The Fli Charge ecosystem consistsXpresSpa believes that its operating metrics represent an attractive return on invested capital and, as a result, is pursuing new locations at airports and terminals around the country. Historically, XpresSpa has won approximately four out of power pads or surfaces as well as devices that are connected to or embedded with Fli Charge enabling technology. Fli Charge pads and surfaces are connected to a power source or battery. The surface of the pad has conductive contact strips that provide power and are constantly monitored by control circuitry that immediately halts power transfer if an unapproved load or short-circuit condition is detected. Fli Charge-enabled devices are embedded with the Fli Charge contact enablement that consists of four contact points, known as the Fli Charge “constellation.” The constellation is designed to make an immediate and continuous electrical connection with the contact strips regardless of the device’s orientation on the pad. The enablement monitors the power coming from the pad and ensures that the correct amount of power goes to the device. Once an approved Fli Charge device is placed on a pad, power is transferred immediately to charge or power the device.

There are several competing wire-free charging technologies on the market or under development today. The most popular competing technology is inductive wireless chargingevery five requests for proposal (“RFP”) in which magnetic induction uses a magnetic coil to create resonance, which can transmit energy over a relatively short distance. The amount of power delivered is a function of the size of the coils, and the coils must be aligned and paired within a typical distance of less than one inch. Products utilizing magnetic induction have been available for 10+ years in products such as rechargeable electronic toothbrushes and pace makers. The leading inductive technologies deliver a maximum of 10-15 watts. Other competing technologies include magnetic resonance, RF harvesting, laser and ultrasound.it has participated.

As compared to each of the competing wire-free technologies above, we believe that our conductive technology exhibits many competitive advantages including:

Group Mobile

We acquired Group Mobile is a provider of rugged, mobile and field-use computing products, serving customers worldwide.on October 15, 2015. Group Mobile provides total hardware solutions, carryingincluding rugged laptops, tablets, and handheld computers. Group Mobile also carriesmarkets rugged mobile printers, vehicle computer docking and mounting gear, power accessories, wireless communication products, antennas, carrying cases and all theother peripherals, accessories and add-ons needed to maximize productivity in a mobile- or field-computing environment. Group Mobile’s professional service offerings are evolving into project lifecycle services including technology consultations, development and deployment, project and asset management, equipment installation, break-fix, hardware service technical support, 24-7 helpdesk and more.

Group Mobile operates a full-service ecommerce website with live chat, up-to-date product information,is aggressively pursuing sales of Law Enforcement In-Vehicle “Video and computer system configuration capabilities.Body-Worn” camera solutions to meet the complex mobile technology demands of thousands of law enforcement agencies and officers in the United States market. Key to the Group Mobile long-term strategy is the complete professional services, post deployment services and lifecycle management of Group Mobile offerings to bring stability to the customer mobile technology platforms.

Group Mobile purchases rugged mobile computing equipment and complementary products from its primary distribution and manufacturing partners and sells them to enterprise, reseller,enterprises, resellers, and retail customers. Our primary customers range from corporations to local governments, emergency first responders and healthcare organizations. We believe that Group Mobile’s business is characterized by gross profits as a percentage of revenue slightly higher than is commonly found in resellers of computing devices. Thethe market for rugged mobile computing products is trending towards an increase in the volume of unit sales combined with declining unit prices as the business transitions from primarily being comprised of laptops to one primarily comprised of rugged tablets. As this transition has occurred, Group Mobile is seeing shortened product life cycles and industry specific devices for segments such as healthcare. Group Mobile sets sale prices based on the market supply and demand characteristics for each particular product. Group Mobile is highly dependent on the end-market demand for rugged mobile computing products, which is influenced by many factors including the introduction of new IT products by OEM,Original Equipment Manufacturers (“OEM”), replacement cycles for existing rugged mobile computing products, overall economic growth, local and state budgets, and general business activity.

Product costs represent the single largest expense and product inventory is one of the largest working capital investments for Group Mobile. Group Mobile’s primary suppliers include Synnex Corporation, Ingram Micro Inc., Xplore Technologies Corporation, and Flextronics International Ltd.,Motion Computing, which, combined, represent approximately 80%81% of Group Mobile’s inventory purchases. We have reseller agreements with most of our OEM and distribution partners. These agreements usually provide for nonexclusive resale and distribution rights. The agreements are generally short-term, subject to periodic renewal, and often contain provisions permitting termination by either our supplier or us without cause upon relatively short notice. Furthermore, product procurement from the OEM suppliers is a highly complex process and, as such, efficient and effective purchasing operations are critical to Group Mobile’s success.

Our StrategyFLI Charge

Our strategyFLI Charge is an early stage company that designs, develops, licenses, manufactures and markets power transfer and charging solutions. FLI Charge is currently working with partners in several verticals to bring products to market. These verticals include education, office, hospitality, power tools, automotive and consumer electronics, among others.

The FLI Charge ecosystem consists of powered surfaces and enablement chips that seamlessly transfer power to electronic devices. FLI Charge surfaces are connected to a power source or battery. The surfaces have conductive contact strips that provide power and are constantly monitored by control circuitry that immediately halts power transfer if an unapproved load or short-circuit condition is detected. FLI Charge-enabled devices are embedded with the FLI Charge contact enablement that consists of four contact points, known as the FLI Charge “constellation.” The constellation is designed to make an immediate and continuous electrical connection with the contact strips regardless of the device’s position or orientation on the surface. The enablement monitors the power coming from the surface and ensures that the correct amount of power goes to the device. Once an approved FLI Charge device is placed on a surface, power is transferred immediately to charge or power the device.

There are several competing charging technologies on the market or under development today. The most popular competing technology is inductive wireless charging, in which magnetic induction uses a magnetic coil to create resonance, which can transmit energy over a relatively short distance. The amount of power delivered is a function of the size of the coils, and the coils must be aligned and paired within a typical distance of less than one inch. Products utilizing magnetic induction have been available for our 10+ years in products such as rechargeable electronic toothbrushes and pace makers. The leading inductive technologies deliver a maximum of 20 watts. Other competing technologies include magnetic resonance, RF harvesting, laser and ultrasound.

FLI Charge launched its consumer product line on Indiegogo, a crowdfunding platform, on June 15, 2016; the campaign was completed on August 15, 2016. FLI Charge delivered products to the participants in the fourth quarter of 2016.

Intellectual Property

Our intellectual property operating segment is to continue to monetize our existing portfolioengaged in the innovation, development and monetization of intellectual propertyproperty. Our portfolio consists of patents and patent applications covering ad-insertion, wireless power, and mobile technologies.

We are currently focused on monetizing our technology portfolio through a variety of value enhancing initiatives including, but not limited to, licensing, litigation and strategic partnerships. In addition, we planWe are currently asserting patents in litigation related to continue to enhance our intellectual property rights around our Fli Charge technologyad-insertion and products.Fli Charge plans to strengthen and develop partnerships in numerous markets, including automotive, education, office, healthcare, power tools and vaporizers.We believe that growth in Group Mobile’s revenue can be achieved by adding new products, by exploring new distribution verticals, such as military and government, and by increasing the sales team’s geographic coverage.remote monitoring.

Recent Developments

ZTE AgreementXpresSpa Acquisition

On August 8, 2016, we signed an agreement to acquire XpresSpa.On December 7, 2015, we entered into a confidential settlement and license agreement (the “Settlement Agreement”) with ZTE Corporation and its affiliates (“ZTE”), pursuant to which: (i) ZTE paid us a total of $21,500,000 net of any withholding, value added or other taxes; (ii) the parties withdrew all pending litigations and proceedings against each other including the litigations related to ZTE’s breach of its non-disclosure agreement with Vringo; and (iii) we granted ZTE a non-exclusive, non-transferable, worldwide perpetual license of certain of our owned patents and patent applications.

Acquisition

On October 15, 2015,23, 2016, we completed the acquisition of IDG. XpresSpa for a total purchase consideration of $37,400,000, which includes:

Pursuant to the Purchase Agreement, we acquired 100%terms of the capital stockagreement governing the XpresSpa acquisition, in February 2017, in view of IDG, including twounexpected expenses, the parties mutually agreed to reduce the purchase price consideration and, as a result, the total number of IDG’s subsidiaries, Fli Charge, inshares of FORM Preferred Stock was decreased from 494,792 shares to 491,427 shares with an aggregate initial liquidation preference of $23,588,000, which IDG owned 70%are initially convertible into 3,931,416 shares of FORM Common Stock, at a conversion price of $6.00 per share. Each holder of FORM Preferred Stock shall be entitled to vote on an as converted basis.

230,208 shares of FORM Preferred Stock, with an estimated fair value of $11,050,000, were placed into an escrow that will be subject to release over an 18 month period once certain conditions are satisfied. The escrow will be used to obtain necessary lease consents from the airports and to cover potential liabilities that may arise after the acquisition, but pertain to the activities before the acquisition.

The FORM Preferred Stock is senior to the FORM Common Stock and the terms of the capital stockFORM Preferred Stock contain no restrictions on our ability to issue additional senior preferred securities or our ability to issue additional preferred securities in the future. We have the right, but not the obligation, upon ten trading days’ notice to convert the outstanding shares of FORM Preferred Stock into FORM Common Stock at the then applicable conversion ratio, at any time or from time to time, if the volume weighted average price per share of the FORM Common Stock exceeds $9.00 for over any 20 days in a 30 consecutive trading day period. The term of the FORM Preferred Stock is seven years, after which time we can repay the holders in shares of FORM Common Stock or cash at our election. If we elect to make a payment, or any portion thereof, in shares of FORM Common Stock, the number of shares deliverable (the “Base Shares”) will be based on the volume weighted average price per share of the FORM Common Stock for the 30 trading days prior to the date of calculation (the “Base Price”) plus an additional number of shares of FORM Common Stock (the “Premium Shares”), calculated as follows: (i) if the Base Price is greater than $9.00, no Premium Shares shall be issued, (ii) if the Base Price is greater than $7.00 and controlsequal to or less than $9.00, an additional number of shares equal to 5% of the Base Shares shall be issued, (iii) if the Base Price is greater than $6.00 and equal to or less than $7.00, an additional number of shares equal to 10% of the Base Shares shall be issued, (iv) if the Base Price is greater than $5.00 and equal to or less than $6.00, an additional number of shares equal to 20% of the Base Shares shall be issued and (v) if the Base Price is less than or equal to $5.00, an additional number of shares equal to 25% of the Base Shares shall be issued. The FORM Preferred Stock will accrue interest at 9% per annum.

Assignment of Infrastructure Patent Portfolio

On December 5, 2016, we entered into an agreement with Nokia Corporation (“Nokia”) to assign Nokia rights related to certain patents previously purchased from Nokia. The carrying value of the patents assigned to Nokia prior to the agreement was $1,186,000, which offset the $1,750,000 of royalty payable and resulted in a gain of $564,000 on the disposal of assets, which is included in general and administrative expense in the consolidated statements of operations and the wholly-owned Group Mobile.comprehensive loss. We retained selected patents previously purchased from Nokia with a carrying value of $50,000 as of December 31, 2016 that are no longer subject to any royalty payments to Nokia.

Senior Secured Notes

As considerationof December 31, 2016, we no longer had an outstanding balance for the acquisition, we issued an equivalent of 1,666,667 common shares(after giving effect to the one-for-ten reverse stock split),which were issued as follows: (i) 1,604,167 shares of our newly designated Series B Convertible Preferred Stock (“Series B Preferred”), convertible into 1,604,167 shares of our common stock, (ii) 57,500 shares of our unregistered common stock issued to one of the sellers, who is a former Chief Executive Officer and Director, in consideration of his forgiveness of debt and (iii) 5,000 shares of our common stock for transaction related services.

A total of 240,625 Series B Preferred shares were placed in escrow to secure certain of the sellers’ indemnity obligations under the Purchase Agreement for a period of up to 12 months.

On November 27, 2015 and pursuant to its terms, all Series B Preferred outstanding shares were converted into our unregistered shares of common stock, resulting in the issuance of the 1,604,167 shares of common stock.

Purchase consideration value was determined based on the market value of our shares of common stock at the date of the transactions, discounted for the fact that the shares are restricted as to their marketability for a period of six months from the issuance date. Total purchase value of consideration of the acquisition was valued at $5,571,000.

On December 28, 2015, we acquired the remaining 30% interest in Fli Charge from third parties. In conjunction with the transaction, we issued 110,000 shares of our unregistered common stock for total consideration valued at $262,000. The value of the consideration for financial reporting purposes was determined based on the market value of our shares at the date of the transaction, discounted due to the restricted nature of the shares and the effect this has on their marketability.

