10q10k10q10k.net

What changed in Identiv, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Identiv, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+302 added−299 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-16)

Top changes in Identiv, Inc.'s 2023 10-K

302 paragraphs added · 299 removed · 263 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

9 edited+0 added−0 removed76 unchanged
Biggest changeWe were founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware.
Biggest changeWe maintain research and development facilities in California, India, Germany, manufacturing facilities in Singapore and Thailand, and local operations and sales facilities in Germany, the United Kingdom, Hong Kong, Japan, Canada, and the United States. We were founded in 1990 in Munich, Germany and incorporated in 1996 under the laws of the State of Delaware.
Factors that could cause our actual results to differ materially from our expectations include, but are not limited to our ability to successfully execute our business plan and sell our products; continued market acceptance and growth or expansion in our target markets; our ability to successfully compete; our history of losses; the effects of product and component shortages; our ability to obtain additional capital; the benefits and attributes of our products and services; the level of customer orders; the ability of our products to perform as expected; risks related to the COVID-19 pandemic; fluctuations in net cash provided and used by operating, financing and investing activities; sources and uses of our cash, and expense levels; the loss of significant customers or types of business; the impact of macroeconomic conditions, including inflation, on our business; and the risks discussed elsewhere in this Annual Report under the heading “Risk Factors”.
Factors that could cause our actual results to differ materially from our expectations include, but are not limited to our ability to successfully execute our business plan and sell our products; continued market acceptance and growth or expansion in our target markets; our ability to successfully compete; our history of losses; the effects of product and component shortages; our ability to obtain additional capital; the benefits and attributes of our products and services; the level of customer orders; the ability of our products to perform as expected; risks related to the recent COVID-19 pandemic; fluctuations in net cash provided and used by operating, financing and investing activities; sources and uses of our cash, and expense levels; the loss of significant customers or types of business; the impact of macroeconomic conditions, including inflation, on our business; and the risks discussed elsewhere in this Annual Report under the heading “Risk Factors”.
Our RFID devices are predominantly manufactured and assembled by our own internal manufacturing teams in Singapore primarily using locally sourced components and are certified to the ISO 9001:2015 and ISO 14001:2015 quality manufacturing standard. Our premises sensors readers, controllers and software are manufactured primarily in California. Our video appliances are manufactured primarily in Wisconsin and Arizona.
Our RFID devices are predominantly manufactured and assembled by our own internal manufacturing teams in Singapore and Thailand primarily using locally sourced components and are certified to the ISO 9001:2015 and ISO 14001:2015 quality manufacturing standard. Our premises sensors readers, controllers and software are manufactured primarily in California. Our video appliances are manufactured primarily in Wisconsin and Arizona.
Wherever possible, we have qualified additional sources of supply for components. Government Regulation Our business is subject to government regulation as discussed in the Risk Factors. Human Capital Our key human capital management objectives are to attract, retain and develop the highest quality talent.
Wherever possible, we have qualified additional sources of supply for components. Government Regulation Our business is subject to government regulation as discussed under "Risk Factors". Human Capital Our key human capital management objectives are to attract, retain and develop the highest quality talent.
Our issued patents expire between 2023 and 2034. Manufacturing and Sources of Supply We utilize a combination of our own manufacturing facilities and the services of contract manufacturers in various countries around the world to manufacture our products and components.
Our issued patents expire between 2024 and 2033. Manufacturing and Sources of Supply We utilize a combination of our own manufacturing facilities and the services of contract manufacturers in various countries around the world to manufacture our products and components.
RFID-enabled smart packaging products, like those being evaluated in the cannabis industry, allow service operators to remain in compliance with government regulations and, potentially, tax authorities. These examples demonstrate the scale of the RFID market opportunity of hundreds of billions of units over time.
RFID-enabled smart packaging products allow service operators to remain in compliance with government regulations and, potentially, tax authorities. These examples demonstrate the scale of the RFID market opportunity of hundreds of billions of units over time.
We leverage data infrastructures across LAN's, Wifi, Bluetooth, mobile, RFID and emerging communication standards such as 5G and UWB (ultra wide-band).
We leverage data infrastructures across LAN's, Wi-Fi, Bluetooth, mobile, RFID and emerging communication standards such as 5G and UWB (Ultra-Wideband).
As of December 31, 2022, we had 343 employees, of which 73 were in research and development, 92 were in sales and marketing, 145 were in manufacturing and 33 were in general and administrative. We are not subject to any collective bargaining agreements and, to our knowledge, none of our employees are currently represented by a labor union.
As of December 31, 2023, we had 394 employees, of which 78 were in research and development, 93 were in sales and marketing, 181 were in manufacturing and 42 were in general and administrative. We are not subject to any collective bargaining agreements and, to our knowledge, none of our employees are currently represented by a labor union.
To date, we have experienced no work stoppages and believe that our employee relations are generally good. Corporate Information Our corporate headquarters are located in Fremont, California. We maintain research and development facilities in California; Chennai, India; Munich, Germany; and local operations and sales facilities in Germany, the United Kingdom, Hong Kong, Singapore, Canada, India, Japan and the United States.
To date, we have experienced no work stoppages and believe that our employee relations are generally good. Corporate Information Our corporate headquarters are located in Fremont, California.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

61 edited+20 added−9 removed81 unchanged
Biggest changeGovernment shutdowns, spending cuts and other changes in budget allocation or availability that create uncertainty for customers in certain parts of our business; • the absence of significant backlog in our business; • cancellations or delays of customer orders or the loss of a significant customer; • the length of sales cycles associated with our product or service offerings; • variations in the mix of products and services we sell; • reductions in the average selling prices that we are able to charge due to competition, new product introductions or other factors; • the impact of increasing freight and logistics costs; • our ability to obtain an adequate supply of quality components and to deliver our products on a timely basis; • our inventory levels and the inventory levels of our customers and indirect sales channels; • the extent to which we invest in development, sales and marketing, and other expense categories; • acquisitions, dispositions or organizational restructuring; • fluctuations in the value of foreign currencies against the U.S. dollar; • the cost or impact of litigation; and • the write-off of trade receivables and investments.
Biggest changeFactors that have caused our results to fluctuate in the past and which are likely to affect us in the future include the following: • business and economic conditions overall and in our markets; • the timing and size of customer orders, including orders that may be tied to annual or other budgetary cycles, seasonal demand, product plans or program roll-out schedules; • the effects of U.S. government shutdowns, spending cuts and other changes in budget allocation or availability that create uncertainty for customers in certain parts of our business; • the absence of significant backlog in our business; • cancellations or delays of customer orders or the loss of a significant customer; • the length of sales cycles associated with our product or service offerings; • variations in the mix of products and services we sell; • reductions in the average selling prices that we are able to charge due to competition, new product introductions or other factors; • the impact of increasing freight and logistics costs; • our ability to obtain an adequate supply of quality components and to deliver our products on a timely basis; • our inventory levels and the inventory levels of our customers and indirect sales channels; • the extent to which we invest in development, sales and marketing, and other expense categories; • acquisitions, dispositions or organizational restructuring; • fluctuations in the value of foreign currencies against the U.S. dollar; 14 • the cost or impact of litigation; and • the write-off of trade receivables and investments.
These regulations include, but are not limited to, HSPD 12 and FIPS 201 produced by the National Institute of Standards and Technology (“NIST”). Discontinuance of, changes in, or lack of adoption of laws or regulations pertaining to security related to sales to end customers in the U.S. Government market could adversely affect our sales. Our U.S.
These regulations include, but are not limited to, HSPD 12 and FIPS 201 produced by the National Institute of Standards and Technology (“NIST”). Discontinuance of, changes in, or lack of adoption of laws or regulations pertaining to security related to sales to end customers in the U.S. government market could adversely affect our sales.
To support our global sales, customer base and product development activities, we maintain offices and/or business operations in several locations around the world, including the United Kingdom, Germany, Hong Kong, India, Japan, Singapore, Canada, and the U.S. We also maintain manufacturing facilities in Singapore and California and engage contract manufacturers in multiple countries outside the U.S .
To support our global sales, customer base and product development activities, we maintain offices and/or business operations in several locations around the world, including the United Kingdom, Germany, Hong Kong, India, Japan, Singapore, Thailand, Canada, and the U.S. We also maintain manufacturing facilities in Singapore, Thailand and California and engage contract manufacturers in multiple countries outside the U.S .
Our manufacturing operations and third-party contract manufacturers are located in China and Singapore/Southeast Asia. We also purchase certain products and key components from a limited number of sources that depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world.
Our manufacturing operations and third-party contract manufacturers are located in China, Singapore, and Thailand/Southeast Asia. We also purchase certain products and key components from a limited number of sources that depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world.
We have in the recent past been named as a defendant in putative securities class action and derivative lawsuits and may again be so named in the future. Any litigation to which we were a party has and may in the future result in the diversion of management attention and resources from our business and business strategy.
We have in the past been named as a defendant in putative securities class action and derivative lawsuits and may again be so named in the future. Any litigation to which we were a party has and may in the future result in the diversion of management attention and resources from our business and business strategy.
We may periodically engage in litigation as a result of these indemnification obligations. Our insurance policies exclude coverage for third-party claims for patent infringement. We have in the past been named as a defendant in putative securities class action and derivative lawsuits.
We may periodically engage in litigation as a result of these indemnification obligations. Our insurance policies exclude coverage for third-party claims for patent infringement. 16 We have in the past been named as a defendant in putative securities class action and derivative lawsuits.
Under the unitary patent system, European applications will soon have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (UPC). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.
Under the unitary patent system, European applications have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (UPC). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.
We have issued a significant number of shares of our common stock as well as warrants to purchase shares of our common stock, in connection with a number of financing transactions and acquisitions in recent years.
We have issued a significant number of shares of our common stock as well as warrants to purchase shares of our common stock, in connection with a number of financing transactions and acquisitions in the recent years.
If a significant portion of operating expenses are incurred in a foreign currency such as the euro or Indian Rupee, and revenues are generated in U.S. dollars, exchange rate fluctuations might have a positive or negative net financial impact on these transactions, depending on whether the value of the U.S. dollar decreases or increases compared to that currency.
If a significant portion of operating expenses are incurred in a foreign currency such as the euro, Indian Rupee or Thai Baht, and revenues are generated in U.S. dollars, exchange rate fluctuations might have a positive or negative net financial impact on these transactions, depending on whether the value of the U.S. dollar decreases or increases compared to that currency.
Although we have not experienced a cyber or physical security breach, we may experience breaches in the future. Our systems also may be affected by outages, delays and other difficulties. In addition, our insurance coverage may be insufficient to cover losses and liabilities that may result from such events.
Although we do not believe we have experienced a cyber or physical security breach, we may experience breaches in the future. Our systems also may be affected by outages, delays and other difficulties. In addition, our insurance coverage may be insufficient to cover losses and liabilities that may result from such events.
However, the allocation and availability of funding for such programs are often impacted by economic or political factors over which we have no control, and which may cause delays in program implementation, which could negatively impact our sales and results of operations. Our U.S.
However, the allocation and availability of funding for such programs are often impacted by economic or political factors over which we have no control, and which may cause delays in program implementation, which could negatively impact our sales and results of operations.
Government business is also dependent upon the receipt of certain governmental approvals or certifications and failure to receive such approvals or certifications could have a material adverse effect on our sales in those market segments for which such approvals or certifications are customary or required.
Our U.S. government business is also dependent upon the receipt of certain governmental approvals or certifications and failure to receive such approvals or certifications could have a material adverse effect on our sales in those market segments for which such approvals or certifications are customary or required.
These provisions will apply even if the offer were to be considered adequate by some of our stockholders. Because these provisions may be deemed to discourage a change of control, they may delay or prevent the acquisition of our company, which could decrease the value of our common stock. 17
These provisions will apply even if the offer were to be considered adequate by some of our stockholders. Because these provisions may be deemed to discourage a change of control, they may delay or prevent the acquisition of our Company, which could decrease the value of our common stock. 18
Any quarantines, labor shortages or other disruptions to our operations, or those of our suppliers or customers, have and may continue to adversely impact our sales and operating results, including additional expenses and strain on the business as well as our supply chain.
Any resulting quarantines, labor shortages or other disruptions to our operations, or those of our suppliers or customers, have and may continue to adversely impact our sales and operating results, including through additional expenses and strain on the business as well as our supply chain.
Government business depends upon the continuance of regulations that require federal agencies to implement security systems such as ours, and upon our ability to receive certain government approvals or certifications and demonstrate compliance in government audits or investigations.
Our U.S. government business depends upon the continuance of regulations that require federal agencies to implement security systems such as ours, and upon our ability to receive certain government approvals or certifications and demonstrate compliance in government audits or investigations.
A significant portion of our business is conducted in foreign currencies, principally the euro and Indian Rupee. Fluctuations in the value of foreign currencies relative to the U.S. dollar will result in currency exchange gains and losses in our reported results.
A significant portion of our business is conducted in foreign currencies, principally the euro, Indian Rupee and Thai Baht. Fluctuations in the value of foreign currencies relative to the U.S. dollar will result in currency exchange gains and losses in our reported results.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies.
In addition, the stock market has experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies.
Government and certain industries in the public sector currently fall, or may in the future fall, under regulations that require federal agencies to implement security systems that utilize physical and logical access control products and solutions such as ours.
The U.S. government, suppliers to the U.S. government and certain industries in the public sector currently fall, or may in the future fall, under regulations that require federal agencies to implement security systems that utilize physical and logical access control products and solutions such as ours.
Our reliance on these manufactures poses a number of risks, including lack of control over the manufacturing process and ultimately over the quality and timing of delivery of our products.
Our reliance on these manufacturers poses a number of risks, including lack of control over the manufacturing process and ultimately over the quality and timing of delivery of our products.
Our business and reputation may adversely affected by information technology system failures or network disruptions. We may be subject to information technology system failures and network disruptions. These may be caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions.
Our business and reputation may be adversely affected by information technology system failures or network disruptions. We may be subject to information technology system failures and network disruptions. These may be caused by natural disasters, accidents, power disruptions, telecommunications failures, large-scale cybersecurity attacks, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions.
We believe that the success and growth of our business will continue to be influenced by our successful procurement of government business either directly or through our indirect sales channels. Accordingly, changes in government purchasing policies or government budgetary constraints, including government shutdowns, could directly affect our financial performance. Sales to government agencies and customers primarily serving the U.S.
We believe that the success and growth of our business will continue to be influenced by our successful procurement of government business either directly or through our indirect sales channels. Accordingly, changes in government purchasing policies or government budgetary constraints, including government shutdowns, could directly affect our financial performance.
If end users with sizable projects change or delay them, we may experience significant fluctuation in revenue on a quarterly or annual basis, and we anticipate that such uncertainty and fluctuations may continue to characterize our business for the foreseeable future. 9 The impact of the COVID-19 pandemic, or similar global health concerns, could negatively impact our operations, supply chain and customer base.
If end users with sizable projects change or delay them, we may experience significant fluctuation in revenue on a quarterly or annual basis, and we anticipate that such uncertainty and fluctuations may continue to characterize our business for the foreseeable future. 9 The impact of health epidemics, pandemics and other outbreaks of infectious disease, such as the global pandemic caused by COVID-19, could negatively impact our operations, supply chain and customer base.
Government budgets will not impact our sales to these government entities or that the terms of existing contracts will not be subject to renegotiation. Our loss of one or more significant customers could have a significant adverse impact on our business, financial condition and results of operations.
We cannot guarantee that future reductions in U.S. government budgets will not impact our sales to these government entities or that the terms of existing contracts will not be subject to renegotiation. Our loss of one or more significant customers could have a significant adverse impact on our business, financial condition and results of operations.
We are unable to accurately fully predict the effect of a future pandemic on our business, and which could be affected by other factors we are not currently able to predict, including the success of actions taken to contain or treat future COVID-19 variants, and reactions by consumers, companies, governmental entities and capital markets.
We are unable to accurately fully predict the effect of any such health concerns on our business, which could be affected by other factors we are not currently able to predict, including the success of actions taken to contain or treat future outbreaks of infectious diseases and reactions by consumers, companies, governmental entities and capital markets.
Our percentage of revenue and customer concentration is significant in certain of our businesses. Sales to our ten largest customers accounted for 25%, 32% and 33% of total net revenue in 2022, 2021 and 2020, respectively. No customer accounted for 10% or more of our total net revenue in 2022, 2021 or 2020.
Our percentage of revenue and customer concentration is significant in certain of our businesses. Sales to our ten largest customers accounted for 30%, 25% and 32% of total net revenue in 2023, 2022 and 2021, respectively.
