. Professional services contracts are generally billed on a time and materials basis and revenue is recognized as the services are performed. For contracts billed on a fixed price basis, revenue is recognized once the contract is complete. Payments for services are generally due when services are performed.

Software Maintenance and Support Revenues— Support and maintenance contract revenues consist of the services provided to support the specialized programming applications performed by our professional services group. Support and maintenance contracts are typically billed at inception of the contract and recognized as revenue over the contract period, typically over a one to three year period.

Extended Hardware Warranties Revenues— Sales of our hardware products may also include optional extended hardware warranties, which typically provide assurance that the product will continue function as initially intended. Extended hardware warranty contracts are typically billed at inception of the contract and recognized as revenue over the respective contract period, typically over one to two year periods after the expiration of the original assurance warranty.

Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Hardware products	When customer obtains control of the product (point-in-time)	Within 30-60 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)	Within 30-60 days of the beginning of license period	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional services	As services are performed and/or when contract is fulfilled (point-in-time)	Within 30-60 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance    and support services	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions
Extended hardware    warranties	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions

Significant Judgments

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the Company allocates revenues to each performance obligation based on its relative standalone selling price (“SSP”).

Judgment is required to determine the SSP for each distinct performance obligation in a contract. For the majority of items, the Company estimates SSP using historical transaction data. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when the product or service is not sold separately, the Company determines the SSP using information that may include market conditions and other observable inputs.

The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.

Disaggregation of Revenues

The Company disaggregates revenue from contracts with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based on the shipping location of the customer. The geographic regions that are tracked are the Americas, Europe and the Middle East, and Asia-Pacific regions. The Company operates as four operating segments.

Total net sales based on the disaggregation criteria described above are as follows (in thousands):

	Three Months Ended September 30,
	2018						2017 (1)
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	13,930	$	1,105	$	15,035	$	9,960	$	331	$	10,291
Europe and the Middle East		2,117		44		2,161		1,771		—		1,771
Asia-Pacific		2,803		23		2,826		3,370		—		3,370
Total	$	18,850	$	1,172	$	20,022	$	15,101	$	331	$	15,432
	Nine Months Ended September 30,
	2018						2017 (1)
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	41,150	$	3,022	$	44,172	$	27,893	$	1,001	$	28,894
Europe and the Middle East		6,921		71		6,992		5,741		26		5,767
Asia-Pacific		5,657		23		5,680		9,003		—		9,003
Total	$	53,728	$	3,116	$	56,844	$	42,637	$	1,027	$	43,664
(1)  As discussed in Note 1, prior periods have not been adjusted for the adoption of Topic 606.

Information about Contract Balances

Amounts invoiced in advance of services being provided are accounted for as deferred revenue. Nearly all of the Company’s deferred revenue balance is related software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 90 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from its customers.

Changes in deferred revenue during the nine months ended September 30, 2018 were as follows (in thousands):

	Amount
Deferred revenue at December 31, 2017	$	1,090
Impact of adoption of Topic 606		(2	)
Deferred revenue at January 1, 2018		1,088
Fair value of deferred revenue acquired in acquisition, net of recognition		1,693
Deferral of revenue billed in current period, net of recognition		1,557
Recognition of revenue deferred in prior periods		(847	)
Balance as of September 30, 2018	$	3,491

Unsatisfied Performance Obligations

Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $2.1 million as of September 30, 2018. Since the Company typically invoices customers at contract inception, this amount is included in deferred revenue balance. As of September 30, 2018, the Company expects to recognize approximately 19% of the revenue related to these unsatisfied performance obligations during the remainder of 2018, 56% during 2019, and 25% thereafter.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs (i.e. commissions) meet the requirements to be capitalized. Capitalized incremental costs related to contracts are amortized over the respective contract periods. For the three and nine months ended September 30, 2018, total capitalized costs to obtain contracts were immaterial.

Practical Expedients

As discussed in Note 1, Organization and Summary of Significant Accounting Policies, and Note 2, Revenue, the Company has elected the following practical expedients in accordance with Topic 606:

• The Company expenses costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs include internal sales force compensation programs and certain partner sales incentive programs as the Company has determined annual compensation is commensurate with annual sales activities.

• The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expense.

• The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

• The Company does not consider the time value of money for contracts with original durations of one year or less.

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Business Combinations

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Business Combinations

3. Business Combinations

On February 14, 2018, the Company acquired 3VR Security, Inc. (“3VR”), a video technology and analytics company, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Eagle Acquisition, Inc., a California corporation and a wholly owned subsidiary of the Company (“Merger Sub”), 3VR, and Fortis Advisors LLC, a Delaware limited liability company, acting as Security Holder Representative. Pursuant to the Merger Agreement, at the effective time, Merger Sub merged with and into 3VR and 3VR became a wholly-owned subsidiary of the Company (the “Acquisition”).

Under the terms of the Merger Agreement, at the closing of the Acquisition, the Company acquired all of the outstanding shares of 3VR for total purchase consideration of $6.2 million, consisting of:

(i) payment in cash of approximately $1.6 million;  

(ii) issuance of subordinated unsecured promissory notes in an aggregate principal amount of $2.0 million;

(iii) issuance of 609,830 shares of the Company’s common stock with a value of approximately $2.3 million.  

An aggregate of up to $1.0 million, or 294,927 shares, of the Company’s common stock issuable at the closing of the transaction were held back for a period of up to 12 months following the closing for the satisfaction of certain indemnification claims. On May 9, 2018, the Company and the Security Holder Representative reached agreement as to the satisfaction of certain of the indemnification claims asserted by the Company at the closing of the Acquisition. As a result, the purchase consideration, and the amount of goodwill recorded, were reduced by $660,000. Of the 294,927 shares that were held back at closing, 181,319 shares were canceled. The remaining 93,406 shares, with a value of approximately $0.3 million, continue to be subject to the terms of the Merger Agreement.

Additionally, in the event that the Company’s subsidiary, 3VR, achieves $24.1 million in product shipments in 2018, the Company will be obligated to issue further earn-out consideration of $3.5 million payable in shares of the Company’s common stock (subject to certain conditions) with a potential maximum earn-out value of $7.0 million in the event that such shipments exceed $48.2 million.  Further, in calendar year 2019, the Company may also be obligated to pay, in cash, and subject to certain conditions, contingent consideration equal to the lesser of (a) 35% of the gross margin of certain products sold and services rendered by 3VR in 2018 pursuant to a supply arrangement and (b) $25.0 million, each subject to adjustments. Management has assessed the probability of the issuance of shares related to the earn-out consideration, and the payment of the contingent consideration noted above, and determined it as remote. Accordingly, no value was ascribed to the earn-out as of September 30, 2018.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. Such estimates and assumptions are subject to change within the measurement period (up to one year from the Acquisition). The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash	$	195
Accounts receivable		2,029
Inventory		257
Prepaid expenses and other current assets		169
Property and equipment		334
Trademarks		400
Customer relationships		2,900
Developed technology		3,000
Total identifiable assets acquired		9,284
Accounts payable		(1,590	)
Accrued expenses and liabilities		(711	)
Deferred revenue		(2,928	)
Debt		(3,622	)
Total liabilities assumed		(8,851	)
Net identifiable assets acquired		433
Goodwill		5,781
Purchase price	$	6,214

In June 2018, the Company recorded an adjustment to its accounting for the amount recorded as accounts receivable at acquisition. Accordingly, the fair value of accounts receivable was decreased by $561,000, with a corresponding increase to goodwill and reflected in the Company’s purchase price allocation.

Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	400		5
Customer relationships		2,900		10
Developed technology		3,000		10
	$	6,300

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of 3VR resulted in $5.8 million of goodwill. With the addition of the 3VR video security and analytics platform, the Company believes this goodwill largely reflects the expansion of its Hirsch product and service offerings through the complementary offerings of 3VR. In accordance with ASC 350, goodwill will not be amortized but will be tested for impairment at least annually in the fourth quarter.

The results of operations of 3VR for the period from the acquisition date through September 30, 2018 are included in the accompanying condensed consolidated statements of operations. Pursuant to ASC 805, Business Combinations, the Company incurred and expensed approximately $212,000 and $548,000 in acquisition and transitional costs associated with the acquisition of 3VR during the year ended December 31, 2017 and the nine months ended September 30, 2018, respectively which were primarily general and administrative expenses.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

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

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

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

• Level 3 – Unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2018 and December 31, 2017, there were no assets that are measured and recognized at fair value on a recurring basis. There were no cash equivalents as of September 30, 2018 and December 31, 2017.

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

Certain of the Company's assets, including intangible assets, and privately-held investments, are measured at fair value on a nonrecurring basis if impairment is indicated. Purchased intangible assets are measured at fair value primarily using discounted cash flow projections. For additional discussion of measurement criteria used in evaluating potential impairment involving goodwill and intangible assets, refer to Note 5, Goodwill and Intangible Assets.  

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

As of September 30, 2018 and December 31, 2017, the Company had $0.3 million of privately-held investments measured at fair value on a nonrecurring basis which were classified as Level 3 assets due to the absence of quoted market prices and inherent lack of liquidity. The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment. The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis. The amount of privately-held investments is included in other assets in the accompanying condensed consolidated balance sheets.

Assets and Liabilities Not Measured at Fair Value

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

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Stockholders' Equity

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Stockholders' Equity

5. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, 40,000 of which have been designated as Series A Participating Preferred Stock, par value $0.001 per share, and 5,000,000 of which have been designated as Series B Non-Voting Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). No shares of the Company’s Series A Participating Preferred Stock were outstanding as of September 30, 2018 and December 31, 2017. During 2017, the Company’s board of directors (the “Board”) authorized the issuance of up to 5,000,000 shares of the Series B Preferred Stock, 5,000,000 of which were outstanding as of September 30, 2018.

The Board may from time to time, without further action by the Company’s stockholders, direct the issuance of shares of preferred stock in other series and may, at the time of issuance, determine the rights, preferences and limitations of each series, including voting rights, dividend rights and redemption and liquidation preferences. Satisfaction of any dividend preferences of outstanding shares of preferred stock would reduce the amount of funds available for the payment of dividends on shares of the Company’s common stock. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of shares of the Company’s common stock. Upon the affirmative vote of the Board, without stockholder approval, the Company may issue shares of preferred stock with voting and conversion rights which could adversely affect the holders of shares of its common stock.

Series B Preferred Stock and Private Placement

On December 20, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of 21 April Fund, Ltd. and 21 April Fund, LP (collectively, the “Purchasers”), pursuant to which the Company, in a private placement, agreed to issue and sell to the Purchasers an aggregate of up to 5,000,000 shares of the Series B Preferred Stock, $0.001 par value per share (collectively referred to as the “Shares”). The Purchasers agreed to purchase an aggregate of 3,000,000 Shares at a price of $4.00 per share in cash at the initial closing of the transaction, and at the sole option of the Company, an additional 2,000,000 Shares at a price of $4.00 per share in cash at a second closing, if any (the “Private Placement”). The total purchase price payable to the Company is $20,000,000, of which $12,000,000 was paid at the initial closing.

On May 30, 2018, the Company issued 2,000,000 Shares, at a price of $4.00 per share in the second closing of the Private Placement. Gross proceeds to the Company from the second closing were approximately $8.0 million, before deducting fees and certain expenses payable by the Company.

The proceeds from the issuance of the Shares are required to be used to pay off existing debt obligations of the Company and to fund future acquisitions of technology, business and other assets by the Company.

Each Share shall be convertible into the Company’s common stock (i) following the sixth (6th) anniversary of the initial closing of the Private Placement or (ii) if earlier, during the thirty (30) day period following the last trading day of any period of three (3) or more consecutive trading days that the closing market price of the Company’s common stock exceeds $10.00. Each Share is convertible at the option of the holder of shares of Series B Preferred Stock into such number of shares of the Company’s common stock determined by taking the accreted value of such Share (purchase price plus accrued but unpaid dividends) and dividing such value by the stated value of such Share ($4.00 per share, subject to adjustment for dilutive issuances, stock splits, stock dividends and the like); provided, however, that the Company shall not convert any Shares if doing so would cause the holder thereof, along with its affiliates, to beneficially own in excess of 19.9% of the outstanding common stock immediately after giving effect to the applicable conversion (the “Ownership Limitation”), unless waiver of this restriction has been effected by the holder requesting conversion of Shares.

Based on the current conversion price, the outstanding shares of Series B Preferred Stock as of September 30, 2018 would be convertible into 5,000,000 shares of the Company’s common stock.  However, the conversion rate will be subject to adjustment in the event of certain instances, such as if the Company issues shares of its common stock at a price less than $4.00 per common share, subject to a minimum conversion price of $3.27 per share.  As of September 30, 2018, none of the contingent conditions to adjust the total common shares to convert the Shares had been met.

Each Share is entitled to an annual dividend of 5% for the first six (6) years following the issuance of such Share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10^th) year in cash. The dividends accrue and are payable in kind upon such time as the Shares convert into the Company’s common stock. In general, the Shares are not entitled to vote except in certain limited cases, including in change of control transactions where the price per share distributable to the Company’s stockholders is expected to be less than $4.00 per share. The Certificate of Designation with respect to the Series B Preferred Stock further provides that in the event of, among other things, any change of control, liquidation or dissolution of the Company, the holders of the Series B Preferred Stock will be entitled to receive, on a pari passu basis with the holders of the common stock, the same amount and form of consideration that the holders of the Company’s common stock receive (on an as-if-converted-to-common-stock basis and without regard to the Ownership Limitation).