Notes Financing

On May 4, 2015 (the “Closing Date”), we entered into a securities purchase agreement with certain institutional investors in a registered direct offering of $12,500,000 of Senior Secured Convertible Notes (the “Notes”), as the Notes were repaid in full during the year. The details of our significant transactions during 2016 pertaining to the Notes are described below.

On March 9, 2016, we and warrantsthe holders (the “Investors”) of our $12,500,000 Notes, which we originally issued in a registered direct offering on May 4, 2015, entered into an exchange note agreement (the “Exchange Note Agreement”). Pursuant to purchase 537,500the Exchange Note Agreement, we issued to the Investors an aggregate of 703,644 shares of our common stock,(after giving effect par value $0.01 per share, in exchange for the reduction of $1,267,000 of the outstanding aggregate principal amount of the Notes and $49,000 of accrued interest. As a result, the outstanding aggregate principal amount under the Notes was reduced from $3,016,000 to $1,749,000 as of March 9, 2016.

In addition, on March 9, 2016, with the consent of each of the Investors, we agreed to amend the Notes. Pursuant to the one-for-ten reverse stock split). OnAmended and Restated Senior Secured Notes (the “Amended Notes”) and the Closing Date, we issuedIndenture dated May 4, 2015, as supplemented by a First Supplemental Indenture dated May 4, 2015 and further supplemented by a Second Supplemental Indenture (the “Second Supplemental Indenture”) dated March 9, 2016: (i) the Amended Notes which are no longer convertible into shares of our common stock atand are payable by us on the Maturity Date (as defined below) in cash only, (ii) the Maturity Date of the Amended Notes was extended to June 30, 2017 (the “Maturity Date”), (iii) we discontinued the payment of principal prior to the Maturity Date (subject to certain exceptions), (iv) the interest rate increased from 8% to 10% per annum and accrues on the outstanding aggregate principal amount of the Amended Notes, payable monthly, and (v) we will pay to the Investors on the Maturity Date 102% of the outstanding aggregate principal amount of the Amended Notes. We also agreed to maintain a cash balance (including cash equivalents) of not less than $2,900,000.

We also agreed to reduce the exercise price of the warrants to purchase an aggregate of 537,500 shares of our common stock pursuant to the initial agreement (the “May 2015 Warrants”) from $10.00 to $3.00 per share bear 8% interest and mature in 21 monthswe agreed to remove from the dateMay 2015 Warrants certain anti-dilution features. Other terms of issuance, unless earlier converted.the May 2015 Warrants remained the same. Furthermore, in connection with the Amended Notes, we paid a restructuring fee of $50,000 to the Investors.

On July 1, 2016, we repaid in full the Amended Notes that were due on June 30, 2017, including a 15% fee for early repayment. We used an aggregate of $2,011,000 of cash on hand for repayment of the Amended Notes. As a result of the repayment in full of the Amended Notes, all liens on our assets, including intellectual property, were released by the Investors.

Impairment of Patents

Our name change and repositioning as a holding company was deemed a triggering event, which required our patent assets to be tested for impairment. In addition,performing this impairment test, we issued 537,500 warrantsdetermined that the patent portfolios, which together represent an asset group, were subject to impairment testing. In the first step of the impairment test, we utilized our projections of future undiscounted cash flows based on our existing plans for the patents. As a result, it was determined that our projections of future undiscounted cash flows were less than the carrying value of the asset group. Accordingly, we performed the second step of the impairment test to measure the potential impairment by calculating the asset group’s fair value as of May 6, 2016. As a result, following amortization for the month of April, we recorded an impairment charge of $11,937,000, which resulted in a new carrying value of $1,526,000 on May 6, 2016. Following the impairment, we reevaluated the remaining useful life of the patent assets and concluded that there were no changes.

Stockholder Rights Plan

On March 18, 2016, we announced that our Board of Directors adopted a stockholder rights plan in the form of a Section 382 Rights Agreement designed to preserve our tax assets. As a part of the plan, our Board of Directors declared a dividend of one preferred-share-purchase right for each share of our common stock outstanding as of March 29, 2016. Effective on March 18, 2016, if any group or person acquires 4.99% or more of our outstanding shares of common stock, or if a group or person that already owns 4.99% or more of our common stock acquires additional shares representing 0.5% or more of our common stock, then, subject to certain exceptions, there would be a triggering event under the plan. The rights would then separate from our common stock and would be adjusted to become exercisable to purchase shares of our common stock which are exercisable at $10.00 per share forhaving a periodmarket value equal to twice the purchase price of five years, beginning on November 4, 2015. In connection with$9.50, resulting in significant dilution in the issuanceownership interest of the Notes andacquiring person or group. Our Board of Directors has the warrants, we received net cash proceeds of $12,425,000. We also incurred third party costs directly associated with the issuance of Notes of $218,000, which are capitalized as debt issuance costs and included in other current assets, and are amortized over the term of the Note. Our obligations under the outstanding Notes are secured by a first priority perfected security interest in substantially all of our U.S. assets. In addition, stock of our certain subsidiaries was pledged. The outstanding Notes contain customary events of default, as well as covenants which include restrictions on our assumption of new debt. As of December 31, 2015, all covenants were met and there were no events of default.

The principal amount of the outstanding Notes is being repaid monthly, and we may make such payments and related interest payments in cash or, subjectdiscretion to certain conditions, in registered sharesexempt any acquisition of our common stock at our election. If we choose to repayfrom the Notes in shares of our common stock, the shares are issued at a 15% discount, based on the then-current market price data of our common stock. We may also repay the Notes in advanceprovisions of the maturity schedule subjectplan and has the ability to early repayment penalties.terminate the plan prior to a triggering event. In connection with this plan, we filed a Certificate of Designation of Series C Junior Preferred Stock with the Secretary of State of Delaware on March 18, 2016.

During August 2015, the holders of the Notes accelerated six principal installments in exchange for common stock as permitted under the securities purchase agreement. The Notes are now expected to mature in July 2016.

During the year ended December 31, 2015, we made principal payments in the aggregate amount of $8,294,000. We elected to make a total of $595,000 of these principal payments in cash and the remaining $7,699,000 in shares of our common stock, which were issued at a 15% discount to the then current market price. As such, we issued approximately 2,070,000 shares(after giving effect to the one-for-ten reverse stock split)in lieu of principal payments for the year ended December 31, 2015, and recorded $1,373,000 extinguishment of debt expense on the consolidated statement of operations for the year ended December 31, 2015.

Reverse Stock Split

On November 27, 2015, we implementedUnless otherwise noted, the information contained in these consolidated financial statements gives effect to a one-for-ten reverse split of our issued and outstanding shares of common stock (the "Reverse Stock Split"), as authorized at a special meeting of our stockholders held on November 16, 2015. The Reverse Stock Split became effective at the opening of trading on the NASDAQ on November 27, 2015. As of November 27, 2015, every 10 shares of our issued and outstanding common stock were combined into one sharesplit of our common stock except to the extent that the Reverseeffected on November 27, 2015 (the “Reverse Stock Split resulted in any of our stockholders owning a fractional share, which was rounded up to the next highest whole share. In connection with the Reverse Stock Split, there was no change in the nominal par value per share of $0.01.

All references in this Annual Report on Form 10-K to number of shares of common stock, price per share and weighted average shares of common stock have been adjusted to reflect the Reverse Stock SplitSplit”) on a retroactive basis for all periods presented unless otherwise noted..

NASDAQ

On December 18, 2014, we received a notification letter from NASDAQ informing us that for the last 30 consecutive business days, the bid price of our securities had closed below $1.00 per share. On June 17, 2015, we received a letter from NASDAQ notifying us that we had been granted an additional 180-day period, or until December 14, 2015, to regain compliance with the minimum $1.00 bid price per share requirement for continued listing on the NASDAQ Capital Market, as set forth in NASDAQ Listing Rule 5810(c)(3)(A)(ii). On December 14, 2015, as a result of the Reverse Stock Split on November 27, 2015, we received a letter from The NASDAQ Stock Market LLC notifying us that we regained compliance with The NASDAQ Stock Market's minimum bid price continued listing requirement. The letter noted that because the closing bid price of our common stock has been at $1.00 per share or greater for the last 10 consecutive trading days, we have regained compliance with Listing Rule 5550(a)(2) and the matter is now closed. 

Competition

Each of our threefour reporting segments operates in different competitive environments.

XpresSpa

XpresSpa operates 53 locations, which includes 49 domestic locations and four international locations. Our domestic units operate within many of the largest and most heavily trafficked airports in the United States. The competitive landscape for wellness service providers in airports consists of approximately 110 spas across North America. XpresSpa’s 49 domestic units represent approximately 45% of the total North American market. The balance of the North American market is highly fragmented and is represented largely by small, privately-owned entities that operate one or two locations in a single airport. Only three other market participants operate 10 or more airport locations in the United States. The largest domestic competitor operates 18 locations in eight airports. Outside of North America, this same competitor operates 18 locations in seven international airports.

Group Mobile

Our rugged devices reselling business is regionally focused with the majority of our customers having direct relationships with local sales staff. Most competitors are private companies that have limited infrastructure. We believe that our key competitive advantages are knowledge, service and breadth of products relative to these competitors. As we grow the business, we also believe that we will be able to further improve our service and overall shopping experience.

FLI Charge

There are several competing wire-free power and charging technologies on the market or under development today. The most popular competing technology is inductive wireless charging, in which magnetic induction uses a magnetic coil to create resonance, which can transmit energy over very short distances. Power is delivered as a function of coil size, and coils must be directly paired within a typical distance of less than one inch. Products utilizing magnetic induction have been available for 10+ years and include rechargeable electronic toothbrushes and pace makers. Other competing technologies include magnetic resonance, RF harvesting, laser and ultrasound. Most competitors utilize these competing technologies and not our technology.

As compared to each of the competing wireless technologies above, we believe that our conductive technology exhibits many competitive advantages including:

Intellectual Property

After a period of intense competition from public and private companies for the acquisition of intellectual property assets, prices have dropped substantially. Due to the many patent sales and divestments over the past few years, many companies continue to seek to monetize intellectual property by licensing their patents to companies in a number of technology sectors. This has occurred in an increasingly challenging and changing legal environment for monetizing patents. Relatively new procedures at the United States Patent and Trademark Office as well as the anticipation of the Unified European Patent Court have created uncertainty as to the value of patent assets. In addition, many of these intellectual property-focused companies incurred significant up-front costs, are faced with significant operating expenses, and/or undertook large amounts of debt. Entities such as VirnetX (NYSE:VHC), Acacia Research Corporation (NASDAQ:ACTG), Interdigital, Inc. (NASDAQ:IDCC), RPX Corporation (NASDAQ:RPXC), Marathon Patent Group (NASDAQ:MARA) and others presently market themselves as being in the business of creating, acquiring, licensing or leveraging the value of intellectual property assets.

Fli Charge

There are several competing wire-free charging technologies on the market or under development today. The most popular competing technology is inductive wireless charging in which magnetic induction uses a magnetic coil to create resonance, which can transmit energy over very short distances. Power is delivered as a function of coil size, and coils must be directly paired within a typical distance of less than one inch. Products utilizing magnetic induction have been available for 10+ years in products such as rechargeable electronic toothbrushes and pace makers. Other competing technologies include magnetic resonance, RF harvesting, laser and ultrasound. Most competitors utilize these competing technologies and not our technology.

Group Mobile

Our rugged devices reselling business is regionally focused with the majority of our customers having direct relationships with local sales staff. Most competitors are private companies that have limited infrastructure. We believe that our key competitive advantages are knowledge, service and breadth of product relative to these competitors. As we restructure the business, we also believe that we will be able to further improve our service and overall shopping experience.

Employees

As of March 10, 2016,15, 2017, we have 24and our subsidiaries had 673 full-time and 390 part-time employees. We do not haveXpresSpa had 58 full-time employees thatin San Francisco International Airport, who are represented by a labor union orand are covered by a collective bargaining agreement. XpresSpa had 25 full-time employees in Los Angeles International Airport, who are represented by a labor union and, starting in March 2017, will be covered by a collective bargaining agreement. We consider our relationships with our employees to be good.

Our Company

We were incorporated in Delaware as a corporation on January 9, 2006 and completed an initial public offering in June 2010. On May 6, 2016, we changed our name to FORM Holdings Corp. from Vringo Inc. and concurrently announced our repositioning as a holding company of small and middle market growth companies. Our common stock, par value $0.01 per share, which was previously listed on The NASDAQ Capital Market under the trading symbol “VRNG,” has been listed under the trading symbol “FH” since May 9, 2016. Our principal executive offices are located at 780 Third Avenue, 12^th Floor, New York, New York 10017. Our telephone number is (212) 309-7549 and our website address iswww.vringoinc.comwww.formholdings.com. ReferenceWe also operate the following websites:www.xpresspa.com,www.groupmobile.com andwww.flicharge.com. References in this Annual Report on Form 10-K to thisthese website address doesaddresses do not constitute incorporation by reference of the information contained on the website. We make our filings with the Securities and Exchange Commission, or the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, and amendments to the foregoing reports, available free of charge on or through our website as soon as reasonably practicable after we file these reports with, or furnish such reports to, the SEC. In addition, we post the following information on our website:

The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC athttp://www.sec.gov.

