Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 30, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'NETWORK 1 TECHNOLOGIES INC | ' |
Entity Central Index Key | '0001065078 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer | 'No | ' |
Is Entity a Voluntary Filer | 'No | ' |
Is Entity's Reporting Status Current | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 25,833,623 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Condensed_Balance_Sheets_Unaud
Condensed Balance Sheets (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
CURRENT ASSETS: | ' | ' |
Cash and cash equivalents | $19,584,000 | $21,983,000 |
Marketable securities | 532,000 | 547,000 |
Royalty receivables | 1,127,000 | 775,000 |
Other current assets | 198,000 | 222,000 |
Total Current Assets | 21,441,000 | 23,527,000 |
OTHER ASSETS: | ' | ' |
Deferred tax asset | 6,002,000 | 6,194,000 |
Patent, net of accumulated amortization | 5,355,000 | 65,000 |
Other Investments | 196,000 | ' |
Security deposits | 19,000 | 19,000 |
Total Other Assets | 11,572,000 | 6,278,000 |
TOTAL ASSETS | 33,013,000 | 29,805,000 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ' | ' |
Accounts payable | 107,000 | 232,000 |
Accrued expenses | 460,000 | 593,000 |
TOTAL LIABILITIES | 567,000 | 825,000 |
COMMITMENTS AND CONTINGENCIES | ' | ' |
STOCKHOLDERS' EQUITY | ' | ' |
Common stock - $0.01 par value; authorized 50,000,000 shares; 26,089,483 and 25,392,269 shares issued and outstanding at September 30,2013 and December 31,2012, respectively | 261,000 | 254,000 |
Additional paid-in capital | 61,046,000 | 58,046,000 |
Accumulated deficit | -28,832,000 | -29,306,000 |
Other comprehensive income (loss) | -29,000 | -14,000 |
TOTAL STOCKHOLDERS' EQUITY | 32,446,000 | 28,980,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $33,013,000 | $29,805,000 |
Condensed_Balance_Sheets_Paren
Condensed Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Condensed Balance Sheets Parenthetical | ' | ' |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 26,089,483 | 25,392,269 |
Common stock, shares outstanding | 26,089,483 | 25,392,269 |
Condensed_Statements_of_Income
Condensed Statements of Income and Comprehensive Income (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Condensed Statements Of Income And Comprehensive Income | ' | ' | ' | ' |
ROYALTY REVENUE | $1,227,000 | $1,418,000 | $7,198,000 | $7,809,000 |
COST OF REVENUE | 345,000 | 393,000 | 2,117,000 | 2,341,000 |
GROSS PROFIT | 882,000 | 1,025,000 | 5,081,000 | 5,468,000 |
OPERATING EXPENSES: | ' | ' | ' | ' |
General and administrative | 738,000 | 622,000 | 1,933,000 | 1,653,000 |
Amortization of Patents | 418,000 | 2,000 | 668,000 | 7,000 |
Non-cash compensation | 70,000 | 58,000 | 326,000 | 223,000 |
TOTAL OPERATING EXPENSES | 1,226,000 | 682,000 | 2,927,000 | 1,883,000 |
OPERATING INCOME (LOSS) | -344,000 | 343,000 | 2,154,000 | 3,585,000 |
OTHER INCOME (EXPENSES): | ' | ' | ' | ' |
Interest income, net | 9,000 | 3,000 | 27,000 | 22,000 |
INCOME (LOSS) BEFORE INCOME TAXES | -335,000 | 346,000 | 2,181,000 | 3,607,000 |
INCOME TAXES (BENEFIT) | ' | ' | ' | ' |
Current | -3,000 | 11,000 | 23,000 | 44,000 |
Deferred | -124,000 | 141,000 | 192,000 | 709,000 |
Total Income Taxes (Benefits) | -127,000 | 152,000 | 215,000 | 753,000 |
NET INCOME (LOSS) | -208,000 | 194,000 | 1,966,000 | 2,854,000 |
Net Income per share | ' | ' | ' | ' |
Basic | ($0.01) | $0.01 | $0.08 | $0.11 |
Diluted | ($0.01) | $0.01 | $0.07 | $0.10 |
Weighted average number of common shares outstanding: | ' | ' | ' | ' |
Basic | 25,792,387 | 25,963,093 | 25,387,348 | 25,659,085 |
Diluted | 28,189,583 | 28,516,642 | 27,462,358 | 28,544,972 |
NET INCOME (LOSS) | -208,000 | 194,000 | 1,966,000 | 2,854,000 |
OTHER COMPREHENSIVE INCOME NET OF TAX: | ' | ' | ' | ' |
Unrealized gain (loss) arising during the period | -1,000 | -6,000 | -15,000 | -4,000 |
COMPREHENSIVE INCOME (LOSS) | ($209,000) | $188,000 | $1,951,000 | $2,850,000 |
Condensed_Statements_of_Cash_F
Condensed Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net Income | $1,966,000 | $2,854,000 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ' | ' |
Amortization of Patents | 668,000 | 7,000 |
Stock based compensation | 326,000 | 223,000 |
Non-cash royalty revenue | -70,000 | ' |
Source (use) of cash from changes in operating assets and liabilities: | ' | ' |
Royalty receivables and other current assets | -279,000 | -596,000 |
Accounts payable and accrued expenses | -255,000 | -1,052,000 |
Income taxes payable and accrued expense | -53,000 | -54,000 |
Deferred tax asset | 192,000 | 709,000 |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 2,495,000 | 2,091,000 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchase of patents and other assets | -4,417,000 | ' |
Investments | -50,000 | ' |
NET CASH USED IN INVESTING ACTIVITIES | -4,467,000 | ' |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Value of shares delivered to fund withholding taxes | -486,000 | -487,000 |
Repurchase of treasury stock | -1,017,000 | -52,000 |
Proceeds from exercises of options and warrants | 1,076,000 | ' |
NET CASH PROVIDED (USED IN) FINANCING ACTIVITIES | -427,000 | -539,000 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | -2,399,000 | 1,552,000 |
CASH AND CASH EQUIVALENTS, beginning of period | 21,983,000 | 20,661,000 |
CASH AND CASH EQUIVALENTS, end of period | 19,584,000 | ' |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ' | ' |
Cash paid during the periods for Interest | ' | ' |
Cash paid during the periods for Taxes | 98,000 | 137,000 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ' | ' |
Value of shares and warrants issued to purchase patents | $1,617,000 | ' |
NATURE_OF_BUSINESS_AND_SUMMARY
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Nature Of Business And Summary Of Significant Accounting Policies | ' | ||||
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||
[1] BASIS OF PRESENTATION: | |||||
The accompanying condensed financial statements as of September 30, 2013 and for the three and nine month periods ended September 30, 2013 and September 30, 2012 are unaudited, but, in the opinion of the management of Network-1 Technologies, Inc. (the "Company"), contain all adjustments consisting only of normal recurring items which the Company considers necessary for the fair presentation of the Company's financial position as of September 30, 2013, and the results of its operations for the three and nine month periods ended September 30, 2013 and September 30, 2012 and its cash flows for the nine month periods then ended. The condensed financial statements included herein have been prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2012 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results of operations to be expected for the full year. | |||||
[2] BUSINESS: | |||||
The Company’s principal business is the development, licensing and protection of our intellectual property. We presently own twenty (20) patents issued by the U.S. Patent and Trademark Office that relate to various technologies including patents covering (i) the delivery of power over Ethernet (“PoE”) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras, over Ethernet networks; (ii) foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; (iii) enabling technology for identifying media content on the Internet, and taking further action to be performed based on such identification including, among others, the insertion of advertising and the facilitation of the purchase of goods and services; and (iv) systems and methods for the transmission of audio, video and data over computer and telephony networks. In addition, the Company continually reviews opportunities to acquire or license additional intellectual property. The Company’s strategy is to pursue licensing and strategic alliances with companies in industries that manufacture and sell products that make use of the technologies underlying its intellectual property as well as with other users of the technologies who benefit directly from the technologies including corporate, educational and governmental entities. The Company has been actively engaged in the licensing of its patent (U.S. Patent No. 6,218,930) covering the control of power delivery over Ethernet cables (the “Remote Power Patent”). At September 30, 2013, the Company had entered into a total of sixteen (16) license agreements with respect to its Remote Power Patent which, among others, include license agreements with Cisco Systems, Inc. and Cisco-Linksys, LLC, Microsemi Corporation, Extreme Networks, Inc., Motorola Solutions, Inc., Allied Telesis, Inc., NEC Corporation and several other major data networking equipment manufacturers. The Company has a pending patent infringement litigation against eleven (11) data network equipment manufacturers for infringement of its Remote Power Patent (See Note D[1] to the financial statements included in this quarterly report). As part of the Company’s patent acquisition and development strategy, in February 2013 the Company acquired four (4) patents and one (1) pending patent application and in May 2013 the Company acquired nine (9) patents and five (5) pending patent applications (See Note B[2] to the financial statements included in this quarterly report). In May 2013, the Company’s newly formed subsidiary (Mirror Worlds Technologies, LLC) initiated patent litigation against Apple, Inc., Microsoft, Inc. and several other major vendors of operating system software and computer systems for infringement of one of the patents acquired in May 2013 (See Note D[2] hereof). | |||||