Sale of Common Stock

In May 2017, the Company sold an aggregate of 2,845,360 shares of its common stock at a public offering price of $4.85 per share in an underwritten public offering. The Company received net proceeds of approximately $12.6 million from the sale of the common stock in the public offering, after deducting the underwriting discount and other offering related expenses of $1.2 million.

Common Stock Warrants

On August 13, 2014, in connection with the Company’s entry into a consulting agreement, the Company issued a consultant a warrant to purchase up to 85,000 shares of the Company’s common stock at a per share exercise price of $10.70 (the “2014 Consultant Warrant”). One fourth of the shares under the warrant are exercisable for cash three months from the date the 2014 Consultant Warrant was issued and quarterly thereafter. The 2014 Consultant Warrant expires on August 13, 2019. In the event of an acquisition of the Company, the 2014 Consultant Warrant shall terminate and no longer be exercisable as of the closing of the acquisition. As of September 30, 2018, the 2014 Consultant Warrant had not been exercised.

On February 8, 2017, the Company entered into Loan and Security Agreements (each, a “Loan and Security Agreement”) with each of East West Bank ("EWB") and Venture Lending & Leasing VII, Inc. and Venture Lending & Leasing VIII, Inc. (collectively referred to as “VLL7 and VLL8”) as discussed in Note 7, Financial Liabilities. The Loan and Security Agreement with EWB, as amended, provides for a $16.0 million revolving loan facility (the “Revolving Loan Facility”), and the Loan and Security Agreement with VLL7 and VLL8 provides for a term loan (the “Term Loan”) in an aggregate principal amount of $10.0 million (the “Term Loan Facility”). In connection with the Revolving Loan Facility, the Company issued to EWB a warrant (the "EWB Warrant") to purchase up to 40,000 shares of the Company's common stock at a per share exercise price of $3.64, and in connection with the Company’s Term Loan Facility, issued to each of VLL7 and VLL8 a warrant to purchase 290,000 shares of the Company's common stock at a per share exercise price of $2.00 (the “VLL7 Warrant” and the “VLL8 Warrant,” respectively). The Company calculated the fair value of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant using the Black-Scholes pricing model using the following assumptions: estimated volatility of 78.8%, risk-free interest rate of 1.94%, no dividend yield, and an expected life of five years. The fair values of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant of $125,000, $1,037,500 and $1,037,500, respectively, were classified as equity as the settlement of the warrants will be in shares and is within the control of the Company. Each of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant is immediately exercisable for cash or by net exercise and will expire five years after its issuance, or on February 8, 2022. In connection with entering into the Loan and Security Agreements with EWB and VLL7 and VLL8, warrants to purchase an aggregate of 400,000 shares of common stock issued to the Company’s previous lender were cancelled.

In connection with securing of the new credit facilities and cancelling of all the warrants previously issued to the previous lender, the Company issued a warrant to a consultant to purchase 60,000 shares of its common stock at an exercise price of $4.60 per share (the “2017 Consultant Warrant”).  The Company calculated the fair value of the 2017 Consultant Warrant using the Black Scholes pricing model using the following assumptions: estimated volatility of 78.8%, risk-free interest rate of 1.22%, no dividend yield, and an expected life of two years. The fair value of the 2017 Consultant Warrant of $119,000 was classified as equity as the settlement of the warrant will be in shares and is within the control of the Company.  The 2017 Consultant Warrant is immediately exercisable for cash or by net exercise and will expire two years after its issuance, or on February 8, 2019.

Below is the summary of outstanding warrants issued by the Company as of September 30, 2018:

Warrant Type	Number of Shares Issuable Upon Exercise		Weighted Average Exercise Price		Issue Date	Expiration Date
2014 Consultant Warrant		85,000	$	10.70	August 13, 2014	August 13, 2019
East West Bank Warrant		40,000		3.64	February 8, 2017	February 8, 2022
VLL7 and VLL8 Warrants		580,000		2.00	February 8, 2017	February 8, 2022
2017 Consultant Warrant		60,000		4.60	February 8, 2017	February 8, 2019
Total		765,000

Stock-Based Compensation Plans

The Company has a stock-based compensation plan to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons. The Company’s stock-based compensation plan consists of the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended. Shares are no longer available for issuance under the Company’s 2010 Bonus and Incentive Plan (the “2010 Plan”) and the 2007 Stock Option Plan (the “2007 Plan”).

Stock Incentive Plans

On June 6, 2011, the Company’s stockholders approved the 2011 Plan, which is administered by the Compensation Committee of the Board. The 2011 Plan provides that stock options, stock units, restricted shares, and stock appreciation rights may be granted to executive officers, directors, consultants, and other key employees. The Company reserved 400,000 shares of common stock under the 2011 Plan, plus 459,956 shares of common stock that remained available for delivery under the 2007 Plan and the 2010 Plan as of June 6, 2011. In aggregate, as of June 6, 2011, 859,956 shares were available for future grants under the 2011 Plan, including shares rolled over from 2007 Plan and 2010 Plan. Subsequent to June 6, 2011 through December 31, 2017, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 3,000,000 shares. On May 31, 2018, the Company’s stockholders approved an amendment to the 2011 Plan to increase the number of shares of common stock authorized for issuance by 500,000 shares.

Stock Option Plans

A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2018 follows:

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Average Intrinsic Value
Balance at December 31, 2017		672,441		$	6.28		—	$	—
Granted		—			—
Cancelled or Expired		(47,970	)		11.56
Exercised		(2,500	)		5.20
Balance at September 30, 2018		621,971		$	5.87		6.93	$	721,856
Vested or expected to vest at     September 30, 2018		618,324		$	5.88		6.93	$	716,020
Exercisable at September 30, 2018		510,856		$	6.20		6.77	$	544,072

The following table summarizes information about options outstanding as of September 30, 2018:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$4.36 - $7.20		472,810		7.50	$	4.47		361,695	$	4.50
$7.50 - $11.30		127,415		5.39		9.42		127,415		9.42
$12.00 - $19.70		17,396		3.73		13.66		17,396		13.66
$21.70 - $24.20		4,350		2.93		23.27		4,350		23.27
$4.36 - $24.20		621,971		6.93	$	5.87		510,856	$	6.20

At September 30, 2018, there was $0.3 million of unrecognized stock-based compensation expense, net of estimated forfeitures related to unvested options, that is expected to be recognized over a weighted-average period of 0.9 years.  

Restricted Stock Units

The following is a summary of restricted stock unit (“RSU”) activity for the nine months ended September 30, 2018:

	Number of RSUs			Weighted Average Fair Value
Unvested at December 31, 2017		1,460,044		$	3.08
Granted		710,763			4.02
Vested		(457,345	)		3.60
Forfeited		(258,417	)		2.67
Unvested at September 30, 2018		1,455,045		$	3.45
Shares vested but not released		372,018		$	3.07

The fair value of the Company’s RSUs is calculated based upon the fair market value of the Company’s stock on the date of grant. As of September 30, 2018, there was $4.6 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.6 years.

Stock-Based Compensation Expense

The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	22	$	24	$	63	$	71
Research and development		125		130		397		361
Selling and marketing		171		193		519		463
General and administrative		385		317		1,008		1,021
Total	$	703	$	664	$	1,987	$	1,916

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of September 30, 2018 was as follows:

Exercise of outstanding stock options, vesting of RSUs, and issuance of RSUs vested but not released	2,449,034
ESPP	293,888
Shares of common stock available for grant under the 2011 Plan	672,223
Noncontrolling interest in Bluehill ID AG	10,355
Warrants to purchase common stock	765,000
Shares of common stock issuable on conversion of Series B Preferred Stock	5,000,000
Total	9,190,500

Net Loss per Common Share Attributable to Identiv Stockholders’ Equity

Basic and diluted net loss per share is based upon the weighted average number of common shares outstanding during the period. The following common stock equivalents have been excluded from diluted net loss per share for the nine months ended September 30, 2018 and 2017 because their inclusion would be anti-dilutive:

	Nine Months Ended September 30,
	2018		2017
Shares of common stock subject to outstanding RSUs		1,455,045		1,698,900
Shares of common stock subject to outstanding options		621,971		675,485
Shares of common stock subject to outstanding warrants		765,000		765,000
Shares of common stock reserved to acquire remaining share of noncontrolling interest		10,355		10,355
Shares of common stock issuable upon conversion of Series B Preferred Stock		5,000,000		—
Total		7,852,371		3,149,740

Accumulated Other Comprehensive Income  

Accumulated other comprehensive income at September 30, 2018 and December 31, 2017 consists of foreign currency translation adjustments totaling $2.1 million and $2.7 million, respectively.

Restricted Stock Unit Net Share Settlements

During the nine months ended September 30, 2018 and 2017, the Company repurchased 109,666 and 121,384 shares, respectively of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.

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Balance Sheet Components

9 Months Ended

Sep. 30, 2018

Statement Of Financial Position [Abstract]

Balance Sheet Components

6. Balance Sheet Components

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

	September 30,		December 31,
	2018		2017
Raw materials	$	4,530	$	3,700
Work-in-progress		7		22
Finished goods		7,436		7,404
Total	$	11,973	$	11,126

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

	September 30,			December 31,
	2018			2017
Building and leasehold improvements	$	2,050		$	1,917
Furniture, fixtures and office equipment		1,852			1,771
Plant and machinery		9,026			9,411
Purchased software		2,163			2,050
Construction-in-progress		217			-
Total		15,308			15,149
Accumulated depreciation		(13,173	)		(13,106	)
Property and equipment, net	$	2,135		$	2,043

The Company recorded depreciation expense of $0.3 million during each of the three months ended September 30, 2018 and 2017, and $0.9 million and $1.0 million during the nine months ended September 30, 2018 and 2017, respectively.  

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

	September 30,		December 31,
	2018		2017
Accrued professional fees	$	1,205	$	1,065
Accrued warranties		319		75
Income taxes payable		47		19
Other accrued expenses		1,426		861
Total	$	2,997	$	2,020

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2018

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill

The following table summarizes the carrying amount of goodwill resulting from the acquisition of 3VR (in thousands):

	Premises		Credentials		Identity		All Other		Total
Balance at December 31, 2017	$	—	$	—	$	—	$	—	$	—
Acquisition of business		5,781		—		—		—		5,781
Balance at September 30, 2018	$	5,781	$	—	$	—	$	—	$	5,781

In accordance with ASC 350, the Company tests goodwill with indefinite lives annually for impairment and assesses whether there are any indicators of impairment on an interim basis. The Company performs interim goodwill impairment reviews between its annual reviews if certain events and circumstances have occurred, including a deterioration in general economic conditions, an increased competitive environment, a change in management, key personnel, strategy or customers, negative or declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods. The Company believes the methodology that it uses to review impairment of goodwill, which includes a significant amount of judgment and estimates, provides it with a reasonable basis to determine whether impairment has occurred. However, many of the factors employed in determining whether its goodwill is impaired are outside of its control and it is reasonably likely that assumptions and estimates will change in future periods. These changes in assumptions and estimates could result in future impairments. During the quarter ended September 30, 2018, the Company noted no indicators of goodwill impairment and concluded no further testing necessary.

Intangible Assets

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

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12
Gross carrying amount at December 31, 2017	$	—		$	4,600		$	10,639		$	15,239
Accumulated amortization		—			(3,257	)		(7,617	)		(10,874	)
Intangible assets, net at December 31, 2017	$	—		$	1,343		$	3,022		$	4,365
Gross carrying amount at September 30, 2018	$	400		$	7,600		$	13,539		$	21,539
Accumulated amortization		(50	)		(3,779	)		(8,555	)		(12,384	)
Intangible assets, net at September 30, 2018	$	350		$	3,821		$	4,984		$	9,155

Each period, the Company evaluates the estimated remaining useful lives of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. If a revision to the remaining period of amortization is warranted, amortization is prospectively adjusted over the remaining useful life of the intangible asset. Intangible assets subject to amortization are amortized over their useful lives as shown in the table above. The Company evaluates its amortizable intangible assets for impairment at the end of each reporting period. The Company did not identify any impairment indicators during the three or nine months ended September 30, 2018.

The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	186	$	112	$	522	$	336
Selling and marketing		345		252		988		756
Total	$	531	$	364	$	1,510	$	1,092

The estimated annual future amortization expense for purchased intangible assets with definite lives as of September 30, 2018 is as follows (in thousands):

2018 (remaining three months)	$	532
2019		2,125
2020		2,125
2021		670
2022		670
Thereafter		3,033
Total	$	9,155

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Long-Term Payment Obligation

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Long-Term Payment Obligation

8. Long-Term Payment Obligation

Hirsch Acquisition – Secure Keyboards and Secure Networks. Prior to the 2009 acquisition of Hirsch by the Company, effective November 1994, Hirsch had entered into a settlement agreement (the “1994 Settlement Agreement”) with two limited partnerships, Secure Keyboards, Ltd. (“Secure Keyboards”) and Secure Networks, Ltd. (“Secure Networks”). At the time, Secure Keyboards and Secure Networks were related to Hirsch through certain common shareholders and limited partners, including Hirsch’s then President Lawrence Midland, who resigned as President of the Company effective July 31, 2014. Immediately following the acquisition, Mr. Midland owned 30% of Secure Keyboards and 9% of Secure Networks. Secure Networks was dissolved in 2012 and Mr. Midland owned 24.5% of Secure Keyboards upon his resignation effective July 31, 2014.