ITEM 1A. RISK FACTORS

Our business, financial condition, results of operations and the trading price of our common stock could be materially adversely affected by any of the following risks as well as the other risks highlighted elsewhere in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may materially affect our business, financial condition and results of operations.

Risks Related to our Financial Condition and Capital Requirements

We may not be able to raise additional capital. Moreover, additional financing may have an adverse effect on the value of the equity instruments held by our stockholders.

We may choose to raise additional funds in connection with any potential acquisition of patent portfoliosoperating businesses or other intellectual property assets or operating businesses.assets. In addition, we may also need additional funds to respond to business opportunities and challenges, including our ongoing operating expenses, protection of our assets, development of new lines of business and enhancement of our operating infrastructure. While we may need to seek additional funding, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our business plans. Any such financing that we undertake will likely be dilutive to our current stockholders.

Global economic conditions may cause counterparties to our negotiations to delay entering into licensing agreements, product purchase agreements or other business arrangements, which could adversely affect our business, financial condition and operating results.

Our business plan depends significantly on worldwide economic conditions, and the United States and world economies have recently experienced fluctuating economic conditions. Uncertainty about global economic conditions poses a risk as businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset values. This response could have a material negative effect on the willingness of parties to enter into revenue generating agreements in a timely manner. Entering into such agreements is critical to our business plan, and our failure to do so could cause material harm to our business, financial condition and results of operations.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2016, we had federal net operating loss carryforwards (“NOL”s) of $138,915,000 which expire 20 years from the respective tax years to which they relate. Our ability to utilize our NOLs may be limited under Section 382 of the Internal Revenue Code. The indebtednesslimitations apply if an ownership change, as defined by Section 382, occurs. Generally, an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). Additionally, United States tax laws limit the time during which these carryforwards may be utilized against future taxes. As a result, we may not be able to take full advantage of these carryforwards for federal and state tax purposes. Future changes in stock ownership may also trigger an ownership change and, consequently, a Section 382 limitation.

Risks Related to our Merger with XpresSpa (the “Merger”)

We may not realize the potential value and benefits created by the saleMerger.

The success of the NotesMerger will depend, in part, on our ability to realize the expected potential value and benefits created from integrating our existing businesses with XpresSpa’s business, which includes the maximization of the economic benefits of our strategic vision and plans, cash balances (which, in the case of XpresSpa, would be used for the build-out of new airport locations), financial reporting and analysis functions and legal expertise. The integration process may be complex, costly, and time-consuming. The difficulties of integrating the operations of XpresSpa’s business could include, among others:

We may not accomplish the integration of XpresSpa’s business smoothly, successfully, or within the anticipated costs or time frame. The diversion of the attention of management from our current operations to the integration effort and any future indebtedness we incur exposesdifficulties encountered in combining businesses could prevent us from realizing the full expected potential value and benefits to risks thatresult from the Merger and could adversely affect our business, financial conditionbusiness. In addition, the integration efforts could divert our and results of operations.

XpresSpa’s focus and resources from other strategic opportunities and operational matters during the integration process. We incurred an aggregate principal amount of $12,500,000 of senior secured indebtedness represented by the Notes in May 2015, of which $1,749,000 remains outstanding as of March 10, 2016. Our indebtednessare dependent on certain key personnel, and the covenants associated with our indebtedness could have significant negative consequences for our business, financial condition and resultsloss of operations, including:

We cannot provide assurance that we will continue to maintain sufficient cash reserves or that our business will generate cash flow from operations at levels sufficient to permit us to pay principal, premium, if any, and interest on our indebtedness, or that our cash needs will not increase. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various requirements of our existing indebtedness, the Notes or any indebtedness which we may incur in the future, we would be in default, which would permit the holders of the Notes and such other indebtedness to accelerate the maturity of the Notes and such other indebtedness and could cause defaults under the Notes and such other indebtedness. Any default under the Notes or such other indebtednessthese key personnel could have a material adverse effect on our business, financial condition and results of operations. Our success and future prospects largely depend on the skills, experience and efforts of our and XpresSpa’s key personnel, including Andrew D. Perlman, our current Chief Executive Officer and Director, and Edward Jankowski, XpresSpa’s Chief Executive Officer. The loss of Mr. Perlman or Mr. Jankowski or other of our or XpresSpa’s executives, or our failure to retain other key personnel, would jeopardize our ability to execute our strategic plan and materially harm our business.

Our success will depend in part on relationships with third parties, which relationships may be affected by third-party preferences or public attitudes about the Merger. Any adverse changes in these relationships could adversely affect our business, financial condition, or results of operations.

Our success is dependent on our ability to maintain and renew our and XpresSpa’s business relationships and to establish new business relationships. There can be no assurance that our management will be able to maintain such business relationships, or enter into or maintain new business contracts and other business relationships, on acceptable terms, if at all. The failure to maintain important business relationships could have a material adverse effect on our business, financial condition, or results of operations.

Our business and financial condition could be constrained by XpresSpa’s outstanding debt.

XpresSpa is obligated under the Senior Secured Note payable to Rockmore Investment Master Fund Ltd. (“Rockmore”), a related party, which has an outstanding balance of approximately $6,500,000, with a maturity date of May 1, 2018, with an additional one-year extension if both we and Rockmore consent to such extension. The Senior Secured Note accrues interest of 11.24% per annum. XpresSpa has granted Rockmore a security interest in all of its tangible and intangible personal property to secure its obligations under the Senior Secured Note. After the completion of the Merger the debt remains outstanding as an obligation of XpresSpa, but is guaranteed by us.

Material weaknesses may exist when we report on the effectiveness of our internal controls over financial reporting for purposes of our reporting requirements.

Prior to the Merger, XpresSpa, as a private company, was not subject to Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). Therefore, XpresSpa’s management and independent auditors were not required to perform an evaluation of XpresSpa’s internal controls over financial reporting as of December 31, 2015 in accordance with the provisions of Sarbanes-Oxley. We are required to provide management’s report on internal control over financial reporting in our Annual Report on Form 10-K, as required by Section 404 of Sarbanes-Oxley. We have not yet assessed the effectiveness of the internal controls for XpresSpa; however, we are not currently aware of any negative indicators.

Because the lack of a public market for XpresSpa’s units makes it difficult to evaluate the fairness of the Merger, XpresSpa’s equity holders may have received or receive consideration in the Merger that is greater than or less than the fair market value of XpresSpa’s units.

The outstanding equity of XpresSpa is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of XpresSpa. Since the amount of our common stock, preferred stock and warrants to be issued to XpresSpa’s equity holders was determined based on negotiations between the parties, it is possible that the value of our common stock, preferred stock and warrants issued or to be issued in connection with the Merger will be greater than the fair market value of XpresSpa. Alternatively, it is possible that the value of the shares of our common stock, preferred stock and warrants issued or to be issued in connection with the Merger will be less than the fair market value of XpresSpa.

The issuance of our securities to XpresSpa equity holders in connection with the Merger diluted the voting power of our current stockholders.

Pursuant to the terms of the Merger Agreement, we issued to XpresSpa unit holders shares of our common stock and warrants to purchase shares of our common stock, and have issued shares of our preferred stock thereto. Without taking into account any shares of our common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa, the former equity holders of XpresSpa own approximately 18% of our outstanding common stock (or 33% of our outstanding common stock calculated on a fully diluted basis) and our stockholders prior to the Merger own approximately 82% of our outstanding common stock (or 67% of our outstanding common stock calculated on a fully diluted basis). In addition, the holders of our preferred stock have certain voting rights as specified in the Certificate of Designation of Preferences, Rights and Limitations of FORM Preferred Stock. Accordingly, the issuance of shares of our common stock and our preferred stock to XpresSpa equity holders in connection with the Merger reduced the relative voting power of each share of our common stock held by our current stockholders.

If we exercise the option to repay the preferred stock issued in connection with the Merger in stock rather than cash, such repayment may result in the issuance of a large number of shares of common stock which may have a negative effect on the trading price of our common stock as well as a dilutive effect.

Pursuant to the terms of the FORM Preferred Stock issued in connection with the Merger, on the seven-year anniversary of the initial issuance date of the shares of FORM Preferred Stock, December 23, 2024, we may repay each share of FORM Preferred Stock, at our option, in cash, by delivery of shares of common stock or through any combination thereof. If we elect to make a payment, or any portion thereof, in shares of common stock, the number of shares deliverable (the “Base Shares”) will be based on the volume weighted average price per share of our common stock for the thirty trading days prior to the date of calculation (the “Base Price”) plus an additional number of shares of common stock (the “Premium Shares”), calculated as follows: (i) if the Base Price is greater than $9.00, no Premium Shares shall be issued, (ii) if the Base Price is greater than $7.00 and equal to or less than $9.00, an additional number of shares equal to 5% of the Base Shares shall be issued, (iii) if the Base Price is greater than $6.00 and equal to or less than $7.00, an additional number of shares equal to 10% of the Base Shares shall be issued, (iv) if the Base Price is greater than $5.00 and equal to or less than $6.00, an additional number of shares equal to 20% of the Base Shares shall be issued and (v) if the Base Price is less than or equal to $5.00, an additional number of shares equal to 25% of the Base Shares shall be issued. Accordingly, if the volume weighted average price per share of our common stock is below $9.00 per share as of the time of repayment and we exercise the option to make such repayment in shares of our common stock, a large number of shares of our common stock may be issued to the holders of the FORM Preferred Stock upon maturity which may have a negative effect on the trading price of our common stock. At the seven year maturity date of the FORM Preferred Stock (which shall be the date that is seven years from the closing date of the Merger), we, at our election, may decide to issue shares of our common stock based on the formula set forth above or to re-pay in cash all or any portion of the FORM Preferred Stock.

On December 23, 2023, upon the maturity of the FORM Preferred Stock, when determining whether to repay the FORM Preferred Stock in cash or shares of common stock, we expect to consider a number of factors, including our cash position, the price of our common stock and our capital structure at such time. Because we do not have to make a determination as to which option to elect until 2023, it is impossible to predict whether it is more or less likely to repay in cash, stock or a portion of each.

The price of our common stock after the Merger may be affected by factors different from those which affected our shares prior to the Merger.

Our business differs from the business of XpresSpa and, accordingly, our results of operations and the trading price of our common stock following the completion of the Merger may be significantly affected by factors different from those that affected our independent results of operations, as we now conduct activities not undertaken by us prior to the Merger.

If any of the events described in ‘‘Risks Related to our Merger with XpresSpa or ‘‘Risks Related to our Business Operations’’ regarding XpresSpa occur, those events could cause the potential benefits of the Merger not to be realized.

Following the completion of the Merger, our current executive officers and certain XpresSpa executive officers and our directors and certain XpresSpa directors direct our business and operations. Additionally, XpresSpa’s business is expected to be an important part of our business following the Merger. As a result, the risks described below in the sections entitled ‘‘Risks Related to our Merger with XpresSpa” or “Risks Related to our Business Operations” regarding XpresSpa herein are among our significant risks. To the extent any of the events described below in either section occur, those events could cause the potential benefits of the Merger not to be realized and the market price of our common stock to decline.

Risks Related to our Business Operations

Future acquisitions or business opportunities could involve unknown risks that could harm our business and adversely affect our financial condition and results of operations.

We strive to be a diversified holding company that owns interests in a number of different businesses. We have in the past, and may in the future, acquire businesses or make investments, directly or indirectly through our subsidiaries, that involve unknown risks, some of which will be particular to the industry in which the investment or acquisition targets operate, including risks in industries with which we are not familiar or experienced. Although we intend to conduct appropriate business, financial and legal due diligence in connection with the evaluation of future investment or acquisition opportunities, there can be no assurance that our due diligence investigations will identify every matter that could have a material adverse effect on us. We may be unable to adequately address the financial, legal and operational risks raised by such investments or acquisitions, especially if we are unfamiliar with the relevant industry. The realization of any unknown risks could expose us to unanticipated costs and liabilities and prevent or limit us from realizing the projected benefits of the investments or acquisitions, which could adversely affect our financial condition, liquidity, results of operations, and trading price.

We may be unsuccessful in identifying suitable acquisition candidates, which may negatively impact our growth strategy.

There can be no assurance given that we will be able to implement our strategy and identify suitable acquisition candidates or consummate future acquisitions on acceptable terms. Our failure to successfully identify suitable acquisition candidates or consummate future acquisitions on acceptable terms could have an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price.