(b) As reflected in the accompanying financial statements, the Company had revenue of $1,227,000 and $1,418,000 for the three month period ended September 30, 2013 and September 30, 2012, respectively, and revenue of $7,198,000 and $7,809,000 for the nine month period ended September 30, 2013 and September 30, 2012, respectively. Non-cash revenue of $70,000 was included in the three and nine month periods ended September 30, 2013. The Company has been dependent upon cash on hand and royalty revenue from licensing of its Remote Power Patent to fund its operations. The Company had cash and cash equivalents of $19,584,000 as of September 30, 2013. | |||||
[3] STOCK-BASED COMPENSATION: | |||||
On January 24, 2013, the Company issued 5-year stock options to each of its then four (4) non-management directors to purchase 25,000 shares of its common stock at an exercise price of $1.19 per share. Such options vest over a one year period in equal quarterly amounts, subject to continued service on the Board (the vesting was accelerated for one director upon his resignation in August 2013). The Company recorded $39,000 in non-cash compensation in connection with the vested portion of these options for the nine month period ended September 30, 2013. | |||||
On June 19, 2013, the Company issued to a director a 5-year stock option to purchase 300,000 shares of its common stock, at an exercise price of $1.88 per share, for service as the sole member of the Company’s Strategic Development Committee. The shares underlying such stock option vested 100,000 shares on the date of grant and will vest 100,000 shares on June 19, 2014 and 100,000 shares on June 19, 2015. The Company recorded $75,000 in non-cash compensation in connection with the vested portion of the stock option for the nine month period ended September 30, 2013. | |||||
During the nine month periods ended September 30, 2013 and 2012, the Company recorded non-cash compensation expense of $81,000 and $37,000 for the vested portion of 10-year stock options to purchase 500,000 and 750,000 shares issued to the Company’s Chairman and Chief Executive Officer in November 2012 and June 2009, respectively. In addition, during the nine month periods ended September 30, 2013 and September 30, 2012, the Company recorded non-cash compensation expense of $129,000 and $98,000, respectively, for the vested portion of stock options granted to its Chief Financial Officer, directors and consultants in current prior years. | |||||
On January 27, 2012, the Company issued a 5-year stock option to purchase 50,000 shares of its common stock, at an exercise price of $1.21 per share, to a director for joining the Board of Directors, which option vested in equal quarterly installments over a one year period. On January 31, 2012 and February 24, 2012, the Company issued 5-year stock options to purchase an aggregate of 25,000 shares to each of its three non-management directors, at exercise prices of $1.21 and $1.35 per share. These stock options vest over a one year period in equal quarterly installments. | |||||
On April 11, 2012, the Company issued a 5-year stock option to purchase 125,000 shares of its common stock to one of its directors, at an exercise price of $1.40 per share, in consideration of serving on a special committee of the Board of Directors, and such option was to vest over a one year period in equal quarterly amounts of 31,250 shares (the vesting was accelerated following the resignation of the director in December 2012). On April 12, 2012, the Company issued to its Chief Financial Officer, in consideration of extension of his consulting agreement with the Company (See Note C[4]), a 5-year stock option to purchase 75,000 shares of its common stock, at an exercise price of $1.40 per share. Such option vested over a one year period in equal installments of 18,750 shares. | |||||
During the nine month period ended September 30, 2013, the Company’s Chairman and Chief Executive Officer, Chief Financial Officer and an employee exercised stock options to purchase an aggregate of 1,125,000, 10,000 and 52,500 shares, respectively, of the Company’s common stock at an exercise price of $0.68 per share. All such options were exercised on a cashless basis (except for the exercise of an option to purchase 10,000 shares by the Chief Financial Officer) by delivery of an aggregate of 396,373 and 18,497 shares of common stock, respectively, and 241,540 and 10,201 shares of common stock were delivered with an aggregate value of $466,172 and $19,688 to fund payroll withholding taxes on exercise, resulting in aggregate net shares of 487,087 and 23,802 issued to the Chairman and Chief Executive Officer and the employee, respectively, with respect to such option exercises. | |||||
During the nine month period ended September 30, 2012, the Company's Chairman and Chief Executive Officer and an affiliate exercised stock options and warrants to purchase an aggregate of 2,623,070 shares of the Company's common stock at an exercise price of $0.68 per share. All such stock options were exercised on a cashless basis by delivery of 1,306,979 shares of common stock and 350,160 shares of common stock were delivered with an aggregate value of $486,951 to fund payroll withholding taxes on exercise, resulting in aggregate net shares of 965,933 issued to the Chairman and Chief Executive Officer with respect to such stock option and warrant exercises. | |||||
The fair value of each stock option grant on the date of grant is estimated using the Black-Scholes option-pricing utilizing the following weighted average assumptions: | |||||
NINE MONTHS ENDED SEPTEMBER 30, | |||||
2013 | 2012 | ||||
Risk-free interest rates | 0.78% -1.24% | 0.71%-0.89% | |||
Expected option life in years | 5 years | 5 years | |||
Expected stock price volatility | 43.54% - 44.31% | 45.86% | |||
Expected dividend yield | -0- | - 0 - | |||
[4] REVENUE RECOGNITION: | |||||
The Company recognizes revenue received from the licensing of its intellectual property in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB No. 104") and related authoritative pronouncements. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been performed pursuant to the terms of the license agreement, (iii) amounts are fixed or determinable, and (iv) collectibility of amounts is reasonably assured. One licensee (Cisco Systems, Inc. and an affiliate) constituted approximately 81% and 80% of the Company’s revenue, for the nine month periods ended September 30, 2013 and September 30, 2012, respectively. | |||||
[5] INCOME TAXES: | |||||
At September 30, 2013, the Company had net operating loss carryforwards (NOLs) totaling approximately $24,317,000 expiring 2029, with a future tax benefit of approximately $8,268,000. During the second quarter of 2011, as a result of the Company's financial results and projected future operating results, management determined that a portion of the NOL was more likely than not to be utilized resulting in the recording of a one-time, non-cash income tax benefit of $7,000,000 (income) or $0.29 per share (basic) for the three and six month periods ended June 30, 2011. At September 30, 2013 and December 31, 2012, $6,002,000 and $6,194,000, respectively, were recorded as a deferred tax asset on the Company's balance sheet. During the nine month period ended September 30, 2013 as a result of income (before taxes) for the period of $2,181,000, $215,000 was recorded as income tax expense and the deferred tax asset was reduced by $192,000 to $6,002,000. To the extent that the Company earns income in the future, it will report income tax expense and such expense attributable to federal income taxes will reduce the recorded income tax benefit asset reflected on the balance sheet. Management will continue to evaluate the recoverability of the NOL and adjust the deferred tax asset appropriately. Utilization of NOL credit carryforwards can be subject to a substantial annual limitation due to ownership change limitations that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. | |||||
[6] EARNINGS (LOSS) PER SHARE: | |||||
Basic Earnings (loss) per share is calculated by dividing the net income (loss) by the weighted average number of outstanding common shares during the period. Diluted per share data includes the dilutive effects of options, warrants and convertible securities. Potential shares of 7,207,500 and 5,460,000 at September 30, 2013 and 2012, respectively, consisted of options and warrants. Computations of basic and diluted weighted average common shares outstanding are as follows: | |||||
Nine Months Ended | Three Months Ended | ||||
September 30, | September 30, | ||||
2013 | 2012 | 2013 | 2012 | ||
Weighted-average common shares outstanding – basic | 25,387,348 | 25,659,085 | 25,792,387 | 25,963,093 | |
Dilutive effect of options and warrants | 2,075,010 | 2,885,887 | 2,397,196 | 2,553,549 | |
Weighted-average common shares outstanding – diluted | 27,462,358 | 28,544,972 | 28,189,583 | 28,516,642 | |
Options and Warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 5,132,490 | 2,574,113 | 4,810,304 | 2,906,451 | |
[7] CASH EQUIVALENTS: | |||||
The Company places cash investments in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC"). At September 30, 2013, the Company maintained cash balance of $19,334,000 in excess of FDIC limits. | |||||
The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. | |||||
Cash and cash equivalents as of September 30, 2013 and December 31, 2012 are composed of: | |||||
September 30, 2013 | December 31, 2012 | ||||
Cash | $ 1,823,000 | $ 1,346,000 | |||
Money market fund | 17,761,000 | 20,637,000 | |||
Total | $ 19,584,000 | $ 21,983,000 | |||
[8] MARKETABLE SECURITIES | |||||
Marketable securities are classified as available-for-sale and are recorded at fair market value. Unrealized gain and losses are reported as other comprehensive income. Realized gains and losses are included in income in the period they are realized. The Company's marketable securities consist of a corporate bond (face value $500,000) with a 5% coupon and a maturity date of June 2015. | |||||
