Note 12 - Other Financial Information

12 Months Ended

Dec. 31, 2012

Additional Financial Information Disclosure [Text Block]

12.  OTHER FINANCIAL INFORMATION

Major Customers:  During 2012, sales to Alcatel-Lucent and Nokia Siemens Networks were $3.8 million (or 27%) and $1.9 million (or 13%), respectively, of the Company’s consolidated revenues.  During 2011, sales to Nokia Siemens Networks and Alcatel-Lucent were $6.7 million (or 31%) and $4.6 million (or 21%), respectively, of the Company’s consolidated revenues.  During 2010, sales to Alcatel-Lucent and Nokia Siemens Networks were $5.1 million (or 28%) and $2.9 million (or 16%), respectively, of the Company’s consolidated revenues.  No other customers individually accounted for more than 10% of the Company’s consolidated revenues in the periods presented.

Included in accounts receivable at December 31, 2012, was $721,000, $401,000, $387,000, and $312,000 due from Nokia Siemens Networks, Networks Engines, Alcatel-Lucent, and Genband, respectively.  Included in accounts receivable at December 31, 2011, was $786,000 and $734,000 due from Alcatel-Lucent and Nokia Siemens Networks, respectively.  No other customers individually accounted for more than 10% of the Company’s accounts receivable at the balance sheet dates presented.    

Commitments:  The Company leases its facilities under non-cancelable operating leases with the longest terms extending to March 2014.  The Company leases its phone system under a non-cancelable operating lease extending to October 2014.  Certain of the leases contain escalation clauses over their respective terms.  Rent expense related to these leases is recorded on a straight-line basis with the difference between rent expense recognized and cash payments made recorded as deferred rent, a component of accrued liabilities in the accompanying consolidated balance sheets.

As of December 31, 2012, operating lease commitments having non-cancelable terms of more than one year are as follows (in thousands):

Year ending December 31:
2013	$	630
2014	$	133
2015	$	-
2016	$	-
Thereafter	$	-

Total rent expense for operating leases was as follows (in thousands):

Year ending December 31:
2012	$	580
2011	$	630
2010	$	794

As of December 31, 2012, the Company had approximately $50,000 of non-cancelable purchase commitments for materials and hardware as part of the normal course of business.

Contingencies:  Twenty-five former employees (“Plaintiffs”) of Interphase SAS, a subsidiary of Interphase Corporation, brought suit in France against Interphase SAS alleging various causes of action and rights to damages relating to claims of wrongful dismissal of employment, specific French employment indemnities, general economic losses, and contractual claims relating specifically to their employment relationship and contracts entered into between the individual and Interphase SAS.  The lawsuits were filed between November 2010 and April 2011 and are pending in the Labor Court of Boulogne-Billancourt, France and the Administrative Court of Cergy-Pontoise, France.  The various claims and assertions arise from, and relate to, the Plaintiffs’ release from employment as part of the restructuring actions taken during the third quarter of 2010.  See Note 7 in the notes to the consolidated financial statements for more information regarding the 2010 restructuring plan.  The updated statement of claim is for an aggregate payment of approximately €3.1 million, which translated to approximately $4.1 million at December 31, 2012, related to these claims.  The Company believes that the Plaintiffs’ claims are without merit and plans to continue to vigorously defend itself in this lawsuit.

On March 22, 2012, a hearing was conducted before the Labor Court of Boulogne-Billancourt, France related to the claims of twenty-three of the twenty-five former employees.  On May 31, 2012, the Court reported that the four judges’ votes were split; therefore, another hearing before the Labor Court took place on January 25, 2013.  The same four judges heard the case again, along with a professional judge from another court to ensure that a majority decision will be reached.  The decision of the Labor Court for twenty-two former employees is scheduled to be rendered on March 22, 2013.  For one of the twenty-three former employees, who was an employee representative, the Labor Court granted the Company’s motion at the January 25, 2013 hearing; the Labor Court rejected the plaintiff’s claim to hear the case on the merits, regarding the alleged irregularity of the information and consultation procedure, and postponed this case in deference to the pending case before the Administrative Tribunal as described below.  This case will be heard again on September 27, 2013.  It is likely that the Labor Court will render the same decision and again postpone the hearing until the Administrative Tribunal makes its decision.

On May 22, 2012, a hearing was conducted before the Labor Court of Boulogne-Billancourt, France related to the claims of one of the twenty-five former employees with non-executive status.  On July 31, 2012, the Court reported that the four judges’ votes were split; therefore, the Labor Court decided to join this case to the cases of the other twenty-three former employees described above in order to be heard again at the same hearing.  Therefore, this case was heard again at the hearing on January 25, 2013 before the Labor Court.  The decision of the Labor Court is scheduled to be rendered on March 22, 2013.

On June 12, 2012, a hearing was conducted with the Labor Court of Boulogne-Billancourt, France related to the claims of one of the twenty-five former employees, who was also an employee representative.  The Labor Court granted the Company’s motion and rejected the plaintiff’s claim to hear the case on the merits, regarding the alleged irregularity of the information and consultation procedure, and decided to postpone this case in deference to the pending case before the Administrative Tribunal as described below.  This case will be heard again on May 28, 2013.  It is likely that the Labor Court will render the same decision and again postpone the hearing until the Administrative Tribunal makes its decision.

Among the twenty-five cases described above, two former employees were made redundant related to a decision of the Labor Inspector to authorize their redundancy.  Because of their protected status as employee representatives, their redundancy required the prior authorization of the French administration.  Each of those former employees filed a claim before the Administrative Tribunal in order to challenge the decision of the Labor Inspector which authorized their redundancy.  Although each such claim or action is directed against the State, Interphase is also a party to these proceedings.  These cases are still pending before the Administrative Tribunal, and the date of the hearing has not been scheduled since additional briefs and evidence are still being communicated.

On April 7, 2011, Interphase was named as one of the defendants in a lawsuit filed by Mosaid Technologies (“Mosaid”) pending in the United States District Court for the Eastern District of Texas.  The complaint includes allegations that Interphase has infringed and is still infringing upon a certain registered U.S. patent to which Mosaid has enforcement rights.  The sole infringement allegation directed at Interphase appears to concern communications controller chips that Interphase purchases (indirectly) from Freescale Semiconductor, Inc. (“Freescale”), another defendant in the infringement allegation, which are used in several of Interphase’s products.

The complaint requests a judgment that Mosaid’s patents have been and are being infringed upon and, accordingly, an award of an unspecified amount of damages, plus interest and costs, as well as injunctive relief and any other remedies available under law.  Because the complaint claims the alleged infringing conduct is willful, it also requests treble damages and attorneys’ fees under the applicable U.S. patent statute.

Following a settlement agreement entered into by Mosaid, Freescale, Interphase, and the other parties to this lawsuit, on February 28, 2013, the court entered an order dismissing this lawsuit and all claims asserted therein by Mosaid against Freescale and Interphase with prejudice.  Under the settlement agreement and the order, Interphase will not have any obligation to pay any amount or materially change any of its business practices.