General | Overview Vringo, Inc., together with its consolidated subsidiaries (“Vringo” or the “Company”), is engaged in the development and monetization of intellectual property worldwide. The Company's intellectual property portfolio consists of over 600 patents and patent applications covering telecom infrastructure, internet search and mobile technologies. The Company’s patents and patent applications have been developed internally or acquired from third parties. On October 15, 2015, the Company completed the acquisition of International Development Group Limited, a Maryland corporation (“IDG”). Pursuant to the Stock Purchase Agreement (the “Purchase Agreement”), the Company acquired 100% of the capital stock of IDG, including two of IDG’s subsidiaries, fliCharge International Ltd. (“fliCharge”), in which IDG owns 70% of the capital stock and controls the operations, and the wholly-owned Group Mobile International Ltd. (“Group Mobile”). fliCharge owns patented conductive wire-free charging technology and is focused on innovation, sales, manufacturing and licensing core technology to large corporations in various industries. Group Mobile is a company with full service technical and customer support in rugged computers, mobile devices and accessories. The Company expanded their intellectual property and technology portfolio with this acquisition. See Note 12 for further detail on the acquisition of IDG. Prior to December 31, 2013, the Company operated a global platform for the distribution of mobile social applications and the services that it developed. On February 18, 2014, the Company executed the sale of its mobile social application business to InfoMedia Services Limited (“InfoMedia”), receiving an 8.25 Infrastructure Patents The Company’s infrastructure patents are primarily made up of a patent portfolio purchased from Nokia Corporation (“Nokia”) in 2012. This patent portfolio is comprised of 124 patent families with counterparts in certain jurisdictions worldwide and encompass technologies relating to telecom infrastructure, including communication management, data and signal transmission, mobility management, radio resources management and services. Declarations were filed by Nokia indicating that 31 of the 124 patent families acquired may be essential to wireless communications standards. The Company also owns other acquired infrastructure patent portfolios and has filed over 60 internally developed patent applications. As one of the means of realizing the value of the patents on telecom infrastructure, the Company has filed a number of suits against ZTE Corporation (“ZTE”), ASUSTeK Computer Inc. (“ASUS”), and certain of their subsidiaries, affiliates and other companies in the United States (“U.S.”), European jurisdictions, India, Australia, Brazil, and Malaysia alleging infringement of certain U.S., European, Indian, Australian, Brazilian, and Malaysian patents. In response, ZTE Corporation or its affiliates have filed a number of counterclaims and other responsive cases in various countries such as the U.S., certain European jurisdictions, the People’s Republic of China (“China”) and To date, in connection with the suits filed against ZTE, Vringo’s patents have been found to be infringed in the United Kingdom (“UK”) and Germany, and preliminary relief has been granted in India, Brazil, Romania, and the Netherlands. Separately, Vringo has entered into settlement and license agreements with ADT, Tyco, D-Link, Belkin, Hop On, Inc., and two other parties. Vringo continues to license its home monitoring portfolio. Quantum Stream In 2012, the Company purchased a portfolio of patents invented by Tayo Akadiri relating to content distribution. The portfolio includes seven patents as well as several pending patent applications. As one of the means of realizing the value of these patents, on October 20, 2015, the Company filed suit against DirecTV in the United States District Court for the Southern District of New York. fliCharge Founded in 2014, fliCharge owns a patented, conductive, wire-free charging technology that is already on the market and available to consumers. The patented fliCharge technology consists of a wire-free charging solution that can simultaneously charge multiple battery operated devices on the same charging pad regardless of their power requirement or position on the pad; users simply place their enabled device onto a fliCharge pad. Group Mobile Founded in 2002, Group Mobile is a supplier of built-to-order rugged computers, mobile devices and accessories. Group Mobile provides a high touch sales experience with full service technical and customer support in the rugged mobile computer market. Group Mobile’s customers include large corporations, military suppliers, small businesses and individuals. Rugged products sold by Group Mobile can be found in military helicopters, police cruisers and ambulance fleets as well as on construction sites, oil rigs and manufacturing facilities. Vringo intends to expand this business through expanding available product lines and further augmenting sales and marketing. Search Patents On September 15, 2011, the Company’s wholly-owned subsidiary, I/P Engine, Inc. (“I/P