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.

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 10, 2020,~~August 4, 2021, the registrant had ~~18,020,175~~22,160,165 shares of common stock outstanding.

	September 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
ASSETS
Current assets:
Cash	$	12,294		$	9,383
Accounts receivable, net of allowances of $361 and $299 as of September 30, 2020 and December 31, 2019, respectively		20,389			18,363
Cash and cash equivalents							$	36,370		$	11,409
Accounts receivable, net of allowances of $386 and $178 as of June 30, 2021 and December 31, 2020, respectively								17,746			18,927
Inventories		20,399			16,145			21,894			20,296
Prepaid expenses and other current assets		3,236			2,292			4,676			2,813
Total current assets		56,318			46,183			80,686			53,445
Property and equipment, net		2,392			2,042			4,101			2,827
Operating lease right-of-use assets		3,463			4,629			2,683			3,405
Intangible assets, net		8,138			10,104			7,036			7,563
Goodwill		10,204			10,238			10,299			10,266
Other assets		1,053			1,122			1,094			1,171
Total assets	$	81,568		$	74,318		$	105,899		$	78,677
LIABILITIES AND STOCKHOLDERS´ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,460		$	8,799		$	8,635		$	10,964
Current portion - contractual payment obligation		950			1,311
Current portion - financial liabilities, net of debt issuance costs of $235 and $41 as of September 30, 2020 and December 31, 2019, respectively		23,758			14,189
Contractual payment obligation								531			1,040
Financial liabilities, net of debt issuance costs of $127 and $59 as of June 30, 2021 and December 31, 2020, respectively								9,853			20,084
Operating lease liabilities		1,957			1,814			1,265			1,279
Deferred revenue		2,180			2,193			2,340			1,981
Accrued compensation and related benefits		2,845			1,671			2,943			2,985
Other accrued expenses and liabilities		2,757			4,498			4,537			3,240
Total current liabilities		43,907			34,475			30,104			41,573
Long-term contractual payment obligation		246			360
Long-term operating lease liabilities		2,673			3,013			1,556			2,272
Long-term deferred revenue		495			640			281			385
Other long-term liabilities		381			364			268			258
Total liabilities		47,702			38,852			32,209			44,488
Commitments and contingencies (see Note 17)
Stockholders´ equity:
Series B convertible preferred stock, $0.001 par value: 5,000 shares authorized; 5,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019		5			5
Common stock, $0.001 par value: 50,000 shares authorized; 19,320 and 18,209 shares issued and 17,966 and 16,986 shares outstanding as of September 30, 2020 and December 31, 2019, respectively		19			18
Commitments and contingencies (see Note 16)
Stockholders' equity:
Series B convertible preferred stock, $0.001 par value: 5,000 shares authorized; 5,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020								5			5
Common stock, $0.001 par value: 50,000 shares authorized; 23,566 and 19,450 shares issued and 22,123 and 18,055 shares outstanding as of June 30, 2021 and December 31, 2020, respectively								23			19
Additional paid-in capital		451,271			447,965			491,431			452,129
Treasury stock, 1,354 and 1,223 shares as of September 30, 2020 and December 31, 2019, respectively		(9,647	)		(9,043	)
Treasury stock, 1,443 and 1,395 shares as of June 30, 2021 and December 31, 2020, respectively								(10,519	)		(9,933	)
Accumulated deficit		(409,911	)		(405,504	)		(409,608	)		(410,609	)
Accumulated other comprehensive income		2,129			2,025			2,358			2,578
Total stockholders´ equity		33,866			35,466
Total stockholders' equity								73,690			34,189
Total liabilities and stockholders' equity	$	81,568		$	74,318		$	105,899		$	78,677

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Net revenue	$	24,859		$	23,026		$	62,084		$	64,785		$	23,993		$	19,105		$	46,155		$	37,225
Cost of revenue		14,974			12,500			36,987			35,672			15,153			11,393			29,623			22,013
Gross profit		9,885			10,526			25,097			29,113			8,840			7,712			16,532			15,212
Operating expenses:
Research and development		2,380			2,125			7,398			6,229			2,131			2,422			4,468			5,018
Selling and marketing		4,245			4,470			12,978			13,689			4,147			4,236			8,211			8,733
General and administrative		2,118			2,591			6,460			7,492			2,595			2,151			4,720			4,342
Increase (decrease) in fair value of earnout liability		—			175			(261	)		175
Decrease in fair value of earnout liability														—			(261	)		—			(261	)
Restructuring and severance		163			(87	)		1,645			(101	)		274			1,417			662			1,482
Total operating expenses		8,906			9,274			28,220			27,484			9,147			9,965			18,061			19,314
Income (loss) from operations		979			1,252			(3,123	)		1,629
Loss from operations														(307	)		(2,253	)		(1,529	)		(4,102	)
Non-operating income (expense):
Interest expense, net		(407	)		(246	)		(1,066	)		(766	)		(144	)		(407	)		(389	)		(659	)
Foreign currency (losses) gains, net		(175	)		168			(119	)		96
Gain on forgiveness of Paycheck Protection Program note														2,946			—			2,946			—
Foreign currency gains (losses), net														—			(30	)		46			56
Income (loss) before income tax provision		397			1,174			(4,308	)		959			2,495			(2,690	)		1,074			(4,705	)
Income tax provision		(8	)		(105	)		(99	)		(289	)		(29	)		(59	)		(73	)		(91	)
Net income (loss)	$	389		$	1,069		$	(4,407	)	$	670			2,466			(2,749	)		1,001			(4,796	)

Other comprehensive income (loss):
Foreign currency translation adjustment		369			(369	)		104			(302	)		63			215			(220	)		(265	)
Liquidation of subsidiary with noncontrolling interest		—			(33	)		—			(33	)
Comprehensive income (loss)	$	758		$	667		$	(4,303	)	$	335		$	2,529		$	(2,534	)	$	781		$	(5,061	)

Net income (loss) per common share:
Basic	$	0.01		$	0.05		$	(0.29	)	$	(0.01	)	$	0.10		$	(0.17	)	$	0.02		$	(0.30	)
Diluted	$	0.01		$	0.05		$	(0.29	)	$	(0.01	)	$	0.09		$	(0.17	)	$	0.02		$	(0.30	)

Weighted average shares used in computing net income (loss) per common share:
Basic		18,144			17,006			17,868			16,933			21,908			17,941			20,185			17,730
Diluted		18,650			17,766			17,868			16,933			28,751			17,941			21,092			17,730

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


	Three Months Ended June 30, 2021
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in		Treasury			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital		Stock			Deficit			Income			Equity
Balances, March 31, 2021		5,000	$	5		18,161		$	19	$	452,921	$	(10,186	)	$	(412,074	)	$	2,295		$	32,980
Net income		—		—		—			—		—		—			2,466			—			2,466
Unrealized income from foreign currency translation adjustments		—		—		—			—		—		—			—			63			63
Issuance of common stock in connection with vesting of stock awards		—		—		195			—		—		—			—			—			—
Stock-based compensation		—		—		—			—		697		—			—			—			697
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(23	)		—		—		(333	)		—			—			(333	)
Issuance of common stock in connection with public offering		—		—		3,779			4		37,711		—			—			—			37,715
Proceeds from exercise of stock options		—		—		11			—		102		—			—			—			102
Balances, June 30, 2021		5,000	$	5		22,123		$	23	$	491,431	$	(10,519	)	$	(409,608	)	$	2,358		$	73,690

	Six Months Ended June 30, 2021
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in		Treasury			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital		Stock			Deficit			Income			Equity
Balances, December 31, 2020		5,000	$	5		18,055		$	19	$	452,129	$	(9,933	)	$	(410,609	)	$	2,578		$	34,189
Net income		—		—		—			—		—		—			1,001			—			1,001
Unrealized loss from foreign currency translation adjustments		—		—		—			—		—		—			—			(220	)		(220	)
Issuance of common stock in connection with vesting of stock awards		—		—		293			—		—		—			—			—			—
Stock-based compensation		—		—		—			—		1,455		—			—			—			1,455
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(48	)		—		—		(586	)		—			—			(586	)
Issuance of common stock in connection with warrant exercise		—		—		28			—		—		—			—			—			—
Issuance of common stock in connection with public offering		—		—		3,779			4		37,711		—			—			—			37,715
Proceeds from exercise of stock options		—		—		16			—		136		—			—			—			136
Balances, June 30, 2021		5,000	$	5		22,123		$	23	$	491,431	$	(10,519	)	$	(409,608	)	$	2,358		$	73,690

	Three Months Ended June 30, 2020
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income			Equity
Balances, March 31, 2020		5,000	$	5		17,475		$	19	$	448,604		$	(9,268	)	$	(407,551	)	$	1,545			33,354
Net loss		—		—		—			—		—			—			(2,749	)		—			(2,749	)
Unrealized income from foreign currency translation adjustments		—		—		—			—		—			—			—			215			215
Issuance of common stock in connection with vesting of stock awards		—		—		212			—		—			—			—			—			—
Stock-based compensation		—		—		—			—		751			—			—			—			751
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(46	)		—		—			(183	)		—			—			(183	)
Issuance of common stock in connection with earnout liability		—		—		157			—		489			—			—			—			489
Issuance of shares to non-employees		—		—		62			—		304			—			—			—			304
Issuance of warrants		—		—		—			—		332			—			—			—			332
Balances, June 30, 2020		5,000	$	5		17,860		$	19	$	450,480		$	(9,451	)	$	(410,300	)	$	1,760		$	32,513

	Six Months Ended June 30, 2020
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income			Equity
Balances, December 31, 2019		5,000	$	5		16,986		$	18	$	447,965		$	(9,043	)	$	(405,504	)	$	2,025		$	35,466
Net loss		—		—		—			—		—			—			(4,796	)		—			(4,796	)
Unrealized loss from foreign currency translation adjustments		—		—		—			—		—			—			—			(265	)		(265	)
Issuance of common stock in connection with vesting of stock awards		—		—		362			—		—			—			—			—			—
Stock-based compensation		—		—		—			—		1,391			—			—			—			1,391
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(94	)		—		—			(408	)		—			—			(408	)
Issuance of common stock in connection with warrant exercise		—		—		387			1		(1	)		—			—			—			—
Issuance of common stock in connection with earnout liability		—		—		157			—		489			—			—			—			489
Issuance of shares to non-employees		—		—		62			—		304			—			—			—			304
Issuance of warrants		—		—		—			—		332			—			—			—			332
Balances, June 30, 2020		5,000	$	5		17,860		$	19	$	450,480		$	(9,451	)	$	(410,300	)	$	1,760		$	32,513

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

Three Months Ended September 30, 2020

Series B
Convertible Preferred Stock

Common Stock

Additional
Paid-in

Treasury

Accumulated

Accumulated
Other
Comprehensive

Total
Stockholders'

Shares

Amount

Shares

Amount

Capital

Stock

Deficit

Income

Equity

Balances, June 30, 2020

5,000

$
5

17,860

$
19

$
450,480

$
(9,451
)

$
(410,300
)

$
1,760

$
32,513

Net income

—

—

—

—

—

—

389

—

389

Unrealized income from foreign
   currency translation adjustments

—

—

—

—

—

—

—

369

369

Issuance of common stock in connection
   with vesting of stock awards

—

—

143

—

—

—

—

—

—

Stock-based compensation

—

—

—

—

791

—

—

—

791

Shares withheld in payment of taxes in
   connection with net share settlement of
   restricted stock units

—

—

(37
)

—

—

(196
)

—

—

(196
)
Balances, September 30, 2020

5,000

$
5

17,966

$
19

$
451,271

$
(9,647
)

$
(409,911
)

$
2,129

$
33,866

Nine Months Ended September 30, 2020

Series B
Convertible Preferred Stock

Common Stock

Additional
Paid-in

Treasury

Accumulated

Accumulated
Other
Comprehensive

Total
Stockholders'

Shares

Amount

Shares

Amount

Capital

Stock

Deficit

Income

Equity

Balances, December 31, 2019

5,000

$
5

16,986

$
18

$
447,965

$
(9,043
)

$
(405,504
)

$
2,025

$
35,466

Net loss

—

—

—

—

—

—

(4,407
)

—

(4,407
)
Unrealized income from foreign
   currency translation adjustments

—

—

—

—

—

—

—

104

104

Issuance of common stock in connection
   with vesting of stock awards

—

—

505

—

—

—

—

—

—

Stock-based compensation

—

—

—

—

2,182

—

—

—

2,182

Shares withheld in payment of taxes in
   connection with net share settlement of
   restricted stock units

—

—

(131
)

—

—

(604
)

—

—

(604
)
Issuance of common stock in connection
   with Viscount Earnout

—

—

157

—

489

—

—

—

489

Issuance of shares to non-employees

—

—

62

—

304

—

—

—

304

Issuance of common stock in connection
   with warrant exercise

—

—

387

1

(1
)

—

—

—

—

Issuance of warrants

—

—

—

—

332

—

—

—

332

Balances, September 30, 2020

5,000

$
5

17,966

$
19

$
451,271

$
(9,647
)

$
(409,911
)

$
2,129

$
33,866

Three Months Ended September 30, 2019

Series B
Convertible Preferred Stock

Common Stock

Additional
Paid-in

Treasury

Accumulated

Accumulated
Other
Comprehensive

Noncontrolling

Total
Stockholders'

Shares

Amount

Shares

Amount

Capital

Stock

Deficit

Income

Interest

Equity

Balances, June 30, 2019

5,000

$
5

16,786

$
18

$
446,819

$
(8,656
)

$
(404,752
)

$
2,276

$
(170
)

$
35,540

Net income

—

—

—

—

—

—

1,069

—

—

1,069

Unrealized loss from foreign
   currency translation adjustments

—

—

—

—

—

—

—

(369
)

—

(369
)
Issuance of common stock in connection
   with vesting of stock awards

—

—

136

—

—

—

—

—

—

—

Stock-based compensation

—

—

—

—

689

—

—

—

—

689

Shares withheld in payment of taxes in
   connection with net share settlement of
   restricted stock units

—

—

(39
)

—

—

(185
)

—

—

—

(185
)
Liquidation of subsidiary with
   noncontrolling interest

—

—

—

—

(137
)

—

—

(33
)

170

—

Balances, September 30, 2019

5,000

$
5

16,883

$
18

$
447,371

$
(8,841
)

$
(403,683
)

