Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 09, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | NETWORK 1 TECHNOLOGIES INC | |
Entity Central Index Key | 0001065078 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2020 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Common Stock Shares Outstanding | 24,033,076 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 24,221,000 | $ 22,587,000 |
Marketable securities, at fair value | 21,271,000 | 25,730,000 |
Royalty receivables, net | 0 | 343,000 |
Other current assets | 30,000 | 98,000 |
TOTAL CURRENT ASSETS | 45,522,000 | 48,758,000 |
OTHER ASSETS: | ||
Patents, net of accumulated amortization | 1,653,000 | 1,819,000 |
Equity investment | 3,793,000 | 4,437,000 |
Operating leases right-of-use asset | 0 | 41,000 |
Security deposits | 21,000 | 21,000 |
Total Other Assets | 5,467,000 | 6,318,000 |
TOTAL ASSETS | 50,989,000 | 55,076,000 |
CURRENT LIABILITIES: | ||
Accounts payable | 70,000 | 421,000 |
Accrued contingency fees and related costs | 75,000 | 492,000 |
Accrued payroll | 5,000 | 334,000 |
Operating lease obligations - current | 0 | 41,000 |
Other accrued expenses | 194,000 | 281,000 |
TOTAL CURRENT LIABILITIES | 344,000 | 1,569,000 |
TOTAL LIABILITIES | 344,000 | 1,569,000 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, $0.01 par value, authorized 10,000,000 shares; none issued and outstanding at September 30,2020 and December 31,2019 | 0 | 0 |
Common stock, $0.01 par value; authorized 50,000,000 shares; 24,033,076 and 24,036,071 shares issued and outstanding at September 30,2020 and December 31,2019,respectively | 240,000 | 240,000 |
Additional paid-in capital | 66,065,000 | 65,824,000 |
Accumulated deficit | (15,664,000) | (12,636,000) |
Accumulated other comprehensive income | 4,000 | 79,000 |
TOTAL STOCKHOLDERS' EQUITY | 50,645,000 | 53,507,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 50,989,000 | $ 55,076,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
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 | 24,033,076 | 24,036,071 |
Common stock, shares outstanding | 24,033,076 | 24,036,071 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) | ||||
REVENUE | $ 4,150,000 | $ 520,000 | $ 4,366,000 | $ 1,725,000 |
OPERATING EXPENSES: | ||||
Costs of revenue | 1,593,000 | 138,000 | 1,645,000 | 459,000 |
Professional fees and related costs | 267,000 | 267,000 | 790,000 | 812,000 |
General and administrative | 473,000 | 466,000 | 1,418,000 | 1,442,000 |
Amortization of patents | 72,000 | 71,000 | 216,000 | 212,000 |
Stock-based compensation | 85,000 | 154,000 | 242,000 | 425,000 |
TOTAL OPERATING EXPENSES | 2,490,000 | 1,096,000 | 4,311,000 | 3,350,000 |
OPERATING INCOME (LOSS) | 1,660,000 | (576,000) | 55,000 | (1,625,000) |
OTHER INCOME (LOSS): | ||||
Interest and dividend income, net | 105,000 | 270,000 | 403,000 | 872,000 |
Net realized and unrealized gain (loss) on marketable securities | 68,000 | (39,000) | (48,000) | 6,000 |
Total other income, net | 173,000 | 231,000 | 355,000 | 878,000 |
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET LOSSES OF EQUITY METHOD INVESTEE | 1,833,000 | (345,000) | 410,000 | (747,000) |
INCOME TAXES PROVISION (BENEFIT): | ||||
Current | 355,000 | (197,000) | (79,000) | (197,000) |
Deferred taxes, net | (355,000) | 67,000 | 79,000 | (36,000) |
Total income taxes (benefit) | 0 | (130,000) | 0 | (233,000) |
INCOME (LOSS) BEFORE SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE: | 1,833,000 | (215,000) | 410,000 | (514,000) |
SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE | (146,000) | (196,000) | (644,000) | (345,000) |
NET INCOME (LOSS) | $ 1,687,000 | $ (411,000) | $ (234,000) | $ (859,000) |
Net Income (loss) per share | ||||
EPS, Basic | $ 0.07 | $ (0.02) | $ (0.01) | $ (0.04) |
EPS, Diluted | $ 0.07 | $ (0.02) | $ (0.01) | $ (0.04) |
Weighted average common shares outstanding: | ||||
Basic | 24,012,333 | 24,138,191 | 23,992,203 | 23,935,304 |
Diluted | 24,521,708 | 24,138,191 | 23,992,203 | 23,935,304 |
Cash dividends declared per share | $ 0.05 | $ 0.05 | $ 0.10 | $ 0.10 |
OTHER COMPREHENSIVE INCOME (LOSS) | ||||
Net unrealized holding gain (loss) on corporate bonds and notes arising during the period, net of tax | $ (67,000) | $ 20,000 | $ (75,000) | $ 183,000 |
COMPREHENSIVE INCOME (LOSS) | $ 1,620,000 | $ (391,000) | $ (309,000) | $ (676,000) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED) - USD ($) | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Accumulated other comprehensive Income (Loss) [Member] |
Balance, shares at Dec. 31, 2018 | 23,735,927 | ||||
Balance, amount at Dec. 31, 2018 | $ 58,205,000 | $ 237,000 | $ 65,151,000 | $ (7,102,000) | $ (81,000) |
Dividends and dividend equivalents declared | (1,215,000) | (1,215,000) | |||
Stock-based compensation | 144,000 | 144,000 | |||
Vesting of restricted stock units, shares | 11,250 | ||||
Cashless exercise of stock options, shares | 105,000 | ||||
Cashless exercise of stock options, amount | $ 1,000 | (1,000) | |||
Shares delivered to fund stock option exercise, shares | (69,116) | ||||
Treasury stock purchased and retired, shares | (300) | ||||
Treasury stock purchased and retired, amount | (1,000) | (1,000) | |||
Net unrealized gain on corporate bonds and notes | 110,000 | 110,000 | |||
Net Loss | (240,000) | (240,000) | |||
Balance, shares at Mar. 31, 2019 | 23,782,761 | ||||
Balance, amount at Mar. 31, 2019 | 57,003,000 | $ 238,000 | 65,294,000 | (8,558,000) | 29,000 |
Balance, shares at Dec. 31, 2018 | 23,735,927 | ||||
Balance, amount at Dec. 31, 2018 | 58,205,000 | $ 237,000 | 65,151,000 | (7,102,000) | (81,000) |
Net Loss | (859,000) | ||||
Proceeds from exercise of stock options, amount | 107,000 | ||||
Balance, shares at Sep. 30, 2019 | 24,137,841 | ||||
Balance, amount at Sep. 30, 2019 | 54,711,000 | $ 241,000 | 65,678,000 | (11,310,000) | 102,000 |
Balance, shares at Mar. 31, 2019 | 23,782,761 | ||||
Balance, amount at Mar. 31, 2019 | 57,003,000 | $ 238,000 | 65,294,000 | (8,558,000) | 29,000 |
Stock-based compensation | 127,000 | 127,000 | |||
Vesting of restricted stock units, shares | 11,250 | ||||
Cashless exercise of stock options, shares | 859,849 | ||||
Cashless exercise of stock options, amount | $ 9,000 | (9,000) | |||
Treasury stock purchased and retired, shares | (139,848) | ||||
Treasury stock purchased and retired, amount | (333,000) | $ (1,000) | (332,000) | ||
Net unrealized gain on corporate bonds and notes | 53,000 | 53,000 | |||
Net Loss | (208,000) | (208,000) | |||
Proceeds from exercise of stock options, amount | 107,000 | 107,000 | |||
Proceeds from exercise of stock options, shares | 65,150 | ||||
Shares delivered to fund stock option exercises, shares | (490,351) | ||||
Shares delivered to fund stock option exercises, amount | $ (5,000) | 5,000 | |||
Value of shares delivered to pay withholding taxes, amount | (366,000) | (366,000) | |||
Balance, shares at Jun. 30, 2019 | 24,088,811 | ||||
Balance, amount at Jun. 30, 2019 | 56,383,000 | $ 241,000 | 65,524,000 | (9,464,000) | 82,000 |
Dividends and dividend equivalents declared | (1,227,000) | (1,227,000) | |||
Stock-based compensation | 154,000 | 154,000 | |||
Vesting of restricted stock units, shares | 136,250 | ||||
Treasury stock purchased and retired, shares | (30,407) | ||||
Treasury stock purchased and retired, amount | (75,000) | (75,000) | |||
Net unrealized gain on corporate bonds and notes | 20,000 | 20,000 | |||
Net Loss | (411,000) | (411,000) | |||
Value of shares delivered to pay withholding taxes, amount | (133,000) | $ (1,000) | 1,000 | (133,000) | |
Vesting of restricted stock units, amount | $ 1,000 | (1,000) | |||
Value of shares delivered to pay withholding taxes, shares | (56,813) | ||||
Balance, shares at Sep. 30, 2019 | 24,137,841 | ||||
Balance, amount at Sep. 30, 2019 | 54,711,000 | $ 241,000 | 65,678,000 | (11,310,000) | 102,000 |
Balance, shares at Dec. 31, 2019 | 24,036,071 | ||||
Balance, amount at Dec. 31, 2019 | 53,507,000 | $ 240,000 | 65,824,000 | (12,636,000) | 79,000 |
Dividends and dividend equivalents declared | (1,221,000) | 0 | 0 | (1,221,000) | 0 |
Stock-based compensation | 72,000 | $ 0 | 72,000 | 0 | 0 |
Vesting of restricted stock units, shares | 11,250 | ||||
Cashless exercise of stock options, shares | 105,000 | ||||
Cashless exercise of stock options, amount | 1,000 | $ 1,000 | 0 | 0 | 0 |
Treasury stock purchased and retired, shares | (72,300) | ||||
Treasury stock purchased and retired, amount | (154,000) | $ (1,000) | 0 | (153,000) | 0 |
Net Loss | (1,337,000) | $ 0 | 0 | (1,337,000) | 0 |
Shares delivered to fund stock option exercises, shares | (100,293) | ||||
Shares delivered to fund stock option exercises, amount | (1,000) | $ (1,000) | 0 | 0 | 0 |
Vesting of restricted stock units, amount | 0 | 0 | 0 | 0 | 0 |
Net unrealized loss on corporate bonds and notes | (183,000) | $ 0 | 0 | 0 | (183,000) |
Balance, shares at Mar. 31, 2020 | 23,979,728 | ||||
Balance, amount at Mar. 31, 2020 | 50,684,000 | $ 239,000 | 65,896,000 | (15,347,000) | (104,000) |
Balance, shares at Dec. 31, 2019 | 24,036,071 | ||||
Balance, amount at Dec. 31, 2019 | 53,507,000 | $ 240,000 | 65,824,000 | (12,636,000) | 79,000 |
Net Loss | (234,000) | ||||
Proceeds from exercise of stock options, amount | 0 | ||||
Balance, shares at Sep. 30, 2020 | 24,033,076 | ||||
Balance, amount at Sep. 30, 2020 | 50,645,000 | $ 240,000 | 66,065,000 | (15,664,000) | 4,000 |
Balance, shares at Mar. 31, 2020 | 23,979,728 | ||||
Balance, amount at Mar. 31, 2020 | 50,684,000 | $ 239,000 | 65,896,000 | (15,347,000) | (104,000) |
Stock-based compensation | 85,000 | $ 0 | 85,000 | 0 | 0 |
Vesting of restricted stock units, shares | 11,250 | ||||
Treasury stock purchased and retired, shares | (43,589) | ||||
Treasury stock purchased and retired, amount | (98,000) | $ 0 | 0 | (98,000) | 0 |
Net unrealized gain on corporate bonds and notes | 175,000 | 0 | 0 | 0 | 175,000 |
Net Loss | (584,000) | 0 | 0 | (584,000) | 0 |
Vesting of restricted stock units, amount | 0 | $ 0 | 0 | 0 | 0 |
Balance, shares at Jun. 30, 2020 | 23,947,389 | ||||
Balance, amount at Jun. 30, 2020 | 50,262,000 | $ 239,000 | 65,981,000 | (16,029,000) | 71,000 |
Dividends and dividend equivalents declared | (1,213,000) | 0 | 0 | (1,213,000) | 0 |
Stock-based compensation | 85,000 | $ 0 | 85,000 | 0 | 0 |
Vesting of restricted stock units, shares | 136,250 | ||||
Net Loss | 1,687,000 | $ 0 | 0 | 1,687,000 | 0 |
Value of shares delivered to pay withholding taxes, amount | (109,000) | 0 | 0 | (109,000) | 0 |
Vesting of restricted stock units, amount | 0 | $ 1,000 | (1,000) | 0 | 0 |
Value of shares delivered to pay withholding taxes, shares | (50,563) | ||||
Net unrealized loss on corporate bonds and notes | (67,000) | $ 0 | 0 | 0 | (67,000) |
Balance, shares at Sep. 30, 2020 | 24,033,076 | ||||
Balance, amount at Sep. 30, 2020 | $ 50,645,000 | $ 240,000 | $ 66,065,000 | $ (15,664,000) | $ 4,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (234,000) | $ (859,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of patents | 216,000 | 212,000 |
Stock-based compensation | 242,000 | 425,000 |
Loss from equity investment | 644,000 | 345,000 |
Deferred tax benefit | 0 | (36,000) |
Amortization of right of use asset, net | 41,000 | 76,000 |