Anti-takeover provisions of Delaware law, provisions in our charter and bylaws and our stockholder rights plan could prevent or frustrate attempts by stockholders to change our board of directors or current management and could make a third-party acquisition of control of us difficult.

We are a Delaware corporation and, as such, certain provisions of Delaware law could prevent or frustrate attempts by stockholders to change the board of directors or current management, or could delay, discourage or make more difficult a third-party acquisition of control of us, even if the change in control would be beneficial to stockholders or the stockholders regard it as such. We are subject to the provisions of Section 203 of the DGCL, which prohibits certain “business combination” transactions (as defined in Section 203) with an “interested stockholder” (defined in Section 203 as a 15% or greater stockholder) for a period of three years after a stockholder becomes an “interested stockholder,” unless the attaining of “interested stockholder” status or the transaction is pre-approved by our Board of Directors, the transaction results in the attainment of at least an 85% ownership level by an acquirer or the transaction is later approved by our Board of Directors and by our stockholders by at least a 66 2/3 percent vote of our stockholders other than the “interested stockholder,” each as specifically provided in Section 203. We have also adopted a shareholder rights plan in the form of the Rights Agreement, designed to help protect and preserve our substantial tax attributes primarily associated with our NOLs and research tax credits under Sections 382 and 383 of the Internal Revenue Code and related United States Treasury regulations. Although this is not the purpose of the Rights Agreement, it could have the effect of making it uneconomical for a third party to acquire us on a hostile basis.

These provisions of the DGCL, our certificate of incorporation and bylaws, and the Rights Agreement may delay, discourage or make more difficult certain types of transactions in which our stockholders might otherwise receive a premium for their shares over the current market price, and might limit the ability of our stockholders to approve transactions that they think may be in their best interest.

Our confidential information may be disclosed by other parties.

We routinely enter into non-disclosure agreements with other parties, including but not limited to vendors, law firms, parties with whom we are engaged in negotiations, and employees. However, there exists a risk that those other parties will not honor their contractual obligations to not disclose our confidential information. This may include parties who breach such obligations in the context of confidential settlement offers and/or negotiations. In addition, there exists a risk that, upon such breach and subsequent dissemination of our confidential information, third parties and potential licensees may seek to use such confidential information to their advantage and/or to our disadvantage including in legal proceedings in which we are involved. Our ability to act against such third parties may be limited, as we may not be in privity of contract with such third parties.

We and our subsidiaries have been, are, and may become involved in litigation that could divert management’s attention and harm our businesses.

Litigation often is expensive and diverts management’s attention and resources, which could adversely affect our businesses. We may be exposed to claims against us even if no wrongdoing has occurred. Responding to such claims, regardless of their merit, can be time-consuming, costly to defend, disruptive to our management’s attention and to our resources, damaging to our reputation and brand, and may cause us to incur significant expenses. Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations.

XpresSpa is reliant on international and domestic airplane travel, and the time that airline passengers spend in United States airports post-security. A decrease in airline travel, a decrease in the desire of customers to buy spa services and products, or decreased time spent in airports would negatively impact XpresSpa’s revenues.

XpresSpa depends upon a large number of airplane travelers with the psychographic propensity for health and wellness, and in particular spa treatments and products, spending significant time post-Transportation Security Administration (“TSA”) security clearance check points.

If the number of airline travelers in the United States decreases, if the time that these travelers spend post-TSA security decreases, and/or if travelers ability or willingness to pay for XpresSpa’s products and services diminishes, this could have an adverse effect on XpresSpa’s growth, business activities, cash flow, financial condition and results of operations. Some reasons for these events could include:

XpresSpa’s operating results may fluctuate significantly due to certain factors, some of which are beyond its control.

XpresSpa’s operating results may fluctuate from period to period significantly because of several factors, including:

XpresSpa’s operating results may fluctuate significantly as a result of the factors discussed above. Accordingly, results for any period are not necessarily indicative of results to be expected for any other period or for any year.

XpresSpa’s expansion into new airports may present increased risks due to its unfamiliarity with those areas.

XpresSpa’s growth strategy depends upon expanding into markets where it has little or no meaningful operating experience. Those locations may have demographic characteristics, consumer tastes and discretionary spending patterns that are different from those in the markets where its existing operations are located. As a result, new airport terminal operations may be less successful than its concession locations in its current airport terminals. XpresSpa may find it more difficult in new markets to hire, motivate and keep qualified employees who can project its vision, passion and culture. XpresSpa may also be unfamiliar with local laws, regulations and administrative procedures, including the procurement of spa services retail licenses, in new markets which could delay the build-out of new concession locations and prevent it from achieving its target revenues on a timely basis. Operations in new markets may also have lower average revenues or enplanements than in the markets where XpresSpa currently operates. Operations in new markets may also take longer to ramp up and reach expected sales and profit levels, and may never do so, thereby negatively affecting XpresSpa’s results of operations.

XpresSpa currently relies on a skilled, licensed labor force to provide spa services, and the supply of this labor force is finite. If XpresSpa cannot hire adequate staff for its locations, it will not be able to operate.

XpresSpa has approximately 720 employees in its locations. Excluding some dedicated retail staff, the majority of these employees are licensed to perform spa services, and hold such licenses as masseuses, nail technicians, aestheticians, barbers and master barbers. The demand for these licensed technicians has been increasing as more consumers gravitate to health and wellness treatments such as spa services. XpresSpa competes not only with other airport-based spa companies but with spa companies outside of the airport for this skilled labor force. In addition, all staff hired by XpresSpa must pass the background checks and security clearances necessary to work in airport locations. If XpresSpa is unable to attract and retain qualified staff to work in its airport locations, its ability to operate will be impacted negatively.

XpresSpa’s labor force could unionize, putting upward pressure on labor costs.

Currently, two XpresSpa locations have a labor force which is unionized. Major players in labor organization, and in particular “Unite Here!” which represents 33,000 employees in the airport concessions and airline catering industries, could target XpresSpa locations for its unionization efforts. In the event of the successful unionization of all of XpresSpa’s labor force, XpresSpa would likely incur additional costs in the form of higher wages, more benefits such as vacation and sick leave, and potentially also higher health care insurance costs.

XpresSpa competes for new locations in airports, and may not be able to secure new locations.

XpresSpa participates in the highly competitive and lucrative airport concessions industry, and as a result competes for retail leases with a variety of larger, better capitalized concessions companies as well as smaller, mid-tier and single unit operators. Frequently, an airport includes a spa concept within its retail product set and, in those instances, XpresSpa competes primarily with BeRelax, Terminal Getaway, Massage Bar and 10 Minute Manicure.

XpresSpa’s leases may be terminated, either for convenience by the landlord or as a result of an XpresSpa default.

XpresSpa has store locations and kiosks in a number of airports in which the landlord, with prior written notice to XpresSpa, can terminate XpresSpa’s lease, including for convenience or as necessary for airport purposes or operations. If a landlord elects to terminate a lease at an airport, XpresSpa may have to shut down one or more store locations at that airport.

Additionally, XpresSpa leases have numerous provisions governing the operation of XpresSpa’s stores. Violation of one or more of these provisions, even unintentionally, may result in the landlord finding that XpresSpa is in default of the lease. Violation of lease provisions may result in fines and, in some cases, termination of a lease.

XpresSpa’s ability to operate depends on the traffic patterns of the terminals in which it operates, and the cessation or disruption of air traveler traffic in these terminals would negatively impact XpresSpa’s addressable market.

XpresSpa depends on a high volume of air travelers in its terminals. It is possible that a terminal in which XpresSpa operates could become subject to a lower volume of air travelers, which would significantly impact traffic near and around XpresSpa locations and therefore its total addressable market. Lower volume in a terminal could be caused by:

Failure to comply with minimum airport concession disadvantaged business enterprise participation goals and requirements could lead to lost business opportunities or the loss of existing business.

A number of XpresSpa’s leases contain minimum Airport Concession Disadvantaged Business Enterprise (“ACDBE”) participation requirements, and bidding on or submitting proposals for new concession contracts often requires that XpresSpa meets or uses good faith efforts to meet certain minimum ACDBE participation requirements. If XpresSpa fails to comply with the minimum ACDBE participation requirements, XpresSpa may be held responsible for a breach of contract, which could result in the termination of a lease and impairment of XpresSpa’s ability to bid on or obtain future concession contracts. To the extent that XpresSpa leases are terminated and XpresSpa is required to shut down one or more store locations, there could be a material adverse impact to its business and results of operations.

Continued minimum wage increases would negatively impact XpresSpa’s cost of labor.

XpresSpa compensates its licensed technicians via a formula that includes commissions. As a result, an increase in the minimum wage would increase XpresSpa’s cost of labor.

If XpresSpa is unable to protect its customers’ credit card data and other personal information, XpresSpa could be exposed to data loss, litigation and liability, and its reputation could be significantly harmed.

Privacy protection is increasingly demanding, and the use of electronic payment methods and collection of other personal information, including order history, travel history and other preferences, exposes XpresSpa to increased risk of privacy and/or security breaches as well as other risks. The majority of XpresSpa’s sales are by credit or debit cards. Additionally, XpresSpa collects and stores personal information from individuals, including its customers and employees.

XpresSpa may experience security breaches in which credit and debit card information or other personal information is stolen in the future. Although XpresSpa uses secure private networks to transmit confidential information, third parties may have the technology or know-how to breach the security of the customer information transmitted in connection with credit and debit card sales, and its security measures and those of technology vendors may not effectively prohibit others from obtaining improper access to this information. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect for long periods of time, which may cause a breach to go undetected for an extensive period of time. Advances in computer and software capabilities, new tools, and other developments may increase the risk of such a breach. Further, the systems currently used for transmission and approval of electronic payment transactions, and the technology utilized in electronic payments themselves, all of which can put electronic payment at risk, are determined and controlled by the payment card industry, not by XpresSpa. In addition, contractors, or third parties with whom XpresSpa does business or to whom XpresSpa outsources business operations may attempt to circumvent its security measures in order to misappropriate such information, and may purposefully or inadvertently cause a breach involving such information. If a person is able to circumvent XpresSpa’s security measures or those of third parties, he or she could destroy or steal valuable information or disrupt XpresSpa’s operations. XpresSpa may become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and XpresSpa may also be subject to lawsuits or other proceedings relating to these types of incidents. Any such claim or proceeding could cause XpresSpa to incur significant unplanned expenses, which could have an adverse effect on its business or results of operations. Further, adverse publicity resulting from these allegations could significantly harm its reputation and may have a material adverse effect on it. Although XpresSpa carries cyber liability insurance to protect against these risks, there can be no assurance that such insurance will provide adequate levels of coverage against all potential claims.

Negative social media regarding XpresSpa could result in decreased revenues and impact XpresSpa’s ability to recruit workers.

XpresSpa’s affinity among consumers is highly dependent on their positive feelings about the brand, its customer service and the range and quality of services and products that it offers. A negative customer experience that is posted to social media outlets and is distributed virally could tarnish XpresSpa’s brand and its customers may opt to no longer engage with the brand.

XpresSpa employs people in multiple different jurisdictions, and the employment laws of those jurisdictions are subject to change. In addition, its services are regulated through government-issued operating licenses. Noncompliance with applicable laws could result in employee lawsuits or legal action taken by government authorities.

XpresSpa must comply with a variety of employment and business practices laws across the United States, Netherlands, and United Arab Emirates. XpresSpa monitors the laws governing its activities, but in the event it does not become aware of a new regulation or fails to comply with a regulation, it could be subject to disciplinary action by governing bodies and potentially employee lawsuits.

XpresSpa is not currently cash flow positive, and will depend on funding from us to open new locations. In the event that capital is unavailable from us, XpresSpa will not be able to open new locations.

Throughout its operating history, XpresSpa has not generated sufficient cash from operations to fund its new store development. As a result, it will be dependent upon us to fund its new location growth until such time as it can produce enough cash to profitably fund its own location growth.

XpresSpa sources, develops and sells products that may result in product liability defense costs and product liability payments.

The ingredients in XpresSpa’s products contain ingredients that are deemed to be safe by the United States Federal Drug Administration and the Federal Food, Drug and Cosmetics Act. However, there is no guarantee that these ingredients will not cause adverse health effects to some consumers given the wide range of ingredients and allergies amongst the general population. XpresSpa may face substantial product liability exposure for products it sells to the general public or that is uses in its services. Product liability claims, regardless of their merits, could be costly and divert management’s attention, and adversely affect XpresSpa’s reputation and the demand for its products and services. XpresSpa to date has not been named as a defendant in any product liability action.

The mobile and/or rugged computing industry is characterized by rapid technological change, and the success of Group Mobile depends upon the frequent enhancement of existing products and services and timely introduction of new products and services that meet Group Mobile’s customers’ needs.