$
1,874

$
—

$
36,744

Nine Months Ended September 30, 2019

Series B
Convertible Preferred Stock

Common Stock

Additional
Paid-in

Treasury

Accumulated

Accumulated
Other
Comprehensive

Noncontrolling

Total
Stockholders'

Shares

Amount

Shares

Amount

Capital

Stock

Deficit

Income

Interest

Equity

Balances, December 31, 2018

5,000

$
5

15,967

$
17

$
444,145

$
(8,153
)

$
(404,353
)

$
2,209

$
(170
)

$
33,700

Net income

—

—

—

—

—

—

670

—

—

670

Unrealized loss from foreign
   currency translation adjustments

—

—

—

—

—

—

—

(302
)

—

(302
)
Issuance of common stock in connection
   with acquisition of business

—

—

419

1

1,634

—

—

—

—

1,635

Issuance of common stock in connection
   with vesting of stock awards

—

—

718

—

—

—

—

—

—

—

Stock-based compensation

—

—

—

—

2,069

—

—

—

—

2,069

Shares withheld in payment of taxes in
   connection with net share settlement of
   restricted stock units

—

—

(138
)

—

—

(688
)

—

—

—

(688
)
Issuance of common stock in connection
   with warrant exercise

—

—

10

—

—

—

—

—

—

—

Cancellation of holdback shares in
   connection with acquisition

—

—

(93
)

—

(340
)

—

—

—

—

(340
)
Liquidation of subsidiary with
   noncontrolling interest

—

—

—

—

(137
)

—

—

(33
)

170

—

Balances, September 30, 2019

5,000

$
5

16,883

$
18

$
447,371

$
(8,841
)

$
(403,683
)

$
1,874

$
—

$
36,744

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	1,001		$	(4,796	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		958			1,650
Gain on forgiveness of Paycheck Protection Program note		(2,946	)		—
Accretion of interest on contractual payment obligation		33			87
Amortization of debt issuance costs		88			146
Stock-based compensation expense		1,455			1,391
Impairment of right-of-use operating lease assets		281			1,199
Decrease in fair value of earnout liability		—			(261	)
Changes in operating assets and liabilities:
Accounts receivable		1,259			405
Inventories		(1,612	)		(2,608	)
Prepaid expenses and other assets		(1,785	)		(555	)
Accounts payable		(2,303	)		699
Contractual payment obligation liability		(542	)		(410	)
Deferred revenue		255			(41	)
Accrued expenses and other liabilities		996			(1,176	)
Net cash used in operating activities		(2,862	)		(4,270	)
Cash flows from investing activities:
Capital expenditures		(1,672	)		(614	)
Net cash used in investing activities		(1,672	)		(614	)
Cash flows from financing activities:
Borrowings under revolving loan facility, net of issuance costs		3,964			4,345
Repayments under revolving loan facility		(8,568	)		(1,347	)
Repayments under East West Bank term loan		—			(750	)
Proceeds from April 21 Funds promissory notes		—			4,000
Repayments of April 21 Funds promissory notes		(2,800	)		—
Proceeds from the sale of common stock, net of issuance costs		37,715			—
Proceeds from Paycheck Protection Program note		—			2,915
Taxes paid related to net share settlement of restricted stock units		(586	)		(408	)
Proceeds from exercise of stock options		136			—
Net cash provided by financing activities		29,861			8,755
Effect of exchange rates on cash and cash equivalents		(366	)		(139	)
Net increase in cash and cash equivalents		24,961			3,732
Cash and cash equivalents at beginning of period		11,409			9,383
Cash and cash equivalents at end of period	$	36,370		$	13,115

Supplemental Disclosures of Cash Flow Information:
Interest paid	$	289		$	515
Taxes paid, net	$	54		$	17
Non-cash investing and financing activities:
Common stock issued to settle vendor liability	$	—		$	304
Common stock issued to settle earnout liability	$	—		$	489
Fair value of warrants issued in connection with financial liabilities	$	—		$	332

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

Nine Months Ended

September 30,

2020

2019

Cash flows from operating activities:

Net (loss) income

$
(4,407
)

$
670

Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:

Depreciation and amortization

2,470

2,704

Accretion of interest on contractual payment obligation

115

115

Stock-based compensation expense

2,182

2,069

Amortization of debt issuance costs

321

42

Impairment of right-of-use operating lease asset

1,199

—

(Decrease) increase in fair value of earnout liability

(261
)

175

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable

(2,035
)

(3,667
)
Inventories

(4,244
)

(72
)
Prepaid expenses and other assets

(875
)

(33
)
Accounts payable

962

1,556

Contractual payment obligation liability

(590
)

(948
)
Deferred revenue

(158
)

721

Accrued expenses and other liabilities

(4
)

(1,962
)
Net cash (used in) provided by operating activities

(5,325
)

1,370

Cash flows from investing activities:

Capital expenditures

(928
)

(202
)
Acquisition of business, net of cash acquired

—

(1,287
)
Net cash used in investing activities

(928
)

(1,489
)
Cash flows from financing activities:

Borrowings under revolving loan facility, net of issuance costs

2,762

5,427

Repayments under revolving loan facility

(3,347
)

(2,144
)
Borrowings under East West Bank term loan

4,500

—

Repayments under East West Bank term loan

(1,250
)

—

Proceeds from April 21 Funds promissory notes

4,000

—

Proceeds from Paycheck Protection Program promissory note

2,915

—

Repayments of notes payable

—

(2,000
)
Taxes paid related to net share settlement of restricted stock units

(604
)

(688
)
Net cash provided by financing activities

8,976

595

Effect of exchange rates on cash

188

(290
)
Net increase in cash

2,911

186

Cash at beginning of period

9,383

10,866

Cash at end of period

$
12,294

$
11,052

Supplemental Disclosures of Cash Flow Information:

Interest paid

$
733

$
713

Taxes paid, net

$
44

$
155

Non-cash investing and financing activities:

Common stock issued to settle vendor liability

$
304

$
—

Common stock issued to settle earnout liability

$
489

$
—

Fair value of warrants issued in connection with financial liabilities

$
332

$
—

Common stock issued for acquisition of business, net

$
—

$
1,635

Liquidation of subsidiary with noncontrolling interest

$
—

$
170

Cancellation of holdback shares in connection with acquisition

$
—

$
340

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

The accompanying unaudited condensed consolidated financial statements include the accounts of Identiv, Inc. and its wholly ~~and majority~~ owned subsidiaries ~~(“Identiv” or~~ (the “Company”). All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the fiscal year ~~2019~~2020 condensed consolidated financial statements to conform to the fiscal year ~~2020~~2021 presentation. The reclassifications had no impact on net income (loss), total assets, total liabilities, or stockholders’ equity.

The accompanying unaudited condensed consolidated financial statements of 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 ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020~~2021 or any future period. The unaudited condensed consolidated balance sheet as of December 31, ~~2019~~2020 has been derived from audited consolidated financial statements at that date, but does not include all disclosures required by U.S. GAAP for complete financial statements. 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 notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

No material changes have been made to the Company's significant accounting policies disclosed in Note 1, ~~Summary of~~ 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvement to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments Credit Losses (Topic 326) Targeted Transition Relief, ASU 2016-13, the FASB issued ASU 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The subsequent ASUs do not change the core principle of the guidance in ASU 2016-13. Instead, these amendments are intended to clarify and improve operability of certain topics included within ASU 2016-13.

Additionally, ASU No. 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies ~~(“SRC”)~~ as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as a ~~SRC.~~smaller reporting company. In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses. The subsequent amendments will have the same effective date and transition requirements as ASU No. 2016-13. Early adoption is permitted. Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. While the Company is currently evaluating the impact of Topic 326, the Company does not expect the adoption of the ASU to have a material impact on its ~~condensed~~ consolidated financial statements.

In December 2019, FASB issued ASU 2019-12, Income Taxes ~~(Topic 740)~~(740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. ~~The Company is currently evaluating~~This standard did not have a material impact on the ~~impact this standard will have on its~~Company’s condensed consolidated financial statements.

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.

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

Hardware Product Revenue —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 Accounting Standards Codification ("ASC”) 460, Guarantees (“ASC 460”).

Software License Revenue— 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 revenue is recognized over the term of the support contract.

Subscription Revenue—Subscription revenue consist of fees received in consideration for providing customers access to one or more of the Company’s software-as-a-service (“SaaS”) based solutions. These SaaS arrangements include access to the Company’s licensed software and, in certain arrangements, use of various hardware devices over the contract term. These SaaS arrangements do not provide the customer the right to take possession of the software supporting the subscription service, or if applicable, any hardware devices at any time during the contract period, and as such are not considered separate performance obligations. Revenue is recognized ratably on a straight-line basis over the term of the contract beginning when the service is made available to the customer. Subscription contract terms range from month-to-month to six years in length and billed monthly or annually.

Professional Services Revenue—Professional services revenue consists primarily of programming customization services performed relating to the integration of the Company’s software products with the customers other systems, such as human resources systems. Professional services contracts are generally billed on a time and materials basis and revenue is recognized as the services are performed.

Software Maintenance and Support Revenue— Support and maintenance contract revenue consists of the services provided to support the specialized programming applications performed by the Company’s 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 toor three year period.

Extended Hardware Warranties Revenue— Sales of the Company’s 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.

The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For such arrangements, the Company allocates the transaction price 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.

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 two operating segments.~~

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

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 to software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 6090 days of contract inception. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts 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~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~June 30, 2020 were as follows (in thousands):

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 ~~$0.9~~$0.7 million as of ~~September~~June 30, ~~2020.~~2021. Since the Company typically invoices customers at contract inception, this amount is included in ~~its~~the deferred revenue balance. As of ~~September~~June 30, ~~2020,~~2021, the Company expects to recognize ~~18%~~35% of the revenue related to these unsatisfied performance obligations during the remainder of ~~2020, 52%~~2021, 42% during ~~2021,~~2022, and ~~30%~~23% thereafter.

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 ~~nine~~six months ended ~~September~~June 30, ~~2020 and 2019,~~2021, total capitalized costs to obtain contracts were immaterial.

On November 1, 2018, the Company completed the acquisition of Thursby Software Systems, Inc. (“Thursby”), a provider of security software for mobile devices, pursuant to an Agreement and Plan of Merger (the “Thursby Agreement”).

Under the terms of the Thursby Agreement, at the closing of the acquisition, the Company acquired all of the outstanding shares of Thursby for total purchase consideration of $3.1 million, consisting of:

An aggregate of up to $0.5 million, or 85,324 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. ~~In the fourth quarter of 2019, the Company and William Thursby reached agreement as to the satisfaction of the indemnification claims, and accordingly, the Company released the 85,324 holdback shares.~~

Additionally, in the event that revenue from Thursby products was greater than $8.0 million, $11.0 million, or $15.0 million in product shipments in 2019, the Company would have been obligated to issue earnout 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 was less than $15.0 million in 2019, but 2020 revenue from Thursby products exceeds $15.0 million, the Company will be obligated to issue an additional $2.5 million in earnout consideration payable in shares of the Company’s common stock. The maximum total earnout consideration payable for all periods is $7.5 million in the aggregate, payable in shares of the Company’s common stock. Management has assessed the probability of the issuance of shares related to the earnout consideration and determined it as remote. Accordingly, no value was ascribed to the earnout consideration as of ~~September~~ ~~30, 2020.~~

Acquisition related intangibles included in the below 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):

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Thursby resulted in $3.6 million of goodwill, which is not deductible for tax purposes. With the addition of the Thursby security software for mobile devices, the Company believes this goodwill largely reflects the synergistic strengthening of its Identity offerings providing complete solutions for secure and convenient logical access across smart cards and derived credentials on Apple iOS and Android mobile devices. In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter. See Note 6, ~~Goodwill and Intangible Assets~~.

On January 2, 2019, the Company completed the purchase of substantially all the assets of the Freedom, Liberty, and Enterphone™ MESH products and services of Viscount Systems, Inc. (“Viscount”) and the assumption of certain liabilities (the “Asset Purchase”). Under the terms of the Asset Purchase, the Company was obligated to pay at closing aggregate consideration of $2.9 million consisting of:

An aggregate of approximately 31,447 shares of the Company’s common stock issuable at the closing of the transaction were held back for 12 months following the closing for the satisfaction of certain indemnification claims. ~~In the first quarter of 2020, the Company released the 31,447 holdback shares as the indemnification claims were satisfied.~~

Additionally, in the event that revenue from the assets purchased under the agreement in 2019 was greater than certain specified revenue targets, the Company would be obligated to issue earnout consideration of up to a maximum of $3.5 million payable in shares of the Company’s common stock (subject to certain conditions). In the event that such revenue targets were not met in 2019, but 2020 revenue from the assets purchased exceeds certain higher targets for 2020, then the Company will be obligated to issue up to a maximum of $2.25 million in earnout consideration in the form of common stock. The maximum total earnout consideration liability for all periods is $3.5 million in the aggregate, payable in the Company’s common stock. At December 31, 2019, management had assessed the probability of the issuance of shares related to the earnout consideration and determined its fair value to be $750,000. In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the 2019 revenue targets were achieved. In the second quarter of 2020, the Company issued to the selling stockholders earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000. The Company recognized a reduction in earnout consideration expense of $261,000 in the statement of comprehensive income (loss) during the quarter ended June 30, 2020, representing the settlement date fair value of the shares issued and the recorded earnout liability.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

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):

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The Asset Purchase resulted in $1.2 million of goodwill. With the addition of Viscount’s products and services, the Company believes this goodwill largely reflects the expansion of its Premises offerings with advanced, complementary solutions for the commercial and small- and medium-sized business markets, leveraging Freedom’s IT-centric software, defined architecture, and hardware-light platform. In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter. See Note 6, ~~Goodwill and Intangible Assets~~.

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 ~~Topic~~ 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:

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, there were nominal cash equivalents.~~

~~The Company’s~~2020, the only ~~liabilities~~assets measured and recognized at fair value on a recurring basis ~~are the~~were nominal cash equivalents. As of June 30, 2021 and December 31, 2020, there were 0 liabilities measured and recognized at fair value on a recurring basis, other than contingent consideration ~~associated with the~~related to prior acquisitions ~~of Thursby and Viscount~~. ~~The fair value of the earnout consideration is based on achieving certain revenue and profit targets~~ as defined under the respective acquisition agreements. The valuation of the earnout consideration is classified as a Level 3 measurement as it is based on significant unobservable inputs and involves management judgment and assumptions about achieving revenue and profit targets and discount rates. The unobservable inputs used in the measurement of the earnout consideration are highly sensitive to fluctuations and any changes in the inputs or the probability weighting thereof could significantly change the measured value of the earnout consideration at each reporting period. As of December 31, ~~2019, management~~2020 which had ~~assessed the probability of the issuance of shares related to the Viscount earnout consideration and determined its~~no fair ~~value to be $750,000.~~ In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the 2019 revenue targets were achieved. Accordingly, in the second quarter of 2020, the Company issued to the selling stockholders the related earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000.