Unrealized gain on marketable securities | (10,000) | (17,000) |
Changes in operating asset and liabilities: | ||
Royalty receivables | 343,000 | (49,000) |
Other current assets | 68,000 | 81,000 |
Accounts payable | (350,000) | 178,000 |
Income taxes payable | 0 | (197,000) |
Operating lease obligations | (41,000) | (74,000) |
Accrued expenses | (812,000) | (1,473,000) |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 107,000 | (1,388,000) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Sales of marketable securities | 17,539,000 | 30,836,000 |
Purchases of marketable securities | (13,145,000) | (30,691,000) |
Development of patents | (50,000) | (55,000) |
Equity investment | (2,500,000) | |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | 4,344,000 | (2,410,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Cash dividends paid | (2,456,000) | (2,428,000) |
Value of shares delivered to fund withholding taxes | (109,000) | (499,000) |
Repurchases of common stock, inclusive of commissions | (252,000) | (408,000) |
Proceeds from exercise of options | 0 | 107,000 |
NET CASH USED IN FINANCING ACTIVITIES: | (2,817,000) | (3,228,000) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,634,000 | (7,026,000) |
CASH AND CASH EQUIVALENTS, beginning of period | 22,587,000 | 23,763,000 |
CASH AND CASH EQUIVALENTS, end of period | 24,221,000 | 16,737,000 |
Cash paid during the period for: | ||
Interest | 0 | 0 |
Income taxes | 0 | 0 |
NON-CASH FINANCING ACTIVITY | ||
Accrued dividend rights on restricted stock units | $ 31,000 | $ 50,000 |
BASIS OF PRESENTATION AND NATUR
BASIS OF PRESENTATION AND NATURE OF BUSINESS | 9 Months Ended |
Sep. 30, 2020 | |
BASIS OF PRESENTATION AND NATURE OF BUSINESS | |
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 September 30, 2020, and the results of its operations and comprehensive income (loss) for the three and nine month periods ended September 30, 2020 and September 30, 2019, changes in stockholders’ equity for the three and nine month periods ended September 30, 2020 and September 30, 2019, and its cash flows for the nine month periods ended September 30, 2020 and September 30, 2019. 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 may 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 unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2020. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results of operations to be expected for the full year. The accompanying unaudited condensed 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 eighty-four (84) 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 Worlds Patent Portfolio”) relating to found a ti a t ec h l o i e t a e a l i f i e ea r c a i e x i i l a y i n a arc i i n c m e t i c m t e s y t e m; (iii) the Cox patent portfolio (the “Cox Patent Portfolio”) relating to enabling technology for identifying media content on the Internet and taking further actions to be performed based on such identification; (iv) the M2M/IoT patent portfolio (the “M2M/IoT Patent Portfolio”) relating to, among other things, enabling technology for authenticating, provisioning and using embedded sim cards in next generation IoT, Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers; and (v) the QoS patents (the “QoS 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 Company’s current strategy includes continuing to pursue licensing opportunities for its intellectual property assets. In addition, the Company continually reviews opportunities to acquire or license additional intellectual property as well as other strategic alternatives. The Company’s patent 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 and Mirror Worlds Patent Portfolio. In addition, the Company may enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property. On September 24, 2020, the U.S. Court of Appeals for the Federal Circuit overturned the judgment of non-infringement of the U.S. District Court of the Eastern District of Texas in the Company’s litigation with Hewlett-Packard involving its Remote Power Patent. The Federal Circuit also vacated the District Court judgment of validity of the Remote Power Patent. The Federal Circuit has remanded the case to the District Court for a new trial on infringement against Hewlett-Packard and further proceedings on validity. As a result of the Federal Circuit’s decision to overturn the District Court judgment of non-infringement, the Company believes that Cisco and certain other licensees of the Company’s Remote Power Patent are obligated to pay the Company significant royalties that accrued but were not paid beginning the fourth quarter of 2017 through March 7, 2020 (the expiration of the Remote Power Patent) (see Note I[1] and Note I[2] hereof). There is, however, no certainty that the Company will receive such royalties from Cisco and certain other licensees. Consistent with the Company’s revenue recognition policy (see Note B[4] hereof), the Company did not record revenue for 2018, 2019 and for the three and nine months ended September 30, 2020 from certain licensees, including Cisco, who notified the Company they would not pay the Company ongoing royalties as a result of the Hewlett-Packard jury verdict. The Company disagrees with the position taken by such licensees and may pursue legal proceedings if it does not achieve a satisfactory resolution (see Notes I[1] and I[2] hereof). |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | [1] Use of Estimates and Assumptions The preparation of the unaudited condensed consolidated 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 unaudited condensed 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 revenue recognition, stock-based compensation, income taxes, valuation of patents and equity method investments, including evaluation of the Company’s basis difference. Actual results could be materially different from those estimates, upon which the carrying values were based. [2] Cash and Cash Equivalents The Company maintains cash deposits in high quality financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Accounts at each institution are insured by the FDIC up to $250,000. At September 30, 2020, the Company maintained a cash balance of $6,772,000 in excess of the FDIC insured limit. The Company considers all highly liquid short-term investments, including certificates of deposit and money market funds, that are purchased with an original maturity of three months or less to be cash equivalents. [3] Marketable Securities The Company’s marketable securities are comprised of certificates of deposit with original maturity greater than three months from date of purchase, fixed income mutual funds, and corporate bonds and notes (see Note F). At September 30, 2020, included in marketable securities, the Company had aggregate certificates of deposit of $8,195,000 at financial institutions which were within the FDIC limit. The Company’s marketable securities are measured at fair value and are accounted for in accordance with ASU 2016-01. Unrealized holding gains and losses on certificates of deposit and fixed income mutual funds are recorded in net realized and unrealized gain (loss) from investments on the unaudited condensed consolidated statements of operations and comprehensive loss. Unrealized holding gains and losses, net of the related tax effect, on corporate bonds and notes are excluded from earnings and are reported as a separate component of stockholders’ equity until realized. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of the marketable securities. [4] Revenue Recognition Under ASC 606, revenue is recognized when the Company completes the licensing of its intellectual property to its licensees, in an amount that reflects the consideration the Company expects to be entitled to in exchange for licensing its intellectual property. The Company determines revenue recognition through the following steps: · identification of the license agreement; · identification of the performance obligations in the license agreement; · determination of the consideration for the license; · allocation of the transaction price to the performance obligations in the contract; and · recognition of revenue when the Company satisfies its performance obligations. Revenue disaggregated by source is as follows: Three Months Nine Months 2020 2019 2020 2019 Fully-Paid - Licenses $ ― $ ― $ ― $ 130,000 (1) Royalty Bearing - Licenses 4,150,000 (2) 520,000 4,366,000 (2) 1,595,000 Total Revenue $ 4,150,000 $ 520,000 $ 4,366,000 $ 1,725,000 __________________________ (1) Includes conversion of an existing royalty bearing license to a fully-paid license. (2) Includes revenue of $4,150,000 from a litigation settlement with Dell, Inc. (see Note I[5] hereof). The Company relies on royalty reports received from third party licensees to record its revenue. From time to time, the Company may audit or otherwise dispute royalties reported from licensees. Any adjusted royalty revenue as a result of such audits or dispute is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined. Revenue from the Company’s patent licensing business is generated from negotiated license agreements. The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the terms of each agreement and the nature of the obligations of the parties. These agreements may include, but not be limited to, elements related to past infringement liabilities, non-refundable upfront license fees, and ongoing royalties on licensed products sold by the licensee. Generally, in the event of settlement of litigation related to the Company’s assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license (a “Fully-Paid License”), or (ii) a non-refundable lump sum payment (license initiation fee) together with an ongoing obligation to pay quarterly or monthly royalties to the Company for the life of the licensed patent (a “Royalty Bearing License”). The Company’s license agreements, both Fully-Paid Licenses and Royalty Bearing Licenses, typically include some combination of the following: (i) the grant of a non-exclusive license to manufacture and/or sell products covered by its patented technologies; (ii) the release of the licensee from certain claims, and (iii) the dismissal of any pending litigation. The intellectual property rights granted pursuant to these licenses typically extend until the expiration of the related patents. Pursuant to the terms of these agreements, the Company typically has no further performance obligations with respect to the grant of the non-exclusive licenses. Generally, the license agreements provide for the grant of the licenses, releases, and other obligations following execution of the agreement and the receipt of the up-front lump sum payment for a Fully-Paid License or a license initiation fee for a Royalty Bearing License. Ongoing Royalty Payments: Certain of the Company’s revenue from Royalty Bearing Licenses results from the calculation of royalties based on a licensee’s actual quarterly sales (one licensee pays monthly royalties) of licensed products, applied to a contractual royalty rate. Licensees that pay royalties on a quarterly basis generally report to the Company actual quarterly sales and related quarterly royalties due within 45 days after the end of the quarter in which such sales activity takes place. Licensees with Royalty