Document and Entity Information
Document and Entity Information - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 25, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | SPHERIX INC | ||
Entity Central Index Key | 12,239 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 16,138,853 | ||
Entity Common Stock, Shares Outstanding | 2,946,978 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 142,000 | $ 805,000 |
Marketable securities | 3,392,000 | 3,500,000 |
Prepaid expenses and other assets | 330,000 | 107,000 |
Total current assets | 3,864,000 | 4,412,000 |
Property and equipment, net | 5,000 | 4,000 |
Patent portfolios, net | $ 9,799,000 | 55,004,000 |
Goodwill | 1,712,000 | |
Deposit | $ 26,000 | 26,000 |
Total assets | 13,694,000 | 61,158,000 |
Current liabilities | ||
Accounts payable and accrued expenses | 384,000 | 728,000 |
Accrued salaries and benefits | 645,000 | $ 329,000 |
Warrant liabilities | 2,959,000 | |
Short-term deferred revenue | 290,000 | |
Short-term lease liabilities | 178,000 | $ 173,000 |
Total current liabilities | 4,456,000 | $ 1,230,000 |
Long-term deferred revenue | 259,000 | |
Long-term lease liabilities | 229,000 | $ 407,000 |
Total liabilities | $ 4,944,000 | 1,637,000 |
Series I redeemable convertible preferred stock, $0.0001 par value; 0 and 35,541 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively; liquidation preference of $167 per share | $ 5,935,000 | |
Commitments and contingencies | ||
Stockholders' equity | ||
Common stock, $0.0001 par value, 100,000,000 shares authorized; 2,539,859 and 1,505,773 shares issued at December 31, 2015 and December 31, 2014, respectively; 2,539,847 and 1,505,761 shares outstanding at December 31, 2015 and December 31, 2014, respectively | ||
Additional paid-in-capital | $ 144,287,000 | $ 137,658,000 |
Treasury stock, at cost, 12 shares at December 31, 2015 and December 31, 2014, respectively | (264,000) | (264,000) |
Accumulated deficit | (135,273,000) | (83,808,000) |
Total stockholders' equity | 8,750,000 | 53,586,000 |
Total liabilities and stockholders' equity | $ 13,694,000 | $ 61,158,000 |
Series D Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock | ||
Series H Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock | ||
Series J Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock | ||
Series A Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock | ||
Series F-1 Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock | ||
Series C Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock | ||
Series D-1 Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Stockholders' equity | ||
Series I redeemable preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Series I redeemable preferred stock, shares issued | 0 | 35,541 |
Series I redeemable preferred stock, shares outstanding | 0 | 35,541 |
Series I redeemable preferred stock, liquidation preference | $ 167 | $ 167 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 2,539,859 | 1,505,773 |
Common stock, shares outstanding | 2,539,847 | 1,505,761 |
Treasury stock, shares | 12 | 12 |
Series A Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
liquidation preference | $ 0.0001 | $ 0.0001 |
Series C Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 1 |
Preferred stock, shares outstanding | 0 | 1 |
liquidation preference | $ 0.0001 | $ 0.0001 |
Series D Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 4,725 | 4,725 |
Preferred stock, shares outstanding | 4,725 | 4,725 |
liquidation preference | $ 0.0001 | $ 0.0001 |
Series D-1 Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 834 | 834 |
Preferred stock, shares outstanding | 834 | 834 |
liquidation preference | $ 0.0001 | $ 0.0001 |
Series F-1 Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
liquidation preference | $ 0.0001 | $ 0.0001 |
Series H Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 381,967 | 439,043 |
Preferred stock, shares outstanding | 381,967 | 439,043 |
liquidation preference | $ 83.50 | $ 83.50 |
Series J Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
liquidation preference | $ 0.0001 | $ 0.0001 |
Series K Convertible Preferred Stock [Member] | ||
Stockholders' equity | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares issued | 1,240 | 0 |
Preferred stock, shares outstanding | 1,240 | 0 |
liquidation preference | $ 1,000 | $ 1,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statements Of Operations | ||
Revenues | $ 33 | $ 10 |
Operating costs and expenses | ||
Amortization of patent portfolio | 6,317 | 9,831 |
Compensation and related expenses (including stock-based compensation) | 1,724 | 13,710 |
Professional fees | 2,780 | $ 4,520 |
Impairment of goodwill and patent portfolio | 40,600 | |
Rent | 88 | $ 864 |
Other selling, general and administrative | 534 | 1,696 |
Total operating expenses | 52,043 | 30,621 |
Loss from operations | (52,010) | (30,611) |
Other income | ||
Other income, net | 276 | 31 |
Change in fair value of warrant liabilities | 269 | 48 |
Total other income | 545 | 79 |
Net loss | (51,465) | $ (30,532) |
Deemed dividend related to immediate accretion of beneficial conversion feature of convertible preferred stock | (323) | |
Deemed capital contribution on extinguishment of preferred stock | 9,485 | |
Net loss attributable to common stockholders | $ (42,303) | $ (30,532) |
Net loss per share attributable to common stockholders, basic and diluted | $ (24.98) | $ (29.41) |
Weighted average number of common shares outstanding, Basic and diluted | 1,693,365 | 1,038,326 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Preferred Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 102,043 | $ (465) | $ (53,276) | $ 48,302 | ||
Beginning Balance, Shares at Dec. 31, 2013 | 198,406 | 1,902,142 | 21 | |||
Issuance of common stock for cash, net, Amount | 3,874 | 3,874 | ||||
Issuance of common stock for cash, net, Shares | 62,401 | |||||
Issuance of common stock for non-cash registration rights penalty, Amount | 654 | 654 | ||||
Issuance of common stock for non-cash registration rights penalty, Shares | 12,606 | |||||
Issuance of common stock for contractual dispute settlement, Amount | 225 | (225) | ||||
Issuance of common stock for contractual dispute settlement, Shares | 6,579 | |||||
Issuance of Series J preferred stock for cash, net, Amount | $ 1 | 18,386 | 18,387 | |||
Issuance of Series J preferred stock for cash, net, Shares | 10,000,000 | |||||
Conversion of Series B preferred stock to common stock, Shares | (1) | |||||
Conversion of Series D preferred stock to common stock, Shares | 674,362 | (1,281,288) | ||||
Conversion of Series F preferred stock to common stock, Shares | 8,224 | (156,250) | ||||
Conversion of Series H preferred stock to common stock, Shares | 10,526 | (20,000) | ||||
Conversion of Series J preferred stock to common stock, Amount | $ (1) | 1 | ||||
Conversion of Series J preferred stock to common stock, Shares | 526,316 | (10,000,000) | ||||
Retirement of treasury stock, Amount | (201) | $ 201 | ||||
Retirement of treasury stock, Shares | (9) | |||||
Stock-based compensation, Amount | 12,676 | 12,676 | ||||
Stock-based compensation, Shares | 6,341 | |||||
Net Loss | (30,532) | (30,532) | ||||
Ending Balance, Amount at Dec. 31, 2014 | 137,658 | $ (264) | (83,808) | $ 53,586 | ||
Ending Balance, Shares at Dec. 31, 2014 | 1,505,761 | 444,603 | 12 | |||
Issuance of common stock for contractual dispute settlement, Amount | ||||||
Issuance common shares in July Financing, net of offering cost, Amount | 337 | $ 337 | ||||
Issuance common shares in July Financing, net of offering cost, Shares | 301,026 | |||||
Issuance of common stock and Series K convertible preferred stock in December Offering, net of offering cost, Amount | 1,202 | 1,202 | ||||
Issuance of common stock and Series K convertible preferred stock in December Offering, net of offering cost, Shares | 726,315 | 1,240 | ||||
Beneficial conversion feature of convertible preferred stock | 323 | 323 | ||||
Deemed dividend related to immediate accretion of beneficial conversion feature of convertible preferred stock, Amount | (323) | (323) | ||||
Extinguishment of Series H convertible preferred stock and deemed capital contribution, Amount | (4,766) | (4,766) | ||||
Extinguishment of Series H convertible preferred stock and deemed capital contribution, Shares | (57,076) | |||||
Deemed capital contribution on extinguishment of preferred stock | 9,485 | 9,485 | ||||
Cancellation of Series C preferred stock | (1) | |||||
Fractional shares adjusted for reverse split | (117) | |||||
Stock-based compensation, Amount | 371 | 371 | ||||
Stock-based compensation, Shares | 6,862 | |||||
Net Loss | (51,465) | (51,465) | ||||
Ending Balance, Amount at Dec. 31, 2015 | $ 144,287 | $ (135,273) | $ 8,750 | |||
Ending Balance, Shares at Dec. 31, 2015 | 2,539,847 | 388,766 | 12 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flows from operating activities | ||
Net loss | $ (51,465) | $ (30,532) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of patent portfolio | $ 6,317 | 9,831 |
Non-cash registration rights penalty | 654 | |
Change in fair value of warrant liabilities | $ (269) | (48) |
Stock-based compensation | $ 371 | 12,676 |
Issuance of common stock - financial advisor | $ 225 | |
Depreciation expenses | $ 1 | |
Unrealized (gain) loss on marketable securities | (19) | $ 54 |
Impairment of goodwill and intangible assets | $ 40,600 | |
Changes in assets and liabilities: | ||
Marketable securities | $ (3,554) | |
Prepaid expenses and other assets | $ (223) | 44 |
Accounts payable and accrued expenses | (344) | 458 |
Accrued salaries and benefits | 316 | $ 96 |
Deferred revenue | 268 | |
Accrued lease liabilities | (173) | $ 580 |
Net cash used in operating activities | (4,620) | $ (9,516) |
Cash flows from investing activities | ||
Purchase of marketable securities | (7,994) | |
Purchase of property and equipment | $ (2) | $ (4) |
Security deposits refund | $ 4 | |
Sale of marketable securities | $ 8,121 | |
Payment of accrued patent costs | $ (1,000) | |
Net provided by (cash used) in investing activities | $ 125 | $ (1,000) |
Cash flows from financing activities | ||
Proceeds from issuance of common stock and warrants in July Financing, net | 1,322 | |
Proceeds from issuance of common stock and preferred stock in December Offering, net | $ 3,445 | |
Proceeds from issuance of common stock and warrants in private placement, net | $ 3,874 | |
Proceeds from issuance of Series J convertible preferred stock, net | 18,387 | |
Redemption of Series I redeemable convertible preferred stock | $ (935) | (14,065) |
Net cash provided by financing activities | 3,832 | 8,196 |
Net decrease in cash and cash equivalents | (663) | (2,320) |
Cash and cash equivalents, beginning of period | 805 | 3,125 |
Cash and cash equivalents, end of period | $ 142 | $ 805 |
Cash paid for interest and taxes | ||
Non-cash investing and financing activities | ||
Retirement of treasury stock | $ 201 | |
Conversion of preferred stock to common stock | $ 3 | |
Extinguishment of Series I Convertible Preferred Stock in connection with license agreement | $ 5,000 | |
Extinguishment of Series H Convertible Preferred Stock in connection with license agreement | 4,766 | |
Recognition of deferred revenue in connection with license agreement | $ 281 |
Organization and Description of
Organization and Description of Business | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
1. Organization and Description of Business | Organization and Description of Business Spherix Incorporated (the Company) is an intellectual property company incorporated in the State of Delaware that owns patented and unpatented intellectual property. The Company was formed in 1967 as a scientific research company and for much of its history pursued drug development including through Phase III clinical studies which were discontinued. Through the Companys acquisition of patents and patent applications developed by Nortel Networks Corporation from Rockstar Consortium US, LP (Rockstar) and Harris Corporation from North South Holdings Inc. (North South) in 2013, the Company has expanded its activities and is a significant owner of intellectual property assets. The Company is a patent commercialization company whose operations are focused on the monetization of its intellectual property (IP). Such monetization includes, but is not limited to, acquiring IP from patent holders in order to maximize the value of the patent holdings by conducting and managing a licensing campaign. The Company intends to generate revenues and related cash flows from the granting of intellectual property rights for the use of patented technologies that it owns, or that it manages for others, or through the settlement and litigation of patents. The Company continually works to enhance the portfolio of intellectual property through acquisition and strategic partnerships. The Companys mission is to partner with inventors, or other entities, who own undervalued intellectual property (IP). The Company then works with the inventors or other entities to commercialize the IP. Currently, the Company owns over 290 patents and patent applications. Reverse Stock Split and Amendment to Certificate of Incorporation The Companys common stock is quoted on the NASDAQ Capital Market under the symbol SPEX. One of the requirements for continued listing on the NASDAQ Capital Market is maintenance of a minimum closing bid price of $1.00 per share. On March 24, 2015, the Company received a letter (the Notice) from the Listing Qualifications Staff of The NASDAQ Stock Market LLC (NASDAQ) notifying the Company that, based upon the closing bid price of the Companys common stock, $0.0001 par value per share (the Common Stock) for the last 30 consecutive business days, the Common Stock no longer meets the requirement to maintain a minimum closing bid price of $1.00 per share, as set forth in NASDAQ Listing Rule 5550(a)(2). In accordance with NASDAQs Listing Rule 5810(c)(3)(A), the Company had a period of 180 calendar days, or until September 21, 2015, to regain compliance with the Rule. After determining that it would not be in compliance with the Rule by September 21, 2015, the Company notified NASDAQ and applied for an extension of the cure period, as permitted under the original notification. In accordance with NASDAQ Listing Rule 5810(c)(3)(A), NASDAQ granted a second grace period of 180 calendar days, or until March 21, 2016, to regain compliance with the minimum closing bid price requirement for continued listing. In order to regain compliance, the minimum closing bid price per share of the Companys Common Stock must be at least $1.00 for a minimum of ten consecutive business days. On February 26, 2016, the Companys stockholders approved an amendment to the Companys certificate of incorporation and authorized the Companys Board of Directors, if in their judgment they deemed it necessary, to effect a reverse stock split of Common Stock at a ratio in the range of 1-for-12 to 1-for-24. The Company implemented this reverse stock split on March 4, 2016 with a ratio of 1-for-19 (the Reverse Stock Split). No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive a fractional share in connection with the Reverse Stock Split received a cash payment in lieu thereof. The par value and other terms of the common stock were not affected by the Reverse Stock Split. In addition, the amendment to the Companys certificate of incorporation that effected the Reverse Stock Split simultaneously reduced the number of authorized shares of Common Stock from 200,000,000 to 100,000,000. The Companys Common Stock began trading at its post-Reverse Stock Split price at the beginning of trading on March 4, 2016. On March 18, 2016, the Company received a letter from NASDAQ indicating that it had regained compliance with the minimum bid price requirement under NASDAQ Listing Rule 5550(a)(2) for continued listing on The NASDAQ Capital Market. The Companys common stock continues to be listed on the NASDAQ Capital Market. The Reverse Stock Split reduced the number of outstanding shares of Common Stock from 48,259,430 shares to 2,539,847 shares as of December 31, 2015. All per share amounts and outstanding shares of Common Stock including stock options, restricted stock and warrants, have been retroactively adjusted in these consolidated financial statements for all periods presented to reflect the 1-for-19 Reverse Stock Split. Further, exercise prices of stock options and warrants have been retroactively adjusted in these consolidated financial statements for all periods presented to reflect the 1-for-19 Reverse Stock Split. Numbers of shares of the Companys preferred stock were not affected by the Reverse Stock Split; however, the conversion ratios have been adjusted to reflect the Reverse Stock Split. |
Liquidity and Financial Conditi
Liquidity and Financial Condition | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
2. Liquidity and Financial Condition | The Company continues to incur ongoing administrative and other expenses, including public company expenses, in excess of corresponding (non-financing related) revenue. While the Company continues to implement its business strategy, it intends to finance its activities through: ● managing current cash and cash equivalents on hand from the Companys past debt and equity offerings, ● seeking additional funds raised through the sale of additional securities in the future, ● seeking additional liquidity through credit facilities or other debt arrangements, and ● increasing revenue from its patent portfolios, license fees and new business ventures. As a result of the Companys recurring operating losses and net operating cash flow deficits, there is substantial doubt about the Companys ability to continue as a going concern. The consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. The Companys ultimate success is dependent on its ability to obtain additional financing and generate sufficient cash flow to meet its obligations on a timely basis. The Companys business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer term business plan. The Companys working capital deficit amounted to approximately $0.6 million at December 31, 2015, and net loss attributable to common stockholders amounted to approximately $42.3 million for the year ended December 31, 2015. The Company had a $135.3 million of accumulated deficits as of December 31, 2015. The Companys existing liquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirements for the foreseeable future. Absent generation of sufficient revenue from the execution of the Companys business plan, the Company will need to obtain additional debt or equity financing, especially if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or operations. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available to the Company on favorable terms, or at all. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. The Company may be forced to litigate against others to enforce or defend its intellectual property rights or to determine the validity and scope of other parties proprietary rights. The defendants or other third parties involved in the lawsuits in which the Company is involved may allege defenses and/or file counterclaims or initiate inter parties reviews in an effort to avoid or limit liability and damages for patent infringement or cause the Company to incur additional costs as a strategy. If such efforts are successful, they may have an impact on the value of the patents and preclude the Company from deriving revenue from the patents. The patents could be declared invalid by a court or the United States Patent and Trademark Office, in whole or in part, or the costs of the Company can increase. Recent rulings also create an increased risk that if the Company is unsuccessful in litigation it could be responsible to pay the attorneys fees and other costs of defendants by lowering the standard for legal fee shifting sought by defendants in patent cases. As a result, a negative outcome of any such litigation, or one or more claims contained within any such litigation, could materially and adversely impact the Companys business. Additionally, the Company anticipates that legal fees which are not included in contingency fee arrangements, experts and other expenses will be material and could have an adverse effect on its financial condition and results of operations if its efforts to monetize its patents are unsuccessful. In addition, the costs of enforcing the Companys patent rights may exceed its recoveries from such enforcement activities. Accordingly, in order for the Company to generate a profit from its patent enforcement and monetization activities, the revenues from such enforcement and monetization activities must be high enough to offset both the cash outlays and the contingent fees payable from such revenues, including any profit sharing arrangements with inventors or prior owners of the patents. The Companys failure to monetize its patent assets or the occurrence of unforeseen circumstances that could have a negative impact on the Companys liquidity could significantly harm its business. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
