Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 15, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | Marathon Patent Group, Inc. | ||
Entity Central Index Key | 1,507,605 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 38.9 | ||
Entity Common Stock, Shares Outstanding | 14,967,141 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 2,555,151 | $ 5,082,569 |
Accounts receivable - net of allowance for bad debt of $375,750 and $0 for December 31, 2015 and December 31, 2014 | 136,842 | 216,997 |
Bonds posted with courts | 1,748,311 | 1,946,196 |
Prepaid expenses and other current assets, net of discounts of $3,414 and $0 for December 31, 2015 and December 31, 2014 | 338,598 | 438,391 |
Total current assets | 4,778,902 | 7,684,153 |
Other assets: | ||
Property and equipment, net of accumulated depreciation of $67,052 and $16,135 for December 31, 2015 and December 31, 2014 | 61,297 | 53,828 |
Intangible assets, net of accumulated amortization of $15,557,353 and $6,550,528 for December 31, 2015 and December 31, 2014 | 25,457,639 | 43,363,832 |
Deferred tax assets | 12,437,741 | 4,789,293 |
Other non current assets, net of discounts $4,831 and $00 for December 31, 2015 and December 31, 2014 | 9,169 | |
Goodwill | 4,482,845 | 4,894,208 |
Total other assets | 42,448,691 | 53,101,161 |
Total Assets | 47,227,593 | 60,785,314 |
Current liabilities: | ||
Accounts payable and accrued expenses | 6,534,825 | 3,293,746 |
Clouding IP earn out - current portion | 33,646 | 2,092,000 |
Notes payable, net of discounts of $730,945 and $82,010 for December 31, 2015 and December 31, 2014 | 10,383,177 | 16,560,000 |
Total current liabilities | 16,951,648 | 21,945,746 |
Long-term liabilities | ||
Notes Payable, net of discount of $1,425,167 and $64,925, for December 31, 2015 and December 31, 2014 | 12,223,884 | 5,403,065 |
Clouding IP earn out | 3,281,238 | 7,360,000 |
Deferred tax liability | 1,044,997 | 1,823,884 |
Revenue sharing liability | 1,000,000 | |
Other long term liability | 50,084 | |
Total long-term liabilities | 17,600,203 | 14,586,949 |
Total liabilities | 34,551,851 | 36,532,695 |
Stockholders' Equity: | ||
Common stock, ($.0001 par value, 200,000,000 shares authorized: 14,867,141 and 13,791,460 adjusted for the stock dividend issued and outstanding at December 31, 2015 and December 31, 2014 | 1,487 | 1,379 |
Additional paid-in capital | 43,217,513 | 36,977,169 |
Accumulated other comprehensive (loss) | (1,265,812) | (388,357) |
Accumulated deficit | (29,277,524) | (12,337,665) |
Total stockholders' equity | 12,675,742 | 24,252,619 |
Total liabilities and stockholders' equity | $ 47,227,593 | $ 60,785,314 |
Series A preferred stock | ||
Stockholders' Equity: | ||
Preferred stock | ||
Series B preferred stock | ||
Stockholders' Equity: | ||
Preferred stock | $ 78 | $ 93 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Allowance for bad debt | $ 375,750 | $ 0 |
Discounts on prepaid expenses and other current assets | 3,414 | 0 |
Accumulated depreciation of property and equipment | 67,052 | 16,135 |
Accumulated amortization of Intangible assets | 15,557,353 | 6,550,528 |
Discount on other noncurrent assets | 4,831 | 0 |
Discount on notes payable | 730,945 | 82,010 |
Discount on notes payable | $ 1,425,167 | $ 64,925 |
Stockholders' Equity: | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 14,867,141 | 13,791,460 |
Common stock, shares outstanding | 14,867,141 | 13,791,460 |
Series A preferred stock | ||
Stockholders' Equity: | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series B preferred stock | ||
Stockholders' Equity: | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 782,004 | 932,000 |
Preferred stock, shares outstanding | 782,004 | 932,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 18,977,794 | $ 21,404,469 |
Expenses | ||
Cost of revenues | 16,603,792 | 11,787,445 |
Amortization of patents and website | 10,825,164 | 5,528,280 |
Compensation and related taxes | 5,419,252 | 3,904,462 |
Consulting fees | 2,324,248 | 2,134,672 |
Professional fees | 2,548,492 | 1,566,375 |
General and administrative | 1,143,869 | 545,475 |
Patent Impairment | 5,793,409 | 0 |
Goodwill impairment | 2,144,488 | |
Total operating expenses | 44,658,226 | 27,611,197 |
Operating loss | (25,680,432) | (6,206,728) |
Other income (expenses) | ||
Other income (expense) | 170,706 | (52,228) |
Foreign exchange gain/(loss) | (61,868) | |
Change in fair value Clouding IP earn out | 6,137,116 | |
Realized loss, available for sale | 6,250 | |
Interest income | 1,068 | 634 |
Interest expense | (4,245,982) | (543,283) |
Loss on debt extinguishment | (1,416,915) | |
Total other income (expenses) | 584,125 | (588,627) |
Loss before benefit from income taxes | (25,096,307) | (6,795,355) |
Income tax benefit | 8,156,448 | 4,913,232 |
Net loss | (16,939,859) | (1,882,123) |
Deemed dividends to related beneficial conversion feature of Series A preferred stock | (1,271,492) | |
Net loss attributable to common shareholders | $ (16,939,859) | $ (3,153,615) |
Loss per common share, basic and diluted: | ||
Loss from continuing operations, per share | $ (1.19) | $ (0.16) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and Diluted | 14,208,787 | 11,660,879 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
Net loss attributable to Marathon Patent Group, Inc. | $ (16,939,859) | $ (3,153,615) |
Other Comprehensive Loss: | ||
Unrealized loss on foreign currency translation | (877,455) | (388,357) |
Realized loss on investment securities, available for sale | 6,250 | |
Comprehensive loss attributable to Marathon Patent Group, Inc. | $ (17,817,314) | $ (3,535,722) |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Preferred Stock/UnitsSeries A preferred stock | Preferred Stock/UnitsSeries B preferred stock | Preferred Stock/Units | Common StockSeries A preferred stock | Common StockSeries B preferred stock | Common Stock | Add'l Paid in CapitalSeries A preferred stock | Add'l Paid in CapitalSeries B preferred stock | Add'l Paid in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Series A preferred stock | Series B preferred stock | Total |
Beginning balance at Dec. 31, 2013 | $ 1,098 | $ 22,673,287 | $ (10,488,018) | $ (6,250) | $ 12,180,117 | |||||||||
Beginning balance (in shares) at Dec. 31, 2013 | 10,979,186 | |||||||||||||
Increase (decrease) in Stockholders' Equity | ||||||||||||||
Write-off of marketable securities/discontinued assets | 32,662 | 6,250 | 38,912 | |||||||||||
Stock compensation expense | 2,203,222 | 2,203,222 | ||||||||||||
Common stock issued in acquisition | $ 19 | 2,078,781 | 2,078,800 | |||||||||||
Common stock issued in acquisition (in shares) | 185,000 | |||||||||||||
Exercise of stock option and warrants | $ 11 | 249,213 | 249,224 | |||||||||||
Exercise of stock option and warrants (in shares) | 107,814 | |||||||||||||
Consulting services paid in warrants | 41,576 | 41,576 | ||||||||||||
Warrant issued in conjunction with convertible debt | 164,020 | 164,020 | ||||||||||||
Currency translation loss | (388,357) | (388,357) | ||||||||||||
Adjustment resulting from stock dividend and other | $ 47 | $ 149 | (6) | (186) | 4 | |||||||||
Adjustment resulting from stock dividend and other (in shares) | 466,000 | 1,495,881 | ||||||||||||
Preferred stock | $ 100 | $ 46 | $ 6,238,164 | $ 3,178,914 | $ 6,238,264 | $ 3,178,960 | ||||||||
Preferred stock (in shares) | 1,000,502 | 466,000 | ||||||||||||
Preferred stock compensation | $ 2 | $ 149,998 | $ 150,000 | |||||||||||
Preferred stock compensation (in shares) | 23,077 | |||||||||||||
Common stock issued upon conversion of preferred stock | $ (102) | $ 102 | ||||||||||||
Common stock issued upon conversion of preferred stock (in shares) | 1,023,579 | 1,023,579 | ||||||||||||
Increase in beneficial conversion feature | 1,271,492 | 1,271,492 | ||||||||||||
Decrease in beneficial conversion feature | (1,271,492) | (1,271,492) | ||||||||||||
Net Loss | (1,882,123) | (1,882,123) | ||||||||||||
Ending balance at Dec. 31, 2014 | $ 93 | $ 1,379 | 36,977,169 | (12,337,665) | (388,357) | 24,252,619 | ||||||||
Ending balance (in shares) at Dec. 31, 2014 | 932,000 | 13,791,460 | ||||||||||||
Increase (decrease) in Stockholders' Equity | ||||||||||||||
Stock compensation expense | 2,490,175 | 2,490,175 | ||||||||||||
Common stock issued for service | $ 21 | 900,479 | 900,500 | |||||||||||
Common stock issued for service (in shares) | 210,000 | |||||||||||||
Exercise of stock option and warrants | $ 4 | 18,745 | 18,749 | |||||||||||
Exercise of stock option and warrants (in shares) | 31,276 | |||||||||||||
Common stock issued in conjunction with debt financing | $ 13 | 999,987 | 1,000,000 | |||||||||||
Common stock issued in conjunction with debt financing (in shares) | 134,409 | |||||||||||||
Issuance Common Stock in Debt Restructuring | $ 20 | 653,980 | 654,000 | |||||||||||
Issue Common Stock in Debt Restructuring (in shares) | 200,000 | |||||||||||||
Warrant issued in conjunction with debt financing | 318,679 | 318,679 | ||||||||||||
Currency translation loss | (877,455) | (877,455) | ||||||||||||
Preferred stock compensation | $ 5 | $ 345,329 | $ 345,334 | |||||||||||
Preferred stock compensation (in shares) | 50,000 | |||||||||||||
Issue common stock in litigation settlement | $ 30 | 512,970 | 513,000 | |||||||||||
Issue common stock in litigation settlement (in shares) | 300,000 | |||||||||||||
Common stock issued upon conversion of preferred stock | $ (20) | $ 20 | ||||||||||||
Common stock issued upon conversion of preferred stock (in shares) | (199,996) | 199,996 | ||||||||||||
Net Loss | (16,939,859) | (16,939,859) | ||||||||||||
Ending balance at Dec. 31, 2015 | $ 78 | $ 1,487 | $ 43,217,513 | $ (29,277,524) | $ (1,265,812) | $ 12,675,742 | ||||||||
Ending balance (in shares) at Dec. 31, 2015 | 782,004 | 14,867,141 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Net loss | $ (16,939,859) | $ (3,153,615) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation | 7,578 | 6,233 |
Amortization of patents and website | 10,825,164 | 5,522,047 |
Provision for allowance for doubtful accounts | 375,750 | |
Deferred tax asset | (7,618,580) | (1,774,807) |
Deferred tax liability | (660,455) | |
Impairment of intangible assets | 5,793,409 | 2,144,488 |
Loss on debt extinguishment | 1,416,915 | |
Stock based compensation | 2,490,175 | 1,751,035 |
Stock issued for services | 1,245,834 | 1,542,353 |
Non-cash interest, discount, and financing costs | 2,220,992 | |
Change in fair value of Clouding earnout | (6,137,116) | |
Deemed Series A dividend beneficial conversion | 1,271,492 | |
Income tax benefit | (3,177,502) | |
Other non-cash adjustments | 260,938 | 71,467 |
Changes in operating assets and liabilities | ||
Accounts receivable | (295,608) | 110,053 |
Prepaid expenses and other current assets | (162,706) | (2,346,667) |
Accounts payable and accrued expenses | 4,216,331 | 2,488,528 |
Net cash provided by (used in) operating activities | (2,961,238) | 4,455,105 |
Cash flows from investing activities: | ||
Acquisition of patents | (7,816,832) | |
Purchase of property, equipment and other intangible assets | (58,386) | (52,963) |
Net cash (used in) investing activities | (58,386) | (7,869,795) |
Cash flows from financing activities: | ||
Payable (Payment on Mdr Escrow (TLI) | (50,000) | 50,000 |
Payment on convertible debt | (5,050,000) | |
Cash received upon issuance of notes payable (net of issuance costs) | 19,600,000 | |
Payments of notes payable to vendors | (181,626) | |
Cash received upon issuance of convertible debt securities | 5,550,000 | |
Proceeds from sale of preferred and common stock, net of issuance costs | 6,388,266 | |
Cash received upon exercise of warrant | 18,751 | 249,222 |
Net cash provided by financing activities | 508,838 | 4,888,528 |
Effect of exchange rate changes on cash | (16,632) | (1,531) |
Net increase (decrease) in cash | (2,527,418) | 1,472,307 |
Cash at beginning of period | 5,082,569 | 3,610,262 |
Cash at end of period | 2,555,151 | 5,082,569 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for: Interest expenses | 1,982,140 | 280,783 |
Cash paid for: Taxes paid | 168,378 | 39,078 |
Cash paid for: Loan fees | 400,000 | 1,050,000 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Common stock issued in conjunction with note payable | 1,000,000 | |
Warrants issued in conjunction with note payable | 318,679 | |
Revenue share liability incurred in conjunction with note payable | 1,000,000 | |
Non-cash interest increase in debt assumed in the acquisition of Orthophoenix | 750,000 | |
Common stock issued in conjunction with debt extinguishment | 654,000 | |
Conversion of accounts payable to notes payable | 705,093 | |
Common stock issued in connection with the acquisition of Clouding Corp | 281,000 | |
Earn-out liability in connection with the acquisition of Clouding Corp. | 9,452,000 | |
Common stock granted in connection with the acquisition of TLI Communications, LLC | 817,800 | |
Series B Preferred stock issued in connection with the acquisition of Dynamic Advances LLC | 1,403,690 | |
Series B Convertible Preferred Stock issued in connection with the acquisition of Dynamic Advances LLC and IP Liquidity Ventures, LLC | 2,087,380 | |
Common stock issued in connection with the acquisition of Selene Communication Technologies, LLC | 980,000 | |
Value of warrants pertaining to equity issuance | 11,595 | |
Value of warrants pertaining to convertible debt issuance | 146,935 | |
Notes payable in connection with the acquisition of IP Liquidity Ventures LLC, Dynamic Advances LLC, Selene Communications Technologies LLC, Clouding Corp, and Medtech Companies | $ 14,000,000 | |
Issuance of common stock for prepaid services | (298,301) | |
IP Liquidity | ||
Cash flows from financing activities: | ||
Payment of note payable | (1,109,375) | $ (1,215,625) |
Dynamic Advances | ||
Cash flows from financing activities: | ||
Payment of note payable | (2,624,375) | (225,625) |
Sarif | ||
Cash flows from financing activities: | ||
Payment of note payable | (276,250) | (23,750) |
Orthophoenix LLC | ||
Cash flows from financing activities: | ||
Payment of note payable | (5,500,000) | |
Medtech And Orthophoenix | ||
Cash flows from financing activities: | ||
Payment of note payable | $ (4,318,287) | (2,000,000) |
Clouding Corp | ||
Cash flows from financing activities: | ||
Payment of note payable | (1,000,000) | |
Payment on earn-out connected to acquisition of Clouding | $ (2,883,960) |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2015 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Organization Our business is to acquire patents and patent rights and to monetize the value of those assets to generate revenue and profit for the Company. We acquire patents and patent rights from their owners, who range from individual inventors to Fortune 500 companies. Part of our acquisition strategy is to acquire or invest in patents and patent rights that cover a wide-range of subject matter, which allows us to achieve the benefits of a growing diversified portfolio of assets. Generally, the patents and patent rights that we acquire are characterized by having large identifiable companies who are or have been using technology that infringes our patents and patent rights. We generally monetize our portfolio of patents and patent rights by entering into license discussions, and if that is unsuccessful, initiating enforcement activities against any infringing parties with the objective of entering into a standard form of comprehensive settlement and license agreement that may include the granting of non-exclusive retroactive and future rights to use the patented technology, a covenant not to sue, a release of the party from certain claims, the dismissal of any pending litigation and other terms that are appropriate in the circumstances. Our strategy has been developed with the expectation that it will result in a long-term, diversified revenue stream for the Company. Marathon Patent Group, Inc. (the “Company”), formerly American Strategic Minerals Corporation, was incorporated under the laws of the State of Nevada on February 23, 2010. On December 7, 2011, the Company changed its name to American Strategic Minerals Corporation from Verve Ventures, Inc., and increased the Company’s authorized capital to 200,000,000 shares of Common Stock, par value $0.0001 per share, and 100,000,000 shares of preferred stock, par value $0.0001 per share. In June 2012, the Company discontinued its exploration and potential development of uranium and vanadium minerals business. In October 2012, we discontinued our real estate business when our CEO joined the firm and we commenced our current business, at which time the Company’s name was changed to Marathon Patent Group, Inc. On August 1, 2012, the shareholders holding a majority of the Company’s voting capital voted in favor of (i) changing the name of the Company to Fidelity Property Group, Inc. and (ii) the adoption the 2012 Equity Incentive Plan and reserving 20,000,000 shares of Common Stock for issuance thereunder (the “2012 Plan”). The board of directors of the Company (the “Board of Directors”) approved the name change and the adoption of the 2012 Plan on August 1, 2012. The Company did not file an amendment to its Articles of Incorporation with the Secretary of State of Nevada and subsequently abandoned the decision to adopt the Fidelity Property Group, Inc. name. On October 1, 2012, the shareholders holding a majority of the Company’s voting capital had voted and authorized the Company to (i) change the name of the Company to Marathon Patent Group, Inc. and (ii) effectuate a reverse stock split of the Company’s Common Stock by a ratio of 3-for-2 (the “Reverse Split”) within one year from the date of approval of the stockholders of the Company. The Board of Directors approved the name change and the Reverse Split on October 1, 2012. The Board of Directors determined the name Marathon Patent Group, Inc. better reflects the long-term strategy in exploring other opportunities and the identity of the Company going forward. On February 15, 2013, the Company filed the Certificate of Amendment with the Secretary of State of the State of Nevada in order to effectuate the name change. On May 31, 2013, shareholders of record holding a majority of the outstanding voting capital of the Company approved a reverse stock split of the Company’s issued and outstanding Common Stock by a ratio of not less than one-for-five and not more than one-for-fifteen at any time prior to April 30, 2014, with such ratio to be determined by the Company’s Board of Directors, in its sole discretion. On June 24, 2013, the reverse stock split ratio of one- (1) for thirteen (13) basis was approved by the Board of Directors. On July 18, 2013, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada in order to effectuate a reverse stock split of the Company’s issued and outstanding Common Stock, par value $0.0001 per share on a one (1) for thirteen (13) basis. All share and per share values for all periods presented in the accompanying consolidated financial statements are retroactively restated for the effect of the reverse stock split. On March 6, 2013, the Company entered into an Asset Purchase Agreement with Augme Technologies (“Seller”) whereby Seller agreed to sell to the Company certain office equipment, data, documentation, and business information related to the Seller’s business and assign agreements and prospective clients and business opportunities to the Company. In consideration for the assets and assigned agreements, the Company paid $10,000 at closing and provides litigation assistance as defined in the agreement. As additional consideration, the Company also entered into a two-year Service Agreement (the “Service Agreement”) with the Seller whereby the Seller shall engage the Company to provide consulting services including patent litigation matters, sale, license involving the Seller’s intellectual property and general consulting services to continue the Seller’s business operations. The Company recorded the $10,000 payment, which was primarily attributable to property and equipment and assumed an office lease agreement that expired in July 2013. On April 16, 2013, the Company through its subsidiary, Relay IP, Inc. acquired a US patent for $350,000. On April 22, 2013, CyberFone Acquisition Corp. (“Acquisition Corp.”), a Texas corporation and newly formed wholly-owned subsidiary of