Significant Accounting and Reporting Policies (Policies)

9 Months Ended

Sep. 30, 2013

(a) Basis of presentation

The accompanying consolidated financial statements include the accounts of the Legal Parent, I/P and their wholly-owned subsidiaries, and are presented in accordance with instructions to Form 10-Q and, therefore, do not include all disclosures necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2012 included in the Company's Annual Report on Form 10-K. The results of operations for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period. All significant intercompany balances and transactions have been eliminated in consolidation.

Development stage enterprise

(b) Development stage enterprise

The Company’s principal activities to date have been focused on development and enforcement of its intellectual property, and on the research and development of its products. To date, the Company has not generated significant revenues from its principal operations. Accordingly, the Company’s financial statements are presented as those of a development stage enterprise.

Translation into U.S. dollars

(c) Translation into U.S. dollars

The Company conducts significant transactions in foreign currencies, which are recorded at the exchange rate as of the transaction date. All exchange gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected as non-operating income or expense in the statement of operations, as they arise.

Use of estimates

(d) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results may differ from such estimates. Significant items subject to such estimates and assumptions include valuation of assets acquired and liabilities assumed as part of the Merger, useful lives of the Company’s tangible and intangible assets, valuation of its October 2012 Warrants and derivative warrants, valuation of stock-based compensation, deferred tax assets and liabilities, income tax uncertainties and other contingencies.

Cash and cash equivalents

(e) Cash and cash equivalents

The Company invests its cash in commercial paper, money market deposits and money market funds with financial institutions. The Company has established guidelines relating to diversification and maturities of its investments, in order to minimize credit risk and maintain high liquidity of funds. All highly liquid investments with original maturities of three months or less are considered cash equivalents.

Revenue recognition

(f) Revenue recognition

Revenue from patent licensing and enforcement, subscription services and software development is recognized if collection is probable, persuasive evidence of an arrangement exists, the sales price is fixed or determinable and delivery of the service has been rendered. The Company uses management's best estimate of selling price for individual elements in multiple-element arrangements, where other sources of evidence are unavailable.

Cost of revenue

(g) Cost of revenue

Cost of revenue mainly includes expenses incurred in connection with the Company’s patent enforcement activities, such as legal fees, consulting costs, patent maintenance and other related expenses, as well as the amortization of acquired patents and technology. Legal costs incurred in connection with ongoing litigation are expensed as incurred. Cost of revenue also includes expenses directly related to providing mobile services in launched markets. In addition, these costs include royalty fees for content sales and amortization of prepaid content licenses. Cost of revenue does not include expenses related to product development, integration or support, as these are included in research and development expenses.

Net loss per share data

(h) Net loss per share data

Basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted-average number of shares of common stock plus dilutive potential common stock considered outstanding during the period. Such dilutive shares consist of incremental shares that would be issued upon exercise of the Company’s derivative warrants. The table below presents the computation of basic and diluted net losses per common share for the periods presented:

									Cumulative
									from Inception
	Three months ended September 30,				Nine months ended September 30,				to September 30,
	2013		2012		2013		2012		2013
Basic Numerator:
Net loss attributable to shares of common stock	$	(10,560)	$	(3,124)	$	(33,464)	$	(6,836)	$	(57,059)
Basic Denominator:
Weighted average number of shares of common stock outstanding during the period		83,450,697		48,437,587		82,757,899		25,493,415		46,229,656
Weighted average number of penny stock options		88,070		353,232		124,506		117,744		109,930
Basic common stock shares outstanding		83,538,767		48,790,819		82,882,405		25,611,159		46,339,586
Basic net loss per common stock share	$	(0.13)	$	(0.06)	$	(0.40)	$	(0.27)	$	(1.23)

Diluted Numerator:
Net loss attributable to shares of common stock	$	(10,560)	$	(3,124)	$	(33,464)	$	(6,836)	$	(57,059)
Increase in net loss attributable to derivative warrants		(758)	$	(7,240)	$	(53)	$	(7,240)	$	(3,387)
Diluted net loss attributable to shares of common stock:	$	(11,318)	$	(10,364)	$	(33,517)	$	(14,076)	$	(60,446)

Diluted Denominator:
Basic common shares outstanding		83,538,767		48,790,819		82,882,405		25,611,159		46,339,586
Weighted average number of derivative warrants outstanding during the period		2,563,090		9,436,281		89,677		9,436,281		1,460,477
Diluted common stock shares outstanding		86,101,857		58,227,100		82,972,082		35,047,440		47,800,063
Diluted net loss per common stock share	$	(0.13)	$	(0.18)	$	(0.40)	$	(0.40)	$	(1.26)

Net loss per share data presented excludes from the calculation of diluted net loss the following potentially dilutive securities, as of September 30 of the applicable period, as they had an anti-dilutive impact:
Both vested and unvested options at $0.96-$5.50 exercise price, to purchase an equal number of shares of common stock of the Company		10,225,387		9,160,429		10,225,387		9,160,429		10,225,387
Unvested penny options to purchase an equal number of shares of common stock of the Company		—		30,250		—		30,250		—
Unvested RSUs to issue an equal number of shares of common stock of the Company		2,411,771		3,126,667		2,411,771		3,126,667		2,411,771
Common stock shares granted, but not yet vested		45,762		108,625		45,762		108,625		45,762
Warrants to purchase an equal number of shares of common stock of the Company		15,829,262		12,814,533		18,289,611		12,814,533		15,115,357
Total number of potentially dilutive instruments, excluded from the calculation of net loss per share:		28,512,182		25,240,504		30,972,531		25,240,504		27,798,277

- Definition

Disclosure of accounting policy for cash and cash equivalents, including the policy for determining which items are treated as cash equivalents. Other information that may be disclosed includes (1) the nature of any restrictions on the entity's use of its cash and cash equivalents, (2) whether the entity's cash and cash equivalents are insured or expose the entity to credit risk, (3) the classification of any negative balance accounts (overdrafts), and (4) the carrying basis of cash equivalents (for example, at cost) and whether the carrying amount of cash equivalents approximates fair value.

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- Definition

Disclosure of accounting policy for recognition of costs in the period which correspond to the sales and revenue categories presented in the statement of operations. The accounting policy may include the amount and nature of costs incurred, provisions associated with inventories, purchase discounts, freight and other costs included in cost of sales incurred and recorded in the period. This disclosure also includes the nature of costs of sales incurred and recorded in the statement of operations for the period relating to transactions with related parties.

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- Definition

Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.

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- Definition

Disclosure of accounting policy for (1) transactions denominated in a currency other than the reporting enterprise's functional currency, (2) translating foreign currency financial statements that are incorporated into the financial statements of the reporting enterprise by consolidation, combination, or the equity method of accounting, and (3) remeasurement of the financial statements of a foreign reporting enterprise in a hyperinflationary economy.

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- Definition

Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

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