As of March 2, 2023, 1,556,641 shares of common stock are reserved for future grants and outstanding equity awards under our equity incentive plans and an additional 8,529,203 shares of common stock are reserved for future issuance in connection with other potential issuances, including conversion of our preferred stock.
As of March 1, 2024, 1,202,748 shares of common stock are reserved for future grants and outstanding equity awards under our equity incentive plans and an additional 8,231,477 shares of common stock are reserved for future issuance in connection with other potential issuances, including conversion of our preferred stock.
We cannot predict with certainty the long-term effects of any potential changes. 15 We face risks from claims of third parties and litigation, which could have an adverse effect on our results of operations. We have, and may in the future, receive notices of claims of infringement and misappropriation or misuse of other parties’ proprietary rights.
We face risks from claims of third parties and litigation, which could have an adverse effect on our results of operations. We have received, and may in the future receive, notices of claims of infringement and misappropriation or misuse of other parties’ proprietary rights.
In addition, a resurgence in COVID-19 variants could 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, and negatively impacted supply and 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.
In addition, an outbreak of infectious disease could 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, negatively impact supply and demand for our products and services, and result in delayed sales and extended payment cycles for our products and services.
During fiscal year 2022, we were impacted by adverse macroeconomic conditions including but not limited to inflation, foreign currency fluctuations, and the slowdown of economic activity around the globe. For example, in the second half of 2022, we experienced delays and reductions in customer orders, shifting supply chain availability and component shortages.
During fiscal years 2023 and 2022, we were impacted by adverse macroeconomic conditions including but not limited to inflation, foreign currency fluctuations, and the slowdown of economic activity around the globe. Adverse conditions included experiencing delays and reductions in customer orders, shifting supply chain availability and component shortages. We also continue to be affected by supply chain challenges.
In addition, the laws of some foreign countries do not protect proprietary and intellectual property rights to the same extent as do the laws in the U.S. Because many of our products are sold and a significant portion of our business is conducted outside the U.S., our exposure to intellectual property risks may be higher.
Because many of our products are sold and a significant portion of our business is conducted outside the U.S., our exposure to intellectual property risks may be higher. Our efforts to protect our proprietary and intellectual property rights may not be adequate.
Government, including further sales pursuant to existing contracts, may be adversely affected by factors outside our control, such as, federal government shutdowns or other Congressional actions to reduce federal spending, and by adverse economic, political or market conditions. A reduction in current or future anticipated sales to the U.S. Government sector could harm our results of operations.
Sales to government agencies and customers primarily serving the U.S. government, including further sales pursuant to existing contracts, may be adversely affected by factors outside our control, such as, federal government shutdowns or other Congressional actions to reduce federal spending, and by adverse economic, political or market conditions.
Additionally, we anticipate that an increasingly significant portion of our future revenues will come from government programs outside the U.S., such as electronic national identity, eGovernment and eHealth programs.
A reduction in current or future anticipated sales to the U.S. government sector could harm our results of operations. Additionally, we anticipate that an increasingly significant portion of our future revenues will come from government programs outside the U.S., such as electronic national identity, eGovernment and eHealth programs.
Our reliance on suppliers and contract manufacturers for the production of our products and hardware components has and may continue to result in product delivery problems and delays. We may suffer a disruption if the supply of components causes us to be unable to purchase sufficient components on a timely basis.
We depend on a number of suppliers and contract manufacturers for the production of our products and components making us potentially vulnerable to supply disruption. Our reliance on suppliers and contract manufacturers for the production of our products and hardware components has and may continue to result in product delivery problems and delays.
We cannot predict the effect of exchange rate fluctuations upon future operating results. The effect of currency exchange rate changes may increase or decrease our costs and/or revenues in any given period, and we may experience currency losses in the future. To date, we have not adopted a hedging program to protect against the risks associated with foreign currency fluctuations.
We cannot predict the effect of exchange rate fluctuations upon future operating results. The effect of currency exchange rate changes may increase or decrease our costs and/or revenues in any given period, and we may experience currency losses in the future.
Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC.
Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of the unitary patent system and any potential changes.
Government market due to the indirect nature of our selling process, we believe that orders from U.S. Government agencies represent a significant portion of our revenues. The U.S. Government, suppliers to the U.S.
While we are not able to quantify the amount of sales made to end customers in the U.S. government market due to the indirect nature of our selling process, we believe that orders from U.S. government agencies represent a significant portion of our revenues.
If our operating results in any future period fall below the expectations of securities analysts and investors, or the guidance that we provide, the market price of our stock would likely decline.
We believe that period-to-period comparisons of our operating results are not necessarily meaningful, but securities analysts and investors often rely upon these comparisons as indicators of future performance. If our operating results in any future period fall below the expectations of securities analysts and investors, or the guidance that we provide, the market price of our stock would likely decline.
A failure to receive these government approvals or certifications or a negative audit result could result in a material adverse impact on our business, financial condition and results of operations. While we are not able to quantify the amount of sales made to end customers in the U.S.
A failure to receive these government approvals or certifications or a negative audit result could result in a material adverse impact on our business, financial condition and results of operations.
The COVID-19 pandemic has severely restricted the level of economic activity around the world, which has and may continue to impact timing of demand for our products and services. Our operations and supply chains for certain of our products or services may be negatively impacted by the regional or global outbreak of illnesses, including a resurgence of COVID-19 variants.
Our operations and supply chains for certain of our products or services may be negatively impacted by the regional or global outbreak of illnesses, including a resurgence of COVID-19 variants.
If RFID market adoption, and 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.
If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected.
We may seek or need to raise additional funds for capacity expansion, general corporate and commercial purposes or for acquisitions. Our ability to obtain financing depends on our historical and expected future operating and financial performance, and is also subject to prevailing economic conditions and to financial, business and other factors beyond our control.
Our ability to obtain financing depends on our historical and expected future operating and financial performance, and is also subject to prevailing economic conditions and to financial, business and other factors beyond our control.
A significant amount of revenue is sourced from sales of products and systems to our OEM partners and an indirect sales network who sell to various entities within the U.S. federal government sector. We cannot guarantee that future reductions in U.S.
One customer accounted for 12% of net revenue in 2023, while no customer accounted for 10% or more of net revenue in 2022 and 2021. A significant amount of revenue is sourced from sales of products and systems to our OEM partners and an indirect sales network who sell to various entities within the U.S. federal government sector.
Any significant shortfall in revenues in relation to our expectations could have an immediate and significant effect on our operating results for that quarter and may lead to a reduced market price for our stock. 14 If we are not able to secure additional capital when needed, our business could be adversely affected.
We may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenues. Any significant shortfall in revenues in relation to our expectations could have an immediate and significant effect on our operating results for that quarter and may lead to a reduced market price for our stock.
For example, the ongoing global semiconductor shortage that began in 2021 has and may continue to adversely impact our ability to meet product demand in a timely fashion.
We may suffer a disruption if the supply of components causes us to be unable to purchase sufficient components on a timely basis. For example, the recent global semiconductor shortage that began in 2021 has and may continue to adversely impact our ability to meet product demand in a timely fashion.
Many of our current and potential competitors have significantly greater financial, technical, marketing, purchasing and other resources than we do. As a result, our competitors may be able to respond more quickly to new or emerging technologies or standards and to changes in customer requirements.
As a result, our competitors may be able to respond more quickly to new or emerging technologies or standards and to changes in customer requirements.
In the future, from time to time we may issue additional previously authorized and unissued securities, resulting in additional dilution of the ownership interests of our current stockholders.
In the future, from time to time we may issue additional previously authorized and unissued securities, resulting in additional dilution of the ownership interests of our current stockholders. In addition, we have reserved shares of common stock for potential future issuance including stock issuable pursuant to our equity incentive plans and the conversion of our preferred stock.
We rely on a combination of patent, copyright, trademark and trade secret laws, nondisclosure agreements and other contractual provisions to establish, maintain and protect our proprietary rights. From time to time, we may be required to use litigation to protect our proprietary technology.
Our future success will depend, in part, upon our intellectual property rights and our ability to protect these rights. We rely on a combination of patent, copyright, trademark and trade secret laws, nondisclosure agreements and other contractual provisions to establish, maintain and protect our proprietary rights.
We also continue to be affected by supply chain challenges. Global economic conditions have also impacted our suppliers, contract manufacturers, logistics providers, and distributors, causing increases in cost of materials and higher shipping and transportation rates, which then impacted the pricing of our products.
Global economic conditions have also impacted our suppliers, contract manufacturers, logistics providers, and distributors, causing increases in cost of materials and higher shipping and transportation rates, which then impacted the pricing of our products. Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our operations.
As a result, we may incur substantial costs and we may not be successful in any such litigation. Despite our efforts to protect our proprietary rights, unauthorized third parties may copy aspects of our products, obtain and use information that we regard as proprietary, or infringe upon our patents.
Despite our efforts to protect our proprietary rights, unauthorized third parties may copy aspects of our products, obtain and use information that we regard as proprietary, or infringe upon our patents. In addition, the laws of some foreign countries do not protect proprietary and intellectual property rights to the same extent as do the laws in the U.S.
Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries. That pace, scope and depth accelerated during 2022 which has caused large fluctuations in our operating results.
Our financial performance depends on the extent and pace of RFID market adoption and end-user adoption of our RFID products and the timing of new customer deployments. Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries.
Further, restructurings and reductions in force that we have recently experienced may have a negative effect on employee morale and the ability to attract and retain qualified personnel. 13 Risks Related to Our Financial Results, Liquidity and Need for Additional Capital Our revenue and operating results are subject to significant fluctuations and such fluctuations may lead to a reduced market price for our stock.
Risks Related to Our Financial Results, Liquidity and Need for Additional Capital Our revenue and operating results are subject to significant fluctuations and such fluctuations may lead to a reduced market price for our stock. Our revenue and operating results have varied in the past and will likely continue to fluctuate in the future.
Risks Related to Our Intellectual Property, and Litigation We may not be able to protect our intellectual property rights, which could make us less competitive and cause us to lose market share. Our future success will depend, in part, upon our intellectual property rights and our ability to protect these rights.
To date, we have not adopted a hedging program to protect against the risks associated with foreign currency fluctuations. 15 Risks Related to Our Intellectual Property, and Litigation We may not be able to protect our intellectual property rights, which could make us less competitive and cause us to lose market share.
If a government agency audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions.
If a government agency audit uncovers improper or illegal activities, we may be subject to 10 civil and criminal penalties and administrative sanctions. A negative audit could materially affect our competitive position and result in a material adverse impact on our business, financial condition and results of operations.
In Europe, a new unitary patent system will likely be introduced by the end of 2023, which would significantly impact European patents, including those granted before the introduction of such a system.
As an example, the complexity and uncertainty of European patent laws have increased in recent years. In Europe, a new unitary patent system took effect June 1, 2023 which will significantly impact European patents, including those granted before the introduction of such a system.
Our efforts to protect our proprietary and intellectual property rights may not be adequate. Additionally, there is a risk that our competitors will independently develop similar technology or duplicate our products or design around patents or other intellectual property rights.
Additionally, there is a risk that our competitors will independently develop similar technology or duplicate our products or design around patents or other intellectual property rights. If we are unsuccessful in protecting our intellectual property or our products or technologies are duplicated by others, our competitive position could be harmed and we could lose market share.
Over the past several years, The Nasdaq Capital Market has experienced significant price and volume fluctuations that have particularly affected the market prices of the stocks of technology companies.
It may also be more expensive for us to obtain director and officer liability insurance. 17 General Risk Factors Our stock price has been and is likely to remain volatile. Over the past several years, The Nasdaq Capital Market has experienced significant price and volume fluctuations that have particularly affected the market prices of the stocks of technology companies.
Low inventory levels can affect our ability to meet customer demand, lengthen lead times and 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 for expected customer demand, there can be no assurance that our efforts will be successful.
This shortage may persist for an indefinite period of time and has and may continue to have a negative impact on our revenue and operating results. Low inventory levels can affect our ability to meet customer demand, lengthen lead times and potentially cause us to miss opportunities, lose market share and/or damage customer relationships, also adversely affecting our business.
If we are not able to get the necessary products and components on a timely basis, our business, financial condition and results of operations may be adversely affected. Our financial performance depends on the extent and pace of RFID market adoption and end-user adoption of our RFID products and the timing of new customer deployments.
Although we have taken steps to ensure we have adequate supply for expected customer demand, there can be no assurance that our efforts will be successful. If we are not able to get the necessary products and components on a timely basis, our business, financial condition and results of operations may be adversely affected.
A negative audit could materially affect our competitive position and result in a material adverse impact on our business, financial condition and results of operations. 10 Our revenues may decline if we cannot compete successfully in an intensely competitive market. We target our products at the rapidly evolving market for security technologies.
Our revenues may decline if we cannot compete successfully in an intensely competitive market. We target our products at the rapidly evolving market for security technologies. Many of our current and potential competitors have significantly greater financial, technical, marketing, purchasing and other resources than we do.
We could also be subject to sanctions or investigations by The Nasdaq Stock Market, the SEC and other regulatory authorities. We have incurred, and in the future will incur, high costs associated with being a public company. We have incurred significant legal, accounting and other costs associated with public-company reporting requirements.
We could also be subject to sanctions or investigations by The Nasdaq Stock Market, the SEC and other regulatory authorities. We incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we identify one or more material weaknesses in our internal controls, our management will be unable to conclude that our internal control over financial reporting is effective.
Removed
Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our operations. We depend on a number of suppliers and contract manufacturers for the production of our products and components making us potentially vulnerable to supply disruption.
Added
That pace, scope and depth continued to accelerate during 2023 which has caused large fluctuations in our operating results. If RFID market adoption, and adoption of our products specifically, does not meet our expectations, then our growth prospects and operating results will be adversely affected.
Removed
This shortage, which is due in part to COVID-19, may persist for an indefinite period of time and has and may continue to have a negative impact on our revenue and operating results.
Added
Our business and operations have and may in the future be adversely affected by health epidemics, pandemics and other outbreaks of infectious disease, such as the global COVID-19 pandemic.
Removed
Our revenue and operating results have varied in the past and will likely continue to fluctuate in the future. We believe that period-to-period comparisons of our operating results are not necessarily meaningful, but securities analysts and investors often rely upon these comparisons as indicators of future performance.
Added
The recent COVID-19 pandemic and efforts to control its spread severely restricted the level of economic activity around the world, which has and may continue to impact timing of demand for our products and services.
Removed
Factors that have caused our results to fluctuate in the past and which are likely to affect us in the future include the following: • business and economic conditions overall and in our markets; • the timing and size of customer orders, including orders that may be tied to annual or other budgetary cycles, seasonal demand, product plans or program roll-out schedules; • the effects of U.S.
Added
Further, a recession, depression, excessive inflation or other sustained adverse market events resulting from the outbreak of infectious diseases that may occur, could materially and adversely affect our business and that of our customers or potential customers.
Removed
We may be unable to adjust spending in a timely manner to compensate for any unexpected shortfall in revenues.
Added
Further, restructurings and reductions in force that we have recently experienced may have a negative effect on employee morale and the ability to attract and retain qualified personnel. 13 We may be required to settle in cash a conditional restricted stock unit grant to our Chief Executive Officer upon the consummation of a Corporate Event.
Removed
If we are unsuccessful in protecting our intellectual property or our products or technologies are duplicated by others, our competitive position could be harmed and we could lose market share. As an example, the complexity and uncertainty of European patent laws have increased in recent years.
Added
In October 2023, our board of directors approved a conditional commitment to issue restricted stock units to Mr. Humphreys pursuant to that certain employment letter agreement with Mr. Humphreys dated as of September 14, 2015 and the amendment thereto dated as of October 4, 2023 (as so amended, the “Agreement”).
Removed
We ceased to be a “smaller reporting company” on December 31, 2021, and are no longer eligible for the reduced disclosure requirements and exemptions applicable to “smaller reporting companies.” Our loss of this status has required additional management attention and increased our costs, including legal, accounting, external professional consulting and investor-relations-related costs.
Added
In the event of (i) a sale or merger of a material business unit at a price and on terms determined by the board of directors to constitute a qualifying transaction or (ii) a Change of Control, as defined in the Agreement (each, a “Corporate Event”) prior to October 4, 2027 and subject to Mr.
Removed
We cannot predict or accurately estimate the additional costs we are likely to incur from being a public company or the timing of these costs. 16 General Risk Factors Our stock price has been and is likely to remain volatile.
Added
Humphreys’ continued employment with the Company (except as provided in the Agreement), we will be required to grant Mr.