On April 8, 2009, Secure Keyboards, Secure Networks and Hirsch amended and restated the 1994 Settlement Agreement to replace the royalty-based payment arrangement under the 1994 Settlement Agreement with a new, definitive installment payment schedule with contractual payments to be made in future periods through 2020 (the “2009 Settlement Agreement”). The Company was not an original party to the 2009 Settlement Agreement as the acquisition of Hirsch occurred subsequent to the 2009 Settlement Agreement being entered into. The Company has, however, provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligations under the 2009 Settlement Agreement (the “Guarantee”). The 2009 Settlement Agreement and the Guarantee became effective upon the acquisition of Hirsch on April 30, 2009. The Company’s annual payment to Secure Keyboards and Secure Networks in any given year under the 2009 Settlement Agreement is subject to an increase based on the percentage increase in the Consumer Price Index during the previous calendar year.

The final payment to Secure Networks was made on January 30, 2012 and the final payment to Secure Keyboards is due on January 30, 2021. The Company’s payment obligations under the 2009 Settlement Agreement will continue through January 30, 2021, unless the Company elects at any time on or after January 1, 2012 to earlier satisfy its obligations by making a lump-sum payment to Secure Keyboards. The Company does not intend to make a lump-sum payment and therefore a portion of the payment obligation amount is classified as a long-term liability.

The Company included $0.1 million and $0.2 million of interest expense during each of the three and nine months ended September 30, 2018, respectively, and $0.1 million and $0.3 million of interest expense during the three and nine months ended September 30, 2017, respectively, in its condensed consolidated statements of operations for interest accreted on the long-term payment obligation.  

The ongoing payment obligation in connection with the Hirsch acquisition as of September 30, 2018 is as follows (in thousands):

2018 (remaining three months)	$	310
2019		1,277
2020		1,422
2021		367
Present value discount factor		(230	)
Total		3,146
Less:  Current portion - payment obligation		(989	)
Long-term payment obligation	$	2,157

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Financial Liabilities

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Financial Liabilities

9. Financial Liabilities

Financial liabilities consist of (in thousands):

	September 30,			December 31,
	2018			2017
Notes payable	$	2,000		$	—
Term loan		—			5,000
Revolving loan facility		11,321			8,736
Total before discount and debt issuance costs		13,321			13,736
Less: Current portion of notes payable		(2,000	)		—
Less: Current portion of financial liabilities		(11,245	)		(9,829	)
Less: Current portion of unamortized discount and debt issuance costs		(76	)		(404	)
Less: Long-term portion of unamortized discount and debt issuance costs		—			(582	)
Long-term financial liabilities	$	—		$	2,921

Bank Term Loan and Revolving Loan Facility

On February 8, 2017, the Company entered into Loan and Security Agreements with EWB and VLL7 and VLL8, which provide for a $16.0 million Revolving Loan Facility and a $10.0 million Term Loan Facility, respectively. In connection with the closing of such agreements, the Company repaid all outstanding amounts under its credit agreement with its previous lender.

The Revolving Loan Facility, as amended, bears interest at prime rate plus 1.0%, matures and becomes due and payable on February 8, 2019 and includes a non-formula line of credit sublimit of up to $3.0 million. Interest is payable monthly beginning on March 1, 2017. The Company may voluntarily prepay amounts outstanding under the Revolving Loan Facility, without prepayment charges. In the event the Revolving Loan Facility is terminated prior to its maturity, the Company would be required to pay an early termination fee in the amount of 1.0% of the revolving line. Additional borrowing requests under the Revolving Loan Facility are subject to various customary conditions precedent, including satisfaction of a borrowing base test as more fully described in the Revolving Loan Facility.

The Term Loan matures on August 8, 2020. Payments under the Term Loan Facility are interest-only for the first twelve months at a per annum rate of 12.5%, followed by principal and interest payments amortized over the remaining term of the Term Loan. If the Company elects to prepay the Term Loan before its maturity, all accrued and unpaid interest outstanding at the prepayment date will be due and payable, together with all the scheduled interest that would have accrued and been payable through the stated maturity of the Term Loan, provided that at any time after the Company has made at least twelve scheduled amortization payments of principal and interest on the Term Loan, the Company shall only be required to pay 80% of the scheduled interest that would have accrued and been payable through the stated maturity of the Term Loan. On December 28, 2017, the Company paid down an aggregate principal amount of $5.0 million of the $10.0 million outstanding principal balance of its Term Loan Facility. The Company paid to VLL7 and VLL8 approximately $5.9 million, consisting of $5.0 million in outstanding principal, and $0.9 million of accrued and unpaid interest outstanding at the prepayment date, together with all scheduled interest that would have accrued and been payable through the stated maturity of the Term Loan. As a result, the Company recorded a loss on extinguishment of debt totaling $1.8 million, representing the difference between the reacquisition price of the repaid portion of the Term Loan and the its net carrying amount.

On May 31, 2018, the Company paid off the remaining amounts payable under its $10.0 million principal amount term loan under the Loan and Security Agreement with VLL7 and VLL8. The Company paid to VLL7 and VLL8 approximately $5.2 million, consisting of $4.6 million in outstanding principal, and $0.6 million of accrued and unpaid interest outstanding at the prepayment date together with all the scheduled interest that would have accrued and been payable through the stated maturity of the term loan. As a result, the Company recorded a loss on extinguishment of debt totaling $1.4 million, representing the difference between the reacquisition price of the repaid portion of the Term Loan and its carrying amount.

The Company was obligated to pay customary fees and expenses, including customary facility fees for credit facilities of this size and type, in the aggregate amount of approximately $120,000, in connection with the closing of the two facilities. An additional facility fee of $40,000 was paid in connection with the Revolving Loan Facility on February 8, 2018.

Each of the Revolving Loan Facility and the Term Loan Facility contain customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the Company's ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and dispose of assets. The Revolving Loan Facility also contains various financial covenants, including but not limited to a liquidity covenant requiring the Company to maintain at least $4.0 million of cash. In addition, each of the Revolving Loan Facility and the Term Loan Facility contains customary events of default that entitle EWB or VLL7 and VLL8, as appropriate, to cause any or all of the Company's indebtedness under the Revolving Loan Facility or the Term Loan Facility, respectively, to become immediately due and payable. The events of default (some of which are subject to applicable grace or cure periods), include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults. Upon the occurrence and during the continuance of an event of default, EWB and VLL7 and VLL8 may terminate their lending commitments and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan and Security Agreements to be immediately due and payable.

As of September 30, 2018, the Company was in compliance with all financial covenants under the Revolving Loan Facility.

The proceeds of the Term Loan and the initial draw under the Revolving Loan Facility, after payment of fees and expenses, were used to repay all outstanding amounts under the credit agreement with the Company’s previous lender. In connection with the repayment, warrants to purchase an aggregate of 400,000 shares of common stock issued to the Company’s previous lender were cancelled. The proceeds of any additional draws under the Revolving Loan Facility will be used for working capital and other general corporate purposes.

On February 14, 2018, the Company completed the acquisition of 3VR. As part of the purchase price consideration paid in the acquisition of 3VR, the Company issued subordinated unsecured promissory notes (“notes payable”) in the aggregate principal amount of $2.0 million, with an annual interest rate of 3.0%, payable on the one year anniversary of the closing date. On February 21, 2018, the Company paid 3VR’s lender $3.6 million in full repayment of all indebtedness outstanding of 3VR.

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Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The Company conducts business globally and, as a result, files federal, state and foreign tax returns.  The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are the probable outcomes, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the condensed consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal.

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code.  Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings, as of December 31, 2017.

As the Company’s previously unremitted earnings have now been subjected to U.S. federal income tax, any repatriation of these earnings to the U.S. would not be expected to incur significant additional taxes related to such amounts. The Company continues to assert that its foreign earnings are indefinitely reinvested in its overseas operations, but in light of the Act, the Company continues to evaluate its position on that assertion.

The Company applies the provisions of, and accounted for uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company generally is no longer subject to tax examinations for years prior to 2013. However, if loss carryforwards of tax years prior to 2013 are utilized in the U.S., these tax years may become subject to investigation by the tax authorities. While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits would materially change in the next 12 months.

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Segment Reporting and Geographic Information

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment Reporting and Geographic Information

11. Segment Reporting and Geographic Information

ASC 280, Segment Reporting (“ASC 280”) establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses and about which separate financial information is available to its chief operating decision makers (“CODM”). The Company’s CODM is its CEO.

The Company is organized into four reportable operating segments: Premises, Identity, Credentials and All Other.

The CODM reviews financial information and business performance for each operating segment. The Company evaluates the performance of its operating segments at the revenue and gross profit levels. The Company does not report total assets, capital expenditures or operating expenses by operating segment as such information is not used by the CODM for purposes of assessing performance or allocating resources.

Net revenue and gross profit information by segment for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Premises:
Net revenue	$	9,364		$	5,916		$	25,691		$	17,058
Gross profit		5,363			3,399			14,336			9,543
Gross profit margin		57	%		57	%		56	%		56	%
Identity:
Net revenue		3,826			3,421			9,760			10,568
Gross profit		1,337			1,229			3,369			3,667
Gross profit margin		35	%		36	%		35	%		35	%
Credentials:
Net revenue		6,832			6,095			21,393			16,035
Gross profit		1,784			1,233			5,440			4,026
Gross profit margin		26	%		20	%		25	%		25	%
All Other:
Net revenue		—			—			—			3
Gross profit		—			—			—			5
Gross profit margin		—			—			—			167	%
Total:
Net revenue		20,022			15,432			56,844			43,664
Gross profit		8,484			5,861			23,145			17,241
Gross profit margin		42	%		38	%		41	%		39	%
Operating expenses:
Research and development		1,860			1,597			5,384			4,584
Selling and marketing		3,915			3,448			12,176			10,142
General and administrative		2,641			1,247			7,952			5,119
Restructuring and severance		223			(49	)		591			(49	)
Total operating expenses:		8,639			6,243			26,103			19,796
Loss from operations		(155	)		(382	)		(2,958	)		(2,555	)
Non-operating income (expense):
Interest expense, net		(291	)		(643	)		(1,239	)		(1,995	)
(Loss) gain on extinguishment of debt, net		—			—			(1,369	)		977
Foreign currency gains (losses), net		200			(51	)		354			(202	)
Loss before income taxes and noncontrolling    interest	$	(246	)	$	(1,076	)	$	(5,212	)	$	(3,775	)

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Americas	$	15,035		$	10,291		$	44,172		$	28,894
Europe and the Middle East		2,161			1,771			6,992			5,767
Asia-Pacific		2,826			3,370			5,680			9,003
Total	$	20,022		$	15,432		$	56,844		$	43,664
Revenues:
Americas		75	%		67	%		78	%		66	%
Europe and the Middle East		11	%		11	%		12	%		13	%
Asia-Pacific		14	%		22	%		10	%		21	%
Total		100	%		100	%		100	%		100	%

Long-lived assets by geographic location as of September 30, 2018 and December 31, 2017 are as follows (in thousands):

	September 30,		December 31,
	2018		2017
Property and equipment, net:
Americas	$	1,106	$	868
Europe and the Middle East		50		89
Asia-Pacific		979		1,086
Total property and equipment, net	$	2,135	$	2,043

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Restructuring and Severance

9 Months Ended

Sep. 30, 2018

Restructuring And Related Activities [Abstract]

Restructuring and Severance

12. Restructuring and Severance

On February 14, 2018, the Company acquired 3VR. As a result of the acquisition, in the three and nine months ended September 30, 2018, the Company incurred restructuring and severance expenses of $0.2 million and $0.6 million, respectively, consisting of facility rental related costs of $0.1 million and $0.3 million, respectively, and severance related costs of $0.1 million and $0.3 million, respectively. In the first quarter of 2018, the Company engaged a property management firm to actively market and search for a tenant to sublease the newly acquired 3VR office facility in San Francisco, California. In the third quarter of 2018, the Company entered into an agreement with a tenant to sublease the entire facility over the remaining term of the original lease.

In the three and nine months ended September 30, 2017, the Company recorded a credit resulting from actual expenditures being less than originally accrued associated with the worldwide restructuring plan implemented in the first quarter of 2016.