[9] INVESTMENT IN LIFESTREAMS | |||||
In May 2013, as part of the acquisition of the Mirror Worlds portfolio (See Note B[2] hereof), the Company acquired from Mirror Worlds, LLC 250,000 shares of common stock of Lifestreams Technologies Corporation (“Lifestreams”), a company engaged in the development of next generation applications and methodologies designed to organize and display digital data. In addition, in July 2013 the Company made an additional investment of $50,000 in Lifestreams and received 123,456 shares of Series A preferred stock and, as part of an amended license agreement between the Company’s subsidiary and Lifestreams, the Company received a warrant to purchase 7.5% of the then outstanding shares of common stock of Lifestreams on a fully diluted basis. The warrant is valued at $70,000 based on the Black-Scholes option model and recorded as non-cash royalty income. Since the investment in Lifestreams does not have a readily determinable fair value, such investment was recorded utilizing the cost-method. At September 30, 2013, the Company’s investment in Lifestream consists of the following: | |||||
Number of | Value | ||||
Shares | |||||
Common Stock | 250,000 | $ 76,000 | |||
Series A Preferred Stock | 123,456 | 50,000 | |||
Warrants | 1,305,000 | 70,000 | |||
$ 196,000 | |||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
Commitments And Contingencies | ' |
COMMITMENTS AND CONTINGENCIES | ' |
[1] Legal Fees: | |
Dovel & Luner, LLP provides legal services to the Company with respect to its patent litigation commenced in May 2013 against Apple, Inc., Microsoft, Inc. and other major vendors of document system software and computer systems in the United States District Court of Texas, Tyler Division for infringement of U.S. Patent No. 6,006,227. The terms of our agreement with Dovel & Luner LLP provide for legal fees on a contingency basis ranging from 25% to 40% of the net recovery (after deduction of expenses) depending upon the stage of proceeding in which a result (settlement or judgment) is achieved, subject to certain agreed upon contingency fee caps depending upon the amount of the net recovery. The Company is responsible for a certain portion of the expenses incurred with respect to the litigation. | |
Dovel & Luner, LLP provides legal services to the Company with respect to the Company’s pending patent litigation against eleven (11) data networking equipment manufacturers filed in September 2011 in the United States District Court for the Eastern District of Texas, Tyler (See Note D[1]). The terms of the Company’s agreement with Dovel & Luner LLP essentially provides for legal fees on a full contingency basis ranging from 12.5% to 35% (with certain exceptions) of the net recovery (after deduction for expenses) depending on the stage of the preceding in which a result (settlement or judgment) is achieved. For the nine month periods ended September 30, 2013 and September 30, 2012, the Company accrued aggregate legal fees with respect to the litigation of $181,000 and $297,000, respectively, to Dovel & Luner, LLP. The Company is responsible for a certain portion of the expenses incurred with respect to the litigation. | |
Dovel & Luner, LLP provided legal services to the Company with respect to the litigation settled in July 2010 against several major data networking equipment manufacturers (See Note D[3] hereof). The terms of the Company’s agreement with Dovel & Luner, LLP with respect to this litigation provided for legal fees of a maximum aggregate cash payment of $1.5 million plus a contingency fee of 24% (based on the settlement being achieved at the trial stage). Because of the royalty payments payable quarterly by Cisco in accordance with the Company’s settlement and license agreement with Cisco (See Note D[3]), the Company has an obligation to pay Dovel & Luner 24% of such royalties received. During the nine months ended September 30, 2013 and 2012, the Company incurred aggregate legal fees to Dovel & Luner, LLP of approximately $1,479,000 and $1,581,000, respectively, with respect to the aforementioned litigation. | |
With respect to the Company’s litigation against D-Link, which was settled in May 2007, the Company utilized the legal services of Blank Rome, LLP on a full contingency basis. In accordance with the Company’s contingency fee agreement with Blank Rome LLP, once the Company recovers its expenses related to the litigation (which was recovered in the first quarter of 2013), the Company is obligated to pay legal fees to Blank Rome LLP equal to 25% of the royalty revenue received by the Company from its license agreement with D-Link. During the nine months ended September 30, 2013, the Company accrued legal fees to Blank Rome of $24,000. | |
[2] Patent Acquisitions: | |
On February 28, 2013, the Company completed the acquisition of four (4) patents (as well as a pending patent application) from Dr. Ingemar Cox, a technology leader in digital watermarking content identification, digital rights management and related technologies, for a purchase price of $1,000,000 in cash and 403,226 shares of the Company’s common stock. In addition, the Company is obligated to pay Dr. Cox 12.5% of the net proceeds (after deduction of expenses) generated by the Company from licensing, sale or enforcement of the patents. As of September 30, 2013, the Company has filed seven (7) additional related patent applications with the United States Patent and Trademark Office seeking patent protection based upon the original patent application filed in 2000. | |
On May 21, 2013, the Company’s newly formed subsidiary, Mirror Worlds Technologies, LLC, acquired all of the patents previously owned by Mirror Worlds, LLC (which subsequently changed its name to Looking Glass LLC), consisting of nine (9) issued United States patents and five (5) pending applications covering foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system. As consideration for the patent acquisition, the Company paid Mirror Worlds, LLC $3,000,000 in cash, and issued 5-year warrants to purchase an aggregate of 1,750,000 shares of the Company’s common stock (875,000 shares of common stock at an exercise price of $1.40 per share and 875,000 shares of common stock at an exercise price of $2.10 per share). As part of the acquisition, the Company also entered into an agreement with Recognition Interface, LLC (“Recognition”), an entity that financed the commercialization of the patent portfolio prior to its sale to Mirror Worlds, LLC and also retained an interest in the licensing proceeds of the patent portfolio held by Mirror Worlds, LLC. Pursuant to the terms of the Company’s agreement with Recognition, Recognition received (i) 5-year warrants to purchase 250,000 shares of the Company’s common stock at $1.40 per share, and (ii) 5-year warrants to purchase 250,000 shares of common stock at $2.10 per share. Recognition also received from the Company an interest in the net proceeds realized from the monetization of the patent portfolio as follows: (i) 10% of the first $125 million of net proceeds, (ii) 15% of the next $125 million of net proceeds, and (iii) 20% of any portion of the net proceeds in excess of $250 million. In addition, Abacus and Associates, Inc. (“Abacus”), an investment entity affiliated with Recognition, received a 60-day warrant to purchase 500,000 shares of the Company’s common stock at $2.05 per share. In accordance with the Company’s agreement with Recognition, as a result of the exercise of the 60-day warrant by Abacus in July 2013, additional warrants to purchase an aggregate of 250,000 shares (125,000 shares at an exercise price of $2.10 per share and 125,000 shares at an exercise price of $1.40 per share) of the Company’s common stock were issued to Recognition. | |
[3] Amended Patent Purchase Agreement: | |
On January 18, 2005, the Company and Merlot Communications, Inc., the successor of which is BAXL Technologies, Inc. (the “Seller”), amended the Patent Purchase Agreement originally entered into in November 2003 (the "Amendment") pursuant to which the Company paid an additional purchase price of $500,000 to Seller for the restructuring of future contingent payments to Seller from the licensing or sale of the patents (including the Remote Power Patent and the QoS family of patents). The Amendment provided for future contingent payments by the Company to Seller of $1.0 million upon achievement of $25 million of Net Royalties (as defined) which payment was accrued in 2011 and subsequently paid, an additional $1.0 million upon achievement of $50 million of Net Royalties and an additional $500,000 upon achievement of $62.5 million of Net Royalties from the licensing or sale of the patents acquired from Seller. | |
[4] Services Agreement: | |
Pursuant to an agreement, dated November 30, 2004, between the Company and ThinkFire Services USA, Ltd. (“ThinkFire”), the Company is obligated to pay ThinkFire fees from royalty payments received from certain licensees in consideration for services performed on behalf of the Company. During the nine month periods ended September 30, 2013 and 2012, the Company accrued fees of approximately $77,000 and $73,000, respectively, with respect to its obligation to ThinkFire. | |
[5] Lease Agreement: | |
The Company currently leases office space in New York City at a cost of $3,500 per month which lease expires on November 30, 2013. | |