3. Summary of Significant Accounting Policies | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Biospherics Incorporated, Nuta Technology Corp. (Nuta), Spherix Portfolio Acquisition I, Inc. (SPXI), Spherix Portfolio Acquisition II, Inc. (SPXII), Guidance IP, LLC (Guidance), CompuFill LLC (CompuFill), Directional IP, LLC (Directional) and NNPT, LLC (NNPT). All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. The Companys significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, derivative liabilities, and the valuation allowance related to the Companys deferred tax assets. Certain of the Companys estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Companys estimates and could cause actual results to differ from those estimates and assumptions. Concentration of Cash The Company maintains cash balances at two financial institutions in checking accounts and money market accounts. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. As of December 31, 2015 and 2014, the Company had $0.1 million and $0.8 million in cash and cash equivalents, respectively. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. Marketable Securities Marketable securities are classified as trading and are carried at fair value. The Companys marketable securities consist of highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices. During the year ended December 31, 2015 and 2014, the Company incurred realized losses of approximately $91,000 and $49,000, respectively, and unrealized gains of approximately $19,000, and unrealized loss of approximately $54,000, respectively, on its investments in marketable securities, which are included in other income, net on the consolidated statements of operations. In addition, during the year ended December 31, 2015 and 2014, the Company earned dividend income of approximately $52,000 and $92,000, respectively, which is included in other income, net on the consolidated statement of operations. The Company reinvested such dividend income into its marketable securities during the years ended December 31, 2015 and 2014. The cost of marketable securities held as of December 31, 2015 and 2014 were $3.4 million and $3.5 million, respectively. Intangible Assets Patent Portfolios Intangible assets include the Companys patent portfolios with original estimated useful lives ranging from six months to 12 years. The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight-line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. Patents include the cost of patents or patent rights (hereinafter, collectively patents) acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years. Certain patent application and prosecution costs incurred to secure additional patent claims, that based on managements estimates are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. Goodwill Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that indicate the carrying amount may be impaired. Accounting Standards Codification (ASC) Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. The Company tests goodwill for impairment at least annually in conjunction with the preparation of its annual business plan, or more frequently if events or circumstances indicate it might be impaired. ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. During the year ended December 31, 2015, the Company recorded a $1.7 million of impairment charge to its goodwill. Refer to Note 5 for further discussion of the goodwill impairment test performed by the Company at June 30, 2015. Impairment of Long-lived Assets (Including Patent Assets) The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. The Company determined it was necessary to test its intangible assets for impairment during the second quarter of 2015. Due to the decline in stock price which the Company considered a triggering event, at December 31, 2015, the Company performed an additional impairment test for intangible assets. During the year ended December 31, 2015, the Company recorded a $38.9 million of impairment charges to its intangible assets (see Note 5). There was no impairment of long-lived assets in 2014. Property and Equipment Property and equipment are stated at cost and include office furniture and equipment and computer hardware and software. The Company computes depreciation and amortization under the straight-line method and typically over the following estimated useful lives of the related assets: ● Office furniture and equipment 3 to 10 years ● Computer hardware and software 3 to 5 years Revenue Recognition Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability of amounts is reasonably assured. In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned by the Company. These rights may include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. Inventor Royalties Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense. Accounting for Warrants The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (ASC 815). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). In addition, Under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the consolidated balance sheet as a current liability. The Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that such instruments met the criteria for liability classification. Accordingly, the Company classified the warrants as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as change in the fair value of warrant liabilities in the consolidated statements of operations. The fair value of the warrants has been estimated using a Black-Scholes valuation model (see Note 6). Fair Value of Financial Instruments Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 quoted prices in active markets for identical assets or liabilities Level 2 quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) Income Taxes The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (ASC 740). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary difference resulting from matters that have been recognized in the Companys financial statement or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. Net Loss per Share Basic loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Companys convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share if their effect would be anti-dilutive. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at December 31, 2015 and 2014 are as follows: As of December 31, 2015 2014 Convertible preferred stock 530,277 271,413 Warrants to purchase common stock 2,304,888 40,452 Options to purchase common stock 289,380 278,863 Total 3,124,545 590,728 Stock-based Compensation The Company accounts for share-based payment awards exchanged for employee services at the estimated grant date fair value of the award. Stock options issued under the Companys long-term incentive plans are granted with an exercise price equal to no less than the market price of the Companys stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a one- to ten-year period. The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option. The expected term assumption is determined using the weighted average midpoint between vest and expiration for all individuals within the grant. The expected volatility assumption is computed based on the standard deviation of the Companys underlying stock price's daily logarithmic returns. The Companys model includes a zero dividend yield assumption, as the Company has not historically paid nor does it anticipate paying dividends on its common stock. The Companys model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions. The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded. The Company estimates of pre-vesting forfeitures is primarily based on the Companys historical experience and is adjusted to reflect actual forfeitures as the options vest. Treasury Stock The Company accounts for the treasury stock using the cost method, which treats it as a reduction in stockholders equity. In February 2014, the Company retired 9 shares of treasury stock. Convertible Preferred Stock The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Companys control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders equity. The Company accounts for convertible preferred stock with detachable warrants in accordance with ASC 470: and allocated proceeds received to the convertible preferred stock and detachable warrants based on relative fair values. The Company evaluated the classification of its convertible preferred stock and warrants and determined that such instruments meet the criteria for equity classification. The Company recorded the related issuance costs and value ascribed to the warrants as a reduction of the convertible preferred stock. The Company has also evaluated its convertible preferred stock and warrants in accordance with the provisions of ASC 815, Derivatives and Hedging , including consideration of embedded derivatives requiring bifurcation. The issuance of the convertible preferred stock could generate a beneficial conversion feature (BCF), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, to additional paid-in capital, resulting in a discount on the convertible preferred stock (see Note 8). As the convertible preferred stock may be converted immediately, the Company recognized the BCF as a deemed dividend in the consolidated statements of operations. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09), which requires an entity to recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective in the annual period ending December 31, 2017, including interim periods within that annual period. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the impact of its pending adoption of this standard on its consolidated financial statements and related disclosures. In June 2014 the FASB issued ASU No. 2014-12, . This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial position and results of operations. In August 2014, the FASB issued ASU 2014-15, . Currently, there is no guidance in U.S. GAAP about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entitys ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of managements plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. The Company has elected to early adopt the provisions of ASU 2014-15 during the year ended December 31, 2014. Managements evaluations regarding the events and conditions that raise substantial doubt regarding the Companys ability to continue as a going concern have been disclosed in Note 2. In November 2015, the FASB issued ASU No. 2015-17, , which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position to simplify the presentation of deferred income taxes. The standard is effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. As of December 31, 2015, the Company elected to early adopt the pronouncement on a prospective basis. Adoption of this amendment did not have an effect on the Company's financial position or results of operations, and prior periods were not retrospectively adjusted. In January 2016, the FASB issued ASU No. 2016-01, . ASU No. 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entitys other deferred tax assets. ASU No. 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU No. 2016-01 will have on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, , which supersedes FASB ASC Topic 840, and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial position and results of operations. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
4. Property and Equipment | The components of property and equipment as of December 31, 2015 and 2014, at cost are ($ in thousands): As of December 31, 2015 2014 Computers $ 12 $ 10 Office furniture and equipment 97 97 Leasehold improvements 229 229 Total cost 338 336 Accumulated depreciation and amortization (333 ) (332 ) Property and equipment, net $ 5 $ 4 The Companys depreciation expense for the years ended December 31, 2015 and 2014 was $1,089 and $402, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
5. Goodwill and Intangible Assets | Patent Portfolio The Companys intangible assets with finite lives consist of its patents and patent rights. For all periods presented, all of the Companys identifiable intangible assets were subject to amortization. The net carrying amounts related to acquired intangible assets as of December 31, 2015 are as follows ($ in thousands): Net Carrying Amount Weighted average amortization period (years) Patent Portfolios at December 31, 2013, net $ 64,835 6.62 Amortization expenses (9,831 ) Patent Portfolios at December 31, 2014, net $ 55,004 5.62 Amortization expenses (6,317 ) Impairment loss (38,888 ) Patent Portfolios at December 31, 2015, net $ 9,799 4.63 The amortization expenses related to acquired intangible assets for the years ended December 31, 2015 and 2014 are as follows ($ in thousands): For the Years Ended December 31, Date Acquired and Description 2015 2014 7/24/13 - Rockstar patent portfolio $ 303 $ 470 9/10/13 - North South patent portfolio 84 130 12/31/13 - Rockstar patent portfolio 5,930 9,231 $ 6,317 $ 9,831 The Company reviews its patent portfolio for impairment as a single asset group whenever events or changes in circumstances indicate that the carrying value may not be recoverable. During the second quarter of 2015, the Company determined that certain events occurred (i.e. decline in common stock price) that were indicators of a potential impairment. In accordance with ASC 360-10, the Company first estimated the future undiscounted cash flows anticipated to be generated by the patent portfolio based on the Companys current usage and future plans for the patent portfolio over its remaining weighted average useful life. The analysis concluded that the carrying amount of the patent portfolio was not recoverable at June 30, 2015. As a result, the Company performed an analysis to determine if the carrying value of the patent portfolio exceeded its fair value. Considering that the patent portfolio is the Companys most significant asset and is the foundation of all of its operations, the Company determined that the most appropriate measurement of fair value of the asset group was the aggregate market value of the Companys common stock. As a result, the Company determined that the fair value of the patent portfolio at June 30, 2015 was approximately $14.6 million, which was comparable to the aggregate market capitalization of the Company as of that date. The Company recorded a $35.5 million impairment charge against its patent portfolio in the second quarter of 2015. Due to the continuing decrease in the Companys stock price, the Companys performed an additional impairment test of intangible assets at December 31, 2015. In accordance with ASC 360-10, the Company first estimated the future undiscounted cash flows anticipated to be generated by the patent portfolio based on the Companys current usage and future plans for the patent portfolio over its remaining weighted average useful life. The analysis concluded that the carrying amount of the patent portfolio was not recoverable at December 31, 2015. As a result, the Company performed an analysis to determine if the carrying value of the patent portfolio exceeded its fair value. Considering that the patent portfolio is the Companys most significant asset and is the foundation of all of its operations, the Company determined that the most appropriate measurement of fair value of the asset group was the aggregate market value of the Companys common stock. As a result, the Company determined that the fair value of the patent portfolio at December 31, 2015 was approximately $9.8 million, which was comparable to the aggregate market capitalization of the Company as of that date. The Company recorded an additional $3.4 million of impairment charge against its patent portfolio at December 31, 2015. The new cost basis of the patent portfolio of $9.8 million will be amortized over its weighted average remaining useful life of 4.63 years. The future amortization of these intangible assets was based on the adjusted carrying amount. Future amortization of all patents is as follows ($ in thousands): Rockstar North South Rockstar Portfolio Portfolio Portfolio Acquired Acquired Acquired Total 24-Jul-13 10-Sep-13 31-Dec-13 Amortization Year Ended December 31, 2016 $ 104 $ 31 $ 2,000 $ 2,135 Year Ended December 31, 2017 104 30 1,995 2,129 Year Ended December 31, 2018 104 30 1,995 2,129 Year Ended December 31, 2019 104 31 1,994 2,129 Year Ended December 31, 2020 104 31 995 1,130 Thereafter 110 37 - 147 Total $ 630 $ 190 $ 8,979 $ 9,799 Goodwill The Companys market capitalization is sensitive to the volatility of the Companys stock price. During the six months ended June 30, 2015, the market price of the Common Stock decreased from $21.47 to $9.12. The decline in stock price experienced by the Company was deemed a triggering event requiring that goodwill be tested for impairment as of June 30, 2015. The Company performed its goodwill impairment test as of June 30, 2015. The Company performed the first step of the goodwill impairment test as of June 30, 2015 in order to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. The fair value of the reporting unit is based upon the Companys market capitalization on the measurement date, June 30, 2015 and also on July 15, 2015 (date of the July 2015 Financing as discussed in Note 8). The Company believes that this is the most appropriate valuation technique for determining the fair value of the reporting unit. Most importantly, the Companys common shares are publicly traded on NASDAQ, and therefore active quoted market prices can be readily observed, and the Company has a widely distributed shareholder base which provides for a substantial amount of daily trading volume. As such, the Company believes that the quoted market price is a good representation of a fair value of one share of the Company, or a fractional interest in the Company. In performing the second step of the goodwill impairment test, the Company compared the carrying value of goodwill to its implied fair value. In estimating the implied fair value of goodwill, the Company assigns the fair value of the reporting unit to all of the assets and liabilities associated with the reporting unit as if the reporting unit had been acquired in a business combination. Based on the estimated implied fair value of goodwill, the Company recorded an impairment charge of $1.7 million to reduce the carrying value of goodwill to its implied fair value, which was determined to be zero. This impairment charge is included in the impairment of goodwill and intangible assets in the consolidated statement of operations for the year ended December 31, 2015. |
Fair Value of Financial Assets
Fair Value of Financial Assets and Liabilities | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