Restructuring and severance activities during the nine months ended September 30, 2018 and 2017 were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Balance at beginning of period	$	—					$	—		$	237
Restructuring expense incurred for the period		223			(49	)		591			(49	)
Payments and non-cash item adjustment during    the period		(223	)		49			(591	)		(188	)
Balance at end of period	$	—		$	—		$	—		$	—

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

The following table summarizes the Company’s principal contractual commitments as of September 30, 2018 (in thousands):

	Operating Leases (a)		Purchase Commitments		Other Contractual Commitments		Total
2018 (remaining three months)	$	498	$	10,535	$	91	$	11,124
2019		1,979		4,035		33		6,047
2020		1,782		450		—		2,232
2021		1,357		450		—		1,807
2022		1,133		450		—		1,583
Thereafter		—		—		—		—
Total	$	6,749	$	15,920	$	124	$	22,793

(a) Operating lease payments have not been reduced by sublease rentals of $2.8 million due in the future under noncancelable subleases.

Purchase commitments for inventories are highly dependent upon forecasts of customer demand. Due to the uncertainty in demand from its customers, the Company may have to change, reschedule, or cancel purchases or purchase orders from its suppliers. These changes may lead to vendor cancellation charges on these purchases or contractual commitments.

The Company provides warranties on certain product sales for periods ranging from 12 to 24 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be required in future periods.

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Subsequent Event

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Event

14. Subsequent Event

On November 1, 2018, the Company completed the acquisition of Thursby Software Systems, Inc.(“TSS”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, at the closing of the acquisition, the Company was obligated to pay aggregate consideration of approximately $3.1 million, consisting of (i) approximately $0.6 million in cash, net of cash acquired, and (ii) the issuance of shares of the Company’s common stock with a value of approximately $2.5 million. An aggregate of $0.5 million of the Company’s common stock issuable at the closing of the transaction will be held back for 12 months following the closing for the satisfaction of certain indemnification claims.

Additionally, in the event that revenue from TSS products is greater than $8.0 million, $11.0 million, or $15.0 million in product shipments in 2019, the Company will be obligated to issue earn-out consideration of up to a maximum of $7.5 million payable in shares of the Company’s common stock, subject to certain conditions.  In the event that such revenue is less than $15.0 million in 2019, but 2020 revenue from TSS products exceeds $15.0 million, the Company will be obligated to issue an additional $2.5 million in earn-out consideration payable in shares of the Company’s common stock. The maximum total earn-out consideration payable for all periods is $7.5 million in the aggregate, payable in shares of the Company’s common stock.

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Organization and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Reclassifications

Reclassifications — Certain reclassifications have been made to the fiscal year 2017 financial statements to conform to the fiscal year 2018 presentation. The reclassifications had no impact on net loss, total assets, or stockholders’ equity.

Concentration of Credit Risk

Concentration of Credit Risk — No customer represented more than 10% of net revenue for either of the three or nine months ended September 30, 2018 or 2017.No customer represented 10% or more of the Company’s accounts receivable balance at September 30, 2018 or December 31, 2017.

Business Combinations

Business Combinations— Business combinations are accounted for at fair value under the purchase method of accounting. Acquisition costs are expensed as incurred and recorded in general and administrative expenses and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date affect income tax expense. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the condensed consolidated financial statements could result in a possible impairment of the intangible assets and goodwill, or require acceleration of the amortization expense of finite-lived intangible assets.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.

Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.

Intangible Assets

Intangible Assets—Amortizable intangible assets include trademarks, developed technology and customer relationships acquired as part of business combinations. Intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from four to twelve years and are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.

Goodwill

Goodwill—In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. In testing for goodwill impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

Research and Development

Research and Development — Costs to research, design, and develop the Company’s products are expensed as incurred and consist primarily of employee compensation and fees for the development of prototype products. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Generally, the Company’s products are released soon after technological feasibility has been established. Costs incurred subsequent to achieving technological feasibility have not been significant and generally have been expensed as incurred. At September 30, 2018, the amount of capitalized software development costs totaled $386,000 and is included in other assets in the accompanying condensed consolidated balance sheet. Software development costs capitalized in 2017 totaled $401,000. No software development costs were capitalized in 2018.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation, which provides guidance to simplify several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance is effective for reporting periods beginning after December 15, 2016. The Company adopted this guidance effective January 1, 2017. The Company's adoption of this standard did not have a significant impact on its condensed consolidated financial statements. No excess income tax benefit or tax deficiencies were recorded as a result of the adoption and there was no change to accumulated deficit with respect to previously unrecognized excess tax benefits. The Company elected to continue to account for forfeitures on an estimated basis. The Company has elected to present the condensed consolidated statements of cash flows on a prospective transition method and no prior periods have been adjusted.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which amends accounting for leases. Under the new guidance, a lessee will recognize assets and liabilities but will recognize expenses similar to current lease accounting. The guidance is effective for reporting periods beginning after December 15, 2018; however early adoption is permitted. The new guidance must be adopted using a modified retrospective approach to each prior reporting period presented with various optional practical expedients.In January 2018, the FASB issued an exposure draft of the proposed ASU, Leases (Topic 842): Targeted Improvements. The proposed ASU provides an alternative transition method of adoption, permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption. The Company will adopt the standard on the effective date, but has not yet selected a transition method. The Company is reviewing its leased assets to determine the potential impact on its consolidated financial statements. Though its evaluation is ongoing, the Company expects changes to its balance sheet due to the recognition of right-of-use assets and lease liabilities related to its real estate leases, but it does not anticipate a material impact to its results of operations or liquidity.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The standard is effective for fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company is currently in the process of evaluating when it will adopt ASU 2017-04 and its impact on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605)” and Subtopic 985-605 “Software - Revenue Recognition.” Topic 605 and Subtopic 985-605 are collectively referred to as “Topic 605” or “prior GAAP.” Under Topic 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, Topic 606 requires enhanced disclosures, including disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

The Company adopted Topic 606 on January 1, 2018 using the modified retrospective transition method. Under this method, the Company evaluated contracts that were in effect at the beginning of fiscal 2018 as if those contracts had been accounted for under Topic 606. Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with historical, pre-Topic 606 accounting.

On the adoption date, a cumulative catch up adjustment was recorded to beginning retained earnings to reflect the impact of all existing arrangements under Topic 606. The Company increased retained earnings and decreased deferred revenue by approximately $2,000 for an uncompleted software development and technical support services contract with a customer. Under Topic 605 accounting, since the Company was unable to establish vendor-specific objective evidence (“VSOE”) of fair value for the product development and technical support services components in the contract, the Company was required to defer the revenue and recognize it over the term of the contract. Under Topic 606, the Company would have been required to establish the standalone selling price of each of the performance obligations in the contract and recognize the product development services revenue upon delivery, and recognize the technical support services revenue ratably over the term of the contract.

The Company does not expect the impact of the adoption of Topic 606 to be material to its annual revenue and net income on an ongoing basis. Revenue generated under Topic 606 is expected to be materially comparable to revenue recognized under Topic 605 in fiscal 2018 primarily due to the elimination of deferred revenue associated with the product development services discussed above that, under Topic 605, would have continued to be recognized into revenue in 2018 and 2019, offset by an increase in the revenue recognized related to the amount and timing of technical support services provided in the contract discussed above. The actual effects on revenue recognized for the nine months ended September 30, 2018 are reported in the table below.

No incremental sales commission costs or other costs related to obtaining customer contracts were capitalized at the adoption date as they were immaterial.

The timing of revenue recognition for hardware and professional services is expected to remain substantially unchanged. The Company’s overall mix of revenue recognized at a point in time versus over time is expected to increase in the future due to the intended growth and expansion of its services offerings. For the three and nine months ended September 30, 2018, approximately 94% and 95%, respectively, of the Company’s revenue was recognizable on delivery and 6% and 5%, respectively, over time.

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated balance sheet as of September 30, 2018 (in thousands):

	Balance at December 31, 2017			Adjustments			Balance at January 1, 2018
Deferred revenue	$	1,090		$	(2	)	$	1,088
Accumulated deficit		(399,647	)		2			(399,645	)

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2018 (in thousands, except per share amounts):

	As Reported Under Topic 606			Adjustments		Balance Under Prior GAAP
Net revenue	$	56,844		$	1	$	56,845
Cost of revenue		33,699			—		33,699
Operating expenses		26,103			—		26,103
Provision for income taxes		(121	)		—		(121	)
Net loss		(5,338	)		1		(5,337	)
Basic and diluted net loss per share		(0.34	)		—		(0.34	)

The adoption of Topic 606 had no impact on the Company’s net cash provided by operating activities, net cash used in investing activities or net cash used in financing activities.

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Organization and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Topic 606

Summary of Effects of Adopting Topic 606 on Condensed Consolidated Balance Sheet and Operations

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated balance sheet as of September 30, 2018 (in thousands):

	Balance at December 31, 2017			Adjustments			Balance at January 1, 2018
Deferred revenue	$	1,090		$	(2	)	$	1,088
Accumulated deficit		(399,647	)		2			(399,645	)

The following table summarizes the effects of adopting Topic 606 on the Company’s condensed consolidated statement of operations for the nine months ended September 30, 2018 (in thousands, except per share amounts):

	As Reported Under Topic 606			Adjustments		Balance Under Prior GAAP
Net revenue	$	56,844		$	1	$	56,845
Cost of revenue		33,699			—		33,699
Operating expenses		26,103			—		26,103
Provision for income taxes		(121	)		—		(121	)
Net loss		(5,338	)		1		(5,337	)
Basic and diluted net loss per share		(0.34	)		—		(0.34	)

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Revenue (Tables)

9 Months Ended

Sep. 30, 2018

Revenue From Contract With Customer [Abstract]

Schedule of Performance Obligation

Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Hardware products	When customer obtains control of the product (point-in-time)	Within 30-60 days of shipment	Observable in transactions without multiple performance obligations
Software licenses	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)	Within 30-60 days of the beginning of license period	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional services	As services are performed and/or when contract is fulfilled (point-in-time)	Within 30-60 days of delivery	Observable in transactions without multiple performance obligations
Software maintenance    and support services	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions
Extended hardware    warranties	Ratably over the course of the support contract (over time)	Within 30-60 days of the beginning of the contract period	Observable in renewal transactions

Total Net Sales Based on Disaggregation Criteria

Total net sales based on the disaggregation criteria described above are as follows (in thousands):

	Three Months Ended September 30,
	2018						2017 (1)
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	13,930	$	1,105	$	15,035	$	9,960	$	331	$	10,291
Europe and the Middle East		2,117		44		2,161		1,771		—		1,771
Asia-Pacific		2,803		23		2,826		3,370		—		3,370
Total	$	18,850	$	1,172	$	20,022	$	15,101	$	331	$	15,432
	Nine Months Ended September 30,
	2018						2017 (1)
	Point-in- Time		Over Time		Total		Point-in- Time		Over Time		Total
Americas	$	41,150	$	3,022	$	44,172	$	27,893	$	1,001	$	28,894
Europe and the Middle East		6,921		71		6,992		5,741		26		5,767
Asia-Pacific		5,657		23		5,680		9,003		—		9,003
Total	$	53,728	$	3,116	$	56,844	$	42,637	$	1,027	$	43,664
(1)  As discussed in Note 1, prior periods have not been adjusted for the adoption of Topic 606.

Changes in Deferred Revenue

Changes in deferred revenue during the nine months ended September 30, 2018 were as follows (in thousands):

	Amount
Deferred revenue at December 31, 2017	$	1,090
Impact of adoption of Topic 606		(2	)
Deferred revenue at January 1, 2018		1,088
Fair value of deferred revenue acquired in acquisition, net of recognition		1,693
Deferral of revenue billed in current period, net of recognition		1,557
Recognition of revenue deferred in prior periods		(847	)
Balance as of September 30, 2018	$	3,491

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Business Combinations (Tables)

9 Months Ended

Sep. 30, 2018

Business Combinations [Abstract]

Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash	$	195
Accounts receivable		2,029
Inventory		257
Prepaid expenses and other current assets		169
Property and equipment		334
Trademarks		400
Customer relationships		2,900
Developed technology		3,000
Total identifiable assets acquired		9,284
Accounts payable		(1,590	)
Accrued expenses and liabilities		(711	)
Deferred revenue		(2,928	)
Debt		(3,622	)
Total liabilities assumed		(8,851	)
Net identifiable assets acquired		433
Goodwill		5,781
Purchase price	$	6,214

Summary of Acquisition Related Finite-lived Intangibles and Estimated Lives

Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	400		5
Customer relationships		2,900		10
Developed technology		3,000		10
	$	6,300

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Summary of Outstanding Warrants Issued by Company

Below is the summary of outstanding warrants issued by the Company as of September 30, 2018:

Warrant Type	Number of Shares Issuable Upon Exercise		Weighted Average Exercise Price		Issue Date	Expiration Date
2014 Consultant Warrant		85,000	$	10.70	August 13, 2014	August 13, 2019
East West Bank Warrant		40,000		3.64	February 8, 2017	February 8, 2022
VLL7 and VLL8 Warrants		580,000		2.00	February 8, 2017	February 8, 2022
2017 Consultant Warrant		60,000		4.60	February 8, 2017	February 8, 2019
Total		765,000

Summary of Activity under Stock-Based Compensation Plans

A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2018 follows:

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Average Intrinsic Value
Balance at December 31, 2017		672,441		$	6.28		—	$	—
Granted		—			—
Cancelled or Expired		(47,970	)		11.56
Exercised		(2,500	)		5.20
Balance at September 30, 2018		621,971		$	5.87		6.93	$	721,856
Vested or expected to vest at     September 30, 2018		618,324		$	5.88		6.93	$	716,020
Exercisable at September 30, 2018		510,856		$	6.20		6.77	$	544,072