Engine”), initiated litigation against AOL Inc., Google, Inc., IAC Search & Media, Inc., Gannett Company, Inc., and Target Corporation (collectively, the “Defendants”) for infringement of claims of certain of its owned patents. Trial commenced during 2012, and, on November 6, 2012, the jury ruled in favor of I/P Engine and against the Defendants. On August 15, 2014, the Court of Appeals for the Federal Circuit (“Federal Circuit”) held that the claims of the patents-in-suit asserted by I/P Engine against the Defendants are invalid for obviousness. The Company sought review by the Supreme Court of the United States (“Supreme Court”) of the Federal Circuit’s opinion, and, on October 5, 2015, the Supreme Court denied Vringo’s petition for a writ of certiorari. Financial condition As of September 30, 2015, the Company had a cash balance of $ 14,402 1,500 2,200 1,970 16,702 31,180 On May 4, 2015 (the “Closing Date”), the Company entered into a securities purchase agreement with certain institutional investors in a registered direct offering of $ 12,500 1.00 8 21 5,375,000 1.00 12,425 The principal amount of the outstanding Notes is being repaid monthly, and the Company may make such payments and related interest payments in cash or, subject to certain conditions, in registered shares of the Company’s common stock, at its election. If the Company chooses to repay the Notes in shares of its common stock, the shares are issued at a 15 During August 2015, the holders of the Notes accelerated six principal installments in exchange for common stock as permitted under the securities purchase agreement. The debt is now expected to mature in July 2016 The Company’s operating plans include efforts to increase revenue through the licensing of its intellectual property, strategic partnerships, and litigation, when required, which may be resolved through a settlement or collection, and generation of revenue from sales of wire-free charging stations, rugged computers and mobile devices. Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. The majority of the Company’s expenditures consist of costs related to the Company’s litigation campaigns. In the cases against ZTE and ASUS, the Company incurred costs during the nine month period ended September 30, 2015 related to the preparation and filing of briefs and other court documents, as well as case preparation and management. A large percentage of these costs were incurred in the UK and the U.S. In civil law jurisdictions, such as Germany, France, Spain, and others, the majority of costs are incurred in the early stages of litigation. With respect to the Company’s litigation in such countries, the respective campaigns are currently in the later stages and therefore the Company has already incurred the large majority of the related anticipated costs. As such, based on the Company’s plans, costs in these jurisdictions are projected to be lower in the remainder of 2015 and other future periods. Despite the Company’s plans, its legal proceedings may continue for several years and may require significant expenditures for legal fees and other expenses. Further, should the Company be deemed the losing party in certain of its litigations, it may be liable for some or all of its opponents’ legal fees. In addition, in connection with litigation, the Company has made several affirmative financial guarantees to courts around the world, and might face the need to make additional guarantees in the future. In addition, the Company’s plans to continue to expand its planned operations through acquisitions may be time consuming, complex and costly to consummate. The Company may utilize many different transaction structures in its acquisitions and the terms of such acquisition agreements tend to be heavily negotiated. The Company’s future ability to raise capital, if necessary, may be limited. Even if the Company is able to acquire other businesses, there is no guarantee that it will generate sufficient revenue related to those assets to offset the acquisition costs. Therefore, no assurance can be given at this time as to whether the Company will be able to achieve its objectives or whether it will have the sources of liquidity for follow through with its operating plans. In addition, until the Company generates sufficient revenue, the Company may need to raise additional funds, which may be achieved through the issuance of additional equity or debt, or through loans from financial institutions. There can be no assurance, however, that any such opportunities will materialize. The Company may also be able to raise additional funds through the exercise of its outstanding warrants and options, however, substantially all of such outstanding equity instruments are currently “out of the money.” As a result of the events and circumstances described above, including the cash proceeds received in connection with the May 2015 financing transaction and the Company’s operating plans, which include paying the principal and interest related to the Notes in shares of the Company’s common stock, the Company believes that it currently has sufficient cash to continue its current operations for at least the next twelve months. |