~~Changes in the fair value of liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):~~value.

Certain of the Company's assets, including goodwill, 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 6,5, 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 the 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~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had $~~348,000~~$348,000 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.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were no0 liabilities that are measured and recognized at fair value on a non-recurring basis.

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. ~~Based on~~The carrying value of the Company’s financial liabilities approximates fair value based upon borrowing rates currently available to the Company for ~~debt~~loans with similar ~~terms, the carrying value of the outstanding debt approximates fair value.~~terms.

~~The~~In accordance with ASC 350, Intangibles – Goodwill and Other, the Company tests goodwill for impairment on an annual basis, in the fourth quarter, 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 performs an initial assessment of qualitative factors to determine whether the ~~Company compares~~existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In performing the qualitative assessment, the Company identifies and considers the significance of relevant key factors, events, and circumstances that affect the fair value of its reporting units. These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial performance. If, after assessing the totality of relevant events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed; however, if the Company concludes otherwise, then the Company will perform the quantitative impairment test which compares the estimated fair value of the reporting unit to its carrying value, including ~~the goodwill of that unit.~~goodwill. If the carrying ~~value, including goodwill, exceeds~~amount of the reporting ~~unit’s~~unit is in excess of its fair value, ~~the Company will recognize~~ an impairment loss ~~for~~would be recorded in the ~~amount by which~~consolidated statement of comprehensive income (loss). During the ~~carrying amount exceeds~~six months ended June 30, 2021 and 2020, the ~~reporting unit’s fair value.~~ ~~No impairment~~Company noted 0 indicators of goodwill impairment and concluded no further testing was ~~identified during the nine months ended September~~ ~~30,~~ ~~2020 and 2019.~~necessary.

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 as of September 30, 2020

$
758

$
9,089

$
15,739

$
25,586

Accumulated amortization

(342
)

(5,542
)

(11,564
)

(17,448
)
Intangible assets, net as of September 30, 2020

$
416

$
3,547

$
4,175

$
8,138

Gross carrying amount as of December 31, 2019

$
763

$
9,109

$
15,763

$
25,635

Accumulated amortization

(229
)

(4,873
)

(10,429
)

(15,531
)
Intangible assets, net as of December 31, 2019

$
534

$
4,236

$
5,334

$
10,104

				Developed			Customer
	Trademarks			Technology			Relationships			Total
Amortization period (in years)	5			10 – 12			4 – 12

Gross carrying amount at June 30, 2021	$	767		$	9,132		$	15,794		$	25,693
Accumulated amortization		(458	)		(5,992	)		(12,207	)		(18,657	)
Intangible assets, net at June 30, 2021	$	309		$	3,140		$	3,587		$	7,036

Gross carrying amount at December 31, 2020	$	765		$	9,123		$	15,771		$	25,659
Accumulated amortization		(382	)		(5,773	)		(11,941	)		(18,096	)
Intangible assets, net at December 31, 2020	$	383		$	3,350		$	3,830		$	7,563

Each period, the Company evaluates the estimated remaining useful lives of purchased 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 on a straight-line basis over their useful lives as ~~shown~~indicated in the table above. The Company performs an evaluation of it its amortizable intangible assets for impairment at the end of each reporting period. NoThe Company did 0t identify any impairment ~~of intangible assets was identified~~indicators during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020.

The following table ~~illustrates~~summarizes the amortization expense included in the unaudited condensed consolidated statements of ~~operations~~ comprehensive income (loss) for the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively (in thousands):

The estimated annual future amortization expense for purchased intangible assets with definite lives as of ~~September~~June 30, ~~2020~~ 2021 was as follows (in thousands):

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

The Company recorded depreciation expense of $0.2 million ~~and $0.3 million~~ during the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$0.6 million and $0.8~~$0.4 million during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019, respectively.~~ respectively.

The rental payments due landlord relate to leased office space acquired in a prior acquisition. The office space was subleased, but the tenant went into default for non-payment beginning April 1, 2020. The Company is currently in active negotiations with the lessor to negotiate a settlement of the outstanding lease obligation.

Hirsch Electronics Corporation (“Hirsch”) Acquisition – Secure Keyboards and Secure Networks. Prior to the Company’s acquisition of Hirsch in 2009, in 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”). On April 8, 2009, the 1994 Settlement Agreement was amended and restated to replace the royalty-based payment arrangement with an installment payment schedule with contractual payments to be made in future periods through 2021 (the “2009 Settlement Agreement”). On April 30, 2009, as part of the acquisition of Hirsch, the Company provided Secure Keyboards and Secure Networks with a limited guarantee of Hirsch’s payment obligation under the 2009 Settlement Agreement.

On April 13, 2020, the Company, Secure Keyboards, and Secure Networks, amended the 2009 Settlement Agreement. The amendment reduced the amount of quarterly payments due under the obligation in 2020, and requires three additional quarterly payments in ~~2021, increasing the total amount due under the obligation by approximately $90,000.~~2021. The Company’s remaining payment obligation under the 2009 Settlement Agreement, as amended, was extended through October 31, 2021. The Company included approximately ~~$28,000~~$14,000 and ~~$115,000~~$33,000 of interest expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and approximately ~~$33,000~~$55,000 and ~~$115,000~~$87,000 of interest expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, in its condensed consolidated statements of ~~operations~~comprehensive income (loss) for interest accreted on the payment obligation.

The payment obligation under the 2009 Settlement Agreement, as amended, as of ~~September~~June 30, ~~2020,~~ ~~was~~2021, is as follows (in thousands):

On February 8, 2017, the Company entered into a Loan and Security ~~Agreements~~Agreement with East West Bank (“EWB”). Following subsequent amendments, on February 8, 2021 the Company amended and ~~Venture Lending & Leasing VII, Inc.~~restated the Loan and ~~Venture Lending VIII, Inc. (collectively referred to as “VLL7~~Security Agreement in its entirety (the “Loan and ~~VLL8”~~Security Agreement”). The Loan and Security ~~agreement, as amended, with EWB provided~~Agreement provides for a ~~$16.0~~$20.0 million revolving loan facility ~~(“Revolving Loan Facility”),~~subject to a borrowing base and a $4.0 million non-formula revolving loan facility that is not subject to a borrowing base. The Company’s obligations under the Loan and Security Agreement ~~with VLL7 and VLL8 provided~~are collateralized by substantially all of its assets.

The maturity date of the main revolving loan facility is February 8, 2023. The non-formula revolving loan facility will terminate on February 7, 2022, however the Company may, at its option if certain conditions are met, convert prior to their maturity any loans under the non-formula revolving loan facility to a ~~$10.0 million~~ term loan ~~facility (“Term Loan”). All amounts due~~that will fully amortize and mature on February 1, 2025. Advances under the ~~Term~~revolving loan facilities and the term loan (if converted) will initially bear interest at a per annum rate equal to the prime rate as determined under the Loan ~~were paid in full in May 2018.~~

and Security Agreement plus 0.25%. On ~~February 6, 2019,~~April 30, 2021, the Company entered into an amendment ~~(the “Tenth Amendment”)~~ to its Loan and Security Agreement ~~as amended, with EWB~~ which ~~increased~~reduced the ~~Revolving Loan Facility from $16.0 million to $20.0 million, lowered the~~per annum interest rate from prime rate plus 1.0% to prime rate plus 0.75%, extended the maturity date to February 8, 2021, and amended certain financial covenants, including covenants with respect to minimum EBITDA levels. On March 27, 2019, the Company entered into an amendment (the “Eleventh Amendment”) which modified certain financial covenants.

On January 28, 2020, the Company entered into an amendment (the “Twelfth Amendment”) to its Loan and Security Agreement with EWB, which provided a new term loan facility (“EWB Term Loan”) in a principal amount of $4.5 million, which was received on January 28, 2020, and reduced the Revolving Loan Facility under the Loan and Security Agreement from $20.0 million to $15.5 million. The EWB Term Loan has an interest rate equal to the prime rate plus 2.25%, began to amortize on February 1, 2020, with principal in the amount of $250,000 due monthly through the first anniversary of the Term Loan, and the remainder due on such first anniversary. In addition, certain definitions in the Loan and Security Agreement were amended pursuant to the Twelfth Amendment, including the definition of EBITDA and Borrowing Base, and a new fixed charge coverage ratio financial covenant was added. Upon repayment of the EWB Term Loan in full, the Revolving Loan Facility will be increased to $20.0 million and the fixed charge coverage ratio financial covenant will no longer apply. Legal and administrative costs of $90,000 were recorded as a direct reduction from the carrying amount of the EWB Term Loan and are being amortized as interest ~~expense over the remaining term of the Loan and Security Agreement with EWB.~~

On May 5, 2020, the Company entered into an amendment (the “Thirteenth Amendment”) to its Loan and Security Agreement with EWB. Under the Thirteenth Amendment, certain definitions were amended, including the definitions of Permitted Indebtedness and EBITDA, and certain financial covenants were amended, including reducing from $4.0 million to $3.0 million the amount of unrestricted cash that must be held in the Company’s accounts with EWB during the period from May 1, 2020 through September 30, 2020 and providing for minimum trailing six-month EBITDA of at least $0.6 million during such period and of $0.3 million thereafter. In addition, the Company is not required to make monthly principal payments on the EWB Term Loan for the three payment dates of May 1, 2020, June 1, 2020 and July 1, 2020. In addition, as discussed in Note 11, ~~Stockholders’ Equity,~~ the Company amended the EWB Warrant. The Company calculated the fair value of the amended EWB Warrant using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years. The fair value of the amended EWB Warrant of $42,000, as well as legal and administrative costs of $92,000, were recorded as a direct reduction from the carrying amount of the Revolving Loan Facility and are being amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.rate.

The Company may voluntarily prepay amounts outstanding under the ~~Revolving Loan Facility,~~revolving loan facilities and the term loan without prepayment charges. In the event the ~~Revolving~~ Loan ~~Facility~~and Security Agreement is terminated prior to ~~its maturity,~~February 8, 2023, the Company would be required to pay an early termination fee in the amount of ~~1.0%~~2.0% of the main revolving ~~line.~~loan line if terminated prior to February 8, 2022 and 1% of the main revolving loan line thereafter. Additional borrowing requests under the ~~Revolving Loan Facility~~revolving loan facilities are subject to various customary conditions precedent, including ~~satisfaction of~~ a borrowing base ~~test as more fully described in~~for the ~~Revolving~~main revolving loan facility.

~~The Revolving Loan Facility~~and Security Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the ~~Company's~~Company’s ability to incur liens, incur indebtedness, make certain restricted payments (including dividends), merge or consolidate and dispose of ~~assets, and various financial and liquidity covenants.~~assets. In addition, the ~~Revolving~~ Loan ~~Facility~~and Security Agreement contains financial covenants requiring that the Company (i) hold $5 million in unrestricted cash in accounts with EWB, (ii) maintain a monthly minimum trailing six-month EBITDA of $0.6 million for the first two quarters of 2021 and $1.2 million thereafter and (iii) maintain, if the Company converts into the term loan and starting with the quarter ending March 31, 2022, a quarterly fixed charge coverage ratio of at least 1.35:1.00.

The Loan and Security Agreement contains customary events of default that entitle EWB to cause any or all of the ~~Company's~~Company’s indebtedness under ~~the Revolving Loan Facility~~it 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 may terminate its lending commitment 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 Agreement to be immediately due and payable.

As of ~~September~~June 30, ~~2020,~~2021, the Company was in compliance with all financial covenants under the Revolving Loan Facility.

On May 5, 2020, the Company issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to 21 April Fund, LP and 21 April Fund, Ltd. (collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”). The Notes ~~are secured~~were collateralized by the Company’s assets, but subordinate to the Company’s obligations to EWB under its Loan and Security Agreement. Proceeds from the sale of the Notes ~~must~~were only to be used for expenses incurred by the Company in connection with its provisions of goods and services under a statement of work with a third party. The Notes ~~have~~had an initial term of nine months and dodid not bear interest during ~~this~~that period. ~~However, if~~If the Notes ~~are~~were not repaid on or before the nine-month anniversary of issuance, (a) the Notes ~~will~~would thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid, as further detailed in the Note Purchase Agreement. In the event the Notes ~~are~~were not paid in full by the first anniversary of their issuance, May 5, 2021, they ~~shall~~would thereafter bear interest of 12% per annum, payable quarterly, and additional warrants would be issuable to the April 21 Funds.

As discussed in Note ~~11,~~ 10, Stockholders’ Equity, the fair value of the warrants issued to April 21 Funds was calculated using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, no0 dividend yield, and an expected life of three years. The relative fair value of the warrants of $290,000 was recorded as a direct reduction from the carrying amount of the Notes and iswas being amortized as interest expense over the term of the April 21 Funds promissory notes.

On February 5, 2021, the Company entered into an amendment to the secured subordinated promissory note with April 21 Funds, which extended the initial term of the Notes to March 31, 2021. As a result of the amendment, if the Notes were repaid on or before March 31, 2021, the Company would incur no further interest on the Notes, or be obligated to issue additional warrants. On March 31, 2021, April 21 Funds waived any additional warrants issuable, and interest payable, to April 21 Funds through May 5, 2021. On April 13, 2021, the Company repaid the remaining principal amount outstanding of $2.8 million.

On April 9, 2020, the Company entered into a promissory note (the ~~“Note”~~“PPP Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The PPP Note iswas dated April 8, 2020 with EWB. The Company borrowed a principal amount of approximately $2.9 million. The interest on the PPP Note ~~is 1.00%~~was 1.0% per annum. The PPP Note iswas payable two years from the date of the PPP Note, and there iswas no prepayment penalty. All interest which accrues during the initial six months of the loan period iswas deferred and payable on the maturity date of the PPP Note. Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with Small Business Administration rules established for the Paycheck Protection Program. ~~The~~OnMay 7, 2021, the principal ~~amount outstanding, including~~and accrued interest ~~is included in current portion – financial liabilities~~amounts outstanding of approximately $2.9 million under the Company’s promissory note pursuant to the Paycheck Protection Program had been forgiven. As a result, the Company recorded a gain on forgiveness of debt of $2.9 million in the ~~accompanying condensed consolidated balance sheets, as the Company expects all amounts outstanding will be forgiven in the first~~second quarter of 2021.