Summary Information about Options Outstanding

The following table summarizes information about options outstanding as of September 30, 2018:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$4.36 - $7.20		472,810		7.50	$	4.47		361,695	$	4.50
$7.50 - $11.30		127,415		5.39		9.42		127,415		9.42
$12.00 - $19.70		17,396		3.73		13.66		17,396		13.66
$21.70 - $24.20		4,350		2.93		23.27		4,350		23.27
$4.36 - $24.20		621,971		6.93	$	5.87		510,856	$	6.20

Summary of Restricted Stock Unit (RSU) Activity

The following is a summary of restricted stock unit (“RSU”) activity for the nine months ended September 30, 2018:

	Number of RSUs			Weighted Average Fair Value
Unvested at December 31, 2017		1,460,044		$	3.08
Granted		710,763			4.02
Vested		(457,345	)		3.60
Forfeited		(258,417	)		2.67
Unvested at September 30, 2018		1,455,045		$	3.45
Shares vested but not released		372,018		$	3.07

Stock-Based Compensation Expense Related to Stock Options and RSUs

The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	22	$	24	$	63	$	71
Research and development		125		130		397		361
Selling and marketing		171		193		519		463
General and administrative		385		317		1,008		1,021
Total	$	703	$	664	$	1,987	$	1,916

Schedule of Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of September 30, 2018 was as follows:

Exercise of outstanding stock options, vesting of RSUs, and issuance of RSUs vested but not released	2,449,034
ESPP	293,888
Shares of common stock available for grant under the 2011 Plan	672,223
Noncontrolling interest in Bluehill ID AG	10,355
Warrants to purchase common stock	765,000
Shares of common stock issuable on conversion of Series B Preferred Stock	5,000,000
Total	9,190,500

Common Stock Equivalents Excluded from Diluted Net loss Per Share

The following common stock equivalents have been excluded from diluted net loss per share for the nine months ended September 30, 2018 and 2017 because their inclusion would be anti-dilutive:

	Nine Months Ended September 30,
	2018		2017
Shares of common stock subject to outstanding RSUs		1,455,045		1,698,900
Shares of common stock subject to outstanding options		621,971		675,485
Shares of common stock subject to outstanding warrants		765,000		765,000
Shares of common stock reserved to acquire remaining share of noncontrolling interest		10,355		10,355
Shares of common stock issuable upon conversion of Series B Preferred Stock		5,000,000		—
Total		7,852,371		3,149,740

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Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2018

Statement Of Financial Position [Abstract]

Inventories

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

	September 30,		December 31,
	2018		2017
Raw materials	$	4,530	$	3,700
Work-in-progress		7		22
Finished goods		7,436		7,404
Total	$	11,973	$	11,126

Property and Equipment, Net

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

	September 30,			December 31,
	2018			2017
Building and leasehold improvements	$	2,050		$	1,917
Furniture, fixtures and office equipment		1,852			1,771
Plant and machinery		9,026			9,411
Purchased software		2,163			2,050
Construction-in-progress		217			-
Total		15,308			15,149
Accumulated depreciation		(13,173	)		(13,106	)
Property and equipment, net	$	2,135		$	2,043

Other Accrued Expenses and Liabilities

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

	September 30,		December 31,
	2018		2017
Accrued professional fees	$	1,205	$	1,065
Accrued warranties		319		75
Income taxes payable		47		19
Other accrued expenses		1,426		861
Total	$	2,997	$	2,020

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2018

Summary of Gross Carrying Amount and Accumulated Amortization for Intangible Assets Resulting from Acquisitions

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

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12
Gross carrying amount at December 31, 2017	$	—		$	4,600		$	10,639		$	15,239
Accumulated amortization		—			(3,257	)		(7,617	)		(10,874	)
Intangible assets, net at December 31, 2017	$	—		$	1,343		$	3,022		$	4,365
Gross carrying amount at September 30, 2018	$	400		$	7,600		$	13,539		$	21,539
Accumulated amortization		(50	)		(3,779	)		(8,555	)		(12,384	)
Intangible assets, net at September 30, 2018	$	350		$	3,821		$	4,984		$	9,155

Amortization Expense Included in Condensed Consolidated Statements of Operations

The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	186	$	112	$	522	$	336
Selling and marketing		345		252		988		756
Total	$	531	$	364	$	1,510	$	1,092

Estimated Future Amortization Expense of Purchased Intangible Assets with Definite Lives

The estimated annual future amortization expense for purchased intangible assets with definite lives as of September 30, 2018 is as follows (in thousands):

2018 (remaining three months)	$	532
2019		2,125
2020		2,125
2021		670
2022		670
Thereafter		3,033
Total	$	9,155

3VR

Summary of Carrying Amount of Goodwill Resulting from Acquisition of 3VR

The following table summarizes the carrying amount of goodwill resulting from the acquisition of 3VR (in thousands):

	Premises		Credentials		Identity		All Other		Total
Balance at December 31, 2017	$	—	$	—	$	—	$	—	$	—
Acquisition of business		5,781		—		—		—		5,781
Balance at September 30, 2018	$	5,781	$	—	$	—	$	—	$	5,781

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Long-Term Payment Obligation (Tables)

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Payment Obligations To Former Related Party Liability

The ongoing payment obligation in connection with the Hirsch acquisition as of September 30, 2018 is as follows (in thousands):

2018 (remaining three months)	$	310
2019		1,277
2020		1,422
2021		367
Present value discount factor		(230	)
Total		3,146
Less:  Current portion - payment obligation		(989	)
Long-term payment obligation	$	2,157

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Financial Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Summary of Financial Liabilities

Financial liabilities consist of (in thousands):

	September 30,			December 31,
	2018			2017
Notes payable	$	2,000		$	—
Term loan		—			5,000
Revolving loan facility		11,321			8,736
Total before discount and debt issuance costs		13,321			13,736
Less: Current portion of notes payable		(2,000	)		—
Less: Current portion of financial liabilities		(11,245	)		(9,829	)
Less: Current portion of unamortized discount and debt issuance costs		(76	)		(404	)
Less: Long-term portion of unamortized discount and debt issuance costs		—			(582	)
Long-term financial liabilities	$	—		$	2,921

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Segment Reporting and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Information Regarding Net Revenue and Gross Profit by Segment

Net revenue and gross profit information by segment for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Premises:
Net revenue	$	9,364		$	5,916		$	25,691		$	17,058
Gross profit		5,363			3,399			14,336			9,543
Gross profit margin		57	%		57	%		56	%		56	%
Identity:
Net revenue		3,826			3,421			9,760			10,568
Gross profit		1,337			1,229			3,369			3,667
Gross profit margin		35	%		36	%		35	%		35	%
Credentials:
Net revenue		6,832			6,095			21,393			16,035
Gross profit		1,784			1,233			5,440			4,026
Gross profit margin		26	%		20	%		25	%		25	%
All Other:
Net revenue		—			—			—			3
Gross profit		—			—			—			5
Gross profit margin		—			—			—			167	%
Total:
Net revenue		20,022			15,432			56,844			43,664
Gross profit		8,484			5,861			23,145			17,241
Gross profit margin		42	%		38	%		41	%		39	%
Operating expenses:
Research and development		1,860			1,597			5,384			4,584
Selling and marketing		3,915			3,448			12,176			10,142
General and administrative		2,641			1,247			7,952			5,119
Restructuring and severance		223			(49	)		591			(49	)
Total operating expenses:		8,639			6,243			26,103			19,796
Loss from operations		(155	)		(382	)		(2,958	)		(2,555	)
Non-operating income (expense):
Interest expense, net		(291	)		(643	)		(1,239	)		(1,995	)
(Loss) gain on extinguishment of debt, net		—			—			(1,369	)		977
Foreign currency gains (losses), net		200			(51	)		354			(202	)
Loss before income taxes and noncontrolling    interest	$	(246	)	$	(1,076	)	$	(5,212	)	$	(3,775	)

Information Regarding Net Revenue by Geographic Region

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Americas	$	15,035		$	10,291		$	44,172		$	28,894
Europe and the Middle East		2,161			1,771			6,992			5,767
Asia-Pacific		2,826			3,370			5,680			9,003
Total	$	20,022		$	15,432		$	56,844		$	43,664
Revenues:
Americas		75	%		67	%		78	%		66	%
Europe and the Middle East		11	%		11	%		12	%		13	%
Asia-Pacific		14	%		22	%		10	%		21	%
Total		100	%		100	%		100	%		100	%

Long-Lived Assets by Geographic Location

Long-lived assets by geographic location as of September 30, 2018 and December 31, 2017 are as follows (in thousands):

	September 30,		December 31,
	2018		2017
Property and equipment, net:
Americas	$	1,106	$	868
Europe and the Middle East		50		89
Asia-Pacific		979		1,086
Total property and equipment, net	$	2,135	$	2,043

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Restructuring and Severance (Tables)

9 Months Ended

Sep. 30, 2018

Restructuring And Related Activities [Abstract]

Restructuring and Severance

Restructuring and severance activities during the nine months ended September 30, 2018 and 2017 were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Balance at beginning of period	$	—					$	—		$	237
Restructuring expense incurred for the period		223			(49	)		591			(49	)
Payments and non-cash item adjustment during    the period		(223	)		49			(591	)		(188	)
Balance at end of period	$	—		$	—		$	—		$	—

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2018

Commitments And Contingencies Disclosure [Abstract]

Summary of Principal Contractual Obligations

The following table summarizes the Company’s principal contractual commitments as of September 30, 2018 (in thousands):

	Operating Leases (a)		Purchase Commitments		Other Contractual Commitments		Total
2018 (remaining three months)	$	498	$	10,535	$	91	$	11,124
2019		1,979		4,035		33		6,047
2020		1,782		450		—		2,232
2021		1,357		450		—		1,807
2022		1,133		450		—		1,583
Thereafter		—		—		—		—
Total	$	6,749	$	15,920	$	124	$	22,793

(a) Operating lease payments have not been reduced by sublease rentals of $2.8 million due in the future under noncancelable subleases.

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Organization and Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($) Customer	Sep. 30, 2017 Customer	Sep. 30, 2018 USD ($) Customer	Sep. 30, 2017 Customer	Dec. 31, 2017 USD ($) Customer	Jan. 01, 2018 USD ($)
Accounting Policies [Line Items]
Number of major customer represented stated percentage of total net revenue | Customer	0	0	0	0
Number of customers who accounted for 10% or more of accounts receivable balance | Customer			0		0
Concentration Risk, Customer			No customer represented more than 10% of net revenue for either of the three or nine months ended September 30, 2018 or 2017. No customer represented 10% or more of the Company’s accounts receivable balance at September 30, 2018 or December 31, 2017.
Capitalized software development costs	$ 386,000		$ 386,000
Software development costs capitalized in period			0		$ 401,000
Accumulated deficit	(404,983,000)		(404,983,000)		(399,647,000)
Deferred Revenue	$ 2,265,000		$ 2,265,000		$ 900,000
Topic 606
Accounting Policies [Line Items]
Accumulated deficit						$ (399,645,000)
Capitalized incremental sales commision costs or other costs						0
Topic 606 | On Delivery
Accounting Policies [Line Items]
Percentage of revenue recognized	94.00%		95.00%
Topic 606 | Over Time
Accounting Policies [Line Items]
Percentage of revenue recognized	6.00%		5.00%
Topic 606 | Adjustments
Accounting Policies [Line Items]
Accumulated deficit						2,000
Deferred Revenue						$ (2,000)
Minimum
Accounting Policies [Line Items]
Estimated useful lives of intangible asset			4 years
Maximum
Accounting Policies [Line Items]
Estimated useful lives of intangible asset			12 years

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Summary of Effects of Adopting Topic 606 on Condensed Consolidated Balance Sheet (Detail) - USD ($)	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Deferred revenue	$ 3,491,000		$ 1,090,000
Accumulated deficit	$ (404,983,000)		$ (399,647,000)
Topic 606
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Deferred revenue		$ 1,088,000
Accumulated deficit		(399,645,000)
Topic 606 | Adjustments
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Deferred revenue		(2,000)
Accumulated deficit		$ 2,000

XML

Summary of Effects of Adopting Topic 606 on Condensed Consolidated Statement of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Net revenue	$ 20,022	$ 15,432	$ 56,844	$ 43,664
Cost of revenue	11,538	9,571	33,699	26,423
Operating expenses	8,639	6,243	26,103	19,796
Income tax (provision) benefit	(41)	42	(121)	161
Net loss	$ (287)	$ (1,032)	$ (5,338)	$ (3,622)
Basic and diluted net loss per share attributable to Identiv, Inc.	$ (0.02)	$ (0.07)	$ (0.34)	$ (0.28)
Topic 606 | Adjustments
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Net revenue			$ 1
Net loss			1
Topic 606 | Balance Under Prior GAAP
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Net revenue			56,845
Cost of revenue			33,699
Operating expenses			26,103
Income tax (provision) benefit			(121)
Net loss			$ (5,337)
Basic and diluted net loss per share attributable to Identiv, Inc.			$ (0.34)