the Company entered into a merger agreement (the “CyberFone Agreement”) with CyberFone Systems LLC, a Texas limited liability company (“CyberFone Systems”), TechDev Holdings LLC (“TechDev”) and The Spangenberg Family Foundation for the Benefit of Children’s Healthcare and Education (“Spangenberg Foundation”). TechDev and Spangenberg Foundation owned 100% of the membership interests of CyberFone Systems (collectively, the “CyberFone Sellers”). In the transaction, the Company acquired 10 US patents, 27 foreign patents and 1 patent pending from CyberFone Systems valued at $1,135,512 (see note 3). On May 6, 2013, in connection with the closing of a settlement and license agreement, the Company agreed to settle and release a certain defendant for past and future use of the Company’s patents. The defendant agreed to assign and transfer three US patents and rights valued at $1,000,000 in lieu of an additional cash payment, which amount has been included in the Company’s revenue during the year ended December 31, 2013. In September 2013, the Company acquired 14 US patents for a total purchase price of $1,100,000. On November 13, 2013, the Company acquired four patents for 150,000 shares of the Company’s Common Stock, which the Company valued at $718,500 based on the fair market value of the stock issued. On December 16, 2013, the Company acquired certain patents from Delphi Technologies, Inc. for $1,700,000 pursuant to a Patent Purchase Agreement entered into on October 31, 2013 and amended on December 16, 2013. On December 22, 2013, in connection with a settlement and license agreement, the Company agreed to settle and release another defendant for past and future use of the Company’s patents, whereby the defendant agreed to assign and transfer two US patents and rights to the Company. The Company valued the two patents at an aggregate of $700,000 and included that amount in revenue during the year ended December 31, 2013. On April 22, 2014, the Company issued 300,000 shares of restricted Common Stock valued at $718,500 to TT IP LLC in consideration of acquisition of patents on November 13, 2013. On May 1, 2014, the Company issued 2,047,158 shares of Series A Convertible Preferred Stock and warrants to purchase an aggregate of 511,790 shares of Common Stock in a private placement to accredited investors. All of the Series A Convertible Preferred Stock was automatically converted pursuant to the terms of the Series A Convertible Preferred Stock Certificate of Designation during the year ended December 31, 2014. The exercise price of the warrants is $3.75, after giving effect to the two-for-one stock dividend issued on December 22, 2014. On May 2, 2014, the Company issued an aggregate of 782,000 shares of Series B Convertible Preferred Stock valued at $2,807,380 to acquire IP Liquidity Ventures, LLC, Dynamic Advances, LLC and Sarif Biomedical, LLC. On June 2, 2014, the Company issued 48,078 shares of unrestricted Common Stock to an investor in the May 2013 private placement, pursuant to the exercise of a warrant received in the May 2013 private placement. On June 30, 2014, the Company issued 200,000 shares of restricted Common Stock in the acquisition of Selene Communications Technologies, LLC. In connection with this transaction, the Company valued the shares at the fair market value on the date of grant at $4.90 per share or $980,000. On July 18, 2014, the Company issued a total of 26,722 shares of Common Stock pursuant to the exercise of stock options held by a former member of the Company’s Board of Directors and the Company’s former Chief Financial Officer. On August 29, 2014, the Company entered into a patent purchase agreement to acquire a portfolio of patents from Clouding IP, LLC for an aggregate purchase price of $2.4 million, of which $1.4 million was paid in cash and $1.0 million was paid in the form of a promissory note issued by the Company that matured on October 31, 2014 and paid on October 1, 2014. The Company also issued 25,000 shares of its restricted common stock valued at $281,000 in connection with the acquisition. Clouding IP, LLC is also entitled to certain possible future cash payments. Clouding IP LLC is owned or controlled by Erich Spangenberg or family members or associates . On September 16, 2014, the Company issued to two of its independent board members, in lieu of cash compensation, 6,178 shares of restricted Common Stock valued at $45,995 to each of its directors . The shares shall vest quarterly over twelve (12) months commencing on the date of grant and $13,415 in expense was recognized in 2014 for each of the two grants. On September 17, 2014, the Company entered into a consulting agreement (the “Consulting Agreement”) with GRQ Consultants, Inc. (“GRQ”), pursuant to which GRQ shall provide certain consulting services including, but not limited to, advertising, marketing, business development, strategic and business planning, channel partner development and other functions intended to advance the business of the Company. As consideration, GRQ shall be entitled to 200,000 shares of the Company’s Series B Convertible Preferred Stock, 50% of which vested upon execution of the Consulting Agreement, and 50% of which shall vest in six (6) equal monthly installments commencing on October 17, 2014. The first tranche of 100,000 shares of Series B Convertible Preferred Stock was issued to GRQ on October 6, 2014. The Company issued an aggregate of 150,000 shares of Series B Convertible Preferred Stock for a value of $1,103,581 in 2014 and 50,000 shares of Series B Convertible Preferred Stock for a value of $345,334 was issued in 2015. In addition, the Consulting Agreement allows for GRQ to receive additional shares of Series B Convertible Preferred Stock upon the achievement of certain performance benchmarks. No milestones were met and no additional shares were issued in 2015. All shares of Series B Convertible Preferred Stock issuable to GRQ shall be pursuant to the 2014 Plan. The Consulting Agreement contains an acknowledgement that the conversion of the preferred stock into shares of the Company’s common stock is precluded by the beneficial ownership blockers set forth in the Series B Convertible Preferred Stock Certificate of Designation and in Section 17 of the 2014 Plan to ensure compliance with NASDAQ Listing Rule 5635(d). Every share of Series B Convertible Preferred Stock may be converted into two shares of Common Stock, after giving effect to the two-for-one stock dividend issued on December 22, 2014. On September 19, 2014, the Company authorized the issuance of 60,000 shares of Common Stock to the sellers of TLI Communications LLC. The Company valued the Common Stock at the fair market value on the date of the Interests Sale Agreement at $13.63 per share or $818,000. On September 30, 2014, the Company issued 50,000 shares of restricted Common Stock in the acquisition of the assets of Clouding IP, LLC. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $5.62 per share or $281,000. For the three months ended September 30, 2014, certain holders of warrants exercised their warrants in a cashless, net exercise basis in exchange for 84,652 shares of the Company’s Common Stock. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On October 10, 2014, the Company entered into an interest sale agreement with MedTech Development, LLC (“MedTech”) to acquire from MedTech 100% of the limited liability membership interests of OrthoPhoenix and TLIF as well as 100% of the shares of MedTech GmbH. In connection with the transaction, the Company paid MedTech $1 million at closing and is obligated to pay $1 million on each of the following nine (9) month anniversary dates of the closing. On July 16, 2015, the Company entered into a forbearance agreement (the “Agreement”) with MedTech Development, the holder of a Promissory Note issued by the Company, dated October 10, 2014. Pursuant to the Agreement, the term of the Note was extended to October 1, 2015 and the Note began accruing interest starting from May 13, 2015. In addition, the Company agreed to make certain mandatory prepayments under certain circumstances and issue to MedTech Development 200,000 shares of restricted common stock of the Company. In accordance with ASC 470-50, the Company recorded this agreement as debt extinguishment and $654,000 was recorded as loss on debt extinguishment for the three and nine months ended September 30, 2015. On October 23, 2015, the Company entered into Amendment No. 1 to the Forbearance Agreement (the “Amendment”) entered into with MedTech Development on July 16, 2015. Pursuant to the Amendment, the due date of the Promissory Note was extended to October 23, 2016 in return for which the Company made a payment of $100,000 on October 23, 2015 and modified the terms under which the Company agreed to make mandatory prepayments under certain circumstances. The acquired subsidiaries are also obligated to make certain additional payments to MedTech from recoveries following the receipt by the acquired subsidiaries of 200% of the purchase payments, plus recovery of out of pocket expenses in connection with patent claims. The participation payments may be paid, at the election of the Company, in common stock of the Company at the market price on the date of issuance. On October 16, 2014, the Company sold to certain accredited investors an aggregate of $5,550,000 of principal amount of convertible notes due October 9, 2018 along with two-year warrants to purchase 258,998 shares of the Company’s Common Stock, par value $0.0001 per share pursuant to a securities purchase agreement. The warrants were valued at $169,015 and were recorded as a discount to the fair value of the convertible notes. The notes and warrants are initially convertible into shares of the Company’s Common Stock at a conversion price of $7.50 per share and an exercise price of $8.25 per share, respectively. The conversion and exercise prices are subject to adjustment in the event of certain events, including stock splits and dividends. The notes bear interest at the rate of 11% per annum, payable quarterly in cash on each of the three, six, nine and twelve month anniversary of the issuance date and on each conversion date. The Company reviewed the instruments in the context of ASC 480 and determined that the convertible notes should be recorded as a liability and analyzed the conversion feature and bifurcation pursuant to ASC 815 and ASC 470, respectively, to determine that the was no beneficial conversion feature and that the convertible notes and warrants should not be bifurcated. For the three months ended December 31, 2014, certain holders of warrants exercised their warrants in exchange for 29,230 shares of the Company’s Common Stock. On January 29, 2015, the Company and certain of its subsidiaries entered into a series of agreements including a Securities Purchase Agreement (the “Fortress Purchase Agreement”) and a Subscription Agreement with DBD Credit Funding, LLC (“DBD”), an affiliate of Fortress Credit Corp., pursuant to which the Company sold to the purchasers: (i) $15,000,000 original principal amount of Senior Secured Notes (the “Fortress Notes”), (ii) a right to receive a portion of certain proceeds from monetization net revenues received by the Company (after receipt by the Company of $15,000,000 of monetization net revenues and repayment of the Fortress Notes), (iii) a five-year warrant (the “Fortress Warrant”) to purchase 100,000 shares of the Company’s Common Stock exercisable at $7.44 per share, subject to adjustment; and (iv) 134,409 shares of the Company’s Common Stock. Pursuant to the Fortress Purchase Agreement, as security for the payment and performance in full of the secured obligations, the Company and certain subsidiaries executed and delivered in favor of the purchasers a Security Agreement and a Patent Security Agreement, including a pledge of the Company’s interests in certain of its subsidiaries (together with the Fortress Purchase Agreement, the Fortress Notes and the Fortress Warrant, the “Fortress Documents”). On February 12, 2015, the Company exercised its right to require the purchasers to purchase an additional $5,000,000 of notes from the Company. On March 13, 2015, the Company settled a dispute with a former consultant whereby the Company issued the consultant 60,000 shares of Common Stock for a full release of all claims. For the three months ended March 31, 2015, certain holders of warrants exercised their warrants to purchase, in cash, 5,000 shares of the Company’s Common Stock. For the three months ended June 30, 2015, certain holders of options exercised their options to purchase, on a net exercise basis, 33,968 (net) shares of the Company’s Common Stock. On July 16, 2015, the Company entered into a forbearance agreement (the “Agreement”) with MedTech Development, the holder of a Promissory Note issued by the Company, dated October 10, 2014. Pursuant to the Agreement, among other terms, the Company issues to MedTech Development 200,000 shares of restricted common stock of the Company. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $3.27 per share or $654,000. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On August 14, 2015, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with Marathon Group SA, a Luxembourg société anonyme (“Holdco”) and Uniloc Luxembourg SA, a Luxembourg société anonyme (“Uniloc”), and Uniloc Corporation Pty. Limited, an Australian corporation (“Uniloc Australia”). The Business Combination Agreement was subsequently terminated on February 23, 2016. In a series of transactions, the Series B Convertible Preferred Stock associated with the GRQ Consulting Agreement was converted into shares of the Company’s Common Stock, with 183,330 shares of Series B Convertible Preferred Stock converted into Common Stock prior to September 30, 2015. On September 21, 2015, the Company issued 150,000 shares of the Company’s Common Stock to Alex Partners, LLC and Del Mar Consulting Group, Inc. pursuant to a services agreement entered into on September 21, 2015. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $2.23 per share or $334,500. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On October 20, 2015, the remaining 16,666 shares of Series B Convertible Preferred Stock associated with the GRQ Consulting Agreement was converted into 16,666 shares of the Company’s Common Stock. On November 4, 2015, the Company issued 300,000 shares of the Company’s Common Stock to Dominion Harbor Group LLC (“Dominion”), pursuant to a settlement agreement entered into with Dominion on October 30, 2015. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $1.71 per share or $513,000. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On December 9, 2015, the Company entered into an agreement with Melechdavid, Inc. (“Melechdavid”), pursuant to which the Company agreed to issue 100,000 shares of the Company’s Common Stock. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $1.61 per share or $161,000. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of December 31, 2015. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated. Use of Estimates and Assumptions The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by management include, but are not limited to, estimating the useful lives of patent assets, the assumptions used to calculate fair value of warrants and options granted, goodwill and intangible assets impairment, realization of long-lived assets, valuation of Clouding IP earn out liability, deferred income taxes, unrealized tax positions and business combination accounting. Cash The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s accounts at this institution are insured, up to $250,000, by the Federal Deposit Insurance Corporation (“FDIC”). For the years ended December 31, 2015 and 2014, the Company’s bank balances exceeded the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. Accounts Receivable The Company has a policy of reserving for accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. At December 31, 2015 and 2014, the Company had recorded an allowance for bad debts in the amounts of $375,750 and $0, respectively. Net accounts receivable at December 31, 2015 and 2014 were $136,842 and $216,997, respectively. Concentration of Revenue and Geographic Area Revenue from the Company’s patent enforcement activities is considered United States revenue as any payments for licenses included in that revenue are for United States operations irrespective of the location of the licensee’s or licensee’s parent home domicile. Revenues from the five largest licenses in 2015 accounted for approximately 62% of the Company’s revenue for the year ended December 31, 2015 and revenue from the largest five licenses in 2014 accounted for approximately 88% of the Company’s revenues for the year ended December 31, 2014. The Company derived these revenues from the one-time issuance of non-recurring, non-exclusive, non-assignable licenses to two different entities and their affiliates for certain of the Company’s patents. While the Company has a growing portfolio of patents, at this time, the Company expects that a significant portion of its future revenues will be based on one-time grants of similar non-recurring, non-exclusive, non-assignable licenses to a relatively small number of entities and their affiliates. Further, with the expected small number of firms with which the Company enters into license agreements, and the amount and timing of such license agreements, the Company also expects that its revenues may be highly variable from one period to the next. At the current time, we define customers as firms that obtain licenses to the Company’s patents, either prior to or during enforcement litigation. These firms generally enter into non-recurring, non-exclusive, non-assignable license agreements with the Company, and these customers do not generally engage on ongoing, recurring business activity with the Company. The Company has historically had a small number of customers enter into such agreements, resulting in higher levels of revenue concentration. Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 605, “Revenue Recognition”. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed, (iii) amounts are fixed or determinable and (iv) collectability of amounts is reasonably assured. The Company considers the revenue generated from its settlement and licensing agreements as one unit of accounting under ASC 605-25, “Multiple-Element Arrangements” as the delivered items do not have value to customers on a standalone basis, there are no undelivered elements and there is no general right of return relative to the license. Under ASC 605-25, the appropriate recognition of revenue is determined for the combined deliverables as a single unit of accounting and revenue is recognized upon delivery of the final elements, including the license for past and future use and the release. Also, due to the fact that the settlement element and license element for past and future use are the Company’s major central business, the Company presents these two elements as one revenue category in its statement of operations. The Company does not expect to provide licenses that do not provide some form of settlement or release. Revenue from patent enforcement activities accounted for 100% of the Company’s revenues for the years ended December 31, 2015 and December 31, 2014. Prepaid Expenses Prepaid expenses of $338,598 and $438,391 at December 31, 2015 and 2014, respectively, consist primarily of costs paid for future services that will occur within a year. Prepaid expenses include prepayments in cash and in equity instruments for investor relations public relations services, business advisory, other consulting and prepaid insurance, all of which assets are being amortized over the terms of their respective agreements. Bonds Posted With Courts Under certain circumstances related to litigations in Germany, the Company is either required to or may decide to enter a bond with the courts. During the years ended December 31, 2015 and December 31, 2014, the Company posted bonds in the amount of $1,748,311 and $1,946,196, respectively. These bonds were entered into in Germany after the first instance of litigation of some of the Company’s patents in German courts and the difference in the balance of the litigation bonds at December 31, 2015 compared to December 31, 2014 is attributable solely to currency translation. With the resolution of the IP Liquidity cases, $523,835 is being returned to the Company during the first quarter of 2016. Related Party Transactions Parties are considered related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. On November 14, 2012, upon the closing of the Sampo Share Exchange with LVL Patent Group LLC, Mr. Croxall, our Chief Executive Officer, who was also the Chief Executive Officer of LVL Patent Group LLC, and John Stetson (both Mr. Croxall and Mr. Stetson were also former members of Sampo), received 307,692 and 38,461 shares of the Company’s Common Stock, respectively, in connection with the Sampo Share Exchange. On May 13, 2013, we entered into a six-year advisory services agreement (the “Advisory Services Agreement”) with IP Navigation Group, LLC, of which Erich Spangenberg is founder and former Chief Executive Officer. Mr. Spangenberg is an affiliate of the Company. The terms of the Advisory Services Agreement provides that, in consideration for its services as intellectual property licensing agent, the Company will pay to IP Navigation Group, LLC between 10% and 20% of the gross proceeds of certain licensing campaigns in which IP Navigation Group, LLC acts as intellectual property licensing agent. On May 31, 2013, Barry Honig, a beneficial owner of more than 5% of our Common Stock at the time, purchased an aggregate of $100,000 of shares of Common Stock and warrants in our private placement. On August 2, 2013, GRQ Consultants Inc. 401K funded a subscription of $150,000 of shares of Common Stock and warrants in our private placement, which was assigned to it by another investor. Barry Honig is the trustee of GRQ Consultants Inc. 401K and was a beneficial owner of more than 5% of our Common Stock at the time of the transaction. On November 11, 2013, we entered into a consulting agreement with Kairix pursuant to which we granted options to acquire 300,000 shares of Common Stock to Kairix in exchange for services. The options shall vest 33%, 33% and 34% on each annual anniversary of the date of the issuance. Craig Nard, a member of our Board of Directors at the time the Company entered into the agreement with Kairix, is a principal of Kairix. On June 18, 2014, the Company cancelled an option to purchase an aggregate amount of 300,000 shares of Common Stock provided to Kairix Analytics when the consulting agreement was terminated without any vesting having occurred. On November 18, 2013, we entered into Amendment No. 1 to the Executive Employment Agreement with our Chief Executive Officer and Chairman, Doug Croxall, pursuant to which Mr. Croxall’s base salary was raised to $480,000, subject to a 3% increase every year commencing on November 14, 2014. We also granted Mr. Croxall a bonus of $350,000 and ten year stock options to purchase an aggregate of 100,000 shares of our Common Stock, with a strike price of $5.93 per share (representing the closing price on the date of grant), vesting in twenty-four (24) equal installments on each monthly anniversary of the date of grant. On November 18, 2013, we entered into a consulting agreement with Jeff Feinberg (“Feinberg Agreement”), pursuant to which we agreed to grant Mr. Feinberg 100,000 shares of our restricted Common Stock, 50% of which shall vest on the one-year anniversary of the Feinberg Agreement and the remaining 50% of which shall vest on the second year anniversary of the Feinberg Agreement. Mr. Feinberg is the trustee of The Feinberg Family Trust and holds voting and dispositive power over shares held by The Feinberg Family Trust, which is a 10% beneficial owner of our Common Stock. On May 1, 2014, the Company conducted a private placement of units to certain accredited investors for a purchase price of $6.50 per unit. Each unit consisted of: (i) one share of the Company’s 8% Series A Preferred Stock, and (ii) a two year warrant to purchase shares of the Company’s Common Stock in an amount equal to twenty five percent (25%) of the number of Series A Preferred Stock purchased. Stuart Smith, who was a director of the Company at the time, purchased 5,000 units and John Stetson, who was an officer and director of the Company at the time, purchased 30,769 units through entities controlled by him. On May 2, 2014, the Company completed the acquisition of certain ownership rights (the “Acquired Intellectual Property”) from TechDev, Granicus and SFF pursuant to the terms of three purchase agreements between: (i) the Company, TechDev, SFF and DA Acquisition LLC, a newly formed Texas limited liability company and wholly-owned subsidiary of the Company; (ii) the Company, Granicus, SFF and IP Liquidity Ventures Acquisition LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company; and (iii) the Company, TechDev, SFF and Sarif Biomedical Acquisition LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company. Pursuant to the DA Agreement, the Company acquired 100% of the limited liability company membership interests of Dynamic Advances, LLC, a Texas limited liability company, in consideration for: (i) two cash payments of $2,375,000, one payment due at closing and the other payment was due on or before June 30, 2014, with such second payment being subject to increase to $2,850,000 if not made on or before June 30, 2014; and (ii) 195,500 shares of the Company’s Series B Convertible Preferred Stock. The remaining cash payment was made on April 1, 2015 and is fully paid. Under the terms of the DA Agreement, TechDev and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Pursuant to the IP Liquidity Agreement, the Company acquired 100% of the limited liability company membership interests of IP Liquidity Ventures, LLC, a Delaware limited liability company, in consideration for: (i) two cash payments of $2,375,000, one payment due at closing and the other payment was due on or before June 30, 2014, with such second payment being subject to increase to $2,850,000 if not made on or before June 30, 2014; and (ii) 195,500 shares of the Company’s Series B Convertible Preferred Stock. The remaining cash payment was made on April 1, 2015 and is fully paid. Under the terms of the IP Liquidity Agreement, Granicus and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Pursuant to the Sarif Agreement, the Company acquired 100% of the limited liability company membership interests of Sarif Biomedical, LLC, a Delaware limited liability company, in consideration for two cash payments of $250,000, one payment due at closing and the other payment was due on or before June 30, 2014, with such second payment being subject to increase to $300,000 if not made on or before June 30, 2014. The remaining cash payment was made on February 24, 2015 and is fully paid. Under the terms of the Sarif Agreement, TechDev and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Pursuant to the Pay Proceeds Agreement, the Company may pay the sellers a percentage of the net recoveries (gross revenues minus certain defined expenses) that the Company makes with respect to the assets held by the entities that the Company acquired pursuant to the DA Agreement, the IP Liquidity Agreement and the Sarif Agreement. Under the terms of the Pay Proceeds Agreement, if the Company recovers $10,000,000 or less with regard to the IP Assets, then nothing is due to the sellers; if the Company recovers between $10,000,000 and $40,000,000 with regard to the IP Assets, then the Company shall pay 40% of the cumulative gross proceeds of such recoveries to the sellers; and if the Company recovers over $40,000,000 with regard to the IP Assets, the Company shall pay 50% of the cumulative gross proceeds of such recoveries to the sellers. In no event will the total payments made by the Company under the Pay Proceeds Agreement exceed $250,000,000. TechDev, SFF and Granicus is owned or controlled by Erich Spangenberg or family members or associates . On May 2, 2014, we entered into an opportunity agreement (the “Marathon Opportunity Agreement”) with Erich Spangenberg, whom is an affiliate of the Company. The terms of the Marathon Opportunity Agreement provide that we have ten business days after receiving notice from Mr. Spangenberg to provide up to 50% of the funding for certain opportunities relating to the licensing, intellectual property acquisitions and/or intellectual property enforcement actions in which Mr. Spangenberg, IP Nav or any entity controlled by Mr. Spangenberg, other than: (i) IP Nav or any of its affiliates, and (ii) Medtech Development, LLC or any of its affiliates. On May 2, 2014, we acquired the rights to market Opus Analytics from IP Nav. Opus Analytics is a proprietary patent analytics tool that we use extensively to review and analyze patent acquisition opportunities. Opus Analytics is also a SAAS (Software as a Service) tool that we intend to offer to third parties to generate additional revenue streams from financial professional, investors, patent licensing and monetization companies, and legal and investment professionals. On June 17, 2014, Selene Communication Technologies Acquisition LLC (“Acquisition LLC”), a Delaware limited liability company and newly formed wholly-owned subsidiary of the Company, entered into a merger agreement with Selene Communication Technologies, LLC (“Selene”). Selene owns a patent portfolio consisting of three United States patents in the field of search and network intrusion that relate to tools for intelligent searches applied to data management systems as well as global information networks such as the internet. IP Nav will continue to support and manage the portfolio of patents and retain a contingent participation interest in all recoveries. IP Nav provides patent monetization and support services under an existing agreement with Selene. On August 29, 2014, the Company entered into a patent purchase agreement to acquire a portfolio of patents from Clouding IP, LLC for an aggregate purchase price of $2.4 million, of which $1.4 million was paid in cash and $1.0 million was paid in the form of a promissory note issued by the Company that matured on October 31, 2014 and was fully paid prior to the maturation date. The Company also issued 25,000 shares of its restricted common stock in connection with the acquisition. Clouding IP, LLC is also entitled to certain possible future cash payments. Clouding IP LLC is owned or controlled by Erich Spangenberg or family members or associates . On October 10, 2014, the Company entered into an interest sale agreement with MedTech Development, LLC (“MedTech”) to acquire from MedTech 100% of the limited liability membership interests of OrthoPhoenix and TLIF as well as 100% of the shares of MedTech GmbH. In connection with the transaction, the Company is obligated to pay to MedTech $1 million at closing and $1 million on each of the following nine (9) month anniversary dates of the closing. On July 16, 2015, the Company entered into a forbearance agreement (the “Agreement”) with MedTech Development, the holder of a Promissory Note issued by the Company, dated October 10, 2014. Pursuant to the Agreement, the term of the Note was extended to October 1, 2015 and the Note began accruing interest starting from May 13, 2015. In addition, the Company agreed to make certain mandatory prepayments under certain circumstances and issue to MedTech Development 200,000 shares of restricted common stock of the Company. In accordance with ASC 470-50, the Company recorded this agreement as debt extinguishment and $654,000 was recorded as loss on debt extinguishment for the three and nine months ended September 30, 2015. On October 23, 2015, the Company entered into Amendment No. 1 to the Forbearance Agreement (the “Amendment”) entered into with MedTech Development on July 16, 2015. Pursuant to the Amendment, the due date of the Promissory Note was extended to October 23, 2016 in return for which the Company made a payment of $100,000 on October 23, 2015 and modified the terms under which the Company agreed to make mandatory prepayments under certain circumstances. The acquired subsidiaries are also obligated to make certain additional payments to MedTech from recoveries following the receipt by the acquired subsidiaries of 200% of the purchase payments, plus recovery of out of pocket expenses in connection with patent claims. The participation payments may be paid, at the election of the Company, in common stock of Marathon at the market price on the date of issuance. In connection with the transaction, the Company entered into a promissory note, common interest agreement and in the event of issuance of common stock to MedTech, will enter into a lockup and registration rights agreement. Approximately forty-five percent (45%) of MedTech is owned or controlled by Erich Spangenberg or family members or associates. Comprehensive Income Accounting Standards Update (“ASU”) No. 2011-05 amends Financial Accounting Standards Board (“FASB”) Codification Topic 220 on comprehensive income (1) to eliminate the current option to present the components of other comprehensive income (loss) in the statement of changes in equity, and (2) to require presentation of net income (loss) and other comprehensive income (loss) (and their respective components) either in a single continuous statement or in two separate but consecutive statements. These amendments do not alter any current recognition or measurement requirements in respect of items of other comprehensive income. The amendments in this Update are effective from fiscal years ending after December 15, 2012 and have been applied to our financial statements. Fair Value of Financial Instruments The Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. The carrying amounts reported in the consolidated balance sheet for cash, accounts receivable, accounts payable, and accrued expenses, approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying value of notes payable and other long-term liabilities approximate fair value as the related interest rates approximate rates currently available to the Company. Clouding IP earn out liability was determined as a Level 3 liability, which requires fair assessment of fair value at each period end by using discounted cash flow as valuation technique using unobservable inputs, such as revenue and expenses forecasts, timing of proceeds, and discount rate. Based on reassessment of fair value as of December 31, 2015, the Company determined Clouding IP earn out liability as $33,646 for current portion and $3,281,238 as long-term portion, which resulted in gain from exchange in fair value adjustment of $6,317,116 for year ended December 31, 2015. Further, the periodic reassessment resulted in non-routine impairment of Clouding patent intangible assets of $5,793,409 for the year ended December 31, 2015. Under certain circumstances related to litigations in Germany, the Company is either required to or may decide to enter a bond with the courts. During the years ended December 31, 2015 and December 31, 2014, the Company posted bonds in the amount of $1,748,311 and $1,946,196, respectively. The Company adjusted the value as of December 31, 2014 of the bonds to reflect changes to the exchange rate between the Euro and the US Dollar. Accounting for Acquisitions In the normal course of its business, the Company makes acquisitions of patent assets and may also make acquisitions of businesses. With respect to each such transaction, the Company evaluates facts of the transaction and follows the guidelines prescribed in accordance with ASC 805 — Business Combinations to determine the proper accounting treatment for each such transaction and then records the transaction in accordance with the conclusions reached in such analysis. The Company performs such analysis with respect to each material acquisition within the consolidated group of entities. Income Taxes The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provision of the ASC 740-10 related to Accounting for Uncertain Income Tax Position. When tax returns are filed, it is highly certain that some positions taken would be situated upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is most likely that not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits. The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax position considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely that not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed. The Company is in the process of filing the previous year’s tax returns. After review of the prior year financial statements and the results of operations through December 31, 2015, the Company has recorded a deferred tax asset in the amount of $12,437,741, from which the Company expects to realize benefits in the future, and an income tax payable of $0. Basic and Diluted Net Loss per Share Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. The computation of diluted net loss per share does not include dilutive Common Stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive. As of December 31, 2015, the Company has warrants to purchase 2,021,308 shares of Common Stock outstanding, options to purchase 3,383,267 shares of Common Stock outstanding, convertible notes convertible into 66,667 shares of Common Stock outstanding and 782,004 shares of Series B Convertible Preferred Stock convertible into 782,004 shares of Common Stock outstanding, all of which were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact on the Company’s net loss per share computation. The following table sets forth the computation of basic and diluted loss per share on a GAAP basis: For the Year Ended December 31, 2015 For the Year Ended December 31, 2014 Net loss attributable to Common Shareholders $ ) $ ) Denominator Weighted Average Common Shares - Basic Weighted Average Common Shares - Diluted Earnings (Loss) per common share: Earnings (Loss) - Basic $ ) $ ) Earnings (Loss) - Diluted $ ) $ ) Intangible Assets - Patents Intangible assets include patents purchased and patents acquired in lieu of cash in licensing transactions. The patents purchased are recorded based on the cost to acquire them and patents acquired in lieu of cash are recorded at their fair market value. The costs of these assets are amortized over their remaining useful lives. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. The Company did not record any impairment charges to its intangible assets during the year ended December 31, 2014 and recorded impairment charges in the amount of $5,793,409 in its Clouding IP portfolio for the year ended December 31, 2015. Goodwill Goodwill is tested for impairment at the reporting unit level at least annually in accordance with ASC 350, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following: 1. Significant underperformance relative to expected historical or projected future operating results; 2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; 3. Significant negative industry or economic trends; and 4. Significant reduction or exhaustion of the potential licenses of the patents which gave rise to the goodwill. When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2015 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 3 — ACQUISITIONS CyberFone Systems, LLC On April 22, 2013, Acquisition Corp., a Texas corporation and newly formed wholly-owned subsidiary of the Company entered into a merger agreement with CyberFone Systems, TechDev and Spangenberg Foundation. TechDev and Spangenberg Foundation owned 100% of the membership interests of CyberFone Systems. CyberFone Systems owns a patent portfolio that includes claims that provide specific transactional data processing, telecommunications, network and database inventions, including financial transactions. The portfolio consists of ten United States patents and 27 foreign patents and one patent pending. The patent rights that cover digital communications and data transaction processing are foundational to certain applications in the wireless, telecommunications, financial and other industries. IP Nav will continue to support and manage the portfolio of patents and retain a contingent participation interest in all recoveries. IP Nav provides patent monetization and support services under an existing agreement with CyberFone Systems. Pursuant to the terms of the CyberFone Merger Agreement, CyberFone Systems merged with and into Acquisition Corp with CyberFone Systems surviving the merger as the wholly owned subsidiary of the Company (the “Merger”). The Company (i) issued 923,076 shares of Common Stock to the CyberFone Sellers (the “Merger Shares”), (ii) paid the CyberFone Sellers $500,000 cash and (iii) issued a $500,000 promissory note to TechDev (the “Note”). The Company valued these common shares at the fair market value on the date of grant at $2.47 per share or $2,280,000. The Note was non-interest bearing and was due on June 22, 2013, subject to acceleration in the event of default. The Company may prepay the Note at any time without premium or penalty. On June 21, 2013, we paid $500,000 to TechDev in satisfaction of the note. The transaction resulted in a business combination and caused CyberFone Systems to become a wholly-owned subsidiary of the Company. In addition to the payments described above, within thirty days following the end of each calendar quarter (commencing with the first full calendar quarter following the calendar quarter in which CyberFone Systems recovers $4 million from licensing or enforcement activities related to the patents), CyberFone Systems will be required to pay out a certain percentage of such recoveries. The Company accounted for the acquisition utilizing the purchase method of accounting in accordance with ASC 805 “Business Combinations.” The Company is the acquirer for accounting purposes and CyberFone Systems is the acquired company. Accordingly, the Company applied push—down accounting for the transaction and adjusted to fair value all of the assets and liabilities directly on the financial statements of the subsidiary. The net purchase price paid by the Company was allocated to assets acquired and liabilities assumed on the records of the Company as follows: Intangible assets $ Goodwill Net purchase price $ Per the disclosure set forth above, the Company determined at September 30, 2014 that the goodwill was impaired and an impairment loss in the amount of $2,144,488 was charged to the consolidated statement of operations. Dynamic Advances, IP Liquidity and Sarif Biomedical On May 2, 2014, the Company completed the acquisition of certain ownership rights (the “Acquired Intellectual Property”) from TechDev, Granicus IP, LLC (“Granicus”) and SFF pursuant to the terms of three purchase agreements between: (i) the Company, TechDev, SFF and DA Acquisition LLC, a newly formed Texas limited liability company and wholly-owned subsidiary of the Company; (ii) the Company, Granicus, SFF and IP Liquidity Ventures Acquisition LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company; and (iii) the Company, TechDev, SFF and Sarif Biomedical Acquisition LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company (the “DA Agreement,” the “IP Liquidity Agreement” and the “Sarif Agreement,” respectively and the collective transactions, the “Acquisitions”). Dynamic Advances Pursuant to the DA Agreement, the Company acquired 100% of the limited liability company membership interests of Dynamic Advances, LLC, a Texas limited liability company, in consideration for: (i) two cash payments totaling $5,225,000; and (ii) 391,000 shares of the Company’s Series B Convertible Preferred Stock. Under the terms of the DA Agreement, TechDev and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Dynamic Advances, LLC holds exclusive license to monetize certain patents owned by a third party. On May 2, 2014, the Company issued TechDev and SFF a promissory note in order to evidence the second cash payment due under the terms of the DA Agreement in the amount of $2,375,000 due on or before September 30, 2014, with such amount due under the terms of the promissory note being subject to increase to $2,850,000 if the Company’s payment pursuant to the terms of the DA Agreement are not made on or before June 30, 2014. The Company did not make the payment prior to June 30, 2014 and the promissory note matured on September 30, 2014. Effective September 30, 2014, TechDev and SFF extended the maturity to March 31, 2015 in return for a payment of $249,375, payable within thirty days. The payment for this extension of the maturity date was made on October 10, 2014 and the loan was paid off on April 1, 2015. The promissory note did not otherwise include any interest payable by the Company. Since the Company did not make the payment on the promissory note prior to June 30, 2014, the Company included in the consideration paid for Dynamic Advances the promissory note balance of $2,850,000. Further, the Company had the Series B Convertible Preferred Stock valued by a third party firm that determined, based on the rights and privileges of the Series B Convertible Preferred Stock, that it was on par with the value of the Company’s Common Stock. The total amount of consideration paid by the Company for Dynamic Advances, including capitalized costs associated with the purchase, was $6,653,078. After evaluating the facts and circumstances of the purchase, the Company determined that this was an asset purchase. In coming to its conclusion, the Company reviewed the status of the assets, the historical activity and the absence of any employees, licenses, revenues, and any other assets other than the IP Assets. Further, as there are no assumed licensees or historical revenues, the Company is not certain that it will be able to obtain access to customers pursuant to AC 805-10-55-7. IP Liquidity Pursuant to the IP Liquidity Agreement, the Company acquired 100% of the limited liability company membership interests of IP Liquidity Ventures, LLC, a Delaware limited liability company, in consideration for: (i) two cash payments totaling $5,225,000; and (ii) 391,000 shares of the Company’s Series B Convertible Preferred Stock. Under the terms of the IP Liquidity Agreement, Granicus and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. IP Liquidity Ventures, LLC holds contract rights to the proceeds from the monetization of certain patents owned by a number of third parties. On May 2, 2014, the Company issued Granicus and SFF a promissory note in order to evidence the second cash payment due under the terms of the IP Liquidity Agreement in the amount of $2,375,000 due on or before September 30, 2014, with such amount due under the terms of the promissory note being subject to increase to $2,850,000 if the Company’s payment pursuant to the terms of the IP Liquidity Agreement are not made on or before June 30, 2014. The Company did not make the payment prior to June 30, 2014 and the promissory note matured on September 30, 2014. Effective September 30, 2014, Granicus and SFF extended the maturity to March 31, 2015 in return for a payment of $249,375, payable within thirty days. The payment for this extension of the maturity date was made on October 10, 2014 and the loan was paid off on April 1, 2015. The promissory note did not otherwise include any interest payable by the Company. Since the Company did not make the payment on the promissory note prior to June 30, 2014, the Company included in the consideration paid for IP Liquidity the promissory note balance of $2,850,000. Further, the Company had the Series B Convertible Preferred Stock valued by a third party firm that determined, based on the rights and privileges of the Series B Convertible Preferred Stock that it was on par with the value of the Company’s Common Stock. The total amount of consideration paid by the Company for IP Liquidity, including capitalized costs associated with the purchase, was $6,653,078. After evaluating the facts and circumstances of the purchase, the Company determined that this was an asset purchase. In coming to its conclusion, the Company reviewed the status of the assets, the historical activity and the absence of any employees, licenses, revenues, and any other assets other than the IP Assets. Further, as there are no assumed licensees or historical revenues, the Company is not certain that it will be able to obtain access to customers pursuant to AC 805-10-55-7. Sarif Biomedical Pursuant to the Sarif Agreement, the Company acquired 100% of the limited liability company membership interests of Sarif Biomedical, LLC, a Delaware limited liability company, in consideration for two cash payments totaling $550,000. Under the terms of the Sarif Agreement, TechDev is entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Sarif Biomedical, LLC holds ownership rights to certain patents. On May 2, 2014, the Company issued TechDev a promissory note in order to evidence the second cash payment due under the terms of the Sarif Agreement in the amount of $250,000 due on or before September 30, 2014, with such amount due under the terms of the promissory note being subject to increase to $300,000 if the Company’s payment pursuant to the terms of the Sarif Agreement are not made on or before September 30, 2014. The Company did not make the payment prior to June 30, 2014 and the promissory note matured on September 30, 2014. Effective September 30, 2014, TechDev extended the maturity to March 31, 2015 in return for a payment of $26,250, payable within thirty days. The payment for this extension of the maturity date was made on October 10, 2014 and the loan was paid off on February 24, 2015. The promissory note did not otherwise include any interest payable by the Company. Since the Company did not make the payment on the promissory note prior to June 30, 2014, the Company included in the consideration paid for Dynamic Advances the higher principal amount of the promissory note. The total amount of consideration paid by the Company for Sarif Biomedical, including capitalized costs associated with the purchase, was $552,024. After evaluating the facts and circumstances of the purchase, the Company determined that this was an asset purchase. In coming to its conclusion, the Company reviewed the status of the assets, the historical activity and the absence of any employees, licenses, revenues, and any other assets other than the IP Assets. Further, as there are no assumed licensees or historical revenues, the Company is not certain that it will be able to obtain access to customers pursuant to AC 805-10-55-7. Dynamic Advances, IP Liquidity and Sarif Biomedical Pursuant to the Pay Proceeds Agreement, the Company may pay the sellers a percentage of the net recoveries (gross revenues minus certain defined expenses) that the Company makes with respect to the assets held by the entities that the Company acquired pursuant to the DA Agreement, the IP Liquidity Agreement and the Sarif Agreement (the “IP Assets”). Under the terms of the Pay Proceeds Agreement, if the Company recovers $10,000,000 or less with regard to the IP Assets, then nothing is due to the sellers; if the Company recovers between $10,000,000 and $40,000,000 with regard to the IP Assets, then the Company shall pay 40% of the net proceeds of such recoveries to the sellers; and if the Company recovers over $40,000,000 with regard to the IP Assets, the Company shall pay 50% of the net proceeds of such recoveries to the sellers. In no event will the total payments made by the Company under the Pay Proceeds Agreement exceed $250,000,000. Pursuant to a Registration Rights Agreement with the sellers (the “Acquisition Registration Rights Agreement”), the Company agreed to file a “resale” registration statement with the SEC covering at least 10% of the registrable shares of the Company’s Series B Convertible Preferred Stock issued to the sellers under the terms of the DA Agreement and the IP Liquidity Agreement, at any time on or after November 2, 2014 upon receipt of a written demand from the sellers which describes the amount and type of securities to be included in the registration and the intended method of distribution thereof. The Company shall not be required to file more than three such registration statements not more than sixty days after the receipt of each such written demand from the sellers. TechDev and Mr. Erich Spangenberg (the founder of IP Nav) and his spouse Audrey Spangenberg have jointly filed a Schedule 13G and are deemed to be affiliates of the Company. Selene Communication Technologies On June 17, 2014, Selene Communication Technologies Acquisition LLC (“Acquisition LLC”), a Delaware limited liability company and newly formed wholly owned subsidiary of the Company, entered into a merger agreement with Selene Communication Technologies, LLC (“Selene”). Selene owns a patent portfolio consisting of three United States patents in the field of search and network intrusion that relate to tools for intelligent searches applied to data management systems as well as global information networks such as the internet. IP Nav will continue to support and manage the portfolio of patents and retain a contingent participation interest in all recoveries. IP Nav provides patent monetization and support services under an existing agreement with Selene. Pursuant to the terms of the Selene Interests Sale Agreement, Selene merged with and into Acquisition LLC with Selene surviving the merger as the wholly-owned subsidiary of the Company. The Company (i) issued 200,000 shares of Common Stock to the Selene Sellers and (ii) paid the Selene Sellers $50,000 cash. The Company valued these common shares at the fair market value on the date of grant at $4.90 per share or $980,000. The transaction resulted in a business combination and caused Selene to become a wholly-owned subsidiary of the Company. The Company accounted for the acquisition as a business combination in accordance with ASC 805 “Business Combinations” in which the Company is the acquirer for accounting purposes and Selene is the acquired company. The Company engaged a third party valuation firm to determine the fair value of the assets purchases, and the net purchase price paid by the Company was subsequently allocated to assets acquired and liabilities assumed on the records of the Company as follows: Intangible assets $ Net working capital Goodwill Net purchase price $ Clouding Corp. On August 29, 2014, the Company entered into a patent purchase agreement (the “Clouding Agreement”) between Clouding Corp., a Delaware corporation and a wholly owned subsidiary of the Company (“Clouding”) and Clouding IP, LLC, a Delaware limited liability company (“Clouding IP”), pursuant to which Clouding acquired a portfolio of patents from Clouding IP. Clouding owns patents related to network and data management technology. The Company paid Clouding IP (i) $1.4 million in cash, (ii) $1.0 million in the form of a promissory note issued by the Company that matures on October 31, 2014, (iii) 50,000 shares of its restricted Common Stock valued at $281,000 and (iv) fifty percent (50%) of the net recoveries (gross revenues minus certain defined expenses) in excess of $4.0 million in net revenues that the Company makes with respect to the patents purchased from Clouding IP. The Company valued the Common Stock at the fair market value on the date of the Interests Sale Agreement at $5.62 per share or $281,000 and the promissory note was paid in full prior to October 31, 2014. The revenue share under item (iv) above was booked as an earn out liability on the balance sheet in accordance with the appraisal of the consideration and intangible value. The Company booked a payable to the sellers pursuant to the earn out liability in the amount of $2,148,000 at September 30, 2014, based on license agreements entered into during the quarter. No further amount is owed until the Company generates additional revenue, if any, from the Clouding patents. The Company accounted for the acquisition as a business combination in accordance with ASC 805 “Business Combinations”. The Company engaged a third party valuation firm to determine the fair value of the assets purchases, and the net purchase price paid by the Company was subsequently allocated to assets acquired and liabilities assumed on the records of the Company as follows: Intangible assets $ Goodwill Net purchase price $ Total consideration paid of the following: Cash $ Promissory Note Common Stock Earn-Out Liability Net purchase price $ Upon further evaluation, the total value of the earn-out liability was reduced, measured as of the acquisition date, to reflect certain underlying changes in the litigation schedule. Historical financial statements of Clouding and the pro forma condensed combined consolidated financial statements can be found on the Form 8-K/A filed with the SEC on November 12, 2014. The unaudited pro forma condensed combined consolidated financial statements are not necessarily indicative of the results that actually would have been attained if the merger had been in effect on the dates indicated or which may be attained in the future. Such statements should be read in conjunction with the historical financial statements of the Company. Clouding IP earn out liability was determined as a Level 3 liability, which requires fair assessment of fair value at each period end by using discounted cash flow as valuation technique using unobservable inputs, such as revenue and expenses forecasts, timing of proceeds, and discount rate. Based on reassessment of fair value as of December 31, 2015, the Company determined Clouding IP earn out liability as $33,646 for current portion and $3,281,238 as long-term portion, which resulted in gain from exchange in fair value adjustment of $6,137,116 for year ended December 31, 2015. Further, the periodic reassessment resulted in non-routine impairment of Clouding patent intangible assets of $5,793,409 for the year ended December 31, 2015. TLI Communications LLC On September 19, 2014, TLI Acquisition Corp (“TLIA”), a Virginia corporation and newly formed wholly-owned subsidiary of the Company, entered into an interest sale agreement to purchase 100% of the membership interests of TLI Communications LLC (“TLIC”), a Delaware limited liability company. TLIC owns a patent in the telecommunications field. Pursuant to the terms of the TLIC Interests Sale Agreement, TLIC merged with and into TLIA with TLIC surviving the merger as the wholly-owned subsidiary of the Company. The Company (i) agreed to issue 120,000 shares of Common Stock to the sellers of TLIC (“TLIC Sellers”), (ii) paid the TLIC Sellers $350,000 cash and (iii) agreed to pay the TLIC Sellers fifty percent (50%) of the net recoveries (gross revenues minus certain defined expenses and the cash portion of the acquisition consideration) that the Company makes with respect to the patent purchased pursuant to the acquisition of TLIC. As of December 31, 2015, the Company accrued $1,401,844 for payment to the TLIC Sellers. The Company valued the Common Stock at the fair market value on the date of the Interests Sale Agreement at $6.815 per share or $818,000. The cash portion of the consideration was outstanding at September 30, 2014 and was subsequently paid in October. The transaction resulted in a business combination and caused TLIC to become a wholly-owned subsidiary of the Company. The Company accounted for the acquisition as a business combination in accordance with ASC 805 “Business Combinations”. The Company is the acquirer for accounting purposes and TLIC is the acquired company. The Company engaged a third party valuation firm to determine the fair value of the assets purchases, and the net purchase price paid by the Company was subsequently allocated to assets acquired and liabilities assumed on the records of the Company as follows: Intangible assets $ Goodwill Net purchase price $ Medtech Entities On October 13, 2014, Medtech Group Acquisition Corp (“Medtech Corp.”), a Texas corporation and newly formed wholly-owned subsidiary of the Company, entered into an interest sale agreement to purchase 100% of the equity or membership interests of OrthoPhoenix, LLC (“OrthoPhoenix”), a Delaware limited liability company, TLIF, LLC (“TLIF”) and MedTech Development Deutschland GmbH (“MedTech GmbH” and along with OrthoPhoenix and TLIF, the “Medtech Entities”) from MedTech Development, LLC (“MedTech Development”). The Medtech Entities own patents in the medical technology field. Pursuant to the terms of the Interest Sale Agreement between MedTech Development, Medtech Corp. and the Medtech Entities, the Company (i) paid MedTech Development $1,000,000 cash and (ii) issue a Promissory Note to MedTech Development in the amount of $9,000,000 and (iii) assumed existing debt payable to Medtronics, Inc. The assumed debt payable to Medtronics was renegotiated, as a result of which, the outstanding amount was $6.25 million prior