Removed
In addition, we have reserved shares of common stock for potential future issuance including stock issuable pursuant to our equity incentive plans, the conversion of our preferred stock and warrants issued in connection with previous capital raises and other transactions.
Added
Humphreys 365,000 fully vested restricted stock units (the “Conditional Award”), effective as of immediately prior to the consummation of the Corporate Event, which will settle for either stock or cash upon the consummation of the Corporate Event in accordance with the Agreement.
Added
If we do not have sufficient available stock reserved under our 2011 Incentive Compensation Plan at the time, we would be required to settle a portion or all of the Conditional Award in cash, based on the fair market value of our common stock as provided in the Agreement. The amount of any such cash settlement could be material.

… 10 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeAt December 31, 2022, our major facilities consisted of the following: Location Function Square Feet Lease Expiration Fremont, California Corporate headquarters 3,082 November 2024 Santa Ana, California Administration; manufacturing; research and development 34,599 January 2028 Sauerlach, Germany European operations; research and development; sales 5,156 April 2026 Chennai, India Research and development 17,500 September 2024 Singapore RFID/NFC product manufacturing 16,060 May 2023
Biggest changeAt December 31, 2023, our major facilities consisted of the following: Location Function Square Feet Lease Expiration Fremont, California Corporate headquarters 3,082 November 2024 Santa Ana, California Administration; manufacturing; research and development 34,599 January 2028 Sauerlach, Germany European operations; research and development; sales 5,156 April 2026 Chennai, India Research and development 17,500 September 2024 Ayutthaya, Thailand RFID/NFC product manufacturing 22,604 March 2028 Singapore RFID/NFC product manufacturing 27,545 August 2026

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS We are and from time to time, may become subject to various legal proceedings and claims arising in the ordinary course of business or could be named a defendant in other lawsuits. Legal proceedings could result in material costs, occupy significant management resources and entail penalties, even if we prevail.
Biggest changeITEM 3. LEGAL PROCEEDINGS We may from time to time become subject to various legal proceedings and claims arising in the ordinary course of business or could be named a defendant in other lawsuits. Legal proceedings could result in material costs, occupy significant management resources and entail penalties, even if we prevail.
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. We are not a party to any material legal proceedings as of December 31, 2022. 18
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. We are not a party to any material legal proceedings as of December 31, 2023. 20

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

5 edited+0 added−1 removed6 unchanged
Biggest changeHumphreys previously served as Chairman of the Board from September 2013 until September 9, 2015. Previously, he also served as Lead Director from May 2010 until April 2013 and as Chairman of the Board from April 2000 to March 2007. Mr.
Biggest changePreviously, he also served as Lead Director from May 2010 until April 2013 and as Chairman of the Board from April 2000 to March 2007. Mr. Humphreys also served as President of the Company from July 1996 to December 1996 and as President and Chief Executive Officer from January 1997 to July 1999. From November 2011 to December 2014, Mr.
Scarpulla holds a B.A. in Accounting and Finance from California State University Fullerton. 19 PA RT II
Scarpulla holds a B.A. in Accounting and Finance from California State University Fullerton. 21 PA RT II
Humphreys holds a B.S. degree from Yale University and M.S. and M.B.A. degrees from Stanford University. Justin Scarpulla, 49, has served as our Chief Financial Officer since December 2021. Mr. Scarpulla previously served as Director of Finance at Space Exploration Technologies Corp., a company that designs, manufactures and launches advanced rockets and spacecraft, from May 2017 to December 2021.
Humphreys holds a B.S. degree from Yale University and M.S. and M.B.A. degrees from Stanford University. Justin Scarpulla, 50, has served as our CFO since December 2021. Mr. Scarpulla previously served as Director of Finance at Space Exploration Technologies Corp., a company that designs, manufactures and launches advanced rockets and spacecraft, from May 2017 to December 2021.
From October 2008 until its acquisition by SMSC in February 2011, Mr. Humphreys served as Chief Executive Officer and President of Kleer Corporation, a provider of wireless audio technology.
Humphreys served as chief executive officer of Flywheel Software, Inc., a location-based mobile solutions company. From October 2008 until its acquisition by SMSC in February 2011, Mr. Humphreys served as Chief Executive Officer and President of Kleer Corporation, a provider of wireless audio technology.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Information About Our Executive Officers Information concerning our executive officers as of March 1, 2023 is as follows: Steven Humphreys, 61, has served as our Chief Executive Officer since September 2015 and as a director since July 1996. Mr.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Information About Our Executive Officers Information concerning our executive officers as of March 1, 2024 is as follows: Steven Humphreys, 62, has served as our CEO since September 2015 and as a director since July 1996. Mr. Humphreys previously served as Chairman of the Board from September 2013 until September 9, 2015.
Removed
Humphreys also served as President of the Company from July 1996 to December 1996 and as President and Chief Executive Officer from January 1997 to July 1999. From November 2011 to December 2014, Mr. Humphreys served as chief executive officer of Flywheel Software, Inc., a location-based mobile solutions company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−0 removed2 unchanged
Biggest changeThe table below sets forth information regarding the Company's purchases of its common stock during the three months ended December 31, 2022: Issuer Purchases of Equity Securities Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2022 – October 31, 2022 4,377 $ 12.46 — — November 1, 2022 – November 30, 2022 4,500 11.47 — — December 1, 2022 – December 31, 2022 4,772 7.95 — — Total 13,649 $ 10.56 — (1) Consists of shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.
Biggest changeThe table below sets forth information regarding the Company's purchases of its common stock during the three months ended December 31, 2023: Issuer Purchases of Equity Securities Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2023 – October 31, 2023 11,737 $ 7.63 — — November 1, 2023 – November 30, 2023 5,174 6.33 — — December 1, 2023 – December 31, 2023 37,101 7.00 — — Total 54,012 $ 7.07 — (1) Consists of shares surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.
The stock performance shown on the graph below is not necessarily indicative of future price performance. 20 This stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The stock performance shown on the graph below is not necessarily indicative of future price performance. 22 This stock performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The following stock performance graph compares total stockholder returns for our common stock from December 31, 2017 through December 31, 2022 against the Nasdaq Market Composite Index and the RDG Technology Composite, assuming a $100 investment made on December 31, 2017. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
The following stock performance graph compares total stockholder returns for our common stock from December 31, 2018 through December 31, 2023 against the Nasdaq Market Composite Index and the RDG Technology Composite, assuming a $100 investment made on December 31, 2018. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Capital Market under the symbol “INVE.” According to data available at March 2, 2023, we had 108 registered holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Capital Market under the symbol “INVE.” According to data available at March 5, 2024, we had 106 registered holders of our common stock.
Not represented in this figure are individual stockholders in Germany whose custodian banks do not release stockholder information to us. During the three months ended December 31, 2022, we repurchased 13,649 shares of our common stock.
Not represented in this figure are individual stockholders in Germany whose custodian banks do not release stockholder information to us. During the three months ended December 31, 2023, we repurchased 54,012 shares of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+6 added−8 removed77 unchanged
Biggest changeYear Ended December 31, 2022 2021 % Change Identity: Net revenue $ 67,422 $ 64,725 4 % Gross profit 15,153 15,670 (3 )% Gross profit margin 22 % 24 % Premises: Net revenue 45,493 39,044 17 % Gross profit 25,791 21,397 21 % Gross profit margin 57 % 55 % Total: Net revenue 112,915 103,769 9 % Gross profit 40,944 37,067 10 % Gross profit margin 36 % 36 % Operating expenses: Research and development 9,916 8,673 14 % Selling and marketing 20,730 17,033 22 % General and administrative 10,429 11,891 (12 )% Restructuring and severance 202 817 (75 )% Total operating expenses 41,277 38,414 7 % Loss from operations (333 ) (1,347 ) (75 )% Non-operating income (expense): Interest expense, net (143 ) (483 ) (70 )% Gain on forgiveness of Paycheck Protection Program note — 2,946 (100 )% Gain on investment 30 611 (95 )% Foreign currency gains (losses), net 155 (79 ) (296 )% Income (loss) before income tax provision $ (291 ) $ 1,648 (118 )% Geographic net revenue based on each customer’s ship-to location is as follows (in thousands): Year Ended December 31, 2022 2021 % Change Americas $ 76,799 $ 69,396 11 % Europe and the Middle East 15,900 12,876 23 % Asia-Pacific 20,216 21,497 (6 )% Total $ 112,915 $ 103,769 9 % As a percentage of net revenue: Americas 68 % 67 % Europe and the Middle East 14 % 12 % Asia-Pacific 18 % 21 % Total 100 % 100 % 24 Fiscal 2022 Compared with Fiscal 2021 Net Revenue Net revenue in 2022 was $112.9 million, an increase of 9% compared with $103.8 million in 2021.
Biggest changeYear Ended December 31, 2023 2022 % Change Identity: Net revenue $ 68,117 $ 67,422 1 % Gross profit 14,679 15,153 (3 %) Gross profit margin 22 % 22 % Premises: Net revenue 48,266 45,493 6 % Gross profit 27,485 25,791 7 % Gross profit margin 57 % 57 % Total: Net revenue 116,383 112,915 3 % Gross profit 42,164 40,944 3 % Gross profit margin 36 % 36 % Operating expenses: Research and development 11,590 9,916 17 % Selling and marketing 22,555 20,730 9 % General and administrative 12,360 10,429 19 % Restructuring and severance 714 202 253 % Total operating expenses 47,219 41,277 14 % Loss from operations (5,055 ) (333 ) 1,418 % Non-operating income (expense): Interest expense, net (427 ) (143 ) 199 % Gain on investment 132 30 340 % Foreign currency gains, net 25 155 (84 %) Loss before income tax provision $ (5,325 ) $ (291 ) 1,730 % Geographic net revenue based on each customer’s ship-to location is as follows (in thousands): Year Ended December 31, 2023 2022 % Change Americas $ 84,512 $ 76,799 10 % Europe and the Middle East 17,880 15,900 12 % Asia-Pacific 13,991 20,216 (31 )% Total $ 116,383 $ 112,915 3 % As a percentage of net revenue: Americas 73 % 68 % Europe and the Middle East 15 % 14 % Asia-Pacific 12 % 18 % Total 100 % 100 % 26 Fiscal 2023 Compared with Fiscal 2022 Net Revenue Net revenue in 2023 was $116.4 million, an increase of 3% compared with $112.9 million in 2022.
Contract Balances Amounts invoiced in advance of services being provided are accounted for as deferred revenue. The deferred revenue balance is primarily related software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 60 days of contract inception.
Contract Balances Amounts invoiced in advance of services being provided are accounted for as deferred revenue. The deferred revenue balance is primarily related to software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 60 days of contract inception.
These estimates involve inherent uncertainties and the application of management judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and recognize expense only for those expected-to-vest shares.
These estimates involve inherent uncertainties and the application of management judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. In addition, we estimate the expected forfeiture rate and recognize expense only for those expected-to-vest shares.
If our actual forfeiture rate is materially different from our estimate, our recorded stock-based compensation expense and operating results could be different. 34 Recent Accounting Pronouncements See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the accompanying notes to our consolidated financial statements in Item 8 of Part II of this Annual Report for a description of recent accounting pronouncements, which is incorporated herein by reference. 10b5-1 Trading Plans From time to time, our executive officers and directors have, and we expect they will in the future, enter into written trading plans pursuant to Rule 10b5-1 of the Securities and Exchange Act of 1934.
If our actual forfeiture rate is materially different from our estimate, our recorded stock-based compensation expense and operating results could be different. 36 Recent Accounting Pronouncements See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in the accompanying notes to our consolidated financial statements in Item 8 of Part II of this Annual Report for a description of recent accounting pronouncements, which is incorporated herein by reference. 10b5-1 Trading Plans From time to time, our executive officers and directors have, and we expect they will in the future, enter into written trading plans pursuant to Rule 10b5-1 of the Securities and Exchange Act of 1934.
Following subsequent amendments, on April 14, 2022, we amended and restated the Loan and Security Agreement by replacing the $20.0 million revolving loan facility subject to a borrowing base with a non-formula revolving loan facility with no borrowing base requirement and a maturity date of February 8, 2023.
Following subsequent amendments, on April 14, 2022, we amended and restated the Loan Agreement by replacing the $20.0 million revolving loan facility subject to a borrowing base with a non-formula revolving loan facility with no borrowing base requirement and a maturity date of February 8, 2023.
We believe significant improvement in chip capabilities at lower costs, combined with the incorporation of the full NDEF (NFC data exchange format) 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.
We believe significant improvement in chip capabilities at lower costs, combined with the incorporation of the full NDEF (NFC data exchange format) protocol by Apple in its iPhone 12 and newer models 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.
In contrast, if our RFID sales exceed expectations, then our revenue and profitability may be positively affected. 22 Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future or acquire inventory at costs to maintain gross margins.
In contrast, if our RFID sales exceed expectations, then our revenue and profitability may be positively affected. 24 Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future or acquire inventory at costs to maintain gross margins.
Should we decide to repatriate foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States. 33 Goodwill Goodwill represents the excess of the aggregate of the fair value of consideration transferred in a business combination, over the fair value of assets acquired, net of liabilities assumed.
Should we decide to repatriate foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States. 35 Goodwill Goodwill represents the excess of the aggregate of the fair value of consideration transferred in a business combination, over the fair value of assets acquired, net of liabilities assumed.
Climate Change We believe that neither climate change, nor governmental regulations related to climate change, have had a material effect on our business, financial condition or results of operations. Critical Accounting Policies Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
Climate Change We believe that neither climate change, nor governmental regulations related to climate change, have had a material effect on our business, financial condition or results of operations. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).
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. 31 Significant Judgments Our contracts with customers often include promises to transfer multiple products and services to a customer.
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. 33 Significant Judgments Our contracts with customers often include promises to transfer multiple products and services to a customer.
Adverse changes in our inventory valuations could have a material effect on our operating results and financial position. 32 Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid.
Adverse changes in our inventory valuations could have a material effect on our operating results and financial position. 34 Income Taxes Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid.
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 year ended December 31, 2022.
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 year ended December 31, 2023.
If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2022, will be accounted for as a reduction of income tax expense.
If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2023, will be accounted for as a reduction of income tax expense.
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2020 compared to fiscal 2021. Overview Identiv is a global provider of secure identification and physical security.
You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2021 compared to fiscal 2022. Overview Identiv is a global provider of secure identification and physical security.
Net revenue from our Premises segment 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 55% of our net revenue in the Americas.
Net revenue from our Premises segment 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 53% of our net revenue in the Americas.
Cash flows from investing activities Cash used in investing activities in 2022 of $3.9 million was primarily due to capital investment expenditures in our manufacturing facility in Singapore and our research and development facility in Germany.
Cash used in investing activities in 2022 of $3.9 million was primarily due to capital investment expenditures in our manufacturing facility in Singapore and our research and development facility in Germany.
Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our financial position, results of operations, and cash flows. 23 Results of Operations The following table includes net revenue and net profit information by business segment and reconciles gross profit to income (loss) before income tax provision (in thousands).
Price increases may not successfully offset cost increases or may cause us to lose market share and, in turn, may adversely impact our financial position, results of operations, and cash flows. 25 Results of Operations The following table includes net revenue and net profit information by business segment and reconciles gross profit to income (loss) before income tax provision (in thousands, except percentages).
We believe that none of the unrecognized tax benefits, excluding the associated interest and penalties, which are insignificant, may be recognized by the end of 2022.
We believe that none of the unrecognized tax benefits, excluding the associated interest and penalties, which are insignificant, may be recognized by the end of 2023.
ASC 740, Income Taxes (“ASC 740”) states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including the resolution of any related appeals or litigation processes, on the basis of the technical merits.
ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including the resolution of any related appeals or litigation processes, on the basis of the technical merits.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2021, filed with the SEC on March 14, 2022.
We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on March 16, 2023.
RFID transponder products comprised approximately 67% of net revenue in these regions in 2022, and 66% of net revenue in 2021, while smart card reader sales in 2022 and 2021 comprised approximately 22% and 24% of the net revenue, respectively.
RFID transponder products comprised approximately 66% of net revenue in these regions in 2023, and 67% of net revenue in 2022, while smart card reader sales in 2023 and 2022 comprised approximately 22% and 22% of the net revenue, respectively.
Gross Profit and Gross Margin Gross profit for 2022 was $40.9 million, or 36% of net revenue, compared to $37.1 million or 36% of net revenue in 2021. 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.
Gross Profit and Gross Margin Gross profit for 2023 was $42.2 million, or 36% of net revenue, compared to $40.9 million or 36% of net revenue in 2022. 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.
