Note 12 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

12. Commitments and Contingencies

Settlement of Intellectual Property Litigation. During September 2012, the Company reached settlement and licensing agreements that effectively ended all of its then on-going intellectual property litigation. Having been approached by the respective counter-parties to each of these lawsuits, and in consultation with the board of directors, the Company determined that it was in its best long-term strategic interests to settle each lawsuit in order to move forward and shift focus to its software products, including our new product initiatives. As a result of such determination, the Company paid $311,000 in aggregate settlement fees during the three-month period ended September 30, 2012. The Company does not intend to pursue intellectual property litigation as an integral part of its strategy to fund future operations.

Operating Leases. On October 7, 2013, we amended our office lease for our corporate headquarters with our landlord. Under the terms of the amendment, we will move from our current location to another building within the same office complex and increase the space we lease from 4,413 square feet to 10,659 square feet. We completed the move on February 1, 2014.

The amended lease became effective on November 1, 2013 and will expire on October 31, 2018. The amended lease contains rent escalation clauses and four months of free rent. Rental of these premises will average approximately $35,700 per month over the remaining term of the lease. Additionally, we paid $18,000 to the landlord as a prepayment of the first month’s rent on the new space; such prepayment is reported as a component of prepaid expenses and other current assets as of December 31, 2013. Also, we accelerated the amortization of the leasehold improvements on our corporate headquarters such that they became fully amortized as of February 1, 2014, and deferred rent associated with our current corporate headquarters are being amortized “as is” until the February 1, 2014 move-in date, at which time the remaining unamortized balance will be added to the deferred rent associated with the amended lease.

The Company currently occupies approximately 2,527 square feet of office space in Concord, New Hampshire, under a lease that will expired in August 2016. The Company will pay rent of $4,000 per month for the life of the lease.

The Company believes that its current facilities will be adequate to accommodate its needs for the foreseeable future.

Future minimum lease payments, which consist entirely of leases for office space, are set forth below. The table assumes that the Company will occupy all currently leased facilities for the full term of each respective lease:

Year Ending December 31,
2014	$	405,700
2015		497,500
2016		495,000
2017		476,900
2018		407,300
	$	2,282,400

Rent expense aggregated approximately $288,000 and $260,700 for the years ended December 31, 2013 and 2012, respectively.

Contingencies. Under its Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws and certain agreements with officers and directors, the Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer’s or director’s serving in such capacity. Generally, the term of the indemnification period is for the officer's or director's lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is limited as the Company currently has a directors and officers liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements is minimal and has no liabilities recorded for these agreements as of December 31, 2013.

The Company enters into indemnification provisions under (i) its agreements with other companies in its ordinary course of business, including contractors and customers and (ii) its agreements with investors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company's activities or, in some cases, as a result of the indemnified party's activities under the agreement. These indemnification provisions often include indemnifications relating to representations made by the Company with regard to intellectual property rights, and often survive termination of the underlying agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2013.

The Company’s software license agreements also generally include a performance guarantee that the Company’s software products will operate substantially as described in the applicable program documentation for a period of 90 days after delivery. The Company also generally warrants that services that the Company performs will be provided in a manner consistent with reasonably applicable industry standards. To date, the Company has not incurred any material costs associated with these warranties and has no liabilities recorded for these agreements as of December 31, 2013.

Employment Agreement – Eldad Eilam

On August 21, 2013, our Board of Directors and Compensation Committee approved a new employment agreement for Eldad Eilam, our President and Chief Executive Officer. Under the employment agreement, Mr. Eilam will receive an annual base salary of $275,000 and will be eligible for a performance-based bonus in the discretion of our Compensation Committee. For 2013, Mr. Eilam is eligible for a bonus of up to $75,000. The employment agreement modified the vesting provisions of restricted shares and stock options that had previously been awarded to Mr. Eilam. Under such modified vesting provisions, which previously only accelerated in connection with a termination without cause and only in certain specified change of control situations, if Mr. Eilam’s employment is terminated as a result of death or disability, by the Company without cause, or by Mr. Eilam for good reason, or following a change in control, then all of Mr. Eilam’s unvested restricted shares and stock options shall immediately vest.

Mr. Eilam is an at-will employee, however, in the event that Mr. Eilam’s employment is terminated by the Company without cause, or Mr. Eilam terminates his employment for good reason or following a change in control, then, in addition to the vesting of Mr. Eilam’s unrestricted shares and stock options as noted above, Mr. Eilam shall receive his base salary for a period of 12 months and shall also receive payment or reimbursement for a period of 12 months of the full cost to Mr. Eilam of any Company provided health insurance that Mr. Eilam elects to obtain for Mr. Eilam and any of his eligible dependents. As a condition to Mr. Eilam receiving such payments, Mr. Eilam will have to execute and deliver to the Company a general release.

At all times that Mr. Eilam is an employee of the Company, the Company, at its own expense, shall provide life insurance on Mr. Eilam’s life with a death benefit in an amount not less than $1,000,000 and shall also maintain long-term disability insurance on Mr. Eilam.

Director Severance Plan and Key Employee Severance Plan

At a meeting of the Company’s board of directors held on October 18, 2011, the board approved the Company’s Director Severance Plan and Key Employee Severance Plan, each of which had been previously approved by the board, and each of which by its terms had expired on December 31, 2010. The board approved both plans without change (except their expiration date was changed to December 31, 2013) and with immediate effect. Following is a summary description of each of these plans.

Director Severance Plan:

This plan provides for accelerated vesting of the director’s stock options upon termination of the director’s position as a director under certain circumstances. Those circumstances include that the termination must take place after the occurrence of any transaction or series of transactions that constitute a change in the ownership or effective control of us, or in the ownership of a substantial portion of our assets, as defined in regulations promulgated under Section 409A of the Internal Revenue Code of 1986, as amended (such occurrence, a “Designated Event”) and that certain other terms and conditions set forth in the plan must have been met.

Key Employee Severance Plan:

This plan provides for payment of certain benefits upon termination of the key employee’s employment under certain circumstances. The benefits consist of accelerated vesting of stock options, continuation of salary for 12 months after termination (24 months for certain members of senior management who are so notified in writing), bonus payments that would have been payable but for termination of employment, and payment of certain health and other insurance benefits on behalf of the employee. The circumstances in which these benefits are payable include that the termination of employment must take place after the occurrence of a Designated Event and that certain other terms and conditions set forth in the plan must have been met.

The plans provide that we have the right to amend or terminate the plans at any time, except that the plans may not be amended or terminated following the occurrence of a Designated Event. Executive officers first elected or appointed after October 18, 2011 are ineligible to participate in the Key Employee Severance Plan absent prior board consideration and, if requested by one or more directors, the affirmative vote of a majority of the directors.