Bearing Licenses are obligated to provide the Company with quarterly (or monthly) royalty reports that summarize their sales of licensed products and their related royalty obligations to the Company. The Company receives these royalty reports subsequent to the period in which its licensees underlying sales occurred. The amount of royalties due under Royalty Bearing Licenses, each quarter, cannot be reasonably estimated by management. Consequently, the Company recognizes revenue for the period in which the royalty report is received in arrears and other revenue recognition criteria are met. Non-Refundable Up-Front Fees: Fully-Paid Licenses provide for a non-refundable up-front payment, for which the Company has no future obligations or performance requirements, revenue is generally recognized when the Company has obtained the signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from Fully-Paid Licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations. [5] Equity Method Investments Equity method investments are equity securities in entities the Company does not control but over which it has the ability to exercise significant influence. These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures [6] 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. [7] Costs of Revenue The Company includes in costs of revenue for the three and nine months ended September 30, 2020 and 2019 contingent legal fees payable to patent litigation counsel (see Note G[1] hereof) and incentive bonus compensation payable to its Chairman and Chief Executive Officer (see Note H[1] hereof). [8] 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 740-10, Accounting for Uncertainty in Income Taxes , 2020. U.S. federal, state and local income tax returns prior to 2016 are not subject to examination by any applicable tax authorities, except that tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent they generated loss carry-forwards that are available for those future years. In July 2018, the Internal Revenue Service notified the Company that it was examining its 2016 federal tax return. In March 2020, the Company was advised by the Internal Revenue Service that the examination was concluded with no change to the Company’s 2016 federal tax return. The personal holding company (“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC’s undistributed personal holding company income (“PHC Income”), which means, in general, taxable income subject to certain adjustments. For a corporation to be classified as a PHC, it must satisfy two tests: (i) that more than 50% in value of its outstanding shares must be owned directly or indirectly by 5 or fewer individuals at any time during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the “Ownership Test”) and (ii) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities and rents (the “Income Test”). Beginning in July 2020, based upon available shareholder ownership information, the Company may have satisfied the Ownership Test. As a result, the Company has engaged tax counsel to further evaluate whether it has satisfied the Ownership Test and whether potential future income generated by the Company constitutes “royalties” within the meaning of the Income Test as well as other related PHC issues. If the Company satisfies the Ownership Test and achieves net income for the year ended December 31, 2020 (or for any subsequent year in which the Ownership Test is also satisfied) that is determined to satisfy the Income Test, the Company would constitute a PHC and for the year ended December 31, 2020 (and each subsequent year in which the Ownership Test is also satisfied), the Company would be subject to a 20% tax on the amount of any PHC Income that it does not distribute to its shareholders. While the Company has sustained a net loss of $234,000 for the nine month period ended September 30, 2020, it is possible that the Company could achieve significant income for the year ended December 31, 2020 in the event of favorable outcomes of pending litigation and receipt of significant revenue including, but not limited to, its successful appeal to the U.S. Court of Appeals for the Federal Circuit of the District Court’s order of non-infringement in its trial with HP (see Note I[1] and Note I[2] hereof). If any such net income were achieved for the year ended December 31, 2020 and determined to be PHC Income, it would be subject to a 20% tax on the amount of any PHC Income the Company does not distribute to its shareholders. [9] Stock-Based Compensation The Company accounts for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718 Compensation Stock Compensation their grant date fair values. Compensation expense related to awards to employees is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Share based payments issued to non-employees are recorded at their fair values and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period and are expensed using an accelerated attribution model. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of options granted. The fair value of restricted stock units is determined based on the number of shares underlying the grant and either the quoted market price of the Company’s common stock on the date of grant for time-based and performance-based awards, or the fair value on the date of grant using the Monte Carlo Simulation model for market-based awards (see Note D for further discussion of the Company’s stock-based compensation). [10] Earnings Per Share The Company reports earnings per share in accordance with U.S. GAAP, which requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income 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 and shares were issued pursuant to outstanding restricted stock units. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share (see Note E). [11] Fair Value Measurements ASC Topic 820, Fair Value Measurement and Disclosures There are three levels of inputs that may be used to measure fair value: Level 1: Observable inputs such as quoted prices (unadjusted) in an active market for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs that are supported by little or no market activity; therefore, the inputs are developed by the Company using estimates and assumptions that the Company expects a market participant would use, including pricing models, discounted cash flow methodologies, or similar techniques. The carrying value of the Company’s financial instruments, including cash and cash equivalents, royalty receivable, other assets, accounts payable, and accrued expenses approximates fair value because of the short-term nature of these financial instruments. The Company’s marketable securities are classified within Level 1 because they are valued using quoted market prices in an active market (see Marketable Securities – Note F). [12] Carrying Value, Recoverability and Impairment of Long-Lived Assets An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited. At September 30, 2020 and 2019, there was no impairment to the Company’s patents and equity investment. The Company’s equity method investment in ILiAD Biotechnologies, LLC (“ILiAD”), a privately held development stage biotechnology company (see Equity Investment – Note J) is evaluated on a non-recurring basis for impairment and is classified within Level 3 as it is valued using significant unobservable inputs or data in an inactive market, and the valuation requires management judgment due to the absence of market price and inherent lack of liquidity. [13] Dividend Policy Cash dividends are recorded when declared by the Company’s Board of Directors. Common stock dividends are charged against retained earnings when declared or paid (see Note M hereof). [14] New Accounting Standards Recently Issued Accounting Standards Income Taxes In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes Equity Securities In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). Recently Adopted Accounting Pronouncements Fair Value Measurements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“ASC 820”), Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. On January 1, 2020, the Company adopted ASU 2018-13. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements. |
PATENTS
PATENTS | 9 Months Ended |
Sep. 30, 2020 | |
PATENTS | |
NOTE C - PATENTS | The Company’s intangible assets at September 30 , 2020 include patents with estimated remaining economic useful lives ranging from 1.00 to 13.00 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 September 30 , 2020 and December 31, 2019 were as follows: September 30 , 2020 December 31, 2019 Gross carrying amount – patents $ 7,847,000 $ 7,797,000 Accumulated amortization – patents (6,194,000 ) (5,978,000 ) Patents, net $ 1,653,000 $ 1,819,000 Amortization expense for the three months ended September 30 , 2020 and September 30 , 2019 was and $71,000, respectively. Amortization expense for the nine months ended September 30, 2020 and September 30, 2019, was and $212,000, respectively. Future amortization of intangible assets, net is as follows: Twelve Months Ended September 30, 2021 $ 293,000 2022 293,000 2023 282,000 2024 83,000 2025 and thereafter 702,000 Total $ 1,653,000 The Company’s Remote Power Patent expired on March 7, 2020. All of the patents within the Company’s Mirror Worlds Patent Portfolio have expired. The expiration dates of the patents within the Cox Patent Portfolio range from September 2021 to November 2023. The expiration dates of patents within the Company’s M2M/IoT Patent Portfolio range from September 2033 to May 2034. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2020 | |
STOCK-BASED COMPENSATION | |