6. Fair Value of Financial Assets and Liabilities | Financial instruments, including cash and cash equivalents, prepaid expenses and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 quoted prices in active markets for identical assets or liabilities Level 2 quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) The following table presents the Company's assets and liabilities that are measured at fair value at December 31, 2015 and 2014 ($ in thousands): Fair value measured at December 31, 2015 Total carrying value at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2015 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual funds $ 3,392 $ 3,392 $ - $ - Liabilities Fair value of warrant liabilities $ 2,959 $ - $ - $ 2,959 Fair value measured at December 31, 2014 Total carrying value at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2014 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual funds $ 3,500 $ 3,500 $ - $ - There were no transfers between Level 1, 2 or 3 for the years ended December 31, 2015 and 2014. Level 3 Valuation Techniques Level 3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. A significant decrease in the volatility or a significant decrease in the Companys stock price, in isolation, would result in a significantly lower fair value measurement. Changes in the values of the warrant liabilities are recorded in change in fair value of warrant liabilities in the Companys consolidated statements of operations. On July 21, 2015, the Company issued the July 2015 Warrants to purchase aggregate of 370,263 shares of common stock to the investors in the July 2015 Financing. The July 2015 Warrants become exercisable on January 22, 2016 at an exercise price of $8.17 per share. The warrants require, at the option of the holder, a net-cash settlement following certain fundamental transactions (as defined in the July 2015 Warrants) at the Company and therefore are classified as liabilities. The July 2015 Warrants have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded at their respective fair value at each subsequent balance sheet date. This model incorporates transaction details such as the Companys stock price, contractual terms, maturity, risk free rates, as well as volatility. On December 7, 2015, the Company issued Series A warrants to purchase of 1,052,624 shares of common stock and Series B warrants to purchase 842,099 shares of common stock contained in December Offering. Series A Warrants have an exercise price of $3.80 per share and are exercisable at any time between December 7, 2015 and May 6, 2016. Series B Warrants have an exercise price of $4.75 per share and are exercisable at any time between December 7, 2015 and December 6, 2020. The Warrants require the issuance of registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are therefore accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the consolidated balance sheet as a current liability. The Series A and Series B warrants have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded at their respective fair value at each subsequent balance sheet date. This model incorporates transaction details such as the Companys stock price, contractual terms, maturity, risk free rates, as well as volatility. A summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Companys warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and as of December 31, 2015 is as follows: Date of valuation July 21, 2015 December 7, 2015 December 31, 2015 Risk-free interest rate 1.69 % 0.57 - 1.67% 0.16% - 1.76% Expected volatility 100.00 % 114.80% 100% - 115.35% Expected life (in years) 5.5 0.5 - 5.0 0.3 - 5.1 Expected dividend yield - - - The risk-free interest rate was based on rates established by the Federal Reserve. For the July 2015 Warrants, the expected volatility in the Black-Scholes model is based on an expected volatility of 100% for both periods which represents the percentage required to be used when valuing the cash settlement feature as contractually stated in the form of warrant. The general expected volatility is based on standard deviation of the Companys underlying stock price's daily logarithmic returns. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based upon the fact that the Company has not historically paid dividends on its common stock, and does not expect to pay dividends on its common stock in the future. The following table sets forth a summary of the changes in the fair value of the Companys Level 3 financial liabilities that are measured at fair value on a recurring basis for the year ended December 31, 2015 and 2014 ($ in thousands): For the Years Ended December 31, 2015 2014 Beginning balance $ - $ 48 Recognition of warrant liabilities 3,228 - Fair value adjustment of warrant liabilities (269 ) (48 ) Ending balance $ 2,959 $ - |
RPX License Agreement
RPX License Agreement | 12 Months Ended |
Dec. 31, 2015 | |
Rpx License Agreement | |
7. RPX License Agreement | On November 23, 2015, the Company and RPX Corporation (RPX) entered into a Patent License Agreement (the RPX License Agreement) under which the Company granted RPX the right to sublicense various patent license rights to certain RPX members. The consideration to the Company included: (i) the transfer to the Company for cancellation of its remaining outstanding Series I Redeemable Convertible Preferred Stock (the Series I Preferred Stock), as to which a $5,000,000 mandatory redemption payment would have been due from the Company on or by December 31, 2015; (ii) the transfer to the Company for cancellation of 13%, or 57,076 shares, of its Series H Convertible Preferred Stock (the Series H Preferred Stock) then held by RPX, having a total carrying amount of $4,765,846 at the time the stock was issued to Rockstar; (iii) cancellation of the only outstanding security interest on 101 of the Companys patents and patent applications that originated at Nortel Networks (Nortel) and were purchased by the Company from Rockstar, which security interest had previously been transferred to RPX by Rockstar (RPX Security Interest); and (iv) $300,000 in cash to the Company. ASC 260-10-S99-2, , requires the gain or loss on extinguishment of equity-classified preferred stock to be included in net income per common stockholder used to calculate earnings per share (similar to the treatment of dividends paid on preferred stock). The difference between (1) the fair value of the consideration transferred to the holders of the preferred stock and (2) the carrying amount of the preferred stock (net of issuance costs) is subtracted from (or added to) net income to arrive at income available to common stockholders in the calculation of earnings per share. The carrying value of Series I Preferred Stock and Series H Preferred Stock on the extinguishment date was estimated at approximately $5.0 million and $4.8 million, respectively. This resulted in the Company receiving cash from RPX of $0.3 million, a deemed dividend of approximately $9.5 million, short term deferred revenue $0.3 million and long term deferred revenue of $0.3 million. The deferred revenue was amortized quarterly. While the license granted to RPX is non-exclusive and the duration of the license is for the life of the patents, the Companys ongoing obligations in the arrangement is to provide certain specific RPX licensors with a non-exclusive license to any new patents that may be acquired by or exclusively licensed to the Company during the two-year period following the effective date of the agreement. Therefore, the Company will recognize $0.6 million revenue ratably over the two-year period that it is obligated to provide these RPX licensees with licenses to such new patents. At December 31, 2015, the Company recorded approximately $31,000 in revenue. |
Stockholders' Equity and Redeem
Stockholders' Equity and Redeemable Convertible Preferred Stock | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
8. Stockholders' Equity and Redeemable Convertible Preferred Stock | Amended and Restated Certificate of Incorporation On April 24, 2014, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which was previously approved by the stockholders at a meeting held on February 6, 2014. The Amended and Restated Certificate of Incorporation, among other things, increased the authorized number of shares of common stock and preferred stock to 200,000,000 shares from 50,000,000 shares and to 50,000,000 shares from 5,000,000 shares, respectively. The Amended and Restated Certificate of Incorporation also requires the Company to indemnify its directors, officer and agents and advance expenses to such persons to the fullest extent permitted by Delaware law. On March 4, 2016, the Company implemented a Reverse Stock Split with a ratio of 1-for-19. The par value and other terms of the common stock were not affected by the Reverse Stock Split. In addition, the amendment to the Companys certificate of incorporation that effected the Reverse Stock Split simultaneously reduced the number of authorized shares of Common Stock from 200,000,000 to 100,000,000 (see Note 1). Preferred Stock On April 23, 2014, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware eliminating its Series B Convertible Preferred Stock, Series E Convertible Preferred Stock and Series F Convertible Preferred Stock and returning them to authorized but undesignated shares of preferred stock. No shares of the foregoing series of preferred stock were outstanding. On May 28, 2014, the Company designated 20,000,000 shares of preferred stock as Series J Convertible Preferred Stock (Series J Preferred Stock). On December 2, 2015, the Company designated 1,240 shares of preferred stock as Series K Convertible Preferred Stock (Series K Preferred Stock). The Company had designated separate series of its capital stock as of December 31, 2015 and December 31, 2014 as summarized below: Number of Shares Issued and Outstanding as of December 31, 2015 2014 Par Value Conversion Ratio Series "A" - - $ 0.0001 N/A Series "C" - 1 0.0001 0.05:1 Series D" 4,725 4,725 0.0001 0.53:1 Series D-1" 834 834 0.0001 0.53:1 Series F-1" - - 0.0001 0.05:1 Series H" 381,967 439,043 0.0001 0.53:1 Series I - 35,541 0.0001 1.05:1 Series J - - 0.0001 0.05:1 Series K 1,240 - 0.0001 263.16:1 Series A Participating Preferred Stock The Companys board of directors has designated 500,000 shares of its preferred stock as Series A Participating Preferred Stock (Series A Preferred Stock). On January 1, 2013, the Company adopted a stockholder rights plan in which rights to purchase shares of Series A Preferred Stock were distributed as a dividend at the rate of one right for each share of common stock. The rights are designed to guard against partial tender offers and other abusive and coercive tactics that might be used in an attempt to gain control of the Company or to deprive its stockholders of their interest in the long-term value of the Company. These rights seek to achieve these goals by forcing a potential acquirer to negotiate with the board of directors (or to go to court to try to force the board of directors to redeem the rights), because only the board of directors can redeem the rights and allow the potential acquirer to acquire the Companys shares without suffering very significant dilution. However, these rights also could deter or prevent transactions that stockholders deem to be in their interests, and could reduce the price that investors or an acquirer might be willing to pay in the future for shares of the Companys common stock. Each right entitles the registered holder to purchase nineteen one-hundredths of a share (a Unit) of the Companys Series A Preferred Stock. Each Unit of Series A Preferred Stock will be entitled to an aggregate dividend of 100 times the dividend declared per share of common stock. In the event of liquidation, the holders of the Units of Series A Preferred Stock will be entitled to an aggregate payment of 100 times the payment made per share of common stock. Each Unit of Series A Preferred Stock will have 100 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each Unit of Series A Preferred Stock will be entitled to receive 100 times the amount received per share of common stock. These rights are protected by customary anti-dilution provisions. The rights will be exercisable only if a person or group acquires 10% or more of the Companys common stock (subject to certain exceptions stated in the plan) or announces a tender offer the consummation of which would result in ownership by a person or group of 10% or more of the Companys common stock. The board of directors may redeem the rights at a price of $0.001 per right. The rights will expire at the close of business on December 31, 2017 unless the expiration date is extended or unless the rights are earlier redeemed or exchanged by the Company. As of December 31, 2015 and 2014, no shares of Series A Preferred Stock were issued and outstanding. Series C Convertible Preferred Stock On March 6, 2013, the Company and certain investors that participated in the Companys November 2012 private placement transaction entered into separate Warrant Exchange Agreements pursuant to which those investors exchanged common stock purchase warrants for 229,337 shares of the Companys Series C Convertible Preferred Stock (Series C Preferred Stock). Each share of Series C Preferred Stock is convertible into one-nineteenth of a share of Common Stock at the option of the holder. The Series C Preferred Stock was established on March 5, 2013 by the filing in the State of Delaware of a Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock. During the year ended December 31, 2013, 229,336 shares of Series C Preferred Stock were converted into 12,070 shares of common stock. In December 2015, the one remaining share of Series C Preferred Stock was surrendered by the stockholder for cancellation. As of December 31, 2015 and 2014, none and one share of Series C Preferred Stock remained issued and outstanding, respectively. Series D Convertible Preferred Stock In connection with the acquisition of North Souths patent portfolio in September 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred Stock (Series D Preferred Stock) to the stockholders of North South. Each share of Series D Preferred Stock has a stated value of $0.0001 per share and is convertible into ten-nineteenths of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Companys business, each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an as converted basis. Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation and the conversion limitations described below. At no time may shares of Series D Preferred Stock be converted if such conversion would cause the holder to hold in excess of 4.99% of issued and outstanding Common Stock, subject to an increase in such limitation up to 9.99% of the issued and outstanding Common Stock on 61 days written notice to the Company. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. During the year ended December 31, 2014, 1,222,857 shares of Series D Preferred Stock were exchanged for Series D-1 Convertible Preferred Stock. As of December 31, 2015 and 2014, 4,725 shares of Series D Preferred Stock remained issued and outstanding. Series D-1 Convertible Preferred Stock The Companys Series D-1 Convertible Preferred Stock (Series D-1 Preferred Stock) was established on November 22, 2013. Each share of Series D-1 Preferred Stock has a stated value of $0.0001 per share and is convertible into ten- nineteenths of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Companys business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an as converted basis. Each holder of Series D-1 Preferred Stock shall be entitled to vote on all matters submitted to the Companys stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation. At no time may shares of Series D-1 Preferred Stock be converted if such conversion would cause the holder to hold in excess of 9.99% of issued and outstanding Common Stock. The conversion ratio of the Series D-1 Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Companys outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Companys Series D-1 Preferred Stock on a one-for-one basis. On January 27, 2014, the Company entered into a lockup agreement with certain holders of an aggregate of 79,376 shares of Common Stock and shares of Common Stock issuable upon conversion of shares of Series D-1 Preferred Stock, which are included in the Companys Registration Statement on Form S-1 (File No.333-192737) (the Lockup Agreement and such 79,376 shares, the Locked Up Shares). The holders of the Locked Up Shares have agreed, for so long as such holders own such shares, not to sell any Locked Up Shares unless either (i) if such sale price is at least $114.00 per share, the cumulative amount sold by such holder (including the anticipated sale) does not exceed such holder's pro rata portion of 60% of the composite aggregate trading volume of the Common Stock during the period beginning on the date that the Registration Statement is declared effective and ending on the date of sale (the Lockup Measuring Period) or (ii), if the sale price is less than $114.00 per share, the cumulative amount sold by such holder does not exceed such holder's pro rata portion of 20% of the composite aggregate trading volume during the Lockup Measuring Period. During the year ended December 31, 2014, (a) 1,222,857 shares of Series D Preferred Stock were exchanged for Series D-1 Preferred Stock and (b) 1,281,288 shares of Series D-1 Preferred Stock were converted into 674,362 shares of Common Stock. As of December 31, 2015 and 2014, 834 shares of Series D-1 Preferred Stock remained issued and outstanding. Series F-1 Convertible Preferred Stock The Companys Series F-1 Convertible Preferred Stock (Series F-1 Preferred Stock) was established on November 22, 2013. Each share of Series F-1 Preferred Stock was convertible, at the option of the holder at any time, into one-nineteenth of a share of Common Stock and had a stated value of $0.0001. Such conversion ratio was subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. Each share of Series F-1 Preferred Stock was entitled to 91% of the number of shares of Common Stock into which the Series F-1 was convertible (subject to beneficial ownership limitations) and voted together with holders of Common Stock. The Company was prohibited from effecting the conversion of the Series F-1 Preferred Stock to the extent that, as a result of such conversion, the holder would beneficially own more than 9.99% in the aggregate of the issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series F-1 Preferred Stock. During the year ended December 31, 2014, 156,250 shares of Series F-1 Preferred Stock were converted into 8,223 shares of Common Stock. As of December 31, 2015 and 2014, no shares of Series F-1 Preferred Stock remained issued and outstanding. Series H Convertible Preferred Stock On December 31, 2013, the Company designated 459,043 shares of preferred stock as Series H Preferred Stock. On December 31, 2013, the Company issued approximately $38.3 million of Series H Preferred Stock (or 459,043 shares) to Rockstar. Each share of Series H Preferred Stock is convertible into ten-nineteenths of a share of Common Stock and has a stated value of $83.50. The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company is prohibited from effecting the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns more than 4.99% (which may be increased to 9.99% and subsequently to 19.99%, each upon 61 days written notice), in the aggregate, of issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series H Preferred Stock. Holders of the Series H Preferred Stock shall be entitled to vote on all matters submitted to the Companys stockholders and shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Series H Preferred Stock are convertible, subject to applicable beneficial ownership limitations. The Series H Preferred Stock provides a liquidation preference of $83.50 per share. The shares of Series H Preferred Stock were not immediately convertible and did not possess any voting rights until such a time as the Company had obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635. On April 16, 2014, the Company obtained the required stockholder approval and, as a result, all outstanding shares of Series H Preferred Stock are convertible and possess voting rights in accordance with its terms. On May 28, 2014, 20,000 shares of Series H Preferred Stock were converted into 10,526 shares of Common Stock. In January 2015, Rockstar transferred its remaining outstanding Series H Preferred Stock to RPX Clearinghouse LLC, an affiliate of RPX. According to the RPX License Agreement disclosed in Note 7, on November 23, 2015, RPX transferred to the Company for cancellation 57,076 shares of Series H Preferred Stock then held by RPX, having a total carrying amount of $4,765,846 at the time the stock was issued to Rockstar. As of December 31, 2015 and 2014, 381,967 and 439,043 shares of Series H Preferred Stock remained issued and outstanding, respectively. Series I Redeemable Convertible Preferred Stock On December 31, 2013, the Company designated 119,760 shares of preferred stock as Series I Preferred Stock. On December 31, 2013, the Company issued approximately $20 million (or 119,760 shares) of Series I Preferred Stock to Rockstar. Each share of Series I Preferred Stock was convertible into twenty-nineteenths of a share of Common Stock and had a stated value of $167.00. The conversion ratio was subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The holder was prohibited from converting the Series I Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owned more than 4.99% (which may be increased to 9.99% and subsequently to 19.99%, each upon 61 days written notice), in the aggregate, of the Companys issued and outstanding shares of Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series I Preferred Stock. Holders of the Series I Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Series I Preferred Stock were convertible, subject to applicable beneficial ownership limitations. The Series I Preferred Stock provided for a liquidation preference of $167.00 per share. The Series I Preferred Stock contained a mandatory redemption date of December 31, 2015 as to 100% of the Series I Preferred Stock then outstanding, requiring a minimum of 25% of the total number of shares of Series I Preferred Stock issued to be redeemed (less the amount of any conversions occurring prior thereto) on or prior to each of September 30, 2014, December 31, 2014, June 30, 2015 and December 31, 2015 (each, a Partial Redemption Date and each payment, a Redemption Payment). On each Partial Redemption Date, the Company was required to pay the holder a Redemption Payment equal to the lesser of (i) such number of shares of Series I Preferred Stock as had a stated value of $5.0 million; or (ii) such number of shares of Series I Preferred Stock as should, together