On June 16, 2011, the Company entered into a four-year lease agreement commencing July 18, 2011 to rent office space, consisting of approximately 2,400 square feet, for offices in New Canaan, Connecticut. In accordance with the lease, the Company pays a base rent of $6,400 per month for the first two years, $6,800 per month for the third year and $7,000 per month for the fourth year. The base rent is subject to annual adjustments to reflect increases in real estate taxes and operating expenses. The Company also entered into a one year sublease (which expired in July 2012 and was not extended) at a base rent of $3,700 per month to sublet approximately 50% of the space to a third party. |
EMPLOYMENT_ARRANGEMENTS_AND_OT
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | 9 Months Ended |
Sep. 30, 2013 | |
Employment Arrangements And Other Agreements | ' |
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | ' |
[1] On November 1, 2012, the Company entered into a new employment agreement (the “Agreement”) with its Chairman and Chief Executive Officer for a one year term (which shall automatically be extended for two successive one year periods unless terminated by the Company) at an annual base salary of $415,000. The Agreement established an annual target bonus of $150,000 for the Chairman and Chief Executive Officer based on performance criteria to be established on an annual basis by the Board of Directors (or compensation committee). For the year ended December 31, 2012, the Chairman and Chief Executive Officer received the target bonus of $150,000. In connection with the Agreement, the Chairman and Chief Executive Officer was issued a 10-year option to purchase 500,000 shares of the Company’s common stock at an exercise price of $1.19 per share, which vests in equal quarterly amounts of 41,667 shares beginning November 1, 2012 through August 31, 2015, subject to acceleration upon a change of control. The Chairman and Chief Executive Officer shall forfeit the balance of unvested shares if his employment has been terminated “For Cause” (as defined) by the Company or by him without "Good Reason" (as defined). Under the terms of the Agreement, the Chairman and Chief Executive Officer also receives incentive compensation in an amount equal to 5% of the Company’s gross royalties or other payments or proceeds (without deduction of legal fees or any other expenses) with respect to its Remote Power Patent and a 10% net interest (gross royalties and other payments or proceeds after deduction of all legal fees and litigation expenses related to licensing, enforcement and sale activities, but in no event shall he receive less than 6.25% of the gross recovery) of the Company’s royalties and other payments with respect to its other patents besides the Remote Power Patent (the “Additional Patents”) (the “Incentive Compensation”). During the nine months ended September 30, 2013 and September 30, 2012 the Chairman and Chief Executive Officer earned Incentive Compensation of $356,000 and $390,000, respectively. The Incentive Compensation shall continue to be paid to the Chairman and Chief Executive Officer for the life of each of the Company’s patents with respect to licenses entered into with third parties during the term of his employment or at anytime thereafter, whether he is employed by the Company or not; provided, that, the Chairman and Chief Executive Officer’s employment has not been terminated by the Company “For Cause” (as defined) or terminated by him without “Good Reason” (as defined). In the event of a merger or sale of substantially all of the assets of the Company, the Company has the option to extinguish the right of Chairman and Chief Executive Officer to receive future Incentive Compensation by payment to him of a lump sum payment, in an amount equal to the fair market value of such future interest as determined by an independent third party expert if the parties do not reach agreement as to such value. In the event that the Chairman and Chief Executive Officer’s employment is terminated by the Company “Other Than For Cause” (as defined) or by him for “Good Reason” (as defined), the Chairman and Chief Executive Officer shall also be entitled to (i) a lump sum severance payment of 12 months base salary, (ii) a pro-rated portion of the $150,000 target bonus provided bonus criteria has been satisfied on a pro-rated basis through the calendar quarter in which the termination occurs and (iii) accelerated vesting of all unvested options and warrants. | |
In connection with the Agreement, the Chairman and Chief Executive Officer has also agreed not to compete with the Company as follows: (i) during the term of the Agreement and for a period of 12 months thereafter if his employment is terminated “Other Than For Cause” (as defined) provided he is paid his 12 month base salary severance amount and (ii) for a period of two years from the termination date, if terminated “For Cause” by the Company or “Without Good Reason” by the Chairman and Chief Executive Officer. | |
[2] On June 8, 2009, the Company entered into an employment agreement (the “Agreement”) with the Chairman and Chief Executive Officer for a three year term (which expired in June 2012) at an annual base salary of $375,000 (retroactive to April 1, 2009) for the first year and increasing 5% on each of April 1, 2010 and April 1, 2011. During the term of the Agreement, the Chairman and Chief Executive Officer received a cash bonus in an amount no less than $150,000 on an annual basis. In connection with the Agreement, the Chairman and Chief Executive Officer was issued a 10-year option to purchase 750,000 shares of common stock at an exercise price of $0.83 per share, which vested in equal quarterly amounts of 62,500 shares beginning June 30, 2010 through March 31, 2012. In addition to the aforementioned option grant, the Company extended for an additional 5 years the expiration dates of all options (an aggregate of 417,500 shares) expiring in the calendar year 2009 owned by the Chairman and Chief Executive Officer. Under the terms of the Agreement, the Chairman and Chief Executive Officer also received additional bonus compensation in an amount equal to 5% of the Company’s royalties or other payments with respect to the Company’s Remote Power Patent (before deduction of payments to third parties including, but not limited to, legal fees and expenses and third party license fees). | |
[3] On February 3, 2011, the Company entered into an agreement with its Chief Financial Officer for his continued service through December 31, 2012. In consideration for his services, the Chief Financial Officer was compensated at the rate of $9,000 per month for the year ending December 31, 2011 and was to be compensated at the rate of $9,450 per month for the year ending December 31, 2012. In connection with the agreement, the Chief Financial Officer was also issued a 5-year stock option to purchase 100,000 shares of the Company’s common stock at an exercise price of $1.59 per share. The option vested 50,000 shares on the date of grant and the balance of the shares (50,000) vested on the one year anniversary date (February 3, 2012) from the date of grant. | |
[4] On April 12, 2012, the Company entered into an agreement with its Chief Financial Officer which amended the agreement, dated February 3, 2011 (See Note C[3] above), pursuant to which he continued to serve the Company. The amendment (the "Amendment") provided as follows: (i) the term of service of the Chief Financial Officer shall be extended until December 31, 2013; (ii) monthly compensation shall be increased to $11,000 per month; and (iii) the Chief Financial Officer was granted a 5-year stock option to purchase 75,000 shares of the Company’s common stock at an exercise price of $1.40 per share, which option vests over a one year period in equal quarterly amounts of 18,750 shares. Except as provided in the Amendment, all other terms of the agreement, dated February 3, 2011, remain in full force and effect. |
LITIGATION
LITIGATION | 9 Months Ended |
Sep. 30, 2013 | |
Litigation | ' |
LITIGATION | ' |
[1] In September 2011, the Company initiated patent litigation against sixteen (16) data networking equipment manufacturers in the United States District Court for the Eastern District of Texas, Tyler Division, for infringement of its Remote Power Patent. Named as defendants in the lawsuit, excluding related parties, were Alcatel-Lucent USA, Inc., Allied Telesis, Inc., Avaya Inc., AXIS Communications Inc., Dell, Inc., GarrettCom, Inc., Hewlett-Packard Company, Huawei Technologies USA, Juniper Networks, Inc., Motorola Solutions, Inc., NEC Corporation, Polycom Inc., Samsung Electronics Co., Ltd., ShoreTel, Inc., Sony Electronics, Inc., and Transition Networks, Inc. The Company seeks monetary damages based upon reasonable royalties. During the year ended December 31, 2012, the Company reached settlement agreements with defendants Motorola Solutions, Inc. ("Motorola"), Transition Networks, Inc. ("Transition Networks") and GarretCom, Inc. (“GarretCom”). In February 2013, the Company reached settlement agreements with Allied Telesis, Inc. (“Allied Telesis”) and NEC Corporation (“NEC”). As part of the settlements, Motorola, Transition Networks, GarretCom, Allied Telesis and NEC each entered into a non-exclusive license agreement for the Company’s Remote Power Patent pursuant to which each such defendant agreed to license the Remote Power Patent for its full term (which expires in March 2020) and pay a license initiation fee and quarterly or annual royalties based on their sales of PoE products. On January 25, 2013, certain defendants filed a motion to stay the litigation pending completion or termination of the Inter Partes Review proceedings pending at the United States Patent and Trademark Office (see Note D(5) hereof). On March 5, 2013, the Court granted defendants’ motion and stayed the litigation pending the disposition of the Inter Partes Review proceedings. | |