Customer requirements for mobile computing products and services are rapidly evolving and technological changes in the industry occur rapidly. To keep up with new customer requirements and distinguish Group Mobile from its competitors in the business of reselling rugged devices, Group Mobile must frequently introduce new products and services and enhancements of existing products and services. Enhancing existing products and services and developing new products and services is a complex and uncertain process. Furthermore, Group Mobile may not be able to launch new or improved products or services before its competition launches comparable products or services. Any of these factors could cause Group Mobile’s business or results of operations to suffer.

Group Mobile depends on a small number of OEMs to supply the products and services that it sells and the loss of, or a material change in, a business relationship with a major OEM supplier, could adversely affect our operations, cash flow, and financial position.

Group Mobile’s future success is highly dependent on its relationships with a small number of OEM suppliers. Group Mobile’s primary suppliers include Synnex Corporation, Ingram Micro Inc., Xplore Technologies Corporation, and Motion Computing, which combined represent approximately 81% of Group Mobile’s inventory purchases. OEM supplier agreements typically are short-term and may be terminated without cause upon short notice. The loss or deterioration of our relationship with any of our major OEM suppliers, the authorization by OEM suppliers of additional distributors, the sale of products by OEM suppliers directly to our reseller and retail customers and end-users, or our failure to establish relationships with new OEM suppliers or to expand the distribution and supply chain services that we provide OEM suppliers could adversely affect our operations, cash flows, and financial position. In addition, OEM suppliers may face liquidity or solvency issues that in turn could negatively affect our operations, cash flows, and financial position.

Group Mobile’s and FLI Charge’s businesses depend upon their ability to keep pace with the latest technological changes and their failure to do so could make Group Mobile and FLI Charge less competitive in their respective industries.

The market for Group Mobile’s and FLI Charge’s products and services is characterized by rapid change and technological change, frequent new product innovations, changes in customer requirements and expectations and evolving industry standards. Products using new technologies or emerging industry standards could make Group Mobile’s and FLI Charge’s products and services less attractive. Furthermore, Group Mobile’s and FLI Charge’s competitors may have access to technology not available to Group Mobile and FLI Charge, which may enable them to produce products of greater interest to consumers or at a more competitive cost. Failure to respond in a timely and cost-effective way to these technological developments may result in serious harm to Group Mobile’s and FLI Charge’s businesses and operating results. As a result, Group Mobile’s and FLI Charge’s success will depend, in part, on their ability to develop and market product and service offerings that respond in a timely manner to the technological advances available to Group Mobile’s and FLI Charge’s customers, evolving industry standards and changing preferences.

If FLI Charge successfully commercially launches a product, and its product does not achieve widespread market acceptance, it will not be able to generate the revenue necessary to support its business.

Achieving acceptance of a wire-free recharging system as a preferred method to recharge fixed and mobile electronic devices will be crucial to FLI Charge’s continued success. Consumers and commercial customers will not begin to use or increase the use of FLI Charge’s product unless they agree that the convenience of its solution would be worth the additional expense of purchasing the FLI Charge system. FLI Charge has no history of marketing any product and it and its commercialization partners may fail to generate significant interest in the initial commercial products or any other product it or its partners may develop. These and other factors, including the following factors, may affect the rate and level of the market acceptance:

If FLI Charge is unable to achieve or maintain market acceptance, its business would be significantly harmed.

The consumer electronics and mobile computing industries are subject to intense competition and rapid technological change, which may result in products or new solutions that are superior to FLI Charge’s technology under development or other future products it may bring to market from time to time. If FLI Charge is unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, its products may become less useful or obsolete and its operating results will suffer.

The consumer electronics and mobile computing industries in general and the power, recharging and alternative recharging segments of that industry in particular are subject to intense and increasing competition and rapidly evolving technologies. Because FLI Charge’s products are expected to have long development cycles, it must anticipate changes in the marketplace and the direction of technological innovation and customer demands. To compete successfully, it will need to demonstrate the advantages of its products and technologies over well-established alternative solutions, products and technologies, as well as newer methods of power delivery and convince consumers and enterprises of the advantages of its products

and technologies.

FLI Charge intends to pursue licensing of its wire-free charging technology as a means of commercialization but it may not be able to secure advantageous license agreements.

FLI Charge is pursuing the licensing of its wire-free technology as a means of commercialization. There can be no assurance that it will be able to achieve partnerships and reach licensing arrangements. Furthermore, the timing and volume of revenue earned from license agreements will be outside of FLI Charge’s control.

Group Mobile and FLI Charge could become subject to product liability claims, product recalls, warranty claims, and other potential liability risks that could be expensive, divert management’s attention and harm their businesses.

The nature of Group Mobile’s and FLI Charge’s businesses exposes them to potential liability risks that are inherent in the marketing and sale of products used by consumers. Group Mobile or FLI Charge may be held liable if their technology under development now or in the future causes injury or death or is found otherwise unsuitable during usage. Group Mobile’s and FLI Charge’s technology incorporates sophisticated components and computer software. Complex software can contain errors, particularly when first introduced. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after installation. In addition, if a product sold by Group Mobile or FLI Charge is defective, whether due to design or manufacturing defects, improper use of the product or other reasons, they or their strategic partners may be required to notify regulatory authorities and/or to recall the product. A required notification to a regulatory authority or recall could result in an investigation by regulatory authorities of their products, which could in turn result in required recalls, restrictions on the sale of the products or other penalties. The adverse publicity resulting from any of these actions could adversely affect the perception of their customers and potential customers. These investigations or recalls, especially if accompanied by unfavorable publicity, could result in substantial costs, loss of revenue and damage to their reputation, each of which would harm their businesses.

We have commenced legal proceedings againstand/or licensing discussions with security, content distribution andand/or telecommunications companies. We expect such proceedings to be time-consuming, which may adversely affect our ability to operate our business.

To license or otherwise monetize the patent assets that we own, we commenced legal proceedings against a number of large, multi-national companies, pursuant to which we allege that such companies infringe one or more of our patents. There is a risk that we may be unable to achieve the results we desire from such litigation, which may harm our business. In addition, the defendants in these litigations have substantially more resources than we do, which could make our litigation efforts more difficult.

We anticipate that legal proceedings may continue for several years. While we have endeavored, where possible, to engage counsel on a full or partial contingency basis, proceedings may commence that fall outside of our contingency arrangements with counsel and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, we may be forced to litigate against other parties in addition to the originally named defendants. Our adversaries may allege defenses and/or file counterclaims for, among other things, revocation of our patents or file collateral litigations or initiate investigations in the United States, Europe, India, and China or elsewhere in an effort to avoid or limit liability and damages for patent infringement. If such actions are successful, they may preclude our ability to derive licensing revenue from the patents currently being asserted.

We have commenced licensing discussions with security, content distribution and telecommunications companies and we expect that theselicensing discussions may be time consuming and may either, absent any litigation we initiate, fail to lead to a license, or may result in litigations commenced by the potential licensee.

To license or otherwise monetize the patent assets that we own, we have commenced legal proceedings and/or attempted to commence licensing discussions with a number of large, multi-national companies, during the course of which we allege that such companies infringe one or more of our patents. The future viability of our licensing program is highly dependent on the outcome of these discussions, and there is a risk that we may be unable to achieve the results we desire from such negotiations and be forced either to accept minimal royalties or commence litigations against the alleged infringer. In addition, the recipients of our licensing overtures have substantially more resources than we do, which could make our licensing efforts more difficult. Furthermore, due to changes in the approach to patent laws around the world it has become much easier for potential licensees to commence legal actionsproceedings to revoke or otherwise nullify our patents in lieu of engaging in bona fide licensing discussions. There is a real risk that any potential licensee we approach would rather commence legal actionproceedings to revoke our patents than engage in any licensing discussions whatsoever.

Should we determine the need to commenceWe anticipate that any legal proceedings could continue for several years. While we endeavor, where possible, to engage counsel on a full or partial contingency basis, proceedings may commence that fall outside of contingency arrangements with counsel and may require significant expenditures for legal fees and other expenses. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, we may be forced to litigate against other parties in addition to the originally named defendants. Our adversaries may allege defenses and/or file counterclaims for, among other things, revocation of our patents or file collateral litigations in an effort to avoid or limit liability and damages for patent infringement. If such actions by our adversaries are successful, they may preclude our ability to derive licensing revenue from the patents being asserted.

There is a potential licensee,risk that we anticipate facingmay be unable to achieve the risks notedresults we desire from such litigation, which may harm our business. In addition, the defendants in the risk factor immediately preceding this one.these litigations have substantially more resources than we do, which could make our litigation efforts more difficult.

There is a risk that a court will find our patents invalid, not infringed or unenforceable and/or that the USPTO or other relevant patent offices in various countries will either invalidate the patents or materially narrow the scope of their claims during the course of a reexamination, opposition or other such proceeding. In addition, even with a positive trial court verdict, the patents may be invalidated, found not infringed or rendered unenforceable on appeal. This risk may occur either presently or from time to time in connection with future litigations we may bring. If this were to occur, it would have a materially adverse effect on the viability of our company and our operations.

Patent litigation is inherently risky and the outcome is uncertain. Some of the parties that we believe infringe on our patents are large and well-financed companies with substantially greater resources than ours. We believe that these parties wouldmay devote a substantial amount of resources in an attempt to avoid or limit a finding that they are liable for infringing on our patents or, in the event liability is found, to avoid or limit the amount of associated damages. In addition, there is a risk that these parties may file reexaminations or other proceedings with the USPTO or other government agencies in the United States or abroad in an attempt to invalidate, narrow the scope or render unenforceable the patents we own.

In addition, as part of our ongoing legal proceedings, the validity and/or enforceability of our patents-in-suit is often challenged in a court or an administrative proceeding. Various adjudicatory bodies have previously found our patents invalid in China, France, Germany, the Netherlands, Spain, and the United States, and invalidity actions remain pending in China, Germany, the Netherlands, and before the European Patent Office.

We may not be able to successfully monetize theour patents we acquired from Nokia, nor any of the other patent acquisitions,and, thus, we may fail to realize all of the anticipated benefits of such acquisition.acquisitions from third parties.

There is no assurance that we will be able to successfully monetize the patent portfolioportfolios that we acquired from Nokia, nor any other patent acquisitions.third parties. The patents we acquired from Nokia could fail to produce anticipated benefits, or could have other adverse effects that we currently do not foresee. Failure to successfully monetize these patent assets may have a material adverse effect on our business, financial condition and results of operations.

In addition, the acquisition of a patent portfolio is subject to a number of risks, including, but not limited to the following:

Therefore, there is no assurance that we will be able to monetize an acquired patent portfolio and recoup our investment.

New legislation, regulations or court rulings related to enforcing patents could harm our business and operating results.

Intellectual property is the subject of intense scrutiny by the courts, legislatures and executive branches of governments around the world. Various patent offices, governments or intergovernmental bodies (like the European Commission) may implement new legislation, regulations or rulings that impact the patent enforcement process or the rights of patent holders and such changes could negatively affect our business model.licensing efforts and/or litigations. For example, limitations on the ability to bring patent enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in the cost to resolve patent disputes and other similar developments could negatively affect our ability to assert our patent or other intellectual property rights.

It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the proposals will become enacted as laws. Compliance with any new or existing laws or regulations could be difficult and expensive, affect the manner in which we conduct our business and negatively impact our business, prospects, financial condition and results of operations. That said, to date, we do not believe that any existing or proposed statutory or regulatory change has materially affected our business.

Further, the leadership changes in the European Commission (“EC”), the body - which among other functions – administers European Union (“EU”) competition or anti-trust law, make it challenging to predict whether and how the EC will shift its focus from its prior stances regarding the enforcement of intellectual property rights and the relationship between such rights and European competition law.

Moreover, in August of 2015 the European Court of Justice (the “ECJ”), the highest court in the EU in matters of European law, issued its opinion and judgment in Huawei Technologies v. Co. Ltd. V. ZTE Corp., ZTE Deutschland GmbH, ECLI:EU:C:2015:477. The ECJ opinion provided a number of guidelines regarding the enforcement of standard-essential patents (“SEPs”) which, while informative, still leave a number of details in the implementation of those guidelines open to interpretation by the national courts and the EC. While we believe that our historical and current activities fall squarely within the ECJ’s guidelines, given the newness of the decision and the lack of interpretive case law, it is challenging to predict whether the EC or relevant national courts will agree.

Additionally, the political and legal climate in China appears to be causing significant challenges for foreign companies that attempt to enforce their intellectual property rights against Chinese business whether such rights are enforced in China or elsewhere in the world. At this time, it is unclear what if any impact this change in climate will have on our business.

We may seek to internally develop new inventions and intellectual property, which would take time and would be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.

