Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 14-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | NETWORK 1 TECHNOLOGIES INC | |
Entity Central Index Key | 1065078 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
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 | 23,439,685 | |
Document Fiscal Year Focus | 2015 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $14,112,000 | $17,662,000 |
Marketable securities, available for sale | 1,099,000 | 1,079,000 |
Royalty receivables | 5,602,000 | 1,249,000 |
Other current assets | 180,000 | 242,000 |
Total Current Assets | 20,993,000 | 20,232,000 |
OTHER ASSETS: | ||
Deferred tax assets | 3,987,000 | 4,743,000 |
Patent, net of accumulated amortization | 3,199,000 | 3,582,000 |
Other investments, at cost | 576,000 | 576,000 |
Security deposits | 19,000 | 19,000 |
Total Other Assets | 7,781,000 | 8,920,000 |
TOTAL ASSETS | 28,774,000 | 29,152,000 |
CURRENT LIABILITIES: | ||
Accounts payable | 230,000 | 338,000 |
Accrued expenses | 1,837,000 | 1,873,000 |
TOTAL LIABILITIES | 2,067,000 | 2,211,000 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.01 par value, authorized 10,000,000 shares; none issued and outstanding at March 31, 2015 and December 31, 2014 | ||
Common stock, $0.01 par value; authorized 50,000,000 shares; 23,445,736 and 24,274,336 shares issued and outstanding at March 31,2015 and December 31, 2014, respectively | 234,000 | 243,000 |
Additional paid-in capital | 61,075,000 | 60,977,000 |
Accumulated deficit | -34,605,000 | -34,262,000 |
Other comprehensive income (loss) | 3,000 | -17,000 |
TOTAL STOCKHOLDERS' EQUITY | 26,707,000 | 26,941,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $28,774,000 | $29,152,000 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 23,445,736 | 24,274,336 |
Common stock, shares outstanding | 23,445,736 | 24,274,336 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income and Comprehensive Income (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Condensed Statements Of Income And Comprehensive Income | ||
ROYALTY REVENUE | $5,627,000 | $4,491,000 |
COST OF REVENUE | 1,689,000 | 1,314,000 |
GROSS PROFIT | 3,938,000 | 3,177,000 |
OPERATING EXPENSES: | ||
General and administrative | 1,105,000 | 598,000 |
Amortization of patents | 413,000 | 409,000 |
Stock-based compensation | 100,000 | 27,000 |
TOTAL OPERATING EXPENSES | 1,618,000 | 1,034,000 |
OPERATING INCOME | 2,320,000 | 2,143,000 |
OTHER INCOME (EXPENSES): | ||
Interest income, net | 21,000 | 9,000 |
INCOME BEFORE INCOME TAXES | 2,341,000 | 2,152,000 |
INCOME TAXES | ||
Current | 55,000 | 45,000 |
Deferred | 756,000 | 711,000 |
Total Income Taxes | 811,000 | 756,000 |
NET INCOME | 1,530,000 | 1,396,000 |
Net Income per share | ||
Basic | $0.06 | $0.05 |
Diluted | $0.06 | $0.05 |
Weighted average number of common shares outstanding: | ||
Basic | 24,089,009 | 25,775,573 |
Diluted | 25,500,903 | 27,793,669 |
NET INCOME | 1,530,000 | 1,396,000 |
OTHER COMPREHENSIVE INCOME: | ||
Unrealized holding gain (loss) on securities available-for-sale arising during the period | 20,000 | -6,000 |
COMPREHENSIVE INCOME | $1,550,000 | $1,390,000 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income | $1,530,000 | $1,396,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of Patents | 413,000 | 409,000 |
Stock based compensation | 100,000 | 27,000 |
Deferred tax provision | 756,000 | 711,000 |
Sources (uses) of cash from changes in operating assets and liabilities: | ||
Royalty receivables | -4,353,000 | -3,706,000 |
Other current assets | 62,000 | 62,000 |
Accounts payable | -108,000 | -29,000 |
Accrued expense | -38,000 | 903,000 |
NET CASH USED IN OPERATING ACTIVITIES | -1,638,000 | -227,000 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of patents and other assets | -30,000 | -24,000 |
Acquisitions of Investments, at cost | -95,000 | |
NET CASH USED IN INVESTING ACTIVITIES | -30,000 | -119,000 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Value of shares delivered to fund withholding taxes on exercise of options | -28,000 | |
Repurchases of common stock | -1,882,000 | -202,000 |
NET CASH USED IN FINANCING ACTIVITIES | -1,882,000 | -230,000 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | -3,550,000 | -576,000 |
CASH AND CASH EQUIVALENTS, beginning of period | 17,662,000 | 18,938,000 |
CASH AND CASH EQUIVALENTS, end of period | $14,112,000 | $18,362,000 |
BASIS_OF_PRESENTATION_AND_NATU
BASIS OF PRESENTATION AND NATURE OF BUSINESS | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE A - BASIS OF PRESENTATION AND NATURE OF BUSINESS | [1] BASIS OF PRESENTATION |
The accompanying condensed consolidated financial statements 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 March 31, 2015, and the results of its operations and comprehensive income and its cash flows for the three month periods ended March 31, 2015 and March 31, 2014. The unaudited condensed consolidated financial statements included herein have been prepared in accordance with the accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP 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 condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2014 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2015. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results of operations to be expected for the full year. The accompanying consolidated financial statements include accounts of the Company and its wholly-owned subsidiary, Mirror Worlds Technologies, LLC. | |
[2] BUSINESS: | |
The Company is engaged in the development, licensing and protection of its intellectual property assets. The Company presently owns twenty-four (24) patents including (i) the remote power patent (the “Remote Power Patent”) covering 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; (ii) the Mirror Worlds patent portfolio (the “Mirror World Patent Portfolio”) relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; (iii) the Cox patent portfolio (the “Cox Patent Portfolio”) relating to enabling technology for identifying media content on the Internet and taking further action to be performed based on such identification; and (iv) patents covering systems and methods for the transmission of audio, video and data over computer and telephony networks in order to achieve high quality of service (QoS) (the “QoS Patents”). The Company has been actively engaged in licensing its Remote Power Patent (U.S. Patent No. 6,218,930). The Company has entered into seventeen (17) license agreements with respect to its Remote Power Patent. The Company’s current strategy includes continuing to pursue licensing opportunities for its Remote Power Patent and its efforts to monetize two patent portfolios (the Cox Patent Portfolio and the Mirror Worlds Patent Portfolio) acquired by the Company in 2013 – (see Note J[2]). The Company’s acquisition strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as the Company has achieved with respect to its Remote Power Patent. The Company’s Remote Power Patent has generated licensing revenue in excess of $76,000,000 from May 2007 through March 31, 2015. The Company continually reviews opportunities to acquire or license additional intellectual property. In addition, the Company may enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property. The Company has been dependent upon royalty revenue from license of its Remote Power Patent to fund its operations. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Use of Estimates and Assumptions |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The significant estimates and assumptions made in the preparation of the Company’s unaudited condensed consolidated financial statements include the valuation of warrants, stock-based payments, deferred income taxes and valuation of other investments. Actual results could be materially different from those estimates, upon which the carrying values were based. | |