XML

Revenue - Additional Information (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2018 USD ($) Segment
Revenue From Contract With Customer [Line Items]
Number of operating segments | Segment	4
Remaining performance obligations | $	$ 2.1
Revenue, practical expedient, unsatisfied performance obligations non disclosure	true
Revenue, practical expedient, time value of money for contracts consideration	false
Minimum
Revenue From Contract With Customer [Line Items]
Payment period from contract inception	30 days
Maximum
Revenue From Contract With Customer [Line Items]
Payment period from contract inception	90 days
Hardware Products | Minimum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	30 days
Hardware Products | Maximum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	60 days
Software Licenses | Minimum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	30 days
Contract period	1 year
Software Licenses | Maximum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	60 days
Contract period	3 years
Software Maintenance and Support Services | Minimum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	30 days
Contract period	1 year
Software Maintenance and Support Services | Maximum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	60 days
Contract period	3 years
Extended Hardware Warranties | Minimum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	30 days
Contract period	1 year
Extended Hardware Warranties | Maximum
Revenue From Contract With Customer [Line Items]
Payment period, after shipment	60 days
Contract period	2 years

XML

Schedule of Performance Obligation (Detail)	9 Months Ended
	Sep. 30, 2018
Hardware Products
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Hardware products
When Performance Obligation is Typically Satisfied	When customer obtains control of the product (point-in-time)
When Payment is Typically Due	Within 30-60 days of shipment
How Standalone Selling Price is Typically Estimated	Observable in transactions without multiple performance obligations
Software Licenses
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Software licenses
When Performance Obligation is Typically Satisfied	When license is delivered to customer or made available for download, and the applicable license period has begun (point-in-time)
When Payment is Typically Due	Within 30-60 days of the beginning of license period
How Standalone Selling Price is Typically Estimated	Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
Professional Services
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Professional services
When Performance Obligation is Typically Satisfied	As services are performed and/or when contract is fulfilled (point-in-time)
When Payment is Typically Due	Within 30-60 days of delivery
How Standalone Selling Price is Typically Estimated	Observable in transactions without multiple performance obligations
Software Maintenance and Support Services
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Software maintenance and support services
When Performance Obligation is Typically Satisfied	Ratably over the course of the support contract (over time)
When Payment is Typically Due	Within 30-60 days of the beginning of the contract period
How Standalone Selling Price is Typically Estimated	Observable in renewal transactions
Extended Hardware Warranties
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Performance Obligation	Extended hardware warranties
When Performance Obligation is Typically Satisfied	Ratably over the course of the support contract (over time)
When Payment is Typically Due	Within 30-60 days of the beginning of the contract period
How Standalone Selling Price is Typically Estimated	Observable in renewal transactions

XML

Schedule of Performance Obligation (Parenthetical) (Detail)	9 Months Ended
	Sep. 30, 2018
Hardware Products | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Hardware Products | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Software Licenses | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Software Licenses | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Professional Services | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Professional Services | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Software Maintenance and Support Services | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Software Maintenance and Support Services | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days
Extended Hardware Warranties | Minimum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	30 days
Extended Hardware Warranties | Maximum
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Payment period, after shipment	60 days

XML

Total Net Sales Based on Disaggregation Criteria (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation Of Revenue [Line Items]
Total net sales	$ 20,022	$ 15,432	$ 56,844	$ 43,664
Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net sales	18,850	15,101	53,728	42,637
Over Time
Disaggregation Of Revenue [Line Items]
Total net sales	1,172	331	3,116	1,027
Americas
Disaggregation Of Revenue [Line Items]
Total net sales	15,035	10,291	44,172	28,894
Americas | Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net sales	13,930	9,960	41,150	27,893
Americas | Over Time
Disaggregation Of Revenue [Line Items]
Total net sales	1,105	331	3,022	1,001
Europe and the Middle East
Disaggregation Of Revenue [Line Items]
Total net sales	2,161	1,771	6,992	5,767
Europe and the Middle East | Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net sales	2,117	1,771	6,921	5,741
Europe and the Middle East | Over Time
Disaggregation Of Revenue [Line Items]
Total net sales	44		71	26
Asia-Pacific
Disaggregation Of Revenue [Line Items]
Total net sales	2,826	3,370	5,680	9,003
Asia-Pacific | Point-in-Time
Disaggregation Of Revenue [Line Items]
Total net sales	2,803	$ 3,370	5,657	$ 9,003
Asia-Pacific | Over Time
Disaggregation Of Revenue [Line Items]
Total net sales	$ 23		$ 23

XML

Changes in Deferred Revenue (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Disaggregation Of Revenue [Line Items]
Deferred revenue	$ 3,491		$ 1,090
Fair value of deferred revenue acquired in acquisition, net of recognition	1,693
Deferral of revenue billed in current period, net of recognition	1,557
Recognition of revenue deferred in prior periods	$ (847)
Topic 606
Disaggregation Of Revenue [Line Items]
Deferred revenue		$ 1,088
Topic 606 | Impact of Adoption of Topic 606
Disaggregation Of Revenue [Line Items]
Deferred revenue		$ (2)

XML

Revenue - Unsatisfied Performance Obligation - Additional Information (Detail)	Sep. 30, 2018
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2018-10-01
Revenue From Contract With Customer [Line Items]
Unsatisfied performance obligations, expected to recognize	19.00%
Unsatisfied performance obligations, expected to recognize, period	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-01-01
Revenue From Contract With Customer [Line Items]
Unsatisfied performance obligations, expected to recognize	56.00%
Unsatisfied performance obligations, expected to recognize, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-01-01
Revenue From Contract With Customer [Line Items]
Unsatisfied performance obligations, expected to recognize	25.00%
Unsatisfied performance obligations, expected to recognize, period

XML

Business Combinations - Additional Information (Detail) - USD ($)			1 Months Ended	9 Months Ended		12 Months Ended
	May 09, 2018	Feb. 14, 2018	Jun. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2019	Dec. 31, 2017
Business Acquisition [Line Items]
Decrease in accounts receivable				$ 202,000	$ (1,197,000)
Goodwill				5,781,000
3VR
Business Acquisition [Line Items]
Date of acquisition completed		Feb. 14, 2018
Business combination, aggregate consideration		$ 6,200,000
Business combination, Payment of cash		1,600,000
Business combination, issuance of notes		$ 2,000,000
Business combination, issuance of common stock, shares		609,830
Business combination, issuance of common stock		$ 2,300,000
Business combination, issuance of common stock value held back	$ 300,000
Business combination, issuance of common stock shares held back	93,406	294,927
Reduction in purchase consideration	$ 660,000
Reduction in goodwill	$ 660,000
Business combination, cancellation of common stock shares held back	181,319
Product shipments have to be achieved to obligate earn-out consideration		$ 24,100,000
Amount of earn-out consideration of payable in shares of common stock		3,500,000
Potential maximum earn-out value		7,000,000
Amount of shipments should exceed to obligate potential maximum earn-out value		48,200,000
Decrease in accounts receivable			$ 561,000,000
Goodwill		5,781,000		5,781,000
3VR | ASC 805
Business Acquisition [Line Items]
Acquisition and transitional costs				$ 548,000			$ 212,000
3VR | Scenario, Forecast
Business Acquisition [Line Items]
Percentage of contingent consideration obligated to pay						35.00%
Amount of contingent consideration obligated to pay for each subject adjustments						$ 25,000,000
3VR | Maximum
Business Acquisition [Line Items]
Business combination, issuance of common stock value held back		$ 1,000,000

XML

Summary of Fair Values of Assets Acquired and Liabilities Assumed at Acquisition (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Feb. 14, 2018
Business Acquisition [Line Items]
Goodwill	$ 5,781
3VR
Business Acquisition [Line Items]
Cash		$ 195
Accounts receivable		2,029
Inventory		257
Prepaid expenses and other current assets		169
Property and equipment		334
Finite-lived intangibles		6,300
Total identifiable assets acquired		9,284
Accounts payable		(1,590)
Accrued expenses and liabilities		(711)
Deferred revenue		(2,928)
Debt		(3,622)
Total liabilities assumed		(8,851)
Net identifiable assets acquired		433
Goodwill	$ 5,781	5,781
Purchase price		6,214
3VR | Trademarks
Business Acquisition [Line Items]
Finite-lived intangibles		400
3VR | Customer Relationships
Business Acquisition [Line Items]
Finite-lived intangibles		2,900
3VR | Developed Technology
Business Acquisition [Line Items]
Finite-lived intangibles		$ 3,000

XML

Summary of Acquisition Related Finite-lived Intangibles and Estimated Lives (Detail) - 3VR $ in Thousands	Feb. 14, 2018 USD ($)
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 6,300
Trademarks
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 400
Estimated Useful Life (in Years)	5 years
Customer Relationships
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 2,900
Estimated Useful Life (in Years)	10 years
Developed Technology
Acquired Finite Lived Intangible Assets [Line Items]
Gross Purchased Intangible Assets	$ 3,000
Estimated Useful Life (in Years)	10 years

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	$ 0	$ 0
Fair Value, Measurements, Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Asset measured and recognized at fair value on recurring basis	0	0
Fair Value Measurements, Non-recurring | Fair Value, Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Privately-held investments measured at fair value	$ 300,000	$ 300,000

XML

Stockholders' Equity - Additional Information (Detail)						1 Months Ended	9 Months Ended		79 Months Ended
	May 31, 2018 shares	May 30, 2018 USD ($) $ / shares shares	Dec. 20, 2017 USD ($) $ / shares shares	Feb. 08, 2017 USD ($) $ / shares shares	Aug. 13, 2014 $ / shares shares	May 31, 2017 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 shares	Dec. 31, 2017 USD ($) shares	Jun. 06, 2011 shares
Stockholders Equity [Line Items]
Preferred stock, shares authorized							10,000,000
Preferred stock, par value | $ / shares							$ 0.001
Preferred stock, outstanding							0		0
Common stock reserved for future issuance							9,190,500
Unrecognized compensation expense | $							$ 300,000
Unrecognized stock-based compensation expense, weighted average period of recognition							10 months 24 days
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax | $							$ 2,100,000		$ 2,700,000
Restricted Stock Units (RSUs)
Stockholders Equity [Line Items]
Unrecognized compensation expense | $							$ 4,600,000
Unrecognized stock-based compensation expense, weighted average period of recognition							2 years 7 months 6 days
Repurchase of common stock (in shares)							109,666	121,384
2007 Plan and 2010 Plan
Stockholders Equity [Line Items]
Common stock reserved for future issuance							0
Number of shares available for grant										459,956
2011 Plan
Stockholders Equity [Line Items]
Common stock reserved for future issuance										400,000
Number of shares available for grant										859,956
Increase in shares of common stock authorized for issuance	500,000								3,000,000
Loan and Security Agreements | East West Bank | Revolving Credit Facility
Stockholders Equity [Line Items]
Borrowing capacity under credit facility | $				$ 16,000,000
Loan and Security Agreements | Venture Lending & Leasing VII and VIII, Inc. | Term Loan Facility
Stockholders Equity [Line Items]
Borrowing capacity under credit facility | $				$ 10,000,000
2014 Consultant Warrant
Stockholders Equity [Line Items]
Warrant exercise price | $ / shares					$ 10.70		$ 10.70
Warrants expiration date					Aug. 13, 2019
Warrants exercised							0
VLL7 Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock				290,000
Warrant exercise price | $ / shares				$ 2.00
Warrants expiration date				Feb. 08, 2022
Common stock warrants fair value | $				$ 1,037,500
VLL7 Warrant | Estimated Volatility
Stockholders Equity [Line Items]
Private placement warrant				78.8
VLL7 Warrant | Risk-Free Interest Rate
Stockholders Equity [Line Items]
Private placement warrant				1.94
VLL7 Warrant | Dividend Yield
Stockholders Equity [Line Items]
Private placement warrant				0
VLL7 Warrant | Expected Life
Stockholders Equity [Line Items]
Private placement warrant				5 years
EWB Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock				40,000
Warrant exercise price | $ / shares				$ 3.64			$ 3.64
Warrants expiration date				Feb. 08, 2022
Common stock warrants fair value | $				$ 125,000
EWB Warrant | Estimated Volatility
Stockholders Equity [Line Items]
Private placement warrant				78.8
EWB Warrant | Risk-Free Interest Rate
Stockholders Equity [Line Items]
Private placement warrant				1.94
EWB Warrant | Dividend Yield
Stockholders Equity [Line Items]
Private placement warrant				0
EWB Warrant | Expected Life
Stockholders Equity [Line Items]
Private placement warrant				5 years
VLL8 Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock				290,000
Warrant exercise price | $ / shares				$ 2.00
Warrants expiration date				Feb. 08, 2022
Common stock warrants fair value | $				$ 1,037,500
VLL8 Warrant | Estimated Volatility
Stockholders Equity [Line Items]
Private placement warrant				78.8
VLL8 Warrant | Risk-Free Interest Rate
Stockholders Equity [Line Items]
Private placement warrant				1.94
VLL8 Warrant | Dividend Yield
Stockholders Equity [Line Items]
Private placement warrant				0
VLL8 Warrant | Expected Life
Stockholders Equity [Line Items]
Private placement warrant				5 years
Previous Lender
Stockholders Equity [Line Items]
Warrants to purchase common stock cancelled				400,000
2017 Consultant Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock				60,000
Warrant exercise price | $ / shares				$ 4.60			4.60
Warrants expiration date				Feb. 08, 2019
Common stock warrants fair value | $				$ 119,000
2017 Consultant Warrant | Estimated Volatility
Stockholders Equity [Line Items]
Private placement warrant				78.8
2017 Consultant Warrant | Risk-Free Interest Rate
Stockholders Equity [Line Items]
Private placement warrant				1.22
2017 Consultant Warrant | Dividend Yield
Stockholders Equity [Line Items]
Private placement warrant				0
2017 Consultant Warrant | Expected Life
Stockholders Equity [Line Items]
Private placement warrant				2 years
Underwritten Public Offering | Common Stock
Stockholders Equity [Line Items]
Sale of stock						2,845,360
Public offering price, per share | $ / shares						$ 4.85
Proceeds from sale of stock in initial public offering | $						$ 12,600,000
Underwriting discount and other offering related expenses | $						$ 1,200,000
Maximum | Common Stock
Stockholders Equity [Line Items]
Shares issued, price per share | $ / shares							$ 4.00
Maximum | Common Stock | 2014 Consultant Warrant
Stockholders Equity [Line Items]
Warrants issued to purchase common stock					85,000
Series A Participating Preferred Stock
Stockholders Equity [Line Items]
Preferred stock, shares authorized							40,000
Preferred stock, par value | $ / shares							$ 0.001
Preferred stock, outstanding							0		0
Series B Preferred Stock
Stockholders Equity [Line Items]
Preferred stock, shares authorized							5,000,000
Preferred stock, par value | $ / shares			$ 0.001				$ 0.001
Preferred stock, outstanding							5,000,000
Shares issued, price per share | $ / shares			$ 4.00
Total purchase price payable | $			$ 20,000,000
Convertible preferred stock, terms of conversion							Each Share shall be convertible into the Company’s common stock (i) following the sixth (6th) anniversary of the initial closing of the Private Placement or (ii) if earlier, during the thirty (30) day period following the last trading day of any period of three (3) or more consecutive trading days that the closing market price of the Company’s common stock exceeds $10.00. Each Share is convertible at the option of the holder of shares of Series B Preferred Stock into such number of shares of the Company’s common stock
Convertible preferred stock, threshold closing market price of entity stock | $ / shares			$ 10.00
Percentage of beneficially ownership limitation in excess of outstanding common stock immediately after effect to applicable conversion			19.90%
Minimum conversion price | $ / shares							$ 3.27
Dividend payment terms							Each Share is entitled to an annual dividend of 5% for the first six (6) years following the issuance of such Share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10th) year in cash. The dividends accrue and are payable in kind upon such time as the Shares convert into the Company’s common stock
Annual dividend for first six years							5.00%
Annual dividend for each year after sixth year							3.00%
Price per share distributable to stockholders | $ / shares			$ 4.00
Series B Preferred Stock | Common Stock
Stockholders Equity [Line Items]
Preferred stock shares convertible into common stock							5,000,000
Series B Preferred Stock | Private Placement at Initial Closing of Transaction
Stockholders Equity [Line Items]
Issuance of stock (in shares)			3,000,000
Shares issued, price per share | $ / shares			$ 4.00
Total purchase price payable | $			$ 12,000,000
Series B Preferred Stock | Private Placement at Second Closing of Transaction
Stockholders Equity [Line Items]
Issuance of stock (in shares)		2,000,000	2,000,000
Shares issued, price per share | $ / shares		$ 4.00	$ 4.00
Total purchase price payable | $		$ 8,000,000
Series B Preferred Stock | Maximum
Stockholders Equity [Line Items]
Preferred stock, shares authorized									5,000,000
Preferred stock, issued			5,000,000