Members of our management team have experience as inventors. As such, part

Part of our business may include the internal development of new inventions or intellectual property that we willmay seek to monetize. However, this aspect of our business would likely require significant capital and would take time to achieve. Such activities could also distract our management team from itsour present business initiatives, which could have a material and adverse effect on our business. There is also the risk that our initiatives in this regard would not yield any viable new inventions or technology, which would lead to a loss of our investments in time and resources in such activities.

We cannot be certain that patents will be issued as a result of any future applications, or that any of our patents, once issued, will provide us with adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we will be the first to make our additional new inventions or to file patent applications covering those inventions. It is also possible that others may have obtained or may obtain issued patents that could prevent us from commercializing our products or services or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we may license or otherwise monetize, our rights will depend on maintaining our obligations to the licensorthird parties under the applicable license agreement, and we may be unable to do so. Our failure to obtain or maintain intellectual property rights for our inventions would lead to the loss of our investments in such activities, which would have a material and adverse effect on our company.

Moreover, patent application delays could cause delays in recognizing revenue from our internally generated patents and could cause us to miss opportunities to license patents before other competing technologies are developed or introduced into the market.

Our confidential information may be disclosed by other parties.

We routinely enter into non-disclosure agreements with other parties, including but not limited to vendors, law firms, parties with whom we are engaged in negotiations, and employees. However, there exists a risk that those other parties will not honor their contractual obligations to not disclose our confidential information. This may include parties who breach such obligations in the context of confidential settlement offers and/or negotiations. In addition, there exists a risk that, upon such breach and subsequent dissemination of our confidential information, third parties and potential licensees may seek to use such confidential information to their advantage and/or to our disadvantage including in legal proceedings in which we are involved. Our ability to act against such third parties may be limited, as we may not be in privity of contract with such third parties.

The expected benefits of the acquisition of IDG may not be realized.

The success of the acquisition of IDG will depend, in large part, on our ability to grow the IDG businesses and maximize operating results. Failure to effectively manage growth could result in difficulty or delays in fulfilling product orders, difficulty in engaging and/or retaining customers, declines in quality or customer satisfaction, increases in costs, or other operational difficulties. Any of these difficulties could adversely impact our business performance and operating results.

In addition, there is no assurance that our efforts in managing growth will succeed, as growth is subject to factors that we do not control. These factors may include such things as the reactions of third parties with whom we enter into contracts and do business, unanticipated liabilities, the loss of key employees or customers and the reactions of investors and analysts.

The mobile computing industry is characterized by rapid technological change, and the success of Group Mobile depends upon the frequent enhancement of existing products and services and timely introduction of new products and services that meet our customers’ needs.

Customer requirements for mobile computing products and services are rapidly evolving and technological changes in our industry occur rapidly. To keep up with new customer requirements and distinguish us from our competitors in the business of reselling rugged devices, we must frequently introduce new products and services and enhancements of existing products and services. Enhancing existing products and services and developing new products and services is a complex and uncertain process. Furthermore, we may not be able to launch new or improved products or services before our competition launches comparable products or services. Any of these factors could cause our business or results or operations to suffer.

If we successfully commercially launch a product, and our product does not achieve widespread market acceptance, we will not be able to generate the revenue necessary to support our business.

Achieving acceptance of a wire-free recharging system as a preferred method to recharge low-power fixed and mobile electronic devices will be crucial to our continued success. Consumers and commercial customers will not begin to use or increase the use of our product unless they agree that the convenience of our solution would be worth the additional expense of purchasing our system. We have no history of marketing any product and we and our commercialization partners may fail to generate significant interest in the initial commercial products or any other product we or our partners may develop. These and other factors, including the following factors, may affect the rate and level of the market acceptance:

If we are unable to achieve or maintain market acceptance, our business would be significantly harmed.

The consumer electronics and mobile computing industries are subject to intense competition and rapid technological change, which may result in products or new solutions that are superior to our technology under development or other future products we may bring to market from time to time. If we are unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, our products may become less useful or obsolete and our operating results will suffer.

The consumer electronics and mobile computing industries in general and the power, recharging and alternative recharging segments of that industry in particular are subject to intense and increasing competition and rapidly evolving technologies. Because our products are expected to have long development cycles, we must anticipate changes in the marketplace and the direction of technological innovation and customer demands. To compete successfully, we will need to demonstrate the advantages of our products and technologies over well-established alternative solutions, products and technologies, as well as newer methods of power delivery and convince consumers and enterprises of the advantages of our products and technologies.

Group Mobile depends on a small number of OEMs to supply the products and services that it sells and the loss of, or a material change in, a business relationship with a major OEM supplier, could adversely affect our operations, cash flow, and financial position.

Group Mobile’s future success is highly dependent on its relationships with a small number of OEM suppliers. Group Mobile’s primary suppliers include Synnex Corporation, Ingram Micro Inc., Xplore Technologies Corporation and Flextronics International Ltd., which combined represent approximately 80% of Group Mobile’s inventory purchases. OEM supplier agreements typically are short-term and may be terminated without cause upon short notice. The loss or deterioration of our relationship with any of our major OEM suppliers, the authorization by OEM suppliers of additional distributors, the sale of products by OEM suppliers directly to our reseller and retail customers and end-users, or our failure to establish relationships with new OEM suppliers or to expand the distribution and supply chain services that we provide OEM suppliers could adversely affect our operations, cash flows, and financial position. In addition, OEM suppliers may face liquidity or solvency issues that in turn could negatively affect our operations, cash flows, and financial position.

We could become subject to product liability claims, product recalls, and warranty claims that could be expensive, divert management’s attention and harm our business.

Our business exposes us to potential liability risks that are inherent in the marketing and sale of products used by consumers. We may be held liable if our technology under development now or in the future causes injury or death or is found otherwise unsuitable during usage. Our technology under development incorporates sophisticated components and computer software. Complex software can contain errors, particularly when first introduced. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after installation.

In addition, if a product we designed is defective, whether due to design or manufacturing defects, improper use of the product or other reasons, we or our strategic partners may be required to notify regulatory authorities and/or to recall the product. A required notification to a regulatory authority or recall could result in an investigation by regulatory authorities of our products, which could in turn result in required recalls, restrictions on the sale of the products or other penalties. The adverse publicity resulting from any of these actions could adversely affect the perception of our customers and potential customers. These investigations or recalls, especially if accompanied by unfavorable publicity, could result in our incurring substantial costs, loss of revenue and damaging our reputation, each of which would harm our business.

We intend to pursue licensing of our wire-free charging technology as a primary means of commercialization but we may not be able to secure advantageous license agreements.

We are pursuing the licensing of our wire-free technology as a primary means of commercialization. There can be no assurance that we will be able to achieve partnerships and reach licensing arrangements. Furthermore, the timing and volume of revenue earned from license agreements will be outside of our control. 

Risks Related to our Capital Stock

Technology and intellectual property company stockStock prices are especiallycan be volatile, and this volatility may depress the price of our common stock.

The stock market has experienced significant price and volume fluctuations, and the market prices of technology companies have been highly volatile. We believe that various factors may cause the market price of our common stock to fluctuate, perhaps substantially, including, among others, the following:

The market prices of the securities of technology companies have been highly volatile and are likely to remain highly volatile in the future. The stock market as a whole also has experienced extreme price and volume fluctuations thatwhich have affected the market price of many technology companies in ways that may have been unrelated to these companies'those companies’ operating performance. Furthermore, we believe that fluctuations in our stock price can also be impacted by court rulings and/or other developments in our patent licensing and enforcement actions and stock price may reflect certain future growth and profitability expectations. If we fail to meet these expectations, then our stock price may significantly decline, which could have an adverse impact on investor confidence. We believe that various factors may cause the market price of our common stock to fluctuate, perhaps substantially, including, among others, the following:

Future sales of our shares of common stock by our stockholders could cause the market price of our common stock to drop significantly, even if our business is otherwise performing well.

As of March 10, 2016,30, 2017, we have 14,956,02619,198,454 shares of common stock issued and outstanding, (after giving effect to the Reverse Stock Split), excluding shares of common stock issuable upon exercise of warrants, options or restricted stock units. As shares saleable under Rule 144 are sold or as restrictions on resale lapse, the market price of our common stock could drop significantly if the holders of shares of restricted sharesstock sell them or are perceived by the market as intending to sell them. This decline in our stock price could occur even if our business is otherwise performing well.

Our and XpresSpa’s executive officers and directors continuing with us beneficially own or control approximately 38% of our common stock on a fully diluted basis. Accordingly, these executive officers and directors, acting individually or as a group, have substantial influence over the outcome of a corporate action requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. These stockholders may also exert influence in delaying or preventing a change in control of us, even if such change in control would benefit our other stockholders. In addition, the significant concentration of stock ownership may adversely affect the market value of our common stock due to investors’ perception that conflicts of interest may exist or arise.

The exercise of a substantial number of warrants or options by our security holders may have an adverse effect on the market price of our common stock.

Should our warrants outstanding as of March 10, 201630, 2017 be exercised, there would be an additional 1,006,6793,506,679 shares of common stock eligible for trading in the public market (after giving effect to the Reverse Stock Split).market. The incentive equity instruments currently outstanding to purchase 816,484 shares of our common stock (after giving effect to the Reverse Stock Split) granted to our management, employees, directors and consultants are subject to acceleration of vesting of 75% and 100% (according to the agreement signed with each grantee) upon a subsequent change of control. Such securities, if exercised, will increase the number of issued and outstanding shares of our common stock. Therefore, the sale or even the possibility of sale, of the shares of common stock underlying the warrants and options could have an adverse effect on the market price for our securities and/or on our ability to obtain future financing.

We have no current plans to pay dividends on our common stock, and youour investors may not receive funds without selling yourtheir common stock.

We have not declared or paid any cash dividends on our common stock, nor do we expect to pay any cash dividends on our common stock for the foreseeable future. Investors seeking cash dividends should not invest in our common stock for that purpose. We currently intend to retain any additional future earnings to finance our operations and growth and, therefore, we have no plans to pay cash dividends on our common stock at this time. Any future determination to pay cash dividends on our common stock will be at the discretion of our board of directors and will be dependent on our earnings, financial condition, operating results, capital requirements, any contractual restrictions, and other factors that our board of directors deems relevant.

Accordingly, our investors may have to sell some or all of their common stock in order to generate cash from your investment. You may not receive a gain on your investment when you sell our common stock and may lose the entire amount of your investment.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

As of March 30, 2017, XpresSpa had 53 company-operated stores in the United States, Netherlands, and United Arab Emirates. All of the stores are located in airports and are leased, typically with one or two renewal options after the initial term. Economic terms vary by type and location of store and, on average, the lease terms are 5-8 years.

Our New York office, which serves as our corporate U.S. office, as well as XpresSpa’s and FLI Charge’s offices, is located at 780 Third Avenue, 12^th Floor, New York, New York. The annual rentrental fee for this space is approximately $403,000 and the lease expires in October 2019. Our Group Mobile office is located at 5590 W. Chandler Blvd, Ste.3,Ste. 3, Chandler, Arizona. The annual rentrental fee for this space is approximately $70,000 and$73,000 for the first year with a price escalation each year through the remainder of the lease. The current lease, expireswhich originally was due to expire on June 30, 2016.2016, was amended in February 2016 and extended until July 31, 2019. We believe that our facilities are adequate to accommodate our business needs.

ITEM 3. LEGAL PROCEEDINGS

Infrastructure Patents

As one of the means of realizing the value of the patents on telecom infrastructure, Vringo, Inc. and our wholly-owned subsidiaries, Vringo Infrastructure, Inc. (“Vringo Infrastructure”) and Vringo Germany GmbH (“Vringo Germany”) have filed a number of suits against certain telecom and infrastructure companies.XpresSpa

ZTECordial

Effective October 2014, our wholly owned-subsidiary, XpresSpa, terminated its former ACDBE partner, Cordial Endeavor Concessions of Atlanta, LLC (“Cordial”), in its Atlanta Terminal A (and future Terminals D, E and F) store locations.

Cordial filed a series of complaints with the City of Atlanta, both before and after the termination, in which Cordial alleged, among other things, that the termination was not valid and that XpresSpa unlawfully retaliated against Cordial when Cordial raised concerns about the joint venture. In response to the numerous complaints it received from Cordial, the City of Atlanta required the parties to engage in two mediations.

After the termination of the relationship with Cordial, XpresSpa sought to substitute two new ACDBE partners in place of Cordial.

In April 2015, Cordial filed a complaint with the United States Federal Aviation Administration (“FAA”), which oversees the City of Atlanta with regard to airport ACDBE programs, and, in December 2015, the FAA instructed that the City of Atlanta review XpresSpa’s request to substitute new partners in lieu of Cordial and Cordial’s claims of retaliation.