Patents | |
The Company owns patents that relate to various technologies. The Company capitalizes the costs associated with acquisition, registration and maintenance of its acquired patents and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the patents would be capitalized and amortized over the balance of the useful life for the patents or expensed as appropriate. | |
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) collectability of amounts is reasonably assured. The Company relies on royalty reports received from third party licensees to record its revenue. From time to time the Company may audit royalties reported from licensees as the Company did with respect to Cisco Systems, Inc. (see Note N). Any adjusted royalty revenue as a result of such audits is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined. | |
Income Taxes | |
The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, “Income Taxes” (ASC 740), which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forward. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized. | |
ASC 740-10, “Accounting for Uncertainty in Income Taxes,” defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. | |
United States federal, state and local income tax returns prior to 2011 are not subject to examination by any applicable tax authorities. | |
Stock-Based Compensation | |
The Company accounts for its stock-based compensation at fair value estimated on the grant date using the Black-Scholes option pricing model. See Note D for further discussion of the Company’s stock-based compensation. | |
Earnings (Loss) Per Share | |
The Company reports earnings (loss) per share in accordance with U.S. GAAP, which requires presentation of basic and diluted earnings (loss) per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings (loss) per share excludes dilution and is computed by dividing income (loss) available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts, such as warrants and options to purchase common stock were exercised. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share. | |
Financial Instruments | |
U.S. GAAP regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. | |
The three levels of inputs are defined as follows: | |
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
Level 3 inputs to the valuation methodology are unobservable. | |
The carrying value of cash, royalty receivables, other assets, accounts payable, and accrued expenses approximates fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest. At March 31, 2015, it was not practicable to determine the fair value of the Company’s investment in Lifestreams Technologies Corporation as it has no readily determinable market value (see Note I). Marketable securities available for sale are measured at fair value on recurring basis based on Level 1 inputs (see Note H). |
PATENTS
PATENTS | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
NOTE C - PATENTS | The Company’s intangible assets at March 31, 2015 include patents with estimated remaining economic useful lives ranging from 1.25 to 6.5 years. For all periods presented, all of the Company’s patents were subject to amortization. The gross carrying amounts and accumulated amortization related to acquired intangible assets as of March 31, 2015 and December 31, 2014 are as follows: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Gross carrying amount – patents | $ | 6,340,000 | $ | 6,310,000 | |||||
Accumulated amortization – patents | (3,141,000 | ) | (2,728,000 | ) | |||||
Patents, net | $ | 3,199,000 | $ | 3,582,000 | |||||
Amortization expense for the three months ended March 31, 2015 and March 31, 2014 was $413,000 and $409,000, respectively. Future amortization of current intangible assets, net is as follows: | |||||||||
Twelve Months Ended March 31, | |||||||||
2016 | $ | 1,652,000 | |||||||
2017 | $ | 439,000 | |||||||
2018 | $ | 189,000 | |||||||
2019 | $ | 189,000 | |||||||
2020 and thereafter | $ | 730,000 | |||||||
Total | $ | 3,199,000 | |||||||
The Company’s Remote Power Patent expires in March 2020. The expiration dates of the patents within the Company’s Mirror Worlds Patent Portfolio range from June 2016 to February 2020. The expiration dates of the patents within the Cox Patent Portfolio range from September 2021 to November 2023 and the expiration date of patents within the QoS Patents is June 2019. |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
Notes to Financial Statements | |||||||||||
NOTE D - STOCK-BASED COMPENSATION | The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model. On the date of grant, the following weighted average assumptions were utilized for options granted during the three months ended March 31, 2015 and 2014. | ||||||||||
2015 | 2014 | ||||||||||
Risk-free interest rates | 1.39% | 1.65% | |||||||||
Expected option life in years | 5 years | 5 years | |||||||||
Expected stock price volatility | 30.24% | 42.65% | |||||||||
Expected dividend yield | -0- | -0- | |||||||||
The following table presents information relating to all stock options outstanding and exercisable at March 31, 2015: | |||||||||||
Weighted | |||||||||||
Weighted | Average | Weighted | |||||||||
Range of | Average | Remaining | Average | ||||||||
Exercise | Options | Exercise | Life in | Options | Exercise | ||||||
Price | Outstanding | Price | Years | Exercisable | Price | ||||||
$0.83 - $2.34 | 3,055,000 | $1.30 | 2.86 | 2,679,170 | $ 1.23 | ||||||
During the three month period ended March 31, 2015, the Company granted 5-year stock options to each of its three non-management directors to purchase 35,000 shares of its common stock at an exercise price of $2.34 per share. Such options vest over a one year period in four equal quarterly amounts beginning on April 22, 2015, subject to continued service on the Board. | |||||||||||
The Company recorded stock-based compensation of $100,000 and $27,000 for the three months ended March 31, 2015 and March 31, 2014, respectively. The Company has an aggregate of $202,000 of unrecognized stock-based compensation cost as of March 31, 2015. The aggregate intrinsic value of options exercisable at March 31, 2015 was $2,721,000. | |||||||||||
During the three month period ended March 31, 2014, the Company’s Executive Vice President exercised a stock option to purchase 75,000 shares of the Company’s common stock at an exercise price of $0.68 per share. The option was exercised on a net exercise (cashless) basis by delivery to the Company of 31,098 shares of common stock. In addition, 16,968 shares were delivered to the Company with an aggregate value of $28,000 to fund payroll withholding taxes on exercise, resulting in net shares of 26,934 issued to the Company’s Executive Vice President with respect to such option exercise. | |||||||||||
As of March 31, 2015, the following are the outstanding warrants to purchase shares of the Company's common stock: | |||||||||||
Number of | Exercise | ||||||||||
Warrants | Price | Expiration Date | |||||||||
250,000 | $2.10 | May 21, 2018 | |||||||||
250,000 | $1.40 | May 21, 2018 | |||||||||
125,000 | $2.10 | July 26, 2018 | |||||||||
125,000 | $1.40 | July 26, 2018 | |||||||||
Total | 750,000 | ||||||||||
All of the aforementioned warrants were issued to Recognition Interface, LLC in connection with the Company’s acquisition of the Mirror Worlds Patent Portfolio (see Note J[2]). |