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Summary of Outstanding Warrants Issued by Company (Detail) - $ / shares	9 Months Ended
	Sep. 30, 2018	Feb. 08, 2017	Aug. 13, 2014
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	765,000
2014 Consultant Warrant
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	85,000
Weighted Average Exercise Price	$ 10.70		$ 10.70
Issue Date	Aug. 13, 2014
Expiration Date	Aug. 13, 2019
East West Bank Warrant
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	40,000
Weighted Average Exercise Price	$ 3.64	$ 3.64
Issue Date	Feb. 08, 2017
Expiration Date	Feb. 08, 2022
VLL7 and VLL8 Warrants
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	580,000
Weighted Average Exercise Price	$ 2.00
Issue Date	Feb. 08, 2017
Expiration Date	Feb. 08, 2022
2017 Consultant Warrant
Class Of Warrant Or Right [Line Items]
Number of Shares Issuable Upon Exercise	60,000
Weighted Average Exercise Price	$ 4.60	$ 4.60
Issue Date	Feb. 08, 2017
Expiration Date	Feb. 08, 2019

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Summary of Activity under Stock-Based Compensation Plans (Detail)	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares
Stock Options Number Outstanding
Beginning Balance | shares	672,441
Cancelled or Expired | shares	(47,970)
Exercised | shares	(2,500)
Ending Balance | shares	621,971
Vested or expected to vest at September 30, 2018 | shares	618,324
Exercisable at September 30, 2018 | shares	510,856
Stock Options Average Exercise Price per share
Beginning Balance | $ / shares	$ 6.28
Cancelled or Expired | $ / shares	11.56
Exercised | $ / shares	5.20
Ending Balance | $ / shares	5.87
Vested or expected to vest at September 30, 2018 | $ / shares	5.88
Exercisable at September 30, 2018 | $ / shares	$ 6.20
Stock Options Remaining Contractual Life (in years)
Remaining Contractual Life	6 years 11 months 4 days
Vested or expected to vest at September 30, 2018	6 years 11 months 4 days
Exercisable at September 30, 2018	6 years 9 months 7 days
Stock Options Average Intrinsic Value
Average intrinsic value | $	$ 721,856
Vested or expected to vest at September 30, 2018 | $	716,020
Exercisable at September 30, 2018 | $	$ 544,072

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Summary Information about Options Outstanding (Detail)	9 Months Ended
	Sep. 30, 2018 $ / shares shares
$4.36 - $7.20
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	$ 4.36
Range of Exercise Prices, upper limit	$ 7.20
Options Number Outstanding | shares	472,810
Options Outstanding Weighted Average Remaining Contractual Life (Years)	7 years 6 months
Options Outstanding Weighted Average Exercise Price	$ 4.47
Options Number Exercisable | shares	361,695
Options Exercisable Weighted Average Exercise Price	$ 4.50
$7.50 - $11.30
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	7.50
Range of Exercise Prices, upper limit	$ 11.30
Options Number Outstanding | shares	127,415
Options Outstanding Weighted Average Remaining Contractual Life (Years)	5 years 4 months 20 days
Options Outstanding Weighted Average Exercise Price	$ 9.42
Options Number Exercisable | shares	127,415
Options Exercisable Weighted Average Exercise Price	$ 9.42
$12.00 - $19.70
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	12.00
Range of Exercise Prices, upper limit	$ 19.70
Options Number Outstanding | shares	17,396
Options Outstanding Weighted Average Remaining Contractual Life (Years)	3 years 8 months 23 days
Options Outstanding Weighted Average Exercise Price	$ 13.66
Options Number Exercisable | shares	17,396
Options Exercisable Weighted Average Exercise Price	$ 13.66
$21.70 - $24.20
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	21.70
Range of Exercise Prices, upper limit	$ 24.20
Options Number Outstanding | shares	4,350
Options Outstanding Weighted Average Remaining Contractual Life (Years)	2 years 11 months 4 days
Options Outstanding Weighted Average Exercise Price	$ 23.27
Options Number Exercisable | shares	4,350
Options Exercisable Weighted Average Exercise Price	$ 23.27
$4.36 - $24.20
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Range of Exercise Prices, lower limit	4.36
Range of Exercise Prices, upper limit	$ 24.20
Options Number Outstanding | shares	621,971
Options Outstanding Weighted Average Remaining Contractual Life (Years)	6 years 11 months 4 days
Options Outstanding Weighted Average Exercise Price	$ 5.87
Options Number Exercisable | shares	510,856
Options Exercisable Weighted Average Exercise Price	$ 6.20

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Summary of Restricted Stock Unit (RSU) Activity (Detail) - Restricted Stock Units (RSUs)	9 Months Ended
	Sep. 30, 2018 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested beginning balance, Number of RSUs | shares	1,460,044
Granted, Number of RSUs | shares	710,763
Vested, Number of RSUs | shares	(457,345)
Forfeited, Number of RSUs | shares	(258,417)
Unvested ending balance, Number of RSUs | shares	1,455,045
Shares vested but not released, Number of RSUs | shares	372,018
Unvested beginning balance, Weighted Average Fair Value | $ / shares	$ 3.08
Granted, Weighted Average Fair Value | $ / shares	4.02
Vested, Weighted Average Fair Value | $ / shares	3.60
Forfeited, Weighted Average Fair Value | $ / shares	2.67
Unvested ending balance, Weighted Average Fair Value | $ / shares	3.45
Shares vested but not released, Weighted Average Fair Value | $ / shares	$ 3.07

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Stock-Based Compensation Expense Related to Stock Options and RSUs (Detail) - Stock Options and Restricted Stock Units - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	$ 703	$ 664	$ 1,987	$ 1,916
Cost of revenue
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	22	24	63	71
Research and Development Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	125	130	397	361
Selling and Marketing Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	171	193	519	463
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-Based Compensation Expense	$ 385	$ 317	$ 1,008	$ 1,021

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Summary of Common Stock Reserved for Future Issuance (Detail)	Sep. 30, 2018 shares
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	9,190,500
Exercise of Outstanding Stock Options, Vesting of RSUs, and Issuance of RSUs Vested but not Released
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	2,449,034
ESPP
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	293,888
Shares of Common Stock Available for Grant Under the 2011 Plan
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	672,223
Noncontrolling Interest in Bluehill ID AG
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	10,355
Warrants to Purchase Common Stock
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	765,000
Shares of Common Stock Issuable on Conversion of Series B Preferred Stock
Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Line Items]
Common stock reserved for future issuance	5,000,000

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Common Stock Equivalents Excluded From Diluted Net Loss Per Share (Details) - shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net loss per share inclusion anti-dilutive	7,852,371	3,149,740
RSUs
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net loss per share inclusion anti-dilutive	1,455,045	1,698,900
Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net loss per share inclusion anti-dilutive	621,971	675,485
Warrants
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net loss per share inclusion anti-dilutive	765,000	765,000
Noncontrolling Interest
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net loss per share inclusion anti-dilutive	10,355	10,355
Shares of Common Stock Issuable upon Conversion of Series B Preferred Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents diluted net loss per share inclusion anti-dilutive	5,000,000

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Inventories (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Inventory Disclosure [Abstract]
Raw materials	$ 4,530	$ 3,700
Work-in-progress	7	22
Finished goods	7,436	7,404
Total	$ 11,973	$ 11,126

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Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 15,308	$ 15,149
Accumulated depreciation	(13,173)	(13,106)
Property and equipment, net	2,135	2,043
Building and Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	2,050	1,917
Furniture, Fixtures and Office Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,852	1,771
Plant and Machinery
Property Plant And Equipment [Line Items]
Property and equipment, gross	9,026	9,411
Purchased Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	2,163	$ 2,050
Construction-in-Progress
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 217

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Balance Sheet Components - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Property Plant And Equipment [Abstract]
Depreciation expense	$ 0.3	$ 0.3	$ 0.9	$ 1.0

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Other Accrued Expenses and Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accrued Liabilities And Other Liabilities Current [Abstract]
Accrued professional fees	$ 1,205	$ 1,065
Accrued warranties	319	75
Income taxes payable	47	19
Other accrued expenses	1,426	861
Total	$ 2,997	$ 2,020

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Summary of Carrying Amount of Goodwill Resulting from Acquisition of 3VR (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Goodwill [Line Items]
Ending Balance	$ 5,781
3VR
Goodwill [Line Items]
Acquisition of business	5,781
Ending Balance	5,781
3VR | Premises
Goodwill [Line Items]
Acquisition of business	5,781
Ending Balance	$ 5,781

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Summary of Gross Carrying Amount and Accumulated Amortization for Intangible Assets Resulting from Acquisitions (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Acquired Finite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 21,539	$ 15,239
Accumulated amortization	(12,384)	(10,874)
Intangible assets, net	$ 9,155	4,365
Minimum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	4 years
Maximum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	12 years
Trademarks
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	5 years
Gross carrying amount	$ 400
Accumulated amortization	(50)
Intangible assets, net	350
Developed Technology
Acquired Finite Lived Intangible Assets [Line Items]
Gross carrying amount	7,600	4,600
Accumulated amortization	(3,779)	(3,257)
Intangible assets, net	$ 3,821	1,343
Developed Technology | Minimum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	10 years
Developed Technology | Maximum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	12 years
Customer Relationships
Acquired Finite Lived Intangible Assets [Line Items]
Gross carrying amount	$ 13,539	10,639
Accumulated amortization	(8,555)	(7,617)
Intangible assets, net	$ 4,984	$ 3,022
Customer Relationships | Minimum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	4 years
Customer Relationships | Maximum
Acquired Finite Lived Intangible Assets [Line Items]
Amortization period (in years)	12 years