In response to the FAA instruction, pursuant to a corrective action plan approved by the FAA, the City of Atlanta held two hearings on February 16 and 26, 2016 and ruled in favor of XpresSpa on both issues. Cordial submitted a further complaint to the FAA claiming that the City of Atlanta was biased against Cordial and that the City of Atlanta’s decision was wrong. In August 2016, the parties met with the FAA. On October 4, 2016, the FAA sent a letter to the City of Atlanta directing that the City of Atlanta retract previous findings on Cordial’s allegations and engage an independent third party to investigate issues previously decided by Atlanta. The FAA also directed that Atlanta determine monies potentially due to Cordial.

On December 7, 2015, we entered intoJanuary 3, 2017, XpresSpa filed a lawsuit in the Settlement Agreement with ZTE, pursuant to which: (i) ZTE paid us a totalSupreme Court of $21,500,000, netthe State of all withholding, value added or other taxes; (ii) theNew York, County of New York against Cordial and several related parties withdrew all pending litigations and proceedings against each other including the litigations related to ZTE’s(“Cordial Defendants”) alleging breach of contract, unjust enrichment, breach of fiduciary duty, fraudulent inducement, fraudulent concealment, tortious interference, and breach of good faith and fair dealing (the “Cordial Litigation”). On February 21, 2017, the Cordial Defendants filed a motion to dismiss. On March 3, 2017, XpresSpa filed a first amended complaint against the Cordial Defendants.

In addition, on January 4, 2017, XpresSpa filed a lawsuit in the United States District Court for the Southern District of New York against its non-disclosure agreementformer attorney, Kevin Ross, and his law firm (“Ross Defendants”) alleging malpractice, unjust enrichment, breach of fiduciary duty, fraudulent inducement, fraudulent concealment, tortious interference, and promissory estoppel (the “Ross Litigation”). On March 2, 2017, the Ross Defendants filed a letter with Vringo; and (iii) we granted ZTE certain rights with respectthe court requesting a pre-motion conference in anticipation of the defendants’ filing of a motion to our patents includingdismiss. On March 17, 2017, XpresSpa filed a non-exclusive, non-transferable, worldwide perpetual license to certain of our owned patents and patent applications.First Amended Complaint against the defendants.

Pursuant toBoth the Settlement Agreement,Cordial Litigation and Ross Litigation are pending before the parties have taken steps to withdraw all pending litigations and proceedings against one another. To date, proceedingsrespective courts; no schedule has been set in Brazil and Romania have yet to be formally closed, though the parties are currently working together to cause those proceedings to be formally closed.either matter.

In several jurisdictions, though ZTE requestedFebruary 2017, Cordial filed a Part 16 complaint with the FAA. On March 7, 2017, the FAA held that government organizations close proceedings against Vringo, those organizations make such determinationsXpresSpa has not been named in Cordial’s complaint, and is not a proper respondent.

In re Chen et al.

In March 2015, four former XpresSpa employees who worked at XpresSpa locations in John F. Kennedy International Airport and LaGuardia Airport filed a putative class and collective action wage-hour litigation in the United States District Court, Eastern District of New York.In re Chen et al., CV 15-1347 (E.D.N.Y.). Plaintiffs claim that they and other spa technicians around the country were misclassified as exempt commissioned salespersons under Section 7(i) of the federal Fair Labor Standards Act (“FLSA”). Plaintiffs also assert class claims for unpaid overtime on their own volition. In China, ZTE requestedbehalf of New York spa technicians under the New York Labor Law, and discriminatory employment practices under New York State and City laws. On July 1, 2015, the plaintiffs moved to have the court authorize notice of the FLSA misclassification claim sent to all employees in the spa technician job classification at XpresSpa locations around the country in the last three years. Defendants opposed the motion. On February 16, 2016, the Magistrate Judge assigned to the case issued a Report & Recommendation, recommending that the National Developmental and Reform Commission (“NDRC”) conclude its investigation against Vringo; however,District Court Judge grant the NDRC has not yet closed its investigation. In addition, ZTE requested that the European Commission close its file on Vringo following ZTE’s withdrawal of its complaint against Vringo.plaintiffs’ motion. On FebruaryMarch 1, 2016, the European Commission confirmeddefendants filed Opposition to the Magistrate Judge’s Report & Recommendation, arguing that the District Court Judge should reject the Magistrate Judge’s findings. On September 23, 2016, the court ruled in favor of the plaintiffs and conditionally certified the class. The parties held a mediation on February 28, 2017 and reached an agreement on a settlement in principle. The parties are in the process of finalizing the settlement documents.

Amiral

In July 2016, Amiral Holdings SAS (“Amiral”) brought a preliminary relief proceeding in Amsterdam against XpresSpa Europe B.V. by filing a Petition for Prejudgment Attachment of Assets of a Debtor Not Domiciled in the Netherlands. This proceeding relates to the proposed acquisition by Amiral of XpresSpa Europe B.V., which owns XpresSpa’s Amsterdam and Dubai locations, from XpresSpa International Holdings LLC (“XpresSpa International”). In its petition, Amiral sought to seize the shares in XpresSpa Europe B.V. On a preliminary basis, the District Court in Amsterdam granted the petition without hearing from XpresSpa International. On July 29, 2016, Amiral levied a preservative attachment over the shares in XpresSpa Europe B.V. stating that it intended to bring a suit against XpresSpa International to continue the negotiations, complete the transaction and transfer the shares in XpresSpa Europe B.V. to Amiral. Amiral had to initiate an action against XpresSpa International within forty-two days after the attachment was levied, failing which the seizure would close itsautomatically expire. On September 1, 2016, the District Court in Amsterdam granted Amiral an extension to file on ZTE’s complaintan action. On October 6, 2016, Amiral filed a request for arbitration with the Nederlands Arbitrage Instituut (NAI) in the Netherlands against Vringo.XpresSpa International related to the alleged transfer of the shares of XpresSpa Europe B.V. to Amiral. On October 7, 2016, Amiral also initiated proceedings before the Dutch court to the same effect for the event that an arbitration agreement is held to be lacking.

In addition, in ChinaAugust 2016, Amiral filed a complaint for breach of contract against XpresSpa related to a potential strategic transaction between Amiral and XpresSpa. Amiral Holdings SAS v. XpresSpa Holdings LLC et al., Supreme Court of the State of New York, County of New York (“Supreme Court”) (Index No. 654051/2016). Among other things, Amiral sought specific performance relating to the contract; an injunction prohibiting the defendants from entering into or consummating a competing transaction; and a declaration with respect to Amiral’s right of first refusal and certain related matters. On October 4, 2016, Amiral filed an amended complaint and motion for a preliminary injunction. On October 14, 2016, XpresSpa filed its response to Amiral’s motion and, on October 20, 2016, Amiral filed a reply brief. A hearing on the preliminary injunction motion was held on November 18, 2016 and the Netherlands, Vringo continuesSupreme Court denied Amiral’s motion. Amiral appealed the Supreme Court’s decision and, on November 23, 2016, the Supreme Court of the State of New York, Appellate Division, 1^st Department (“Appellate Division”) issued a temporary restraining order enjoining XpresSpa and Mistral Equity Partners, the then-majority owner of XpresSpa, from closing our proposed merger. On December 15, 2016, the Appellate Division ordered that the appeal of the Supreme Court’s order be heard during the Supreme Court’s April term, resulting in a de facto extension of the injunction until the appeal could be heard. As a condition to the injunction, the Appellate Division ordered Amiral to extend a bridge loan to XpresSpa to fund its operations during the pendency of the appeal, patent invalidity rulings issued in connection with proceedings originally brought by ZTE. In each instance, ZTE has indicated that it will not oppose Vringo’s appeals, though Vringo must still plead its case before the respective adjudicatory body in each jurisdiction. In addition, the European Patent Office has not yet dismissedand to post an opposition action filed on one of Vringo’s recently issued European patents, and has requested that Vringo defend this action even though ZTE has indicatedundertaking. On December 22, 2016, Amiral informed XpresSpa that it would not continue to pursueextend the action.court-ordered amounts. As such, on December 23, 2016, we and XpresSpa closed our previously-announced merger.

On December 7, 2016, we filed a lawsuit against Amiral and several additional related parties in the United States District Court for the Southern District of New York, alleging breach of contract and tortious interference.

ASUSDuring the first quarter of 2017, the parties resolved their disputes and have dismissed and/or withdrawn all actions against each other.

Vringo hasEmployment related complaints

There have been three complaints filed patent infringement lawsuits against ASUSTekXpresSpa with the Equal Employment Opportunity Commission for unlawful termination of employment and discriminatory employment practices. At this time we do not believe that the outcome of these matters, individually or in the aggregate, would have a material adverse effect on our business or results of operations.

Intellectual Property

ASUS

In March 2016, we settled all disputes and ended all litigations with ASUSTeK Computer Inc. and its subsidiaries (collectively, “ASUS”). Google, Inc., who intervened as a party in Germany, India, and Spain.

In Germany, on January 22, 2015, the Düsseldorf Regional Court found that ASUS does not infringe either of the patents-in-suit. Vringo filed notices of appeal for each patent, and appeals are not expected to be heard until at least the second quarter of 2016. ASUS filed nullity suits with respect to those patents-in-suit in the Federal Patents Court in Munich, Germany, during the second quarter of 2014. On January 28, 2016, the Court found one of the patents-in-suit invalid; Vringo plans to appeal this ruling. The nullity hearing on the second patent-in-suit is expected to occur in the first quarter of 2017.

In India, Vringo’s suit against ASUS pending before the High Court of Delhi, New Delhi is not expected to be heard until the fourth quarter of 2016.

In Spain, Vringo awaits the ruling of the Commercial Court of Barcelona in Vringo’s lawsuit against ASUS, alleging infringement of one of same patents-in-suit in Vringo’sour litigation against ASUS in Germany. On February 4, 2016,India, and the Court held its hearing in ASUS’ lawsuit seeking to invalidate that same patent and on March 1, 2016, the Court found the patent invalid. Vringo’s opening brief on appeal of the invalidity decision is due on March 21, 2016.parties have withdrawn their respective outstanding claims against each other.

Content Distributiondistribution

In 2012, we purchased a portfolio of patents invented by Tayo Akadiri relating to content distribution. The portfolio includes seven patents as well as several pending patent applications. As one of the means of realizing the value of these patents, on October 20, 2015, weQuantum Stream Inc. (“Quantum Stream”), one of our subsidiaries, filed suita lawsuit against DirecTV, LLC in the United States District Court for the Southern District of New York.

Search PatentsYork, alleging patent infringement. During the third quarter of 2016, the parties resolved the litigation, and the lawsuit has been dismissed.

On September 15, 2011, our wholly-owned subsidiary, I/P Engine, Inc. (“I/P Engine”) initiated litigationNovember 4, 2016, Quantum Stream filed a lawsuit against Cablevision Systems Corp. and several additional related parties in the United States District Court for the EasternSouthern District of Virginia,New York, alleging patent infringement. The lawsuit was dismissed without prejudice during the first quarter of 2017.

On March 8, 2017, Quantum Stream filed a lawsuit against AOLCharter Communications, Inc. and several additional related parties in the United States District Court for the Southern District of New York, alleging patent infringement. No schedule has been set in this case.

Remote monitoring

On November 9, 2015, Iron Gate Security, Inc. (“Iron Gate”), Google,one of our subsidiaries, filed a lawsuit against Lowe’s Companies, Inc., IAC Search & Media, Inc., Gannett Company, Inc., in the United States District Court for the Southern District of New York, alleging patent infringement. During the fourth quarter of 2016, the parties resolved the litigation, and Target Corporation (collectively, the “Defendants”) for infringement of claims of U.S. Patent Nos. 6,314,420 and 6,775,664, which I/P Engine acquired from Lycos, Inc.lawsuit has been dismissed.

On November 6, 2012, the jury ruled15, 2016, Iron Gate filed a lawsuit against Logitech Inc. in favor of I/P Engine and against the Defendants. On August 15, 2014, the Court of Appeals for the Federal Circuit (“Federal Circuit”) held that the claims of the patents-in-suit asserted by I/P Engine against the Defendants are invalid for obviousness. Vringo sought review, by the Supreme Court of the United States (“Supreme Court”District Court for the Southern District of New York, alleging patent infringement. During the first quarter of 2017, the parties resolved the litigation, and the lawsuit has been dismissed.

On March 8, 2017, our wholly-owned subsidiary, Quantum Stream filed a lawsuit against Charter Communications, Inc. and several additional related parties in the United States District Court for the Southern District of New York, alleging patent infringement. No schedule has been set in this case. 

On March 15, 2017, our wholly-owned subsidiary, Iron Gate Security, Inc., filed a lawsuit against Vivint, Inc., in the United States District Court for the Southern District of New York, alleging patent infringement. No schedule has been set in this case.