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE E - INCOME TAXES | At March 31, 2015, the Company had net operating loss carryforwards (NOLs) totaling approximately $22,796,000 expiring through 2029, with a future tax benefit of approximately $7,751,000. At March 31, 2015 and December 31, 2014, $3,987,000 and $4,743,000, respectively, were recorded as deferred tax assets on the Company's condensed consolidated balance sheets. During the three month period ended March 31, 2015 as a result of income (before taxes) for the period of $2,341,000, $811,000 was recorded as income tax expense and the deferred tax assets were reduced by $756,000 to $3,987,000. To the extent that the Company has taxable income in the future, it will report income tax expense and such expense attributable to federal income taxes will reduce the deferred tax assets reflected on the accompanying condensed consolidated balance sheets. Management will continue to evaluate the recoverability of the Company’s NOLs and adjust the deferred tax assets accordingly. Utilization of NOLs 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. There was no change in the allowance against the deferred tax assets since December 31, 2014. |
EARNINGS_LOSS_PER_SHARE
EARNINGS (LOSS) PER SHARE | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
NOTE F - 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 3,805,000 and 6,707,500 at March 31, 2015 and March 31, 2014, respectively, consisted of options and warrants. Computations of basic and diluted weighted average common shares outstanding are as follows: | ||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Weighted-average common shares outstanding – basic | 24,089,009 | 25,775,573 | |||||||
Dilutive effect of options and warrants | 1,411,894 | 2,018,096 | |||||||
Weighted-average common shares outstanding – diluted | 25,500,903 | 27,793,669 | |||||||
Options and warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 2,393,106 | 4,689,404 |
CASH_AND_CASH_EQUIVALENTS
CASH AND CASH EQUIVALENTS | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
NOTE G - CASH AND CASH EQUIVALENTS | The Company places cash investments in high quality financial institutions insured by the Federal Deposit Insurance Corporation ("FDIC"). At March 31, 2015, the Company maintained a cash balance of $13,857,000 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 March 31, 2015 and December 31, 2014 are composed of: | |||||||||
March 31, 2015 | December 31, 2014 | ||||||||
Cash | $ | 2,065,000 | $ | 2,984,000 | |||||
Money market fund | 12,047,000 | 14,678,000 | |||||||
Total | $ | 14,112,000 | $ | 17,662,000 |
MARKETABLE_SECURITIES
MARKETABLE SECURITIES | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE H - 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 or loss. Realized gains and losses are reclassified from other comprehensive income or loss to net income or loss in the period they are realized. At March 31, 2015, the Company's marketable securities consisted of two corporate bonds (aggregate face value $1,000,000) with a 3.9% and 4.5% coupon and term of greater than three months when purchased. The Company’s marketable securities mature in 2021 and it is not the intention of the Company to hold such securities until maturity. |
OTHER_INVESTMENTS_AT_COST
OTHER INVESTMENTS, AT COST | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Notes to Financial Statements | |||||||||
NOTE I - OTHER INVESTMENTS, AT COSTS | In May 2013, as part of the acquisition of the Mirror Worlds Patent Portfolio (see Note J[2]), 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 July 2013, the Company made an additional investment of $50,000 in Lifestreams as part of a financing and received 123,456 shares of Series A preferred stock and, as part of an amended license agreement between the Company’s wholly-owned subsidiary and Lifestreams, the Company received a warrant to purchase 1,305,000 shares of common stock of Lifestreams. The warrant was valued at $70,000 based on the Black-Scholes option model and recorded as non-cash royalty income during 2013. In March 2014, the Company participated in a $2.0 million secured convertible notes (the “Notes”) financing of Lifestreams by agreeing to invest an aggregate of $380,000 in four equal tranches (the first tranche of $95,000 was paid at closing). In May 2014, August 2014 and December 2014, the Company made additional investments of $95,000 each as part of the second, third and fourth tranche of the investment. | ||||||||
The Notes all matured on March 31, 2015. Since there was no “qualified financing” (gross proceeds of a minimum of $3.0 million) or optional conversion of the Notes by March 31, 2015, in accordance with the terms of the Notes the Company and the other holders of the Notes may elect to convert the Notes into the most senior outstanding preferred stock at 80% of the conversion price of such preferred stock. The Company has not made such election. In addition, if the majority holders of the Notes elect to convert the Notes, the other holders of the Notes (including the Company) are required to convert. Since the Company owns less than 20% of the outstanding equity of Lifestreams at March 31, 2015 and does not have significant influence or control, the Company’s investment in Lifestreams is recorded at cost. Management’s assessment of value at March 31, 2015 was that it was not practicable to determine the fair value of the Company’s investment in Lifestreams as it has no readily determinable market value. At March 31, 2015, the Company’s investment in Lifestreams, which is included in “Other investments, at cost” on the condensed consolidated balance sheets, consists of the following: | |||||||||
Number of | Carrying | ||||||||
Shares | Value | ||||||||
Common Stock | 250,000 | $ | 76,000 | ||||||
Series A Preferred Stock | 123,456 | 50,000 | |||||||
Warrant | 1,305,000 | 70,000 | |||||||
Convertible Secured Notes | — | 380,000 | |||||||
$ | 576,000 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE J - COMMITMENTS AND CONTINGENCIES | [1] Legal Fees: |
Russ, August & Kabat provides legal services to the Company with respect to its pending patent litigations filed in April 2014 and December 2014 against Google Inc. and YouTube, LLC in the United States District Court for the Southern District of New York relating to certain patents within the Company’s Cox Patent Portfolio (see Note L[1] hereof). The terms of the Company’s agreement with Russ, August & Kabat provides for legal fees on a full contingency basis ranging from 15% to 30% of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all of the expenses incurred with respect to this litigation. | |
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 (part of the Mirror Worlds Patent Portfolio - see Note L[2] hereof). The terms of the Company’s 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 filed in September 2011 pending against ten (10) data networking equipment manufacturers in the United States District Court for the Eastern District of Texas, Tyler (see Note L[3]). 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 three month period ended March 31, 2015 and March 31, 2014, the Company accrued aggregate contingent legal fees with respect to the litigation of $208,000 and $34,000, 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 L[4]). 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). As a result of the royalty payments payable quarterly by Cisco in accordance with the Company’s settlement and license agreement with Cisco, the Company has an obligation to pay Dovel & Luner, LLP 24% of such royalties received. During the three months ended March 31, 2015 and March 31, 2014, the Company incurred aggregate legal fees to Dovel & Luner, LLP of approximately $1,187,000 and $1,014,000, 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 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 were 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 for the life of the Remote Power Patent. During the three month period ended March 31, 2015 and March 31, 2014, the Company accrued legal fees to Blank Rome LLP of $13,000 and $14,000, respectively. | |