to any repayment by the Company. The debt is due in installments through July 20, 2015; in the event that the Company paid the total amount due by June 30, 2015, the Company would have received a reduction in the remaining principal owed by the Company in the amount of $750,000. Since the Company expected to make the payment by that time when it entered into the agreement, the Company took a discount to the principal amount during the fourth quarter of 2014 when it made the acquisition. However, since the Company did not actually make the payment of the final principal amount by June 30, 2015, the Company reversed the earlier discount as of June 30, 2015. The transaction resulted in a business combination and caused the Medtech Entities to become wholly-owned subsidiaries of the Company.. The Company accounted for the acquisition as a business combination in accordance with ASC 805 “Business Combinations”. The Company is the acquirer for accounting purposes and TLIC is the acquired company. The Company engaged a third party valuation firm to determine the fair value of the assets purchases, and the net purchase price paid by the Company was subsequently allocated to assets acquired and liabilities assumed on the records of the Company as follows: Intangible assets $ Goodwill Net purchase price $ Historical financial statements of the Medtech Entities and the pro forma condensed combined consolidated financial statements can be found on the Form 8-K/A filed with the SEC on December 24, 2014. The unaudited pro forma condensed combined consolidated financial statements are not necessarily indicative of the results that actually would have been attained if the merger had been in effect on the dates indicated or which may be attained in the future. Such statements should be read in conjunction with the historical financial statements of the Company. Bridgestone Americas Tire Operations, LLC (“BATO”) On April 23, 2015, IP Liquidity entered into a Patent Purchase Agreement (“BATO PPA”), as amended, whereby IP Liquidity purchased 43 patents from Bridgestone Americas Tire Operations LLC (“BATO”). Pursuant to the terms of the BATO PPA, the Company agreed to pay BATO (i) $3.5 million in two increments shortly after the execution of the document and (ii) an additional $7.5 million in the event that the Company funds the German court bond requirement to put an injunction in place. The Company has not made the first payment to BATO pending further potential amendments to the BATO PPA. The Company accounted for the acquisition as an asset acquisition in accordance with ASC 805 “Business Combinations”. The Company engaged a third party valuation firm to determine the fair value of the assets purchased, which determined that the fair value of the assets was in excess of the purchase consideration, so the Company booked the assets at the purchase consideration of $11 million. On November 15, 2015, the Company and its wholly-owned subsidiary, IP Liquidity, entered into a Memorandum of Understanding with BATO and IPNav pursuant to which BATO acknowledged that IP Liquidity was entitled to certain fees under an Advisory Services Agreement dated December 3, 2012. In addition, (i) the parties further agreed to terminate the agreement and (ii) terminate the BATO PPA entered into between Bridgestone and the Company on April 23, 2015, as amended. In connection with the termination of the agreement and the BATO PPA, as of November 15, 2015, the Company removed notes payable in the amount of $10,000,000 and $9,068,504 in patent assets from the Company’s books and records, and in connection with the termination of the agreement, the Company removed $2,451,550 in patents assets from the Company’s books and records. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended |
Dec. 31, 2015 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | NOTE 4 - DISCONTINUED OPERATIONS None |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 5 — INTANGIBLE ASSETS Intangible assets include patents purchased and patents acquired in lieu of cash in licensing transactions. Patents purchased are recorded based at their acquisition cost and patents acquired in lieu of cash are recorded at their fair market value. Intangible assets consisted of the following: December 31, 2015 December 31, 2014 Intangible Assets $ $ Accumulated Amortization & Impairment ) ) Intangible assets, net $ $ Intangible assets are comprised of patents with estimated useful lives between approximately 1 to 13 years. Once placed in service, the Company amortizes the costs of 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. Amortization of patents is included as an operating expense as reflected in the accompanying consolidated statements of operations. The Company assesses fair market value for any impairment to the carrying values. Management concluded that there was impairment to the carrying value in the amount of $5,793,409 for the year ended December 31, 2015 and no impairment for the year ended December 31, 2014. Amortization and depreciation expense for the years ended December 31, 2015 and 2014 was $10,825,164 and $5,528,280, respectively. Future amortization of current intangible assets, net is as follows: 2016 $ 2017 2018 2019 2020 2021 and thereafter Total $ Since November 2012, the Company has continued to add to its intangible assets, through either the purchase of intangible asset directly or purchasing entities holding intangible assets. During the years ended December 31, 2015 and December 31, 2014, the Company made the following intangible asset acquisitions: · In May 2014, we acquired ownership rights of Dynamic Advances, LLC, a Texas limited liability company, IP Liquidity Ventures, LLC, a Delaware limited liability company, and Sarif Biomedical, LLC, a Delaware limited liability company, all of which hold patent portfolios or contract rights to the revenue generated from the patent portfolios; · In June 2014, we acquired Selene Communication Technologies, LLC, which holds multiple patents in the search and network intrusion field; · In August 2014, we acquired patents from Clouding IP LLC, with such patents related to network and data management technology; · In September 2014, we acquired TLI Communications, which owns a single patent in the telecommunication field; · In October 2014, we acquired three patent portfolios from MedTech Development, LLC, which owns medical technology patents; and · In April 2015, we purchased 43 patents from Bridgestone Americas Tire Operations LLC (“BATO”), with such patents related to automobile tire pressure monitoring systems, with such purchase terminated and reversed on November 15, 2015. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 6 - STOCKHOLDERS’ EQUITY On December 7, 2011, the Company increased its authorized capital to 200,000,000 shares of Common Stock from 75,000,000 shares, changed the par value to $0.0001 per share from $.001 per share, and authorized new 100,000,000 shares of preferred stock, par value $0.0001 per share. On June 24, 2013, the reverse stock split ratio of one-for-thirteen basis was approved by the Board of Directors. On July 18, 2013, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada in order to effectuate a reverse stock split of the Company’s issued and outstanding common stock, par value $0.0001 per share on a one-for-thirteen basis. On November 19, 2014, the Board of Directors of the Company declared a stock dividend pursuant to which holders of the Company’s Common Stock as of the close of business of the record date of December 15, 2014 received one additional share of Common Stock at the close of business on December 22, 2014 for each share of Common Stock held by such holders. Throughout this Annual Report, all share and per share values for all periods presented in the accompanying consolidated financial statements are retroactively restated for the effect of the reverse stock split and stock dividend. Preferred Stock On May 1, 2014, the Company issued 2,047,158 shares of Series A Convertible Preferred Stock and warrants to purchase an aggregate of 511,790 shares of Common Stock in a private placement to accredited investors. All of the Series A Convertible Preferred Stock was automatically converted pursuant to the terms of the Series A Convertible Preferred Stock Certificate of Designation during the year ended December 31, 2014. The exercise price of the warrants is $3.75, after giving effect to the two-for-one stock dividend issued on December 22, 2014. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of the provisions of Section 4(a)(2) and Regulation D (Rule 506) thereunder, and the corresponding provisions of state securities laws. On May 2, 2014, the Company issued an aggregate of 782,000 shares of Series B Convertible Preferred Stock valued at $2,807,380 to acquire IP Liquidity Ventures, LLC, Dynamic Advances, LLC and Sarif Biomedical, LLC. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On September 17, 2014, the Company entered into a consulting agreement (the “Consulting Agreement”) with GRQ Consultants, Inc. (“GRQ”), pursuant to which GRQ shall provide certain consulting services including, but not limited to, advertising, marketing, business development, strategic and business planning, channel partner development and other functions intended to advance the business of the Company. As consideration, GRQ shall be entitled to 200,000 shares of the Company’s Series B Convertible Preferred Stock, 50% of which vested upon execution of the Consulting Agreement, and 50% of which shall vest in six (6) equal monthly installments of commencing on October 17, 2014. The first tranche of 100,000 shares of Series B Convertible Preferred Stock was issued to GRQ on October 6, 2014. An aggregate of 150,000 shares of Series B Convertible Preferred Stock for a value of $1,103,581 was issued in 2014 and 50,000 shares of Series B Convertible Preferred Stock for a value of $345,334 was issued in 2015. In addition, the Consulting Agreement allows for GRQ to receive additional shares of Series B Convertible Preferred Stock upon the achievement of certain performance benchmarks. No milestones were met and no additional shares were issued in 2015. All shares of Series B Convertible Preferred Stock issuable to GRQ shall be pursuant to the 2014 Plan (as defined below) . The Consulting Agreement contains an acknowledgement that the conversion of the preferred stock into shares of the Company’s Common Stock is precluded by the beneficial ownership blockers set forth in the Series B Convertible Preferred Stock Certificate of Designation and in Section 17 of the 2014 Plan to ensure compliance with NASDAQ Listing Rule 5635(d). Common Stock In April 2013, the Company sold an aggregate of 4,808 post-split units with gross proceeds to the Company of $25,000 to a certain accredited investor pursuant to a subscription agreement. Each unit was sold for a purchase price of $5.20 per unit and consists of: (i) two shares of the Company’s Common Stock and (ii) a five-year warrant to purchase an additional share of Common Stock at an exercise price of $3.90 per share, subject to adjustment upon the occurrence of certain events such as stock splits and dividends. The warrants may be exercised on a cashless basis. On April 17, 2013, the Company executed a consulting agreement with a consultant pursuant to a twelve-month consulting agreement for business advisory services. Pursuant to the terms of the agreement, the consultant shall receive a retainer of $5,000 per month. Additionally, the Company shall issue to the consultant 61,538 shares of Common Stock of which, 15,384 shares vest immediately and the remaining 46,154 shares vested over a 12-month period. In connection with the acquisition of CyberFone Systems, the Company (i) issued 923,076 shares of Common Stock to the CyberFone sellers. The Company valued these common shares at the fair market value on the date of grant at $2.47 per share or $2,280,000. On May 22, 2013, the Company executed a one-year consulting agreement with a consultant for business advisory and capital restructuring services. The Company granted 46,154 post-split shares of Common Stock in connection with this consulting agreement and was valued at fair market value on the date of grant at approximately $2.925 post-split per share. The Company recorded the total consideration of $135,000 as prepaid expense and amortized $78,750 during 2013 and the remaining balance was amortized during 2014. On May 31, 2013, the Company sold an aggregate of 1,999,996 units (the “Units”) representing gross proceeds to the Company of $5,200,000 to certain accredited investors (the “Investors”) pursuant to a securities purchase agreement (the “Securities Purchase Agreement”). Each Unit was subscribed for a purchase price of $2.60 per Unit and consists of: (i) one share (the “Shares”) of the Company’s Common Stock and (ii) a three-year warrant to purchase half a share of the Common Stock at an exercise price of $3.25 per share, subject to adjustment upon the occurrence of certain events such as stock splits and stock dividends and similar events. The Company paid placement agent fees of $170,000 to two broker-dealers in connection with the sale of the Units, of which $30,000 was previously paid by the Company as a retainer. The above warrants may be exercised on a cashless basis at any time that the registration statement to be filed pursuant to the Registration Rights Agreement is not effective after the Effectiveness Date (as defined below). The above warrants contains limitations on the holder’s ability to exercise such warrant in the event such exercise causes the holder to beneficially own in excess of 9.99% of the Company’s issued and outstanding Common Stock. Pursuant to a Registration Rights Agreement with the Investors, the Company has agreed to file a “resale” registration statement with the Securities and Exchange Commission (“SEC”) covering the Shares and the Common Stock underlying the Warrants within 45 days of the final closing date of the sale of Units (the “Filing Date”) and to maintain the effectiveness of such registration statement. The Company has agreed to use its best efforts to have the initial registration statement declared effective within 120 days of the Filing Date (or within 135 days of the Filing Date in the event that the registration statement is subject to full review by the SEC) (the “Effectiveness Date”). If (i) a registration statement is (A) not filed with the SEC on or before the Filing Date or (B) not declared effective by the SEC on or before the Effectiveness Date, (ii) other than during an allowable grace period, sales cannot be made pursuant to the registration statement or the prospectus contained therein is not available for use for any reason or (iii) the Company fails to file with the SEC any required reports under the Exchange, then, the Company shall pay to the Investors an amount in cash equal to one percent (1%) of such Investor’s purchase price every thirty (30) days. Notwithstanding the foregoing, however, the Company shall not be obligated to pay any such liquidated damages if the Company is unable to fulfill its registration obligations as a result of rules, regulations, positions or releases issued or actions taken by the SEC pursuant to its authority with respect to “Rule 415”, provided the Company registers at such time the maximum number of shares of Common Stock permissible upon consultation with the staff of the SEC. In June 2013, the Company issued 23,076 shares for services rendered and valued these common shares at the fair market value on the date of grant at approximately $2.515 per share or $58,000. In third quarter of 2013, the Company issued an aggregate of 11,538 shares of Common Stock in connection with this consulting agreement. The Company valued the shares at the fair market value on the date of grant at approximately $3.00 per share or $34,480. On June 11, 2013, the Company granted an aggregate of 192,308 shares of Common Stock to the Company’s CFO and to a director of the Company, which were valued at fair market value on the date of grant at approximately $2.635 per share for a total of $506,250. The shares vested immediately on issuance. During the year ended December 31, 2013, the Company recorded stock-based compensation expense of the total $506,250 related to the vested restricted stock grants. On June 28, 2013, the Company executed one-year consulting agreements with two consultants for investor communications and public relation services. The Company granted an aggregate of 134,616 shares of Common Stock in connection with these consulting agreements, which shares were valued at fair market value on the date of grant at approximately $2.275 post-split per share for aggregate value of $306,251. In connection with the issuance of these common shares, the Company recorded prepaid stock-based consulting of $306,256 and amortized $153,128 during the year ended December 31, 2013, with the balance amortized during 2014. On July 25, 2013, the Company granted 8,760 shares of Common Stock for legal services rendered. In connection with this transaction, the Company valued the shares at the fair market value on the date of grant at $3.425 per share or $30,000. On July 29, 2013, the Company converted legal fees of $29,620 into 11,392 units of securities. Each unit was subscribed for a purchase price of $2.60 per unit and consists of: (i) one share of the Company’s Common Stock and (ii) a three-year warrant to purchase half a share of the Common Stock at an exercise price of $3.25 per share, subject to adjustment upon the occurrence of certain events such as stock splits and stock dividends and similar events. In August 2013, the Company sold an aggregate of 307,692 units representing gross proceeds to the Company of $800,000 to certain accredited investors pursuant to a securities purchase agreement. Each unit was subscribed for a purchase price of $2.60 per unit and consists of: (i) one share of the Company’s Common Stock and (ii) a three-year warrant to purchase half a share of the Common Stock at an exercise price of $3.25 per share, subject to adjustment upon the occurrence of certain events such as stock splits and stock dividends and similar events. Additionally, the Company paid placement agent fees of $35,029 and legal fees of $42,375 in connection with the sale of units. On September 19, 2014, the Company authorized the issuance of 60,000 shares of Common Stock to the sellers of TLI Communications LLC. The Company valued the Common Stock at the fair market value on the date of the Interests Sale Agreement at $13.63 per share or $818,000. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. On November 13, 2013, the Company acquired four US patents in consideration for 300,000 restricted shares of the Company’s Common Stock. The restricted shares shall be subject to forfeiture rights for the benefit of the Company in the event no enforcement action is effected by the lapse of the enforcement period as defined in the patent purchase agreement. In connection with this transaction, the Company valued the shares at the fair market value on the date of grant at $2.395 per share or $718,500. The shares were issued on April 22, 2014. On November 12, 2013, the Company received, in cash, the amount of $25,000 in full payment of a subscription receivable for the purchase of 9,616 shares of the Company’s Common Stock and subsequently issued the shares to the investor. On June 2, 2014, the Company issued 48,078 shares of unrestricted Common Stock to an investor in the May 2013 PIPE, pursuant to the exercise of a warrant received in the May 2013 PIPE investment. On June 30, 2014, the Company issued 200,000 shares of restricted Common Stock pursuant to the acquisition of Selene Communications Technologies, LLC (see Note 3). In connection with this transaction, the Company valued the shares at the fair market value on the date of grant at $4.90 per share or $980,000. On July 18, 2014, the Company issues a total of 26,722 shares of Common Stock pursuant to the exercise of stock options held by a former member of the Company’s Board of Directors and the Company’s former Chief Financial Officer. On September 16, 2014, the Company issued to two of its independent board members, in lieu of cash compensation, 6,178 shares valued at $45,995 of restricted Common Stock to each of its directors . The shares shall vest quarterly over twelve (12) months commencing on the date of grant. On September 30, 2014, the Company issued 50,000 shares of restricted Common Stock pursuant to the acquisition of the assets of Clouding IP, LLC (see Note 3). In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $5.62 per share or $281,000. For the three months ended September 30, 2014, certain holders of warrants exercised their warrants in a cashless, net exercise basis in exchange for 84,652 shares of the Company’s Common Stock. For the three months ended December 31, 2014, certain holders of warrants exercised their warrants in exchange for 29,230 shares of the Company’s Common Stock. On January 29, 2015, the Company issued 134,409 shares of the Company’s Common Stock to DBD Credit Funding, LLC (“DBD”), an affiliate of Fortress Credit Corp., pursuant to the Fortress transaction. On March 13, 2015, the Company settled a dispute with a former consultant whereby the Company issued the consultant 60,000 shares of Common Stock for a full release of all claims. For the three months ended March 31, 2015, certain holders of warrants exercised their warrants to purchase, in cash, 5,000 shares of the Company’s Common Stock. For the three months ended June 30, 2015, certain holders of options exercised their options to purchase, on a net exercise basis, 33,968 (net) shares of the Company’s Common Stock. In a series of transactions, the Series B Convertible Preferred Stock associated with the GRQ Consulting Agreement was converted into shares of the Company’s Common Stock, with 183,330 shares of Series B Convertible Preferred Stock converted into Common Stock prior to September 30, 2015. On September 21, 2015, the Company issued 150,000 shares of the Company’s Common Stock to Alex Partners, LLC and Del Mar Consulting Group, Inc., pursuant to a services agreement entered into on September 21, 2015. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $2.23 per share or $334,500. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On October 20, 2015, 16,666 shares of Series B Convertible Preferred Stock associated with the GRQ Consulting Agreement was converted into 16,666 shares of the Company’s Common Stock. On November 4, 2015, the Company issued 300,000 shares of the Company’s Common Stock to Dominion Harbor Group LLC (“Dominion”), pursuant to a settlement agreement entered into with Dominion on October 30, 2015. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $1.71 per share or $513,000. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. On December 9, 2015, the Company entered into an agreement with Melechdavid, Inc. (“Melechdavid”), pursuant to which the Company agreed to issue 100,000 shares of the Company’s Common Stock. In connection with this transaction, the Company valued the shares at the quoted market price on the date of grant at $1.61 per share or $161,000. The transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The issuance of these securities was deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof, as a transaction by an issuer not involving a public offering. Common Stock Warrants During the year ended December 31, 2015, the Company issued warrants to purchase 100,000 shares of Common Stock in connection with financings, warrants for 5,000 shares of Common Stock were exercised and warrants for 0 shares of Common Stock were forfeited in accordance with the terms of the underlying agreements. During the year ended December 31, 2015, the Company recorded stock based compensation expense of $3,465 in connection with the vested warrants associated with one warrant-based compensatory grant. At December 31, 2015, there was a total of $0 of unrecognized compensation expense related to future recognition of warrant-based compensation arrangements. As of December 31, 2015, the Company had warrants outstanding to purchase 2,021,308 shares of Common Stock with a weighted average remaining life of 0.87 years. A summary of the status of the Company’s outstanding stock warrants and changes during the period then ended is as follows: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life Balance at December 31, 2014 $ Granted $ Cancelled — — — Forfeited — — — Exercised $ — Balance at December 31, 2015 Warrants exercisable at December 31, 2015 Weighted average fair value of warrants granted during the period $ Common Stock Options On November 14, 2012, the Company entered into an employment agreement with Doug Croxall (the “Croxall Employment Agreement”), whereby Mr. Croxall agreed to serve as Company’s Chief Executive Officer for a period of two years. Mr. Croxall received a ten-year option award to purchase an aggregate of 307,692 shares of the Company’s Common Stock with an exercise price of $3.25 per share, subject to adjustment, which shall vest in 24 equal monthly installments on each monthly anniversary of the date of the Croxall Employment Agreement. The options were valued on the grant date at approximately $3.12 per option or a total of $968,600 using a Black-Scholes option pricing model with the following assumptions: stock price of $3.25 per share (based on the recent selling price of the Company’s Common Stock at private placements), volatility of 192%, expected term of 5 years, and a risk free interest rate of 0.61%. On January 28, 2013, the Company entered into an employment agreement with John Stetson, the Company’s Chief Financial Officer and Secretary (the “Stetson Employment Agreement”) whereby Mr. Stetson agreed to serve as the Company’s Chief Financial Officer for a period of one year, subject to renewal. Mr. Stetson received a ten-year option award to purchase an aggregate of 76,924 shares of the Company’s Common Stock with an exercise price of $3.25 per share, subject to adjustment, which shall vest in three (3) equal annual installments on the beginning on the first annual anniversary of the date of the Stetson Employment Agreement, provided Mr. Stetson is still employed by the Company. On March 1, 2013, Mr. Nathaniel Bradley was appointed as the Company’s Chief Technology Officer and President of IP Services. Pursuant to the employment agreement between the Company and Mr. Bradley dated March 1, 2013 (“Bradley Employment Agreement”), Mr. Bradley was awarded five-year stock options to purchase an aggregate of 153,846 shares of the Company’s Common Stock, with a strike price based on the closing price of the Company’s Common Stock on March 1, 2013 as reported by the OTC Bulletin Board or an exercise price of $5.525 per share, vesting in twenty-four (24) equal installments on each monthly anniversary of March 1, 2013, provided Mr. Bradley is still employed by the Company on each such date. On June 19, 2013, the Board of Directors accepted resignation of Mr. Bradley from his position of Chief Technology Officer and President of IP Services with the Company. In connection with his resignation, Mr. Bradley entered into a Separation and Release Agreement with the Company, pursuant to which, Mr. Bradley received a vested option to purchase 19,230 shares of Common Stock and an option to purchase 134,616 shares of Common Stock were cancelled. On March 1, 2013, Mr. James Crawford was appointed as the Company’s Chief Operating Officer. Pursuant to the employment agreement between the Company and Mr. Crawford dated March 1, 2013 (“Crawford Employment Agreement”), Mr. Crawford shall serve as the Company’s Chief Operating Officer for two (2) years. Mr. Crawford was awarded five-year stock options to purchase an aggregate of 76,924 shares of the Company’s Common Stock, with a strike price based on the closing price of the Company’s Common Stock on March 1, 2013 as reported by the OTC Bulletin Board or an exercise price of $5.525per share, vesting in twenty-four (24) equal installments on each monthly anniversary of March 1, 2013, provided Mr. Crawford is still employed by the Company on each such date. On June 19, 2013, the Company granted Mr. Crawford an option to purchase 76,924 shares of Common Stock. The stock options granted have an exercise price equal to the fair market value per share on the option grant date, which was $2.47 per share. The options issued to Mr. Crawford are conditioned upon the cancellation of the stock options granted to him on March 1, 2013 under his employment agreement with the Company and will vest in twenty-four (24) equal installments on each monthly anniversary of the date of grant. Pursuant to the Independent Director Agreement between the Company and each of Mr. Nard and Mr. Rosellini dated March 8, 2013, each director was granted a five-year stock option to purchase an aggregate of 15,384 shares of the Company’s Common Stock, with a strike price based on the closing price of the Company’s Common Stock on March 8, 2013 as reported by the OTC Bulletin Board or an exercise price of $3.25 per share. The options shall vest as follows: 33% the first anniversary hereof; 33% on the second anniversary and 34% on the third anniversary, and shall be subject to the Company’s stock plan as in effect from time to time, including any claw-back and termination provisions therein. The option agreements shall provide for cashless exercise features. Such agreement shall be terminated upon resignation or removal of Mr. Nard and Mr. Rosellini as members of our Board of Directors. Mr. Nard resigned from the Company’s Board of Directors in April 2014 and on July 18, 2014, the Company issued a total of 7,608 shares of Common Stock to Mr. Nard pursuant to the exercise of vested stock options. On June 11, 2013, the Company granted five-year options to purchase an aggregate of 353,846 shares of Common Stock exercisable at $2.625 per share to the Chief Executive Officer and two directors of the Company. The stock options shall vest pro rata monthly over the following 24-month period. On June 11, 2013, the Company granted a five-year option to purchase 30,770 shares of Common Stock exercisable at $2.625 per share to a consultant for legal services. The stock options shall vest pro rata monthly over the following 24-month period. On June 19, 2013, the Company granted two five-year options to purchase an aggregate of 46,154 shares of Common Stock exercisable at $2.47 per share to two employees of the Company. The options shall vest as follows: 33% the first anniversary hereof; 33% on the second anniversary and 34% on the third anniversary. On July 25, 2013, the Company granted four five-year options to purchase an aggregate of 134,614 shares of Common Stock to four consultants who are employees of IP Nav. Such options shall vest 33% on the first year anniversary, 33% on the second year anniversary and 34% on the third year anniversary. The exercise price was based on the $3.425 closing price of the Company’s Common Stock on the date of grant. These options were forfeited in accordance with the termination of consultant relationships. On August 19, 2013, the Company granted two five-year options to purchase an aggregate of 607,692 shares of Common Stock to two consultants who are employees of IP Nav. Such options shall vest 33% on the first year anniversary, 33% on the second year anniversary and 34% on the third year anniversary. The exercise price was based on the $2.925 closing price of the Company’s Common Stock on the date of grant. These options were forfeited in accordance with the termination of consultant relationships. On November 11, 2013, we entered into a three-year consulting agreement with Kairix Analytics, Ltd. (“Kairix”) (the “Kairix Agreement”), pursuant to which we agreed to grant to Kairix an option to purchase 600,000 shares of the Company’s Common Stock at an exercise price of $2.85 per share, reflecting the closing price of the Company’s Common Stock on the date of grant. The option has a term of five (5) years and vests 33% on each of the first and second anniversaries and 34% on the third anniversary of the Kairix Agreement. The Company has valued the option at $984,447 using the Black-Scholes option pricing model with the following assumptions: an expected life of two and one-half years; volatility of 100% and a risk-free interest rate of 0.65%. In addition, Kairix will be entitled to receive either 2% or 5% of the net revenue derived from the enforcement of patents by either the Company or its subsidiaries and resulting from work performed by Kairix on behalf of the Company, with the percentage applied to be based on the contribution made to the generation of the revenue by Kairix, as further described in the Kairix Agreement. No net revenues were ever paid to Kairix as the consulting agreement was terminated without any work being performed by Kairix. Mr. Craig Nard, one of the principals of Kairix, was a member of our Board of Directors at the time the Company entered into the agreement with Kairix. On June 18, 2014, the Company cancelled an option to purchase an aggregate amount of 600,000 shares of Common Stock provided to Kairix Analytics when the consulting agreement was terminated without any vesting having occurred. On November 18, 2013, we entered into Amendment No. 1 to the Croxall Employment Agreement with our Chief Executive Officer and Chairman, Doug Croxall. As part of Amendment No. 1, we granted Mr. Croxall a ten-year stock options to purchase an aggregate of 200,000 shares of our Common Stock, with an exercise price of $2.965 per share, reflecting the closing price of our Common Stock on the date of grant, and vesting in twenty-four (24) equal installments on each monthly anniversary date of the grant. The Company has valued the option grant at $442,692 using the Black-Scholes option pricing model with the following assumptions: an expected life of five years; volatility of 100%; and a risk-free rate of 1.33%. On November 18, 2013, we entered into a two-year executive employment agreement with Richard Raisig (the “Raisig Agreement”), pursuant to which Mr. Raisig shall serve as our Chief Financial Officer, effective December 3, 2013. As part of the Raisig Agreement, we agreed to issue Mr. Raisig a ten-year stock option to purchase an aggregate of 230,000 shares of Common Stock, with an exercise price of $2.95 per share, vesting in twenty-four (24) equal installments on each monthly anniversary of the date of the Raisig Agreement, provided Mr. Raisig is still employed by us on each such date. We have valued the options at $511,036 using the Black-Scholes option pricing model with the following assumptions: market price on the date of grant of $2.95; an expected life of five years; volatility of 101%; and a risk-free rate of 1.40%. Mr. Raisig’s employment with the Company was terminated in April 2014 and on July 18, 2014, the Company issued a total of 19,114 shares of Common Stock to Mr. Raisig pursuant to the exercise of vested stock options. On April 15, 2014, the Company issued a new board member, Edward Kovalik, a five (5) year option to purchase an aggregate of 20,000 shares of the Company’s Common Stock with an exercise price of $3.295 per share, subject to adjustment, which shall vest in twelve (12) monthly installments commencing on the date of grant. The option was valued based on the Black-Scholes model, using the strike and market prices of $3.295 per share, life of three years, volatility of 51% based on the closing price of the 50 trading sessions immediately preceding the grant and a discount rate as published by the Federal Reserve of 0.84%. On May 14, 2014, the Company issued existing employees, ten-year options to purchase an aggregate of 80,000 shares of the Company’s Common Stock with an exercise price of $4.165 per share, subject to adjustment, which shall vest in three (3) annual installments, with 33% vesting on the first anniversary of the date of grant, 33% on the second anniversary of the date of grant and 34% on the third anniversary of the date of grant. The options were valued based on the Black-Scholes model, using the strike and market prices of $4.165 per share, life of 6.5 years, volatility of 63% based on the closing price of the 50 trading sessions immediately preceding the grant and a discount rate as published by the Federal Reserve of 1.97%. On May 14, 2014, the Company issued to consultants, five (5) year options to purchase an aggregate of 160,000 shares of the Company’s Common Stock with an exercise price of $4.165 per share, subject to adjustment, which shall vest in three (3) annual installments, with 33% vesting on the first anniversary of the date of grant, 33% on the second anniversary of the date of grant and 34% on the third anniversary of the date of grant. The options were valued based on the Black-Scholes model, using the strike and market prices of $4.165 per share, life of 3.5 years, volatility of 50% based on the closing price of the 50 trading sessions immediately preceding the grant and a discount rate as published by the Federal Reserve of 1.00%. On May 15, 2014, the Company entered into an executive employment agreement with Francis Knuettel II (“Knuettel Agreement”) pursuant to which Mr. Knuettel would serve as the Company’s Chief Financial Officer. As part of the consideration, the Company agreed to grant Mr. Knuettel a ten-year stock option to purchase an aggregate of 290,000 shares of Common Stock, with a strike price of $4.165 per share, vesting in thirty-six (36) equal installments on each monthly annive |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 — COMMITMENTS AND CONTINGENCIES Office Lease In October 2013, the Company entered into a net-lease for its current office space in Los Angeles, California. The lease commenced on May 1, 2014 and has a term of seven years, which term expires on April 30, 2021, with monthly lease payments escalating each year of the lease. In addition, to paying a deposit of $7,564 and the monthly base lease cost, the Company is required to pay its pro rata share of operating expenses and real estate taxes. Under the terms of the lease, the Company will not be required to pay rent for the first five months but must remain in compliance with the terms of the lease to continue to maintain that benefit. In addition, the Company has a one-time option to terminate the lease in the 42nd month of the lease. Minimum future lease payments under this lease at December 31, 2015, net of the rent abatement, for the next five years are as follows: 2016 2017 2018 2019 Thereafter Total $ The leases for the properties maintained in Alexandria, Virginia and Longview, Texas are month-to-month and can be cancelled upon thirty days’ notice. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
INCOME TAXES | |