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.

The Company applies the provisions of, and ~~accounts~~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 2016. However, if loss carryforwards of tax years prior to 2016 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.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the “Act”) into law. The $1.9 trillion Act includes COVID-19 relief, as well as broader stimulus, but also includes several revenue-raising and business tax provisions. The CARES Act ~~which was enacted on March 27, 2020,~~also includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits. Several foreign (non-U.S.) jurisdictions in which ~~we operate~~the Company operates have taken similar economic stimulus measures. The ~~Company analyzed the provisions of~~Act and the CARES Act ~~and determined there was~~had no ~~effect on its provision for the current period and will continue to evaluate the~~material impact ~~if any, the CARES Act may have~~ on the Company’s condensed consolidated financial statements and ~~disclosures~~.disclosures.

On June 29, 2020, California Governor Gavin Newsom signed Assembly Bill 85 (“AB85”) into law as part of the California 2020 Budget Act, which temporarily suspends the use of California net operating losses and imposes a cap on the amount of business incentive tax credits that companies can utilize against their net income for tax years 2020, 2021, and 2022. The Company analyzed the provisions of AB 85 and determined there was no impact on the Company’s provision for income taxes for the current period and will continue to evaluate the impact, if any, AB 85 may have on the Company’s condensed consolidated financial statements and disclosures.

The following tables summarize Series B convertible preferred stock and the accretion of dividend activity for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 (in thousands):

Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of ~~September~~June 30, ~~2020~~2021 would be convertible into ~~5,673,281~~5,884,594 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~~June 30, ~~2020,~~2021, none of the contingent conditions to adjust the ~~conversion rate~~total common shares to convert the shares had ~~occurred.~~

Each share of Series B convertible preferred stock is entitled to a cumulative 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 expected 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 convertible 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 convertible 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 applicable to the Series B convertible preferred stock).

On April 7, 2021, the Company sold an aggregate of 3,779,342 shares of its common stock at a public offering price of $10.65 per share in an underwritten public offering. The Company received net proceeds of approximately $37.7 million from the sale of the common stock in the public offering, after deducting the underwriting discounts and other offering related expenses of $2.5 million.

On February 8, 2017, the Company entered into a Loan and Security ~~Agreements~~Agreement with ~~each of~~ EWB ~~and VLL7 and VLL8 as discussed in Note 9,~~ ~~Financial Liabilities~~. In connection with the ~~Company’s Revolving~~ Loan ~~Facility,~~and Security Agreement, 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). ~~Each of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant was~~which were immediately exercisable for cash or by net exercise and expire on February 8, 2022. On ~~January 30, 2020, each of VLL7 and VLL8 exercised their warrant on a cashless net exercise basis, with each receiving 193,494 shares of the Company’s common stock.~~

On May 5, 2020, the Company entered into ~~the Thirteenth Amendment~~an amendment to ~~its~~the Loan and Security Agreement, ~~with EWB, as discussed in Note 9,~~ ~~Financial Liabilities. In connection with the Thirteenth Amendment, the Company amended~~which included amending the EWB Warrant, reducing its exercise price from $3.64 to $3.50 per share and extending the expiration date of the EWB Warrant from February 8, 2022 to February 8, 2023.

The Company calculated the fair value of the amended EWB Warrant using the Black Scholes pricing model using the following assumptions: estimated volatility of 63.2%, risk free interest rate of 0.24%, 0 dividend yield, and an expected life of three years. The fair value of the amended EWB Warrant of $42,000, as well as legal and administrative costs of $92,000, were recorded as a direct reduction from the carrying amount of the Revolving Loan Facility and amortized as interest expense over the remaining term of the Loan and Security Agreement. On February 11, 2021, EWB exercised their warrant on a cashless net exercise basis receiving 27,599 shares of the Company’s common stock.

On May 5, 2020, the Company entered into a Note and Warrant Purchase Agreement with the April 21 Funds, as discussed in Note 9, 8, Financial Liabilities, in which the Company issued warrants (“April 21 Funds Warrants”) to purchase 275,000 shares of common stock of the Company. The April 21 Funds Warrants have a term of three years (subject to early termination upon the closing of an acquisition); provided, that in the event that the Note is not paid in full by the nine-month anniversary of issuance, the term of the April 21 Funds Warrants shall be extended for a period of time equal to the period of time from such nine-month anniversary until the date the Note is fully paid (“Extension Warrants”). The Extension Warrants would have a term of three years from the date of issuance of the latest Extension Warrant to be issued (subject to early termination upon an acquisition). The shares of common stock issuable upon exercise of the April 21 Fund Warrants and any Extension Warrants that may be issued are entitled to the same resale registration rights granted to the April 21 Funds Warrants under the Stockholders Agreement dated December 21, 2017 in connection with the April 21 Funds previous purchase of certain securities of the Company.

Below is the summary of outstanding warrants issued by the Company as of S~~eptember~~June 30, ~~2020:~~ 2021:

Common stock reserved for future issuance as of ~~September~~June 30, ~~2020~~ 2021 was as follows:

The Company maintains a stock-based compensation plan, the 2011 Incentive Compensation Plan, as amended, (the “2011 Plan”), ~~as amended,~~ 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.

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 grant under the 2011 Plan, including shares rolled over from the 2007 Plan and the 2010 Plan. Subsequent to June 6, 2011 through June 30, 2020, ~~the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 4,400,000 shares.~~

AThe following is a summary of stock option activity for the ~~Company’s stock option plans for the nine~~six months ended ~~September~~June 30, ~~2020 is as follows:~~2021:

Number
Outstanding

Average Exercise
Price per Share

Weighted Average
Remaining
Contractual Term
(Years)

Aggregate
Intrinsic
Value

Balance as of December 31, 2019

562,102

$
5.60

5.86

$
572,869

Granted

—

—

Cancelled or Expired

(8,833
)

8.17

Exercised

—

—

Balance as of September 30, 2020

553,269

$
5.56

5.14

$
851,594

Vested or expected to vest as of
September 30, 2020

553,269

$
5.56

5.14

$
851,594

Exercisable as of September 30, 2020

553,269

$
5.56

5.14

$
851,594

	Number Outstanding			Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance at December 31, 2020		550,769		$	5.56		4.88	$	1,875,719
Granted		—			—
Cancelled or Expired		(792	)		20.21
Exercised		(16,651	)		8.19
Balance at June 30, 2021		533,326		$	5.46		4.49	$	6,182,448
Vested or expected to vest at June 30, 2021		533,326		$	5.46		4.49	$	6,182,448
Exercisable at June 30, 2021		533,326		$	5.46		4.49	$	6,182,448

The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock and the stock option exercise price of in-the-money stock options multiplied by the number of such stock options.

The following table summarizes information about stock options outstanding as of ~~September~~June 30, ~~2020:~~ 2021:

As of ~~September~~ June 30, ~~2020,~~2021, there was no 0unrecognized stock-based compensation expense related to stock options.

The following is a summary of RSU activity for the ~~nine~~six months ended ~~September~~June 30, ~~2020:~~2021:

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~~June 30, ~~2020,~~2021, there was ~~$3.3~~$2.6 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of ~~2.2~~2.4 years.

The Company granted 200,000 PSUs to a certain key employee during the year ended December 31, 2020, with a grant date fair value of $6.38 per share. The PSUs are subject to the attainment of performance goals established by the Company’s Compensation Committee, the periods during which performance is to be measured, and other limitations and conditions. Performance goals are based on pre-established objectives that specify the manner of determining the number of PSUs that will vest if performance goals are attained. If the employee terminates employment, the non-vested portion of the PSUs will not vest and all rights to the non-vested portion will terminate.

The following is a summary of PSU activity for the six months ended June 30, 2021:

As of June 30, 2021, there was $1.1 million of unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a period of 1.5 years. NaN tax benefit was realized from PSUs for the six months ended June 30, 2021.

The following table ~~illustrates all employee~~summarizes stock-based compensation expense related to stock options, RSUs, and ~~RSUs~~PSUs included in the condensed consolidated statements of ~~operations~~comprehensive income (loss) for the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ (in thousands):

During the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ the Company repurchased ~~130,745~~48,590 and ~~136,519~~94,134 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders during the period by the weighted average number of common shares outstanding during that period. Diluted net income (loss) per common share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock or the if-converted method of accounting.

The calculations for basic and diluted net income (loss) per common share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and June 30, 2021 are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Basic net income (loss) per common share:
Numerator:
Net income (loss)	$	389		$	1,069		$	(4,407	)	$	670		$	2,466		$	(2,749	)	$	1,001		$	(4,796	)
Less: Accretion of Series B preferred stock dividends		(275	)		(262	)		(818	)		(780	)
Accretion of Series B convertible preferred stock dividends														(286	)		(272	)		(570	)		(543	)
Net income (loss) available to common stockholders	$	114		$	807		$	(5,225	)	$	(110	)	$	2,180		$	(3,021	)	$	431		$	(5,339	)

Denominator:
Weighted average common shares outstanding - basic		18,144			17,006			17,868			16,933			21,908			17,941			20,185			17,730
Net income (loss) per common share - basic	$	0.01		$	0.05		$	(0.29	)	$	(0.01	)	$	0.10		$	(0.17	)	$	0.02		$	(0.30	)

Diluted net income (loss) per common share:
Numerator:
Net income (loss) available to common stockholders	$	114		$	807		$	(5,225	)	$	(110	)	$	2,180		$	(3,021	)	$	431		$	(5,339	)
Plus: Accretion of Series B preferred stock dividends, if dilutive		—			—			—			—
Plus: accretion of Series B convertible preferred stock dividends, if dilutive														286			—			—			—
Net income (loss) available to common stockholders	$	114		$	807		$	(5,225	)	$	(110	)	$	2,466		$	(3,021	)	$	431		$	(5,339	)

Denominator:
Weighted average common shares outstanding - basic		18,144			17,006			17,868			16,933			21,908			17,941			20,185			17,730
Dilutive securities:
Stock options, RSUs, and Warrants		506			760			—			—
Stock options, RSUs, PSUs, and warrants														958			—			907			—
Convertible preferred shares														5,885			—			—			—
Weighted average common shares outstanding - diluted		18,650			17,766			17,868			16,933			28,751			17,941			21,092			17,730
Net income (loss) per common share - diluted	$	0.01		$	0.05		$	(0.29	)	$	(0.01	)	$	0.09		$	(0.17	)	$	0.02		$	(0.30	)

The following common stock equivalents have been excluded from diluted net income (loss) per ~~common~~ share for the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ because their inclusion would have been anti-dilutive (in thousands):

~~14.~~13. Segment Reporting, Geographic Information, and Concentration of Credit Risk

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 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~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Premises:
Identity:
Net revenue	$	9,430		$	12,938		$	25,146		$	32,939		$	14,796		$	11,623		$	28,454		$	21,509
Gross profit		5,191			7,212			13,810			17,573			3,563			3,619			6,922			6,593
Gross profit margin		55	%		56	%		55	%		53	%		24	%		31	%		24	%		31	%
Identity:
Premises:
Net revenue		15,429			10,088			36,938			31,846			9,197			7,482			17,701			15,716
Gross profit		4,694			3,314			11,287			11,540			5,277			4,093			9,610			8,619
Gross profit margin		30	%		33	%		31	%		36	%		57	%		55	%		54	%		55	%
Total:
Net revenue		24,859			23,026			62,084			64,785			23,993			19,105			46,155			37,225
Gross profit		9,885			10,526			25,097			29,113			8,840			7,712			16,532			15,212
Gross profit margin		40	%		46	%		40	%		45	%		37	%		40	%		36	%		41	%
Operating expenses:
Research and development		2,380			2,125			7,398			6,229			2,131			2,422			4,468			5,018
Selling and marketing		4,245			4,470			12,978			13,689			4,147			4,236			8,211			8,733
General and administrative		2,118			2,591			6,460			7,492			2,595			2,151			4,720			4,342
Increase (decrease) in fair value of earnout liability		—			175			(261	)		175
Decrease in fair value of earnout liability														—			(261	)		—			(261	)
Restructuring and severance		163			(87	)		1,645			(101	)		274			1,417			662			1,482
Total operating expenses:		8,906			9,274			28,220			27,484			9,147			9,965			18,061			19,314
Income (loss) from operations		979			1,252			(3,123	)		1,629
Loss from operations														(307	)		(2,253	)		(1,529	)		(4,102	)
Non-operating income (expense):
Interest expense, net		(407	)		(246	)		(1,066	)		(766	)		(144	)		(407	)		(389	)		(659	)
Foreign currency (losses) gains, net		(175	)		168			(119	)		96
Gain on forgiveness of Paycheck Protection Program note														2,946			—			2,946			—
Foreign currency gains (losses), net														—			(30	)		46			56
Income (loss) before income tax provision	$	397		$	1,174		$	(4,308	)	$	959		$	2,495		$	(2,690	)	$	1,074		$	(4,705	)

Geographic net revenue is based on the customer’s ship-to location. Information regarding net revenue by geographic region for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Americas	$	15,050		$	17,825		$	42,588		$	48,495		$	14,208		$	13,670		$	29,356		$	27,538
Europe and the Middle East		2,082			2,436			7,312			8,790			3,626			2,630			6,086			5,230
Asia-Pacific		7,727			2,765			12,184			7,500			6,159			2,805			10,713			4,457
Total	$	24,859		$	23,026		$	62,084		$	64,785		$	23,993		$	19,105		$	46,155		$	37,225

Percentage of net revenue:
Americas		61	%		77	%		69	%		75	%		59	%		71	%		64	%		74	%
Europe and the Middle East		8	%		11	%		12	%		14	%		15	%		14	%		13	%		14	%
Asia-Pacific		31	%		12	%		19	%		11	%		26	%		15	%		23	%		12	%
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%		100	%

NoNaN customer accounted for 10% or more of net revenue for either of the three or ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 or ~~2019. No~~ 2020. NaNcustomer accounted for 10% of net accounts receivable as of ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019.~~

Long-lived assets by geographic location as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are as follows (in thousands):

Restructuring expenses incurred induring the three and ~~nine~~six months ended ~~September~~June 30, ~~2019 consist primarily~~2021 of $274,000 and $662,000, respectively, consists of facility rental related costs ~~associated with~~of $127,000 and $456,000, respectively, and severance related costs of $147,000 and $206,000, respectively. Facility rental related costs during the ~~sublet 3VR~~six months ended June 30, 2021 included a charge of $281,000 resulting from the impairment of a right-of-use operating lease asset for office space the Company vacated in ~~San Francisco, California, offset by sublease income received from a tenant which is subletting~~ the ~~office space over the remaining term~~first quarter of ~~the original lease. The restructuring accrual at~~ ~~September~~ ~~30, 2019 related to the Company’s future rental payment obligation associated with vacated office space at its Fremont, California facility.~~ 2021.