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 December 31, 2022, the amount of cash included at such subsidiaries was $5.3 million.
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 December 31, 2023, the amount of cash included at such subsidiaries was $7.8 million.
General and Administrative Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) General and administrative expenses $ 10,429 $ 11,891 $ (1,462 ) (12 )% Percentage of revenue 9 % 11 % General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
General and Administrative Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) General and administrative expenses $ 12,360 $ 10,429 $ 1,931 19 % Percentage of revenue 11 % 9 % General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables and are included in other current assets on the consolidated balance sheet. As of December 31, 2022 and 2021, the amount of unbilled receivables were immaterial. Allowance for Doubtful Accounts Our allowance for doubtful accounts is based on our assessment of the collectability of customer accounts.
Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables and are included in other current assets on the consolidated balance sheet. As of December 31, 2023 and 2022, the amount of unbilled receivables were immaterial. Allowance for Credit Losses Our allowance for credit losses is based on our assessment of the collectibility of customer accounts.
As of December 31, 2022, we had a total accumulated deficit of $409.4 million. 28 We believe our existing cash and cash equivalents, together with cash generated from operations and available credit under our Loan Agreement will be sufficient to satisfy our working capital needs to fund operations for the next twelve months.
As of December 31, 2023, we had a total accumulated deficit of $414.9 million. 30 We believe our existing cash and cash equivalents, together with cash generated from operations and available credit under our Loan Agreement will be sufficient to satisfy our working capital needs to fund operations for the next twelve months.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results. As of December 31, 2022, we have federal and state income tax net operating loss (“NOL”) carryforwards of $121.0 million and $50.3 million, respectively, which will expire at various dates.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results. As of December 31, 2023, we have federal and state income tax net operating loss (“NOL”) carryforwards of $89.0 million and $49.8 million, respectively, which will expire at various dates.
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. 27 Income Tax Provision Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Income tax provision $ 101 $ 28 $ 73 261 % As of December 31, 2022, our deferred tax assets are fully offset by a valuation allowance.
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. 29 Income Tax Provision Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Income tax provision $ 164 $ 101 $ 63 62 % As of December 31, 2023, our deferred tax assets are fully offset by a valuation allowance.
The effective tax rate for the year ended December 31, 2021 differs from the federal statutory rate of 21% primarily due to PPP loan forgiveness, stock-based compensation, GILTI inclusions the provision in certain foreign jurisdictions partially offset by the change in the valuation allowance.
The effective tax rate for the year ended December 31, 2023 differs from the federal statutory rate of 21% primarily due to stock-based compensation, and the provision in certain foreign jurisdictions partially offset by the change in the valuation allowance.
Liquidity and Capital Resources As of December 31, 2022, our working capital, defined as current assets less current liabilities, was $51.7 million, a decrease of $0.2 million compared to $51.9 million as of December 31, 2021. As of December 31, 2022, our cash and cash equivalents balance was $16.7 million.
Liquidity and Capital Resources As of December 31, 2023, our working capital, defined as current assets less current liabilities, was $48.7 million, a decrease of $3.0 million compared to $51.7 million as of December 31, 2022. As of December 31, 2023, our cash and cash equivalents balance was $23.3 million.
Selling and Marketing Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Selling and marketing expenses $ 20,730 $ 17,033 $ 3,697 22 % Percentage of revenue 18 % 16 % 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 Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Selling and marketing expenses $ 22,555 $ 20,730 $ 1,825 9 % Percentage of revenue 19 % 18 % 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.
Seasonality and Other Factors In our business overall, we 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.
Seasonality and Other Factors In our business overall, we 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.
Within each product category, gross profit 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.
Within each product category, gross profit 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. 27 Operating Expenses Information about our operating expenses for the years ended December 31, 2023 and 2022 is set forth below.
Management bases its estimates and judgments on historical experience and on various other factors, which we believe are reasonable based upon the information available to us at the time these 30 estimates, judgments and assumptions are made. Actual results may differ from these estimates under different assumptions or conditions.
Management bases its estimates and judgments on historical experience and on various other factors, which we believe are reasonable based upon the information available to us at the time these estimates, judgments and assumptions are made.
Operating Expenses Information about our operating expenses for the years ended December 31, 2022 and 2021 is set forth below.
Non-operating Income (Expense) Information about our non-operating income (expense) for the years ended December 31, 2023 and 2022 is set forth below.
Research and Development Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Research and development expenses $ 9,916 $ 8,673 $ 1,243 14 % Percentage of revenue 9 % 8 % Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products.
Research and Development Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Research and development expenses $ 11,590 $ 9,916 $ 1,674 17 % Percentage of revenue 10 % 9 % Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products.
Selling and marketing expenses in 2022 increased compared with 2021 primarily due to higher headcount and related payroll costs, higher external contractor costs as well as higher travel related costs.
Selling and marketing expenses in 2023 increased compared with 2022 primarily due to higher headcount and related payroll costs and higher travel related costs, partially offset by lower external contractor costs in 2023.
In addition, the interest rate was lowered from prime to prime minus 0.25%, and certain financial covenants were amended. On February 8, 2023, we entered into an amendment (the "Fourth Amendment") to the amended and restated the Loan and Security Agreement with EWB (as amended to date, the "Loan Agreement").
In addition, the interest rate was lowered from prime to prime minus 0.25%, and certain financial covenants were amended. On February 8, 2023, we entered into an amendment (the "Fourth Amendment") to the Loan Agreement. The Fourth Amendment amends the Loan Agreement to, among other things, extend the maturity date to February 8, 2025 and amend certain financial covenants.
Revenue Recognition We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to receive in exchange for those products or services.
Actual results may differ from these estimates under different assumptions or conditions. 32 Revenue Recognition We recognize revenue when we transfer control of the promised products or services to our customers, in an amount that reflects the consideration we expect to receive in exchange for those products or services.
Our other long-term liabilities include gross unrecognized tax benefits, and related interest and penalties. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities. Accordingly, such amounts are not included in the table above.
See Note 16, Commitments and Contingencies , in the accompanying notes to our consolidated financial statements. Our other long-term liabilities include gross unrecognized tax benefits, and related interest and penalties. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities.
Premises Segment Net revenue in our Premises segment was $45.5 million in 2022, an increase of 17% compared with $39.0 million in 2021. Net revenue in this segment in 2022 and 2021 represented 40% and 38%, respectively, of our net revenue.
Premises Segment Net revenue in our Premises segment was $48.3 million in 2023, an increase of 6% compared with $45.5 million in 2022. Net revenue in this segment in 2023 and 2022 represented 41% and 40%, respectively, of our net revenue.
Factors Affecting Our Performance Market Adoption Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries. That pace, scope and depth accelerated during 2020 causing large fluctuations in our operating results. During 2021, we believe RFID deployments occurred at a much faster pace of growth than historically.
Factors Affecting Our Performance Market Adoption Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries. That pace, scope and depth accelerated during 2023 and 2022 causing large fluctuations in our operating results.
The increase was primarily due to product mix as well as the continued focus on production and logistical efficiencies. 25 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.
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.
Cash used in investing activities in 2021 of $1.5 million was primarily due to $2.1 million of capital investment expenditures in our manufacturing facility in Singapore and our research and development facility in Germany, partially offset by $0.6 million related to proceeds received from an investment.
Cash flows from investing activities Cash used in investing activities in 2023 of $4.2 million was due to capital investment expenditures in our manufacturing facility in Thailand, partially offset by $0.1 million related to additional proceeds received from an investment.
The following summarizes our cash flows for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 Net cash provided by (used in) operating activities $ (7,807 ) $ 1,228 Net cash used in investing activities (3,872 ) (1,476 ) Net cash provided by (used in) financing activities (1,039 ) 19,341 Effect of exchange rates on cash, cash equivalents, and restricted cash 48 (695 ) Net increase (decrease) in cash, cash equivalents, and restricted cash (12,670 ) 18,398 Cash, cash equivalents, and restricted cash, beginning of year 29,807 11,409 Cash, cash equivalents, and restricted cash, end of year $ 17,137 $ 29,807 29 Cash flows from operating activities Cash used in operating activities in 2022 of $7.8 million was primarily due to net loss of $0.4 million, a decrease in cash from changes in operating assets and liabilities of $12.9 million, which included $9.3 million in strategic inventory purchases, partially offset by adjustments for certain non-cash items of $5.5 million, consisting primarily of depreciation, amortization, and stock-based compensation.
The following summarizes our cash flows for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Net cash provided by (used in) operating activities $ 1,157 $ (7,807 ) Net cash used in investing activities (4,152 ) (3,872 ) Net cash provided by (used in) financing activities 10,073 (1,039 ) Effect of exchange rates on cash, cash equivalents, and restricted cash 169 48 Net increase (decrease) in cash, cash equivalents, and restricted cash 7,247 (12,670 ) Cash, cash equivalents, and restricted cash, beginning of year 17,137 29,807 Cash, cash equivalents, and restricted cash, end of year $ 24,384 $ 17,137 31 Cash flows from operating activities Cash provided by operating activities in 2023 of $1.2 million was primarily due to net loss of $5.5 million, offset by adjustments for certain non-cash items of $6.6 million, consisting primarily of depreciation, amortization, stock-based compensation and gain on investment.
Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $36.1 million in 2022, an increase of 5% compared with $34.4 million in 2021. Sales of RFID and NFC products and smart card readers comprised a significant proportion of our net revenue in these regions.
Sales of RFID and NFC products and smart card readers comprised a significant proportion of our net revenue in these regions. Identity Segment Net revenue in our Identity segment was $68.1 million in 2023, an increase of 1% compared with $67.4 million in 2022.
On February 8, 2017, we entered into a Loan and Security Agreement with East West Bank (“EWB”).
On February 8, 2017, we entered into a Loan and Security Agreement (as amended or amended and restated from time to time, the “Loan Agreement”) with East West Bank (“EWB”).
Cash provided by financing activities in 2021 was primarily due to net proceeds of $37.6 million received from the sale of common stock in an underwritten public offering, partially offset by net repayments under our revolving loan facility of $14.6 million, repayments of promissory notes of $2.8 million to 21 April Fund, LP and 21 April Fund, Ltd., and taxes paid related to net share settlement of restricted stock units of $1.2 million.
Cash flows from financing activities Cash provided by financing activities in 2023 was primarily due to net borrowings of $9.9 million under our revolving loan facility with our lender, proceeds received from the exercise of warrants by 21 April Fund, LP and 21 April Fund, Ltd. of approximately $1.0 million, partially offset by taxes paid related to net share settlement of restricted stock units of $0.8 million.
Net revenue in this segment in the Americas in 2022 increased 18% compared with 2021 due to higher sales of Hirsch Velocity hardware, software, support services, and video product offerings across both federal government and commercial businesses. Net revenue in this segment across Europe, the Middle East, and Asia-Pacific increased 2% in 2022 compared with 2021.
Net revenue in this segment in the Americas in 2023 increased 7% compared with 2022 due to higher sales of Hirsch Velocity hardware, software, and related support services across both federal government and commercial businesses, partially offset by lower sales of video analytical software products.
Due to the uncertainty in demand from our customers, we may have to change, reschedule, or cancel purchases or purchase orders from our suppliers. These changes may lead to vendor cancellation charges on these orders or contractual commitments. See Note 16, Commitments and Contingencies , in the accompanying notes to our consolidated financial statements.
Purchases for inventories are highly dependent upon forecasts of customer demand. Due to the uncertainty in demand from our customers, we may have to change, reschedule, or cancel purchases or purchase orders from our suppliers. These changes may lead to vendor cancellation charges on these orders or contractual commitments.
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.
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.
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 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.
To address sales opportunities in the United States in general and with our U.S. government customers in particular, we focus on a strong U.S. sales organization and our sales presence in Washington D.C.
Net revenue in this segment in the Americas in 2022 increased 3% compared with 2021 primarily due to higher sales of RFID transponder products to mobile phone and consumer products contract manufacturers and higher sales of access cards, offset by lower sales of our legacy smart card readers resulting from critical component supply-chain constraints.
Net revenue in this segment in the Americas in 2023 increased 14% compared with 2022 primarily due to higher sales of RFID transponder products to customers in the healthcare and specialty packaging markets, and higher sales of our legacy smart card readers, partially offset by lower sales of access cards.
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.
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.
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.
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 and operating results may be adversely affected.
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.
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.
Identity Segment In our Identity segment, gross profit was $15.2 million in 2022 compared with $15.7 million in 2021. Gross profit margins in the Identity segment in 2022 decreased to 22% compared to 24% in 2021.
Identity Segment In our Identity segment, gross profit was $14.7 million in 2023 compared with $15.2 million in 2022. Gross profit margins in the Identity segment in 2023 of 22% were consistent with 22% in 2022 as product mix was comparable year-over-year.
Research and development expenses in 2022 increased compared with 2021 primarily due to higher headcount and related payroll costs, higher travel related costs, as well as higher stock-based compensation costs associated with performance stock units.
Research and development expenses in 2023 increased compared with 2022 primarily due to higher headcount and related payroll costs, higher certification costs in line with our product development roadmap, higher subscription costs, as well as higher non-recurring engineering costs.
The Fourth Amendment amends the Loan Agreement to, among other things, extend the maturity date to February 8, 2025 and amend certain financial covenants . 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.
We were not in compliance with a financial covenant under the Loan Agreement as of December 31, 2023, which non-compliance was waived by EWB. 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.
Cash provided by operating activities in 2021 of $1.2 million was primarily due to net income of $1.6 million and adjustments for certain non-cash items of $4.0 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, stock-based compensation, gain on forgiveness of the Paycheck Protection Program note and impairment of a right-of-use operating lease asset, partially offset by a decrease in cash from changes in operating assets and liabilities of $4.4 million.
Cash used in operating activities in 2022 of $7.8 million was primarily due to net loss of $0.4 million, a decrease in cash from changes in operating assets and liabilities of $12.9 million, which included $9.3 million in strategic inventory purchases, partially offset by adjustments for certain non-cash items of $5.5 million, consisting primarily of depreciation, amortization, and stock-based compensation.
Contractual Obligations We lease facilities, certain equipment, and automobiles under non-cancelable operating lease agreements. See Note 14, Leases , in the accompanying notes to our consolidated financial statements. Purchases for inventories are highly dependent upon forecasts of customer demand.
Cash used in financing activities in 2022 was primarily due to taxes paid related to net share settlement of restricted stock units of $1.0 million. Contractual Obligations We lease facilities, certain equipment, and automobiles under non-cancelable operating lease agreements. See Note 14, Leases , in the accompanying notes to our consolidated financial statements.
Premises Segment In our Premises segment, gross profit was $25.8 million in 2022 compared with $21.4 million in 2021. Gross profit margins in the Premises segment in 2022 increased to 57% compared to 55% in 2021.
Premises Segment In our Premises segment, gross profit was $27.5 million in 2023 compared with $25.8 million in 2022. Gross profit margins in the Premises segment in 2023 of 57% were consistent with 57% in 2022 as product mix was comparable year-over-year.
Sales of RFID and NFC products and smart card readers comprise a significant proportion of our net revenue in these regions.
Net revenue in this segment in Europe, the Middle East, and the Asia-Pacific decreased 13% in 2023 compared with 2022 primarily due to lower sales of RFID transponder products, our legacy smart card readers, and access cards. Sales of RFID and NFC products and smart card readers comprise a significant proportion of our net revenue in these regions.
Gain on investment is associated with proceeds received in connection with the acquisition of a private company that we had invested in, which had been fully impaired and had no carrying value. 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.
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, the Thai Baht, and the Euro.
The increases in these regions are primarily project driven and can vary period to period. 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.
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. 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.
Identity Segment Net revenue in our Identity segment was $67.4 million in 2022, an increase of 4% compared with $64.7 million in 2021. Net revenue in this segment in 2022 and 2021 represented 60% and 62%, respectively, of our net revenue.
Net revenue in this segment in 2023 and 2022 represented 59% and 60%, respectively, of our net revenue.
General and administrative expenses decreased compared with 2021 primarily due to bad debt expense recorded in the fourth quarter of 2021 of $2.6 million for aged accounts receivables, and lower merchant card fees in 2022, partially offset by higher headcount and related payroll costs in 2022 compared to 2021. 26 Restructuring and Severance Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Restructuring and severance expenses $ 202 $ 817 $ (615 ) (75 )% Restructuring expenses incurred in 2022 consists of severance related costs of $353,000 offset by a net credit of $151,000 associated with a settlement agreement for outstanding rental payments due the landlord on leased office space in San Francisco, California.