[2] Patent Acquisitions: | |
On February 28, 2013, the Company completed the acquisition of four patents (as well as a pending patent application) from Dr. Ingemar Cox (these patents together with subsequent related patent issuances comprise the Cox Patent Portfolio), 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. Since the acquisition of the patent portfolio from Dr. Cox, the Company has been issued five additional related patents by the USPTO. Professional fees and filing fees of $169,000 were capitalized as patent cost. | |
On May 21, 2013, the Company’s wholly-owned 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 (“Looking Glass”)), consisting of nine issued United States patents and five pending applications covering foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system (these patents together with subsequent related patent issuances comprise the Mirror Worlds Patent Portfolio). As consideration for the patent acquisition, the Company paid Looking Glass $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) (the “Looking Glass Warrants”). On June 3, 2014, the Company repurchased the Looking Glass Warrants from Looking Glass at a cost of $505,000. As part of the acquisition of the Mirror Worlds Patent Portfolio, 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 an exercise price of $1.40 per share, and (ii) 5-year warrants to purchase 250,000 shares of common stock at an exercise price of $2.10 per share. Recognition also received from the Company an interest in the net proceeds realized from the monetization of the Mirror Worlds Patent Portfolio, as follows: (i) 10% of the first $125 million of net proceeds, (ii) 15% of the next $125 million of net proceeds, (iii) and 20% of any portion of the net proceeds in excess of $250 million. In addition, Abacus and Associates, Inc. (“Abacus”), an entity affiliated with Recognition, received a 60-day warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $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 5-year warrants to purchase an aggregate of 250,000 shares of the Company’s common stock were issued to Recognition (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). As part of the acquisition of the Mirror Worlds Patent Portfolio, professional fees and filing fees of $409,000 were capitalized as patent cost. | |
[3] Amended Patent Purchase Agreement: | |
In January 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 made in 2012, an additional $1.0 million contingent payment upon achievement of $50 million of Net Royalties (the “Second Contingent Payment”) and an additional $500,000 contingent payment upon achievement of $62.5 million of Net Royalties from the licensing or sale of the patents acquired from Seller. On March 11, 2015, the Company entered into an agreement with a secured creditor of the Seller, who had all rights with respect to the Second Contingent Payment, pursuant to which the Company paid the secured creditor $900,000 in full satisfaction of the Second Contingent Payment of $1.0 million. | |
[4] Services Agreement: | |
Pursuant to a master services agreement, dated November 30, 2004 (the “Services Agreement”), between the Company and ThinkFire Services USA, Ltd. (“ThinkFire”), the Company was obligated to pay ThinkFire fees from royalty payments received from certain licensees of the Remote Power Patent over the term of the licenses in consideration for services performed on behalf of the Company. During the years ended December 31, 2014 and December 31, 2013, the Company incurred fees to ThinkFire of $105,000 and $104,000, respectively. On February 10, 2015, the Company entered into an agreement with ThinkFire pursuant to which the Services Agreement was terminated with no further obligations in consideration of the Company’s payment of $285,000 to ThinkFire ($261,000 of such payment has been included as general and administrative expenses for the three months ended March 31, 2015 and the balance of $24,000 had been accrued as an expense for the year ended December 31, 2014). | |
[5] Lease Agreements: | |
The Company currently leases office space in New York, New York at a cost of $3,600 per month pursuant to a lease expiring on November 30, 2015. | |
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. The Company pays a base rent of $7,000 per month which is subject to annual adjustments to reflect increases in real estate taxes and operating expenses. | |
Mirror Worlds Technologies, LLC, the Company’s wholly-owned subsidiary, leases office space in Tyler, Texas with a base monthly rent of $620, which expires in April 2016. |
EMPLOYMENT_ARRANGEMENTS_AND_OT
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE K - EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | [1] On November 1, 2012, the Company entered into an employment agreement (the “Agreement”) with its Chairman and Chief Executive Officer for a one year term (which was automatically 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, 2014, the Chairman and Chief Executive Officer received an annual cash bonus of $200,000. In connection with the Agreement, the Chairman and Chief Executive Officer was issued a ten-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 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 (including the Mirror Worlds Patent Portfolio and the Cox Patent Portfolio) besides the Remote Power Patent (the “Incentive Compensation”). During the three months ended March 31, 2015 and March 31, 2014, the Chairman and Chief Executive Officer earned Incentive Compensation of $281,000 and $225,000, respectively, which amounts are included in accrued expenses. |
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 the 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 have 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 April 9, 2014, the Company’s Chief Financial Officer entered into an offer letter with the Company pursuant to which he continues to serve, on an at-will basis, at an annual base salary of $157,500 and is eligible to receive incentive or bonus compensation on an annual basis in the discretion of the Company’s Compensation Committee. The Chief Financial Officer received an annual bonus of $30,000 for the year ended December 31, 2014. In connection with the offer letter, the Chief Financial Officer was issued under the Company’s 2013 Stock Incentive Plan a 5-year stock option to purchase 50,000 shares of the common stock, at an exercise price of $1.65 per share, which option vests in two equal amounts (25,000 shares each) on each of December 31, 2014 and December 31, 2015. In addition, in the event the Chief Financial Officer’s employment is terminated without “Good Cause” (as defined), he shall receive (i) (a) 6 months base salary or (b) 12 months base salary in the event of a termination without “Good Cause” within 6 months following a “Change of Control” of the Company (as defined) and (ii) accelerated vesting of all remaining unvested shares underlying his options or any other awards he may receive in the future. |
LEGAL_PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE L - LEGAL PROCEEDINGS | [1] On April 4, 2014 and December 3, 2014, the Company initiated litigation against Google Inc. and YouTube, LLC in the United States District Court for the Southern District of New York for infringement of several of its patents within the Cox Patent Portfolio (see Note J[2] hereof) which relate to the identification of media content on the Internet. The lawsuits allege that Google and YouTube have infringed and continue to infringe certain of the Company’s patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube’s Content ID system. |