with all voluntary and mandatory redemptions and conversions to Common Stock occurring prior to the applicable Partial Redemption Date, had an aggregate stated value of $5.0 million; or (iii) the remaining shares of Series I Preferred Stock issued and outstanding if such shares had an aggregate stated value of less than $5.0 million, in an amount of cash equal to its stated value plus all accrued but unpaid dividends, distributions and interest thereon, unless such holder of Series I Preferred Stock, in its sole discretion, elected to waive such Redemption Payment or convert such shares of Series I Preferred Stock (or a portion thereof) into Common Stock. No interest or dividends were payable on the Series I Preferred Stock unless the Company failed to make the first $5.0 million Partial Redemption Payment due September 30, 2014, then interest should accrue on the outstanding stated value of all outstanding shares of Series I Preferred Stock at a rate of 15% per annum from January 1, 2014. The Companys obligations to pay the Redemption Payments and any interest payments in connection therewith were secured pursuant to the terms of a Security Agreement under which the Rockstar patent portfolio serves as collateral security. No action can be taken under the Security Agreement unless the Company had failed to make a second redemption payment of $5.0 million due December 31, 2014, which payment was made. The Security Agreement contains additional usual and customary events of default under which the holder could take action, including a sale to a third party or reduction of secured amounts via transfer of the Rockstar patent portfolio to the holder. Additionally, in the event the Company consummated a Fundamental Transaction (as defined below), the Company should be required to redeem such portion of the outstanding shares of Series I Preferred Stock as shall equal (i) 50% of the net proceeds of the Fundamental Transaction after deduction of the amount of net proceeds required to leave the Company with cash and cash equivalents on hand of $5.0 million and up until the net proceeds leave the Company with cash and cash equivalents on hand of $7.5 million and (ii) 100% of the net proceeds of the Fundamental Transaction thereafter. Fundamental Transaction means directly or indirectly, in one or more related transactions: (a) the Company of any subsidiary realizes net proceeds from any financing, recovery, sale, license fee or other revenue received by the Company (including on account of any intellectual property rights held by the Company and not just in respect of the patents) during any fiscal quarter in an amount which would cause the cash or cash equivalents of the Company to exceed $5,000,000, (b) the Company consolidates or merges with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other person, or (c) the Company or any of its subsidiaries sells, leases, licenses, assigns, transfers, conveys or otherwise disposes of all or substantially all of its respective properties or assets to any other Person, provided that, in the event of a Fundamental Transaction under clause (b) or (c), neither such Fundamental Transaction may proceed without the consent of the holders holding a majority of the shares of Series I Preferred Stock unless (A) all shares of Series I Preferred Stock held by the holders are redeemed with interest upon closing of such Fundamental Transaction, and (B) all shares of Common Stock of the Company then held by the holders are redeemed or otherwise purchased for cash or freely tradable securities of a publicly traded company at a price at or above the then-current market value of such Common Stock. The shares of Series I Preferred Stock were not immediately convertible and did not possess any voting rights until such a time as the Company had obtained stockholder approval of the issuance, pursuant to NASDAQ Listing Rule 5635. On April 16, 2014, the Company obtained the required stockholder approval and, as a result, all outstanding shares of Series I Preferred Stock are convertible and possess voting rights in accordance with its terms. In June 2014, the Company redeemed 84,219 shares of Series I Preferred Stock. In accordance with this Redemption Payment, the Company paid Rockstar $14.1 million. In January 2015, Rockstar transferred its remaining outstanding Series I Preferred Stock, as well as its other stock in the Company to RPX Clearinghouse LLC. In June 2015, the Company redeemed 5,601 shares of Series I Preferred Stock. In accordance with this redemption, the Company paid RPX $0.9 million. On November 23, 2015, as per RPX License Agreement disclosed in Note 7, RPX transferred to the Company for cancellation all remaining 29,940 shares of Series I Preferred Stock, as to which a $5,000,000 mandatory redemption payment would have been due from the Company on or by December 31, 2015. As of December 31, 2015 and 2014, none and 35,514 shares of Series I Preferred Stock remained issued and outstanding, respectively. Series J Convertible Preferred Stock On May 28, 2014, the Company designated 20,000,000 shares of preferred stock as Series J Preferred Stock. On May 28, 2014, the Company entered into an placement agency agreement with Laidlaw & Company (UK) Ltd., as the placement agent, which provided for the issuance and sale in a registered direct public offering (the Series J Offering) by the Company of 10,000,000 shares of Series J Preferred Stock which were convertible into a total of 526,315 shares of Common Stock. The Series J Preferred Stock in the Series J Offering was sold at a public offering price of $2.00 per share. The net offering proceeds to the Company from the sale of the shares were approximately $18.4 million, after deducting placement agent fees ($1.32 million), legal fees ($0.18 million) and escrow fee ($0.04 million). The sale of the Series J Preferred Stock was made pursuant to a subscription agreement between the Company and certain investors in the Series J Offering. The shares of Series J Preferred Stock carry a liquidation preference equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock if such holder had converted the Series J Preferred Stock immediately prior to such liquidation, dissolution or winding up. Each holder of Series J Preferred Stock is entitled to vote on all matters submitted to stockholders of the Company and is entitled to a vote of 67.3% of the number of votes for each share of Common Stock into which the Series J Preferred Stock is convertible owned at the record date for the determination of stockholders entitled to vote on such matter. Subject to certain ownership limitations as described below, shares of Series J Preferred Stock are convertible at any time at the option of the holder into shares of Common Stock in an amount equal to one-nineteenths of a share of Common Stock for each one share of Series J Preferred Stock surrendered. Subject to limited exceptions, holders of shares of Series J Preferred Stock do not have the right to convert any portion of their Series J Preferred Stock that would result in the holder, together with its affiliates, beneficially owning in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to its conversion; notwithstanding the foregoing, some Investors elected to have the 9.99% beneficial ownership limitation to initially be 4.99%. As of December 31, 2014, all 10,000,000 shares of Series J Preferred Stock had been converted into 526,315 shares of Common Stock. As of December 31, 2015 and 2014, no shares of Series J Preferred Stock are issued and outstanding. Series K Convertible Preferred Stock On December 2, 2015, the Company designated 1,240 shares of preferred stock as Series K Preferred Stock. On December 7, 2015, the Company issued 1,240 shares of Series K Preferred Stock in December 2015 Offering. Each share of Series K Preferred Stock is convertible into five thousand-nineteenths of a share of Common Stock and has a stated value of $1,000. The conversion ratio is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Series K Preferred do not generally have any voting rights but are convertible into shares of Common Stock. At no time may shares of Series K Preferred Stock be converted if such conversion would cause the holder to hold in excess of 4.99% of the issued and outstanding Common Stock, subject to an increase in such limitation up to 9.99% of the issued and outstanding Common Stock on 61 days written notice to the Company. The conversion ratio of the Series K Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. As of December 31, 2015, 1,240 shares of Series K Preferred Stock are issued and outstanding. Common Stock Offerings of Common Stock and Warrants On March 26, 2014, the Company sold an aggregate of $4,446,000 of its securities in a private offering made solely to accredited investors (the March 26 Offering) pursuant to subscription agreements, dated as of March 26, 2014. Pursuant to the March 26 Offering, investors purchased (i) 62,401 shares of Common Stock and (ii) five-year warrants to purchase an aggregate of 31,152 shares of Common Stock at an exercise price of $116.85 per share. The warrants became exercisable on the six-month anniversary of the date of issuance by payment to the Company of the exercise price of $116.85 per share, or if a registration statement covering the Common Stock underlying the warrants is not then in effect, on a cashless basis. Each warrant may be callable at $0.19 per warrant upon the consummation of a Company financing with a per-share offering price of at least $152.00 and net proceeds to the Company from such offering of at least $15 million. Pursuant to the terms of the subscription agreements, the Company registered with the United States Securities and Exchange Commission (SEC) all shares of Common Stock and the shares of Common Stock underlying the warrants issued in the March 26 Offering (including the Placement Agent Warrant described below) on Form S-3, which was declared effective on May 16, 2014. The Company incurred aggregate costs associated with the March 26 Offering of approximately $572,000, and issued a five-year warrant to purchase 6,240 shares of common stock to the placement agent at an exercise price of $88.73 per share of common stock (the Placement Agent Warrant). The Placement Agent Warrant became exercisable on the six-month anniversary of the date of issuance. On July 15, 2015, the Company entered into a placement agency agreement with Chardan Capital Markets, LLC as placement agent (the Placement Agent), relating to the July 2015 Financing, which was a registered direct offering to select institutional Investors of 301,026 shares of the Companys Common Stock, $0.0001 par value per share, and Common Stock Purchase Warrants to purchase up to an aggregate of 370,263 shares of Common Stock. Pursuant to the Placement Agency Agreement, the Company paid the Placement Agent a cash fee of 8.0% of the gross proceeds from the July 2015 Financing and $25,000 for its expenses related to the offering. The Placement Agent had no commitment to purchase any of the shares of Common Stock or Warrants and was acting only as an agent in obtaining indications of interest from investors who purchased the shares of Common Stock and Warrants directly from the Company. In addition, on July 15, 2015, the Company and the investors in the July 2015 Financing entered into a securities purchase agreement (the Securities Purchase Agreement) relating to the issuance and sale of the Offered Shares and the warrants. The Offered Shares and warrants were sold in units, with each unit consisting of one-nineteenth of an Offered Share and a warrant to purchase 0.06 shares of Common Stock. The purchase price per unit was $4.864. The Warrants provide for an exercise price of $8.17 per share and became exercisable on January 22, 2016 and have a term of five years thereafter. The exercise price of the Warrants will also be adjusted in the event of stock splits and reverse stock splits. Except upon at least 61 days prior notice from the holder to the Company, the holder will not have the right to exercise any portion of the Warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Companys common stock (including securities convertible into common stock) outstanding immediately after the exercise; provided, however, that the holder may not increase this limitation at any time in excess of 9.99%. The Securities Purchase Agreement further provides that, subject to certain exceptions, until the warrants issued in the July 2015 Financing are no longer outstanding, the Company will not affect or enter into a variable rate transaction. The Securities Purchase Agreement also provides the investors an 18-month right of participation for an amount up to 100% of such subsequent financing common stock (or common stock equivalents or a combination thereof), on the same terms and conditions of such transaction. The net proceeds to the Company from the July 2015 Financing, after deducting Placement Agent fees and the Companys estimated offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants, were approximately $1.3 million. The July 2015 Financing closed on July 21, 2015. As disclosed in Note 6, the warrants issued in the July 2015 Financing were required to be accounted for as derivative liabilities as a result certain net cash settlement provisions in control of the holder. As a result, of the total net proceeds received, $985,000was allocated to the warrants on the closing date of the July 2015 Financing. On December 2, 2015, the Company entered into a purchase agreement with investors to sell an aggregate of 13.8 million Class A Units (consisting of one-nineteenth of a share of Common Stock, a Series A Warrant and a Series B). Included in the sale were 1,240 Class B Units issuable to those investors whose purchase of Class A Units in this offering would otherwise result in such investor beneficially owning more than 4.99% of the Companys outstanding Common Stock immediately following the consummation of the December 2015 Offering. Each Class B Unit consisted of one share of Series K Preferred Stock, with a stated value of $1,000 per share and convertible into shares of Common Stock (on a 1 for 263 basis) at the public offering price of the Class A Units, together with the equivalent number of Series A warrants and Series B warrants as would have been issued to such purc |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
9. Related Party Transactions | Executive Officer Agreements As it relates to Mr. Hayes 2014 annual bonus, during the year ended December 31, 2014, the Compensation Committee of the Board of Directors (the Board) approved a bonus payout of $175,000 for services provided in 2014. The Company has included such bonus in accrued expenses on the consolidated balance sheet as of December 31, 2014. Mr. Hayes waived the receipt of this accrued bonus during the year ended December 31, 2015. In February 2015, the members of the Compensation Committee established milestones related to the target bonus per the Employment Agreement (a Target Bonus) for the Companys Chief Executive Officer, Mr. Anthony Hayes. The amount of the Target Bonus per the Agreement is (i) $350,000 in cash, which shall be payable in a single lump-sum payment promptly following the consummation of a Qualifying Strategic Transaction (or series of transactions), and (ii) a discretionary bonus to be determined by the Compensation Committee, in its sole discretion, prior to the earlier of a proxy solicitation in 2015 in relation to a qualifying strategic transaction(s) or the consummation thereof. Qualifying Strategic Transactions were defined as transaction(s) that would provide gross proceeds or borrowing capacity of at least $12.0 million to the Company. The Target Bonus of $350,000 was included in accrued salaries and benefits in the first quarter of 2015 as management determined at that time it was probable that a Qualifying Strategic Transaction would occur. In December 2015, the members of Compensation Committee reviewed the 2015 achievements and deemed that Mr. Hayes achieved the criteria for his 2015 Target Bonus by consummating a number of strategic transactions prior to December 31, 2015 that together reached the applicable bonus threshold. The Company accrued Mr. Hayes $350,000 bonus under accrued salaries and benefits on the consolidated balance sheets, paid it to him in cash in January 2016. On January 6, 2014, the Companys Board appointed Richard Cohen as its Chief Financial Officer, and Michael Pollack resigned as the interim Chief Financial Officer of the Company, effective January 3, 2014. Mr. Cohen was served as the Companys Chief Financial Officer pursuant to an agreement with Chord Advisors LLC (Chord), of which Mr. Cohen was Chairman. In consideration for Mr. Cohens services, the Company agreed to pay Chord a monthly fee of $20,000, $5,000 of which was initially payable in shares of the Companys common stock. In April 2014, the Company modified this agreement to pay Chord a monthly fee of $20,000 in cash. The previous $15,000 payable in shares was forgiven by Chord. On June 30, 2015, the Board of the Company accepted the resignation of Richard Cohen as Chief Financial Officer of the Company, effective immediately. In connection therewith, the Company amended and restated its consulting agreement with Chord, an advisory firm that provides the Company with certain accounting services, such that it would continue to provide the Company with certain financial accounting and advisory services, with the monthly fee to Chord reduced from $20,000 to $10,000 per month since its affiliate would no longer serve as the Companys Chief Financial Officer. In connection with the resignation of Mr. Cohen, on June 30, 2015, the Board of Directors appointed Frank Reiner as the Interim Chief Financial Officer of the Company, effective immediately. Pursuant to Mr. Reiners employment agreement with the Company, dated as of March 14, 2014, as amended, the term of Mr. Reiners employment is one year and automatically extends for additional one-year terms unless no less than 60 days prior written notice of non-renewal is given by Mr. Reiner or the Company. Mr. Reiners base salary under his employment agreement was $235,000 per year, but in connection with being named Interim Chief Financial Officer, the Board of Directors authorized an amendment to Mr. Reiners employment agreement to increase Mr. Reiners base salary to $271,000. Mr. Reiner is also entitled to receive an annual bonus if the Compensation Committee of the Board determines that performance targets have been met. The amount of the annual bonus is determined based on the Companys gross proceeds from certain monetization of the Companys intellectual property. Mr. Reiner is also eligible to participate in all employee benefits plans from time to time in effect for the Companys other senior executive officers. In December 2015, the members of the Compensation Committee determined that, under Mr. Reiners employment agreement, the Company has the obligation to pay Mr. Reiner $60,000 in shares of common stock in respect of his performance for the 2015 fiscal year. The Company will also pay Mr. Reiner an annual bonus of $40,000 in cash in respect of his 2015 performance. For the 2014 fiscal year, Mr. Reiner achieved the target for an annual bonus of $20,000 in cash and $20,000 in shares of common stock. The payment was deferred in 2015. The common stock portion of 2014 bonus shall be paid in cash lieu of in common stock. The Company accrued Mr. Reiners 2014 and 2015 cash bonus under accrued salaries and benefits on the consolidated balance sheets. In January 2016, the Company paid Mr. Reiner $80,000 in cash. On August 10, 2015, the Company entered into a consulting agreement with Mr. Howard E. Goldberg (d/b/a Forward Vision Associates, of which Mr. Goldberg is the sole proprietor and owner), on an independent contractor basis, pursuant to which Mr. Goldberg will, among other services, provide advisory services to the Company in areas including licensing, litigation and business strategies. The Company will pay Mr. Goldberg an agreed upon quarterly retainer amount of $20,400 (calculated on an hourly basis) and, if applicable, upon exhaustion of each quarterly retainer, at an hourly rate to be paid in equity (for the first 50 hours above the quarterly retainer), and subsequently (if applicable) at an hourly rate thereafter in cash. The Company will reimburse Mr. Goldberg for actual out-of-pocket expenses. The consulting agreement with Mr. Goldberg has an initial term of one year, unless consultant has completed the desired services by an earlier date or unless the agreement is earlier terminated pursuant to its terms. The consulting agreement with Mr. Goldberg may be extended by written agreement of both the Company and consultant. For the year ended December 31, 2015, the Company incurred $42,287 consulting expenses related to this agreement, which included $1,487 of expenses paid in equity in January 2016. Mr. Goldberg was also appointed as a director of the Company. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