NOTE D - STOCK-BASED COMPENSATION | Restricted Stock Units During the nine months ended September 30, 2020, the Company issued 15,000 restricted stock units (“RSUs”) to each of its three non-management directors as an annual grant for 2020 for service on the Company’s Board of Directors. The RSUs vest in four equal quarterly installments of 3,750 shares of common stock on March 15, 2020, June 15, 2020, September 15, 2020 and December 15, 2020, subject to continued service on the Board of Directors. During the nine months ended September 30, 2019, the Company issued 15,000 RSUs to each of its three non-management directors as an annual grant for 2019 for service on the Company’s Board of Directors. The RSUs vested in four equal quarterly installments of 3,750 shares of common stock on March 15, 2019, June 15, 2019, September 15, 2019 and December 15, 2019. On July 14, 2020, 125,000 RSUs owned by the Company’s Chairman and Chief Executive Officer vested in accordance with his employment agreement (see Note H[1] hereof), and he delivered 50,563 shares of the Company’s common stock to satisfy withholding taxes resulting in 74,437 net shares issued. A summary of restricted stock unit activity for the nine months ended September 30, 2020 is as follows (each restricted stock unit issued by the Company represents the right to receive one share of the Company’s common stock): Number of Shares Weighted-Average Grant Date Fair Value Balance of restricted stock units outstanding at December 31, 2019 340,000 $ 2.15 Grants of restricted stock units 45,000 2.30 Vested restricted stock units (158,750 ) 2.10 Balance of unvested restricted stock units at September 30, 2020 226,250 $ 2.22 Restricted stock unit compensation expense was $85,000 and $154,000 for the three months ended September 30, 2020 and September 30, 2019, respectively. Restricted stock unit compensation expense was $242,000 and $425,000 for the nine months ended September 30, 2020 and September 30, 2019, respectively. The Company has an aggregate of $85,000 of unrecognized restricted stock unit compensation as of September 30, 2020 to be expensed over a weighted average period of 0.57 years. All of the Company’s outstanding (unvested) restricted stock units have dividend equivalent rights. As of September 30, 2020, there was $68,000 accrued for dividend equivalent rights. As of December 31, 2019, there was $90,000 accrued for dividend equivalent rights. Stock Options There were no stock option grants during the nine months ended September 30, 2020 and September 30, 2019. The following table presents information relating to all stock options outstanding and exercisable at September 30 , 2020: Options Weighted Average Exercise Weighted Options 500,000 $1.19 2.09 500,000 The Company had no recorded stock-based compensation related to stock option grants for the nine months ended September 30, 2020 and September 30, 2019. The Company had no unrecognized stock-based compensation cost as of September 30, 2020. The aggregate intrinsic value of stock options exercisable at September 30, 2020 was $730,000. During the three months ended September 30, 2020 and September 30, 2019, there were no stock option exercises. During the nine months ended September 30, 2020, stock options to purchase an aggregate of 105,000 shares of the Company’s common stock, at an exercise price of $2.34 per share, were exercised on a net exercise (cashless) basis by three non-management directors of the Company. With respect to the aforementioned stock options, net shares of an aggregate of 4,707 shares were delivered to the non-management directors. During the nine months ended September 30, 2019, stock options to purchase an aggregate of 925,000 shares were exercised by executive officers of the Company and a consultant (750,000 shares at an exercise price of $0.83 per share by the Company’s Chairman and Chief Executive Officer, 50,000 shares at an exercise price of $1.65 per share by each of the Company’s Chief Financial Officer and Executive Vice President and 75,000 shares at an exercise price of $1.65 per share by a consultant). With respect to such options, options to purchase an aggregate of 859,849 shares were exercised on a net exercise (cashless) basis by the Company’s Chairman and Chief Executive Officer (750,000 shares), the Company’s Executive Vice President (34,849 shares) and a consultant (75,000 shares) resulting in 328,111 net shares (after delivery of shares for withholding taxes) issued to the Company’s Chairman and Chief Executive Officer, 27,713 net shares issued to the Company’s Executive Vice President and 28,824 net shares issued to the consultant. During the nine months ended September 30, 2019, stock options to purchase an aggregate of 105,000 shares of the Company’s common stock, at an exercise price of $1.65 per share, were exercised on a net exercise (cashless) basis by three non-management directors of the Company. With respect to the aforementioned stock options, 35,884 net shares were issued to the three non-management directors. |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
Net Income (loss) per share | |
NOTE E - EARNINGS (LOSS) PER SHARE | Basic earnings (loss) per share is calculated by dividing the net loss by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share data includes the dilutive effects of options, warrants and restricted stock units. Potential shares of 726,250 and 996,250 at September 30, 2020 and September 30, 2019, respectively, consisted of options and restricted stock units. Computations of basic and diluted weighted average common shares outstanding were as follows: Nine Months Ended Three Months Ended 2020 2019 2020 2019 Weighted-average common shares outstanding – basic 23,992,203 23,935,304 24,012,333 24,138,191 Dilutive effect of options, warrants and restricted stock units — — 509,375 — Weighted-average common shares outstanding – diluted 23,992,203 23,935,304 24,521,708 24,138,191 Options and restricted stock units excluded from the computation of diluted earnings (loss) per share because the effect of inclusion would have been anti-dilutive 726,250 996,250 -0- 996,250 |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 9 Months Ended |
Sep. 30, 2020 | |
MARKETABLE SECURITIES | |
NOTE F - MARKETABLE SECURITIES | Marketable securities as of September 30 , 2020 and December 31, 2019 were composed of: September 30, 2020 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Certificates of deposit $ 8,282,000 $ 22,000 $ — $ 8,304,000 Fixed income mutual funds 9,616,000 — (24,000 ) 9,592,000 Corporate bonds and notes 3,371,000 26,000 (22,000 ) 3,375,000 Total marketable securities $ 21,269,000 $ 48,000 $ (46,000 ) $ 21,271,000 December 31, 2019 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Certificates of deposit $ 8,953,000 $ 6,000 $ — $ 8,959,000 Fixed income mutual funds 7,878,000 1,000 — 7,879,000 Corporate bonds and notes 8,813,000 112,000 (33,000 ) 8,892,000 Total marketable securities $ 25,644,000 $ 119,000 $ (33,000 ) $ 25,730,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE G - COMMITMENTS AND CONTINGENCIES | [1] Legal Fees Russ, August & Kabat provides legal services to the Company with respect to its patent litigation filed in May 2017 against Facebook, Inc. in the U.S. District Court for the Southern District of New York relating to several patents within the Company’s Mirror Worlds Patent Portfolio (see Note I[4] hereof). The terms of the Company’s agreement with Russ, August & Kabat provide for cash payments on a monthly basis subject to a cap plus a contingency fee ranging between 15% and 24% 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. Russ, August & Kabat also 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 U.S. District Court for the Southern District of New York relating to certain patents within the Company’s Cox Patent Portfolio (see Note I[3] hereof). The terms of the Company’s agreement with Russ, August & Kabat provide 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 filed in September 2011 against sixteen (16) data networking equipment manufacturers in the U.S. District Court for the Eastern District of Texas, Tyler (see Note I[1] hereof). The terms of the Company’s agreement with Dovel & Luner LLP essentially provide 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 months ended September 30, 2020 and September 30, 2019, the Company incurred aggregate contingent legal fees to Dovel & Luner, LLP with respect to the litigation of $1,385,000 and $103,000, respectively. For the nine months ended September 30, 2020 and September 30, 2019, the Company incurred contingent legal fees to Dovel & Luner, LLP with respect to the litigation of $1,421,000 and $346,000, respectively. As of September 30, 2020 and for the year ended December 31, 2019, the Company included in accrued expenses aggregate contingent legal fees to Dovel & Luner, LLP with respect to the litigation of $36,000 and $485,000, respectively. The Company is responsible for a certain portion of the expenses incurred with respect to the litigation. Dovel & Luner, LLP also provided legal services to the Company with respect to the litigation settled in July 2010 against Cisco and several other major data networking equipment manufacturers (see Note I[2] 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). With respect to royalty payments received from Cisco in accordance with the Company’s settlement and license agreement with Cisco, the Company has an obligation to pay Dovel & Luner, LLP (including local counsel) 24% of such royalties received. During the three and nine months ended September 30, 2020 and September 30, 2019, the Company did not incur any contingent legal fees to Dovel & Luner, LLP with respect to the litigation. [2] Patent Acquisitions In connection with the Company’s acquisition of its Cox Patent Portfolio, 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 patent portfolio. As part of the a c i iti e n t ere i t a a r e e m e n it Interface, LLC (“Recognition”) pursuant to which g iti r e ce i e fr the Company a i t ere i t h e p r c ee rea li z e fr t m e ti z a ti t Mirror Worlds P a t e P r t f li a f ll ( i t f i r milli e p r c e e ( ii t e x milli n e r c ee ( iii a n r ti t e r c e e i e x ce mil l In connection with the Company’s acquisition of its M2M/IoT Patent Portfolio, the Company is obligated to pay M2M 14% of the first $100 million of net proceeds (after deduction of expenses) and 5% of net proceeds greater than $100 million from Monetization Activities (as defined) related to the patent portfolio. In addition, M2M will be entitled to receive from the Company $250,000 of additional consideration upon the occurrence of certain future events related to the patent portfolio. [3] Lease Agreements The Company leases its principal office in New York City at a monthly base rate of approximately $3,900 which expired on May 31, 2020 and is currently occupied on a month-to-month basis. The Company also leases office space in New Canaan, Connecticut at a base rent of $7,850 per month which expired on March 31, 2020 and is currently occupied on a month-to-month basis. Under ASC 842 operating lease expense is generally recognized evenly over the term of the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease arrangements entered into or reassessed after the adoption of ASC 842, the Company combines the lease and non-lease components in determining the right-of-use (“ROU”) assets and related lease obligation. As of September 30, 2020, there were no future lease payments included in the measurement of operating lease liabilities on the unaudited condensed consolidated balance sheet as all of the Company’s leases are now on a month-to-month basis. In accordance with ASC 842 and the Company’s policy, the Company does not recognize an operating lease right-of-use asset and associated lease obligation for leases with an initial term of less than 12 months. |
EMPLOYMENT ARRANGEMENTS AND OTH
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | 9 Months Ended |
Sep. 30, 2020 | |
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | |
NOTE H - EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS | [1] Under the terms of the Agreement, so long as the Chairman and Chief Executive Officer continues to serve as an executive officer of the Company, whether pursuant to the Agreement or otherwise, the Chairman and Chief Executive Officer shall also receive incentive compensation in an amount equal to 5% of the Company’s gross royalties or other payments from Licensing Activities (as defined) (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 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 relating to Licensing Activities with respect to patents other than the Remote Power Patent (including the Mirror Worlds Patent Portfolio, Cox Patent Portfolio and M2M/IoT Patent Portfolio) (collectively, the “Incentive Compensation”). During the three months ended September 30, 2020 and September 30, 2019, the Chairman and Chief Executive Officer earned Incentive Compensation of $208,000 and $26,000, respectively. During the nine months ended September 30, 2020 and September 30, 2019, the Chairman and Chief Executive Officer earned incentive compensation $218,000 and $86,000, respectively. At September 30, 2020 and December 31, 2019, $-0- and $92,000 of such compensation were included in accrued expenses, respectively. On July 14, 2018, 375,000 RSUs owned by the Company’s Chairman and Chief Executive Officer vested in accordance with the above referenced terms of the Agreement. With respect to such vesting of RSUs, the Company’s Chairman and Chief Executive Officer delivered 172,313 shares of common stock to satisfy withholding taxes and received 202,687 net shares of common stock. On July 14, 2019, 125,000 additional RSUs owned by the Company’s Chairman and Chief Executive Officer vested in accordance with the Agreement. With respect to the vesting of such restricted stock units, the Company’s Chairman and Chief Executive Officer delivered 56,813 shares of common stock to satisfy withholding taxes and received 68,187 net shares of common stock. On July 14, 2020, 125,000 additional RSUs owned by the Chairman and Chief Executive Officer vested in accordance with the Agreement and he delivered 50,563 shares of common stock to satisfy withholding taxes resulting in 74,437 net shares issued. 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 any time 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 $175,000 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, warrants, RSUs and other awards. 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 by us “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] [3] |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended |
Sep. 30, 2020 | |
LEGAL PROCEEDINGS | |
NOTE I - LEGAL PROCEEDINGS | [1] On November 13, 2017, a jury empaneled in the U.S. District Court for the Eastern District of Texas, Tyler Division, found that certain claims of the Company’s Remote Power Patent were invalid and not infringed by HP. On February 2, 2018, the Company moved to throw out the jury verdict and have the Court determine that certain claims of the Remote Power Patent are not obvious (invalid) as a matter of law by filing motions for judgment as a matter of law on validity and a new trial on validity and infringement. On August 29, 2018, the District Court issued an order granting the Company’s motion for judgment as a matter of law that the Remote Power Patent is valid, thereby overturning the jury verdict of invalidity and denied the Company’s motion for a new trial on infringement. On August 30, 2018, the Company appealed the District Court’s denial of its motion for a new trial on infringement to the U.S. Court of Appeals for the Federal Circuit. On September 13, 2018, HP filed a cross-appeal of the District Court’s order that the Remote Power Patent is valid as a matter of law. On September 24, 2020, the U.S. Court of Appeals for the Federal Circuit overturned the judgment of non-infringement of the U.S. District Court of the Eastern District of Texas. The Federal Circuit also vacated the District Court judgment of validity of the Remote Power Patent. The Federal Circuit has remanded the case to the District Court for a new trial on infringement against HP and further proceedings on validity. On October 9, 2020, the Company filed a petition for rehearing to the Federal Circuit to clarify the scope of the Federal Circuit’s remand to the District Court on validity. On October 14, 2020, Hewlett-Packard filed a petition seeking rehearing of the Federal Circuit’s decision that the Company is entitled to a new trial on infringement. Both Petitions for Rehearing are currently pending. [2] In accordance with the Settlement and License Agreement, dated May 25, 2011, between the Company and Cisco (the “Agreement”), Cisco became obligated 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 $9,000,000 beginning in 2016 for the remaining term of the patent. The royalty payments from Cisco are subject to certain conditions including the continued validity of certain claims of the Remote Power Patent or a finding that a third party’s PoE products are found not to infringe the Remote Power Patent and such finding applies to the applicable licensee’s licensed products. As a result of the HP jury verdict in November 2017 several of the Company’s largest licensees, including Cisco, its largest licensee, notified the Company in late November 2017 and January 2018 that they will no longer make ongoing royalty payments to the Company pursuant to their license agreements. As a [3] [4] [5] |
EQUITY INVESTMENT
EQUITY INVESTMENT | 9 Months Ended |
Sep. 30, 2020 | |
EQUITY INVESTMENT | |
NOTE J - EQUITY INVESTMENT | During the period December 2018 – August 2019, the Company made an aggregate investment of $5,000,000 in ILiAD Biotechnologies, LLC (“ILiAD, a privately held clinical stage biotechnology company dedicated to the prevention of human disease caused by Bordetella pertussis with a current focus on its proprietary intranasal vaccine BPZE1, for the prevention of pertussis (whooping cough). At September 30, 2020, the Company owned approximately 9.5% of the outstanding units of ILiAD on a non-fully diluted basis and 8.3% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options and warrants). In connection with its investment, the Company’s Chairman and Chief Executive Officer obtained a seat on ILiAD’s Board of Managers and receives the same compensation for service on the Board of Managers as other non-management Board members. The Company incurred approximately $41,000 of advisory and legal expenses in conjunction with its equity investment in ILiAD which have been capitalized as a component of the equity investment carrying value. On September 29, 2020, ILiAD presented positive topline Phase 2b trial results of its lead pertussis (whooping cough) vaccine candidate BPZE1 at the virtual World Vaccine Congress. BPZE1 met both primary endpoints of overall safety and induction of mucosal immunity. Specifically, a single vaccination with BPZE1 prevented 90% of colonization by revaccination/challenge three months later (only 10% colonization observed). BPZE1 was differentiated in its ability to demonstrate induction of broad mucosal immunity against whole cell extract (WCE) and pertussis-specific protein antibodies. In addition, BPZE1 induced both IgG and IgA systemic immunity using WCE and pertussis specific protein assays, with durability of response measured to end of study (nine months). The Company’s investment in ILiAD is accounted for as an equity method investment in accordance with ASC 323, Investments — Equity Method and Joint Ventures The difference between the Company’s share of equity in ILiAD’s net assets and the equity investment carrying value reported on the Company’s unaudited condensed consolidated balance sheet at September 30, 2020 is due to an excess amount paid over the book value of the investment totaling approximately $5,000,000 which is accounted for as equity method goodwill. |
STOCK REPURCHASES
STOCK REPURCHASES | 9 Months Ended |
Sep. 30, 2020 | |
STOCK-BASED COMPENSATION | |
NOTE K - STOCK REPURCHASES | On June 11, 2019, the Board of Directors authorized an extension and increase of the Company’s share repurchase program (the “Share Repurchase Program”) to repurchase up to $5,000,000 of common stock over the subsequent 24 month period (for a total authorization of approximately $22,000,000 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 September 30, 2020, the Company has repurchased an aggregate of 8,605,659 shares of its common stock at an aggregate cost of $16,156,005 (exclusive of commissions) or an average per share price of $1.88. All such repurchased shares have been cancelled. During the three months ended September 30, 2020, the Company did not repurchase any of its shares. During the nine months ended September 30, 2020, the Company repurchased 115,889 shares of its common stock at an aggregate cost of $249,158 (exclusive of commissions) or an average per share price of $2.15. At September 30, 2020, the dollar value of remaining shares that may be repurchased under the Share Repurchase Program was $4,196,100. |
CONCENTRATIONS
CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2020 | |
CONCENTRATIONS | |
NOTE L - CONCENTRATIONS | Revenue from the Company’s Remote Power Patent constituted 100% of the Company’s revenue for the three and nine months ended September 30, 2020 and September 30, 2019. Revenue from one licensee constituted 100% of the Company’s revenue for the three months ended September 30, 2020. Revenue from one licensee constituted approximately 95% of the Company’s revenue for the nine months ended September 30, 2020. Revenue from five licensees constituted approximately 93% of the Company’s revenue for the three months ended September 30, 2019 and revenue from five licensees constituted approximately 86% of the Company’s revenue for the nine months ended September 30, 2019. At September 30, 2020, the Company had no royalty receivables. At December 31, 2019, royalty receivables from four licensees constituted in the aggregate approximately 97% of the Company’s royalty receivables. |
DIVIDEND POLICY
DIVIDEND POLICY | 9 Months Ended |
Sep. 30, 2020 | |
DIVIDEND POLICY | |
Note M - DIVIDEND POLICY | On June 9, 2020, the Board of Directors of the Company approved the continuation of the Company’s dividend policy which consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which are anticipated to be paid in March and September of each year. The Company’s dividend policy was previously contingent upon receipt of revenue from its Remote Power Patent through March 7, 2020 (the expiration of the patent). On February 15, 2020, the Company’s Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of March 31, 2020 to all common shareholders of record as of March 16, 2020. On August 18, 2020, the Company’s Board of Directors declared a semi-annual dividend of $0.05 per share with a payment date of September 30, 2020 to all common shareholders of record as of September 14, 2020. The Company’s dividend policy undergoes a periodic review by the Board of Directors and is subject to change at any time depending upon the Company’s earnings, financial requirements and other factors existing at the time. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Use of Estimates and Assumptions | The preparation of the unaudited condensed consolidated 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 unaudited condensed 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 revenue recognition, stock-based compensation, income taxes, valuation of patents and equity method investments, including evaluation of the Company’s basis difference. Actual results could be materially different from those estimates, upon which the carrying values were based. |
Cash and Cash Equivalents | The Company maintains cash deposits in high quality financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Accounts at each institution are insured by the FDIC up to $250,000. At September 30, 2020, the Company maintained a cash balance of $6,772,000 in excess of the FDIC insured limit. The Company considers all highly liquid short-term investments, including certificates of deposit and money market funds, that are purchased with an original maturity of three months or less to be cash equivalents. |
