Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

Operating lease

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. The future minimum payments related to this lease are as follows:

Years ending December 31:
2015		85,153
2016		116,201
2017		68,587
Total	$	269,941

Rent expense was approximately $27,152 and $24,732 for the three months ended March 31, 2015 and 2014, respectively.

Guaranteed payments

The Company has entered into agreements to purchase certain patent assets. The Company will be required to pay the remaining future unconditional guaranteed payments of $20,000,000 ($18 million of which is to be paid out of net revenues from patent licensing receipts) through December 31, 2017, such payments representing the purchase of patents and minimum revenue sharing from the Company’s licensing arrangements and/or similar transactions regarding the purchased patents to other parties. The guaranteed payments are accrued on the Company’s accompanying balance sheet as of March 31, 2015 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 March 31, 2015 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:
2015		4,000,000
2016		6,000,000
2017		10,000,000
Less: discount to present value		(2,646,275)
Guaranteed payments, net of discount	$	17,353,725

Pursuant to the patent purchase agreement with Panasonic Corporation (“Panasonic”), a significant portion of the above guaranteed payments are owed to Panasonic. If the Company’s market capitalization falls below the aggregate dollar amount that the Company owes at that relevant point in time to Panasonic (but only prior to full payment), Panasonic may exercise a limited right to repurchase the Panasonic patent portfolio assets at a purchase price at least equal to the amount the Company paid to purchase the Panasonic patent portfolio. During the three months ended March 31, 2015, the Company was in compliance with the terms of the agreement.

Fortress Notes payable

Pursuant to the Fortress Agreement (as described in Note 6), future debt payments owed to Fortress are as follows:

Years ending December 31:
2015		1,578,107
2016		6,433,856
2017		4,955,250
Total	$	12,967,213