10. Commitments and Contingencies | Financing of Directors and Officers Insurance The Company financed its Directors and Officers insurance policy for approximately $0.2 million. Payments are due monthly and the policy is for 12 months. Finance charges for the 12-month period are nominal. As of December 31, 2015, the Company owed approximately $0.1 million and such amounts were recorded in accrued expenses. The Company has made regular payments in accordance with this insurance policy. Leases As of December 31, 2013, the Company had office in Tysons Corner, Virginia, where it leased 837 square feet of office space with a $1,883 monthly lease payment under lease agreement. Upon the expiration of this lease in August 2014, the Companys Virginia operations were moved to Bethesda. The Company also has offices in Bethesda, Maryland, where it leases 5,000 square feet of office space with a $13,090 monthly lease payment under lease agreement. The Maryland lease runs from April 1, 2013 through March 31, 2018. From December 2013 to July 2014, the Company leased office space in New York, NY on a month-to-month basis at a monthly rate of $6,000. In June 2014, the Company opened a new office in Longview, Texas. The lease term of the Texas office runs from June 1, 2014 through May 31, 2015 at a monthly rate of $1,958. In May 2015, the Company extended the lease term to May 31, 2016 at a monthly rate of $1,958. In August 2014, the Company secured new office space in New York City, with a $4,990 monthly cost for a 12-month period. In August 2015, the Company extended the lease term to another 12-month period with a monthly cost of $5,240. In December 2014, the Company determined to accelerate the lease expense for Bethesda offices since the Bethesda facility was not adequate for the Companys current needs and future sublets were not considered probable. The Company recognized $0.2 million estimated short-term lease liabilities and $0.4 million estimated long-term lease liabilities related to the acceleration of lease cost at December 31, 2014. As of December 31, 2015, the Company recorded $0.2 million of short-term lease liabilities and $0.2 million estimated long-term lease liabilities on the consolidated balance sheets. Future minimum rental payments required as of December 31, 2015, including Bethesda office lease obligation are as follows ($ in thousands): Lease Payments Year Ended December 31, 2016 $ 225 Year Ended December 31, 2017 183 Year Ended December 31, 2018 46 $ 454 Legal Proceedings In the ordinary course of business, the Company actively pursues legal remedies to enforce its intellectual property rights and to stop unauthorized use of our technology. From time to time, the Company may be involved in various claims and counterclaims and legal actions arising in the ordinary course of our business. There were no pending material claims or legal matters as of the date of this report other than the following matters: Guidance IP LLC v. T-Mobile Inc., Case No. 2:14-cv-01066-RSM, in the United States District Court for the Western District of Washington On August 1, 2013, the Companys wholly owned subsidiary Guidance initiated litigation against T-Mobile Inc. (T-Mobile) in , Case No. 6:13-cv-01168-CEH-GJK, in the United States District Court for the Middle District of Florida for infringement of U.S. Patent No. 5,719,584 (the Asserted Patent). The complaint alleges that T-Mobile has manufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patent. The Company sought relief in the form of a finding of infringement of the Asserted Patent, an accounting of all damages sustained by the Company as a result of T-Mobiles infringement, actual damages, enhanced damages under 35 U.S.C. Section 284, attorneys fees and costs. On April 24, 2014, the United States District Court for the Middle District of Florida transferred the case to the United States District Court for the Western District of Washington (the Court). On July 14, 2014, the Court assigned the case a new case number, 2:14-cv-01066-RSM. On January 29, 2015, the Court issued an Order requiring the parties to serve Initial Disclosures by February 26, 2015 and submit a Joint Status Report and Discovery Plan to the Court by March 12, 2015, which were timely served and filed. At present, the dispute between the parties has been resolved. On April 30, 2015, the parties filed a dismissal without prejudice of all claims, defenses and counterclaims, with all attorneys fees, costs of court and expenses to be borne by each party incurring the same. Spherix Incorporated v. VTech Telecommunications Ltd. et al., Case No. 3:13-cv-03494-M, in the United States District Court for the Northern District of Texas On August 30, 2013, the Company initiated litigation against VTech Telecommunications Ltd. and VTech Communications, Inc. (collectively VTech) in ., Case No. 3:13-cv-03494-M, in the United States District Court for the Northern District of Texas (the Court) for infringement of U.S. Patent Nos. 5,581,599; 5,752,195; 5,892,814; 6,614,899; and 6,965,614 (collectively, the Asserted Patents). The complaint alleges that VTech has manufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patents. The Company is seeking relief in the form of a finding of infringement of the Asserted Patents, an accounting of all damages sustained by the Company as a result of VTechs infringement, actual damages, enhanced damages under 35 U.S.C. Section 284, attorneys fees and costs. On November 11, 2013, VTech filed its Answer with counterclaims requesting a declaration that the Asserted Patents are non-infringed and invalid. On December 5, 2013, the Company filed its Answer to the counterclaims, in which the Company denied that the Asserted Patents were non-infringed and invalid. On May 22, 2014, the Court entered a Scheduling Order for the case setting trial to begin on January 11, 2016. On June 3, 2014, in an effort to narrow the case, the parties filed a stipulation dismissing without prejudice all claims and counterclaims related to U.S. Patent No. 5,752,195. On September 4, 2014, VTech Communications, Inc., together with Uniden America Corporation, filed a request for review (IPR) of two of the Asserted Patents in the United States Patent and Trademark Office. On March 3, 2015, the Patent Trial and Appeal Board (PTAB) entered decisions instituting, on limited grounds, IPR proceedings regarding a portion of the claims for the two Spherix patents. The PTAB also suggested an accelerated IPR schedule to culminate in an oral hearing on or about September 28, 2015. The PTAB held a conference call with the parties on March 17, 2015 to finalize the IPR schedule. On October 27, 2014, the Court held a Technology Tutorial Hearing for the educational benefit of the Court. The hearing was held on November 21 and 26, 2014. Both the Technology Tutorial and the hearing were held jointly with the case (see below). On March 19, 2015, the Court issued its order, construing a total of 13 claim terms that had been disputed by the parties. On April 2, 2015, the Company filed an Amended Complaint with Jury Demand and the parties filed a Settlement Conference Report informing the Court that the parties have not yet resumed settlement negotiations. The Court has ordered the parties to hold a settlement conference not later than December 28, 2015. On April 15, 2015, the Company filed a Motion to Compel Production of Technical Documents against Defendants. On April 20, 2015, the Company filed an Opposed Motion for Leave to Serve Supplemental Infringement Contentions. Also on April 20, 2015, Defendants filed their Amended Answer to the Companys Amended Complaint with their counterclaims. On May 1, 2015, the Company filed its Answer to the counterclaims. On May 5, 2015, the parties filed a Joint Stipulation and Motion to Modify the Scheduling Order. On May 6, 2015, the Court entered the Stipulation, in which the Court estimated the trial date to occur in July of 2016 and ordered the parties to be ready for trial on or after June 22, 2016. The Companys patent owners response to the petition in the IPR was timely filed on May 26, 2015. On September 28, 2015, the hearing in the IPR proceedings was held before the PTAB. On October 9, 2015, the parties filed a Joint Motion to stay the litigation pending the issuance of the PTABs final written decisions in the IPR proceedings. On October 13, 2015, the Court granted the stay and administratively closed the case until the PTAB issues its final written decisions. On February 3, 2016, the PTAB issued its final decisions in the IPR proceedings, finding invalid eight of the 15 asserted claims of U.S. Patent No. 5,581,599 (the 599 Patent) and all asserted claims of U.S. Patent No. 6,614,899. The Companys deadline to file a Notice of Appeal of the PTABs decision to the United States Court of Appeals for the Federal Circuit is April 6, 2016. On February 29, 2016, at the parties joint request, the Court ordered that the stay of the case remain in effect for 30 days so the parties may work to resolve the case without further Court intervention. The Court also ordered the parties to file an updated status report on or before March 31, 2016 advising the Court of their progress toward resolving this litigation without further Court intervention and whether it is appropriate to reopen the case and lift the stay. Spherix Incorporated v. Uniden Corporation et al., Case No. 3:13-cv-03496-M, in the United States District Court for the Northern District of Texas On August 30, 2013, the Company initiated litigation against Uniden Corporation and Uniden America Corporation (collectively Uniden) in , Case No. 3:13-cv-03496-M, in the United States District Court for the Northern District of Texas (the Court) for infringement of U.S. Patent Nos. 5,581,599; 5,752,195; 6,614,899; and 6,965,614 (collectively, the Asserted Patents). The complaint alleges that Uniden has manufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patents. The Company is seeking relief in the form of a finding of infringement of the Asserted Patents, an accounting of all damages sustained by the Company as a result of Unidens infringement, actual damages, enhanced damages under 35 U.S.C. Section 284, attorneys fees and costs. On April 15, 2014, Uniden filed its Answer with counterclaims requesting a declaration that the patents at issue are non-infringed and invalid. On April 28, 2014, the Company filed its Answer to the counterclaims, in which the Company denied that the patents at issue were non-infringed and invalid. On May 22, 2014, the Court entered a scheduling order for the case setting trial to begin on February 10, 2016. On June 3, 2014, in an effort to narrow the case, the parties filed a stipulation dismissing without prejudice all claims and counterclaims related to U.S. Patent No. 5,752,195. On September 4, 2014, Uniden America Corporation, together with VTech Communications, Inc., filed a request for review (IPR) of two of the Asserted Patents in the United States Patent and Trademark Office. On March 3, 2015, the PTAB entered decisions instituting, on limited grounds, IPR proceedings regarding a portion of the claims for the two Spherix patents. The PTAB also suggested an accelerated IPR schedule to culminate in an oral hearing on September 28, 2015. The PTAB held a conference call with the parties on March 17, 2015 to finalize the IPR schedule. On October 27, 2014, the Court held a Technology Tutorial Hearing for the educational benefit of the Court. The hearing was held on November 21 and 26, 2014, with both hearings occurring jointly with the case (see above). On March 19, 2015, the Court issued its order, construing a total of 13 claim terms that had been disputed by the parties. On April 2, 2015, the Company filed its Amended Complaint with Jury Demand and the parties filed a Settlement Conference Report informing the Court that the parties have not yet resumed settlement negotiations. The Court has ordered the parties to hold a settlement conference not later than January 20, 2016. On April 9, 2015, the parties filed a Joint Motion to Modify Patent Scheduling Order. On April 10, 2015, the Court granted the Motion. On April 20, 2015, Defendants filed their Amended Answer to the Companys Amended Complaint with their counterclaims. On May 1, 2015, the Company filed its Answer to the counterclaims. The Companys patent owners response to the petition in the IPR was timely filed on May 26, 2015. On July 9, 2015, the Court issued a modified Scheduling Order setting the Final Pretrial Conference for February 2, 2016 and confirming the Trial Date beginning February 20, 2016. On September 9, 2015, the parties jointly filed a motion to stay the case pending the decision in the two IPR proceedings. On September 10, 2015, the Court stayed the case and ordered the parties to file a status report within 10 days of the Patent Office issuing its decision in the IPR proceedings. On October 13, 2015, the Court ordered the case administratively closed until the PTAB issues its final written decisions. On February 3, 2016, the PTAB issued its final decisions in the IPR proceedings, finding invalid eight of the 15 asserted claims of U.S. Patent No. 5,581,599 (the 599 Patent) and all asserted claims of U.S. Patent No. 6,614,899. The Companys deadline to file a Notice of Appeal of the PTABs decision to the United States Court of Appeals for the Federal Circuit is April 6, 2016. On February 29, 2016, at the parties joint request, the Court ordered that the stay of the case remain in effect for 30 days so the parties may work to resolve the case without further Court intervention. The Court also ordered the parties to file an updated status report on or before March 31, 2016 advising the Court of their progress toward resolving this litigation without further Court intervention and whether it is appropriate to reopen the case and lift the stay. Spherix Incorporated v. Cisco Systems Inc., Case No. 1:14-cv-00393-SLR, in the United States District Court for the District of Delaware On March 28, 2014, the Company initiated litigation against Cisco Systems Inc. (Cisco) in Spherix Incorporated v. Cisco Systems Inc., Case No. 1:14-cv-00393- SLR, in the United States District Court for the District of Delaware for infringement of U.S. Patent Nos. RE40467; 6,697,325; 6,578,086; 6,222,848; 6,130,877; 5,970,125; 6,807,174; 7,397,763; 7,664,123; 7,385,998; and 8,607,323 (collectively, the Asserted Patents). The complaint alleges that Cisco has manufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patents. The Company is seeking relief in the form of a finding of infringement of the Asserted Patents, an accounting of all damages sustained by the Company as a result of Ciscos infringement, actual damages, enhanced damages under 35 U.S.C. Section 284, attorneys fees and costs. On July 8, 2014, the Company filed its amended complaint to reflect that certain of the patents asserted were assigned to its wholly-owned subsidiary NNPT LLC (NNPT), based in Longview, Texas. By the amended complaint, NNPT was added as a co-plaintiff with the Company. On August 5, 2014, Cisco filed a motion to dismiss certain claims alleged in the amended complaint. On August 26, 2014, the Company and NNPT filed an opposition to Ciscos motion to dismiss. On September 5, 2014, Cisco filed its reply brief regarding its motion to dismiss. On March 9, 2015, Cisco moved to consolidate certain claims relating to alleged obligations by the Company to license Cisco on two unrelated patents, which Cisco had made against the Company on June 6, 2014 in the pending case , Case No. 1:13-cv-02020- SLR-SRF (see below). On March 23, 2015, the Company filed its opposition to Ciscos motion to consolidate. On March 31, 2015, the Court granted Ciscos motion to dismiss allegations of willful infringement. Spherixs allegations of patent infringement for the eleven (11) patents continue. Spherix has the ability to re-allege willful infringement at a later time. On April 3, 2015, Cisco Systems, Inc. petitioned the U.S. Patent Office for an review (IPR) of Spherix patents 7,397,763 and 8,607,323. The remaining nine patents Spherix has asserted against Cisco were not part of the petitions and the time for Cisco to petition the USPTO for an IPR on those remaining patents expired on April 6, 2015. On April 10, 2015, Cisco withdrew its March 9, 2015 motion to consolidate claims from the case. On May 5, 2015, Cisco filed its Answer to the Companys amended complaint with counterclaims under the Sherman Act, breach of contract, breach of covenant of good faith and fair dealing implied in contract, promissory estoppel, and requesting a declaration that the patents at issue are non-infringed and invalid. On June 10, 2015, the Court entered a Scheduling Order for the case. The Court set the hearing to occur in two phases, for two different sets of patents, to occur on June 24, 2016 and September 8, 2016. The Court set trial to begin on January 16, 2018. On July 13, 2015, the Company filed its oppositions to Ciscos IPR petitions. On July 20, 2015, the Company filed a motion to dismiss or transfer certain of Ciscos counterclaims. On September 22, 2015, the PTAB issued orders instituting the two IPR proceedings, Nos. IPR2015-00999 and IPR2015-01001, as requested by Cisco. On November 23, 2015, the Company and RPX entered into the RPX License Agreement (see Note 7), which resolved all issues in this case. On December 3, 2015, the parties filed a Joint Motion to Dismiss, which the Court granted on December 4, 2015. On December 3, 2015, the parties also filed a Joint Motion to Terminate in each of the two IPR proceedings, which the PTAB granted on December 4, 2015. Spherix Incorporated v. Juniper Networks, Inc., Case No. 1:14-cv-00578-SLR, in the United States District Court for the District of Delaware On May 2, 2014, the Company initiated litigation against Juniper Networks, Inc. (Juniper) in , Case No. 1:14-cv- 00578-SLR, in the United States District Court for the District of Delaware for infringement of U.S. Patent Nos. RE40467; 6,578,086; 6,130,877; 7,385,998; 7,664,123; and 8,607,323 (collectively, the Asserted Patents). The complaint alleges that Juniper has manufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patents. The Company is seeking relief in the form of a finding of infringement of the Asserted Patents, an accounting of all damages sustained by the Company as a result of Junipers infringement, actual damages, enhanced damages under 35 U.S.C. Section 284, attorneys fees and costs. On July 8, 2014, the Company filed its amended complaint to reflect that certain of the patents asserted were assigned to the Companys wholly-owned subsidiary NNPT LLC, based in Longview, Texas. By the amended complaint, NNPT LLC was added as a co-plaintiff with the Company. On August 8, 2014, Juniper filed a motion to dismiss certain claims alleged in the amended complaint. On August 29, 2014, the Company filed its opposition to Junipers motion to dismiss. On September 15, 2014, Juniper filed its reply brief regarding its motion to dismiss. On March 31, 2015, the Court granted Junipers motion to dismiss allegations of willful infringement. Spherixs allegations of patent infringement for the eleven (11) patents continue. Spherix has the ability to reallege willful infringement at a later time. On April 14, 2015, Juniper filed its Answer to the Companys amended complaint. On May 6, 2015, the Court held an in-person Scheduling Conference in court and ordered the parties to submit the final proposed Scheduling Order to the Court. On May 28, 2015, the Court entered a Scheduling Order for the case setting the hearing for June 24, 2016 and trial to begin on May 15, 2017. On November 23, 2015, the Company and RPX entered into the RPX License Agreement (see Note 7), which resolved all issues in this case. On December 2, 2015, the parties filed a Joint Motion to Dismiss, which the Court granted on December 4, 2015. NNPT, LLC v. Huawei Investment & Holding Co., Ltd. et al., Case No. 2:14-cv-00677-JRG-RSP, in the United States District Court for the Eastern District of Texas On June 9, 2014, NNPT initiated litigation against Futurewei Technologies, Inc., Huawei Device (Hong Kong) Co., Ltd., Huawei Device USA Inc., Huawei Investment & Holding Co., Ltd., Huawei Technologies Co., Ltd., Huawei Technologies Cooperatif U.A., and Huawei Technologies USA Inc. (collectively Huawei), in , Case No. 2:14-cv-00677-JRG-RSP, in the United States District Court for the Eastern District of Texas (the Court), for infringement of U.S. Patent Nos. 6,578,086; 6,130,877; 6,697,325; 7,664,123; and 8,607,323 (collectively, the Asserted Patents). On September 8, 2014, Huawei filed its answers to the complaint in which defendant Huawei Technologies USA asserted counterclaims requesting a declaration