[2] On May 23, 2013, the Company’s newly formed subsidiary (Mirror Worlds Technologies, LLC) initiated patent litigation in the United States District Court for the Eastern District of Texas, Tyler Division, against Apple, Inc., Microsoft, Inc., Hewlett-Packard Company, Lenovo Group Ltd., Lenovo (United States), Inc., Dell, Inc., Best Buy Co., Inc., Samsung Electronics America, Inc. and Samsung Telecommunications America L.L.C., for infringement of the ‘227 Patent (one of the patents the Company acquired as part of the Mirror Worlds patent portfolio – See Note B[2] to the Company’s financial statements included in this quarterly report). The Company seeks, among other things, monetary damages based upon reasonable royalties. The lawsuit alleges that the defendants have infringed and continue to infringe the claims of the ‘227 Patent by making, selling, offering to sell and using infringing products including Mac OS and Windows operating systems and personal computers and tablets that include versions of those operating systems, and by encouraging others to make, sell, and use these products. | |
[3] In July 2010, the Company settled its patent litigation pending in the United States District Court for the Eastern District of Texas, Tyler Division, against Adtran, Inc, Cisco Systems, Inc. and Cisco-Linksys, LLC, (collectively, “Cisco”), Enterasys Networks, Inc., Extreme Networks, Inc., Foundry Networks, Inc., and 3Com Corporation, Inc. As part of the settlement, Adtran, Cisco, Enterasys, Extreme Networks and Foundry Networks each entered into a settlement agreement with the Company and entered into non-exclusive licenses for the Company’s Remote Power Patent (the “Licensed Defendants”). Under the terms of the licenses, the Licensed Defendants paid the Company aggregate upfront payments of approximately $32 million and also agreed to license the Remote Power Patent for its full term, which expires in March 2020. In accordance with the Settlement and License Agreement, dated May 25, 2011, which expanded upon the July 2010 agreement, Cisco is obliged to pay the Company royalties (which began in the first quarter of 2011) based on its sales of PoE products up to maximum royalty payments per year of $8 million through 2015 and $9 million per year thereafter for the remaining term of the patent. The royalty payments are subject to certain conditions including the continued validity of the Company’s Remote Power Patent, and the actual royalty amounts received may be less than the caps stated above, as was the case in 2012 and 2011. Under the terms of the agreement, if the Company grants other licenses with lower royalty rates to third parties (as defined in the agreement), Cisco shall be entitled to the benefit of the lower royalty rates provided it agrees to the material terms of such other license. Under the terms of the agreement, the Company has certain obligations to Cisco and if it materially breaches such terms, Cisco will be entitled to stop paying royalties to the Company. Such a breach of the agreement by the Company would have a material adverse effect on the Company’s business, financial condition and results of operations. | |
[4] On July 20, 2012, an unknown third party filed with the United States Patent and Trademark Office (USPTO) a request for an Ex Parte Reexamination, requesting that our Remote Power Patent be reexamined by the USPTO. The request for reexamination was stayed on December 21, 2012 pending the termination or completion of the Inter Partes Review proceedings described in Note D[5] below. The initial grant of the reexamination by USPTO is not unusual as the majority of such applications are initially granted by USPTO. While the Company believes that the reexamination proceeding will further validate and strengthen the Remote Power Patent, should the USPTO reach a final determination that the Remote Power Patent is invalid (unless overturned by the USPTO’s Board of Patent Appeals and Interference or the United States Court of Appeals for the Federal Circuit), such a determination would have a material adverse effect on the Company as its entire current revenue stream is dependent upon the continued validity of our Remote Power Patent. | |
[5] At September 30, 2013, Avaya Inc., Dell Inc., Sony Corporation of America and Hewlett Packard Co. were petitioners in Inter Partes Review proceedings (which have been joined together) (the “IPR Proceeding”) pending at the United States Patent and Trademark Office before the Patent Trial and Appeal Board (the “Patent Board”) involving our Remote Power Patent. The IPR Proceeding is scheduled for a trial before the Patent Board on January 17, 2014. In the event that the Patent Board reaches a final determination in the IPR proceedings that certain of the Company’s claims related to the Remote Power Patent are unpatentable, such a determination (unless overturned by the United States Court of Appeals for the Federal Circuit) would have a material adverse effect on the Company’s business, financial condition and results of operations as the Company’s entire current revenue stream is dependent upon the continued validity of the Company’s Remote Power Patent. |
STOCK_REPURCHASE
STOCK REPURCHASE | 9 Months Ended |
Sep. 30, 2013 | |
Stock Repurchase | ' |
STOCK REPURCHASE | ' |
On August 22, 2011, the Company announced that its Board of Directors approved a share repurchase program to repurchase up to $2,000,000 of shares of its common stock over the next 12 months ("Share Repurchase Program"). The common stock may be repurchased from time to time in open market transactions or privately negotiated transactions in the Company’s discretion. The timing and amount of the shares repurchased is determined by management based on its evaluation of market conditions and other factors. The Share Repurchase Program may be increased, suspended or discontinued at any time. On January 31, 2012, the Board of Directors increased the Share Repurchase Program to purchase up to an additional $2,000,000 (or an aggregate of $4,000,000) of the Company's common stock for the next 12 months. On January 24, 2013, the Board of Directors increased the Share Repurchase Program to purchase up to an additional $1,000,000 (or an aggregate of $5,000,000) of the Company’s common stock over the next 12 months. During the three month period ended September 30, 2013, the Company repurchased 97,812 shares of common stock as, at an average price per share of $1.78, as part of its Share Repurchase Program. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events | ' |
SUBSEQUENT EVENTS | ' |
[1] On October 9, 2013, the Company filed an Amendment to its Certificate of Incorporation to change its name to Network-1 Technologies, Inc. | |
[2] On October 9, 2013, the Company’s 2013 Stock Incentive Plan (“2013 Plan”) was approved by the Company’s stockholders (previously approved by the Company’s Board of Directors in August 2013). The 2013 Plan provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock, (c) deferred stock, (d) stock appreciation rights, and (e) other stock-based awards. Awards under the 2013 Plan may be granted singly, in combination, or in tandem. Subject to standard anti-dilution adjustments as provided in the 2013 Plan, the 2013 Plan provides for an aggregate of 2,600,000 shares of the Company’s common stock to be available for distribution pursuant to the 2013 Plan. The Compensation Committee (or the Board of Directors) will generally have the authority to administer the 2013 Plan, determine participants who will be granted awards under the 2013 Plan, the size and types of awards, the terms and conditions of awards and the form and content of the award agreements representing awards. Awards under the 2013 Plan may be granted to employees, directors and consultants of the Company and its subsidiaries. |
NATURE_OF_BUSINESS_AND_SUMMARY1
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Nature Of Business And Summary Of Significant Accounting Policies Policies | ' | ||||
[1] BASIS OF PRESENTATION: | ' | ||||
The accompanying condensed financial statements as of September 30, 2013 and for the three and nine month periods ended September 30, 2013 and September 30, 2012 are unaudited, but, in the opinion of the management of Network-1 Technologies, Inc. (the "Company"), contain all adjustments consisting only of normal recurring items which the Company considers necessary for the fair presentation of the Company's financial position as of September 30, 2013, and the results of its operations for the three and nine month periods ended September 30, 2013 and September 30, 2012 and its cash flows for the nine month periods then ended. The condensed financial statements included herein have been prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2012 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results of operations to be expected for the full year. | |||||
[2] BUSINESS: | ' | ||||