InRestructuring expenses incurred during the three and ~~nine~~six months ended ~~September~~June 30, 2020 ~~the Company incurred restructuring expenses~~ of ~~$163,000~~$1,417,000 and ~~$1,645,000,~~$1,482,000, respectively ~~consisting~~consists of severance related costs of ~~$145,000~~$20,000, and ~~$229,000,~~$84,000, respectively, and facility rental related costs associated with ~~the 3VR~~ office space from a prior acquisition of ~~approximately $18,000~~$1,397,000 and ~~$1,416,000,~~$1,398,000, respectively. The facility rental related costs included a charge of $1,199,000 associated with the impairment of the ROU operating lease asset, which was subleased, but ~~has gone~~went into default due to non-payment of rent beginning April 1, 2020. Sublease income of $198,000 was received in the first quarter of 2020, however, ~~since the first quarter of 2020, no~~0 rental payments ~~have been received.~~ were received during the three months ended June 30, 2020.

The Company’s leases consist primarily of operating leases for administrative office space, research and development facilities, a manufacturing facility, and sales offices in various countries around the world. The Company determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which are accounted for as a single lease component. Total rent expense was ~~approximately $0.4~~$0.3 million and ~~$1.2~~$0.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively. Total rent expense was approximately~~2021, respectively, and $0.4 million and ~~$1.1~~$0.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively.

Initial lease terms are determined at commencement and may include options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. Remaining lease terms range from one to ~~seven~~five years, some of which include options to extend for up to five years. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. As the Company’s leases do not provide an implicit rate, the present value of future lease payments is determined using the Company’s incremental borrowing rate based on information available at the lease commencement date.

The table below reconciles the undiscounted cash flows for the first five years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of ~~September~~June 30, ~~2020~~2021 (in thousands):

As of ~~September~~June 30,~~, 2020,~~ 2021, the weighted average remaining lease term for the Company’s operating leases was ~~2.9~~2.6 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was ~~6.4%~~6.3%. Sublease rental income due in the future under non-cancelable subleases was $1.6 million. As discussed in Note 14, Restructuring and Severance, sublease income is associated with office space acquired in an acquisition where the tenant went into default due to non-payment of rent beginning April 1, 2020. NaN cash has been received from the tenant since April 1, 2020.

Cash paid for amounts included in the measurement of operating lease liabilities was $0.4 million and ~~$1.4~~$0.8 millionfor the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively. ~~Cash received from sublease rentals was $0 and $0.2~~ ~~million for the three and nine months ended September 30, 2020, respectively.~~The Company does not expect to receive any additional sublease rental income related to the subleased 3VR office space, as the sublease has gone into default due to non-payment a discussed in Note 15, Restructuring and Severance.

The following table summarizes the Company’s principal contractual commitments, excluding operating leases, as of ~~September~~June 30, ~~2020~~2021 (in thousands):

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 following table summarizes the Company’s warranty accrual account activity during the ~~nine~~three and six months ended ~~September~~ June 30, ~~2020~~2021 and ~~2019:~~

The Company provides warranties on certain product sales for periods ranging from 12 to 36 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. Historically the warranty accrual and the expense amounts have been immaterial.

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 II, Item 1A of this Report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 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, ~~2019.~~2020. 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.

Identiv ~~Inc.~~ is a global provider of secure identification and physical ~~security and secure identification. Our products, software, systems, and services address the markets for physical and logical access control, video analytics and a wide range of~~security.

We are leveraging our Radio Frequency Identification (“RFID”)~~-enabled applications.~~ based physical device-management expertise as well as our physical access, video and analytics solutions to provide leading solutions as our customers, and our customers’ customers, embracing the Internet of Things (“IoT”). Customers in the technology and mobility, consumer, government, ~~enterprise, consumer,~~healthcare, education ~~healthcare, banking, retail, transportation~~ and other sectors rely on ~~our security~~Identiv’s identification and ~~identification~~access solutions. ~~Our~~Identiv’s platform encompasses RFID and Near-Field Communication (“NFC”), cybersecurity, and the full spectrum of physical access, video, and audio security. We are bringing the benefits of the IoT to a wide range of physical, connected items.

Identiv’s mission is to ~~make~~digitally enable every physical thing and every physical place on the ~~physical world digital and secure.~~planet. Our full continuum of security solutions is delivered through our platform ~~to deliver on our mission can be deployed through Internet~~ of ~~Things (“IoT”)~~RFID enabled devices, mobile, client/server, cloud, web, dedicated hardware and ~~software-defined~~software defined architectures. ~~Our solutions encompass what~~In doing so, we believe ~~to be the most complete set of technologies in the industry. We are a one-stop provider of software delivering~~that we will create smart physical security ~~management, video surveillance, logical access, analytics~~ and ~~identities; and devices spanning access readers, panels, processing appliances, and identity cards. We provide services to deliver optimized total solutions, serving as~~ a ~~single-point provider for our customers rather than several separate vendors that the customer would otherwise have to coordinate and manage.~~smarter physical world.

We have organized our operations into two reportable business segments, principally by solution families: Identity and Premises. Our Identity segment includes products and solutions enabling secure access to information serving the logical access and cyber-security market, and protecting connected objects and information using RFID embedded security.OurPremises ~~and Identity. Our~~ ~~Premises~~ segment includes our solutions to address the premises security market for government and enterprise, including access control, video surveillance, analytics, ~~customer experience~~audio, access readers and ~~other applications.~~identities.

Our financial performance depends on the pace, scope and ~~solutions enabling secure access to information serving the logical access and cyber security market, and protecting assets and objects in the IoT with RFID.~~

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

~~Net revenue~~ ~~for nine~~ ~~months ended September 30, 2020 was $62.1 million, a decrease~~depth of ~~4% compared with $64.8 million for the~~ ~~nine months ended~~ ~~September 30, 2019. Net revenue in our Premises segment, which accounted for 41% of our net revenue, was $25.1 million~~ ~~for the nine months ended~~ ~~September 30, 2020,~~ ~~a decrease of 24% compared with $32.9 million~~ ~~for the~~ ~~nine months ended September 30, 2019. Net revenue in our Identity segment, which represented 59% of our net revenue, was $36.9 million~~ ~~for the nine months ended~~ ~~September~~ ~~30, 2020, an increase of 16% compared with $31.8 million~~ ~~for the~~ ~~nine months ended September 30, 2019.~~

~~Net revenue in the Americas was approximately~~ ~~$42.6~~ ~~million for the nine months ended~~ ~~September~~ ~~30, 2020, representing approximately 69~~% ~~of total net revenue, a decrease of 12~~% ~~compared to $48.5 million for the nine months ended~~ ~~September~~ 30, 2019. 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 54% ~~of our net revenue in the Americas region.~~

~~Net revenue in our Premises segment for the nine months ended~~ ~~September~~ ~~30, 2020 decreased 22~~% compared to the prior year period primarily due to delays associated with the impact of the COVID-19 pandemic on our partners’ ability to access customer site locations, as well as the impact of business closures in the retail, hospitality and education markets. These delays were partially offset by higher Hirsch Velocity software product sales and related support services, particularly in the federal government. Net revenue in our Identity segment for the nine months ended ~~September~~ ~~30, 2020 increased 4~~% compared to the prior year period primarily due to higher sales of RFID transponder products and smart card readers, partially offset by lower sales of access card products. The primary driver of higher salesend-user adoption of our RFID ~~transponder~~ products ~~was~~in multiple industries. That pace, scope and depth accelerated during 2020 causing large fluctuations in our operating results. During 2020, we saw several events that we believe are opening up the ~~broad~~third wave of RFID deployments which is occurring at a much faster pace of growth than historically. We believe significant improvement in chip capabilities at lower costs, combined with the incorporation of the full NFC Data Exchange Format (“NDEF”) protocol by Apple in its iPhone 12 and iOS 14 has accelerated the opportunities for product engineers to integrate RFID into their products to create new and more engaging customer experiences, product reliability and performance. As the market hit this pivot point, we expanded both our capacity and technical leadership. We track growth indicators including design wins, customer launches and technology launches. We have made investments in our technology, world class quality and automation, and we believe that our competitive advantages will continue to drive growth.

We believe the underlying, long-term trend is continued RFID adoption by multiple verticals. We also believe that expanding use cases fosters adoption across verticals and into other markets. In addition, we do not have any significant concentration of ~~NFC, and the continued~~customers so we believe that our demand ~~of smart card reader products with shelter in place actions driving the need for more work from home technologies.~~

~~As a general trend, U.S. Federal agencies~~will continue to be ~~subject~~resilient to ~~security improvement mandates under programs such as Homeland Security Presidential Directive-12 (“HSPD-12”)~~the loss of any individual customer or application.

If RFID market adoption, and ~~reiterated in memoranda from~~adoption of our products specifically, does not meet our expectations then our growth prospects and operating results will be adversely affected. If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected. In contrast, if our RFID sales exceed expectations, then our revenue and profitability may be positively affected.

Given the ~~Office~~uncertainties of ~~Management~~the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and ~~Budget (“OMB M-11-11”). We believe~~capacity levels or that ~~our solution for trusted physical access is a superior offering to help federal agency customers move towards compliance with federal directives and mandates. To address our sales opportunities~~we will not experience inventory shortfalls or overages in the ~~United States~~future. We mitigate those risks by being deeply embedded in ~~general and~~our customers design cycle, working with our ~~U.S. Government customers~~chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and future proofing our facilities with the most recent expansion to accommodate several scenarios for growth potential.

If end users with sizable projects change or delay them, we may experience significant fluctuation in ~~particular, we focus~~revenue on a ~~strong U.S. sales organization~~quarterly or annual basis, and we anticipate that uncertainty to continue to characterize our ~~sales presence in Washington D.C.~~

More recently, in response to the new needs for health and safety in the physical security market overall, we have released products to address these trends. During the first half of 2020, we launched our contract tracing downloadable extension for our Velocity access system, our occupancy tracking system based on our 3VR platform, our MobilisID touchless reader and our temperature tracking tag. In addition, with the economic impact creating more uncertainty for our customers, we have released several products (Cirrus and 3VR Prime) which are subscription based which allow payments over time for our physical access and video solutions as a service.

~~Net revenue in Europe, the Middle East, and Asia-Pacific was approximately~~ ~~$19.5~~ ~~million~~business for the ~~nine months ended September 30, 2020, accounting for 31~~% ~~of total net revenue, was up 20~~% compared to $16.3 million for the nine months ended September 30, 2019 primarily as a result of higher sales in the Asia-Pacific region partially offset by lower sales in Europe and Middle East region. Sales of Identity readers and RFID and NFC products and tags comprise a significant proportion of our net revenue in these regions.foreseeable future.

~~Net revenue from our Premises products decreased 36~~% for the nine months ended September 30, 2020 from the prior year period primarily due to lower sales of Hirsch related physical access control solutions in both the Europe and Middle East and Asia-Pacific regions. Net revenue from our Identity products increased 34% for the nine months ended September 30, 2020 compared with the same period of the prior year primarily due to higher sales of RFID transponder products in both regions, partially offset by lower sales of smart card readers in the Asia-Pacific region and lower sales of access cards in the Europe and Middle East region. RFID transponder products comprised approximately 62% ~~of net revenue in both regions for the nine months ended September 30, 2020, while Identity smart card readers and access cards comprised approximately 28~~% ~~of net revenue in both regions in the same period.~~

In our business overall, we may experience 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. Sales of our identity readers, many of which are sold to government agencies worldwide, are impacted by project schedules of government agencies, as well as roll-out schedules for application deployments. 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 depend on the relative strength of project completions and sales mix between our U.S. customer base and our international customer base.

Purchasing of our Products and Services for U.S. Federal Government Security Programs

In addition to the general seasonality of demand, overall U.S. Federal Government expenditure patterns have a significant effect on demand for our products due to the significant portion of revenue that are typically sourced from U.S. Federal Government agencies. Drivers of growth included our technology strength and proven security solutions, work from home mandates, and continued strength in investments for security across a number of different agencies. We believe that the success and growth of our business will continue through the U.S. Federal Government focus on security and our successful procurement of government business. If there are changes in government purchasing policies or budgetary constraints there could be implications for our growth prospects and operating results. If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected.

In March 2020, the World Health Organization characterized the coronavirus (“COVID-19”) a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy. In view of the rapidly changing business environment created by the uncertainty related to the depth and or duration of the impact resulting from COVID-19, we have experienced delays in our sales in select vertical markets and are currently unable to determine if there will be any continued disruption and the extent to which this may have future impact on our business. We continue to monitor the progression of the pandemic and its effect on our financial position, results of operations, and cash flows.

~~Our base operating expenses (i.e., research and development, selling and marketing, and general and administrative expense) decreased 5% and 2% for the three and nine months ended~~ ~~September~~ ~~30, 2020, respectively,~~ ~~compared with the same periods in 2019. Research and development expenses increased 12% and 19% for the three and nine months ended~~ ~~September~~ ~~30, 2020, respectively,~~ compared with the same periods in 2019 primarily due to higher salaries and related costs associated with investments in engineering, including additional headcount, and higher external contractor costs. Selling and marketing expenses decreased 5~~% and 5% for the three and nine months ended~~ ~~September~~ ~~30, 2020, respectively,~~ compared with the same periods in 2019 due to primarily due to lower travel related costs associated with the COVID-19 pandemic, and lower trade show and advertising costs, partially offset by an increase in employment recruiting fees in the first and second quarters of 2020. General and administrative expenses decreased 18~~% and 14% for the three and nine months ended~~ ~~September~~ ~~30, 2020, respectively,~~ compared with the same periods in 2019 primarily due to reductions in headcount and related costs associated with our continued integration efforts across general and administrative functions, lower external services costs and professional fees in the first and second quarters of 2020, and the impact of bad debt reserve reductions recorded in the third quarter of 2020.