that the patents at issue were non-infringed and invalid. On October 8, 2014, NNPT filed its Answer to the counterclaims, in which it denied that the Asserted Patents were non-infringed and invalid. On January 20, 2015, the Court held a Scheduling Conference and set the hearing for July 17, 2015 and trial to begin on February 8, 2016. On January 28, 2015, the Court appointed as mediator for the parties, Hon. David Folsom, former Chief Judge of the United States District Court for the Eastern District of Texas. On February 24, 2015, the Court issued its Docket Control Order setting the hearing for July 17, 2015 and trial to begin on February 8, 2016. The Court also set an August 14, 2015 deadline to complete mediation. On June 11, 2015, Huawei filed a request for review (IPR) of two of the Asserted Patents in the United States Patent and Trademark Office. On July 7, 2015, the Court reset the hearing date for August 5, 2015. The hearing was held on August 5, 2015 as scheduled. The parties held an initial mediation on August 6, 2015. On August 17, 2015, the Court issued its Order. On August 20, 2015, the mediator filed a report with the Court reporting that the parties reached a settlement of the case on August 14, 2015. On August 31, 2015, the parties filed a Joint Motion to Stay and Notice of Settlement. On September 9, 2015, the Court stayed the case and set a status conference for October 2, 2015. On September 18, 2015, the parties filed in the PTAB a joint motion to terminate the two IPR petitions file by Huawei, Nos. IPR2015-01382 and IPR2015-01390. On September 24, 2015, the PTAB issued orders terminating the two IPR proceedings. On October 13, 2015, the Company received Huaweis fully executed copy of a confidential settlement and license agreement (the Agreement). The Agreement provides Huawei with a fully paid-up, non-exclusive, irrevocable, worldwide license (without the right to sub-license) to make, sell and otherwise dispose of certain specifically listed licensed products under eleven (11) of the Companys patents (the License). Hence, the License is not a license to the Companys entire portfolio. The Company agreed that it will not bring suit or otherwise assert a claim with respect to the licensed products. In exchange for a one-time cash payment to the Company in the amount of $295,000, the Company will have granted the License and an irrevocable release in law and equity of all claims and liabilities involved in the Litigation. On November 16, 2015, the parties file a Stipulation of Dismissal and the Court ordered the case dismissed on November 17, 2015. Spherix Incorporated v. Verizon Services Corp. et al., Case No. 1:14-cv-00721-GBL-TCB, in the United States District Court for the Eastern District of Virginia On June 11, 2014, the Company initiated litigation against Verizon Services Corp.; Verizon South Inc.; Verizon Virginia LLC; Verizon Communications Inc.; Verizon Federal Inc.; Verizon Business Network Services Inc.; and MCI Communications Services, Inc. (collectively, Verizon) in , Case No. 1:14-cv-00721-GBL-TCB, in the United States District Court for the Eastern District of Virginia (the Court) for infringement of U.S. Patent Nos. 6,507,648; 6,882,800; 6,980,564; and 8,166,533. On July 2, 2014, the Company filed its Amended Complaint in the case in which the Company added allegations of infringement of U.S. Patent No. 7,478,167. On August 15, 2014, Verizon filed a motion to dismiss, or in the alternative, a motion for a more definite statement. On September 9, 2014, the Court issued a Scheduling Order adopting the parties Joint Proposed Discovery Plan. According to the Scheduling Order, the hearing is currently scheduled for March 16, 2015. On September 12, 2014, the Company filed its opposition to Verizons motion to dismiss, and on September 26, 2014, Verizon filed its reply brief. On October 3, 2014, the Court held a hearing on the motion to dismiss and issued a Minute Entry stating that motion was denied. The Court stated that an Order would follow. On October 17, 2014, Verizon filed its Answer to the Companys Amended Complaint. The parties agreed to narrow the case by dismissing without prejudice the claims under U.S. Patent Nos. 6,507,648 and 6,882,800, with each party to bear its own costs and attorneys fees as to the dismissed claims. The parties filed a joint motion to that effect on October 27, 2014, which was granted on October 30, 2014. The parties further agreed to narrow the case by dismissing without prejudice the claims under U.S. Patent Nos. 8,166,533 and 7,478,167, and filed a joint motion to that effect on November 6, 2014. On November 13, 2014, the Court granted the parties Joint Motion to Dismiss the 533 Patent and the 167 Patent without prejudice, with each party to bear its own costs and attorneys fees as to the dismissed claims. On December 18, 2014, the Court set the case for a five-day trial beginning on May 18, 2015. On January 9, 2015, the Company and Verizon each filed their motions for summary adjudication and entry of proposed claim constructions. On January 12, 2015, the Court set the motions for summary adjudication for hearing on March 16, 2015 along with the hearing. On January 22, 2015, the parties filed their oppositions to the motions for summary adjudication and entry of proposed claim constructions, and on February 5, 2015, the parties filed their reply briefs. On March 16, 2015, the Court held the hearing as scheduled. On March 25, 2015, the Court reset the May 18, 2015 jury trial date to August 10, 2015. On March 25, 2015, the Court clarified that the trial will be held on August 10, 11, 12, 13 and 17 of 2015. On, June 11, 2015, Verizon filed a request for review (IPR) of the Asserted Patent in the United States Patent and Trademark Office. On July 1, 2015, the Court granted Verizons motion for summary judgment as to indefiniteness and non-infringement. On July 30, 2015, the Company filed a Notice of Appeal of the Courts judgment in the United States Court of Appeals for the Federal Circuit. On August 31, 2015, a settlement agreement between Spherix and Verizon was entered into, resolving all outstanding litigation between the two companies. On September 4, 2015, the Company filed an unopposed motion to withdraw its Notice of Appeal. On September 8, 2015, the Court granted the motion to withdraw the Notice of Appeal. On September 10, 2015, the parties filed a joint motion to terminated the IPR proceeding. On September 14, 2015, the PTAB terminated Verizons petition. Spherix Incorporated v. Verizon Services Corp. et al., Case No. 1:15-cv-0576-GBL-IDD, in the United States District Court for the Eastern District of Virginia On May 1, 2015, the Company initiated litigation against Verizon Services Corp.; Verizon South Inc.; Verizon Virginia LLC; Verizon Communications Inc.; Verizon Federal Inc.; Verizon Business Network Services Inc.; MCI Communications Services, Inc.; Cellco Partnership d/b/a Verizon Wireless; and Cisco Systems, Inc. (collectively, Defendants) in , Case No. 1:15-cv-0576-GBL-IDD, in the United States District Court for the Eastern District of Virginia for infringement of U.S. Patent Nos. 5,959,990; 6,111,876; RE40,999; RE44,775; RE45,065; RE45,081; RE45,095; and RE45,121 (collectively, the Asserted Patents). The complaint alleges that Defendants has used, manufactured, sold, offered for sale and/or imported technology that infringes the Asserted Patents. The Company is seeking relief in the form of a finding of infringement of the Asserted Patents, damages sufficient to compensate the Company for Defendants infringement, together with pre-and post-judgment interest and costs, and the Companys attorneys fees. On June 30, 2015, the Company filed its Amended Complaint to add allegations of infringement of U.S. Patent Nos. RE45,521 and RE45,598. On July 15, 2015, Cisco filed a motion to transfer the case to the District of Delaware. On July 17, 2015, Verizon filed its Answer and Counterclaims to the Complaint. On July 17, 2015, the Court issued a Scheduling Order setting the Final Pretrial Conference for November 19, 2015, with trial to be set within 4-8 weeks of the pretrial conference. On July 31, 2015, the Company filed its Opposition to Ciscos motion to transfer. On August 5, 2015, the Court held an Initial Pretrial Conference in the case to discuss the discovery plan for the case. On August 6, 2015, the Company filed its answer to Verizon's counterclaims. On August 11, 2015, the Court issued its Scheduling Order regarding the discovery schedule, setting discovery to be concluded by November 15, 2015. On August 31, 2015, a settlement agreement between Spherix and Verizon was entered into, resolving all outstanding litigation between the two companies. Cisco was not a party to the agreement and the case continues against Cisco. On September 1, 2015, the Company and Verizon filed a joint motion to dismiss the Verizon entities from the case. On September 2, 2015, the Court granted the motion to dismiss Verizon. On September 23, 2015, Cisco filed a Consent Motion to transfer the action to the District of Delaware, and on September 25, 2015, the Court granted the motion. The case has been transferred to the District of Delaware and assigned new case number 1:15-cv-00869-SLR (Delaware Case). On November 23, 2015, the Company and RPX entered into the RPX License Agreement (see Note 7), which resolved all issues in the Delaware Case. On December 3, 2015, the parties filed a Joint Motion to Dismiss, which the Court granted on December 4, 2015. Cisco Systems, Inc. v. Spherix Incorporated, 1:15-cv-00559-SLR, in the United States District Court for the District of Delaware On June 30, 2015, Cisco Systems, Inc. initiated litigation against the Company in United States District Court for the District of Delaware, requesting a declaration of non-infringement U.S. Patent No. RE45,598, which issued on June 30, 2015, and, with respect to that patent, alleging breach of contract, breach of covenant of good faith and fair dealing implied in contract and promissory estoppel. On August 28, 2015, the Company filed motions to dismiss the case in light of previously filed case, case No. 1:15-cv-0576-GBL-IDD, in the Eastern District of Virginia, which involves U.S. Patent No. RE45,598. On November 23, 2015, the Company and RPX entered into the RPX License Agreement (see Note 7), which resolved all issues in this case. On December 3, 2015, the parties filed a Joint Motion to Dismiss, which the Court granted on December 4, 2015. Counterclaims In the ordinary course of business, the Company, along with the Companys wholly-owned subsidiaries, will initiate litigation against parties whom the Company believe have infringed on intellectual property rights and technologies. The initiation of such litigation exposes us to potential counterclaims initiated by the defendants. Currently, as stated above, defendants in the cases ; have filed counterclaims against the Company. The Company has evaluated the counterclaims and believe they are without merit and have not recorded a loss provision relating to such matters. The Company can provide no assurance that the outcome of these claims will not have a material adverse effect on the Companys financial position and results from operation. Registration Penalty As stipulated in the Registration Rider of the December 2013 Rockstar patent acquisition agreement, the Company was required to both (i) file a registration state |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
11. Income Taxes | Note 11. Income Taxes The income tax provision consists of the following ($ in thousands): For the Years Ended December 31, 2015 2014 Federal Current $ - $ - Deferred 16,374 5,453 Increase in valuation allowance (16,374 ) (5,453 State and Local Current - - Deferred 837 (44 ) Increase in valuation allowance (837 ) 44 Change in valuation allowance (17,211 ) (5,409 ) Income tax provision (benefit) $ - $ - The following is a reconciliation of the U.S. federal statutory rate to the effective income tax rates for the years ended December 31, 2015 and 2014: For the Years Ended December 31, 2015 2014 U.S. statutory federal rate (34.00 )% (34.00 )% State income tax, net of federal benefit (2.52 ) (3.43 ) Other Permanent Differences (0.01 ) 0.11 Change in Derivative Liability - (0.06) State rate change effect 0 .75 - Reduction due to change in NOL and other true ups 2.35 55.1 (33.43 ) 17.72 Valuation Allowance 33.43 (17.72 ) Income tax provision (benefit) - % - % At December 31, 2015 and 2014, the Companys deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following ($ in thousands): For the Years Ended December 31, 2015 2014 Deferred tax assets Net operating loss carryforward $ 7,843 $ 4,992 Stock-based compensation 8,014 8,087 Patent portfolio and other 17,298 2,865 Total deferred tax assets 33,155 15,944 Valuation allowance (33,155 ) (15,944 ) Deferred tax assets, net of allowance $ - $ - In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The Company has determined that, based on objective evidence currently available, it is more likely than not that the deferred tax assets will not be realized in future periods. Accordingly, the Company has provided a valuation allowance for the full amount of the deferred tax assets at December 31, 2015 and 2014. As of December 31, 2015, the change in valuation allowance is approximately $17.2 million. As of December 31, 2015, the Company had federal and state net operating loss carryovers (NOLs) of approximately $21.5 million, which expire from 2033 through 2035. The NOL carryover may be subject to limitation under Internal Revenue Code section 382, should there be a greater than 50% ownership change as determined under the regulations. The Company has performed a study with respect to Internal Revenue Code section 382 and has determined that an ownership change occurred on September 10, 2013 and accordingly, a portion of the NOL carryovers may never be utilized. At this time, the Company estimates that post change NOLs of $21.5 million are available for potential carryover without any limitations under IRC Section 382. The effect of any subsequent ownership change would be the imposition of another annual limitation on the use of net operating loss carryforwards attributable to periods before the subsequent change. Any subsequent limitation may result in expiration of additional portions of the NOLs before utilization. As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of NOL or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprises potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. If applicable, interest costs and penalties related to unrecognized tax benefits are required to be calculated and would be classified as interest and penalties in general and administrative expense in the statement of operations. As of December 31, 2015 and 2014, no liability for unrecognized tax benefit was required to be reported. No interest or penalties were recorded during the years ended December 31, 2015 and 2014. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. The Company files U.S. federal and state income tax returns. As of December 31, 2015, the Companys U.S. and state tax returns (California, Delaware, Maryland, New York, New York City Pennsylvania and Texas) remain subject to examination by tax authorities beginning with the tax return filed for the year ended December 31, 2013. At this time, the Company's 2013 federal tax return has been selected for examination by the Internal Revenue Service. The Company believes that its income tax positions would be sustained upon an audit and does not anticipate any adjustments that would result in material changes to its consolidated financial position. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
11. Subsequent Events | The Company evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements other than disclosed. Amendment to 2014 Plan On February 26, 2016, the Companys stockholders approved, and the Company adopted, an amendment to the 2014 Plan increasing the number of shares issuable thereunder from 219,046 shares of Common Stock to 434,210 shares of Common Stock. Conversions of Series K Preferred Stock Since January 1, 2016, stockholders have converted 1,190 shares of Series K Preferred Stock into 313,157 shares of Common Stock. Stock Grants In January 2016, the Company issued 652 shares of Common Stock to its director, Howard E. Goldberg, for $1,487 of 2015 service expenses, which exceeds the quarterly retainers. In January 2016, the Company granted 8,771 shares of restricted stock to a third party for consulting services as per the consulting agreement executed in December 2015. The shares issued at the closing price of December 22, 2015. In February 2016, the Company entered into a consulting agreement with a third party for six months of services. The Company agreed to pay the consultant a cash retainer of $35,000 upon execution of agreement. A second cash retainer will be due in the amount of $25,000 on February 15, 2016. A third cash retainer will be due in the amount of $10,000 on March 1, 2016. The Company also agreed to pay a one-time retain of $100,000, payable in 42,445 shares of the companys common stock based on the average closing price of the companys common stock on its principal exchange for ten trading days immediately prior to the execution of the consulting agreement. In March 2016, the Company issued each of Mr. Reiner and Mr. Dotson 21,053 shares of common stock in respect of their performance for the 2015 fiscal year. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation and Principles of Consolidation | The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Biospherics Incorporated, Nuta Technology Corp. (Nuta), Spherix Portfolio Acquisition I, Inc. (SPXI), Spherix Portfolio Acquisition II, Inc. (SPXII), Guidance IP, LLC (Guidance), CompuFill LLC (CompuFill), Directional IP, LLC (Directional) and NNPT, LLC (NNPT). All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). This requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. The Companys significant estimates and assumptions include the recoverability and useful lives of long-lived assets, stock-based compensation, derivative liabilities, and the valuation allowance related to the Companys deferred tax assets. Certain of the Companys estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Companys estimates and could cause actual results to differ from those estimates and assumptions. |
Concentration of Cash | The Company maintains cash balances at two financial institutions in checking accounts and money market accounts. The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. As of December 31, 2015 and 2014, the Company had $0.1 million and $0.8 million in cash and cash equivalents, respectively. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. |
Marketable Securities | Marketable securities are classified as trading and are carried at fair value. The Companys marketable securities consist of highly liquid mutual funds and exchange-traded & closed-end funds which are valued at quoted market prices. During the year ended December 31, 2015 and 2014, the Company incurred realized losses of approximately $91,000 and $49,000, respectively, and unrealized gains of approximately $19,000, and unrealized loss of approximately $54,000, respectively, on its investments in marketable securities, which are included in other income, net on the consolidated statements of operations. In addition, during the year ended December 31, 2015 and 2014, the Company earned dividend income of approximately $52,000 and $92,000, respectively, which is included in other income, net on the consolidated statement of operations. The Company reinvested such dividend income into its marketable securities during the years ended December 31, 2015 and 2014. The cost of marketable securities held as of December 31, 2015 and 2014 were $3.4 million and $3.5 million, respectively. |
Intangible Assets - Patent Portfolios | Intangible assets include the Companys patent portfolios with original estimated useful lives ranging from six months to 12 years. The Company amortizes the cost of the intangible assets over their estimated useful lives on a straight-line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. Patents include the cost of patents or patent rights (hereinafter, collectively patents) acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years. Certain patent application and prosecution costs incurred to secure additional patent claims, that based on managements estimates are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. |