The Company’s principal business is the development, licensing and protection of our intellectual property. We presently own twenty (20) patents issued by the U.S. Patent and Trademark Office that relate to various technologies including patents covering (i) the delivery of power over Ethernet (“PoE”) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras, over Ethernet networks; (ii) foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; (iii) enabling technology for identifying media content on the Internet, and taking further action to be performed based on such identification including, among others, the insertion of advertising and the facilitation of the purchase of goods and services; and (iv) systems and methods for the transmission of audio, video and data over computer and telephony networks. In addition, the Company continually reviews opportunities to acquire or license additional intellectual property. The Company’s strategy is to pursue licensing and strategic alliances with companies in industries that manufacture and sell products that make use of the technologies underlying its intellectual property as well as with other users of the technologies who benefit directly from the technologies including corporate, educational and governmental entities. The Company has been actively engaged in the licensing of its patent (U.S. Patent No. 6,218,930) covering the control of power delivery over Ethernet cables (the “Remote Power Patent”). At September 30, 2013, the Company had entered into a total of sixteen (16) license agreements with respect to its Remote Power Patent which, among others, include license agreements with Cisco Systems, Inc. and Cisco-Linksys, LLC, Microsemi Corporation, Extreme Networks, Inc., Motorola Solutions, Inc., Allied Telesis, Inc., NEC Corporation and several other major data networking equipment manufacturers. The Company has a pending patent infringement litigation against eleven (11) data network equipment manufacturers for infringement of its Remote Power Patent (See Note D[1] to the financial statements included in this quarterly report). As part of the Company’s patent acquisition and development strategy, in February 2013 the Company acquired four (4) patents and one (1) pending patent application and in May 2013 the Company acquired nine (9) patents and five (5) pending patent applications (See Note B[2] to the financial statements included in this quarterly report). In May 2013, the Company’s newly formed subsidiary (Mirror Worlds Technologies, LLC) initiated patent litigation against Apple, Inc., Microsoft, Inc. and several other major vendors of operating system software and computer systems for infringement of one of the patents acquired in May 2013 (See Note D[2] hereof). | |||||
(b) As reflected in the accompanying financial statements, the Company had revenue of $1,227,000 and $1,418,000 for the three month period ended September 30, 2013 and September 30, 2012, respectively, and revenue of $7,198,000 and $7,809,000 for the nine month period ended September 30, 2013 and September 30, 2012, respectively. Non-cash revenue of $70,000 was included in the three and nine month periods ended September 30, 2013. The Company has been dependent upon cash on hand and royalty revenue from licensing of its Remote Power Patent to fund its operations. The Company had cash and cash equivalents of $19,584,000 as of September 30, 2013. | |||||
[3] STOCK-BASED COMPENSATION: | ' | ||||
On January 24, 2013, the Company issued 5-year stock options to each of its then four (4) non-management directors to purchase 25,000 shares of its common stock at an exercise price of $1.19 per share. Such options vest over a one year period in equal quarterly amounts, subject to continued service on the Board (the vesting was accelerated for one director upon his resignation in August 2013). The Company recorded $39,000 in non-cash compensation in connection with the vested portion of these options for the nine month period ended September 30, 2013. | |||||
On June 19, 2013, the Company issued to a director a 5-year stock option to purchase 300,000 shares of its common stock, at an exercise price of $1.88 per share, for service as the sole member of the Company’s Strategic Development Committee. The shares underlying such stock option vested 100,000 shares on the date of grant and will vest 100,000 shares on June 19, 2014 and 100,000 shares on June 19, 2015. The Company recorded $75,000 in non-cash compensation in connection with the vested portion of the stock option for the nine month period ended September 30, 2013. | |||||
During the nine month periods ended September 30, 2013 and 2012, the Company recorded non-cash compensation expense of $81,000 and $37,000 for the vested portion of 10-year stock options to purchase 500,000 and 750,000 shares issued to the Company’s Chairman and Chief Executive Officer in November 2012 and June 2009, respectively. In addition, during the nine month periods ended September 30, 2013 and September 30, 2012, the Company recorded non-cash compensation expense of $129,000 and $98,000, respectively, for the vested portion of stock options granted to its Chief Financial Officer, directors and consultants in current prior years. | |||||
On January 27, 2012, the Company issued a 5-year stock option to purchase 50,000 shares of its common stock, at an exercise price of $1.21 per share, to a director for joining the Board of Directors, which option vested in equal quarterly installments over a one year period. On January 31, 2012 and February 24, 2012, the Company issued 5-year stock options to purchase an aggregate of 25,000 shares to each of its three non-management directors, at exercise prices of $1.21 and $1.35 per share. These stock options vest over a one year period in equal quarterly installments. | |||||
On April 11, 2012, the Company issued a 5-year stock option to purchase 125,000 shares of its common stock to one of its directors, at an exercise price of $1.40 per share, in consideration of serving on a special committee of the Board of Directors, and such option was to vest over a one year period in equal quarterly amounts of 31,250 shares (the vesting was accelerated following the resignation of the director in December 2012). On April 12, 2012, the Company issued to its Chief Financial Officer, in consideration of extension of his consulting agreement with the Company (See Note C[4]), a 5-year stock option to purchase 75,000 shares of its common stock, at an exercise price of $1.40 per share. Such option vested over a one year period in equal installments of 18,750 shares. | |||||
During the nine month period ended September 30, 2013, the Company’s Chairman and Chief Executive Officer, Chief Financial Officer and an employee exercised stock options to purchase an aggregate of 1,125,000, 10,000 and 52,500 shares, respectively, of the Company’s common stock at an exercise price of $0.68 per share. All such options were exercised on a cashless basis (except for the exercise of an option to purchase 10,000 shares by the Chief Financial Officer) by delivery of an aggregate of 396,373 and 18,497 shares of common stock, respectively, and 241,540 and 10,201 shares of common stock were delivered with an aggregate value of $466,172 and $19,688 to fund payroll withholding taxes on exercise, resulting in aggregate net shares of 487,087 and 23,802 issued to the Chairman and Chief Executive Officer and the employee, respectively, with respect to such option exercises. | |||||
During the nine month period ended September 30, 2012, the Company's Chairman and Chief Executive Officer and an affiliate exercised stock options and warrants to purchase an aggregate of 2,623,070 shares of the Company's common stock at an exercise price of $0.68 per share. All such stock options were exercised on a cashless basis by delivery of 1,306,979 shares of common stock and 350,160 shares of common stock were delivered with an aggregate value of $486,951 to fund payroll withholding taxes on exercise, resulting in aggregate net shares of 965,933 issued to the Chairman and Chief Executive Officer with respect to such stock option and warrant exercises. | |||||
The fair value of each stock option grant on the date of grant is estimated using the Black-Scholes option-pricing utilizing the following weighted average assumptions: | |||||
NINE MONTHS ENDED SEPTEMBER 30, | |||||
2013 | 2012 | ||||
Risk-free interest rates | 0.78% -1.24% | 0.71%-0.89% | |||
Expected option life in years | 5 years | 5 years | |||
Expected stock price volatility | 43.54% - 44.31% | 45.86% | |||
Expected dividend yield | -0- | - 0 - | |||
[4] REVENUE RECOGNITION: | ' | ||||
The Company recognizes revenue received from the licensing of its intellectual property in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB No. 104") and related authoritative pronouncements. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been performed pursuant to the terms of the license agreement, (iii) amounts are fixed or determinable, and (iv) collectibility of amounts is reasonably assured. One licensee (Cisco Systems, Inc. and an affiliate) constituted approximately 81% and 80% of the Company’s revenue for the nine month periods ended September 30, 2013 and September 30, 2012, respectively. | |||||
[5] INCOME TAXES: | ' | ||||
At September 30, 2013, the Company had net operating loss carryforwards (NOLs) totaling approximately $24,317,000 expiring 2029, with a future tax benefit of approximately $8,268,000. During the second quarter of 2011, as a result of the Company's financial results and projected future operating results, management determined that a portion of the NOL was more likely than not to be utilized resulting in the recording of a one-time, non-cash income tax benefit of $7,000,000 (income) or $0.29 per share (basic) for the three and six month periods ended June 30, 2011. At September 30, 2013 and December 31, 2012, $6,002,000 and $6,194,000, respectively, were recorded as a deferred tax asset on the Company's balance sheet. During the nine month period ended September 30, 2013 as a result of income (before taxes) for the period of $2,181,000, $215,000 was recorded as income tax expense and the deferred tax asset was reduced by $192,000 to $6,002,000. To the extent that the Company earns income in the future, it will report income tax expense and such expense attributable to federal income taxes will reduce the recorded income tax benefit asset reflected on the balance sheet. Management will continue to evaluate the recoverability of the NOL and adjust the deferred tax asset appropriately. Utilization of NOL credit carryforwards can be subject to a substantial annual limitation due to ownership change limitations that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. | |||||