The following table includes ~~segment~~ net revenue and ~~segment~~ net profit information by business segment and reconciles gross profit to ~~results of operations~~income (loss) before income ~~taxes~~tax provision (in thousands).

	Three Months Ended June 30,									Six Months Ended June 30,
	2021			2020			% Change			2021			2020			% Change
Identity:
Net revenue	$	14,796		$	11,623			27	%	$	28,454		$	21,509			32	%
Gross profit		3,563			3,619			(2	%)		6,922			6,593			5	%
Gross profit margin		24	%		31	%					24	%		31	%
Premises:
Net revenue		9,197			7,482			23	%		17,701			15,716			13	%
Gross profit		5,277			4,093			29	%		9,610			8,619			11	%
Gross profit margin		57	%		55	%					54	%		55	%
Total:
Net revenue		23,993			19,105			26	%		46,155			37,225			24	%
Gross profit		8,840			7,712			15	%		16,532			15,212			9	%
Gross profit margin		37	%		40	%					36	%		41	%
Operating expenses:
Research and development		2,131			2,422			(12	%)		4,468			5,018			(11	%)
Selling and marketing		4,147			4,236			(2	%)		8,211			8,733			(6	%)
General and administrative		2,595			2,151			21	%		4,720			4,342			9	%
Decrease in fair value of earnout liability		—			(261	)	N/A				—			(261	)	N/A
Restructuring and severance		274			1,417			(81	%)		662			1,482			(55	%)
Total operating expenses:		9,147			9,965			(8	%)		18,061			19,314			(6	%)
Loss from operations		(307	)		(2,253	)		(86	%)		(1,529	)		(4,102	)		(63	%)
Non-operating income (expense):
Interest expense, net		(144	)		(407	)		(65	%)		(389	)		(659	)		(41	%)
Gain on forgiveness of Paycheck Protection Program note		2,946			—		N/A				2,946			—		N/A
Foreign currency gains (losses), net		—			(30	)	N/A				46			56			(18	%)
Income (loss) before income tax provision	$	2,495		$	(2,690	)		(193	%)	$	1,074		$	(4,705	)		(123	%)

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

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

% Change

2020

2019

% Change

Premises:

Net revenue

$
9,430

$
12,938

(27
%)

$
25,146

$
32,939

(24
%)
Gross profit

5,191

7,212

(28
%)

13,810

17,573

(21
%)
Gross profit margin

55
%

56
%

55
%

53
%

Identity:

Net revenue

15,429

10,088

53
%

36,938

31,846

16
%
Gross profit

4,694

3,314

42
%

11,287

11,540

(2
%)
Gross profit margin

30
%

33
%

31
%

36
%

Total:

Net revenue

24,859

23,026

8
%

62,084

64,785

(4
%)
Gross profit

9,885

10,526

(6
%)

25,097

29,113

(14
%)
Gross profit margin

40
%

46
%

40
%

45
%

Operating expenses:

Research and development

2,380

2,125

12
%

7,398

6,229

19
%
Selling and marketing

4,245

4,470

(5
%)

12,978

13,689

(5
%)
General and administrative

2,118

2,591

(18
%)

6,460

7,492

(14
%)
Increase (decrease) in fair value of earnout liability

—

175

N/A

(261
)

175

N/A

Restructuring and severance

163

(87
)

N/A

1,645

(101
)

N/A

Total operating expenses:

8,906

9,274

(4
%)

28,220

27,484

3
%
Income (loss) from operations

979

1,252

(22
%)

(3,123
)

1,629

(292
%)
Non-operating income (expense):

Interest expense, net

(407
)

(246
)

65
%

(1,066
)

(766
)

39
%
Foreign currency (losses) gains, net

(175
)

168

N/A

(119
)

96

N/A

Income (loss) before income tax provision

$
397

$
1,174

(66
%)

$
(4,308
)

$
959

(549
%)

	Three Months Ended June 30,									Six Months Ended June 30,
	2021			2020			% Change				2021			2020			% Change
Americas	$	14,208		$	13,670			4	%		$	29,356		$	27,538			7	%
Europe and the Middle East		3,626			2,630			38	%			6,086			5,230			16	%
Asia-Pacific		6,159			2,805			120	%			10,713			4,457			140	%
Total	$	23,993		$	19,105			26	%		$	46,155		$	37,225			24	%

Percentage of net revenue:
Americas		59	%		71	%						64	%		74	%
Europe and the Middle East		15	%		14	%						13	%		14	%
Asia-Pacific		26	%		15	%						23	%		12	%
Total		100	%		100	%						100	%		100	%

~~For~~Net revenue for the three months ended ~~September~~June 30, ~~2020, net revenue~~ 2021 was ~~$24.9~~$24.0 million, ~~up 8~~% an increase of 26% compared with ~~$23.0~~$19.1 million for the comparable period of 2020. Net revenue in the Americas was $14.2 million for the three months ended June 30, 2021, an increase of 4% compared to $13.7 million for the comparable period of 2020. Net revenue in ~~2019.~~ ~~For~~Europe, the ~~nine~~Middle East, and Asia-Pacific was $9.8 million for the three months ended ~~September~~June 30, ~~2020,~~ ~~net revenue was $62.1 million, down 4~~% 2021, an increase of 80% compared with ~~$64.8~~the comparable period of 2020.

Net revenue for the six months ended June 30, 2021 was $46.2 million, an increase of 24% compared with $37.2 million for the comparable period of 2020. Net revenue in the Americas was $29.4 million for the six months ended June 30, 2021, an increase of 7% compared to $27.5 million for the comparable period ~~in 2019.~~

~~For the three months ended September 30, 2020, net~~of 2020. Net revenue in ~~our Premises segment~~Europe, the Middle East, and Asia-Pacific was ~~$9.4 million, a decrease of 27~~% ~~from $12.9~~$16.8 million for the ~~comparable period in 2019.~~ ~~For the nine~~six months ended ~~September~~June 30, ~~2020,~~ ~~net revenue in our Premises segment was $25.1 million, a decrease~~2021, an increase of 24% ~~from $32.9 million for~~73% compared with the comparable period ~~in 2019~~. ~~The decrease in the three and nine months ended September 30, 2020 were primarily attributable to continued delays caused by the impact~~ of ~~the COVID-19 pandemic on our partners’ ability to access customer site locations. For the nine months ended September 30,~~ 2020 ~~the decrease was partially offset by higher Hirsch Velocity software product sales and related support services.~~.

Net revenue in our Identity segment was ~~$15.4~~$14.8 million for the three months ended June 30, 2021, an increase of ~~53% from $10.1~~27% compared with $11.6 million for the comparable period of ~~2019.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020, net~~2021, net revenue in ~~our Identity~~this segment was ~~$36.9~~$28.5 million, an increase of ~~16% from~~32% compared with $21.5 million for the comparable period of 2020. Net revenue in ~~2019. Higher~~this segment for the three and six months ended June 30, 2021 represented 62% and 62%, respectively, of our net revenue, compared to 61% and 58% in the comparable periods of the prior year.

Net revenue in this segment in the Americas for the three and six months ended June 30, 2021 decreased 16% and 1%, respectively, compared with the comparable periods of 2020. The decrease was primarily due to lower sales of RFID transponder products and smart card readers associated with the increased demand for transponder and smart card reader products beginning in the second quarter of 2020 with shelter in place actions underway which drove the need for more work from home technologies. These decreases were partially offset by higher sales of access cards as sales to commercial consumers in select market verticals, including retail, banking and travel, rebounded in 2021.

Net revenue in this segment in Europe, the Middle East, and the Asia-Pacific for the three and six months ended June 30, 2021 increased 90% and 86%, respectively, compared with the comparable period of 2020 primarily due to higher sales of RFID transponder products to mobile phone and consumer products contract manufacturers. Sales of RFID and NFC products and smart card readers comprise a significant proportion of our net revenue in these regions. RFID transponder products comprised approximately 67% and 66% of net revenue in these regions for the three and six months ended June 30, 2021, respectively, compared to 56% and 51% in the comparable periods of the prior year. Smart card reader products comprised 24% and 24% of net revenue in these regions for the three and six months ended June 30, 2021, respectively, compared to 32% and 33% in the comparable periods of the prior year.

Net revenue in our Premises segment was $9.2 million for the three months ended June 30, 2021, an increase of 23% compared with $7.5 million for the comparable period of 2020. For the six months ended June 30, 2021, net revenue in this segment was $17.7 million, an increase of 13% compared with $15.7 million for the comparable period of 2020. Net revenue in our Premises segment for the three and six months ended June 30, 2021 represented 38% and 38%, respectively, of our net revenue, compared to 39% and 42% in the comparable periods of the prior year.

Net revenue in this segment in the Americas for the three and six months ended June 30, 2021 increased 24% and 14%, respectively, compared with the comparable periods of 2020. The increase was primarily due to a rebound in sales of Hirsch Velocity hardware and software products to consumers in select commercial verticals, growth in sales to the federal government, and higher sales of video technology and analytics software products. Net revenue from our Premises solution 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, in the three and ~~nine~~six months ended ~~September~~June 30, 2021 represented 60% and 55%, respectively, of our net revenue in the Americas.

Net revenue in this segment across Europe, the Middle East, and Asia-Pacific in the three and six months ended June 30, 2021 was comparable to the comparable periods of 2020 ~~were partially offset by lower~~.

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 solutions for trusted physical access is an attractive offering to help federal agency customers move towards compliance with federal directives and mandates. To address sales ~~of access card products primarily attributable~~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.

More recently, in response to the new needs for health and safety in the physical security market overall, due to the COVID-19 pandemic, we have released products to address these trends. During 2020, we launched our contact tracing downloadable extension for our Velocity access system, our occupancy tracking system based on our 3VR platform, our MobilisID touchless reader and ~~its~~our temperature tracking tag. In addition, with the economic impact onof the ~~hospitality~~COVID-19 pandemic continuing to create uncertainty for our customers, we have released several products which are subscription based and ~~education markets.~~which allow payments over time for our physical access and video solutions as a service.

Gross profit infor the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$9.9~~$8.8 million, or 40% 37% of net revenue, compared with ~~$10.5~~$7.7 million, or ~~46%~~40% of net revenue in the comparable period of ~~2019.~~2020. Gross profit infor the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$25.1~~$16.5 million, or 40% 36% of net revenue, compared with ~~$29.1~~$15.2 million, or ~~45%~~41% of net revenue in the comparable period of ~~2019.~~2020. 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~~Identity segment, gross profit ~~was~~ ~~$5.2~~ ~~million~~ in the three and six months ended ~~September~~June 30, 2021 was $3.6 million and $6.9 million, respectively. Gross profit in the three and six months ended June 30, 2020 ~~compared with $7.2~~was $3.6 million ~~in the comparable period of 2019,~~ and ~~was~~ ~~$13.8~~ $6.6 million, ~~in the nine months ended September 30, 2020 compared with $17.6 million in the comparable period of 2019. In the three months ended September 30, 2020, gross~~respectively. Gross profit margins in this segment decreased to ~~55%~~24% in the three months ended June 30, 2021 from ~~56%~~31% in the comparable period of ~~2019. In~~2020 and decreased to 24% in the ~~nine~~six months ended ~~September~~June 30, ~~2020, gross profit margins in this segment increased to 55%~~2021 from ~~53%~~31% in the comparable period of ~~2019~~2020. The decreases were primarily ~~due to adjustments to our inventory reserves in the first quarter of 2019 as a result of management’s assessment of on-hand inventory levels and demand forecasts.~~

In our Identity segment, gross profit was $4.7 million in the three months ended September 30, 2020 compared with $3.3 million in the comparable period of 2019, and was $11.3 million in the nine months ended September 30, 2020 compared with $11.5 million in the comparable period of 2019. Gross profit margins in the Identity segment of 30% in the three months ended September 30, 2020 decreased from 33% in the comparable period of 2019 primarily due to product mix, with a higher proportion of lower margin RFID transponder product sales. In the nine months ended September 30, 2020, gross profit margins in this segment decreased to 31% from 36% in the comparable period of 2019. This decrease was attributable to ~~the change~~near-term investments in technology and manufacturing processes and systems, as well as changes in product mix, with a higher proportion of lower margin RFID transponder product sales ~~and a large~~in 2021 compared to the comparable period in 2020.

In our Premises segment, gross profit was $5.3 million in the three months ended June 30, 2021 compared with $4.1 million in the comparable period of 2020. Gross profit margins in this segment increased to 57% in the three months ended June 30, 2021 from 55% in the comparable period of 2020 primarily due to product mix, with higher sales of higher margin ~~bulk order of readers~~video analytics software compared to the ~~U.S. Navy Reserve~~comparable period in 2020. Gross profit was $9.6 million in the ~~first quarter~~six months ended June 30, 2021 compared with $8.6 million in the comparable period of ~~2019.~~2020. Gross profit margins in this segment in the six months ended June 30, 2021 were comparable to the comparable period in 2020.

We expect there will be variation in our total gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products. Within each product category, gross margins have tended to be consistent, but over time may 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.

Information about our operating expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 is set forth below (dollars in thousands).

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 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 increased~~2021 decreased compared to the comparable prior year periods primarily due to ~~higher salaries~~lower headcount and related costs, ~~associated with investments in engineering, including additional headcount, and~~ partially offset by higher external contractor costs.

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 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 decreased ~~from~~compared to the comparable prior year periods primarily due to lower ~~travel related costs~~amortization expense associated with intangible assets that were fully amortized in the ~~COVID-19 pandemic,~~fourth quarter of 2020, and ~~lower trade show and advertising costs, partially offset by an increase in employment~~higher recruiting fees in the ~~first and second quarters of~~comparable periods in 2020.

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

General and administrative ~~expenses~~expense for the three and six months ended ~~September~~June 30, 2020 decreased compared with the prior year period primarily due to reductions in headcount and related costs associated with our continued integration efforts across general and administrative functions, and the impact of bad debt reserve reductions recorded in the third quarter of 2020. For the nine months ended September 30, 2020, general and administrative expenses decreased2021 increased compared to the prior year ~~period~~periods primarily due ~~to reductions~~to an increase in ~~headcount and related costs as noted above,~~bad debt expense, as well as ~~lower external services costs~~higher and professional ~~fees.~~fees and external contractor costs.