Goodwill | Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that indicate the carrying amount may be impaired. Accounting Standards Codification (ASC) Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. The Company tests goodwill for impairment at least annually in conjunction with the preparation of its annual business plan, or more frequently if events or circumstances indicate it might be impaired. ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. During the year ended December 31, 2015, the Company recorded a $1.7 million of impairment charge to its goodwill. Refer to Note 5 for further discussion of the goodwill impairment test performed by the Company at June 30, 2015. |
Impairment of Long-lived Assets (Including Patent Assets) | The Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If a change in circumstance occurs, the Company performs a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether impairment has occurred for the group of assets for which the Company can identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows, the Company measures any impairment by comparing the fair value of the asset or asset group to its carrying value. The Company determined it was necessary to test its intangible assets for impairment during the second quarter of 2015. Due to the decline in stock price which the Company considered a triggering event, at December 31, 2015, the Company performed an additional impairment test for intangible assets. During the year ended December 31, 2015, the Company recorded a $38.9 million of impairment charges to its intangible assets (see Note 5). There was no impairment of long-lived assets in 2014. |
Property and Equipment | Property and equipment are stated at cost and include office furniture and equipment and computer hardware and software. The Company computes depreciation and amortization under the straight-line method and typically over the following estimated useful lives of the related assets: ● Office furniture and equipment 3 to 10 years ● Computer hardware and software 3 to 5 years |
Revenue Recognition | Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability of amounts is reasonably assured. In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned by the Company. These rights may include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. |
Inventor Royalties | Inventor royalties are expensed in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, costs paid by the Company to acquire patents are recoverable from future net revenues. Patent acquisition costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense. |
Accounting for Warrants | The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (ASC 815). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). In addition, Under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the consolidated balance sheet as a current liability. The Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that such instruments met the criteria for liability classification. Accordingly, the Company classified the warrants as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as change in the fair value of warrant liabilities in the consolidated statements of operations. The fair value of the warrants has been estimated using a Black-Scholes valuation model (see Note 6). |
Fair Value of Financial Instruments | Financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value: Level 1 quoted prices in active markets for identical assets or liabilities Level 2 quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) |
Income Taxes | The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (ASC 740). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary difference resulting from matters that have been recognized in the Companys financial statement or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
Net Loss Per Share | Basic loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Companys convertible preferred stock and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the conversion of preferred stock and the exercise of stock options and warrants from the calculation of net loss per share if their effect would be anti-dilutive. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at December 31, 2015 and 2014 are as follows: As of December 31, 2015 2014 Convertible preferred stock 530,277 271,413 Warrants to purchase common stock 2,304,888 40,452 Options to purchase common stock 289,380 278,863 Total 3,124,545 590,728 |
Stock-based Compensation | The Company accounts for share-based payment awards exchanged for employee services at the estimated grant date fair value of the award. Stock options issued under the Companys long-term incentive plans are granted with an exercise price equal to no less than the market price of the Companys stock at the date of grant and expire up to ten years from the date of grant. These options generally vest over a one- to ten-year period. The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. The risk free interest rate is based on U.S. Treasury zero-coupon yield curve over the expected term of the option. The expected term assumption is determined using the weighted average midpoint between vest and expiration for all individuals within the grant. The expected volatility assumption is computed based on the standard deviation of the Companys underlying stock price's daily logarithmic returns. The Companys model includes a zero dividend yield assumption, as the Company has not historically paid nor does it anticipate paying dividends on its common stock. The Companys model does not include a discount for post-vesting restrictions, as the Company has not issued awards with such restrictions. The periodic expense is then determined based on the valuation of the options, and at that time an estimated forfeiture rate is used to reduce the expense recorded. The Company estimates of pre-vesting forfeitures is primarily based on the Companys historical experience and is adjusted to reflect actual forfeitures as the options vest. |
Treasury Stock | The Company accounts for the treasury stock using the cost method, which treats it as a reduction in stockholders equity. In February 2014, the Company retired 9 shares of treasury stock. |
Convertible Preferred Stock | The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Companys control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders equity. The Company accounts for convertible preferred stock with detachable warrants in accordance with ASC 470: and allocated proceeds received to the convertible preferred stock and detachable warrants based on relative fair values. The Company evaluated the classification of its convertible preferred stock and warrants and determined that such instruments meet the criteria for equity classification. The Company recorded the related issuance costs and value ascribed to the warrants as a reduction of the convertible preferred stock. The Company has also evaluated its convertible preferred stock and warrants in accordance with the provisions of ASC 815, Derivatives and Hedging , including consideration of embedded derivatives requiring bifurcation. The issuance of the convertible preferred stock could generate a beneficial conversion feature (BCF), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. The Company recognized the BCF by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment date, to additional paid-in capital, resulting in a discount on the convertible preferred stock (see Note 8). As the convertible preferred stock may be converted immediately, the Company recognized the BCF as a deemed dividend in the consolidated statements of operations. |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, (ASU 2014-09), which requires an entity to recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective in the annual period ending December 31, 2017, including interim periods within that annual period. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the impact of its pending adoption of this standard on its consolidated financial statements and related disclosures. In June 2014 the FASB issued ASU No. 2014-12, . This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial position and results of operations. In August 2014, the FASB issued ASU 2014-15, . Currently, there is no guidance in U.S. GAAP about managements responsibility to evaluate whether there is substantial doubt about an entitys ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entitys ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of managements plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of managements plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. The Company has elected to early adopt the provisions of ASU 2014-15 during the year ended December 31, 2014. Managements evaluations regarding the events and conditions that raise substantial doubt regarding the Companys ability to continue as a going concern have been disclosed in Note 2. In November 2015, the FASB issued ASU No. 2015-17, , which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position to simplify the presentation of deferred income taxes. The standard is effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. As of December 31, 2015, the Company elected to early adopt the pronouncement on a prospective basis. Adoption of this amendment did not have an effect on the Company's financial position or results of operations, and prior periods were not retrospectively adjusted. In January 2016, the FASB issued ASU No. 2016-01, . ASU No. 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entitys other deferred tax assets. ASU No. 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU No. 2016-01 will have on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, , which supersedes FASB ASC Topic 840, and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The adoption of this standard is not expected to have a material impact on the Companys consolidated financial position and results of operations. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Tables | |
Estimated useful lives | The Company computes depreciation and amortization under the straight-line method and typically over the following estimated useful lives of the related assets: ● Office furniture and equipment 3 to 10 years ● Computer hardware and software 3 to 5 years |
Diluted earning per share Calculation | Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at December 31, 2015 and 2014 are as follows: As of December 31, 2015 2014 Convertible preferred stock 530,277 271,413 Warrants to purchase common stock 2,304,888 40,452 Options to purchase common stock 289,380 278,863 Total 3,124,545 590,728 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property And Equipment Tables | |
Property and equipment | The components of property and equipment as of December 31, 2015 and 2014, at cost are ($ in thousands): As of December 31, 2015 2014 Computers $ 12 $ 10 Office furniture and equipment 97 97 Leasehold improvements 229 229 Total cost 338 336 Accumulated depreciation and amortization (333 ) (332 ) Property and equipment, net $ 5 $ 4 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill And Intangible Assets Tables | |
Amortization to acquired intangible assets | The net carrying amounts related to acquired intangible assets as of December 31, 2015 are as follows ($ in thousands): Net Carrying Amount Weighted average amortization period (years) Patent Portfolios at December 31, 2013, net $ 64,835 6.62 Amortization expenses (9,831 ) Patent Portfolios at December 31, 2014, net $ 55,004 5.62 Amortization expenses (6,317 ) Impairment loss (38,888 ) Patent Portfolios at December 31, 2015, net $ 9,799 4.63 The amortization expenses related to acquired intangible assets for the years ended December 31, 2015 and 2014 are as follows ($ in thousands): For the Years Ended December 31, Date Acquired and Description 2015 2014 7/24/13 - Rockstar patent portfolio $ 303 $ 470 9/10/13 - North South patent portfolio 84 130 12/31/13 - Rockstar patent portfolio 5,930 9,231 $ 6,317 $ 9,831 |
Future amortization of all patents | The future amortization of these intangible assets was based on the adjusted carrying amount. Future amortization of all patents is as follows ($ in thousands): Rockstar North South Rockstar Portfolio Portfolio Portfolio Acquired Acquired Acquired Total 24-Jul-13 10-Sep-13 31-Dec-13 Amortization Year Ended December 31, 2016 $ 104 $ 31 $ 2,000 $ 2,135 Year Ended December 31, 2017 104 30 1,995 2,129 Year Ended December 31, 2018 104 30 1,995 2,129 Year Ended December 31, 2019 104 31 1,994 2,129 Year Ended December 31, 2020 104 31 995 1,130 Thereafter 110 37 - 147 Total $ 630 $ 190 $ 8,979 $ 9,799 |
Fair Value of Financial Asset23
Fair Value of Financial Assets and Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value Measurement Tables | |
Financial liabilities measured at fair value on a recurring basis | The following table presents the Company's assets and liabilities that are measured at fair value at December 31, 2015 and 2014 ($ in thousands): Fair value measured at December 31, 2015 Total carrying value at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2015 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual funds $ 3,392 $ 3,392 $ - $ - Liabilities Fair value of warrant liabilities $ 2,959 $ - $ - $ 2,959 Fair value measured at December 31, 2014 Total carrying value at December 31, Quoted prices in active markets Significant other observable inputs Significant unobservable inputs 2014 (Level 1) (Level 2) (Level 3) Assets Marketable securities - mutual funds $ 3,500 $ 3,500 $ - $ - |
Significant assumptions used in the valuations | A summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Companys warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and as of December 31, 2015 is as follows: Date of valuation July 21, 2015 December 7, 2015 December 31, 2015 Risk-free interest rate 1.69 % 0.57 - 1.67% 0.16% - 1.76% Expected volatility 100.00 % 114.80% 100% - 115.35% Expected life (in years) 5.5 0.5 - 5.0 0.3 - 5.1 Expected dividend yield - - - |
Changes in the fair value of the Company's Level 3 inputs | The following table sets forth a summary of the changes in the fair value of the Companys Level 3 financial liabilities that are measured at fair value on a recurring basis for the year ended December 31, 2015 and 2014 ($ in thousands): For the Years Ended December 31, 2015 2014 Beginning balance $ - $ 48 Recognition of warrant liabilities 3,228 - Fair value adjustment of warrant liabilities (269 ) (48 ) Ending balance $ 2,959 $ - |
Stockholders' Equity and Rede24
Stockholders' Equity and Redeemable Convertible Preferred Stock (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Stockholders Equity Tables | |
Preferred Stock | The Company had designated separate series of its capital stock as of December 31, 2015 and December 31, 2014 as summarized below: Number of Shares Issued and Outstanding as of December 31, 2015 2014 Par Value Conversion Ratio Series "A" - - $ 0.0001 N/A Series "C" - 1 0.0001 0.05:1 Series D" 4,725 4,725 0.0001 0.53:1 Series D-1" 834 834 0.0001 0.53:1 Series F-1" - - 0.0001 0.05:1 Series H" 381,967 439,043 0.0001 0.53:1 Series I - 35,541 0.0001 1.05:1 Series J - - 0.0001 0.05:1 Series K 1,240 - 0.0001 263.16:1 |
Summary of warrant activity | A summary of warrant activity for year ended December 31, 2015 is presented below: Warrants Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of January 1, 2015 40,452 $ 260.34 $ - 4.03 Issued 2,264,986 4.87 - 2.82 Expired (550 ) 5,700.00 Outstanding as of December 31, 2015 2,304,888 $ 32.94 $ - 2.83 Exercisable as of December 31, 2015 2,304,888 $ 32.94 $ - 2.83 |
Fair value of stock-based compensation | The fair value of options granted in 2015 and 2014 was estimated using the following assumptions: For the Years Ended December 31, 2015 2014 Exercise price $4.18 - $32.87 $25.46 - $110.77 Expected stock price volatility 117.2% - 130.4% 77.7% - 90.6% Risk-free rate of interest 0.74% - 1.08% 0.76% - 1.80% Term (years) 1.9 - 3.0 2.5 - 5.5 |
Summary of option activity | A summary of option activity under the Companys employee stock option plan for year ended December 31, 2015 is presented below: Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of January 1, 2015 275,970 $ 94.37 $ - 6.0 Employee options granted 23,682 9.53 - 4.4 Employee options forfeited (13,157 ) 54.34 - - Employee options expired (8 ) 4,332.00 - - Outstanding as of December 31, 2015 286,487 $ 89.07 $ - 5.0 Options vested and expected to vest 286,487 $ 89.07 $ - 5.0 Options vested and exercisable 284,514 $ 89.66 $ - 5.0 A summary of options that the Company granted to non-employees for the year ended December 31, 2015 is presented below: Number of Shares Weighted Average Exercise Price Total Intrinsic Value Weighted Average Remaining Contractual Life (in years) Outstanding as of January 1, 2015 2,893 $ 98.07 $ - 6.4 Non-employee options granted - - - - Outstanding as of December 31, 2015 2,893 $ 98.07 $ - 5.4 Options vested and expected to vest 2,893 $ 98.07 $ - 5.4 Options vested and exercisable 2,893 $ 98.07 $ - 5.4 |
Summary of the restricted stock award activity | A summary of the restricted stock award activity for the year ended December 31, 2015 is as follows: Number of Units Weighted Average Grant Day Fair Value Nonvested at January 1, 2015 394 $ 49.97 Granted 6,732 8.49 Vested (7,126 ) 5.30 Nonvested at December 31, 2015 - $ - |
Stock-based compensation expense | Stock-based compensation expense for the year ended December 31, 2015 and 2014 was comprised of the following ($ in thousands): For the Years Ended December 31, 2015 2014 Employee restricted stock awards $ 132 $ 49 Employee stock option awards 155 12,403 Non-employee restricted stock awards 84 176 Non-employee option awards - 48 Total compensation expense $ 371 $ 12,676 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitment And Contingencies Tables | |
Future minimum rental payments | Future minimum rental payments required as of December 31, 2015, including Bethesda office lease obligation are as follows ($ in thousands): Lease Payments Year Ended December 31, 2016 $ 225 Year Ended December 31, 2017 183 Year Ended December 31, 2018 46 $ 454 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes Tables | |
Income tax (benefit) provision | The income tax provision consists of the following ($ in thousands): For the Years Ended December 31, 2015 2014 Federal Current $ - $ - Deferred 16,374 5,453 Increase in valuation allowance (16,374 ) (5,453 State and Local Current - - Deferred 837 (44 ) Increase in valuation allowance (837 ) 44 Change in valuation allowance (17,211 ) (5,409 ) Income tax provision (benefit) $ - $ - |
Reconciliation of the expected tax expense (benefit) | The following is a reconciliation of the U.S. federal statutory rate to the effective income tax rates for the years ended December 31, 2015 and 2014: For the Years Ended December 31, 2015 2014 U.S. statutory federal rate (34.00 )% (34.00 )% State income tax, net of federal benefit (2.52 ) (3.43 ) Other Permanent Differences (0.01 ) 0.11 Change in Derivative Liability - (0.06) State rate change effect 0 .75 - Reduction due to change in NOL and other true ups 2.35 55.1 (33.43 ) 17.72 Valuation Allowance 33.43 (17.72 ) Income tax provision (benefit) - % - % |
Deferred tax assets and liabilities | At December 31, 2015 and 2014, the Companys deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following ($ in thousands): For the Years Ended December 31, 2015 2014 Deferred tax assets Net operating loss carryforward $ 7,843 $ 4,992 Stock-based compensation 8,014 8,087 Patent portfolio and other 17,298 2,865 Total deferred tax assets 33,155 15,944 Valuation allowance (33,155 ) (15,944 ) Deferred tax assets, net of allowance $ - $ - |
Organization and Description 27
Organization and Description of Business (Details Narrative) - $ / shares | Mar. 04, 2016 | Feb. 26, 2016 | Sep. 21, 2015 | Mar. 24, 2015 | Dec. 31, 2015 | Jun. 30, 2015 | Dec. 31, 2014 |
Common stock shares par value per share | $ 0.0001 | $ 0.0001 | |||||
Common Stock shares authorized | 100,000,000 | 100,000,000 | |||||
Common Stock shares outstanding | 2,539,847 | 1,505,761 | |||||
First Grace Period [Member] | |||||||
Common stock bid price per share | $ 1 | ||||||
Common stock bid price grace period | 30 days | ||||||
Second Grace Period [Member] | |||||||
Common stock bid price per share | $ 1 | ||||||
Common stock bid price grace period | 10 days | ||||||
NASDAQ Capital Markets, LLC [Member] | |||||||
Common stock bid price per share | $ 1 | ||||||
Common stock shares par value per share | $ 0.0001 | ||||||
Subsequent Event [Member] | |||||||
Reverse stock split of Common Stock at a ratio | 1-for-19 | 1-for-12 to 1-for-24 | |||||
Minimum [Member] | |||||||
Common stock bid price per share | $ 9.12 | ||||||
Common Stock shares authorized | 100,000,000 | ||||||
Common Stock shares outstanding | 2,539,847 | ||||||
Maximum [Member] | |||||||
Common stock bid price per share | $ 21.47 | ||||||
Common Stock shares authorized | 200,000,000 | ||||||
Common Stock shares outstanding | 48,259,430 |
Liquidity and Financial Condi28
Liquidity and Financial Condition (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Liquidity And Financial Condition Details Narrative | ||