INCOME TAXES | NOTE 8 - INCOME TAXES The Company accounts for income taxes under ASC Topic 740: Income Taxes, which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry-forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The following table presents the current and deferred provision (benefit) for income taxes for the years ended December 31, 2015: 2015 2014 Current: Federal ) — State — Foreign — — $ $ — Deferred: Federal ) ) State ) ) Foreign ) ) ) ) $ ) $ ) The table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate for the years ended December 31, 2015 and 2014. 2015 2014 Tax benefit computed at “expected” statutory rate $ ) $ ) State income taxes, net of benefit ) ) Permanent differences : — Deemed Dividend — Stock based compensation and consulting Transaction Cost Other permanent differences Timing differences — Amortization of patents and other — — Change in valuation allowance — ) Net income tax benefit $ ) $ ) The table below summarizes the differences between the Companies’ effective tax rate and the statutory federal rate as follows for the years ended December 31, 2015 and 2014: 2015 2014 Computed “expected” tax expense (benefit) -34.00 % )% State income taxes )% )% Permanent differences % % Timing differences — % — % Change in valuation allowance — % )% Effective tax rate )% )% The Company has a deferred tax asset, which is summarized as follows at December 31: 2015 2014 Deferred tax assets: Total deferred tax assets $ $ Total deferred tax liabilities ) ) Less: valuation allowance — — Net deferred tax asset $ $ The Company does not have any taxable income in carryback years in which net operating losses (“NOLs”) can be carried back to. At December 31, 2015, the Company did not have any taxable temporary differences that will reverse and generate taxable income and was still in a cumulative loss position. Based on all the available information, including tax planning strategies and future forecast, the Company believes that it is more likely than not that the net deferred tax assets will be realized; therefore, valuation allowance is not needed. As of December 31, 2015, the Company had NOL carry-forwards for federal and state purposes of approximately $21.6 million and $20.2 million, respectively, which will begin to expire in 2032. The utilization of NOL and credit carry-forwards may be limited under the provisions of the Internal Revenue Code (“IRC”) Section 382 and similar state provisions. IRC Section 382 generally imposes an annual limitation on the amount of NOL carry-forwards that may be used to offset taxable income where a corporation has undergone significant changes in stock ownership. The Company has not analyzed whether an ownership change has taken place that could limit the utilization of NOL. An analysis may be required at the time the Company begins utilizing any of its net operating losses to determine if there is an IRC Section 382 limitation. As of December 31, 2015 and 2014, the Company does not increase or decrease liability for unrecognized tax benefit. As of December 31, 2015 and 2014 the Company did not increase or decrease penalties or interest in connection with liability for unrecognized tax benefit. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company files U.S. and state income tax returns with varying statutes of limitations. The 2011 through 2014 tax years generally remain subject to examination by federal and state tax authorities. The Company has not recognized a deferred tax liability on foreign earnings that it has declared as indefinitely reinvested. This amount may become taxable upon repatriation of assets from the subsidiaries or a sale or liquidation of the subsidiaries. The amount of earnings designated as indefinitely reinvested offshore is based upon our expectations of the future cash needs of the Company’s foreign entities. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 9 — SUBSEQUENT EVENTS On February 22, 2016, Marathon Group SA, a Luxembourg société anonyme , Uniloc Luxembourg, S.A., a Luxembourg société anonyme , Uniloc Corporation Pty. Limited, an Australian company limited by shares ACN 058 043 744, and Marathon Patent Group, Inc., a Nevada corporation, entered into a Termination Agreement terminating the Business Combination Agreement dated August 14, 2015 by and among the parties set forth above. |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of December 31, 2015. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated. |
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by management include, but are not limited to, estimating the useful lives of patent assets, the assumptions used to calculate fair value of warrants and options granted, goodwill and intangible assets impairment, realization of long-lived assets, valuation of Clouding IP earn out liability, deferred income taxes, unrealized tax positions and business combination accounting. |
Cash | Cash The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s accounts at this institution are insured, up to $250,000, by the Federal Deposit Insurance Corporation (“FDIC”). For the years ended December 31, 2015 and 2014, the Company’s bank balances exceeded the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. |
Accounts Receivable | Accounts Receivable The Company has a policy of reserving for accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the bad debt expense after all means of collection have been exhausted and the potential for recovery is considered remote. At December 31, 2015 and 2014, the Company had recorded an allowance for bad debts in the amounts of $375,750 and $0, respectively. Net accounts receivable at December 31, 2015 and 2014 were $136,842 and $216,997, respectively. |
Concentration of Revenue and Geographic Area | Concentration of Revenue and Geographic Area Revenue from the Company’s patent enforcement activities is considered United States revenue as any payments for licenses included in that revenue are for United States operations irrespective of the location of the licensee’s or licensee’s parent home domicile. Revenues from the five largest licenses in 2015 accounted for approximately 62% of the Company’s revenue for the year ended December 31, 2015 and revenue from the largest five licenses in 2014 accounted for approximately 88% of the Company’s revenues for the year ended December 31, 2014. The Company derived these revenues from the one-time issuance of non-recurring, non-exclusive, non-assignable licenses to two different entities and their affiliates for certain of the Company’s patents. While the Company has a growing portfolio of patents, at this time, the Company expects that a significant portion of its future revenues will be based on one-time grants of similar non-recurring, non-exclusive, non-assignable licenses to a relatively small number of entities and their affiliates. Further, with the expected small number of firms with which the Company enters into license agreements, and the amount and timing of such license agreements, the Company also expects that its revenues may be highly variable from one period to the next. At the current time, we define customers as firms that obtain licenses to the Company’s patents, either prior to or during enforcement litigation. These firms generally enter into non-recurring, non-exclusive, non-assignable license agreements with the Company, and these customers do not generally engage on ongoing, recurring business activity with the Company. The Company has historically had a small number of customers enter into such agreements, resulting in higher levels of revenue concentration. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 605, “Revenue Recognition”. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed, (iii) amounts are fixed or determinable and (iv) collectability of amounts is reasonably assured. The Company considers the revenue generated from its settlement and licensing agreements as one unit of accounting under ASC 605-25, “Multiple-Element Arrangements” as the delivered items do not have value to customers on a standalone basis, there are no undelivered elements and there is no general right of return relative to the license. Under ASC 605-25, the appropriate recognition of revenue is determined for the combined deliverables as a single unit of accounting and revenue is recognized upon delivery of the final elements, including the license for past and future use and the release. Also, due to the fact that the settlement element and license element for past and future use are the Company’s major central business, the Company presents these two elements as one revenue category in its statement of operations. The Company does not expect to provide licenses that do not provide some form of settlement or release. Revenue from patent enforcement activities accounted for 100% of the Company’s revenues for the years ended December 31, 2015 and December 31, 2014. |
Prepaid Expenses | Prepaid Expenses Prepaid expenses of $338,598 and $438,391 at December 31, 2015 and 2014, respectively, consist primarily of costs paid for future services that will occur within a year. Prepaid expenses include prepayments in cash and in equity instruments for investor relations public relations services, business advisory, other consulting and prepaid insurance, all of which assets are being amortized over the terms of their respective agreements. |
Bonds Posted With Courts | Bonds Posted With Courts Under certain circumstances related to litigations in Germany, the Company is either required to or may decide to enter a bond with the courts. During the years ended December 31, 2015 and December 31, 2014, the Company posted bonds in the amount of $1,748,311 and $1,946,196, respectively. These bonds were entered into in Germany after the first instance of litigation of some of the Company’s patents in German courts and the difference in the balance of the litigation bonds at December 31, 2015 compared to December 31, 2014 is attributable solely to currency translation. With the resolution of the IP Liquidity cases, $523,835 is being returned to the Company during the first quarter of 2016. |
Related Party Transactions | Related Party Transactions Parties are considered related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. On November 14, 2012, upon the closing of the Sampo Share Exchange with LVL Patent Group LLC, Mr. Croxall, our Chief Executive Officer, who was also the Chief Executive Officer of LVL Patent Group LLC, and John Stetson (both Mr. Croxall and Mr. Stetson were also former members of Sampo), received 307,692 and 38,461 shares of the Company’s Common Stock, respectively, in connection with the Sampo Share Exchange. On May 13, 2013, we entered into a six-year advisory services agreement (the “Advisory Services Agreement”) with IP Navigation Group, LLC, of which Erich Spangenberg is founder and former Chief Executive Officer. Mr. Spangenberg is an affiliate of the Company. The terms of the Advisory Services Agreement provides that, in consideration for its services as intellectual property licensing agent, the Company will pay to IP Navigation Group, LLC between 10% and 20% of the gross proceeds of certain licensing campaigns in which IP Navigation Group, LLC acts as intellectual property licensing agent. On May 31, 2013, Barry Honig, a beneficial owner of more than 5% of our Common Stock at the time, purchased an aggregate of $100,000 of shares of Common Stock and warrants in our private placement. On August 2, 2013, GRQ Consultants Inc. 401K funded a subscription of $150,000 of shares of Common Stock and warrants in our private placement, which was assigned to it by another investor. Barry Honig is the trustee of GRQ Consultants Inc. 401K and was a beneficial owner of more than 5% of our Common Stock at the time of the transaction. On November 11, 2013, we entered into a consulting agreement with Kairix pursuant to which we granted options to acquire 300,000 shares of Common Stock to Kairix in exchange for services. The options shall vest 33%, 33% and 34% on each annual anniversary of the date of the issuance. Craig Nard, a member of our Board of Directors at the time the Company entered into the agreement with Kairix, is a principal of Kairix. On June 18, 2014, the Company cancelled an option to purchase an aggregate amount of 300,000 shares of Common Stock provided to Kairix Analytics when the consulting agreement was terminated without any vesting having occurred. On November 18, 2013, we entered into Amendment No. 1 to the Executive Employment Agreement with our Chief Executive Officer and Chairman, Doug Croxall, pursuant to which Mr. Croxall’s base salary was raised to $480,000, subject to a 3% increase every year commencing on November 14, 2014. We also granted Mr. Croxall a bonus of $350,000 and ten year stock options to purchase an aggregate of 100,000 shares of our Common Stock, with a strike price of $5.93 per share (representing the closing price on the date of grant), vesting in twenty-four (24) equal installments on each monthly anniversary of the date of grant. On November 18, 2013, we entered into a consulting agreement with Jeff Feinberg (“Feinberg Agreement”), pursuant to which we agreed to grant Mr. Feinberg 100,000 shares of our restricted Common Stock, 50% of which shall vest on the one-year anniversary of the Feinberg Agreement and the remaining 50% of which shall vest on the second year anniversary of the Feinberg Agreement. Mr. Feinberg is the trustee of The Feinberg Family Trust and holds voting and dispositive power over shares held by The Feinberg Family Trust, which is a 10% beneficial owner of our Common Stock. On May 1, 2014, the Company conducted a private placement of units to certain accredited investors for a purchase price of $6.50 per unit. Each unit consisted of: (i) one share of the Company’s 8% Series A Preferred Stock, and (ii) a two year warrant to purchase shares of the Company’s Common Stock in an amount equal to twenty five percent (25%) of the number of Series A Preferred Stock purchased. Stuart Smith, who was a director of the Company at the time, purchased 5,000 units and John Stetson, who was an officer and director of the Company at the time, purchased 30,769 units through entities controlled by him. On May 2, 2014, the Company completed the acquisition of certain ownership rights (the “Acquired Intellectual Property”) from TechDev, Granicus and SFF pursuant to the terms of three purchase agreements between: (i) the Company, TechDev, SFF and DA Acquisition LLC, a newly formed Texas limited liability company and wholly-owned subsidiary of the Company; (ii) the Company, Granicus, SFF and IP Liquidity Ventures Acquisition LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company; and (iii) the Company, TechDev, SFF and Sarif Biomedical Acquisition LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of the Company. Pursuant to the DA Agreement, the Company acquired 100% of the limited liability company membership interests of Dynamic Advances, LLC, a Texas limited liability company, in consideration for: (i) two cash payments of $2,375,000, one payment due at closing and the other payment was due on or before June 30, 2014, with such second payment being subject to increase to $2,850,000 if not made on or before June 30, 2014; and (ii) 195,500 shares of the Company’s Series B Convertible Preferred Stock. The remaining cash payment was made on April 1, 2015 and is fully paid. Under the terms of the DA Agreement, TechDev and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Pursuant to the IP Liquidity Agreement, the Company acquired 100% of the limited liability company membership interests of IP Liquidity Ventures, LLC, a Delaware limited liability company, in consideration for: (i) two cash payments of $2,375,000, one payment due at closing and the other payment was due on or before June 30, 2014, with such second payment being subject to increase to $2,850,000 if not made on or before June 30, 2014; and (ii) 195,500 shares of the Company’s Series B Convertible Preferred Stock. The remaining cash payment was made on April 1, 2015 and is fully paid. Under the terms of the IP Liquidity Agreement, Granicus and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Pursuant to the Sarif Agreement, the Company acquired 100% of the limited liability company membership interests of Sarif Biomedical, LLC, a Delaware limited liability company, in consideration for two cash payments of $250,000, one payment due at closing and the other payment was due on or before June 30, 2014, with such second payment being subject to increase to $300,000 if not made on or before June 30, 2014. The remaining cash payment was made on February 24, 2015 and is fully paid. Under the terms of the Sarif Agreement, TechDev and SFF are entitled to possible future payments for a maximum consideration of $250,000,000 pursuant to the Pay Proceeds Agreement described below. Pursuant to the Pay Proceeds Agreement, the Company may pay the sellers a percentage of the net recoveries (gross revenues minus certain defined expenses) that the Company makes with respect to the assets held by the entities that the Company acquired pursuant to the DA Agreement, the IP Liquidity Agreement and the Sarif Agreement. Under the terms of the Pay Proceeds Agreement, if the Company recovers $10,000,000 or less with regard to the IP Assets, then nothing is due to the sellers; if the Company recovers between $10,000,000 and $40,000,000 with regard to the IP Assets, then the Company shall pay 40% of the cumulative gross proceeds of such recoveries to the sellers; and if the Company recovers over $40,000,000 with regard to the IP Assets, the Company shall pay 50% of the cumulative gross proceeds of such recoveries to the sellers. In no event will the total payments made by the Company under the Pay Proceeds Agreement exceed $250,000,000. TechDev, SFF and Granicus is owned or controlled by Erich Spangenberg or family members or associates . On May 2, 2014, we entered into an opportunity agreement (the “Marathon Opportunity Agreement”) with Erich Spangenberg, whom is an affiliate of the Company. The terms of the Marathon Opportunity Agreement provide that we have ten business days after receiving notice from Mr. Spangenberg to provide up to 50% of the funding for certain opportunities relating to the licensing, intellectual property acquisitions and/or intellectual property enforcement actions in which Mr. Spangenberg, IP Nav or any entity controlled by Mr. Spangenberg, other than: (i) IP Nav or any of its affiliates, and (ii) Medtech Development, LLC or any of its affiliates. On May 2, 2014, we acquired the rights to market Opus Analytics from IP Nav. Opus Analytics is a proprietary patent analytics tool that we use extensively to review and analyze patent acquisition opportunities. Opus Analytics is also a SAAS (Software as a Service) tool that we intend to offer to third parties to generate additional revenue streams from financial professional, investors, patent licensing and monetization companies, and legal and investment professionals. On June 17, 2014, Selene Communication Technologies Acquisition LLC (“Acquisition LLC”), a Delaware limited liability company and newly formed wholly-owned subsidiary of the Company, entered into a merger agreement with Selene Communication Technologies, LLC (“Selene”). Selene owns a patent portfolio consisting of three United States patents in the field of search and network intrusion that relate to tools for intelligent searches applied to data management systems as well as global information networks such as the internet. IP Nav will continue to support and manage the portfolio of patents and retain a contingent participation interest in all recoveries. IP Nav provides patent monetization and support services under an existing agreement with Selene. On August 29, 2014, the Company entered into a patent purchase agreement to acquire a portfolio of patents from Clouding IP, LLC for an aggregate purchase price of $2.4 million, of which $1.4 million was paid in cash and $1.0 million was paid in the form of a promissory note issued by the Company that matured on October 31, 2014 and was fully paid prior to the maturation date. The Company also issued 25,000 shares of its restricted common stock in connection with the acquisition. Clouding IP, LLC is also entitled to certain possible future cash payments. Clouding IP LLC is owned or controlled by Erich Spangenberg or family members or associates . On October 10, 2014, the Company entered into an interest sale agreement with MedTech Development, LLC (“MedTech”) to acquire from MedTech 100% of the limited liability membership interests of OrthoPhoenix and TLIF as well as 100% of the shares of MedTech GmbH. In connection with the transaction, the Company is obligated to pay to MedTech $1 million at closing and $1 million on each of the following nine (9) month anniversary dates of the closing. On July 16, 2015, the Company entered into a forbearance agreement (the “Agreement”) with MedTech Development, the holder of a Promissory Note issued by the Company, dated October 10, 2014. Pursuant to the Agreement, the term of the Note was extended to October 1, 2015 and the Note began accruing interest starting from May 13, 2015. In addition, the Company agreed to make certain mandatory prepayments under certain circumstances and issue to MedTech Development 200,000 shares of restricted common stock of the Company. In accordance with ASC 470-50, the Company recorded this agreement as debt extinguishment and $654,000 was recorded as loss on debt extinguishment for the three and nine months ended September 30, 2015. On October 23, 2015, the Company entered into Amendment No. 1 to the Forbearance Agreement (the “Amendment”) entered into with MedTech Development on July 16, 2015. Pursuant to the Amendment, the due date of the Promissory Note was extended to October 23, 2016 in return for which the Company made a payment of $100,000 on October 23, 2015 and modified the terms under which the Company agreed to make mandatory prepayments under certain circumstances. The acquired subsidiaries are also obligated to make certain additional payments to MedTech from recoveries following the receipt by the acquired subsidiaries of 200% of the purchase payments, plus recovery of out of pocket expenses in connection with patent claims. The participation payments may be paid, at the election of the Company, in common stock of Marathon at the market price on the date of issuance. In connection with the transaction, the Company entered into a promissory note, common interest agreement and in the event of issuance of common stock to MedTech, will enter into a lockup and registration rights agreement. Approximately forty-five percent (45%) of MedTech is owned or controlled by Erich Spangenberg or family members or associates. |