Restructuring expenses incurred in 2022 included severance related costs of $353,000 which was partially offset by a net credit of $151,000 associated with a settlement agreement for outstanding rental payments due the landlord on leased office space in San Francisco, California. The net credit represented the difference between amounts accrued and the settlement amount.
Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Interest expense, net $ (143 ) $ (483 ) $ 340 (70 )% Gain on forgiveness of Paycheck Protection Program note $ — $ 2,946 $ (2,946 ) 100 % Gain on investment $ 30 $ 611 $ (581 ) (95 )% Foreign currency gains (losses), net $ 155 $ (79 ) $ 234 (296 )% Interest expense, net consists of interest on financial liabilities, amortization of debt issuance costs, and interest accretion expense for a liability on a contractual payment obligation arising from our acquisition of Hirsch Electronics Corporation.
Year Ended December 31, 2023 2022 $ Change % Change ($ in thousands) Interest expense, net $ (427 ) $ (143 ) $ 284 199 % Gain on investment $ 132 $ 30 $ 102 340 % Foreign currency gains, net $ 25 $ 155 $ (130 ) (84 )% Interest expense, net consists of interest on financial liabilities and amortization of debt issuance costs.
Net revenue in the Americas was $76.8 million in 2022, an increase of 11% compared with $69.4 million in 2021.
Net revenue in the Americas was $84.5 million in 2023, an increase of 10% compared with $76.8 million in 2022. Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $31.9 million in 2023, a decrease of 12% compared with $36.1 million in 2022.
The decrease in interest expense in 2022 compared to 2021 was primarily attributable to lower borrowings outstanding under our revolving loan facility with our lender (which was fully paid down in August 2021), and lower amounts outstanding under our contractual payment obligation as all amounts outstanding had been paid as of December 31, 2021.
The increase in interest expense in 2023 compared to 2022 was attributable to borrowings outstanding under our revolving loan facility with our lender in 2023. Gain on investment is associated with additional proceeds received in connection with the acquisition of a private company that we had invested in, which had been fully impaired and had no carrying value.
Removed
If we are unable to meet end-user or customer volume or performance expectations, then our business prospects and operating results may be adversely affected. Impacts of Macroeconomic Conditions and Other Factors on our Business In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic.
Added
During 2023, we believe RFID deployments continued to occur at a much faster pace of growth than historically.
Removed
The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy, including industry-wide global supply chain challenges, such as manufacturing, transportation and logistics.
Added
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.
Removed
Net revenue in this segment in Europe, the Middle East, and the Asia-Pacific increased approximately 5% in 2022 compared with 2021 primarily due to higher sales of RFID transponder products to existing customers in the medical device and library markets.
Added
Drivers of growth included our technology strength and proven security solutions, work from home mandates in connection with the recent COVID-19 pandemic, 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.
Removed
The decrease in gross profit margins was primarily attributable to continued investments in technology, manufacturing processes and equipment, and changes in product mix, with lower sales of higher margin legacy smart card readers and higher sales of lower margin RFID transponder products.
Added
Impacts of Macroeconomic Conditions and Other Factors on our Business We conduct operations internationally with sales in the Americas, Europe and the Middle East, and Asia-Pacific regions. Our manufacturing operations and third-party contract manufacturers are located in China, Singapore, and Thailand/Southeast Asia.
Removed
The net credit represented the difference between amounts accrued and the settlement amount. Restructuring expenses incurred in 2021 consists of facility rental related costs of $521,000 and severance related costs of $296,000.
Added
Net revenue in this segment across Europe, the Middle East, and Asia-Pacific in 2023 was comparable with 2022. Net revenue in these regions is primarily project driven and can vary period to period. As a general trend, U.S.

… 4 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

110 edited+13 added−18 removed127 unchanged
Biggest changeCONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2022 2021 2020 Cash flows used in operating activities: Net income (loss) $ ( 392 ) $ 1,620 $ ( 5,105 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,272 1,971 3,313 Provision for (recovery from) doubtful accounts — 2,562 ( 41 ) Gain on forgiveness of Paycheck Protection Program note — ( 2,946 ) — Gain on investment ( 30 ) ( 611 ) — Accretion of interest on contractual payment obligation — 43 139 Loss on disposal of fixed assets 68 — — Amortization of debt issuance costs — 108 497 Stock-based compensation expense 3,161 2,606 3,027 Impairment of right-of-use operating lease asset — 281 1,294 Decrease in fair value of earnout liability — — ( 261 ) Changes in operating assets and liabilities: Accounts receivable ( 5,051 ) ( 3,572 ) ( 550 ) Inventories ( 9,330 ) 389 ( 4,105 ) Prepaid expenses and other assets ( 1,210 ) ( 12 ) ( 570 ) Accounts payable 4,073 ( 441 ) 2,455 Contractual payment obligation liability — ( 1,083 ) ( 770 ) Deferred revenue 222 67 ( 467 ) Accrued expenses and other liabilities ( 1,590 ) 246 ( 622 ) Net cash provided by (used in) operating activities ( 7,807 ) 1,228 ( 1,766 ) Cash flows from investing activities: Capital expenditures ( 3,902 ) ( 2,087 ) ( 1,564 ) Proceeds from investment 30 611 — Net cash used in investing activities ( 3,872 ) ( 1,476 ) ( 1,564 ) Cash flows from financing activities: Borrowings under revolving loan facility, net of issuance costs — 3,964 3,362 Repayments under revolving loan facility — ( 18,548 ) ( 3,347 ) Borrowings under East West Bank term loan — — 4,500 Repayments under East West Bank term loan — — ( 4,500 ) Proceeds from April 21 Funds promissory notes — — 4,000 Repayments of April 21 Funds promissory notes — ( 2,800 ) ( 1,200 ) Proceeds from the sale of common stock, net of issuance costs — 37,627 — Proceeds from Paycheck Protection Program promissory note — — 2,915 Taxes paid related to net share settlement of restricted stock units ( 1,039 ) ( 1,201 ) ( 890 ) Proceeds from exercise of stock options — 299 13 Net cash provided by (used in) financing activities ( 1,039 ) 19,341 4,853 Effect of exchange rates on cash, cash equivalents, and restricted cash 48 ( 695 ) 503 Net increase (decrease) in cash, cash equivalents, and restricted cash ( 12,670 ) 18,398 2,026 Cash, cash equivalents and restricted cash Beginning of period 29,807 11,409 9,383 End of period $ 17,137 $ 29,807 $ 11,409 Supplemental Disclosures of Cash Flow Information: Interest paid $ 6 $ 340 $ 945 Taxes paid, net $ 88 $ 74 $ 112 Non-cash investing and financing activities: Dividends earned on Series B preferred stock $ 1,206 $ 1,148 $ 1,094 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 3,646 $ 183 $ 1,676 Reclassification of debt issuance costs to prepaid expenses and other current assets $ — $ 114 $ — 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 consolidated financial statements. 42 IDENTIV, INC.
Biggest changeCONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 2021 Cash flows used in operating activities: Net income (loss) $ ( 5,489 ) $ ( 392 ) $ 1,620 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,732 2,272 1,971 Provision for (recovery from) credit losses — — 2,562 Gain on forgiveness of Paycheck Protection Program note — — ( 2,946 ) Gain on investment ( 132 ) ( 30 ) ( 611 ) Accretion of interest on contractual payment obligation — — 43 Loss on disposal of fixed assets — 68 — Amortization of debt issuance costs 43 — 108 Stock-based compensation expense 3,971 3,161 2,606 Impairment of right-of-use operating lease asset — — 281 Changes in operating assets and liabilities: Accounts receivable 2,890 ( 5,051 ) ( 3,572 ) Inventories 219 ( 9,330 ) 389 Prepaid expenses and other assets ( 361 ) ( 1,210 ) ( 12 ) Accounts payable ( 2,530 ) 4,073 ( 441 ) Contractual payment obligation liability — — ( 1,083 ) Deferred revenue 613 222 67 Accrued expenses and other liabilities ( 799 ) ( 1,590 ) 246 Net cash provided by (used in) operating activities 1,157 ( 7,807 ) 1,228 Cash flows from investing activities: Capital expenditures ( 4,284 ) ( 3,902 ) ( 2,087 ) Proceeds from investment 132 30 611 Net cash used in investing activities ( 4,152 ) ( 3,872 ) ( 1,476 ) Cash flows from financing activities: Borrowings under revolving loan facility, net of issuance costs 23,906 — 3,964 Repayments under revolving loan facility ( 14,000 ) — ( 18,548 ) Repayments of April 21 Funds promissory notes — — ( 2,800 ) Proceeds from the sale of common stock, net of issuance costs — — 37,627 Taxes paid related to net share settlement of restricted stock units ( 796 ) ( 1,039 ) ( 1,201 ) Proceeds from exercise of warrants 963 — — Proceeds from exercise of stock options — — 299 Net cash provided by (used in) financing activities 10,073 ( 1,039 ) 19,341 Effect of exchange rates on cash, cash equivalents, and restricted cash 169 48 ( 695 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 7,247 ( 12,670 ) 18,398 Cash, cash equivalents and restricted cash Beginning of period 17,137 29,807 11,409 End of period $ 24,384 $ 17,137 $ 29,807 Supplemental Disclosures of Cash Flow Information: Interest paid $ 451 $ 6 $ 340 Taxes paid, net $ 123 $ 88 $ 74 Non-cash investing and financing activities: Dividends earned on Series B preferred stock $ 1,266 $ 1,206 $ 1,148 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 2,368 $ 3,646 $ 183 Reclassification of debt issuance costs to prepaid expenses and other current assets $ — $ — $ 114 The accompanying notes are an integral part of these consolidated financial statements. 44 IDENTIV, INC.
Nearly all of the Company’s deferred revenue balance is related software maintenance contracts. Payment terms and conditions vary by contract type, although payment is typically due within 30 to 60 days of contract inception.
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 60 days of contract inception.
The Company performs an initial assessment of qualitative factors to determine whether the 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.
The Company performs an initial assessment of qualitative factors to determine whether the 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.
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.
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).
The Certificate of Designation with respect to the Series B convertible preferred stock further provides that in the event of, 58 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).
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. 47 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 contract is fulfilled (point-in-time) Within 30 - 60 days of delivery Observable in transactions without multiple performance obligations Software maintenance and support services Ratably over the course of the support contract (over time) Within 30 - 60 days of the beginning of the contract period Observable in renewal transactions Extended hardware warranties Ratably over the course of the support contract (over time) Within 30 - 60 days of the beginning of the contract period Observable in renewal transactions Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services to a customer.
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. 49 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 contract is fulfilled (point-in-time) Within 30 - 60 days of delivery Observable in transactions without multiple performance obligations Software maintenance and support services Ratably over the course of the support contract (over time) Within 30 - 60 days of the beginning of the contract period Observable in renewal transactions Extended hardware warranties Ratably over the course of the support contract (over time) Within 30 - 60 days of the beginning of the contract period Observable in renewal transactions Significant Judgments The Company’s contracts with customers often include promises to transfer multiple products and services to a customer.
Restructuring and Severance During the year ended December 31, 2022 , the Company incurred restructuring expenses of $ 202,000 , consisting of severance related costs of $ 353,000 offset by a net credit of $ 151,000 associated with a settlement agreement for outstanding rental payments due the landlord on leased office space in San Francisco, California.
During the year ended December 31, 2022, the Company incurred restructuring expenses of $ 202,000 , consisting of severance related costs of $ 353,000 offset by a net credit of $ 151,000 associated with a settlement agreement for outstanding rental payments due the landlord on leased office space in San Francisco, California.
As a result, the Company reevaluated its available deferred tax assets, and the loss carryforward and credit amounts, excluding the valuation allowance presented above have been adjusted for the limitation resulting from the change in ownership in accordance with the provisions of the Tax Reform Act.
As a result, the Company reevaluated its available deferred tax assets, and the loss carryforward and credit amounts, excluding the valuation 56 allowance presented above have been adjusted for the limitation resulting from the change in ownership in accordance with the provisions of the Tax Reform Act.
Following subsequent amendments, on April 14, 2022, the Company and EWB amended the Loan and Security Agreement replacing the $ 20.0 million revolving loan facility subject to a borrowing base with a non-formula revolving loan facility with no borrowing base requirement and a maturity date of February 8, 2023 .
Following subsequent amendments, on April 14, 2022, the Company and EWB amended the Loan Agreement replacing the $ 20.0 million revolving loan facility subject to a borrowing base with a non-formula revolving loan facility with no borrowing base requirement and a maturity date of February 8, 2023 .
Dilutive-potential common share equivalents are excluded from the computation of net income (loss) per share 45 in loss periods, as their effect would be antidilutive. See Note 11, Net Income (Loss) per Common Share , for further information regarding the Company’s computation of both basic and diluted net income (loss) per common share.
Dilutive-potential common share equivalents are excluded from the computation of net income (loss) per share in loss periods, as their effect would be antidilutive. See Note 11, Net Income (Loss) per Common Share , for further information regarding the Company’s computation of both basic and diluted net income (loss) per common share.
The Purchasers agreed to purchase an aggregate of 3,000,000 Shares at a price of $ 4.00 per share in cash at the initial closing of the transaction, and at the sole option of the Company, an additional 2,000,000 56 Shares at a price of $ 4.00 per share in cash at a second closing, if any (the “Private Placement”).
The Purchasers agreed to purchase an aggregate of 3,000,000 Shares at a price of $ 4.00 per share in cash at the initial closing of the transaction, and at the sole option of the Company, an additional 2,000,000 Shares at a price of $ 4.00 per share in cash at a second closing, if any (the “Private Placement”).
Assets and Liabilities Not Measured at Fair Value The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, and other accrued expenses and liabilities approximate fair value due to their short maturities. 5.
Assets and Liabilities Not Measured at Fair Value The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, and other accrued expenses and liabilities approximate fair value due to their short maturities.
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. 17. Subsequent Events There were no subsequent events except as disclosed within Note 7, Financial Liabilities . 65
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. 17. Subsequent Events There were no subsequent events except as disclosed within Note 7, Financial Liabilities . 66
Since there was a full valuation allowance against these deferred tax assets, there was no impact on the Company’s consolidated balance sheets or statements of comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020. Also the subsequent recognition, if any, of these previously unrecognized tax benefits would not affect the effective tax rate.
Since there was a full valuation allowance against these deferred tax assets, there was no impact on the Company’s consolidated balance sheets or statements of comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021. Also the subsequent recognition, if any, of these previously unrecognized tax benefits would not affect the effective tax rate.
Dollars results in a gain or loss which is recorded as a component of accumulated other comprehensive income (loss) in our condensed consolidated statements of stockholders’ equity.
Dollars results in a gain or loss which is recorded as a component of accumulated other comprehensive income (loss) in our consolidated statements of stockholders’ equity.
Dollar compared to the functional currency of the foreign subsidiary, with all other variables held constant, to determine the incremental transaction gains or losses that would have been incurred. The foreign exchange rates used were based on market rates in effect at each of December 31, 2022 and December 31, 2021.
Dollar compared to the functional currency of the foreign subsidiary, with all other variables held constant, to determine the incremental transaction gains or losses that would have been incurred. The foreign exchange rates used were based on market rates in effect at each of December 31, 2023 and December 31, 2022.
If the carrying amount of the reporting unit is in excess of its fair value, an impairment loss would be recorded in the consolidated statement of comprehensive income (loss). During the years ended December 31, 2022, 2021 and 2020 , the Company noted no indicators of goodwill impairment and concluded no further testing was necessary.
If the carrying amount of the reporting unit is in excess of its fair value, an impairment loss would be recorded in the consolidated statement of comprehensive income (loss). During the years ended December 31, 2023, 2022 and 2021 , the Company noted no indicators of goodwill impairment and concluded no further testing was necessary.
In certain circumstances, changes in the functional currency value of these assets and liabilities create fluctuations in our consolidated financial statements. We have performed sensitivity analyses as of December 31, 2022 and December 31, 2021 using a modeling technique that evaluated the hypothetical impact of a 10% movement in the value of the U.S.
In certain circumstances, changes in the functional currency value of these assets and liabilities create fluctuations in our consolidated financial statements. We have performed sensitivity analyses as of December 31, 2023 and December 31, 2022 using a modeling technique that evaluated the hypothetical impact of a 10% movement in the value of the U.S.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Income Taxes — The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the asset and liability approach for financial accounting and reporting of income taxes.
Forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. 47 Income Taxes — The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the asset and liability approach for financial accounting and reporting of income taxes.
Advertising Costs — The Company expenses advertising costs as incurred. Advertising costs were not significant for the years ended December 31, 2022, 2021 and 2020 . Stock-based Compensation — The Company accounts for all stock-based payment awards, including employee stock options, restricted stock awards, and performance share units in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”).