The ~~reduction of~~decrease in earnout consideration expense of $261,000 during the ~~nine~~three and six months ended ~~September~~June 30, 2020 was attributable to the decrease in the fair value of the earnout liability associated with ~~the Viscount~~a prior acquisition, ~~from $750,000 to $489,000,~~ representing the settlement date fair value of the shares issued and the recorded earnout liability. ~~The increase in the earnout consideration expense for~~

Restructuring expenses incurred during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019 was attributable to~~2021consists of facility rental related costs of $127,000 and $456,000, respectively, and severance related costs of $147,000 and $206,000, respectively. Facility rental related costs during the ~~increase in fair value~~six months ended June 30, 2021, included a charge of ~~earnout liability~~ ~~associated with~~$281,000 resulting from the ~~Viscount acquisition from $200,000 to $375,000~~impairment of a right-of-use operating lease asset for office space we vacated in the ~~third~~first quarter of ~~2019.~~

Restructuring expenses incurred induring the three and ~~nine~~six months ended ~~September~~June 30, 2020 consists of ~~severance related costs of $145,000 and $229,000, respectively, and~~ facility rental related costs associated with ~~the 3VR~~ office space from a prior acquisition of ~~approximately $18,000~~$1,397,000 and ~~$1,416,000,~~$1,398,000, respectively, which included a charge of $1,199,000 associated with the impairment of the right-of-use operating lease asset, which was subleased, but ~~has gone~~went into default due to non-payment of rent beginning April 1, 2020. Sublease income of $198,000 was received in the first quarter of 2020, however, since the first quarter of 2020, no rental payments ~~were received in~~have been received.

Information about our non-operating income (expense) for the ~~second and third quarters of 2020.~~

~~Restructuring expenses incurred in the~~ three and ~~nine~~six months ended ~~September~~June 30, ~~2019 consist of facility rental related costs associated with the 3VR office space, offset by sublease income.~~

~~See Note 15,~~ ~~Restructuring~~2021 and ~~Severance,~~2020 is set forth below (dollars in ~~the accompanying notes to our condensed consolidated financial statements for more information.~~

Interest expense, net consists of interest ~~and~~ on financial liabilities, amortization of debt issuance costs, ~~associated with our financial liabilities~~ and interest accretion expense for a liability on a contractual payment obligation arising from our acquisition of Hirsch Electronics Corporation. The ~~increase~~decrease in ~~net~~ interest expense infor the three and ~~nine~~six months ended ~~September~~June 30,~~, 2020~~ 2021 compared to the comparable periods of ~~2019~~ 2020 was primarily ~~due~~attributable to ~~higher amounts~~lower borrowings outstanding under our revolving loan facility with our lender, and ~~the amortization of warrants issued to April 21 Funds in the second quarter of 2020.~~

lower amounts outstanding under our contractual payment obligation. See Note 9, 7, Contractual Payment Obligation and Note 8, Financial Liabilities, in the accompanying notes to our unaudited condensed consolidated financial statements for more information.

On May 7, 2021, the principal and accrued interest amounts outstanding of approximately $2.9 million under our promissory note pursuant to the Paycheck Protection Program had been forgiven. As a result, we recorded a gain on forgiveness of debt of $2.9 million in the second quarter of 2021.

Changes in currency valuation in the periods mainly were the result of exchange rate movements between the U.S. dollar, the Indian Rupee, the Canadian dollar, and the ~~Euro.~~euro. 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.

As of ~~September~~June 30,~~, 2020,~~ 2021, our deferred tax assets are fully offset by a valuation allowance. Accounting Standards Codification (“ASC”) 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is ~~more likely than not.~~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.

We recorded an income tax provision during the three and ~~nine~~six months ended ~~September~~June 30,, 2021 and 2020. The effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30,, 2021 and 2020 ~~and 2019~~ differ from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision or benefit in certain foreign jurisdictions, which are subject to higher tax rates.

As of ~~September~~June 30, ~~2020,~~2021, our working capital, defined as current assets less current liabilities, was ~~$12.4~~$50.6 million, an increase of ~~$0.7~~$38.7 million compared to ~~$11.7~~$11.9 million as of December 31, ~~2019.~~2020. As of ~~September~~June 30, ~~2020,~~2021, our cash balance was ~~$12.3~~$36.4 million.

On April 7, 2021, we sold an aggregate of 3,779,342 shares of our common stock at a public offering price of $10.65 per share in an underwritten public offering. We received net proceeds of approximately $37.7 million from the sale of the common stock in the public offering, after deducting the underwriting discount and other offering related expenses of $2.5 million.

On February 8, 2017, we entered into a ~~Loan~~loan and ~~Security Agreement~~security agreement with East West Bank (“EWB”). Following subsequent amendments, on February 8, 2021 we amended and restated the Loan and Security Agreement in its entirety (the “Loan and Security Agreement”). The Loan and Security Agreement ~~as amended, provided~~provides for a ~~$16.0~~$20.0 million revolving loan ~~facility. In the first quarter of 2019, we amended~~facility subject to a borrowing base and a $4.0 million non-formula revolving loan facility that is not subject to a borrowing base. Our obligations under the Loan and Security Agreement ~~increasing~~are collateralized by substantially all of our assets.

The maturity date of the main revolving loan facility is February 8, 2023. The non-formula revolving loan facility will terminate on February 7, 2022, however we may, at our option if certain conditions are met, convert prior to their maturity any loans under the non-formula revolving loan facility to a term loan that will fully amortize and mature on February 1, 2025. Advances under the revolving loan ~~facility from $16.0 million~~facilities and the term loan (if converted) will initially bear interest at a per annum rate equal to ~~$20.0 million, lowering~~ the ~~interest rate from~~ prime rate as determined under the Loan and Security Agreement plus ~~1.0% to prime rate plus 0.75%, extending the maturity date to February 8,~~0.25%. On April 30, 2021, ~~and amending certain financial covenants, including covenants with respect to minimum EBITDA levels.~~

~~On January 28, 2020,~~ we entered into an amendment ~~(the “Twelfth Amendment”)~~ to our Loan and Security Agreement ~~with EWB,~~ which ~~provided a new term loan facility in a principal amount of $4.5 million, which was received on January 28, 2020, and~~ reduced the per annum interest rate to the prime interest rate.

We may voluntarily prepay amounts outstanding under the revolving loan ~~facility~~facilities and the term loan without prepayment charges. In the event the Loan and Security Agreement is terminated prior to February 8, 2023, we would be required to pay an early termination fee in the amount of 2.0% of the main revolving loan line if terminated prior to February 8, 2022 and 1% of the main revolving loan line thereafter. Additional borrowing requests under the revolving loan facilities are subject to various customary conditions precedent, including a borrowing base for the main revolving loan facility.

The Loan and Security Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on our ability to incur liens, incur indebtedness, make certain restricted payments (including dividends), merge or consolidate and dispose of assets. In addition, the Loan and Security Agreement contains financial covenants requiring that we (i) hold $5 million in unrestricted cash in accounts with EWB, (ii) maintain a monthly minimum trailing six-month EBITDA of $0.6 million for the first two quarters of 2021 and $1.2 million thereafter and (iii) maintain, if we convert into the term loan and starting with the quarter ending March 31, 2022, a quarterly fixed charge coverage ratio of at least 1.35 : 1.00.

The Loan and Security Agreement contains customary events of default that entitle EWB to cause any or all of our indebtedness under it 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 may terminate its lending commitment 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 Agreement ~~from $20.0 million~~ to ~~$15.5 million. The term loan has an interest rate equal to the prime rate plus 2.25%, began to amortize beginning February 1, 2020, with principal in the amount of $250,000~~be immediately due ~~monthly through the first anniversary of the term loan,~~ and the remainder due on such first anniversary. In addition, certain definitions in the Loan and Security Agreement were amended pursuant to the Twelfth Amendment, including the definition of EBITDA and Borrowing Base, and a new fixed charge coverage ratio financial covenant was added. Upon repayment of the new term loan in full, the revolving loan facility will be increased to $20.0 million and the fixed charge coverage ratio financial covenant will no longer apply. payable.

See Note 9, 8, Financial Liabilities, and Note 10, Stockholders’ Equity in the accompanying notes to our unaudited condensed consolidated financial statements for more information.

On May 5, 2020, we entered into an amendment (the “Thirteenth Amendment”) to our Loan and Security Agreement. Under the Thirteenth Amendment, certain definitions were amended, including the definitions of Permitted Indebtedness and EBITDA, and certain financial covenants were amended, including reducing from $4.0 million to $3.0 million the amount of unrestricted cash that must be held in the our accounts with EWB during the period from May 1, 2020 through September 30, 2020 and providing for minimum trailing six-month EBITDA of at least $0.6 million during such period and of $0.3 million thereafter. In addition, we were not required to make monthly principal payments on the term loan for the three payment dates of May 1, 2020, June 1, 2020 and July 1, 2020. See Note 9, ~~Financial Liabilities~~ ~~and Note 11,~~ ~~Stockholders’ Equity~~ ~~in the accompanying notes to our condensed consolidated financial statements for more information.~~April 21 Funds

On May 5, 2020, we issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to 21 April Fund, LP and 21 April Fund, Ltd. (collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”). The Notes ~~are secured~~were collateralized by our assets, but subordinate to our obligations to EWB under the Loan and Security Agreement. Proceeds from the sale of the Notes ~~must~~were only to be used for expenses incurred by us in connection with our provisions of goods and services under a statement of work with a third party. The Notes ~~have~~had an initial term of nine months and dodid not bear interest during ~~this~~that period. However, if the Notes ~~are~~were not repaid on or before the nine-month anniversary of issuance, (a) the Notes ~~will~~would thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes ~~remain~~remained unpaid. In the event the Notes ~~are~~were not paid in full by the first anniversary of their issuance, May 5, 2021, they ~~shall~~would thereafter bear interest of 12% per annum, payable quarterly, and additional ~~extension~~ warrants would be issuable to the April 21 Funds. ~~See Note 9,~~ ~~Financial Liabilities~~ ~~and Note 11,~~ ~~Stockholders’ Equity~~ ~~in the accompanying notes~~

On February 5, 2021, we entered into an amendment to our ~~condensed consolidated financial statements for more information.~~secured subordinated promissory note with April 21 Funds, which extended the initial term of the Notes to March 31, 2021. As a result of the amendment, if the Notes were repaid on or before March 31, 2021, we would incur no further interest on the Notes, or be obligated to issue additional warrants. On March 31, 2021, April 21 Funds waived any additional warrants issuable, and interest payable, to April 21 Funds through May 5, 2021. On April 13, 2021, we repaid the remaining principal amount outstanding of $2.8 million.

~~As of~~ ~~September~~ ~~30, 2020, we were in compliance with all financial covenants under the Revolving Loan Facility.~~Paycheck Protection Program

On April 9, 2020, we entered into a promissory note (the PPP Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The ~~note is~~PPP Note was dated April 8, 2020 with ~~EWB, our current lender under our existing Loan and Security Agreement, pursuant to which we~~EWB. We borrowed a principal amount of approximately $2.9 million. The interest on the ~~note is 1.00%~~PPP Note was 1.0% per ~~annum, and~~annum. The PPP Note was payable two years from the date of the ~~note,~~PPP Note, and there iswas no prepayment penalty. All interest which accrues during the initial six months of the loan period iswas deferred and payable on the maturity date of the PPP Note. Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with ~~SBA~~Small Business Administration rules established for the Paycheck Protection Program. ~~We expect~~ On May 7, 2021, the principal ~~amount outstanding, including~~and accrued interest ~~will be forgiven~~amounts outstanding of approximately $2.9 million under our promissory note pursuant to the Paycheck Protection Program had been forgiven. As a result, we recorded a gain on forgiveness of debt of $2.9 million in the ~~first~~second quarter of 2021.

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~~June 30,~~, 2020,~~ 2021, the amount of cash included at such subsidiaries was ~~$2.1~~$2.4 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.

WeWhile we recorded net income during the period, 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~~June 30,~~, 2020,~~ 2021, we had a total accumulated deficit of ~~$409.9~~$409.6 million. ~~During the nine months ended September~~ 30~~, 2020, we had a net loss of $4.4 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 choose to finance our ~~cash requirements~~business 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~~Debt or 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 debt or 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 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~~six months ended ~~September~~June 30,, 2021 and 2020 ~~and 2019~~ (in thousands):

Cash used in operating activities for the ~~nine~~six months ended ~~September~~June 30,, 2021 of $2.9 million was primarily due to a decrease in cash from net changes in operating assets and liabilities of $3.7 million, and adjustments for certain non-cash items of $0.1 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, stock-based compensation, gain on forgiveness of debt and impairment of a right-of-use operating lease asset, partially offset by net income of $1.0 million.

Cash used in operating activities for the six months ended June 30, 2020 of $4.3 million was primarily due to net loss of ~~$4.4~~$4.8 million, a decrease in cash from net changes in operating assets and liabilities of ~~$6.9~~$3.7 million, partially offset by adjustments for certain non-cash items of ~~$6.0~~$4.2 million, consisting primarily of impairment of right-of-use operating lease assets, decrease in fair value of earnout liability, ~~depreciation, amortization,~~ ~~amortization of debt issuance costs, and stock-based compensation.~~ Cash provided by operating activities for the nine months ended September 30, 2019 was primarily due to net income of $0.7 million and adjustments for certain non-cash items of $5.1 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, and stock-based ~~compensation, partially offset by a decrease in cash from net changes in operating assets and liabilities of $4.4 million.~~ compensation.

Cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 was ~~$0.9~~$1.7 million and $0.6 million, respectively, related primarily to capital ~~expenditures.~~ ~~Cash used~~investment expenditures in ~~investing activities for the nine months ended September 30, 2019 was $1.5 million, of which $1.3 million related to the acquisition of Viscount, and $0.2 million related to capital expenditures.~~our manufacturing facility in Singapore.

Cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily due to net proceeds of $37.7 million received from the ~~issuance~~sale of ~~promissory notes to April 21 Funds~~common stock in our underwritten public offering and $0.1 million of ~~$4.0 million, net borrowings under our term loan facility~~proceeds from the exercise of ~~$3.3 million, and proceeds received under the Payment Protection Program of $2.9 million,~~stock options, partially offset by net repayments under our revolving loan facility of ~~$0.6~~$4.6 million, repayments of April 21 Funds promissory notes of $2.8 million and taxes paid related to net share settlement of restricted stock units of $0.6 million.

Cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was primarily due to the issuance of secured subordinated promissory notes to April 21 Funds of $4.0 million, proceeds received under the Payment Protection Program of $2.9 million, and net borrowings under our revolving loan ~~facility~~and term loan facilities of ~~$5.4~~$2.2 million, partially offset by ~~repayment of notes payable of $2.0 million associated with the acquisition of 3VR, repayments under our revolving loan facility of $2.1 million, and~~ taxes paid related to net share settlement of restricted stock units of ~~$0.7~~$0.4 million.