Marketable Securities | The Company’s marketable securities are comprised of certificates of deposit with original maturity greater than three months from date of purchase, fixed income mutual funds, and corporate bonds and notes (see Note F). At September 30, 2020, included in marketable securities, the Company had aggregate certificates of deposit of $8,195,000 at financial institutions which were within the FDIC limit. The Company’s marketable securities are measured at fair value and are accounted for in accordance with ASU 2016-01. Unrealized holding gains and losses on certificates of deposit and fixed income mutual funds are recorded in net realized and unrealized gain (loss) from investments on the unaudited condensed consolidated statements of operations and comprehensive loss. Unrealized holding gains and losses, net of the related tax effect, on corporate bonds and notes are excluded from earnings and are reported as a separate component of stockholders’ equity until realized. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of the marketable securities. |
Revenue Recognition | Under ASC 606, revenue is recognized when the Company completes the licensing of its intellectual property to its licensees, in an amount that reflects the consideration the Company expects to be entitled to in exchange for licensing its intellectual property. The Company determines revenue recognition through the following steps: · identification of the license agreement; · identification of the performance obligations in the license agreement; · determination of the consideration for the license; · allocation of the transaction price to the performance obligations in the contract; and · recognition of revenue when the Company satisfies its performance obligations. Revenue disaggregated by source is as follows: Three Months Nine Months 2020 2019 2020 2019 Fully-Paid - Licenses $ ― $ ― $ ― $ 130,000 (1) Royalty Bearing - Licenses 4,150,000 (2) 520,000 4,366,000 (2) 1,595,000 Total Revenue $ 4,150,000 $ 520,000 $ 4,366,000 $ 1,725,000 __________________________ (1) Includes conversion of an existing royalty bearing license to a fully-paid license. (2) Includes revenue of $4,150,000 from a litigation settlement with Dell, Inc. (see Note I[5] hereof). The Company relies on royalty reports received from third party licensees to record its revenue. From time to time, the Company may audit or otherwise dispute royalties reported from licensees. Any adjusted royalty revenue as a result of such audits or dispute is recorded by the Company in the period in which such adjustment is agreed to by the Company and the licensee or otherwise determined. Revenue from the Company’s patent licensing business is generated from negotiated license agreements. The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the terms of each agreement and the nature of the obligations of the parties. These agreements may include, but not be limited to, elements related to past infringement liabilities, non-refundable upfront license fees, and ongoing royalties on licensed products sold by the licensee. Generally, in the event of settlement of litigation related to the Company’s assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license (a “Fully-Paid License”), or (ii) a non-refundable lump sum payment (license initiation fee) together with an ongoing obligation to pay quarterly or monthly royalties to the Company for the life of the licensed patent (a “Royalty Bearing License”). The Company’s license agreements, both Fully-Paid Licenses and Royalty Bearing Licenses, typically include some combination of the following: (i) the grant of a non-exclusive license to manufacture and/or sell products covered by its patented technologies; (ii) the release of the licensee from certain claims, and (iii) the dismissal of any pending litigation. The intellectual property rights granted pursuant to these licenses typically extend until the expiration of the related patents. Pursuant to the terms of these agreements, the Company typically has no further performance obligations with respect to the grant of the non-exclusive licenses. Generally, the license agreements provide for the grant of the licenses, releases, and other obligations following execution of the agreement and the receipt of the up-front lump sum payment for a Fully-Paid License or a license initiation fee for a Royalty Bearing License. Ongoing Royalty Payments: Certain of the Company’s revenue from Royalty Bearing Licenses results from the calculation of royalties based on a licensee’s actual quarterly sales (one licensee pays monthly royalties) of licensed products, applied to a contractual royalty rate. Licensees that pay royalties on a quarterly basis generally report to the Company actual quarterly sales and related quarterly royalties due within 45 days after the end of the quarter in which such sales activity takes place. Licensees with Royalty Bearing Licenses are obligated to provide the Company with quarterly (or monthly) royalty reports that summarize their sales of licensed products and their related royalty obligations to the Company. The Company receives these royalty reports subsequent to the period in which its licensees underlying sales occurred. The amount of royalties due under Royalty Bearing Licenses, each quarter, cannot be reasonably estimated by management. Consequently, the Company recognizes revenue for the period in which the royalty report is received in arrears and other revenue recognition criteria are met. Non-Refundable Up-Front Fees: Fully-Paid Licenses provide for a non-refundable up-front payment, for which the Company has no future obligations or performance requirements, revenue is generally recognized when the Company has obtained the signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from Fully-Paid Licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations. |
Equity Method Investments | Equity method investments are equity securities in entities the Company does not control but over which it has the ability to exercise significant influence. These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures |
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. |
Costs of Revenue | The Company includes in costs of revenue for the three and nine months ended September 30, 2020 and 2019 contingent legal fees payable to patent litigation counsel (see Note G[1] hereof) and incentive bonus compensation payable to its Chairman and Chief Executive Officer (see Note H[1] hereof). |
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 740-10, Accounting for Uncertainty in Income Taxes , 2020. U.S. federal, state and local income tax returns prior to 2016 are not subject to examination by any applicable tax authorities, except that tax authorities could challenge returns (only under certain circumstances) for earlier years to the extent they generated loss carry-forwards that are available for those future years. In July 2018, the Internal Revenue Service notified the Company that it was examining its 2016 federal tax return. In March 2020, the Company was advised by the Internal Revenue Service that the examination was concluded with no change to the Company’s 2016 federal tax return. The personal holding company (“PHC”) rules under the Internal Revenue Code impose a 20% tax on a PHC’s undistributed personal holding company income (“PHC Income”), which means, in general, taxable income subject to certain adjustments. For a corporation to be classified as a PHC, it must satisfy two tests: (i) that more than 50% in value of its outstanding shares must be owned directly or indirectly by 5 or fewer individuals at any time during the second half of the year (after applying constructive ownership rules to attribute stock owned by entities to their beneficial owners and among certain family members and other related parties) (the “Ownership Test”) and (ii) at least 60% of its adjusted ordinary gross income for a taxable year consists of dividends, interest, royalties, annuities and rents (the “Income Test”). Beginning in July 2020, based upon available shareholder ownership information, the Company may have satisfied the Ownership Test. As a result, the Company has engaged tax counsel to further evaluate whether it has satisfied the Ownership Test and whether potential future income generated by the Company constitutes “royalties” within the meaning of the Income Test as well as other related PHC issues. If the Company satisfies the Ownership Test and achieves net income for the year ended December 31, 2020 (or for any subsequent year in which the Ownership Test is also satisfied) that is determined to satisfy the Income Test, the Company would constitute a PHC and for the year ended December 31, 2020 (and each subsequent year in which the Ownership Test is also satisfied), the Company would be subject to a 20% tax on the amount of any PHC Income that it does not distribute to its shareholders. While the Company has sustained a net loss of $234,000 for the nine month period ended September 30, 2020, it is possible that the Company could achieve significant income for the year ended December 31, 2020 in the event of favorable outcomes of pending litigation and receipt of significant revenue including, but not limited to, its successful appeal to the U.S. Court of Appeals for the Federal Circuit of the District Court’s order of non-infringement in its trial with HP (see Note I[1] and Note I[2] hereof). If any such net income were achieved for the year ended December 31, 2020 and determined to be PHC Income, it would be subject to a 20% tax on the amount of any PHC Income the Company does not distribute to its shareholders. |
Stock-based compensation | The Company accounts for its stock-based compensation awards to employees and directors in accordance with FASB ASC Topic 718 Compensation Stock Compensation their grant date fair values. Compensation expense related to awards to employees is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term. Share based payments issued to non-employees are recorded at their fair values and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period and are expensed using an accelerated attribution model. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of options granted. The fair value of restricted stock units is determined based on the number of shares underlying the grant and either the quoted market price of the Company’s common stock on the date of grant for time-based and performance-based awards, or the fair value on the date of grant using the Monte Carlo Simulation model for market-based awards (see Note D for further discussion of the Company’s stock-based compensation). |
Earnings Per Share | The Company reports earnings per share in accordance with U.S. GAAP, which requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income 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 and shares were issued pursuant to outstanding restricted stock units. Common stock equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share (see Note E). |