Advertising Costs — The Company expenses advertising costs as incurred. Advertising costs were not significant for the years ended December 31, 2023, 2022 and 2021 . Stock-based Compensation — The Company accounts for all stock-based payment awards, including employee stock options, restricted stock awards, and performance share units in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”).
Significant Accounting Policies and Recent Accounting Pronouncements Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications — Certain reclassifications have been made to the fiscal year 2021 consolidated financial statements to conform to the fiscal year 2022 presentation.
Significant Accounting Policies and Recent Accounting Pronouncements Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Reclassifications — Certain reclassifications have been made to the fiscal year 2022 consolidated financial statements to conform to the fiscal year 2023 presentation.
(a Delaware Corporation) and its subsidiaries (collectively, the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).
(a Delaware Corporation) and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
As of December 31, 2022 and 2021 , the Company had $ 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.
As of December 31, 2023 and 2022 , the Company had $ 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.
Although the Company expects to collect net amounts due as stated on the consolidated balance sheets, actual collections may differ from these estimated amounts. 43 Inventories — Inventories are stated at the lower of cost (using average cost or standard cost, as applicable) or net realizable value (market).
Although the Company expects to collect net amounts due as stated on the consolidated balance sheets, actual collections may differ from these estimated amounts. 45 Inventories — Inventories are stated at the lower of cost (using average cost or standard cost, as applicable) or net realizable value (market).
ITEM 7A. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK We are primarily exposed to changes in currency exchange rates as certain of our operations are conducted in foreign currencies such as the Indian Rupee, the Canadian Dollar, and the Euro.
ITEM 7A. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK We are primarily exposed to changes in currency exchange rates as certain of our operations are conducted in foreign currencies such as the Indian Rupee, the Thai Baht, the Canadian Dollar, and the Euro.
Additionally, for newer products there may be limited historical data with which to evaluate forecasts. 37 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
Additionally, for newer products there may be limited historical data with which to evaluate forecasts. 39 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
These costs are recorded within selling and marketing expense. • The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. • The Company does not consider the time value of money for contracts with original durations of one year or less. 49 4.
These costs are recorded within selling and marketing expense. • The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. • The Company does not consider the time value of money for contracts with original durations of one year or less. 51 4.
The Company maintains research and development facilities in California, India, and Germany and local operations and sales facilities in Germany, Hong Kong, Japan, Singapore, Canada, and the United States. The Company was founded in 1990 in Munich, Germany and was incorporated in 1996 under the laws of the State of Delaware. 2.
The Company maintains research and development facilities in California, India, and Germany, manufacturing facilities in Singapore and Thailand, and local operations and sales facilities in Germany, Hong Kong, Japan, Canada, and the United States. The Company was founded in 1990 in Munich, Germany and was incorporated in 1996 under the laws of the State of Delaware. 2.
During the years ended December 31, 2022 and 2021 , the Company received proceeds of approximately $ 30 ,000 and $ 611 ,000, respectively from the acquisition of a private company that the Company had invested in, which had been fully impaired and had no carrying value.
During the years ended December 31, 2023, 2022 and 2021, the Company received proceeds of approximately $ 132,000 , $ 30,000 and $ 611,000 , respectively from the acquisition of a private company that the Company had invested in, which had been fully impaired and had no carrying value.
A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth.
A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth.
The Company performs an evaluation of its amortizable intangible assets for impairment at the end of each reporting period. The Company did no t identify any impairment indicators during the years ended December 31, 2022, 2021 and 2020.
The Company performs an evaluation of its amortizable intangible assets for impairment at the end of each reporting period. The Company did no t identify any impairment indicators during the years ended December 31, 2023, 2022 and 2021.
We re-measure all monetary assets and liabilities at the current exchange rate at the end of the period, non-monetary assets and liabilities at historical exchange rates, and revenue and expenses at average exchange rates in effect during the periods. 35 ITEM 8 .
We re-measure all monetary assets and liabilities at the current exchange rate at the end of the period, non-monetary assets and liabilities at historical exchange rates, and revenue and expenses at average exchange rates in effect during the periods. 37 ITEM 8 .
The shares of common stock issuable upon exercise of the April 21 Fund Warrants are entitled to the same resale registration rights granted to the April 21 Funds Warrants under the Stockholders Agreement dated December 21, 2017.
The shares of common stock issuable upon exercise of the April 21 Fund Warrants were entitled to the same resale registration rights granted to the April 21 Funds Warrants under the Stockholders Agreement dated December 21, 2017.
Assets and Liabilities Measured at Fair Value on a Recurring Basis As of December 31, 2022 and 2021, the only assets measured and recognized at fair value on a recurring basis were nominal cash equivalents. As of December 31, 2022 and 2021 , there were no liabilities measured and recognized at fair value on a recurring basis.
Assets and Liabilities Measured at Fair Value on a Recurring Basis As of December 31, 2023 and 2022, the only assets measured and recognized at fair value on a recurring basis were nominal cash equivalents. As of December 31, 2023 and 2022 , there were no liabilities measured and recognized at fair value on a recurring basis.
(collectively, the "April 21 Funds"), pursuant to 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 .
(collectively, the "April 21 Funds"), pursuant to 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 had a term of three years .
No shares of the Company’s Series A Participating Preferred Stock were outstanding as of December 31, 2022 and 2021. At both December 31, 2022 and 2021 , 5,000,000 shares of the Series B convertible preferred stock were outstanding.
No shares of the Company’s Series A Participating Preferred Stock were outstanding as of December 31, 2023 and 2022. At both December 31, 2023 and 2022 , 5,000,000 shares of the Series B convertible preferred stock were outstanding.
As of December 31, 2022 and 2021 , there were no liabilities that are measured and recognized at fair value on a non-recurring basis.
As of December 31, 2023 and 2022 , there were no liabilities that are measured and recognized at fair value on a non-recurring basis.
Comprehensive Income (Loss) — Comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020 has been disclosed within the consolidated statements of comprehensive income (loss). Other accumulated comprehensive income (loss) includes net foreign currency translation adjustments, which are excluded from consolidated net income (loss).
Comprehensive Income (Loss) — Comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021 has been disclosed within the consolidated statements of comprehensive income (loss). Other accumulated comprehensive income (loss) includes net foreign currency translation adjustments, net of tax, which are excluded from consolidated net income (loss).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 15, 2023, expressed an unqualified opinion.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2024, expressed an unqualified opinion.
Such recognition would result in adjustments to other tax accounts, primarily deferred taxes. The amount of unrecognized tax benefits which, if recognized, would not affect the Company's tax rate as of December 31, 2022 and 2021, respectively. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense.
Such recognition would result in adjustments to other tax accounts, primarily deferred taxes. The amount of unrecognized tax benefits which, if recognized, would not affect the Company's tax rate as of December 31, 2023 and 2022, respectively. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as in the income tax provision.
As of December 31, 2022 and 2021 , the Company recognized liabilities for unrecognized tax benefits of $ 2.3 million and $ 2.3 million, respectively.
As of December 31, 2023 and 2022 , the Company recognized liabilities for unrecognized tax benefits of $ 2.3 million and $ 2.3 million, respectively.
The results of these sensitivity analyses indicated that the impact on a hypothetical 10% movement in foreign currency exchange rates would result in increased foreign currency gains or losses of $1.1 million as of December 31, 2022 and $0.4 million as of December 31, 2021.
The results of these sensitivity analyses indicated that the impact on a hypothetical 10% movement in foreign currency exchange rates would result in increased foreign currency gains or losses of $0.7 million as of December 31, 2023 and $1.1 million as of December 31, 2022.
Inventory Valuation – Adjustments for Excess or Obsolete Inventories As described in Notes 2 and 6 to the consolidated financial statements, the Company’s consolidated inventories balance was $29 million as of December 31, 2022. The Company’s inventories are valued using standard cost, approximating average cost, and are stated at the lower of cost or net realizable value.
Inventory Valuation – Adjustments for Excess or Obsolete Inventories As described in Notes 2 and 6 to the consolidated financial statements, the Company’s consolidated inventories balance was $28.7 million as of December 31, 2023. The Company’s inventories are valued using standard cost, approximating average cost, and are stated at the lower of cost or net realizable value.
As of December 31, 2022 and 2021 , the net amount of capitalized software development costs were $ 515,000 and $ 303,000 , respectively, and are included in other current and long term assets in the accompanying consolidated balance sheets. 44 The Company capitalizes certain costs for its internal-use software incurred during the application development stage.
As of December 31, 2023 and 2022 , the net amount of capitalized software development costs were $ 146,000 and $ 515,000 , respectively, and are included in other current and long term assets in the accompanying consolidated balance sheets. The Company capitalizes certain costs for its internal-use software incurred during the application development stage.
A valuation allowance of $ 60.0 million and $ 62.4 million, as of December 31, 2022 and 2021, respectively, has been recorded to offset the related net deferred tax assets as the Company is unable to conclude that it is more likely than not that such deferred tax assets will be realized.
A valuation allowance of $ 56.0 million and $ 60.0 million, as of December 31, 2023 and 2022, respectively, has been recorded to offset the related net deferred tax assets as the Company is unable to conclude that it is more likely than not that such deferred tax assets will be realized.
As of December 31, 2022, none of the contingent conditions to adjust the conversion rate had been met.
As of December 31, 2023, none of the contingent conditions to adjust the conversion rate had been met.
The following table summarizes the Company’s warranty accrual activity during the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 Balance at beginning of period $ 377 $ 321 Charged (credited) to costs and expenses ( 24 ) 59 Cost of warranty claims ( 8 ) ( 3 ) Balance at end of period $ 345 $ 377 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 following table summarizes the Company’s warranty accrual activity during the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Balance at beginning of period $ 345 $ 377 Charged (credited) to costs and expenses 56 ( 24 ) Cost of warranty claims ( 23 ) ( 8 ) Balance at end of period $ 378 $ 345 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 following table summarizes the Company’s net deferred tax assets valuation allowance activity (in thousands): Year Ended December 31, 2022 2021 2020 Balance at beginning of period $ 62,441 $ 62,699 $ 62,492 Increases in valuation allowance — 459 1,142 Decreases in valuation allowance ( 2,445 ) ( 717 ) ( 935 ) Balance at end of period $ 59,996 $ 62,441 $ 62,699 Section 951A under the Tax Cuts and Jobs Act (the “Act”) requires a U.S. shareholder of a controlled foreign corporation to include in taxable income the shareholder’s share of global intangible low-taxed income (“GILTI”) for the year.
The following table summarizes the Company’s net deferred tax assets valuation allowance activity (in thousands): Year Ended December 31, 2023 2022 2021 Balance at beginning of period $ 59,996 $ 62,441 $ 62,699 Increases in valuation allowance 1,407 — 459 Decreases in valuation allowance ( 5,358 ) ( 2,445 ) ( 717 ) Balance at end of period $ 56,045 $ 59,996 $ 62,441 Section 951A under the Tax Cuts and Jobs Act (the “Act”) requires a U.S. shareholder of a controlled foreign corporation to include in taxable income the shareholder’s share of global intangible low-taxed income (“GILTI”) for the year.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 207) 37 Consolidated Balance Sheets 39 Consolidated Statements of Comprehensive Income (Loss) 40 Consolidated Statements of Stockholders’ Equity 41 Consolidated Statements of Cash Flows 42 Notes to Consolidated Financial Statements 43 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Identiv, Inc.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 207) 39 Consolidated Balance Sheets 41 Consolidated Statements of Comprehensive Income (Loss) 42 Consolidated Statements of Stockholders’ Equity 43 Consolidated Statements of Cash Flows 44 Notes to Consolidated Financial Statements 45 38 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Identiv, Inc.
For the year ended December 31, 2022 , the Company recorded an increase in accrued penalties of $ 2,000 and an increase in accrued interest of $ 1,000 related to the unrecognized tax benefits noted above. As of December 31, 2022 , the Company has recognized a total liability for penalties of $ 4,000 and interest of $ 7,000 .
For the year ended December 31, 2023 , the Company recorded an increase in accrued interest of $ 1,000 related to the unrecognized tax benefits noted above. As of December 31, 2023 , the Company has recognized a total liability for penalties of $ 4,000 and interest of $ 8,000 .
Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.4 million, $ 1.4 million and $ 2.1 million for the years ended December 31, 2022, 2021 and 2020 , respectively. 15.
Cash paid for amounts included in the measurement of operating lease liabilities was $ 1.8 million, $ 1.4 million and $ 1.4 million for the years ended December 31, 2023, 2022 and 2021 , respectively. 15.
Restricted cash as of December 31, 2022 and 2021 of $ 0.5 million and $ 1.3 million, respectively, pertains primarily to a stand by letter of credit with a manufacturer for equipment purchased for the Company’s manufacturing facility in Singapore.
Restricted cash as of December 31, 2023 and 2022 of $ 1.1 million and $ 0.5 million, respectively, pertains primarily to a stand by letter of credit with a manufacturer for equipment purchased for the Company’s manufacturing facility in Thailand.
As of December 31, 2022 and 2021, the amount of unbilled receivables was immaterial.
As of December 31, 2023 and 2022, the amount of unbilled receivables was immaterial.
Unsatisfied Performance Obligations Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $ 0.9 million as of December 31, 2022.
Unsatisfied Performance Obligations Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $ 1.5 million as of December 31, 2023.
The income tax provision reconciled to the amount computed by applying the statutory federal tax rate to the income (loss) before income tax provision is as follows (in thousands): For the Year Ended December 31, 2022 2021 2020 Income tax provision (benefit) at statutory federal tax rate of 21 % $ ( 61 ) $ 345 $ ( 1,057 ) State taxes, net of federal benefit 2 ( 19 ) ( 12 ) Foreign taxes provisions provided for at rates other than U.S. statutory rate ( 410 ) ( 494 ) ( 202 ) Section 951(A) inclusion 428 523 — Stock options ( 218 ) ( 443 ) — Change in valuation allowance 274 700 1,432 Permanent differences 86 42 ( 76 ) PPP loan forgiveness — ( 619 ) — Other — ( 7 ) ( 12 ) Total provision for income taxes $ 101 $ 28 $ 73 The Company applies the provisions of, and accounted for uncertain tax positions in accordance with, ASC 740.
The income tax provision reconciled to the amount computed by applying the statutory federal tax rate to the income (loss) before income tax provision is as follows (in thousands): For the Year Ended December 31, 2023 2022 2021 Income tax provision (benefit) at statutory federal tax rate of 21 % $ ( 1,119 ) $ ( 61 ) $ 345 State taxes, net of federal benefit ( 42 ) 2 ( 19 ) Foreign taxes provisions provided for at rates other than U.S. statutory rate ( 315 ) ( 410 ) ( 494 ) Section 951(A) inclusion 83 428 523 Stock options 467 ( 218 ) ( 443 ) Change in valuation allowance 1,041 274 700 Permanent differences 50 86 42 PPP loan forgiveness — — ( 619 ) Other ( 1 ) — ( 7 ) Total income tax provision $ 164 $ 101 $ 28 The Company applies the provisions of, and accounted for uncertain tax positions in accordance with, ASC 740.
Changes in deferred revenue during the years ended December 31, 2022 and 2021 were as follows (in thousands): Year Ended December 31, 2022 2021 Deferred revenue, beginning of period $ 2,433 $ 2,366 Deferral of revenue billed in current period, net of recognition 2,241 1,905 Recognition of revenue deferred in prior periods ( 2,019 ) ( 1,838 ) Deferred revenue, end of period $ 2,655 $ 2,433 Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables and are included in other current assets on the consolidated balance sheet.
Changes in deferred revenue during the years ended December 31, 2023 and 2022 were as follows (in thousands): Year Ended December 31, 2023 2022 Deferred revenue, beginning of period $ 2,655 $ 2,433 Deferral of revenue billed in current period, net of recognition 2,477 2,241 Recognition of revenue deferred in prior periods ( 1,864 ) ( 2,019 ) Deferred revenue, end of period $ 3,268 $ 2,655 Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables and are included in other current assets on the consolidated balance sheet.
Goodwill and Intangible Assets Goodwill The following table summarizes the activity of goodwill (in thousands): Identity Premises Total Balance as of December 31, 2020 $ 3,554 $ 6,712 $ 10,266 Currency translation adjustment — 2 2 Balance as of December 31, 2021 3,554 6,714 10,268 Currency translation adjustment — ( 78 ) ( 78 ) Balance as of December 31, 2022 $ 3,554 $ 6,636 $ 10,190 50 In accordance with ASC 350, 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.