Working capital | $ (600) | |
Net loss | (51,465) | $ (30,532) |
Accumulated deficit | $ (135,273) | $ (83,808) |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2015 | |
Office furniture and equipment [Member] | Minimum [Member] | |
Property and equipment useful life | 3 years |
Office furniture and equipment [Member] | Maximum [Member] | |
Property and equipment useful life | 10 years |
Computer hardware and software [Member] | Minimum [Member] | |
Property and equipment useful life | 3 years |
Computer hardware and software [Member] | Maximum [Member] | |
Property and equipment useful life | 5 years |
Summary of Significant Accoun30
Summary of Significant Accounting Policies (Details 1) - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Potentially dilute securities excluded from calculation | 3,124,545 | 590,728 |
Convertible preferred stock [Member] | ||
Potentially dilute securities excluded from calculation | 530,277 | 271,413 |
Warrants to purchase common stock [Member] | ||
Potentially dilute securities excluded from calculation | 2,304,888 | 40,452 |
Options to purchase common stock [Member] | ||
Potentially dilute securities excluded from calculation | 289,380 | 278,863 |
Summary of Significant Accoun31
Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Summary Of Significant Accounting Policies Details Narrative | ||
Cash and cash equivalents | $ 100 | $ 800 |
Realized loss on marketable securities | 91 | 49 |
Unrealized loss on marketable securities | 19 | (54) |
Dividend income | 52 | 92 |
Cost of marketable securities | 3,400 | $ 3,500 |
Godwill impairment charge | 1,700 | |
Intangible assets impairment charges | $ 38,900 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Property And Equipment Details | ||
Computers | $ 12 | $ 10 |
Office furniture and equipment | 97 | 97 |
Leasehold improvements | 229 | 229 |
Total cost | 338 | 336 |
Accumulated depreciation and amortization | (333) | (332) |
Property and equipment, net | $ 5 | $ 4 |
Property and Equipment (Detai33
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 1,089 | $ 402 |
Goodwill and Intangible Asset34
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Patent Portfolios at December 31, 2014, net | $ 55,004 | ||
Impairment loss | 38,900 | ||
Patent Portfolios at December 31, 2015, net | 9,799 | $ 55,004 | |
Patents [Member] | |||
Patent Portfolios at December 31, 2014, net | 55,004 | 64,835 | |
Amortization expenses | (6,317) | ||
Impairment loss | (38,888) | (9,831) | |
Patent Portfolios at December 31, 2015, net | $ 9,799 | $ 55,004 | $ 64,835 |
Weighted average amortization period | 4 years 7 months 17 days | 5 years 7 months 13 days | 6 years 7 months 13 days |
Goodwill and Intangible Asset35
Goodwill and Intangible Assets (Details 1) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Amortization Expense | $ 6,317 | $ 9,831 |
7/24/13 - Rockstar Patent Portfolio Acquired [Member] | ||
Amortization Expense | 303 | 470 |
9/10/13 - North South patent portfolio Acquired [Member] | ||
Amortization Expense | 84 | 130 |
12/31/13 - Rockstar Patent Portfolio Acquired [Member] | ||
Amortization Expense | $ 5,930 | $ 9,231 |
Goodwill and Intangible Asset36
Goodwill and Intangible Assets (Details 2) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
December 31, 2016 | $ 2,135 | |
December 31, 2017 | 2,129 | |
December 31, 2018 | 2,129 | |
December 31, 2019 | 2,129 | |
December 31, 2020 | 1,130 | |
Thereafter | 147 | |
Total | 9,799 | $ 55,004 |
7/24/13 - Rockstar Patent Portfolio Acquired [Member] | ||
December 31, 2016 | 104 | |
December 31, 2017 | 104 | |
December 31, 2018 | 104 | |
December 31, 2019 | 104 | |
December 31, 2020 | 104 | |
Thereafter | 110 | |
Total | 630 | |
9/10/13 - North South patent portfolio Acquired [Member] | ||
December 31, 2016 | 31 | |
December 31, 2017 | 30 | |
December 31, 2018 | 30 | |
December 31, 2019 | 31 | |
December 31, 2020 | 31 | |
Thereafter | 37 | |
Total | 190 | |
12/31/13 - Rockstar Patent Portfolio Acquired [Member] | ||
December 31, 2016 | 2,000 | |
December 31, 2017 | 1,995 | |
December 31, 2018 | 1,995 | |
December 31, 2019 | 1,994 | |
December 31, 2020 | $ 995 | |
Thereafter | ||
Total | $ 8,979 |
Goodwill and Intangible Asset37
Goodwill and Intangible Assets (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Jun. 30, 2015 | |
Amortization of patent portfolio | $ 9,800 | |
Weighted average life in years | 4 years 7 months 17 days | |
Fair value of the patent portfolio | $ 9,800 | $ 14,600 |
Impairment charge of patent portfolio | 35,500 | |
Additional impairment charge of patent portfolio | $ 3,400 | |
Minimum [Member] | ||
Market price of common stock | $ 9.12 | |
Maximum [Member] | ||
Market price of common stock | $ 21.47 |
Fair Value of Financial Asset38
Fair Value of Financial Assets and Liabilitiest (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Assets | ||
Marketable securities - mutual funds | $ 3,392 | $ 3,500 |
Liabilities | ||
Fair value of warrant liabilities | 2,959 | |
Level 1 [Member] | ||
Assets | ||
Marketable securities - mutual funds | $ 3,392 | $ 3,500 |
Liabilities | ||
Fair value of warrant liabilities | ||
Fair Value, Inputs, Level 2 [Member] | ||
Assets | ||
Marketable securities - mutual funds | ||
Liabilities | ||
Fair value of warrant liabilities | ||
Fair Value, Inputs, Level 3 [Member] | ||
Assets | ||
Marketable securities - mutual funds | ||
Liabilities | ||
Fair value of warrant liabilities | $ 2,959 |
Fair Value of Financial Asset39
Fair Value of Financial Assets and Liabilities (Details 1) | Dec. 07, 2015 | Jul. 21, 2015 | Dec. 31, 2015 |
Risk-free interest rate | 1.69% | ||
Expected volatility | 114.80% | 100.00% | |
Expected life (in years) | 5 years 6 months | ||
Expected dividend yield | 0.00% | 0.00% | |
Minimum [Member] | |||
Risk-free interest rate | 0.57% | 0.16% | |
Expected volatility | 100.00% | ||
Expected life (in years) | 6 months | 3 months 18 days | |
Maximum [Member] | |||
Risk-free interest rate | 1.67% | 1.76% | |
Expected volatility | 115.35% | ||
Expected life (in years) | 5 years | 5 years 1 month 6 days |
Fair Value of Financial Asset40
Fair Value of Financial Assets and Liabilities (Details 2) - Level 3 [Member] - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Beginning balance | $ 48 | |
Recognition of warrant liabilities | $ 3,228 | |
Fair value adjustments for warrant liabilities | (269) | $ (48) |
Ending balance | $ 2,959 |
Fair Value of Financial Asset41
Fair Value of Financial Assets and Liabilities (Details Narrative) - $ / shares | Dec. 07, 2015 | Dec. 07, 2014 | Jul. 21, 2015 |
Binomial model based on expected volatility | 114.80% | 100.00% | |
Series A [Member] | |||
Common stock warrants purchase | 1,052,624 | ||
Warrants exercisable date | May 6, 2016 | ||
Warrants exercise price per share | $ 3.80 | ||
Series B [Member] | |||
Common stock warrants purchase | 842,099 | ||
Warrants exercisable date | Dec. 6, 2020 | ||
Warrants exercise price per share | $ 4.75 | ||
July 2015 Financing [Member] | |||
Common stock warrants purchase | 370,263 | ||
Warrants exercisable date | Jan. 22, 2016 | ||
Warrants exercise price per share | $ 8.17 |
RPX License Agreement (Details
RPX License Agreement (Details Narrative) $ in Thousands | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Rpx License Agreement Details Narrative | |
Redemption payment | $ 5,000 |
Revenue recorded | $ 31 |
Stockholders' Equity and Rede43
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Par Value | $ 0.0001 | $ 0.0001 |
Series A Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | ||
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | N/A | |
Series C Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | 1 | |
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 0.05:1 | |
Series D Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | 4,725 | 4,725 |
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 0.53:1 | |
Series D-1 Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | 834 | 834 |
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 0.53:1 | |
Series F-1 Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | ||
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 0.05:1 | |
Series H Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | 381,967 | 439,043 |
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 0.53:1 | |
Series I Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | 35,541 | |
Par Value | $ 0.0001 | |
Conversion Ratio | 1.05:1 | |
Series J Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | ||
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 0.05:1 | |
Series K Convertible Preferred Stock [Member] | ||
Number of Shares Issued and Outstanding | 1,240 | |
Par Value | $ 0.0001 | $ 0.0001 |
Conversion Ratio | 263.16:1 |
Stockholders' Equity and Rede44
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details 1) - Warrants | 12 Months Ended |
Dec. 31, 2015USD ($)$ / sharesshares | |
Number of Shares | |
Outstanding at beginning of year | shares | 40,452 |
Issued | shares | 2,264,986 |
Expired | shares | (550) |
Outstanding at end of year | shares | 2,304,888 |
Exercisable at end of year | shares | 2,304,888 |
Weighted Average Exercise Price | |
Outstanding at beginning of year | $ / shares | $ 260.34 |
Issued | $ / shares | 4.87 |
Expired | $ / shares | 5,700 |
Outstanding at end of year | $ / shares | 32.94 |
Exercisable at end of year | $ / shares | $ 32.94 |
Total Intrinsic Value | |
Outstanding at beginning of year | $ | |
Issued | $ | |
Expired | $ | |
Outstanding at end of year | $ | |
Exercisable at end of year | $ | |
Weighted Average Remaining Contractual Life (in years) | |
Outstanding at beginning of year | 4 years 11 days |
Issued | 2 years 9 months 26 days |
Outstanding at end of year | 2 years 9 months 29 days |
Exercisable at end of year | 2 years 9 months 29 days |
Stockholders' Equity and Rede45
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details 2) - $ / shares | Dec. 07, 2015 | Jul. 21, 2015 | Dec. 31, 2015 | Dec. 31, 2014 |
Risk-free interest rate | 1.69% | |||
Minimum [Member] | ||||
Risk-free interest rate | 0.57% | 0.16% | ||
Maximum [Member] | ||||
Risk-free interest rate | 1.67% | 1.76% | ||
Stock Option [Member] | Minimum [Member] | ||||
Exercise price | $ 4.18 | $ 25.46 | ||
Expected stock price volatility | 117.20% | 77.70% | ||
Risk-free interest rate | 0.74% | 0.76% | ||
Term (years) | 1 year 10 months 24 days | 2 years 6 months | ||
Stock Option [Member] | Maximum [Member] | ||||
Exercise price | $ 32.87 | $ 110.77 | ||
Expected stock price volatility | 130.40% | 90.60% | ||
Risk-free interest rate | 1.08% | 1.80% | ||
Term (years) | 3 years | 5 years 6 months |
Stockholders' Equity and Rede46
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details 3) - Stock Option [Member] | 12 Months Ended |
Dec. 31, 2015USD ($)$ / sharesshares | |
Number of Shares | |
Outstanding at beginning of year | shares | 275,970 |
Employee Options granted | shares | 23,682 |
Employee options forfeited | shares | (13,157) |
Employee options expired | shares | (8) |
Outstanding at end of year | shares | 286,487 |
Options vested and expected to vest | shares | 286,487 |
Options vested and exercisable | shares | 284,514 |
Weighted Average Exercise Price | |
Outstanding at beginning of year | $ 94.37 |
Employee Options granted | 9.53 |
Employee options forfeited | 54.34 |
Employee options expired | 4,332 |
Outstanding at end of year | 89.07 |
Options vested and expected to vest | 89.07 |
Options vested and exercisable | $ 89.66 |
Total Intrinsic Value | |
Outstanding at beginning of year | $ | |
Employee Options granted | $ | |
Employee options forfeited | |
Employee options expired | $ | |
Outstanding at end of year | $ | |
Options vested and expected to vest | $ | |
Options vested and exercisable | $ | |
Weighted Average Remaining Contractual Life (in years) | |
Outstanding at beginning of year | 6 years |
Weighted average remaining contractual life of share Options granted | 4 years 4 months 24 days |
Outstanding at end of year | 5 years |
Options vested and expected to vest | 5 years |
Options vested and exercisable | 5 years |
Stockholders' Equity and Rede47
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details 4) - Non Employee | 12 Months Ended |
Dec. 31, 2015USD ($)$ / sharesshares | |
Number of Shares | |
Outstanding at beginning of year | shares | 2,893 |
Non-employee options granted | shares | |
Outstanding at end of year | shares | 2,893 |
Options vested and expected to vest | shares | 2,893 |
Options vested and exercisable | shares | 2,893 |
Weighted Average Exercise Price | |
Outstanding at beginning of year | $ 98.07 |
Non-employee options granted | |
Outstanding at end of year | $ 98.07 |
Options vested and expected to vest | 98.07 |
Options vested and exercisable | $ 98.07 |
Aggregate Intrinsic Value | |
Outstanding at beginning of year | $ | |
Non-employee options granted | |
Outstanding at end of year | $ | |
Options vested and expected to vest | $ | |
Options vested and exercisable | $ | |
Weighted Average Remaining Contractual Life (in years) | |
Outstanding at beginning of year | 6 years 4 months 24 days |
Outstanding at end of year | 5 years 4 months 24 days |
Options vested and expected to vest | 5 years 4 months 24 days |
Options vested and exercisable | 5 years 4 months 24 days |
Stockholders' Equity and Rede48
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details 5) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Stockholders Equity Details 5 | |
Nonvested shares outstanding, Beginning | shares | 394 |
Nonvested shares granted | shares | 6,732 |
Nonvested shares vested | shares | (7,126) |
Nonvested shares outstanding, Ending | shares | |
Nonvested shares outstanding, weighted average grant date fair value, Beginning | $ / shares | $ 49.97 |
Nonvested shares granted, weighted average grant date fair value | $ / shares | 8.49 |
Nonvested shares vested, weighted average grant date fair value | $ / shares | $ 5.30 |
Nonvested shares outstanding, weighted average grant date fair value, Ending | $ / shares |
Stockholders' Equity and Rede49
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details 6) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Stockholders Equity Details 6 | ||
Employee restricted stock awards | $ 132 | $ 49 |
Employee stock option awards | 155 | 12,403 |
Non-employee restricted stock awards | $ 84 | 176 |
Non-employee option awards | 48 | |
Total compensation expense | $ 371 | $ 12,676 |
Stockholders' Equity and Rede50
Stockholders' Equity and Redeemable Convertible Preferred Stock (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Common stock shares issued | 2,539,859 | 1,505,773 | |
Stock Options 2014 Plan [Member] | |||
Stock based compensation | $ 200 | $ 12,600 | |
Vested options outstanding | 183,410 | ||
Fair value of stock options granted | $ 35,636 | ||
Weighted average remaining vesting period | 4 days | ||
Estimated future stock-based compensation expense | $ 4 | ||
Stock Options 2013 Plan [Member] | |||
Vested options outstanding | 105,610 | ||
Fair value of stock options granted | $ 41,758 | ||
Stock Options 2012 Plan [Member] | |||
Vested options outstanding | 360 | ||
Fair value of stock options granted | $ 161 | ||
Series K Preferred Stock [Member] | |||
Preferred stock, shares issued | 1,240 | 0 | |
Preferred stock, shares outstanding | 1,240 | 0 | |
Dividend on preferred paid | $ 323,000 | ||
Series J Convertible Preferred Stock [Member] | |||
Convertible Preferred Stock | 10,000,000 | ||
Preferred Stock converted into common stock during period | 526,315 | ||
Preferred stock, shares issued | 0 | 0 | |
Preferred stock, shares outstanding | 0 | 0 | |
Series I Convertible Preferred Stock [Member] | |||
Preferred stock, shares issued | 35,514 | 35,514 | |
Preferred stock, shares outstanding | 35,514 | 35,514 | |
Series H Convertible Preferred Stock [Member] | |||
Preferred stock, shares issued | 381,967 | 439,043 | |
Preferred stock, shares outstanding | 381,967 | 439,043 | |
Series F-1 Convertible Preferred Stock [Member] | |||
Convertible Preferred Stock | 156,250 | ||
Preferred Stock converted into common stock during period | 8,223 | ||
Preferred stock, shares issued | 0 | 0 | |
Preferred stock, shares outstanding | 0 | 0 | |
Series D-1 Convertible Preferred Stock [Member] | |||
Convertible Preferred Stock | 1,281,288 | ||
Preferred Stock converted into common stock during period | 674,362 | ||
Convertible Preferred Stock exchanged | 1,222,857 | ||
Preferred stock, shares issued | 834 | 834 | |
Preferred stock, shares outstanding | 834 | 834 | |
Series D Preferred Stock [Member] | |||
Preferred stock, shares issued | 4,725 | 4,725 | |
Preferred stock, shares outstanding | 4,725 | 4,725 | |
Series C Convertible Preferred Stock [Member] | |||
Convertible Preferred Stock | 229,336 | ||
Preferred Stock converted into common stock during period | 229,336 | ||
Convertible Preferred Stock exchanged | 12,070 | ||
Preferred stock, shares issued | 0 | 1 | |
Preferred stock, shares outstanding | 0 | 1 | |
Series A Preferred Stock [Member] | |||
Preferred stock, shares issued | 0 | 0 | |
Preferred stock, shares outstanding | 0 | 0 | |
Restricted Stock Awards One [Member] | |||
Stock based compensation | $ 11,400 | ||
Vested options outstanding | 264 | ||
Fair value of stock options granted | $ 28,000 | ||
Restricted Stock Awards [Member] | |||
Stock based compensation | $ 2 | $ 37 | |
Common stock shares issued | 42,106 | ||
Vested options outstanding | 262 | 395 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Annual bonus | $ 316 | $ 96 |
Consulting expenses | $ 42,287 |
Commitments and Contingencies52
Commitments and Contingencies (Details) $ in Thousands | Dec. 31, 2014USD ($) |
Notes to Financial Statements | |
Year Ended December 31, 2016 | $ 225 |
Year Ended December 31, 2017 | 183 |
Year Ended December 31, 2018 | 46 |
Total | $ 454 |
Commitments and Contingencies53
Commitments and Contingencies (Details Narrative) | 12 Months Ended | |
Dec. 31, 2015USD ($)ft² | Dec. 31, 2014USD ($) | |
Notes to Financial Statements | ||
Financed to director and officer for insurance | $ 200,000 | |
Term of policy | 12 months | |
Accrued expenses | $ 100,000 | |
Lease area | ft² | 837 | |
Monthly lease payment | $ 1,883 | |
Short-term lease liabilities | 178,000 | $ 173,000 |
Long-term lease liabilities | $ 200,000 | $ 200,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Federal | ||
Current | ||
Deferred | $ 16,374 | $ 5,453 |
Increase in valuation allowance | $ (16,374) | $ (5,453) |
State and Local | ||
Current | ||
Deferred | $ 837 | $ (44) |
Increase in valuation allowance | (837) | 44 |
Change in valuation allowance | $ (17,211) | $ (5,409) |
Income tax provision (benefit) |
Income Taxes (Details 1)
Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details 1 | ||
U.S. statutory federal rate | (34.00%) | (34.00%) |
State income tax, net of federal benefit | (2.52%) | (3.43%) |
Other Permanent Differences | (0.01%) | 0.11% |
Change in Derivative Liability | (0.06%) | |
State rate change effect | 0.75% | |
Reduction due to change in NOL and other true ups | 2.35% | 55.10% |
Effective Income Tax Rate | (33.43%) | 17.72% |
Valuation Allowance | (33.43%) | (17.72%) |
Income tax provision (benefit) |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets | ||
Net operating loss carryforward | $ 7,843 | $ 4,992 |
Stock-based compensation | 8,014 | 8,087 |
Patent portfolio and other | 17,298 | 2,865 |
Total deferred tax assets | 33,155 | 15,944 |
Valuation Allowance | $ (33,155) | $ (15,944) |
Deferred tax asset, net of allowance |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) $ in Thousands | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Notes to Financial Statements | |
Net operating loss carryovers | $ 21,500 |
Net operating loss carryovers expire | 2033 through 2035 |
Change in valuation allowance | $ 17,200 |
Operating Loss Carryforwards, Limitations on Use | $ 21,500 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) $ in Thousands | Mar. 02, 2016 | Jan. 02, 2016 | Mar. 31, 2016 | Feb. 29, 2016 | Feb. 26, 2016 | Feb. 15, 2016 | Jan. 31, 2016 |
Amendment to increase number of shares issuable of common stock | 219,046 shares of Common Stock to 434,210 shares of Common Stock. | ||||||
Restricted stock granted | 8,771 | ||||||
Cash retainer pay to consultant | $ 10 | $ 35 | $ 25 | ||||
One time Cash retainer pay to consultant | $ 100 | ||||||
Director [Member] | |||||||
Common stock shares issued | 652 | ||||||
Common stock shares issued for services | $ 1,487 | ||||||
Mr. Reiner [Member] | |||||||
Common stock shares issued | 21,053 | ||||||
Mr. Dotson [Member] | |||||||
Common stock shares issued | 21,053 | ||||||
Consultant [Member] | |||||||
Common stock shares issued | 42,445 | ||||||
Series K Preferred Stock [Member] | |||||||
Conversion of Stock, Shares Converted | 1,190 | ||||||
Common Stock [Member] | |||||||
Conversion of Stock, Shares Converted | 313,157 |