Corporate

Mason Chu

On December 31, 2015, Mason Chu filed a lawsuit against us and our directors, alleging that the defendants breached their fiduciary duty to FORM and our stockholders. On January 26, 2016, our Board of Directors resolved that it is in our best interests and those of our stockholders that Article Five of our Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation"), be amended. The parties resolved the litigation in March 2017.

With respect to our outstanding legal matters, based on our current knowledge, we believe that the amount or range of a potential loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. We evaluated the matters described above, and assessed the probability and likelihood of the Federal Circuit’s opinionoccurrence of liability. Based on our estimates, we recorded $671,000, which is included in accounts payable, accrued expenses, and on October 5, 2015,other current liabilities in the Supreme Court denied Vringo’s petition for a writconsolidated balance sheet as of certiorari.December 31, 2016.

In the event that an action is brought against us or one of our subsidiaries, we will investigate the allegation and vigorously defend ourselves.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Reverse Stock Split

On November 27, 2015, we implemented the Reverse Stock Split, as authorized at a special meeting of our stockholders held on November 16, 2015. As of November 27, 2015, every 10 shares of our issued and outstanding common stock were combined into one share of our common stock, except to the extent that the Reverse Stock Split resulted in any of our stockholders owning a fractional share, which was rounded up to the next highest whole share. In connection with the Reverse Stock Split, there was no change in the nominal par value per share of $0.01.

All references in this Annual Report on Form 10-K to number of shares of common stock, price per share and weighted average shares of common stock have been adjusted to reflect the Reverse Stock Split on a retroactive basis for all periods presented, unless otherwise noted.

Market Information

Our common stock, ispar value $0.01 per share, which was previously listed on the NASDAQ Capital Market under the sametrading symbol “VRNG.“VRNG,” has been listed under the trading symbol “FH” since May 9, 2016. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported by the NASDAQ Capital Market, with prices prior to November 27, 2015 adjusted to account for our 1-for-10 reverse stock split that occurred on that date:

On June 21, 2015, our publicly traded warrants to purchase 478,400 shares of common stock at an exercise price of $50.60, then listed on the NASDAQ Capital Market under the symbol “VRNGW,” expired.

Stockholders

As of March 10, 2016,30, 2017, we have 3247 stockholders of record of the 14,956,02619,198,454 outstanding shares of our common stock. This does not reflect persons or entities that hold their stock in nominee or "street" name through various brokerage firms.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock, and do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance our operations and to expand our business. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements and other factors that our Board of Directors considers appropriate. Our outstanding Notes contain certain restrictions on our ability to declare or pay cash dividends.

Issuer Purchases of Equity Securities

None.

Unregistered Sales of Equity Securities

In conjunction with our

On February 2, 2017, we completed the acquisition of IDG on October 15, 2015,Excalibur Integrated Systems, Inc. (“Excalibur”). In consideration for the acquisition, we issued Series B Preferred shares as purchase consideration, which were converted intoto the sellers an aggregate of 888,573 unregistered shares of our common stock, in an aggregate of 1,604,167 shares. We also issued to one of the sellers, who is a former chief executive officer and director, 57,500 sharespar value $0.01 per share.

As part of our unregistered common stock in considerationacquisition of his forgiveness of debt. In addition,XpresSpa, on August 8, 2016 we issued to a finder a warrant to purchase up to an aggregate of 50,000750,574 unregistered shares of our common stock to certain holders of XpresSpa, at an exercisea purchase price of $5.00$2.31 per share, (after giving effect to the Reverse Stock Split) expiring on April 15, 2021. On December 28, 2015, we acquired the remaining 30% interest in Fli Charge from third parties and, as consideration, issued 110,000 sharesfor a total amount of our unregistered common stock. $1,734,000.

The issuanceissuances of shares of our common stock waswere made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA

Not required as we are a smaller reporting company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, our consolidated financial statements (including notes to the consolidated financial statements) and the other consolidated financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Actual results and timing of events could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Vringo, Inc.FORM Holdings Corp (“Vringo”FORM” or the “Company”) is engaged in the innovation, developmentfocuses on acquiring and monetization of intellectual property, as well as the commercialization and distribution of wire-free power and rugged computing devices. Our company has three operating segments:building companies that would benefit from:

On July 19, 2012, we consummatedOur management team is committed to executing on our strategy. Our focus is on travel, health and wellness, and technology. We limit our scope by only looking at companies with a merger with Innovate/Protect, Inc., then a privately held Delaware corporation (“I/P”).clear path for growth.

On August 9, 2012,May 6, 2016, we acquired a patent portfoliochanged our name to FORM Holdings Corp. from Nokia Corporation (“Nokia”), comprised of 124 patent families with counterparts in certain jurisdictions worldwide, for $22,000,000. Under the terms of the purchase agreement, to the extent that the gross revenueVringo Inc. and concurrently announced our repositioning as defined by agreement exceeds $22,000,000, we are obligated to pay a royalty of 35% of such excess.

On October 15, 2015, we acquired 100% of International Development Group Limited (“IDG”), a holding company including its two subsidiaries: fliCharge International Ltd. (“Fli Charge”)of small and Group Mobile International LLC (“Group Mobile”). IDG owned 70% of Fli Charge and 100% of Group Mobile. The purchase was a stock purchase whereby we acquired the entire interest in IDG in exchange for shares in Vringo. The total value of the consideration was $5,571,000. On December 28, 2015, we acquired the remaining 30% of Fli Charge from third party shareholders in exchange for 110,000 shares in Vringo.

Prior to December 31, 2013, we operated a global platform for the distribution of mobile social applications and services. On February 18, 2014, we sold our mobile social application business to InfoMedia Services Limited (“InfoMedia”), receiving an 8.25% ownership interest in InfoMedia as consideration and a seat on the board of directors of InfoMedia. As part of the transaction, we have the opportunity to license certain intellectual property assets and work with InfoMedia to identify and protect new intellectual property.middle market growth companies.

Segments

We currently operate in threefour operating segments: Intellectual Property, FliXpresSpa, Group Mobile, FLI Charge and Group Mobile.intellectual property.

Our Strategy and Outlook

Our strategy for our Intellectual Property operating segmentXpresSpa is to continue to monetize our existing portfolioa leading airport retailer of intellectual property through licensingspa services and strategic partnerships. In addition, werelated products. We plan to continuegrow XpresSpa’s 2017 Comp Store Sales as compared to enhance our intellectual property rights around our Fli Charge technology and products.Fli Charge plans2016. In the longer term, we expect to strengthen and develop partnerships in numerous markets including automotive, education, office, healthcare, power tools and vaporizers.double the number of XpresSpa locations. Group Mobile is a supplier of built-to-order rugged computers, mobile devices and accessories. We plan to increase Group Mobile’s revenue, which we believe can be achieved by adding new products, exploring new distribution verticals, such as military and government, and increasing the sales team’s geographic coverage. FLI Charge is an early stage company that designs, develops, licenses, manufactures and markets power transfer and charging solutions. FLI Charge is currently working with partners in several verticals to bring products to market. These verticals include education, office, hospitality, power tools, automotive and consumer electronics, among others. Our intellectual property operating segment is engaged in the innovation, development and monetization of intellectual property. Our strategy for our intellectual property operating segment is to continue to monetize our existing portfolio of intellectual property through licensing and strategic partnerships.

Results of Operations

Revenue

We recognize revenue from the sale of XpresSpa products and services at the point of sale, net of discounts and applicable sales taxes. Revenues from the XpresSpa wholesale and e-commerce businesses are recorded at the time goods are shipped. We exclude all sales taxes assessed to our customers. Sales taxes assessed on revenues are included in accounts payable, accrued expenses and other current liabilities in the consolidated balance sheets until remitted to the state agencies.

We record revenue from the product sales of Group Mobile and FLI Charge when title and risk of loss are passed to the customer, there is persuasive evidence of an arrangement for sale, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Our shipping terms typically specify F.O.B. destination, at which time title and risk of loss have passed to the customer. At the time of sale of hardware products, we record an estimate for sales returns and allowances based on historical experience. Hardware products sold by us are warranted by the vendor.

Group Mobile uses drop-shipment arrangements with many of its hardware vendors and suppliers to deliver products directly to customers. Revenue for drop-shipment arrangements is recorded on a gross basis upon delivery to the customer with contract terms that typically specify F.O.B. destination. Revenue is recognized on a gross basis as Group Mobile is the principal in the transaction as the primary obligor in the arrangement, assumes the inventory risk if the product is returned by the customer, sets the price of the product to the customer, assumes credit risk for the amounts invoiced, and works closely with the customers to determine their hardware specifications.

Freight billed to customers is recognized as net product revenue and the related freight costs as a cost of goods sold.

Deferred revenue includes (i) payments received from customers in advance of providing products and services and (ii) amounts deferred if other conditions of revenue recognition have not been met. We account for funds raised from crowdfunding campaigns and pre-sales as deferred revenue until the product is delivered to customers.

Revenue from patent licensing and enforcement is recognized if collectability is reasonably assured, persuasive evidence of an arrangement exists, the sales price is fixed or determinable and delivery of the service has been rendered. We use management's best estimate of selling price for individual elements in multiple-element arrangements, where vendor specific evidence or third party evidence of selling price is not available.

Currently, revenue arrangements related to intellectual property provide for the payment of contractually determined fees and other consideration for the grant of certain intellectual property rights related to our patents. These rights typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patents, (ii) the release of the licensee from certain claims, and (iii) the dismissal of any pending litigation. The intellectual property rights granted typically extend until the expiration of the related patents. Pursuant to the terms of these agreements, we have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on our part to maintain or upgrade the related technology, or provide future support or services. Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the upfront payment. As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, upon receipt of the upfront fee, and when all other revenue recognition criteria have been met.

Intellectual property costs

Intellectual property costs mainly include expenses incurred in connection with our patent licensing and enforcement activities, patent-related legal expenses paid to external patent counsel (including contingent legal fees), licensing and enforcement related research, consulting and other expenses paid to third parties, as well as related internal payroll expenses and stock-based compensation. In addition, amounts received by us for reimbursements of legal fees in connection with our litigation campaigns are recorded in intellectual property costs as an offset to legal expense.

Also included in intellectual property costs are royalties owed to previous owners of our intellectual property assets. The royalties fluctuate period to period, based on the amount of licensing revenue we recognize each period, the terms and conditions of agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period.

Depreciation, amortization and impairment

Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives of our property and equipment is based on estimates of the period over which we expect the assets to be of economic benefit to us. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease.

Amortization of our acquired patent portfolios and other intangible assets are recognized on a straight-line basis over the remaining useful life of the intangible assets (i.e., through the expiration date of the patent). Impairment charges related to our acquired intangible assets are recorded when an impairment indicator exists and the carrying amount of the related asset exceeds its fair value.

General and administrative

General and administrative expenses include management and administrative personnel, public and investor relations, overhead/office costs, insurance and various other professional fees, as well as sales and marketing costs, product development costs and stock-based compensation.

Non-operating income (expense)

Non-operating income (expense) includes transaction gains (losses) from foreign exchange rate differences, bank charges, deposits, interest related to outstanding debt, as well as fair value adjustments related to our derivative warrant liabilities and conversion feature of debt. The value of such derivative liabilities is highly influenced by assumptions used in its valuation, as well as by our stock price as of the period end (revaluation date).

Income taxes

As of December 31, 2016, deferred tax assets generated from our activities in the United States were offset by a valuation allowance because realization depends on generating future taxable income, which, in our estimation, is not more likely than not to be generated before such net operating loss carryforwards expire.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly evaluated by the enterprise’s chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. We conduct our business through four operating segments, which are also our reportable segments: XpresSpa,Group Mobile, FLI Charge, and intellectual property. It should be noted that the segment reporting for XpresSpa only covers the period following the closing of the acquisition of XpresSpa on December 23, 2016 through our fiscal year end on December 31, 2016.

Organizing our business through four operating segments allows us to align our resources and manage the operations. We determine our operating segments based on a number of factors our management uses to evaluate and run our business operations, including similarities of customers, products and technology. Our Chief Executive Officer is our CODM, who regularly reviews operating segment revenue and operating income (loss) when assessing financial results of operating segments and allocating resources.

We measure the performance of our operating segments based upon operating segment revenue and operating income (loss). Operating segment operating income (loss) includes revenue and expenses incurred directly by the operating segment, including material cost of goods sold, intellectual property costs, and selling, marketing, and general and administrative costs. General and administrative costs are allocated amongst the operating segments and non-operating corporate segment.

Year ended December 31, 2016 compared to the year ended December 31, 2015

Revenue

We generate revenue through each of our four operating segments: XpresSpa, Group Mobile, FLI Charge, and intellectual property.