Goodwill and Intangible Assets Goodwill The following table summarizes the activity of goodwill (in thousands): Identity Premises Total Balance as of January 1, 2022 $ 3,554 $ 6,714 $ 10,268 Currency translation adjustment — ( 78 ) ( 78 ) Balance as of December 31, 2022 3,554 6,636 10,190 Currency translation adjustment — 28 28 Balance as of December 31, 2023 $ 3,554 $ 6,664 $ 10,218 52 In accordance with ASC 350, 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.
Since the Company typically invoices customers at contract inception, this amount is included in the deferred revenue balance. As of December 31, 2022 , the Company expects to recognize approximately 39 % of the revenue related to these unsatisfied performance obligations during 2023, 26 % during 2024, and 35 % thereafter.
Since the Company typically invoices customers at contract inception, this amount is included in the deferred revenue balance. As of December 31, 2023 , the Company expects to recognize approximately 41 % of the revenue related to these unsatisfied performance obligations during 2024, 25 % during 2025, and 34 % thereafter.
The Company recorded amortization expense related to software development costs of $ 45,000 , $ 55,000 and $ 78,000 for the years ended December 31, 2022, 2021 and 2020 , respectively. The Company capitalized software development costs of $ 103,000 and $ 84,000 for the year ended December 31, 2022 and 2021 , respectively.
The Company recorded amortization expense related to software development costs of $ 82,000 , $ 45,000 and $ 55,000 for the years ended December 31, 2023, 2022 and 2021 , respectively. The Company capitalized software development costs of $ 93,000 , $ 84,000 and $ 103,000 for the years ended December 31, 2023, 2022 and 2021, respectively.
Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of December 31, 2022 would be convertible into 6,330,762 shares of the Company’s common stock.
Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of December 31, 2023 would be convertible into 6,647,300 shares of the Company’s common stock.
Stock-Based Compensation Expense The following table summarizes stock-based compensation expense related to stock options, RSUs, and PSUs included in the consolidated statements of comprehensive income (loss) (in thousands): Year Ended December 31, 2022 2021 2020 Cost of revenue $ 192 $ 183 $ 160 Research and development 699 486 685 Selling and marketing 845 545 480 General and administrative 1,425 1,392 1,702 Total $ 3,161 $ 2,606 $ 3,027 Restricted Stock Unit Net Share Settlements During the years ended December 31, 2022, 2021 and 2020 , the Company repurchased 67,723 , 82,351 , and 171,641 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees. 60 11.
Stock-Based Compensation Expense The following table summarizes stock-based compensation expense related to stock options, RSUs, and PSUs included in the consolidated statements of comprehensive income (loss) (in thousands): Year Ended December 31, 2023 2022 2021 Cost of revenue $ 195 $ 192 $ 183 Research and development 692 699 486 Selling and marketing 1,152 845 545 General and administrative 1,932 1,425 1,392 Total $ 3,971 $ 3,161 $ 2,606 Restricted Stock Unit Net Share Settlements During the years ended December 31, 2023, 2022 and 2021 , the Company repurchased 110,753 , 67,723 , and 82,351 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees. 61 11.
The Company recorded an income tax benefit of $ 6.2 million in the year ended December 31, 2021 as a result of deductibility of expenses paid by the forgiveness of the PPP loan. 55 A reconciliation of the beginning and ending amount of unrecognized tax benefits with an impact on the Company’s consolidated balance sheets or statements of comprehensive income (loss) is as follows (in thousands): December 31, 2022 2021 Balance at beginning of period $ 2,276 $ 2,307 Additions based on tax positions related to the current year 1 1 Additions for tax positions of prior years 2 — Reductions in prior year tax positions — ( 32 ) Balance at end of period $ 2,279 $ 2,276 While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits as presented in the above table would materially change in the next 12 months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits with an impact on the Company’s consolidated balance sheets or statements of comprehensive income (loss) is as follows (in thousands): December 31, 2023 2022 Balance at beginning of period $ 2,279 $ 2,276 Additions based on tax positions related to the current year 1 1 Additions for tax positions of prior years — 2 Reductions in prior year tax positions ( 1 ) — Balance at end of period $ 2,279 $ 2,279 While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits as presented in the above table would materially change in the next 12 months.
Subsequent to June 6, 2011 through December 31, 2022, 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. 58 Stock Options The following is a summary of stock option activity for the year ended December 31, 2022: Number Outstanding Average Exercise Price per Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance as of December 31, 2021 514,693 $ 5.11 4.11 $ 11,850,930 Granted — — — Cancelled or Expired ( 9,100 ) 8.47 — Exercised — — — Balance as of December 31, 2022 505,593 $ 5.05 3.17 $ 1,280,805 Vested or expected to vest as of December 31, 2022 505,593 $ 5.05 3.17 $ 1,280,805 Exercisable as of December 31, 2022 505,593 $ 5.05 3.17 $ 1,280,805 The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock as of December 31, 2022 and the exercise price of in-the-money stock options multiplied by the number of such stock options.
Subsequent to June 6, 2011 through December 31, 2023, 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. 59 Stock Options The following is a summary of stock option activity for the year ended December 31, 2023: Number Outstanding Average Exercise Price per Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Balance as of January 1, 2023 505,593 $ 5.05 3.17 $ 1,280,805 Granted — — — Cancelled or Expired ( 10,633 ) 8.20 — Exercised — — — Balance as of December 31, 2023 494,960 $ 4.99 2.23 $ 1,725,985 Vested or expected to vest as of December 31, 2023 494,960 $ 4.99 2.23 $ 1,725,985 Exercisable as of December 31, 2023 494,960 $ 4.99 2.23 $ 1,725,985 The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock as of December 31, 2023 and the exercise price of in-the-money stock options multiplied by the number of such stock options.
As of December 31, 2022 , there was $ 8.7 million of unrecognized compensation cost related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 3.3 years.
As of December 31, 2023 , there was $ 6.9 million of unrecognized compensation cost related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.6 years.
The calculations for basic and diluted net income (loss) per common share are as follows: Year Ended December 31, 2022 2021 2020 Basic net income (loss) per common share: Numerator: Net income (loss) $ ( 392 ) $ 1,620 $ ( 5,105 ) Less: accretion of Series B convertible preferred stock dividends ( 1,206 ) ( 1,148 ) ( 1,094 ) Net income (loss) available to common stockholders $ ( 1,598 ) $ 472 $ ( 6,199 ) Denominator: Weighted average common shares outstanding - basic 22,659 21,340 17,978 Net income (loss) per common share - basic $ ( 0.07 ) $ 0.02 $ ( 0.34 ) Diluted net income (loss) per common share: Numerator: Net income (loss) available to common stockholders $ ( 1,598 ) $ 472 $ ( 6,199 ) Plus: accretion of Series B convertible preferred stock dividends, if dilutive — — — Net income (loss) available to common stockholders $ ( 1,598 ) $ 472 $ ( 6,199 ) Denominator: Weighted average common shares outstanding - basic 22,659 21,340 17,978 Dilutive securities: Stock options, RSUs, and warrants — 927 — Weighted average common shares outstanding - diluted 22,659 22,267 17,978 Net income (loss) per common share - diluted $ ( 0.07 ) $ 0.02 $ ( 0.34 ) The following common stock equivalents have been excluded from diluted net income (loss) per share for the fiscal years presented below because their inclusion would have been anti-dilutive (in thousands): December 31, 2022 2021 2020 Shares of common stock subject to outstanding RSUs 819 — 683 Shares of common stock subject to outstanding stock options 506 — 551 Shares of common stock subject to outstanding warrants 275 — 315 Shares of common stock issuable upon conversion of Series B convertible preferred stock 6,331 6,029 5,742 Total 7,931 6,029 7,291 61 12.
The calculations for basic and diluted net income (loss) per common share are as follows: Year Ended December 31, 2023 2022 2021 Basic net income (loss) per common share: Numerator: Net income (loss) $ ( 5,489 ) $ ( 392 ) $ 1,620 Less: accretion of Series B convertible preferred stock dividends ( 1,266 ) ( 1,206 ) ( 1,148 ) Net income (loss) available to common stockholders $ ( 6,755 ) $ ( 1,598 ) $ 472 Denominator: Weighted average common shares outstanding - basic 23,068 22,659 21,340 Net income (loss) per common share - basic $ ( 0.29 ) $ ( 0.07 ) $ 0.02 Diluted net income (loss) per common share: Numerator: Net income (loss) available to common stockholders $ ( 6,755 ) $ ( 1,598 ) $ 472 Plus: accretion of Series B convertible preferred stock dividends, if dilutive — — — Net income (loss) available to common stockholders $ ( 6,755 ) $ ( 1,598 ) $ 472 Denominator: Weighted average common shares outstanding - basic 23,068 22,659 21,340 Dilutive securities: Stock options, RSUs, and warrants — — 927 Weighted average common shares outstanding - diluted 23,068 22,659 22,267 Net income (loss) per common share - diluted $ ( 0.29 ) $ ( 0.07 ) $ 0.02 The following common stock equivalents have been excluded from diluted net income (loss) per share for the fiscal years presented below because their inclusion would have been anti-dilutive (in thousands): December 31, 2023 2022 2021 Shares of common stock subject to outstanding RSUs 730 819 — Shares of common stock subject to outstanding PSUs — 40 175 Shares of common stock subject to outstanding stock options 495 506 — Shares of common stock subject to outstanding warrants — 275 — Shares of common stock issuable upon conversion of Series B convertible preferred stock 6,647 6,331 6,029 Total 7,872 7,971 6,204 62 12.
In addition, the interest rate was lowered from prime to prime minus 0.25 %, and 52 certain financial covenants were amended. On February 8, 2023, the Company entered into an amendment (the "Fourth Amendment") to its amended and restated the Loan and Security Agreement with EWB (as amended to date, the "Loan Agreement").
In addition, the interest rate was lowered from prime to prime minus 0.25 % (interest rate as of December 31, 2023 was 8.50 %), and certain financial covenants were amended. On February 8, 2023, the Company entered into an amendment (the "Fourth Amendment") to the Loan Agreement.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except par value) Additional Accumulated Other Series B Preferred Stock Common Stock Paid-in Treasury Accumulated Comprehensive Total Shares Amount Shares Amount Capital Stock Deficit Income Equity Balances, January 1, 2020 5,000 $ 5 16,986 $ 18 $ 447,965 $ ( 9,043 ) $ ( 405,504 ) $ 2,025 $ 35,466 Net loss — — — — — — ( 5,105 ) — ( 5,105 ) Unrealized income from foreign currency translation adjustments — — — — — — — 553 553 Issuance of common stock in connection with vesting of stock awards — — 632 — — — — — — Proceeds from exercise of stock options — — 3 — 13 — — — 13 Stock-based compensation — — — — 3,027 — — — 3,027 Shares withheld in payment of taxes in connection with net share settlement of restricted stock units — — ( 172 ) — — ( 890 ) — — ( 890 ) Issuance of common stock in connection with 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, December 31, 2020 5,000 5 18,055 19 452,129 ( 9,933 ) ( 410,609 ) 2,578 34,189 Net income — — — — — — 1,620 — 1,620 Unrealized loss from foreign currency translation adjustments — — — — — — — ( 629 ) ( 629 ) Issuance of common stock in connection with vesting of stock awards — — 421 1 — — — — 1 Proceeds from exercise of stock options — — 29 — 299 — — — 299 Stock-based compensation — — — — 2,606 — — — 2,606 Shares withheld in payment of taxes in connection with net share settlement of restricted stock units — — ( 82 ) — — ( 1,201 ) — — ( 1,201 ) Issuance of common stock in connection with warrant exercise — — 28 — — — — — — Issuance of common stock in connection with public offering — — 3,779 4 37,623 — — — 37,627 Balances, December 31, 2021 5,000 5 22,230 24 492,657 ( 11,134 ) ( 408,989 ) 1,949 74,512 Net loss — — — — — — ( 392 ) — ( 392 ) Unrealized loss from foreign currency translation adjustments — — — — — — — ( 848 ) ( 848 ) Issuance of common stock in connection with vesting of stock awards — — 461 — — — — — — Stock-based compensation — — — — 3,161 — — — 3,161 Shares withheld in payment of taxes in connection with net share settlement of restricted stock units — — ( 68 ) — — ( 1,039 ) — — ( 1,039 ) Balances, December 31, 2022 5,000 $ 5 22,623 $ 24 $ 495,818 $ ( 12,173 ) $ ( 409,381 ) $ 1,101 $ 75,394 The accompanying notes are an integral part of these consolidated financial statements. 41 IDENTIV, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except par value) Additional Accumulated Other Series B Preferred Stock Common Stock Paid-in Treasury Accumulated Comprehensive Total Shares Amount Shares Amount Capital Stock Deficit Income Equity Balances, January 1, 2021 5,000 $ 5 18,055 $ 19 $ 452,129 $ ( 9,933 ) $ ( 410,609 ) $ 2,578 $ 34,189 Net income — — — — — — 1,620 — 1,620 Unrealized loss from foreign currency translation adjustments — — — — — — — ( 629 ) ( 629 ) Issuance of common stock in connection with vesting of stock awards — — 421 1 — — — — 1 Proceeds from exercise of stock options — — 29 — 299 — — — 299 Stock-based compensation — — — — 2,606 — — — 2,606 Shares withheld in payment of taxes in connection with net share settlement of restricted stock units — — ( 82 ) — — ( 1,201 ) — — ( 1,201 ) Issuance of common stock in connection with warrant exercise — — 28 — — — — — - Issuance of common stock in connection with public offering — — 3,779 4 37,623 — — — 37,627 Balances, December 31, 2021 5,000 5 22,230 24 492,657 ( 11,134 ) ( 408,989 ) 1,949 74,512 Net loss — — — — — — ( 392 ) — ( 392 ) Unrealized loss from foreign currency translation adjustments — — — — — — — ( 848 ) ( 848 ) Issuance of common stock in connection with vesting of stock awards — — 461 — — — — — — Stock-based compensation — — — — 3,161 — — — 3,161 Shares withheld in payment of taxes in connection with net share settlement of restricted stock units — — ( 68 ) — — ( 1,039 ) — — ( 1,039 ) Balances, December 31, 2022 5,000 5 22,623 24 495,818 ( 12,173 ) ( 409,381 ) 1,101 75,394 Net loss — — — — — — ( 5,489 ) — ( 5,489 ) Unrealized gain from foreign currency translation adjustments — — — — — — — 228 228 Issuance of common stock in connection with vesting of stock awards — — 459 1 — — — — 1 Stock-based compensation — — — — 3,971 — — — 3,971 Shares withheld in payment of taxes in connection with net share settlement of restricted stock units — — ( 110 ) — — ( 796 ) — — ( 796 ) Proceeds from exercise of warrants 275 963 963 Balances, December 31, 2023 5,000 $ 5 23,247 $ 25 $ 500,752 $ ( 12,969 ) $ ( 414,870 ) $ 1,329 $ 74,272 The accompanying notes are an integral part of these consolidated financial statements. 43 IDENTIV, INC.
CONSOLIDATED STATEMENTS OF C OMPREHENSIVE INCOME (LOSS) (In thousands, except per share data) Year Ended December 31, 2022 2021 2020 Net revenue $ 112,915 $ 103,769 $ 86,920 Cost of revenue 71,971 66,702 53,239 Gross profit 40,944 37,067 33,681 Operating expenses: Research and development 9,916 8,673 9,781 Selling and marketing 20,730 17,033 17,270 General and administrative 10,429 11,891 8,623 Decrease in fair value of earnout liability — — ( 261 ) Restructuring and severance 202 817 1,716 Total operating expenses 41,277 38,414 37,129 Loss from operations ( 333 ) ( 1,347 ) ( 3,448 ) Non-operating income (expense): Interest expense, net ( 143 ) ( 483 ) ( 1,462 ) Gain on forgiveness of Paycheck Protection Program note — 2,946 — Gain on investment 30 611 — Foreign currency gains (losses), net 155 ( 79 ) ( 122 ) Income (loss) before income tax provision ( 291 ) 1,648 ( 5,032 ) Income tax provision ( 101 ) ( 28 ) ( 73 ) Net income (loss) $ ( 392 ) $ 1,620 $ ( 5,105 ) Other comprehensive income (loss): Foreign currency translation adjustment ( 848 ) ( 629 ) 553 Comprehensive income (loss) $ ( 1,240 ) $ 991 $ ( 4,552 ) Net income (loss) per common share: Basic $ ( 0.07 ) $ 0.02 $ ( 0.34 ) Diluted $ ( 0.07 ) $ 0.02 $ ( 0.34 ) Weighted average shares used in computing net income (loss) per common share: Basic 22,659 21,340 17,978 Diluted 22,659 22,267 17,978 The accompanying notes are an integral part of these consolidated financial statements. 40 IDENTIV, INC.