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Amortization Expense Included in Condensed Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Finite Lived Intangible Assets [Line Items]
Amortization expense	$ 531	$ 364	$ 1,510	$ 1,092
Cost of revenue
Finite Lived Intangible Assets [Line Items]
Amortization expense	186	112	522	336
Selling and Marketing Expense
Finite Lived Intangible Assets [Line Items]
Amortization expense	$ 345	$ 252	$ 988	$ 756

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Estimated Future Amortization Expense of Purchased Intangible Assets with Definite Lives (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
2018 (remaining three months)	$ 532
2019	2,125
2020	2,125
2021	670
2022	670
Thereafter	3,033
Intangible assets, net	$ 9,155	$ 4,365

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Long-Term Payment Obligation - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2012
Related Party Transaction [Line Items]
Interest accreted on long-term payment obligation	$ 0.1	$ 0.1	$ 0.2	$ 0.3
Secure Keyboards Ltd
Related Party Transaction [Line Items]
Percentage of ownership by a related party following acquisition			24.50%		30.00%
Secure Networks Ltd
Related Party Transaction [Line Items]
Percentage of ownership by a related party following acquisition					9.00%
Settlement Agreement | Maximum
Related Party Transaction [Line Items]
Installment payment, contractual payment year			2020

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Payment Obligation in Connection with Hirsch Acquisition (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Related Party Transaction [Line Items]
2018 (remaining three months)	$ 10,535
2019	4,035
2020	450
2021	450
Total	15,920
Less: Current portion - payment obligation	(989)	$ (888)
Long-term payment obligation	2,157	$ 2,998
Hirsch Electronics
Related Party Transaction [Line Items]
2018 (remaining three months)	310
2019	1,277
2020	1,422
2021	367
Present value discount factor	(230)
Total	3,146
Less: Current portion - payment obligation	(989)
Long-term payment obligation	$ 2,157

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Summary of Financial Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Total before discount and debt issuance costs	$ 13,321	$ 13,736
Less: Current portion of notes payable	(2,000)
Less: Current portion of financial liabilities	(11,245)	(9,829)
Less: Current portion of unamortized discount and debt issuance costs	(76)	(404)
Less: Long-term portion of unamortized discount and debt issuance costs	0	(582)
Long-term financial liabilities		2,921
Term Loan
Debt Instrument [Line Items]
Total before discount and debt issuance costs		5,000
Notes Payable
Debt Instrument [Line Items]
Total before discount and debt issuance costs	2,000
Revolving Credit Facility
Debt Instrument [Line Items]
Total before discount and debt issuance costs	$ 11,321	$ 8,736

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Financial Liabilities - Additional Information (Detail) - USD ($)							9 Months Ended
	May 31, 2018	Feb. 21, 2018	Feb. 14, 2018	Feb. 08, 2018	Dec. 28, 2017	Feb. 08, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Debt Instrument [Line Items]
Payment of debt instrument, aggregate principal amount							$ 23,612,000	$ 42,805,000
Debt instrument, outstanding prinicipal balance							13,321,000		$ 13,736,000
Loss on extinguishment of debt							$ 1,369,000	$ (977,000)
3VR
Debt Instrument [Line Items]
Date of acquisition completed			Feb. 14, 2018
Business combination, issuance of notes			$ 2,000,000
Repayment of indebtedness outstanding of acquiree		$ 3,600,000
Term Loan
Debt Instrument [Line Items]
Debt instrument, outstanding prinicipal balance									5,000,000
Term Loan | Venture Lending & Leasing VII and VIII, Inc.
Debt Instrument [Line Items]
Loan maturity date							Aug. 08, 2020
Debt instrument, interest per annum rate						12.50%
Debt instrument scheduled interest accrued and payable						80.00%
Debt instrument, interest term						12 months
Payment of debt instrument, aggregate principal amount					$ 5,000,000
Debt instrument, outstanding prinicipal balance					10,000,000
Debt instrument payment, principal and interest					5,900,000
Debt instrument, outstanding principal					5,000,000
Debt instrument, accrued and unpaid interest outstanding					900,000
Loss on extinguishment of debt					$ 1,800,000
Revolving Credit Facility
Debt Instrument [Line Items]
Debt instrument, outstanding prinicipal balance							$ 11,321,000		$ 8,736,000
Revolving Credit Facility | Minimum
Debt Instrument [Line Items]
Line of credit facility liquidity covenant in cash						$ 4,000,000
Notes Payable
Debt Instrument [Line Items]
Debt instrument, outstanding prinicipal balance							2,000,000
Notes Payable | 3VR
Debt Instrument [Line Items]
Business combination, issuance of notes							$ 2,000,000
Annual interest rate of notes							3.00%
Notes payable, description							The Company issued subordinated unsecured promissory notes (“notes payable”) in the aggregate principal amount of $2.0 million, with an annual interest rate of 3.0%, payable on the one year anniversary of the closing date.
Previous Lender
Debt Instrument [Line Items]
Warrants to purchase common stock cancelled							400,000
Loan and Security Agreements
Debt Instrument [Line Items]
Line of credit facility customary fees and expenses including facility fees							$ 120,000
Loan and Security Agreements | Term Loan | Venture Lending & Leasing VII and VIII, Inc.
Debt Instrument [Line Items]
Payment of debt instrument, aggregate principal amount	$ 10,000,000
Debt instrument payment, principal and interest	5,200,000
Debt instrument, outstanding principal	4,600,000
Debt instrument, accrued and unpaid interest outstanding	600,000
Loss on extinguishment of debt	$ 1,400,000
Loan and Security Agreements | Revolving Credit Facility
Debt Instrument [Line Items]
Borrowing capacity under non-formula line of credit						$ 3,000,000
Line of credit facility early termination fee percentage						1.00%
Interest payable monthly date							Mar. 01, 2017
Line of credit facility additional facility fees paid				$ 40,000
Loan and Security Agreements | Revolving Credit Facility | Prime Rate
Debt Instrument [Line Items]
Percentage of interest rate						1.00%
Loan facility payable date							Feb. 08, 2019
Loan and Security Agreements | East West Bank | Revolving Credit Facility
Debt Instrument [Line Items]
Borrowing capacity under credit facility						$ 16,000,000
Loan and Security Agreements | Venture Lending & Leasing VII and VIII, Inc. | Term Loan Facility
Debt Instrument [Line Items]
Borrowing capacity under credit facility						$ 10,000,000

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Income Taxes - Additional Information (Detail)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Corporate tax rate	21.00%	35.00%

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Segment Reporting and Geographic Information - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2018 Segment
Segment Reporting [Abstract]
Number of reportable business segments	4

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Information Regarding Net Revenue and Gross Profit by Segment (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment Reporting Information [Line Items]
Net revenue	$ 20,022	$ 15,432	$ 56,844	$ 43,664
Gross profit	$ 8,484	$ 5,861	$ 23,145	$ 17,241
Gross profit margin	42.00%	38.00%	41.00%	39.00%
Operating expenses:
Research and development	$ 1,860	$ 1,597	$ 5,384	$ 4,584
Selling and marketing	3,915	3,448	12,176	10,142
General and administrative	2,641	1,247	7,952	5,119
Restructuring and severance	223	(49)	591	(49)
Total operating expenses	8,639	6,243	26,103	19,796
Loss from operations	(155)	(382)	(2,958)	(2,555)
Non-operating income (expense):
Interest expense, net	(291)	(643)	(1,239)	(1,995)
(Loss) gain on extinguishment of debt, net			(1,369)	977
Foreign currency gains (losses), net	200	(51)	354	(202)
Loss before income taxes and noncontrolling interest	(246)	(1,076)	(5,212)	(3,775)
Premises
Segment Reporting Information [Line Items]
Net revenue	9,364	5,916	25,691	17,058
Gross profit	$ 5,363	$ 3,399	$ 14,336	$ 9,543
Gross profit margin	57.00%	57.00%	56.00%	56.00%
Identity
Segment Reporting Information [Line Items]
Net revenue	$ 3,826	$ 3,421	$ 9,760	$ 10,568
Gross profit	$ 1,337	$ 1,229	$ 3,369	$ 3,667
Gross profit margin	35.00%	36.00%	35.00%	35.00%
Credentials
Segment Reporting Information [Line Items]
Net revenue	$ 6,832	$ 6,095	$ 21,393	$ 16,035
Gross profit	$ 1,784	$ 1,233	$ 5,440	$ 4,026
Gross profit margin	26.00%	20.00%	25.00%	25.00%
All Other
Segment Reporting Information [Line Items]
Net revenue				$ 3
Gross profit				$ 5
Gross profit margin				167.00%

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Information Regarding Net Revenue by Geographic Region (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Segment Reporting Information [Line Items]
Net revenue	$ 20,022	$ 15,432	$ 56,844	$ 43,664
Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	100.00%	100.00%	100.00%	100.00%
Americas
Segment Reporting Information [Line Items]
Net revenue	$ 15,035	$ 10,291	$ 44,172	$ 28,894
Americas | Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	75.00%	67.00%	78.00%	66.00%
Europe and the Middle East
Segment Reporting Information [Line Items]
Net revenue	$ 2,161	$ 1,771	$ 6,992	$ 5,767
Europe and the Middle East | Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	11.00%	11.00%	12.00%	13.00%
Asia-Pacific
Segment Reporting Information [Line Items]
Net revenue	$ 2,826	$ 3,370	$ 5,680	$ 9,003
Asia-Pacific | Geographic Concentration Risk | Revenue from Contract with Customer
Segment Reporting Information [Line Items]
Percentage of net revenue	14.00%	22.00%	10.00%	21.00%

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Long-Lived Assets by Geographic Location (Detail) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Property and equipment, net	$ 2,135	$ 2,043
Americas
Segment Reporting Information [Line Items]
Property and equipment, net	1,106	868
Europe and the Middle East
Segment Reporting Information [Line Items]
Property and equipment, net	50	89
Asia-Pacific
Segment Reporting Information [Line Items]
Property and equipment, net	$ 979	$ 1,086

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Restructuring and Severance - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Feb. 14, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses		$ 223	$ (49)	$ 591	$ (49)
3VR
Restructuring Cost And Reserve [Line Items]
Date of acquisition completed	Feb. 14, 2018
Restructuring and severance expenses		200		600
3VR | Facility Rental
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses		100		300
3VR | Severance
Restructuring Cost And Reserve [Line Items]
Restructuring and severance expenses		$ 100		$ 300

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Restructuring and Severance (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Restructuring And Related Activities [Abstract]
Balance at beginning of period				$ 237
Restructuring expense incurred for the period	$ 223	$ (49)	$ 591	(49)
Payments and non-cash item adjustment during the period	(223)	$ 49	(591)	$ (188)
Balance at end of period

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Summary of Principal Contractual Obligations (Detail) $ in Thousands	Sep. 30, 2018 USD ($)
Operating Leases
2018 (remaining three months)	$ 498
2019	1,979
2020	1,782
2021	1,357
2022	1,133
Total	6,749
Purchase Commitments
2018 (remaining three months)	10,535
2019	4,035
2020	450
2021	450
2022	450
Total	15,920
Other Contractual Commitments
2018 (remaining three months)	91
2019	33
Total	124
Total Commitments
2018 (remaining three months)	11,124
2019	6,047
2020	2,232
2021	1,807
2022	1,583
Total	$ 22,793

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Summary of Principal Contractual Obligations (Parenthetical) (Detail) $ in Millions	Sep. 30, 2018 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Future minimum rental payments under non-cancelable operating leases	$ 2.8

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Commitments and Contingencies - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2018
Minimum
Commitment And Contingencies [Line Items]
Term of warranties on certain product sales	12 months
Maximum
Commitment And Contingencies [Line Items]
Term of warranties on certain product sales	24 months

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Subsequent Event - Additional Information (Detail) - Thursby Software Systems, Inc. - USD ($)		12 Months Ended
	Nov. 01, 2018	Dec. 31, 2020	Dec. 31, 2019
Scenario, Forecast
Subsequent Event [Line Items]
Product revenue to be achieved to obligate earn-out consideration			$ 11,000,000
Amount of additional earn-out consideration of payable in shares of common stock			2,500,000
Minimum | Scenario, Forecast
Subsequent Event [Line Items]
Product revenue to be achieved to obligate earn-out consideration			8,000,000
Product revenue to be achieved to obligate additional earn-out consideration		$ 15,000,000
Maximum | Scenario, Forecast
Subsequent Event [Line Items]
Product revenue to be achieved to obligate earn-out consideration			15,000,000
Amount of earn-out consideration of payable in shares of common stock			7,500,000
Product revenue to be achieved to obligate additional earn-out consideration			$ 15,000,000
Subsequent Event
Subsequent Event [Line Items]
Date of acquisition completed	Nov. 01, 2018
Business combination, aggregate consideration	$ 3,100,000
Business combination, Payment of cash, net of cash acquired	600,000
Business combination, issuance of common stock	2,500,000
Business combination, issuance of common stock value held back	500,000
Amount of maximum earn-out consideration of payable for all periods in shares of common stock	$ 7,500,000