Fair Value Measurements | ASC Topic 820, Fair Value Measurement and Disclosures There are three levels of inputs that may be used to measure fair value: Level 1: Observable inputs such as quoted prices (unadjusted) in an active market for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs that are supported by little or no market activity; therefore, the inputs are developed by the Company using estimates and assumptions that the Company expects a market participant would use, including pricing models, discounted cash flow methodologies, or similar techniques. The carrying value of the Company’s financial instruments, including cash and cash equivalents, royalty receivable, other assets, accounts payable, and accrued expenses approximates fair value because of the short-term nature of these financial instruments. The Company’s marketable securities are classified within Level 1 because they are valued using quoted market prices in an active market (see Marketable Securities – Note F). |
Carrying Value, Recoverability and Impairment of Long-Lived Assets | An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited. At September 30, 2020 and 2019, there was no impairment to the Company’s patents and equity investment. The Company’s equity method investment in ILiAD Biotechnologies, LLC (“ILiAD”), a privately held development stage biotechnology company (see Equity Investment – Note J) is evaluated on a non-recurring basis for impairment and is classified within Level 3 as it is valued using significant unobservable inputs or data in an inactive market, and the valuation requires management judgment due to the absence of market price and inherent lack of liquidity. |
Dividend Policy | Cash dividends are recorded when declared by the Company’s Board of Directors. Common stock dividends are charged against retained earnings when declared or paid (see Note M hereof). |
New Accounting Standards | Recently Issued Accounting Standards Income Taxes In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes Equity Securities In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). Recently Adopted Accounting Pronouncements Fair Value Measurements In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“ASC 820”), Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 is intended to improve the effectiveness of fair value measurement disclosures. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. On January 1, 2020, the Company adopted ASU 2018-13. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Disaggregation of revenue | Three Months Nine Months 2020 2019 2020 2019 Fully-Paid - Licenses $ ― $ ― $ ― $ 130,000 (1) Royalty Bearing - Licenses 4,150,000 (2) 520,000 4,366,000 (2) 1,595,000 Total Revenue $ 4,150,000 $ 520,000 $ 4,366,000 $ 1,725,000 |
PATENTS (Tables)
PATENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
PATENTS | |
Accumulated amortization related to acquired intangible assets | September 30 , 2020 December 31, 2019 Gross carrying amount – patents $ 7,847,000 $ 7,797,000 Accumulated amortization – patents (6,194,000 ) (5,978,000 ) Patents, net $ 1,653,000 $ 1,819,000 |
Future amortization of current intangible assets, net | Twelve Months Ended September 30, 2021 $ 293,000 2022 293,000 2023 282,000 2024 83,000 2025 and thereafter 702,000 Total $ 1,653,000 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
STOCK-BASED COMPENSATION | |
Summary of restricted stock unit activity | Number of Shares Weighted-Average Grant Date Fair Value Balance of restricted stock units outstanding at December 31, 2019 340,000 $ 2.15 Grants of restricted stock units 45,000 2.30 Vested restricted stock units (158,750 ) 2.10 Balance of unvested restricted stock units at September 30, 2020 226,250 $ 2.22 |
Summary of information of stock options outstanding and exercisable | Options Weighted Average Exercise Weighted Options 500,000 $1.19 2.09 500,000 |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Net Income (loss) per share | |
Schedule of Loss Per Share | Nine Months Ended Three Months Ended 2020 2019 2020 2019 Weighted-average common shares outstanding – basic 23,992,203 23,935,304 24,012,333 24,138,191 Dilutive effect of options, warrants and restricted stock units — — 509,375 — Weighted-average common shares outstanding – diluted 23,992,203 23,935,304 24,521,708 24,138,191 Options and restricted stock units excluded from the computation of diluted earnings (loss) per share because the effect of inclusion would have been anti-dilutive 726,250 996,250 -0- 996,250 |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
MARKETABLE SECURITIES (Tables) | |
Marketable securities | September 30, 2020 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Cerficates of deposits $ 8,282,000 $ 22,000 $ — $ 8,304,000 Fixed income mutual funds 9,616,000 — (24,000 ) 9,592,000 Corporate bonds and notes 3,371,000 26,000 (22,000 ) 3,375,000 Total marketable securities $ 21,269,000 $ 48,000 $ (46,000 ) $ 21,271,000 December 31, 2019 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value Certificates of deposit $ 8,953,000 $ 6,000 $ — $ 8,959,000 Fixed income mutual funds 7,878,000 1,000 — 7,879,000 Corporate bonds and notes 8,813,000 112,000 (33,000 ) 8,892,000 Total marketable securities $ 25,644,000 $ 119,000 $ (33,000 ) $ 25,730,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Fully-Paid Licenses | $ 0 | $ 0 | $ 0 | $ 130,000 |
Royalty Bearing Licenses | 4,150,000 | 520,000 | 4,366,000 | 1,595,000 |
Total Revenue | $ 4,150,000 | $ 520,000 | $ 4,366,000 | $ 1,725,000 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
FDIC insured limit | $ 250,000 |
Cash in excess of FDIC insured limit | $ 6,772,000 |
Description of quarterly sales by license bearer | Licensees that pay royalties on a quarterly basis generally report to the Company actual quarterly sales and related quarterly royalties due within 45 days after the end of the quarter in which such sales activity takes place. |
Sustained net loss | $ (234,000) |
Certificates of Deposit [Member] | |
Certificate of deposits | $ 8,195,000 |
PATENTS (Details)
PATENTS (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Patents, net | $ 1,653,000 | $ 1,819,000 |
Patents [Member] | ||
Gross carrying amount - patents | 7,847,000 | 7,797,000 |
Accumulated amortization - patents | (6,194,000) | (5,978,000) |
Patents, net | $ 1,653,000 | $ 1,819,000 |
PATENTS (Details 1)
PATENTS (Details 1) - Patents [Member] | Sep. 30, 2020USD ($) |
2021 | $ 293,000 |
2022 | 293,000 |
2023 | 282,000 |
2024 | 83,000 |
2025 and thereafter | 702,000 |
Total | $ 1,653,000 |
PATENTS (Details Narrative)
PATENTS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Amortization expense | $ 72,000 | $ 71,000 | $ 216,000 | $ 212,000 |
Expiration date of Remote Power Patent | March 7, 2020 | |||
Minimum [Member] | ||||
Estimated remaining economic useful of patents | 1 year | |||
Expiration dates of the patents within the Cox patent portfolio | September 2021 | |||
Expiration dates of the patents within the Company's M2M/IoT Patent Portfolio | September 2033 | |||
Maximum [Member] | ||||
Estimated remaining economic useful of patents | 13 years | |||
Expiration dates of the patents within the Cox patent portfolio | November 2023 | |||
Expiration dates of the patents within the Company's M2M/IoT Patent Portfolio | May 2034 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) | 9 Months Ended |
Sep. 30, 2020$ / sharesshares | |
Number of shares | |
Balance of restricted stock units outstanding shares, Begining Balance | shares | 340,000 |
Grants of restricted stock units | shares | 45,000 |
Vested restricted stock units | shares | (158,750) |
Balance of unvested restricted stock units of shares, Ending Balance | shares | 226,250 |
Weighted Average Grant Date Fair Value | |
Restricted stock, Weighted Average Grant Date Fair Value, Begining Balance | $ / shares | $ 2.15 |
Grants of restricted stock units, Weighted Average Grant Date Fair Value | $ / shares | 2.30 |
Vested restricted stock units, Weighted Average Grant Date Fair Value | $ / shares | 2.10 |
Unvested Restricted stock, Weighted Average Grant Date Fair Value, Ending Balance | $ / shares | $ 2.22 |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details 1) | 9 Months Ended |
Sep. 30, 2020$ / sharesshares | |
STOCK-BASED COMPENSATION | |
Options outstanding | 500,000 |
Weighted average exercise price | $ / shares | $ 1.19 |
Weighted Average Remaining Life in Years | 2 years 1 month 2 days |
Options exercisable | 500,000 |
STOCK-BASED COMPENSATION (Det_3
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Jul. 14, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 15, 2020 | Sep. 15, 2020 | Jun. 15, 2020 | Mar. 15, 2020 | Dec. 15, 2019 | Sep. 15, 2019 | Jun. 15, 2019 | Mar. 15, 2019 |
Stock options exercised to purchase shares, cashless basis | 859,849 | |||||||||||||
Aggregate intrinsic value of options exercisable | $ 730,000 | $ 730,000 | ||||||||||||
Restricted Stock Units (RSUs) [Member] | ||||||||||||||
Net common shares issued to CEO after delivery of shares for withholding taxes | 50,563 | |||||||||||||
Quarterly vesting of shares to each non-management director | 3,750 | 3,750 | 3,750 | 3,750 | 3,750 | 3,750 | 3,750 | 3,750 | ||||||
Restricted stock unit compensation expense | 85,000 | $ 154,000 | 242,000 | $ 425,000 | ||||||||||
Unrecognized restricted stock unit compensation expense | $ 85,000 | $ 85,000 | ||||||||||||
Weighted average amortized period | 6 months 26 days | |||||||||||||
RSUs granted to each non-management director | 15,000 | 15,000 | ||||||||||||
Net shares issued to CEO | 74,437 | |||||||||||||
Accrued dividend rights on restricted stock unit | $ 68,000 | $ 90,000 | ||||||||||||
Non-Management Directors [Member] | ||||||||||||||
Exercise price | $ 2.34 | $ 1.65 | ||||||||||||
Stock options exercised to purchase shares | 105,000 | 105,000 | ||||||||||||
Net shares issued to non-management directors | 4,707 | 35,884 | ||||||||||||
Stock Option [Member] | Chief Financial Officer [Member] | ||||||||||||||
Exercise price | $ 1.65 | |||||||||||||
Stock options exercised to purchase shares | 50,000 | |||||||||||||
Stock Option [Member] | Chairman and Chief Executive Officer [Member] | ||||||||||||||
Exercise price | $ 0.83 | |||||||||||||
Stock options exercised to purchase shares | 750,000 | |||||||||||||
Net common shares issued to CEO after delivery of shares for withholding taxes | 328,111 | |||||||||||||
Stock Option [Member] | Consultant [Member] | ||||||||||||||
Exercise price | $ 1.65 | |||||||||||||
Stock options exercised to purchase shares | 75,000 | |||||||||||||
Net common shares issued to CEO after delivery of shares for withholding taxes | 28,824 | |||||||||||||
Stock Option [Member] | Executive Vice President [Member] | ||||||||||||||
Exercise price | $ 1.65 | |||||||||||||
Stock options exercised to purchase shares | 50,000 | |||||||||||||
Net common shares issued to CEO after delivery of shares for withholding taxes | 27,713 | |||||||||||||
Stock options exercised, cashless basis | 34,849 | |||||||||||||
Stock Option [Member] | Executive Officers, Consultants and Directors [Member] | ||||||||||||||
Exercise price | $ 2.34 | $ 0.83 | ||||||||||||
Aggregate stock options exercised to purchase shares | 105,000 | 925,000 |
