Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Operating lease

The Company previously leased offices in Cupertino, California under a cancelable month-to-month operating lease. The Company sublet an office on a month-to-month basis to a related party entity for approximately $551 per month during 2013. The majority stockholder of the related party is a stockholder of the Company. The Company terminated its sublease agreement effective December 31, 2013.

In March 2014, the Company entered into a non-cancelable thirty-eight month lease agreement for offices in Campbell, California commencing June 1, 2014 with escalating rent payments ranging from approximately $9,200 to $9,800 per month and one option to extend the lease term for an additional three years. Included in the lease agreement was a full rent abatement period of two months. Rent expense is recognized on a straight line basis. The Company paid a security deposit of $18,993 during the nine months ended September 30, 2014. The future minimum payments related to this lease are as follows for the years ending December 31:

Remainder of Year Ended 2014	$	27,742
2015		112,895
2016		116,201
2017		68,587
Total	$	325,425

Rent expense was approximately $36,202, and $19,211 for the three months ended September 30, 2014 and 2013, respectively, and approximately $81,221, and $50,750 for the nine months ended September 30, 2014 and 2013, respectively.

Guaranteed payments

The Company has entered into agreements to purchase certain patent assets. The agreements include future unconditional guaranteed payments of $21,000,000 representing purchase of patents and minimum revenue sharing from the Company’s ability to license the purchased patents to other parties. The guaranteed payments are accrued on the Company’s accompanying balance sheet as of September 30, 2014 at net present value using a discount rate of 12%. The associated discount is being amortized using the effective interest method. Expenses related to minimum revenue sharing payments are deferred as of September 30, 2014 and will be amortized in correlation with the future payment schedule. Minimum revenue sharing payments are generally due sixty days after fully earned. Future guaranteed payments associated with these agreements are payable as follows:

Years ending December 31:
2014	$	1,000,000
2015		4,000,000
2016		6,000,000
2017		10,000,000
Less: discount to present value		(3,537,951)
Guaranteed payments, net of discount	$	17,462,049