In December 2014, Google filed four petitions to institute Inter Partes Review at the USPTO pertaining to patents within the Cox Patent Portfolio asserted in the litigation filed in April 2014 as described above. Google in each of the four Inter Partes Review petitions seeks to cancel certain claims of the Company’s patents at issue within the Cox Patent Portfolio. The USPTO has not yet made a determination as to whether any of the four petitions for Inter Partes Review will be instituted (and proceed to trial) or denied. | |
On April 13, 2015, Google filed a Petition for Covered Business Method Review (CBM) seeking to invalidate claims pertaining to the Company’s U.S. Patent No. 8,904,464, the patent asserted in our litigation against Google and YouTube filed on December 3, 2014 as referenced above. The USPTO has not yet made a decision as to whether the CBM Petition will be instituted (and proceed to trial) or denied. | |
[2] On May 23, 2013, the Company’s wholly-owned 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 U.S. Patent No. 6,006,227 (the “227 Patent”) (one of the patents the Company acquired as part of the acquisition of the Mirror Worlds Patent Portfolio). 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. In September 2013 and October 2013, the defendants filed their answers to the Company’s complaint. Defendants Apple Inc. and Microsoft, Inc. also filed counterclaims for a declaratory judgment of non infringement and invalidity of the ‘227 Patent. In December 2013, the litigation was severed into two consolidated actions, Mirror Worlds v Apple, et. al. and Mirror Worlds v. Microsoft, et. al. | |
[3] 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 Transitions Networks, Inc. Network-1 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. In March 2015, the Company reached a settlement agreement with Samsung Electronics Co., Ltd. (“Samsung”) pursuant to which Samsung received a fully-paid license for the Remote Power Patent for the remaining life of the patent. | |
[4] 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 upon settlement 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, 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 2013 and 2012. 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. This would have a material adverse effect on the Company’s business, financial condition and results of operations. | |
[5] On July 20, 2012, an unknown third party filed with the USPTO a request for ex parte reexamination of certain claims of the Company’s Remote Power Patent. On September 5, 2012, the USPTO issued an order granting the reexamination. The request for reexamination was stayed by the USPTO on December 21, 2012 until May 2014 (the completion of the Inter Partes Review proceedings at the USPTO involving our Remote Power Patent described below). On October 14, 2014, the USPTO issued a Reexamination Certificate, rejecting a challenge to the patentability of the Remote Power Patent. The Reexamination Certificate confirms the patentability of the challenged claims of the Remote Power (claims 6, 8 and 9) without any amendment or modification. The USPTO also allowed fourteen (14) new claims, bringing the total claims in the Remote Power Patent to twenty-three (23) claims. No claims were rejected. | |
[6] Avaya Inc., Dell Inc., Sony Corporation of America and Hewlett Packard Co. were petitioners in Inter Partes Review proceedings (which were joined together) (the “IPR Proceeding”) at the USPTO before the Patent Trial and Appeal Board (“PTAB”) involving the Company’s Remote Power Patent. Petitioners in the IPR Proceeding sought to cancel certain claims of the Remote Power as unpatentable. A hearing on the merits of the IPR Proceeding was held on January 9, 2014. On May 22, 2014, the Patent Board issued its Final Written Decision in the Company’s favor rejecting a challenge to the patentability of the Company’s Remote Power Patent. On July 24, 2014, the Petitioners in the IPR Proceeding each filed a Notice of Appeal of the Patent Board’s decision to the United States Court of Appeals for the Federal Circuit. The Appeal is currently pending. In the event the decision of the PTAB is reversed by the United States Court of Appeals for the Federal Circuit and certain claims of the Remote Power Patent are ultimately determined to be invalid, such a decision would have a material adverse effect on our business, financial condition and results of operations as the Company’s entire current revenue stream is dependent upon the continued validity of certain claims of our Remote Power Patent. | |
[7] On February 16, 2015, Sony Corporation of America filed a Petition for a Covered Business Method Review (CBM) and a request for ex parte reexamination with the USPTO seeking to invalidate certain claims of the Company’s Remote Power Patent. On April 3, 2015, the USPTO issued an order granting Sony’s request for an ex parte reexamination of the Remote Power Patent. The USPTO has not yet made a decision as to whether the CBM Petition will be instituted (and proceed to trial) or denied. |
STOCK_REPURCHASE
STOCK REPURCHASE | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE M - 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"). On June 3, 2014, the Board of Directors authorized its fourth increase to the Share Repurchase Program authorizing the repurchase of up to an additional $5.0 million of shares of common stock over the subsequent 12 month period (for a total of up to $12 million since inception of the program in August 2011). 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. Since inception of the Share Repurchase Program through March 31, 2015, the Company has repurchased an aggregate of 6,527,668 shares of its common stock at an average price per share of $1.63 or an aggregate cost of $10,624,000 (exclusive of commissions). During the three month period ended March 31, 2015, the Company repurchased 828,600 shares of its common stock at an average price per share of $2.25 or an aggregate cost of $1,866,000 (exclusive of commissions). All such repurchased shares have been cancelled. |
CISCO_ROYALTY_AUDIT_AND_CONCEN
CISCO ROYALTY AUDIT AND CONCENTRATION | 3 Months Ended |
Mar. 31, 2015 | |
Notes to Financial Statements | |
NOTE N - CISCO ROYALTY AUDIT AND CONCENTRATION | In late December 2013, the Company exercised its right to audit the royalties paid to it by Cisco for the years 2012 and 2013 (the “Audit Period”) in accordance with its May 2011 license agreement with Cisco. As a result of the audit, Cisco agreed to pay the Company additional royalty payments pursuant to the May 2011 license agreement of $3,281,000 for the Audit Period and other periods covered by the license agreement which was recorded as royalty revenue in the three month period ended June 30, 2014, at the time the Company completed the audit and additional royalty payments were agreed to by the parties. |
Cisco constituted approximately 85% and 91% of the Company’s revenue, respectively, for the three months periods ended March 31, 2015 and March 31, 2014. At March 31, 2015 and December 31, 2014, the royalty receivable from Cisco constituted approximately 85% and 74% of the Company’s royalty receivables, respectively. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | |
Use of Estimates and Assumptions | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The significant estimates and assumptions made in the preparation of the Company’s unaudited condensed consolidated financial statements include the valuation of warrants, stock-based payments, deferred income taxes and valuation of other investments. Actual results could be materially different from those estimates, upon which the carrying values were based. |
Patents | The Company owns patents that relate to various technologies. The Company capitalizes the costs associated with acquisition, registration and maintenance of its acquired patents and amortizes these assets over their remaining useful lives on a straight-line basis. Any further payments made to maintain or develop the patents would be capitalized and amortized over the balance of the useful life for the patents or expensed as appropriate. |
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) collectability of amounts is reasonably assured. The Company relies on royalty reports received from third party licensees to record its revenue. From time to time the Company may audit royalties reported from licensees as the Company did with respect to Cisco Systems, Inc. (see Note N). Any adjusted royalty revenue as a result of such audits is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined. |
Income Taxes | The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, “Income Taxes” (ASC 740), which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forward. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized. |
ASC 740-10, “Accounting for Uncertainty in Income Taxes,” defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. | |
United States federal, state and local income tax returns prior to 2011 are not subject to examination by any applicable tax authorities. | |
Stock-based compensation | The Company accounts for its stock-based compensation at fair value estimated on the grant date using the Black-Scholes option pricing model. See Note D for further discussion of the Company’s stock-based compensation. |
Earnings/Loss per Share | The Company reports earnings (loss) per share in accordance with U.S. GAAP, which requires presentation of basic and diluted earnings (loss) per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings (loss) per share excludes dilution and is computed by dividing income (loss) available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts, such as warrants and options to purchase common stock were exercised. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share. |
Financial Instruments | U.S. GAAP regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. |
The three levels of inputs are defined as follows: | |
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
Level 3 inputs to the valuation methodology are unobservable. | |
The carrying value of cash, royalty receivables, other assets, accounts payable, and accrued expenses approximates fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest. At March 31, 2015, it was not practicable to determine the fair value of the Company’s investment in Lifestreams Technologies Corporation as it has no readily determinable market value (see Note I). Marketable securities available for sale are measured at fair value on recurring basis based on Level 1 inputs (see Note H). |
PATENTS_Tables
PATENTS (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Patents Tables | |||||||||
Accumulated amortization related to acquired intangible assets | The gross carrying amounts and accumulated amortization related to acquired intangible assets as of March 31, 2015 and December 31, 2014 are as follows: | ||||||||
March 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Gross carrying amount – patents | $ | 6,340,000 | $ | 6,310,000 | |||||
Accumulated amortization – patents | (3,141,000 | ) | (2,728,000 | ) | |||||
Patents, net | $ | 3,199,000 | $ | 3,582,000 | |||||
Future amortization of current intangible assets, net | Amortization expense for the three months ended March 31, 2015 and March 31, 2014 was $413,000 and $409,000, respectively. Future amortization of current intangible assets, net is as follows: | ||||||||
Twelve Months Ended March 31, | |||||||||
2016 | $ | 1,652,000 | |||||||
2017 | $ | 439,000 | |||||||
2018 | $ | 189,000 | |||||||
2019 | $ | 189,000 | |||||||
2020 and thereafter | $ | 730,000 | |||||||
Total | $ | 3,199,000 | |||||||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
Stock-Based Compensation Tables | |||||||||||
Schedule of stock option | 2015 | 2014 | |||||||||
Risk-free interest rates | 1.39% | 1.65% | |||||||||
Expected option life in years | 5 years | 5 years | |||||||||
Expected stock price volatility | 30.24% | 42.65% | |||||||||
Expected dividend yield | -0- | -0- | |||||||||
Schedule of information of stock options outstanding and exercisable | The following table presents information relating to all stock options outstanding and exercisable at March 31, 2015: | ||||||||||
Weighted | |||||||||||
Weighted | Average | Weighted | |||||||||
Range of | Average | Remaining | Average | ||||||||
Exercise | Options | Exercise | Life in | Options | Exercise | ||||||
Price | Outstanding | Price | Years | Exercisable | Price | ||||||
$0.83 - $2.34 | 3,055,000 | $1.30 | 2.86 | 2,679,170 | $ 1.23 | ||||||
Outstanding warrants to puchase shares | As of March 31, 2015, the following are the outstanding warrants to purchase shares of the Company's common stock: | ||||||||||
Number of | Exercise | ||||||||||
Warrants | Price | Expiration Date | |||||||||
250,000 | $2.10 | May 21, 2018 | |||||||||
250,000 | $1.40 | May 21, 2018 | |||||||||
125,000 | $2.10 | July 26, 2018 | |||||||||
125,000 | $1.40 | July 26, 2018 | |||||||||
Total | 750,000 |
EARNINGS_LOSS_PER_SHARE_Tables
EARNINGS (LOSS) PER SHARE (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Earnings Loss Per Share Tables | |||||||||
Schedule Earnings Per Share | Computations of basic and diluted weighted average common shares outstanding are as follows: | ||||||||
Three Months Ended | |||||||||
March 31, | |||||||||
2015 | 2014 | ||||||||
Weighted-average common shares outstanding – basic | 24,089,009 | 25,775,573 | |||||||
Dilutive effect of options and warrants | 1,411,894 | 2,018,096 | |||||||
Weighted-average common shares outstanding – diluted | 25,500,903 | 27,793,669 | |||||||
Options and warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 2,393,106 | 4,689,404 |
CASH_AND_CASH_EQUIVALENTS_Tabl
CASH AND CASH EQUIVALENTS (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Cash And Cash Equivalents Tables | |||||||||
Scedule of cash and cash equivalent | Cash and cash equivalents as of March 31, 2015 and December 31, 2014 are composed of: | ||||||||
March 31, 2015 | December 31, 2014 | ||||||||
Cash | $ | 2,065,000 | $ | 2,984,000 | |||||
Money market fund | 12,047,000 | 14,678,000 | |||||||
Total | $ | 14,112,000 | $ | 17,662,000 |
OTHER_INVESTMENTS_AT_COST_Tabl
OTHER INVESTMENTS AT COST (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Other Investments At Cost Tables | |||||||||
Schedule of Investment | At March 31, 2015, the Company’s investment in Lifestreams, which is included in “Other investments, at cost” on the condensed consolidated balance sheets, consists of the following: | ||||||||
Number of | Carrying | ||||||||
Shares | Value | ||||||||
Common Stock | 250,000 | $ | 76,000 | ||||||
Series A Preferred Stock | 123,456 | 50,000 | |||||||
Warrant | 1,305,000 | 70,000 | |||||||
Convertible Secured Notes | — | 380,000 | |||||||
$ | 576,000 |
BASIS_OF_PRESENTATION_AND_NATU1
BASIS OF PRESENTATION AND NATURE OF BUSINESS (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Agreement | |
Number | |
Notes to Financial Statements | |
Remote power patent revenue since May 2007 | $76,000,000 |
Patents owned | 24 |