[6] EARNINGS (LOSS) PER SHARE: | ' | ||||
Basic Earnings (loss) per share is calculated by dividing the net income (loss) by the weighted average number of outstanding common shares during the period. Diluted per share data includes the dilutive effects of options, warrants and convertible securities. Potential shares of 7,207,500 and 5,460,000 at September 30, 2013 and 2012, respectively, consisted of options and warrants. Computations of basic and diluted weighted average common shares outstanding are as follows: | |||||
Nine Months Ended | Three Months Ended | ||||
September 30, | September 30, | ||||
2013 | 2012 | 2013 | 2012 | ||
Weighted-average common shares outstanding – basic | 25,387,348 | 25,659,085 | 25,792,387 | 25,963,093 | |
Dilutive effect of options and warrants | 2,075,010 | 2,885,887 | 2,397,196 | 2,553,549 | |
Weighted-average common shares outstanding – diluted | 27,462,358 | 28,544,972 | 28,189,583 | 28,516,642 | |
Options and Warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 5,132,490 | 2,574,113 | 4,810,304 | 2,906,451 | |
[7] CASH EQUIVALENTS: | ' | ||||
The Company places cash investments in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC"). At September 30, 2013, the Company maintained cash balance of $19,334,000 in excess of FDIC limits. | |||||
The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. | |||||
Cash and cash equivalents as of September 30, 2013 and December 31, 2012 are composed of: | |||||
September 30, 2013 | December 31, 2012 | ||||
Cash | $ 1,823,000 | $ 1,346,000 | |||
Money market fund | 17,761,000 | 20,637,000 | |||
Total | $ 19,584,000 | $ 21,983,000 | |||
[8] MARKETABLE SECURITIES | ' | ||||
Marketable securities are classified as available-for-sale and are recorded at fair market value. Unrealized gain and losses are reported as other comprehensive income. Realized gains and losses are included in income in the period they are realized. The Company's marketable securities consist of a corporate bond (face value $500,000) with a 5% coupon and a maturity date of June 2015. | |||||
[9] INVESTMENT IN LIFESTREAMS | ' | ||||
In May 2013, as part of the acquisition of the Mirror Worlds portfolio (See Note B[2] hereof), the Company acquired from Mirror Worlds, LLC 250,000 shares of common stock of Lifestreams Technologies Corporation (“Lifestreams”), a company engaged in the development of next generation applications and methodologies designed to organize and display digital data. In addition, in July 2013 the Company made an additional investment of $50,000 in Lifestreams and received 123,456 shares of Series A preferred stock and, as part of an amended license agreement between the Company’s subsidiary and Lifestreams, the Company received a warrant to purchase 7.5% of the then outstanding shares of common stock of Lifestreams on a fully diluted basis. The warrant is valued at $70,000 based on the Black-Scholes option model and recorded as non-cash royalty income. Since the investment in Lifestreams does not have a readily determinable fair value, such investment was recorded utilizing the cost-method. At September 30, 2013, the Company’s investment in Lifestream consists of the following: | |||||
Number of | Value | ||||
Shares | |||||
Common Stock | 250,000 | $ 76,000 | |||
Series A Preferred Stock | 123,456 | 50,000 | |||
Warrants | 1,305,000 | 70,000 | |||
$ 196,000 |
NATURE_OF_BUSINESS_AND_SUMMARY2
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Nature Of Business And Summary Of Significant Accounting Policies Tables | ' | ||||
Schedule Fair Value Options | ' | ||||
The fair value of each stock option grant on the date of grant is estimated using the Black-Scholes option-pricing utilizing the following weighted average assumptions: | |||||
NINE MONTHS ENDED SEPTEMBER 30, | |||||
2013 | 2012 | ||||
Risk-free interest rates | 0.78% -1.24% | 0.71%-0.89% | |||
Expected option life in years | 5 years | 5 years | |||
Expected stock price volatility | 43.54% - 44.31% | 45.86% | |||
Expected dividend yield | -0- | - 0 - | |||
Schedule Earnings Per Share | ' | ||||
Computations of basic and diluted weighted average common shares outstanding are as follows: | |||||
Nine Months Ended | Three Months Ended | ||||
September 30, | September 30, | ||||
2013 | 2012 | 2013 | 2012 | ||
Weighted-average common shares outstanding – basic | 25,387,348 | 25,659,085 | 25,792,387 | 25,963,093 | |
Dilutive effect of options and warrants | 2,075,010 | 2,885,887 | 2,397,196 | 2,553,549 | |
Weighted-average common shares outstanding – diluted | 27,462,358 | 28,544,972 | 28,189,583 | 28,516,642 | |
Options and Warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 5,132,490 | 2,574,113 | 4,810,304 | 2,906,451 | |
Schedule of Cash and Cash Equivalents | ' | ||||
Cash and cash equivalents as of September 30, 2013 and December 31, 2012 are composed of: | |||||
September 30, 2013 | December 31, 2012 | ||||
Cash | $ 1,823,000 | $ 1,346,000 | |||
Money market fund | 17,761,000 | 20,637,000 | |||
Total | $ 19,584,000 | $ 21,983,000 | |||
Schedule of Investment | ' | ||||
At September 30, 2013, the Company’s investment in Lifestream consists of the following: | |||||
Number of | Value | ||||
Shares | |||||
Common Stock | 250,000 | $ 76,000 | |||
Series A Preferred Stock | 123,456 | 50,000 | |||
Warrants | 1,305,000 | 70,000 | |||
$ 196,000 |
NATURE_OF_BUSINESS_AND_SUMMARY3
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Business (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Data | Data | |||||
Nature Of Business And Summary Of Significant Accounting Policies - Business Details Narrative | ' | ' | ' | ' | ' | ' |
Number of patents owned covering various technologies | 20 | ' | 20 | ' | ' | ' |
Number of license agreements entered with respect to Remote Power Patent | 16 | ' | 16 | ' | ' | ' |
Royalty revenue | $1,227,000 | $1,418,000 | $7,198,000 | $7,809,000 | ' | ' |
Cash and cash equivalents | $19,584,000 | ' | $19,584,000 | ' | $21,983,000 | $20,661,000 |
NATURE_OF_BUSINESS_AND_SUMMARY4
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details Narrative) (USD $) | 1 Months Ended | 9 Months Ended | ||||
Sep. 30, 2013 | Jan. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Nov. 30, 2012 | Jun. 30, 2009 | |
Nature Of Business And Summary Of Significant Accounting Policies - Stock-Based Compensation Details Narrative | ' | ' | ' | ' | ' | ' |
Common stock subject to issued stock options for non-management directors | 300,000 | 100,000 | ' | ' | ' | ' |
Common stock subject to issued stock options for non-management directors, exercise price per share | $1.88 | $1.19 | ' | ' | ' | ' |
Non-cash compensation charges for non-management directors | ' | ' | $39,000 | ' | ' | ' |
Non-cash compensation charges for directors | ' | ' | 75,000 | ' | ' | ' |
Common stock subject to issued stock options of Chairman and CEO | ' | ' | ' | ' | 500,000 | 750,000 |
Common stock subject to issued stock options for chairman and CEO, exercise price per share | ' | ' | ' | ' | $1.19 | $0.68 |
Non-cash compensation expense for vested portion of options granted to Chairman and CEO | ' | ' | 81,000 | 37,000 | ' | ' |
Non-cash compensation expense for vested portion of options granted to the Chief Financial Officer, directors and consultants | ' | ' | 129,000 | 98,000 | ' | ' |
Common stock issued by exercised options and warrants | ' | ' | 1,187,500 | 2,623,070 | ' | ' |
Common stock issued through exercised options and warrants, exercise price per share | ' | ' | $0.68 | $0.68 | ' | ' |
Delivered common stock to exercise options on a cashless basis | ' | ' | 414,870 | 1,306,979 | ' | ' |
Delivered common stock to fund payroll withholding taxes on exercise | ' | ' | 251,741 | 350,160 | ' | ' |
Value of common stock delivered to fund payroll witholding taxes on exercise | ' | ' | $485,860 | $486,951 | ' | ' |
Net common stock issued | ' | ' | 510,889 | 965,953 | ' | ' |
NATURE_OF_BUSINESS_AND_SUMMARY5
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule Fair Value Options (Details) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Weighted average assumptions used for fair valuation of stock options | ' | ' |
Method used for fair valuation of stock options | ' | ' |
The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing utilizing the following weighted average assumptions | ||
Expected option life (in years) | '5 years | '5 years |
Expected stock price volatility (in percent) | ' | 45.86% |
Expected dividend yield (in percent) | 0.00% | 0.00% |
Minimum [Member] | ' | ' |
Weighted average assumptions used for fair valuation of stock options | ' | ' |
Risk-free interest rates | 0.78% | 0.71% |
Expected stock price volatility (in percent) | 43.54% | ' |
Maximum [Member] | ' | ' |
Weighted average assumptions used for fair valuation of stock options | ' | ' |
Risk-free interest rates | 1.24% | 0.89% |
Expected stock price volatility (in percent) | 44.31% | ' |
NATURE_OF_BUSINESS_AND_SUMMARY6
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details Narrative) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Nature Of Business And Summary Of Significant Accounting Policies - Revenue Recognition Details Narrative | ' | ' |
Percentage of revenue from one licensee (Cisco Systems) out of total revenue (in percent) | 81.00% | 80.00% |
NATURE_OF_BUSINESS_AND_SUMMARY7
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2011 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2011 | Dec. 31, 2012 | |
Nature Of Business And Summary Of Significant Accounting Policies - Income Taxes Details Narrative | ' | ' | ' | ' | ' | ' | ' |