We have not entered into off-balance sheet arrangements, or issued guarantees to third ~~parties.~~parties, except as disclosed in Note 7, Contractual Payment Obligation.

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.

During the three months ended ~~September~~June 30, ~~2020,~~2021, 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, ~~2019.~~2020.

See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, 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.

From time to time, we expect our executive officers and directors will enter into written trading plans pursuant to Rule 10b5-1 of the Securities and Exchange Act of 1934.

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.

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~~June 30, ~~2020,~~2021, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

On August 11, 2021, our Board of Directors appointed Steven Humphreys as acting Chief Financial Officer, Principal Accounting Officer and Principal Financial Officer until an interim Chief Financial Officer is appointed. Mr. Humphreys, 60, has served as our Chief Executive Officer since September 2015 and as a director since July 1996. We have not entered into any new compensation arrangements with Mr. Humphreys in connection with the appointment described above.

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. After the appeal was fully-briefed, the matter was argued before the Ninth Circuit on March 5, 2020. On April 2, 2020, the Ninth Circuit issued a memorandum decision affirming final judgment in favor of defendants. In the interim, the state court Chopra and Wollnik actions remained stayed with periodic status conferences. Following the Ninth Circuit’s affirmance of the Oswald judgment in favor of defendants, the parties to the Wollnik action stipulated to its dismissal without prejudice, which was entered by the Court on May 21, 2020. The parties to the Chopra action similarly stipulated to its dismissal without prejudice, which was entered by the Court on June 10, 2020.

From time to time, we may 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.

Our business and results of operations are subject to numerous risks, uncertainties, and other factors that you should be aware of. You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Part I - Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019. There~~2020. Other than as discussed below, there have been no material changes from the risk factors disclosed in our ~~2019~~2020 Annual Report on Form ~~10-K, except for the risk factor below.~~10-K.The risks, uncertainties and other factors described in the 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.

~~The impact~~We depend on a number of suppliers and contract manufacturers for the ~~COVID-19 outbreak, or similar global health concerns, could negatively impact our operations, supply chain and customer base.~~

~~The COVID-19 outbreak has severely restricted the level~~production of ~~economic activity around the world, which has and may continue to impact timing of demand for~~ our products and ~~services.~~ components making us potentially vulnerable to supply disruption.

Our ~~operations~~reliance on suppliers and ~~supply chains~~contract manufacturers for ~~certain~~the production of our products ~~or services~~and hardware components could result in product delivery problems and delays. We may suffer a disruption if the supply of components causes us to be ~~negatively impacted by~~unable to purchase sufficient components on a timely basis. For example, the ~~regional or~~ global ~~outbreak of illnesses, including COVID-19. Any quarantines, labor shortages or other disruptions to our operations, or those of our suppliers or customers, have and~~semiconductor shortage in 2021 may ~~continue to~~ adversely impact our ~~sales~~ability to meet product demand in a timely fashion. This shortage, which is due in part to COVID-19, may persist for an indefinite period of time and could have a negative impact on our revenue and operating ~~results, including additional expenses~~results. Low inventory levels can affect our ability to meet customer demand, lengthen lead times and ~~strain on the business as well as~~potentially cause us to miss opportunities, lose market share and/or damage customer relationships, also adversely affecting our business. Although we have taken steps to ensure we have adequate supply ~~chain. In addition, the COVID-19 pandemic has resulted in a widespread health crisis~~for expected customer demand, there can be no assurance that has and may continue to adversely affect some of the market verticals that we participate in as well as the general economies and financial markets of many countries, including those in which we operate, resulting in an economic downturn that could affect the supply or demand for our products and services, and has and may continue to result in delayed sales and extended payment cycles for our products and services. We are unable to accurately fully predict the possible future effect on the Company, which couldefforts will be ~~material to our 2020 results, which is highly dependent on the breadth and duration of the outbreak and could be affected by other factors~~successful. If we are not ~~currently~~ able to ~~predict, including new information which~~get the necessary products and components on a timely basis, our business, financial condition and results of operations may ~~emerge concerning the severity of COVID-19, the success of actions taken to contain or treat COVID-19, and reactions by consumers, companies, governmental entities and capital markets.~~be adversely affected.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, we repurchased ~~130,745~~48,590 shares and ~~136,519~~94,134 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.

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.

~~DELAWARE~~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)

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common Stock, $0.001 par value per share		INVE		The Nasdaq Stock Market LLC

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and ~~Nine~~Six Months Ended ~~September 30,~~June 30,2021 and 2020 ~~and 2019~~	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2827
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	3938
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3938
Item 5.	Other Information	38
Item 6.	Exhibits	4039

SIGNATURES		4140

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
Subscriptions	Ratably over the course of the subscription term (over time)	In advance of subscription term	Contractually stated or list price
Professional services	As services are performed and/or when ~~the~~ 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

	Nine Months Ended September 30,						Six Months Ended June 30,
	2020			2019			2021			2020
Deferred revenue, beginning of period	$	2,833		$	2,810		$	2,366		$	2,833
Fair value of deferred revenue acquired in acquisition, net of recognition		—			4
Deferral of revenue billed in current period, net of recognition		1,719			2,567			1,658			1,619
Recognition of revenue deferred in prior periods		(1,877	)		(1,816	)		(1,403	)		(1,660	)
Deferred revenue as, end of period	$	2,675		$	3,565
Deferred revenue, end of period							$	2,621		$	2,792

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
Emerging growth company	☐

	Three Months Ended September 30, 2020
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive		Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income		Equity
Balances, June 30, 2020		5,000	$	5		17,860		$	19	$	450,480		$	(9,451	)	$	(410,300	)	$	1,760	$	32,513
Net income		—		—		—			—		—			—			389			—		389
Unrealized income from foreign currency translation adjustments		—		—		—			—		—			—			—			369		369
Issuance of common stock in connection with vesting of stock awards		—		—		143			—		—			—			—			—		—
Stock-based compensation		—		—		—			—		791			—			—			—		791
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(37	)		—		—			(196	)		—			—		(196	)
Balances, September 30, 2020		5,000	$	5		17,966		$	19	$	451,271		$	(9,647	)	$	(409,911	)	$	2,129	$	33,866

	Nine Months Ended September 30, 2020
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive		Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income		Equity
Balances, December 31, 2019		5,000	$	5		16,986		$	18	$	447,965		$	(9,043	)	$	(405,504	)	$	2,025	$	35,466
Net loss		—		—		—			—		—			—			(4,407	)		—		(4,407	)
Unrealized income from foreign currency translation adjustments		—		—		—			—		—			—			—			104		104
Issuance of common stock in connection with vesting of stock awards		—		—		505			—		—			—			—			—		—
Stock-based compensation		—		—		—			—		2,182			—			—			—		2,182
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(131	)		—		—			(604	)		—			—		(604	)
Issuance of common stock in connection with Viscount Earnout		—		—		157			—		489			—			—			—		489
Issuance of shares to non-employees		—		—		62			—		304			—			—			—		304
Issuance of common stock in connection with warrant exercise		—		—		387			1		(1	)		—			—			—		—
Issuance of warrants		—		—		—			—		332			—			—			—		332
Balances, September 30, 2020		5,000	$	5		17,966		$	19	$	451,271		$	(9,647	)	$	(409,911	)	$	2,129	$	33,866

	Three Months Ended September 30, 2019
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive			Noncontrolling			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income			Interest			Equity
Balances, June 30, 2019		5,000	$	5		16,786		$	18	$	446,819		$	(8,656	)	$	(404,752	)	$	2,276		$	(170	)	$	35,540
Net income		—		—		—			—		—			—			1,069			—			—			1,069
Unrealized loss from foreign currency translation adjustments		—		—		—			—		—			—			—			(369	)		—			(369	)
Issuance of common stock in connection with vesting of stock awards		—		—		136			—		—			—			—			—			—			—
Stock-based compensation		—		—		—			—		689			—			—			—			—			689
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(39	)		—		—			(185	)		—			—			—			(185	)
Liquidation of subsidiary with noncontrolling interest		—		—		—			—		(137	)		—			—			(33	)		170			—
Balances, September 30, 2019		5,000	$	5		16,883		$	18	$	447,371		$	(8,841	)	$	(403,683	)	$	1,874		$	—		$	36,744

	Nine Months Ended September 30, 2019
	Series B Convertible Preferred Stock				Common Stock					Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive			Noncontrolling			Total Stockholders'
	Shares		Amount		Shares			Amount		Capital			Stock			Deficit			Income			Interest			Equity
Balances, December 31, 2018		5,000	$	5		15,967		$	17	$	444,145		$	(8,153	)	$	(404,353	)	$	2,209		$	(170	)	$	33,700
Net income		—		—		—			—		—			—			670			—			—			670
Unrealized loss from foreign currency translation adjustments		—		—		—			—		—			—			—			(302	)		—			(302	)
Issuance of common stock in connection with acquisition of business		—		—		419			1		1,634			—			—			—			—			1,635
Issuance of common stock in connection with vesting of stock awards		—		—		718			—		—			—			—			—			—			—
Stock-based compensation		—		—		—			—		2,069			—			—			—			—			2,069
Shares withheld in payment of taxes in connection with net share settlement of restricted stock units		—		—		(138	)		—		—			(688	)		—			—			—			(688	)
Issuance of common stock in connection with warrant exercise		—		—		10			—		—			—			—			—			—			—
Cancellation of holdback shares in connection with acquisition		—		—		(93	)		—		(340	)		—			—			—			—			(340	)
Liquidation of subsidiary with noncontrolling interest		—		—		—			—		(137	)		—			—			(33	)		170			—
Balances, September 30, 2019		5,000	$	5		16,883		$	18	$	447,371		$	(8,841	)	$	(403,683	)	$	1,874		$	—		$	36,744

	Gross Purchased Intangible Assets		Estimated Useful Life (in Years)
Trademarks	$	200		5
Customer relationships		1,500		10
Developed technology		700		10
	$	2,400

Accounts receivable	$	636
Inventory		249
Prepaid expenses and other current assets		29
Property and equipment		190
Operating lease ROU assets		550
Trademarks		160
Customer relationships		710
Developed technology		800
Total identifiable assets acquired		3,324
Accounts payable		(372	)
Operating lease liabilities		(61	)
Accrued expenses and liabilities		(120	)
Deferred revenue		(34	)
Earnout consideration liability		(200	)
Other current liabilities		(326	)
Long-term operating lease liabilities		(489	)
Total liabilities assumed		(1,602	)
Net identifiable assets acquired		1,722
Goodwill		1,200
Net purchase price	$	2,922

	Viscount Earnout Consideration
Balance as of December 31, 2019	$	750
Decrease in fair value of earnout liability		(261	)
Issuance of common stock in connection with earnout consideration		(489	)
Balance as of September 30, 2020	$	—

	Premises			Identity		Total
Balance as of December 31, 2019	$	6,684		$	3,554	$	10,238
Currency translation adjustment		(34	)		—		(34	)
Balance as of September 30, 2020	$	6,650		$	3,554	$	10,204

2020 (remaining three months)	$	644
2021		1,111
2021 (remaining six months)			$	562
2022		1,111		1,125
2023		1,034		1,048
2024		959		971
2025				971
Thereafter		3,279		2,359
Total	$	8,138	$	7,036

2020 (remaining three months)	$	180
2021		1,083
Present value discount factor		(67	)
Total	$	1,196
Less: Current portion - contractual payment obligation		(950	)
Long-term contractual payment obligation	$	246

Exercise of outstanding stock options, vesting of restricted stock units ("RSU"), ~~and~~vesting of performance stock units ("PSU"), and issuance of RSUs vested but not released			~~1,710,044~~1,514,543
Employee Stock Purchase Plan			293,888
Shares of common stock available for grant under the 2011 Plan			~~1,166,485~~1,011,418
Warrants to purchase common stock			~~315,000~~275,000
Shares of common stock issuable upon conversion of Series B convertible preferred stock			7,541,449
Total			~~11,026,866~~10,636,298

	Options Outstanding						Options Exercisable				Stock Options Outstanding						Stock Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price		Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$4.36 - $7.20		462,110		5.56	$	4.44		462,110	$	4.44		454,010		4.87	$	4.41		454,010	$	4.41
$7.50 - $11.25		70,698		3.42		9.95		70,698		9.95		61,817		2.73		10.17		61,817		10.17
$11.30 - $16.95		13,764		1.94		12.90		13,764		12.90		11,302		1.23		13.03		11,302		13.03
$17.60 - $26.40		6,697		0.99		21.55		6,697		21.55		6,197		0.27		21.38		6,197		21.38
$4.36 - $26.40		553,269		5.14	$	5.56		553,269	$	5.56		533,326		4.49	$	5.46		533,326	$	5.46

	Number of RSUs			Weighted Average Fair Value		Number Outstanding			Weighted Average Fair Value
Unvested as of December 31, 2019		1,148,110		$	4.43
Unvested at December 31, 2020							682,563		$	4.34
Granted		482,683			4.12		136,356			12.20
Vested		(551,565	)		4.10		(257,440	)		5.33
Forfeited		(173,224	)		4.69		(42,973	)		4.32
Unvested as of September 30, 2020		906,004		$	4.41
Shares vested but not released		250,771		$	5.02
Unvested at June 30, 2021							518,506		$	5.92
RSUs vested but not released							286,211		$	4.94

	Number Outstanding
Unvested at December 31, 2020		200,000
Granted		—
Vested		(23,500	)
Forfeited		—
Unvested at June 30, 2021		176,500

	Purchase Commitments		Other Contractual Commitments		Total
2020 (remaining three months)	$	12,384	$	206	$	12,590
2021		1,502		8		1,510
Total	$	13,886	$	214	$	14,100

Exhibit Number		Description

~~31.1^~~		~~Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.~~

~~31.2^~~ 31^		Certification of Chief Executive Officer and 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		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	IDENTIV, INC.

~~November 13, 2020~~August 11, 2021	By:	/S/ Steven Humphreys
		Steven Humphreys
		Chief Executive Officer and Acting Chief Financial Officer
		(Principal Executive, Financial and Accounting Officer)

~~November 13, 2020~~	~~By:~~	/S~~/ Sandra Wallach~~
		~~Sandra Wallach~~
		~~Chief Financial Officer and Secretary~~
		~~(Principal Financial and Accounting Officer)~~