Number of License Agreements | 17 |
PATENTS_Details
PATENTS (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Patents Details | ||
Gross carrying amount - patents | $6,340,000 | $6,310,000 |
Accumulated amortization - patents | -3,141,000 | -2,728,000 |
Patents, net | $3,199,000 | $3,582,000 |
PATENTS_Details_1
PATENTS (Details 1) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Patents Details 1 | ||
2016 | $1,652,000 | |
2017 | 439,000 | |
2018 | 189,000 | |
2019 | 189,000 | |
2020 and thereafter | 730,000 | |
Total | $3,199,000 | $3,582,000 |
PATENTS_Details_Narrative
PATENTS (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Amortization expense | $413,000 | $409,500 |
Expiration of Remote Power Patent | Mar-20 | |
Expiration of QoS family patents | Jun-19 | |
Minimum [Member] | ||
Estimated remaining economic useful of patents | 1 year 3 months | |
Expiration dates of the patents within the Company's Mirror Worlds patent portfolio | Jun-16 | |
Expiration dates of the patents within the Cox patent portfolio | Sep-21 | |
Maximum [Member] | ||
Estimated remaining economic useful of patents | 6 years 6 months | |
Expiration dates of the patents within the Company's Mirror Worlds patent portfolio | Feb-20 | |
Expiration dates of the patents within the Cox patent portfolio | Nov-23 |
STOCK_BASED_COMPENSATION_Detai
STOCK BASED COMPENSATION (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Stock Based Compensation Details | ||
Risk-free interest rates | 1.39% | 1.65% |
Expected option life in years | 5 years | 5 years |
Expected stock price volatility | 30.24% | 42.65% |
Expected dividend yield | 0.00% | 0.00% |
STOCK_BASED_COMPENSATION_Detai1
STOCK BASED COMPENSATION (Details 1) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2015 | |
Options outstanding | 3,055,000 | |
Weighted average exercise price | $1.30 | |
Weighted Average Remaining Life in Years | 2 years 10 months 10 days | |
Options exercisable | 2,679,170 | |
Weighted average exercise price | $1.23 | |
Minimum [Member] | ||
Range of Exercise price | $0.83 | $0.83 |
Maximum [Member] | ||
Range of Exercise price | $2.34 | $2.34 |
STOCK_BASED_COMPENSATION_Detai2
STOCK BASED COMPENSATION (Details 2) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Number of warrants outstanding | 750,000 |
Exercise Price $ 2.10 | |
Number of warrants outstanding | 250,000 |
Exercise Price | $2.10 |
Expiration Date | 21-May-18 |
Exercise Price $ 1.40 | |
Number of warrants outstanding | 250,000 |
Exercise Price | $1.40 |
Expiration Date | 21-May-18 |
Exercise Price $ 2.10 | |
Number of warrants outstanding | 125,000 |
Exercise Price | $2.10 |
Expiration Date | 26-Jul-18 |
Exercise Price $ 1.40 | |
Number of warrants outstanding | 125,000 |
Exercise Price | $1.40 |
Expiration Date | 26-Jul-18 |
STOCK_BASED_COMPENSATION_Detai3
STOCK BASED COMPENSATION (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Issuance of stock options to each of the three non-management director to purchase common stock | 35,000 | |
Issuance of stock options to each of the three non-management directors to purchase common stock, exercise price per share | $2.34 | |
Stock-based compensation | $100,000 | $27,000 |
Unrecognized stock-based compensation cost | 202,000 | |
Aggregate intrinsic value of options exercisable | 2,721,000 | |
Executive Vice President [Member] | ||
Stock option excercised | 75,000 | |
Stock option excercised, exercise price per share | $0.68 | |
Delivery of shares of common stock by cashless basis | 31,098 | |
Delivery of shares to fund withholding taxes | 16,968 | |
Aggregate value of shares delieverd to fund withholding taxes | $28,000 | |
Net shares issued | 26,934 |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Income Taxes Details Narrative | |||
Net operating loss carryforwards | $22,796,000 | ||
Future tax benefit | 7,751,000 | ||
Deferred tax assets | 3,987,000 | 4,743,000 | |
Income before taxes | 2,341,000 | 2,152,000 | |
Income tax expense | 811,000 | 756,000 | |
Decrease in deferred tax assets | $756,000 |
EARNINGS_LOSS_PER_SHARE_Detail
EARNINGS (LOSS) PER SHARE (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Earnings Loss Per Share Details | ||
Weighted-average common shares outstanding - basic | 24,089,009 | 25,775,573 |
Dilutive effect of options and warrants | 1,411,894 | 2,018,096 |
Weighted-average common shares outstanding - diluted | 25,500,903 | 27,793,669 |
Options and warrants excluded from the computation of diluted income (loss) per share because the effect of inclusion would have been anti-dilutive | 2,393,106 | 4,689,404 |
EARNINGS_LOSS_PER_SHARE_Detail1
EARNINGS (LOSS) PER SHARE (Details Narratrive) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Earnings Loss Per Share Details Narratrive | ||
Potentialy Dilutive Shares | 3,805,000 | 6,707,500 |
CASH_AND_CASH_EQUIVALENTS_Deta
CASH AND CASH EQUIVALENTS (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 |
Cash And Cash Equivalents Details | ||||
Cash | $2,065,000 | $2,984,000 | ||
Money market fund | 12,047,000 | 14,678,000 | ||
Total | $14,112,000 | $17,662,000 | $18,362,000 | $18,938,000 |
CASH_AND_CASH_EQUIVALENTS_Deta1
CASH AND CASH EQUIVALENTS (Details Narrative) (USD $) | Mar. 31, 2015 |
Cash And Cash Equivalents Details Narrative | |
Maintained cash balance in excess of FDIC | $13,857,000 |
MARKETABLE_SECURITIES_Details_
MARKETABLE SECURITIES (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Corporate bonds face value, 3.9% - 4.5% coupon | $1,000,000 |
Maturity date of marketable securities | 2021 |
Corporate Bond 1 [Member] | |
Corporate bond coupon | 3.90% |
Corporate Bond 2 [Member] | |
Corporate bond coupon | 4.50% |
OTHER_INVESTMENTS_AT_COST_Deta
OTHER INVESTMENTS AT COST (Details) (USD $) | Mar. 31, 2015 |
Total other investments at cost, Carrying value | $380,000 |
Common Stock [Member] | |
Investment at cost, Number of shares | 250,000 |
Total other investments at cost, Carrying value | 76,000 |
Series A Preferred Stock [Member] | |
Investment at cost, Number of shares | 123,456 |
Total other investments at cost, Carrying value | 50,000 |
Warrant [Member] | |
Investment at cost, Number of shares | 1,305,000 |
Total other investments at cost, Carrying value | 70,000 |
Convertible Secured Notes [Member] | |
Investment at cost, Number of shares | |
Total other investments at cost, Carrying value | $380,000 |
OTHER_INVESTMENTS_AT_COST_Deta1
OTHER INVESTMENTS, AT COST (Details Narrative) (USD $) | 3 Months Ended | 1 Months Ended | |||||||
Mar. 31, 2015 | Sep. 30, 2013 | Jul. 31, 2013 | 31-May-13 | Dec. 31, 2014 | Aug. 31, 2014 | 31-May-14 | Jul. 31, 2014 | Mar. 31, 2014 | |
Non cash royalty income valued from warrants | $70,000 | ||||||||
Aggregate investment in convertible secured notes | 380,000 | 576,000 | |||||||
Additional investment in various tranche | 95,000 | 95,000 | 95,000 | ||||||
Conversion price of senior outstanding preferred stock in percentage | 80.00% | ||||||||
Minimum gross proceeds of qualified financing | 3,000,000 | ||||||||
The Company owns less than this percentage ownership of outstanding equity of Lifestreams | 20.00% | ||||||||
Lifestreams Technologies Corporation [Member] | |||||||||
Additional investment | 50,000 | ||||||||
Company received a warrant to purchase common stock shares | 1,305,000 | ||||||||
Company participated in convertible secured notes | 2,000,000 | ||||||||
Aggregate investment in convertible secured notes | 380,000 | ||||||||
Additional investment in various tranche | $95,000 | ||||||||
Mirror Worlds, LLC [Member] | |||||||||
Acquisition of common stock | 250,000 | ||||||||
Series A Preferred Stock [Member] | |||||||||