Net operating loss carryforwards | $24,317,000 | ' | ' | $24,317,000 | ' | ' | ' |
Net operating loss carryforwards, Future tax benefits | 8,268,000 | ' | ' | 8,268,000 | ' | ' | ' |
Non-cash income tax expense (benefit) from operating loss carry forwards | -124,000 | 141,000 | -7,000,000 | 192,000 | 709,000 | -7,000,000 | ' |
Non-cash income tax benefit from operating loss carry forwards (in dollars per share) | ' | ' | $0.29 | ' | ' | $0.29 | ' |
Deferred tax assets | 6,002,000 | ' | ' | 6,002,000 | ' | ' | 6,194,000 |
Income before taxes | -335,000 | 346,000 | ' | 2,181,000 | 3,607,000 | ' | ' |
Income tax expense (benefit) | -127,000 | 152,000 | ' | 215,000 | 753,000 | ' | ' |
Reduction in deferred tax assets | ' | ' | ' | $192,000 | $709,000 | ' | ' |
NATURE_OF_BUSINESS_AND_SUMMARY8
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule Earnings Per Share (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Nature Of Business And Summary Of Significant Accounting Policies - Schedule Earnings Per Share Details | ' | ' | ' | ' |
Weighted-average common shares outstanding - basic | 25,792,387 | 25,963,093 | 25,387,348 | 25,659,085 |
Dilutive effect of options and warrants | 2,397,196 | 2,553,549 | 2,075,010 | 2,885,887 |
Weighted-average common shares outstanding - diluted | 28,189,583 | 28,516,642 | 27,462,358 | 28,544,972 |
Options and Warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 4,810,304 | 2,906,451 | 5,132,490 | 2,574,113 |
NATURE_OF_BUSINESS_AND_SUMMARY9
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule Earnings Per Share (Details Narratrive) | Sep. 30, 2013 | Sep. 30, 2012 |
Nature Of Business And Summary Of Significant Accounting Policies - Schedule Earnings Per Share Details Narratrive | ' | ' |
Potentialy Dilutive Shares | 7,207,500 | 5,460,000 |
Recovered_Sheet1
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Cash and Cash Equivalents (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Nature Of Business And Summary Of Significant Accounting Policies - Schedule Of Cash And Cash Equivalents Details | ' | ' | ' |
Cash | $1,823,000 | $1,346,000 | ' |
Money Market fund | 17,761,000 | 20,637,000 | ' |
Cash and cash equivalents | $19,584,000 | $21,983,000 | $20,661,000 |
Recovered_Sheet2
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule Cash Equivalents (Details Narrative) (USD $) | Sep. 30, 2013 |
Nature Of Business And Summary Of Significant Accounting Policies - Schedule Cash Equivalents Details Narrative | ' |
Cash in excess of FDIC limits | $19,334,000 |
Recovered_Sheet3
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Marketable Securities (Details Narrative) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Nature Of Business And Summary Of Significant Accounting Policies - Marketable Securities Details Narrative | ' |
Corporate Bond | $500,000 |
Coupon rate on corporate bond (in percent) | 5.00% |
Recovered_Sheet4
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Investment In Lifestreams (Details) (USD $) | Sep. 30, 2013 |
Nature Of Business And Summary Of Significant Accounting Policies - Investment In Lifestreams Details | ' |
Common Stock Shares Investment | 250,000 |
Common Stock Value Investment | $76,000 |
Series A Preferred Stock Shares Investment | 123,456 |
Series A Preferred Stock Value Investments | 50,000 |
Warrants Shares Investment | 1,305,000 |
Warrants Value Investment | 70,000 |
Total value of Investment | $196,000 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES - Legal Fees (Details Narrative) (USD $) | 9 Months Ended | 1 Months Ended | 9 Months Ended | ||||
Sep. 30, 2012 | 31-May-13 | Sep. 30, 2011 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | |
Legal Service Agreement With Dovel And Luner For Litigation Filed In September 2011 [Member] | Legal Service Agreement With Dovel And Luner For Litigation Filed In May 2013 [Member] | Legal Service Agreement With Dovel And Luner For Litigation Filed In September 2011 [Member] | Legal Service Agreement With Dovel And Luner For Litigation Filed In September 2011 [Member] | Legal Service Agreement-Blank Rome [Member] | Legal Service Agreement With Dovel And Luner For Litigation Settlement In July 2010 [Member] | Legal Service Agreement With Dovel And Luner For Litigation Settlement In July 2010 [Member] | |
Legal Fees payment ,Terms | ' | ' Legal fees on a contingency basis ranging from 25% to 40% of the net recovery (after deduction of expenses), subject to certain caps. | 'Legal fees on a full contingency basis ranging from 12.5% to 35% (with certain exceptions) of the net recovery (after deduction for expenses) | ' | 'Once the Company recovers its expenses related to the litigation it is obligated to pay legal fees to Blank Rome LLP equal to 24% of the royalty revenue received by the Company from its license agreement with D-Link | 'Maximum aggregate cash payment of $1.5 million plus a contingency fee of up to 24% | ' |
Legal fees and expenses | $297,000 | ' | ' | $181,000 | $24,000 | $1,479,000 | $1,581,000 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES - Patent Acquisition (Details Narrative) (USD $) | Jul. 31, 2013 | 21-May-13 | Feb. 28, 2013 |
Exercise price of five year option | ' | ' | ' |
Acquisition of four patents cash, purchase price | ' | ' | $1,000,000 |
Acquisition of four patents, common stock issued | ' | ' | 403,226 |
Obligated to pay Dr Cox, net proceeds percentage | ' | ' | 12.50% |
Cash consideration for patent acquisition (Mirror Worlds) | ' | $3,000,000 | ' |
Issued 5-year warrants to purchase an aggregate shares of common stock | ' | 2,250,000 | ' |
60 days Warrants to purchase shares of common stock | ' | 500,000 | ' |
Additional 5-year warrants to purchase shares of common stock as a result of exercise of 60-day warrant | 250,000 | ' | ' |
Net proceeds percentage payable to third party from the monetization of the Mirror Worlds patent portfolio | ' | ' | ' |
First $125 Million | ' | 10.00% | ' |
Next $125 Million | ' | 15.00% | ' |
Over $250 Million | ' | 20.00% | ' |
COMMITMENTS_AND_CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Services Agreement (Details Narrative) (Services Agreement with ThinkFire, USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Services Agreement with ThinkFire | ' | ' |
Purchase Commitment, Excluding Long-term Commitment [Line Items] | ' | ' |
Fees for services performed on behalf of entity | $77,000 | $73,000 |
COMMITMENTS_AND_CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES - Lease Agreement (Details Narrative) (USD $) | Dec. 01, 2012 | Jun. 16, 2011 |
Lease Agreement | ||
sqft | ||
Lease rent for office space in New York City | $3,500 | ' |
Area of four-year lease agreement for offices in New Canaan, Connecticut (in square feet) | ' | 2,400 |
Lease Expiration | '2013-11-30 | '2015-07-18 |
Base Rent for Lease - Per Month | ' | ' |
Base rent - year One | ' | 6,400 |
Base rent - year Two | ' | 6,400 |
Base rent - year Three | ' | 6,800 |
Base rent - year Four | ' | 7,000 |
Sublease Expiration | ' | '2012-07-31 |
One year sublease agreement to sublet 50% of space, Base rent expense, Per month | ' | $3,700 |
EMPLOYMENT_ARRANGEMENTS_AND_OT1
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended | 21 Months Ended | 22 Months Ended | 34 Months Ended | ||||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2011 | Dec. 31, 2013 | Jun. 30, 2012 | Aug. 31, 2015 | Nov. 01, 2012 | Apr. 12, 2012 | Jun. 08, 2009 | |
Employment Arrangements And Other Agreements Details Narrative | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Annual base salary Chairman and CEO | $415,000 | $415,000 | ' | ' | ' | ' | ' | ' | ' |
Ten year option to purchase common stock issued to Chairman and CEO | ' | ' | ' | ' | ' | ' | 500,000 | ' | 750,000 |
Ten year option, exercise price | ' | ' | ' | ' | ' | ' | $1.19 | ' | $0.83 |
Equal quarterly vesting, shares | ' | ' | ' | ' | 62,500 | 41,667 | ' | ' | ' |
Gross royalties incentives for remote power patent to Chairman and CEO | ' | ' | ' | ' | ' | ' | 5.00% | ' | ' |
Net royalties incentives for other patents to Chairman and CEO | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' |
Incentive Compensation for Chairman and CEO | 356,000 | 390,000 | ' | ' | ' | ' | ' | ' | ' |
Target bonus or minimum bonus Chairman and CEO | 150,000 | 150,000 | ' | ' | ' | ' | ' | ' | ' |
Monthly compensation for CFO | ' | $9,450 | $9,000 | $11,000 | ' | ' | ' | ' | ' |
Five year option issued to CFO | ' | ' | ' | ' | ' | ' | ' | 75,000 | ' |
Exercise price of five year option | ' | ' | ' | ' | ' | ' | ' | $1.40 | ' |
Equal quarterly amounts, CFO | ' | ' | ' | ' | ' | ' | ' | 18,750 | ' |
LITIGATION_Details_Narrative
LITIGATION (Details Narrative) (USD $) | 1 Months Ended | 9 Months Ended | 12 Months Ended | 60 Months Ended | 1 Months Ended |
Jul. 31, 2010 | Sep. 30, 2013 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2011 | |
Legal Service Agreement With Dovel And Luner For Litigation Filed In September 2011 [Member] | |||||
Data | |||||
Number of pending patent litigation defendants filed | ' | ' | ' | ' | 16 |
Aggregate upfront payments | $32,000,000 | ' | ' | ' | ' |
Maximum royalty payments | ' | ' | ' | 8,000,000 | ' |
Maximum royalty payments after 2015 | ' | ' | $9,000,000 | ' | ' |
Settlements expiry period | ' | '2020-03 | ' | ' | ' |
STOCK_REPURCHASE_Details_Narra
STOCK REPURCHASE (Details Narrative) (USD $) | Sep. 30, 2013 | Jan. 24, 2013 | Jan. 31, 2012 | Aug. 22, 2011 |
Stock Repurchase Details Narrative | ' | ' | ' | ' |
Maximum shares for repurchase over the next 12 months (in dollars) | 97,812 | 5,000,000 | 4,000,000 | 2,000,000 |
Additional shares for repurchase (in dollars) | ' | 1,000,000 | 2,000,000 | ' |
Common stock average price per share | $1.78 | ' | ' | ' |