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SELECT BALANCE SHEET DETAILS

6 Months Ended

Jun. 30, 2015

Inventory

Inventories of $473,000 as of June 30, 2015 were comprised of work in process of $465,000 representing direct labor costs of approximately $436,000 on in-process projects, approximately $29,000 of equipment related to in-process projects and finished goods of $8,000 net of reserves for obsolete and slow-moving items of $3,000.

Inventories of $916,000 as of December 31, 2014 were comprised of work in process of $909,000 comprised of direct labor costs on in-process projects of $881,000 and equipment on in-process projects of $28,000. Finished goods inventories were $7,000 net of reserves for obsolete and slow-moving items of $3,000.

Intangible Assets

The Company has intangible assets in the form of trademarks, trade names and patents. The carrying amounts of the Company’s acquired trademark and trade name intangible assets were $8,000 and $15,000 as of June 30, 2015 and December 31, 2014, respectively, which include accumulated amortization of $339,000 and $332,000 as of June 30, 2015 and December 31, 2014, respectively. Amortization expense for the intangible assets was $4,000 and 7,000 for the three and six months ended June 30, 2015 and 2014, respectively. All intangible assets are being amortized over their estimated useful lives with no estimated residual values. Any costs incurred by the Company to renew or extend the life of intangible assets will be evaluated under ASC No. 350, Intangibles – Goodwill and Other, for proper treatment.

The carrying amounts of the Company’s patent assets were $123,000 and $129,000 as of June 30, 2015 and December 31, 2014, respectively, which include accumulated amortization of $536,000 and $530,000 as of June 30, 2015 and December 31, 2014, respectively. Amortization expense for patent assets was $3,000 and $6,000 for the three and six months ended June 30, 2015 and 2014, respectively. Patent assets are being amortized on a straight-line basis over their weighted-average remaining life of approximately 11.0 years.

The estimated acquired intangible amortization expense for the next five fiscal years is as follows:

Fiscal Year Ended December 31,	Estimated Amortization Expense ($ in thousands)
2015 (6 months)	$	14
2016		12
2017		12
2018		12
2019		12
Thereafter		69
Totals	$	131

Goodwill

The Company annually, or more frequently if events or circumstances indicate a need, tests the carrying amount of goodwill for impairment. A two-step impairment test is used to first identify potential goodwill impairment and then measure the amount of goodwill impairment loss, if any. The first step was conducted by determining and comparing the fair value, employing the market approach, of the Company’s reporting unit to the carrying value of the reporting unit. The Company continues to have only one reporting unit, Identity Management. Based on the results of this impairment test, the Company determined that its goodwill was not impaired as of June 30, 2015 and December 31, 2014.