EARNINGS (LOSS) PER SHARE (Deta
EARNINGS (LOSS) PER SHARE (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Net Income (loss) per share | ||||
Weighted-average common shares outstanding - basic | 24,012,333 | 24,138,191 | 23,992,203 | 23,935,304 |
Dilutive effect of stock options and restricted stock units | 509,375 | |||
Weighted-average common shares outstanding - diluted | 24,521,708 | 24,138,191 | 23,992,203 | 23,935,304 |
Stock options and restricted stock units excluded from the computation of diluted earning (loss) per share because the effect of inclusion would have been anti-dilutive | 996,250 | 726,250 | 996,250 |
EARNINGS (LOSS) PER SHARE (De_2
EARNINGS (LOSS) PER SHARE (Details Narrative) - shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Net Income (loss) per share | ||
Potentially Dilutive Shares | 726,250 | 996,250 |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value [Member] | ||
Certificates of deposit | $ 8,304,000 | $ 8,959,000 |
Fixed income mutual funds | 9,592,000 | 7,879,000 |
Corporate bonds and notes | 3,375,000 | 8,892,000 |
Total marketable securities | 21,271,000 | 25,730,000 |
Cost Basis [Member] | ||
Certificates of deposit | 8,282,000 | 8,953,000 |
Fixed income mutual funds | 9,616,000 | 7,878,000 |
Corporate bonds and notes | 3,371,000 | 8,813,000 |
Total marketable securities | 21,269,000 | 25,644,000 |
Gross Unrealized Gains [Member] | ||
Certificates of deposit | 22,000 | 6,000 |
Fixed income mutual funds | 0 | 1,000 |
Corporate bonds and notes | 26,000 | 112,000 |
Total marketable securities | 48,000 | 119,000 |
Gross Unrealized Losses [Member] | ||
Certificates of deposit | 0 | 0 |
Fixed income mutual funds | (24,000) | 0 |
Corporate bonds and notes | (22,000) | (33,000) |
Total marketable securities | $ (46,000) | $ (33,000) |
COMMITMENTS AND CONTINGENCIES L
COMMITMENTS AND CONTINGENCIES Legal Fees (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Legal Service Agreement With Dovel And Luner For Litigation Settlement [Member] | |||||
Accrued expenses | $ 36,000 | $ 36,000 | $ 485,000 | ||
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 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) | ||||
Contingent legal fees | $ 1,385,000 | $ 103,000 | $ 1,421,000 | $ 346,000 | |
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 Russ, August Kabot For Litigation Filed In May 2017 [Member] | |||||
Legal Fees payment ,Terms | Cash payments on a monthly basis subject to a cap plus a contingency fee ranging between 15% and 24% of the net recovery (after deduction of expenses) |
COMMITMENTS AND CONTINGENCIES P
COMMITMENTS AND CONTINGENCIES Patent Acquisitions (Details Narrative) - USD ($) | Sep. 30, 2020 | May 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ||
Obligated to pay Cox, net proceeds percentage | 12.50% | |
Recognition net proceeds payment related to Mirror Worlds patents | $ 3,127,000 | |
Recognition Net Proceeds | ||
First $125 Million | 10.00% | |
Next $125 Million | 15.00% | |
Over $250 Million | 20.00% | |
M2M Net Proceeds | ||
First $100 Million | 14.00% | |
Next $100 Million | 5.00% | |
Additional consideration payable upon occurrence of certain future events | $ 250,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES Lease Agreements (Details Narrative) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
New York City [Member] | |
Rental cost per month | $ 3,900 |
Expiring date | May 31, 2020, continuing on a month-to-month basis |
New Canaan CT [Member] | |
Rental cost per month | $ 7,850 |
Expiring date | March 31, 2020, continuing on a month-to-month basis |
EMPLOYMENT ARRANGEMENTS AND O_2
EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS (Details Narrative) - USD ($) | Jul. 14, 2020 | Jul. 14, 2019 | Jul. 14, 2018 | Jul. 14, 2016 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 |
Annual base salary of Chief Financial Officer | $ 175,000 | ||||||||
Earned incentive compensation - Chairman and CEO | $ 208,000 | $ 26,000 | 218,000 | $ 86,000 | |||||
Incentive compensation included in accrued expenses - chairman and chief executive officer | $ 0 | 0 | $ 92,000 | ||||||
Annual salary of executive vice president | 200,000 | ||||||||
Chairman and Chief Executive Officer [Member] | |||||||||
Restricted stock units vested | 125,000 | 125,000 | |||||||
Net common stock shares issued to CEO after delivery of shares for withholding taxes | 50,563 | 56,813 | |||||||
Common stock shares received | 74,437 | 68,187 | |||||||
EmploymentAgreement [Member] | Chairman and Chief Executive Officer [Member] | |||||||||
Restricted stock units vested | 375,000 | ||||||||
Target annual bonus or minimum target bonus Chairman and CEO | $ 175,000 | $ 175,000 | |||||||
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% | ||||||||
Common stock shares delivered to satisfy withholding taxes | 172,313 | ||||||||
Common stock shares issued, net | 202,687 | ||||||||
New Employment Agreement [Member] | Chairman and Chief Executive Officer [Member] | |||||||||
Target annual bonus or minimum target bonus Chairman and CEO | $ 175,000 | ||||||||
Annual base salary | $ 475,000 | ||||||||
Rate of annual increment in salary, percentage | 3.00% | ||||||||
Term of employment contract | 5 years | ||||||||
Restricted Stock Units (RSUs) [Member] | 2013 Stock Incentive Plan [Member] | |||||||||
RSUs granted to chairman and chief executive officer | 750,000 | ||||||||
Restricted Stock Units (RSUs) [Member] | 2013 Stock Incentive Plan [Member] | Transaction One [Member] | |||||||||
RSUs granted to chairman and chief executive officer | 250,000 | ||||||||
Closing price minimum for vesting beginning July 14, 2018 | $ 4.25 | ||||||||
Restricted Stock Units (RSUs) [Member] | 2013 Stock Incentive Plan [Member] | Transaction Two [Member] | |||||||||
RSUs granted to chairman and chief executive officer | 250,000 | ||||||||
Closing price minimum for vesting beginning July 14, 2018 | $ 3.25 | ||||||||
Description of employment term | Term of employment, subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company’s common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $3.25 per share (subject to adjustment for stock splits) at any time during the term of employment; and (iii) 250,000 RSUs vest at any time beginning July 14, 2018 through July 14, 2021 in equal annual installments for the remaining term of employment subject to (1) the Employment Condition being satisfied through each such annual vesting date and (2) the Company’s common stock achieving a closing price (for 20 consecutive trading days) of a minimum of $4.25 per share (subject to adjustment for stock splits) at any time during the term of employment. The aforementioned stock price vesting conditions of $3.25 per share and $4.25 per share have been satisfied. Notwithstanding the above, in the event of a Change of Control (as defined), a Termination Other Than for Cause (as defined), or a termination of employment by the Chairman and Chief Executive Officer for Good Reason (as defined), all of the 750,000 RSUs shall accelerate and become immediately fully vested. | ||||||||
Restricted Stock Units (RSUs) [Member] | 2013 Stock Incentive Plan [Member] | Transaction 3 [Member] | |||||||||
RSUs granted to chairman and chief executive officer | 250,000 | ||||||||
Restricted Stock Units (RSUs) [Member] | Mr. Horowitz [Member] | Transaction [Member] | |||||||||
Restricted stock units vested | 125,000 |
LEGAL PROCEEDINGS (Details Narr
LEGAL PROCEEDINGS (Details Narrative) - USD ($) | Nov. 13, 2018 | Sep. 30, 2020 | Mar. 31, 2020 |
Revenue from litigation settlement | $ 4,150,000 | ||
Maximum Cisco royalty payment per year for remaining term of the remote power patent | $ 9,000,000 | ||
Dell [Member] | |||
Litigation settlement, description | On November 13, 2018, the Company filed a lawsuit against Dell, Inc. in the District Court, 241st Judicial District, Smith County, Texas, for breach of a settlement and license agreement, dated August 15, 2016, with the Company as a result of Dell’s failure to make royalty payments, and provide corresponding royalty reports to the Company based on sales of Dell’s PoE products. The Company alleged that Dell is obligated to pay the Company all prior unpaid royalties that accrued prior to and after the date of the HP Jury Verdict (November 2017) as well as future royalties through the expiration of the Remote Power Patent in March 2020. On December 7, 2018, Dell filed its Answer and Counterclaim. Dell denied the claims asserted by the Company and asserted a counterclaim in excess of $1,000,000. On December 19, 2019, the Company filed a motion for summary judgment. On March 25, 2020, the Court granted the Company’s motion for summary judgment on its breach of contract claim and denied Dell’s motion for summary judgment on its breach of contract claim. |
EQUTY INVESTMENT (Details Narra
EQUTY INVESTMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2020 | Aug. 31, 2019 | |
Equity Method Goodwill | $ 5,000,000 | $ 5,000,000 | |
ILiAD [Member] | |||
Advisory and legal expenses | $ 41,000 | ||
ILiAD [Member] | Class C units [Member] | |||
Ownership percentage fully diluted | 8.30% | 8.30% | |
Share of net loss of equity investment | $ (146,000) | $ (644,000) | |
Ownership percentage - non fully diluted | 9.50% | 9.50% | |
ILiAD [Member] | Maximum [Member] | |||
Company total investment | $ 5,000,000 |
STOCK REPURCHASE (Details Narra
STOCK REPURCHASE (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 110 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | Jun. 11, 2019 | Aug. 31, 2011 | |
Number of shares, common stock repurchased | 115,889 | 8,605,659 | |||
Average price per share, common stock subject to repurchase | $ 2.15 | $ 1.88 | |||
Aggregate cost of common stock eligible for repurchase | $ 249,158 | $ 16,156,005 | |||
Remaining shares subject to repurchase, value | $ 4,196,100 | ||||
Board of Directors [Member] | |||||
Stock Repurchase Program, dollar amount of shares authorized to be repurchased next 24 months | 5,000,000 | ||||
Share Repurchase Program, dollar amount of shares authorized for repurchase since inception | 22,000,000 |
CONCENTRATIONS (Details Narrati
CONCENTRATIONS (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Licensees Five [Member] | |||||
Percentage revenue | 93.00% | 86.00% | |||
Licensees Four [Member] | |||||
Royalty receivables percentage | 97.00% | ||||
Remote Power Patent [Member] | |||||
Percentage revenue | 100.00% | 100.00% | 100.00% | 100.00% | |
Licensees One [Member] | |||||
Percentage revenue | 100.00% | 95.00% |
DIVIDEND POLICY (Details Narrat
DIVIDEND POLICY (Details Narrative) - $ / shares | Jun. 09, 2020 | Aug. 18, 2020 | Feb. 15, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
LEGAL PROCEEDINGS | |||||||
Semi-annual cash dividend per common share | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.05 | $ 0.10 | $ 0.10 | |
Dividend policy payment description | The Company approved the continuation of the Company’s dividend policy which consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which are anticipated to be paid in March and September of each year. The Company’s dividend policy was previously contingent upon receipt of revenue from its Remote Power Patent through March 7, 2020 (the expiration of the patent). |