CONSOLIDATED STATEMENTS OF C OMPREHENSIVE INCOME (LOSS) (In thousands, except per share data) Year Ended December 31, 2023 2022 2021 Net revenue $ 116,383 $ 112,915 $ 103,769 Cost of revenue 74,219 71,971 66,702 Gross profit 42,164 40,944 37,067 Operating expenses: Research and development 11,590 9,916 8,673 Selling and marketing 22,555 20,730 17,033 General and administrative 12,360 10,429 11,891 Restructuring and severance 714 202 817 Total operating expenses 47,219 41,277 38,414 Loss from operations ( 5,055 ) ( 333 ) ( 1,347 ) Non-operating income (expense): Interest expense, net ( 427 ) ( 143 ) ( 483 ) Gain on forgiveness of Paycheck Protection Program note — — 2,946 Gain on investment 132 30 611 Foreign currency gains (losses), net 25 155 ( 79 ) Income (loss) before income tax provision ( 5,325 ) ( 291 ) 1,648 Income tax provision ( 164 ) ( 101 ) ( 28 ) Net income (loss) $ ( 5,489 ) $ ( 392 ) $ 1,620 Other comprehensive income (loss): Foreign currency translation adjustment, net of tax 228 ( 848 ) ( 629 ) Comprehensive income (loss) $ ( 5,261 ) $ ( 1,240 ) $ 991 Net income (loss) per common share: Basic $ ( 0.29 ) $ ( 0.07 ) $ 0.02 Diluted $ ( 0.29 ) $ ( 0.07 ) $ 0.02 Weighted average shares used in computing net income (loss) per common share: Basic 23,068 22,659 21,340 Diluted 23,068 22,659 22,267 The accompanying notes are an integral part of these consolidated financial statements. 42 IDENTIV, INC.
Facility rental related costs during the year ended December 31, 2021 included a charge of $ 281,000 resulting from the impairment of a ROU operating lease asset for office space the Company vacated in the first quarter of 2021.
Facility rental related costs during the year ended December 31, 2021 included a charge of $ 281,000 resulting from the impairment of a ROU operating lease asset for office space the Company vacated in the first quarter of 2021. As of December 31, 2023 and 2022, there was no accrual for restructuring activities. 64 14.
The following table summarizes the amortization expense included in the consolidated statements of comprehensive income (loss) (in thousands): Year Ended December 31, 2022 2021 2020 Cost of revenue $ 447 $ 453 $ 899 Selling and marketing 670 671 1,666 Total $ 1,117 $ 1,124 $ 2,565 51 The estimated annual future amortization expense for purchased intangible assets with definite lives as of December 31, 2022 was as follows (in thousands): 2023 $ 1,030 2024 956 2025 956 2026 956 2027 956 Thereafter 411 Total $ 5,265 6.
The following table summarizes the amortization expense included in the consolidated statements of comprehensive income (loss) (in thousands): Year Ended December 31, 2023 2022 2021 Cost of revenue $ 450 $ 447 $ 453 Selling and marketing 582 670 671 Total $ 1,032 $ 1,117 $ 1,124 53 The estimated annual future amortization expense for purchased intangible assets with definite lives as of December 31, 2023 was as follows (in thousands): 2024 $ 961 2025 961 2026 961 2027 961 2028 407 Total $ 4,251 6.
The Company has determined that the Section 951A provisions do apply to its operations and relationships with its controlled foreign corporations (“CFCs”). The Company recorded $ 2.0 million and $ 2.5 million of GILTI income in 2022 and 2021, respectively. The Company did not record any GILTI income in 2020 due to net tested losses at its CFCs.
The Company has determined that the Section 951A provisions do apply to its operations and relationships with its controlled foreign corporations (“CFCs”). The Company recorded $ 0.4 million, $ 2.0 million and $ 2.5 million of GILTI income in 2023, 2022 and 2021, respectively.
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 consolidated balance sheets as of December 31, 2022 (in thousands): December 31, 2022 2023 $ 1,398 2024 1,222 2025 984 2026 765 2027 723 Thereafter — Total minimum lease payments 5,092 Less: amount of lease payments representing interest ( 536 ) Present value of future minimum lease payments 4,556 Less: current liabilities under operating leases ( 1,190 ) Long-term operating lease liabilities $ 3,366 As of December 31, 2022, the weighted average remaining lease term for the Company’s operating leases was 2.8 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was 6.3 %.
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 consolidated balance sheets as of December 31, 2023 (in thousands): December 31, 2023 2024 $ 2,004 2025 1,776 2026 1,354 2027 864 2028 24 Thereafter — Total minimum lease payments 6,022 Less: amount of lease payments representing interest ( 592 ) Present value of future minimum lease payments 5,430 Less: current liabilities under operating leases ( 1,714 ) Long-term operating lease liabilities $ 3,716 As of December 31, 2023, the weighted average remaining lease term for the Company’s operating leases was 3.3 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was 7.0 %.
Income Taxes Income (loss) before income tax provision for domestic and non-U.S. operations is as follows (in thousands): For the Year Ended December 31, 2022 2021 2020 Income (loss) from operations before income tax provision: U.S. $ ( 2,710 ) $ ( 1,189 ) $ ( 6,321 ) Foreign 2,419 2,837 1,289 Income (loss) from operations before income tax provision $ ( 291 ) $ 1,648 $ ( 5,032 ) The income tax provision consisted of the following (in thousands): For the Year Ended December 31, 2022 2021 2020 Deferred: Federal $ — $ — $ — State — — — Foreign — — — $ — $ — $ — Current: Federal $ — $ — $ — State 3 ( 24 ) ( 15 ) Foreign 98 52 88 Total current 101 28 73 Total income tax provision $ 101 $ 28 $ 73 53 Significant items making up deferred tax assets and liabilities are as follows (in thousands): December 31, 2022 2021 Deferred tax assets: Allowances not currently deductible for tax purposes $ 777 $ 978 Net operating loss carryforwards 41,730 44,068 Operating lease liabilities 1,018 312 General carryforwards 16,407 16,433 Stock-based compensation 1,471 1,487 Accrued and other 2,090 1,961 63,493 65,239 Less valuation allowance ( 59,996 ) ( 62,441 ) 3,497 2,798 Deferred tax liabilities: Depreciation and amortization ( 867 ) ( 925 ) Operating lease right-of-use assets ( 693 ) ( 10 ) State income taxes ( 1,937 ) ( 1,863 ) ( 3,497 ) ( 2,798 ) Net deferred tax asset $ — $ — Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.
Income Taxes Income (loss) before income tax provision for domestic and non-U.S. operations is as follows (in thousands): For the Year Ended December 31, 2023 2022 2021 Income (loss) from operations before income tax provision: U.S. $ ( 7,864 ) $ ( 2,710 ) $ ( 1,189 ) Foreign 2,539 2,419 2,837 Income (loss) from operations before income tax provision $ ( 5,325 ) $ ( 291 ) $ 1,648 The income tax provision consisted of the following (in thousands): For the Year Ended December 31, 2023 2022 2021 Deferred: Federal $ — $ — $ — State — — — Foreign — — — $ — $ — $ — Current: Federal $ — $ — $ — State ( 54 ) 3 ( 24 ) Foreign 218 98 52 Total current 164 101 28 Total income tax provision $ 164 $ 101 $ 28 55 Significant items making up deferred tax assets and liabilities are as follows (in thousands): December 31, 2023 2022 Deferred tax assets: Allowances not currently deductible for tax purposes $ 803 $ 777 Net operating loss carryforwards 35,252 41,730 Operating lease liabilities 834 1,018 General carryforwards 16,844 16,407 Stock-based compensation 1,272 1,471 Accrued and other 4,270 2,090 59,275 63,493 Less valuation allowance ( 56,045 ) ( 59,996 ) 3,230 3,497 Deferred tax liabilities: Depreciation and amortization ( 660 ) ( 867 ) Operating lease right-of-use assets ( 493 ) ( 693 ) State income taxes ( 2,077 ) ( 1,937 ) ( 3,230 ) ( 3,497 ) Net deferred tax asset $ — $ — Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.
Intangible Assets The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands): Developed Customer Trademarks Technology Relationships Total Amortization period (in years) 5 10 - 12 4 - 12 Gross carrying amount as of December 31, 2022 $ 766 $ 9,093 $ 15,743 $ 25,602 Accumulated amortization ( 691 ) ( 6,666 ) ( 12,980 ) ( 20,337 ) Intangible assets, net as of December 31, 2022 $ 75 $ 2,427 $ 2,763 $ 5,265 Gross carrying amount as of December 31, 2021 $ 764 $ 9,127 $ 15,774 $ 25,665 Accumulated amortization ( 536 ) ( 6,219 ) ( 12,465 ) ( 19,220 ) Intangible assets, net as of December 31, 2021 $ 228 $ 2,908 $ 3,309 $ 6,445 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.
Intangible Assets The following table summarizes the gross carrying amount and accumulated amortization for intangible assets resulting from acquisitions (in thousands): Developed Customer Trademarks Technology Relationships Total Amortization period (in years) 5 10 - 12 4 - 12 Gross carrying amount as of December 31, 2023 $ 760 $ 9,098 $ 15,748 $ 25,606 Accumulated amortization ( 760 ) ( 7,110 ) ( 13,485 ) ( 21,355 ) Intangible assets, net as of December 31, 2023 $ — $ 1,988 $ 2,263 $ 4,251 Gross carrying amount as of December 31, 2022 $ 766 $ 9,093 $ 15,743 $ 25,602 Accumulated amortization ( 691 ) ( 6,666 ) ( 12,980 ) ( 20,337 ) Intangible assets, net as of December 31, 2022 $ 75 $ 2,427 $ 2,763 $ 5,265 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.
Net revenue and gross profit information by segment are as follows (in thousands): Year Ended December 31, 2022 2021 2020 Identity: Net revenue $ 67,422 $ 64,725 $ 52,742 Gross profit 15,153 15,670 14,781 Gross profit margin 22 % 24 % 28 % Premises: Net revenue 45,493 39,044 34,178 Gross profit 25,791 21,397 18,900 Gross profit margin 57 % 55 % 55 % Total: Net revenue 112,915 103,769 86,920 Gross profit 40,944 37,067 33,681 Gross profit margin 36 % 36 % 39 % Operating expenses: Research and development 9,916 8,673 9,781 Selling and marketing 20,730 17,033 17,270 General and administrative 10,429 11,891 8,623 Decrease in fair value of earnout liability — — ( 261 ) Restructuring and severance 202 817 1,716 Total operating expenses: 41,277 38,414 37,129 Loss from operations ( 333 ) ( 1,347 ) ( 3,448 ) Non-operating income (expense): Interest expense, net ( 143 ) ( 483 ) ( 1,462 ) Gain on forgiveness of Paycheck Protection Program note — 2,946 — Gain on investment 30 611 — Foreign currency gains (losses), net 155 ( 79 ) ( 122 ) Income (loss) before income tax provision $ ( 291 ) $ 1,648 $ ( 5,032 ) 62 Geographic Information Geographic net revenue is based on the customer’s ship-to location.
Net revenue and gross profit information by segment are as follows (in thousands): Year Ended December 31, 2023 2022 2021 Identity: Net revenue $ 68,117 $ 67,422 $ 64,725 Gross profit 14,679 15,153 15,670 Gross profit margin 22 % 22 % 24 % Premises: Net revenue 48,266 45,493 39,044 Gross profit 27,485 25,791 21,397 Gross profit margin 57 % 57 % 55 % Total: Net revenue 116,383 112,915 103,769 Gross profit 42,164 40,944 37,067 Gross profit margin 36 % 36 % 36 % Operating expenses: Research and development 11,590 9,916 8,673 Selling and marketing 22,555 20,730 17,033 General and administrative 12,360 10,429 11,891 Restructuring and severance 714 202 817 Total operating expenses: 47,219 41,277 38,414 Loss from operations ( 5,055 ) ( 333 ) ( 1,347 ) Non-operating income (expense): Interest expense, net ( 427 ) ( 143 ) ( 483 ) Gain on forgiveness of Paycheck Protection Program note — — 2,946 Gain on investment 132 30 611 Foreign currency gains (losses), net 25 155 ( 79 ) Income (loss) before income tax provision $ ( 5,325 ) $ ( 291 ) $ 1,648 63 Geographic Information Geographic net revenue is based on the customer’s ship-to location.
Leases with an initial term of twelve months or less are not recorded on the 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.
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.
Total net sales based on the disaggregation criteria described above are as follows (in thousands): Year Ended December 31, 2022 2021 2020 Point-in- Time Over Time Total Point-in- Time Over Time Total Point-in- Time Over Time Total Americas $ 73,317 $ 3,482 $ 76,799 $ 66,162 $ 3,234 $ 69,396 $ 54,491 $ 3,811 $ 58,302 Europe and the Middle East 15,492 408 15,900 12,507 369 12,876 9,124 373 9,497 Asia-Pacific 20,216 — 20,216 21,497 — 21,497 19,121 — 19,121 Total $ 109,025 $ 3,890 $ 112,915 $ 100,166 $ 3,603 $ 103,769 $ 82,736 $ 4,184 $ 86,920 48 Contract Balances Amounts invoiced in advance of services being provided are accounted for as deferred revenue.
Total net sales based on the disaggregation criteria described above are as follows (in thousands): Year Ended December 31, 2023 2022 2021 Point-in- Time Over Time Total Point-in- Time Over Time Total Point-in- Time Over Time Total Americas $ 81,050 $ 3,462 $ 84,512 $ 73,317 $ 3,482 $ 76,799 $ 66,162 $ 3,234 $ 69,396 Europe and the Middle East 17,506 374 17,880 15,492 408 15,900 12,507 369 12,876 Asia-Pacific 13,991 — 13,991 20,216 — 20,216 21,497 — 21,497 Total $ 112,547 $ 3,836 $ 116,383 $ 109,025 $ 3,890 $ 112,915 $ 100,166 $ 3,603 $ 103,769 50 Contract Balances Amounts invoiced in advance of services being provided are accounted for as deferred revenue.
Freight Costs — The Company reflects the cost of shipping its products to customers as a cost of revenue. Reimbursements received from customers for freight costs are recognized as product revenue.
Freight Costs — The Company reflects the cost of shipping its products to customers as a cost of revenue.
Information regarding net revenue by geographic region is as follows (in thousands): Year Ended December 31, 2022 2021 2020 Americas $ 76,799 $ 69,396 $ 58,302 Europe and the Middle East 15,900 12,876 9,497 Asia-Pacific 20,216 21,497 19,121 Total $ 112,915 $ 103,769 $ 86,920 As percentage of net revenue: Americas 68 % 67 % 67 % Europe and the Middle East 14 % 12 % 11 % Asia-Pacific 18 % 21 % 22 % Total 100 % 100 % 100 % Long-lived assets by geographic location as of December 31, 2022 and 2021 are as follows (in thousands): December 31, 2022 2021 Property and equipment, net: Americas $ 530 $ 545 Europe and the Middle East 458 334 Asia-Pacific 5,731 3,187 Total property and equipment, net $ 6,719 $ 4,066 Operating lease ROU assets: Americas $ 3,637 $ 1,344 Europe and the Middle East 384 135 Asia-Pacific 352 609 Total operating lease ROU assets $ 4,373 $ 2,088 13.
Information regarding net revenue by geographic region is as follows (in thousands): Year Ended December 31, 2023 2022 2021 Americas $ 84,512 $ 76,799 $ 69,396 Europe and the Middle East 17,880 15,900 12,876 Asia-Pacific 13,991 20,216 21,497 Total $ 116,383 $ 112,915 $ 103,769 As percentage of net revenue: Americas 73 % 68 % 67 % Europe and the Middle East 15 % 14 % 12 % Asia-Pacific 12 % 18 % 21 % Total 100 % 100 % 100 % Long-lived assets by geographic location as of December 31, 2023 and 2022 are as follows (in thousands): December 31, 2023 2022 Property and equipment, net: Americas $ 711 $ 530 Europe and the Middle East 519 458 Asia-Pacific 8,090 5,731 Total property and equipment, net $ 9,320 $ 6,719 Operating lease ROU assets: Americas $ 2,836 $ 3,637 Europe and the Middle East 371 384 Asia-Pacific 2,007 352 Total operating lease ROU assets $ 5,214 $ 4,373 13.

… 61 more changes not shown on this page.

Other INVE 10-K year-over-year comparisons