Shares received | 123,456 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES - Legal Fees (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Legal Service Agreement With Russ, August Kabot For Litigation Filed In April 2014 and December 2014 [Member] | ||
Legal Fees payment ,Terms | Legal fees on a full contingency basis ranging from 15% to 30% of the net recovery (after deduction of expenses) | |
Legal Service Agreement With Dovel And Luner For Litigation Settlement In May 2013 [Member] | ||
Legal Fees payment ,Terms | Legal fees on a contingency basis ranging from 25% to 40% of the net recovery (after deduction of expenses) | |
Legal Service Agreement-Blank Rome [Member] | ||
Legal Fees payment ,Terms | Legal fees to Blank Rome LLP equal to 25% of the royalty revenue received by the Company from its license agreement with D-Link | |
Legal fees and expenses | $13,000 | $14,000 |
Legal Service Agreement With Dovel And Luner For Litigation Settlement In July 2010 [Member] | ||
Legal Fees payment ,Terms | 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) | |
Legal fees and expenses | 1,187,000 | 1,014,000 |
Legal Service Agreement With Dovel And Luner For Litigation Filed In September 2011 [Member] | ||
Legal Fees payment ,Terms | Legal fees on a full contingency basis ranging from 12.5% to 35% (with certain exceptions) of the net recovery (after deduction for expenses) | |
Legal fees and expenses | $208,000 | $34,000 |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES - Patent Acquisitions (Details Narrative) (USD $) | Jun. 03, 2014 | Jul. 31, 2013 | 21-May-13 | Feb. 28, 2013 |
Exercise price of five year option | ||||
Acquisition of Cox patents cash, purchase price | $1,000,000 | |||
Acquisition of Cox patents, common stock issued | 403,226 | |||
Obligated to pay Cox, net proceeds percentage | 12.50% | |||
Capitalized professional fees and filing fees related to Cox Patent Portfolio | 169,000 | |||
Cash consideration for Mirror Worlds patent acquisition | 3,000,000 | |||
Cost of repurchase of Mirror Worlds warrants | 505,000 | |||
Issued 5-year warrants (Looking Glass) to purchase shares of common stock | 1,750,000 | |||
5-year warrants (Looking Glass) to purchase 875,000 shares, exercise price per share | 1.4 | |||
5-year warrants (Looking Glass) to purchase 875,000 shares, exercise price per share | 2.1 | |||
Issued 5-year warrants (Recognition) to purchase 250,000 shares, exercise price per share | 1.4 | |||
Issued 5-year warrants (Recognition) to purchase 250,000 shares, exercise price per share | 2.1 | |||
60 day warrants (Abacus) to purchase shares of common stock | 500,000 | |||
60-day warrants (Abacus), exercise price per shares | $2.05 | |||
Issued additional 5-year warrants (Recognition) to purchase shares of common stock as a result of exercise of 60-day warrant | 250,000 | |||
Additional 5-year warrants to purchase 125,000 shares of common stock as a result of exercise of 60-day warrant, exercise price per share | 2.1 | |||
Additional 5-year warrants to purchase 125,000 shares of common stock as a result of exercise of 60-day warrant, exercise price per share | 1.4 | |||
Capitalized professional fees and filing fees related to Mirror Worlds patents | $409,000 | |||
Net proceeds percentage payable to Recognition 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 - Amended Patent Purchase Agreement (Details Narrative) (USD $) | Mar. 31, 2015 | Mar. 11, 2015 | Dec. 31, 2014 | Dec. 31, 2012 | Jan. 01, 2005 |
Additional patent cost for restructuring of future contingent payments | $500,000 | ||||
Achievement of net royalties | 62,500,000 | 50,000,000 | |||
Contingent payment made | 1,000,000 | 1,000,000 | |||
Payment to secured creditor in satisfaction of contingent payment | 900,000 | ||||
Additional contingent payment | 500,000 | ||||
2012 [Member] | |||||
Achievement of net royalties | 25,000,000 | ||||
Contingent payment made | $1,000,000 |
COMMITMENTS_AND_CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES - Services Agreement (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Feb. 10, 2015 | |
Purchase Commitment, Excluding Long-term Commitment [Line Items] | |||||
Company paid for service agreement termination | $285,000 | ||||
General and administrative expenses | 1,105,000 | 598,000 | |||
Accrued expense | -38,000 | 903,000 | |||
Service Agreement with ThinkFire | |||||
Purchase Commitment, Excluding Long-term Commitment [Line Items] | |||||
Fees for services performed on behalf of entity | 105,000 | 104,000 | |||
General and administrative expenses | 261,000 | ||||
Accrued expense | $24,000 |
COMMITMENTS_AND_CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES - Leases Agreements (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Rental cost per month | $3,600 |
Expiring date | 30-Nov-15 |
Tyler, Texas [Member] | |
Rental cost per month | 620 |
Expiring date | Apr-16 |
In June 2011 [Member] | |
Rental cost per month | $7,000 |
Expiring date | Aug-15 |
Rent space | 2,400 |
EMPLOYMENT_ARRANGEMENTS_AND_OT1
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Dec. 31, 2014 | Apr. 09, 2014 | Nov. 01, 2012 | |
Employment Arrangements And Other Agreements Details Narrative | ||||||
Annual base salary Chairman and CEO | $415,000 | |||||
Target annual bonus or minimum bonus Chairman and CEO | 150,000 | |||||
Annual cash bonus for CEO | 200,000 | |||||
Issuance of stock option to CEO to purchase common stock | 500,000 | |||||
CEO Stock option, exercise price | $1.19 | |||||
Number of shares vested in equal quarterly amounts | 41,667 | |||||
Earned incentive compensation | 281,000 | 225,000 | ||||
CEO Incentive Compensation - percentage of gross royalties - Remote Power Patent | 5.00% | |||||
CEO Incentive Compensation - percentage of net royalties - Additional Patents | 10.00% | |||||
CEO Incentive Compensation - percentage of gross royalties - Additional Patents | 6.25% | |||||
Number of years option granted to Chief Financial Officer | 5 years | |||||
Annual base salary of Chief Financial Officer | 157,500 | |||||
Annual bonus for Chief Financial Officer | $30,000 | |||||
Issuance of 5 year stock option to CFO | 50,000 | |||||
CFO stock option, exercise price | $1.65 |
LEGAL_PROCEEDINGS_Details_narr
LEGAL PROCEEDINGS (Details narrative) (USD $) | 1 Months Ended | 51 Months Ended | 55 Months Ended |
Jul. 31, 2010 | Mar. 31, 2020 | Dec. 31, 2015 | |
Legal Proceedings Details Narrative | |||
Royalties received from license defendants upon setlement | $32,000,000 | ||
Maximum Cisco royalty payment per year | 8,000,000 | ||
Maximum Cisco royalty payment per year for remaning term of the patent | $9,000,000 |
STOCK_REPURCHASE_PROGRAM_Detai
STOCK REPURCHASE PROGRAM (Details Narrative) (USD $) | 3 Months Ended | 44 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2015 | Aug. 22, 2011 | Jun. 03, 2011 | |
Number of shares, common stock subject to repurchase | 828,600 | 6,527,668 | ||
Average price per share, common stock subject to repurchase | $2.25 | $1.63 | ||
Aggregate cost of common stock repurchase | $1,866,000 | $10,624,000 | ||
Board of Directors [Member] | ||||
Stock Repurchase Program, dollar amount of shares authorized to be repurchased | 2,000,000 | |||
Stock Repurchase Program, doller amount of additional shares authorized to be repurchased | 5,000,000 | |||
Stock Repurchase Program, dollar amount of shares to be repurchase since inception | 12,000,000 |
CISCO_AUDIT_Details_Narrative
CISCO AUDIT (Details Narrative) (USD $) | 3 Months Ended | |||
Mar. 31, 2015 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2014 | |
Cisco Audit Details Narrative | ||||
Additional Cisco royalty payments as a result of audit | $3,281,000 | |||
Percentage Revenue | 85.00% | 91.00% | ||
Percentage of royalty receivable | 85.00% | 74.00% |