Comprehensive Income | Comprehensive Income Accounting Standards Update (“ASU”) No. 2011-05 amends Financial Accounting Standards Board (“FASB”) Codification Topic 220 on comprehensive income (1) to eliminate the current option to present the components of other comprehensive income (loss) in the statement of changes in equity, and (2) to require presentation of net income (loss) and other comprehensive income (loss) (and their respective components) either in a single continuous statement or in two separate but consecutive statements. These amendments do not alter any current recognition or measurement requirements in respect of items of other comprehensive income. The amendments in this Update are effective from fiscal years ending after December 15, 2012 and have been applied to our financial statements. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. The carrying amounts reported in the consolidated balance sheet for cash, accounts receivable, accounts payable, and accrued expenses, approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying value of notes payable and other long-term liabilities approximate fair value as the related interest rates approximate rates currently available to the Company. Clouding IP earn out liability was determined as a Level 3 liability, which requires fair assessment of fair value at each period end by using discounted cash flow as valuation technique using unobservable inputs, such as revenue and expenses forecasts, timing of proceeds, and discount rate. Based on reassessment of fair value as of December 31, 2015, the Company determined Clouding IP earn out liability as $33,646 for current portion and $3,281,238 as long-term portion, which resulted in gain from exchange in fair value adjustment of $6,317,116 for year ended December 31, 2015. Further, the periodic reassessment resulted in non-routine impairment of Clouding patent intangible assets of $5,793,409 for the year ended December 31, 2015. Under certain circumstances related to litigations in Germany, the Company is either required to or may decide to enter a bond with the courts. During the years ended December 31, 2015 and December 31, 2014, the Company posted bonds in the amount of $1,748,311 and $1,946,196, respectively. The Company adjusted the value as of December 31, 2014 of the bonds to reflect changes to the exchange rate between the Euro and the US Dollar. |
Accounting for Acquisitions | Accounting for Acquisitions In the normal course of its business, the Company makes acquisitions of patent assets and may also make acquisitions of businesses. With respect to each such transaction, the Company evaluates facts of the transaction and follows the guidelines prescribed in accordance with ASC 805 — Business Combinations to determine the proper accounting treatment for each such transaction and then records the transaction in accordance with the conclusions reached in such analysis. The Company performs such analysis with respect to each material acquisition within the consolidated group of entities. |
Income Taxes | Income Taxes The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provision of the ASC 740-10 related to Accounting for Uncertain Income Tax Position. When tax returns are filed, it is highly certain that some positions taken would be situated upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is most likely that not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits. The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax position considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely that not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed. The Company is in the process of filing the previous year’s tax returns. After review of the prior year financial statements and the results of operations through December 31, 2015, the Company has recorded a deferred tax asset in the amount of $12,437,741, from which the Company expects to realize benefits in the future, and an income tax payable of $0. |
Basic and Diluted Net Loss per Share | Basic and Diluted Net Loss per Share Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. The computation of diluted net loss per share does not include dilutive Common Stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive. As of December 31, 2015, the Company has warrants to purchase 2,021,308 shares of Common Stock outstanding, options to purchase 3,383,267 shares of Common Stock outstanding, convertible notes convertible into 66,667 shares of Common Stock outstanding and 782,004 shares of Series B Convertible Preferred Stock convertible into 782,004 shares of Common Stock outstanding, all of which were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact on the Company’s net loss per share computation. The following table sets forth the computation of basic and diluted loss per share on a GAAP basis: For the Year Ended December 31, 2015 For the Year Ended December 31, 2014 Net loss attributable to Common Shareholders $ ) $ ) Denominator Weighted Average Common Shares - Basic Weighted Average Common Shares - Diluted Earnings (Loss) per common share: Earnings (Loss) - Basic $ ) $ ) Earnings (Loss) - Diluted $ ) $ ) |
Intangible Assets | Intangible Assets - Patents Intangible assets include patents purchased and patents acquired in lieu of cash in licensing transactions. The patents purchased are recorded based on the cost to acquire them and patents acquired in lieu of cash are recorded at their fair market value. The costs of these assets are amortized over their remaining useful lives. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. The Company did not record any impairment charges to its intangible assets during the year ended December 31, 2014 and recorded impairment charges in the amount of $5,793,409 in its Clouding IP portfolio for the year ended December 31, 2015. |
Goodwill | Goodwill Goodwill is tested for impairment at the reporting unit level at least annually in accordance with ASC 350, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following: 1. Significant underperformance relative to expected historical or projected future operating results; 2. Significant changes in the manner of use of the acquired assets or the strategy for the overall business; 3. Significant negative industry or economic trends; and 4. Significant reduction or exhaustion of the potential licenses of the patents which gave rise to the goodwill. When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statement of operations. The Company performs the annual testing for impairment of goodwill at the reporting unit level during the quarter ended September 30. For the year ended December 31, 2015, the Company recorded no impairment charge to its goodwill, and for the year ended December 31, 2014, the Company recorded an impairment charge in the amount of $2,144,488 to the goodwill associated with CyberFone. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company accounts for the impairment or disposal of long-lived assets according to the ASC 360 “Property, Plant and Equipment”. The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of long-lived assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted cash flows expected to be generated by the asset. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The Company did not record any impairment charges on its long-lived assets, except for patent intangible assets noted above, during the years ended December 31, 2015 and 2014. |
Stock-based Compensation | Stock-based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date. As stock-based compensation expense is recognized based on awards expected to vest , forfeitures are also estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For the year ended December 31 , 2015, the expected forfeiture rate was 10.3975%, which resulted in an expense of $28,663, recognized in the Company’s compensation expenses. There were no forfeitures for the year ended December 31, 2014. The Company will continue to re-assess the impact of forfeitures if actual forfeitures increase in future quarters. |
Reclassification | Reclassification Certain prior year reported amounts have been reclassified to conform to the current year presentation. The reclassification did not have an impact on previously issued net income (loss) or Total Shareholders’ Equity. |
Liquidity and Capital Resources | Liquidity and Capital Resources At December 31, 2015, we had approximately $2.6 million in cash and cash equivalents and a working capital deficit of approximately $12.2 million. Based on the Company’s current revenue and profit projections, management is uncertain that the Company’s existing cash and accounts receivables will be sufficient to fund its operations through at least the next twelve months. If we do not meet our revenue and profit projections or the business climate turns negative, then we will need to: raise additional funds to support the Company’s operations; provided, however,there is no assurance that the Company will be able to raise such additional funds on acceptable terms, if at all. If the Company raises additional funds by issuing securities, existing stockholders may be diluted; and review strategic alternatives. If adequate funds are not available, we may be required to curtail our operations or other business activities or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain technologies or potential markets. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. This update requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified statement of financial position. ASU 2015-17 is effective for annual and interim reporting periods beginning after December 15, 2016. This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. Early application is permitted as of the beginning of the interim or annual reporting period. The Company adopted this standard for the annual period ending December 31, 2015. The effect of adopting the new guidance on the balance sheet was not significant. In September 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, or ASU 2015-16. This amendment requires the acquirer in a business combination to recognize in the reporting period in which adjustment amounts are determined, any adjustments to provisional amounts that are identified during the measurement period, calculated as if the accounting had been completed at the acquisition date. Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of the acquisition date for adjustments to provisional amounts. The new standard for an annual reporting period beginning after December 15, 2017 with an earlier effective application is permitted only as of annual reporting periods beginning after December 15, 2016. The new guidance is not expected to have significant impact on the Company’s consolidated financial statements, In April 2015, the FASB issued ASU 2015-05, Intangibles-Goodwill and Other — Internal-Use Software; Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . Prior to this ASU, U.S. GAAP did not include explicit guidance about a customer’s accounting for fees paid in a cloud computing arrangement. Examples of cloud computing arrangements include software as a service, platform as a service, infrastructure as a service, and other similar hosting arrangements. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license, in which case the customer should account for such license consistent with the acquisitions of other software licenses. If the cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The ASU does not change the accounting for service contracts. The new standard is effective for us on January 1, 2016 with early adoption permitted. We do not expect the adoption of ASU 2015-05 to have a significant impact on our consolidated financial statements. In April 2015, the FASB issued new guidance on the presentation of debt issuance costs (ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs) , effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and should be applied retrospectively to all periods presented. Early adoption of the new guidance is permitted for financial statements that have not been previously issued. The new guidance will require that debt issuance costs be presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset, consistent with debt discounts. The Company adopted ASU 2015-03 and as such, the debt issuance costs for Fortress note was presented in the balance sheet as direct deduction from the related debt liability. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. This standard update provides guidance around management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance is effective for all annual and interim periods ending after December 15, 2016. The new guidance is not expected to have a significant impact on the Company’s consolidated financial statements. In May 2014, the Financial Accountings Standards Board ( “FASB” ) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers , or ASU 2014-09, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and shall take effective on January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method and the early application of the standard is not permitted. The Company is presently evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures and has not yet selected a transition method. There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. |
SUMMARY OF SIGNIFICANT ACCOUN18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of computation of basic and diluted loss per share | For the Year Ended December 31, 2015 For the Year Ended December 31, 2014 Net loss attributable to Common Shareholders $ ) $ ) Denominator Weighted Average Common Shares - Basic Weighted Average Common Shares - Diluted Earnings (Loss) per common share: Earnings (Loss) - Basic $ ) $ ) Earnings (Loss) - Diluted $ ) $ ) |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
CyberFone | |
Net purchase price paid, assets and liabilities | Intangible assets $ Goodwill Net purchase price $ |
Selene Communication Technologies | |
Net purchase price paid, assets and liabilities | Intangible assets $ Net working capital Goodwill Net purchase price $ |
Clouding Corp | |
Net purchase price paid, assets and liabilities | Intangible assets $ Goodwill Net purchase price $ Total consideration paid of the following: Cash $ Promissory Note Common Stock Earn-Out Liability Net purchase price $ |
TLI Communications LLC | |
Net purchase price paid, assets and liabilities | Intangible assets $ Goodwill Net purchase price $ |
Medtech Entities | |
Net purchase price paid, assets and liabilities | Intangible assets $ Goodwill Net purchase price $ |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
INTANGIBLE ASSETS | |
Schedule of Intangible Assets | December 31, 2015 December 31, 2014 Intangible Assets $ $ Accumulated Amortization & Impairment ) ) Intangible assets, net $ $ |
Schedule of Amortization Expense | 2016 $ 2017 2018 2019 2020 2021 and thereafter Total $ |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
STOCKHOLDERS' EQUITY | |
Status of outstanding stock warrants | Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life Balance at December 31, 2014 $ Granted $ Cancelled — — — Forfeited — — — Exercised $ — Balance at December 31, 2015 Warrants exercisable at December 31, 2015 Weighted average fair value of warrants granted during the period $ |
Summary of stock options | Number of Options Weighted Average Exercise Price Weighted Average Remaining Life Balance at December 31, 2014 $ Granted $ Cancelled — $ — — Forfeited $ — Exercised $ — Balance at December 31, 2015 $ Options Exercisable at December 31, 2015 Options expected to vest Weighted average fair value of options granted during the period $ |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of leases | 2016 2017 2018 2019 Thereafter Total $ |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
INCOME TAXES | |
Schedule of current and deferred provision (benefit) for income taxes | 2015 2014 Current: Federal ) — State — Foreign — — $ $ — Deferred: Federal ) ) State ) ) Foreign ) ) ) ) $ ) $ ) |
Summary of reconciliation between effective tax rate and statutory federal rate (in dollars) | 2015 2014 Tax benefit computed at “expected” statutory rate $ ) $ ) State income taxes, net of benefit ) ) Permanent differences : — Deemed Dividend — Stock based compensation and consulting Transaction Cost Other permanent differences Timing differences — Amortization of patents and other — — Change in valuation allowance — ) Net income tax benefit $ ) $ ) |
Summary of reconciliation between effective tax rate and statutory federal rate (as a percent) | 2015 2014 Computed “expected” tax expense (benefit) -34.00 % )% State income taxes )% )% Permanent differences % % Timing differences — % — % Change in valuation allowance — % )% Effective tax rate )% )% |
Summary of deferred tax asset | 2015 2014 Deferred tax assets: Total deferred tax assets $ $ Total deferred tax liabilities ) ) Less: valuation allowance — — Net deferred tax asset $ $ |
ORGANIZATION AND DESCRIPTION 24
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) - $ / shares | Jun. 24, 2013 | May. 31, 2013 | Oct. 01, 2012 | Dec. 31, 2015 | Dec. 31, 2014 | Jul. 18, 2013 | Aug. 01, 2012 | Dec. 07, 2011 | Dec. 06, 2011 |
Common stock, shares authorized | 200,000,000 | 200,000,000 | 200,000,000 | 75,000,000 | |||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.001 | ||||
Preferred stock, shares authorized | 100,000,000 | ||||||||
Preferred stock, par value | $ 0.0001 | ||||||||
Common Stock | |||||||||
Reverse stock split ratio (as a percent) | .07692 | 1.5 | |||||||
Reverse stock split time to effectuate | 1 year | ||||||||
2012 Equity Incentive Plan | |||||||||
Shares reserved for issuance under plan | 20,000,000 | ||||||||
Minimum | Common Stock | |||||||||
Reverse stock split ratio (as a percent) | .20 | ||||||||
Maximum | Common Stock | |||||||||
Reverse stock split ratio (as a percent) | .06666 |
ORGANIZATION AND DESCRIPTION 25
ORGANIZATION AND DESCRIPTION OF BUSINESS - Asset Purchase (Details) | Apr. 16, 2016USD ($) | Dec. 09, 2015USD ($)$ / sharesshares | Nov. 04, 2015USD ($)$ / sharesshares | Oct. 23, 2015USD ($) | Oct. 20, 2015shares | Sep. 21, 2015USD ($)$ / sharesshares | Jul. 16, 2015USD ($)$ / sharesshares | Mar. 13, 2015shares | Jan. 29, 2015USD ($)$ / sharesshares | Dec. 22, 2014$ / shares | Oct. 16, 2014USD ($)$ / sharesshares | Oct. 10, 2014USD ($)payment | Oct. 06, 2014shares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 19, 2014USD ($)$ / sharesshares | Sep. 16, 2014USD ($)itemshares | Aug. 29, 2014USD ($)shares | Jul. 18, 2014shares | Jun. 30, 2014USD ($)$ / sharesshares | Jun. 02, 2014shares | May. 02, 2014USD ($)shares | May. 01, 2014$ / sharesshares | Apr. 22, 2014USD ($)shares | Dec. 22, 2013USD ($)patent | Dec. 16, 2013USD ($) | Nov. 13, 2013USD ($)patentshares | May. 06, 2013USD ($)patent | Apr. 22, 2013USD ($)patent | Apr. 17, 2013 | Mar. 06, 2013USD ($) | Sep. 30, 2013USD ($)patent | Sep. 30, 2015shares | Jun. 30, 2015shares | Mar. 31, 2015shares | Dec. 31, 2014item$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014USD ($)item$ / sharesshares | Feb. 12, 2015USD ($) | Oct. 17, 2014installment | Sep. 17, 2014shares | Jul. 18, 2013$ / shares | Dec. 07, 2011$ / shares | Dec. 06, 2011$ / shares |
Acquisition of patents | $ 1,100,000 | $ 7,816,832 | |||||||||||||||||||||||||||||||||||||||||||
Number of patents (in patents) | patent | 4 | ||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 718,500 | 2,078,800 | |||||||||||||||||||||||||||||||||||||||||||
Vesting period (in months) | 12 months | 12 months | |||||||||||||||||||||||||||||||||||||||||||
Stock issued for warrants exercised (in shares) | shares | 5,000 | 29,230 | |||||||||||||||||||||||||||||||||||||||||||
Exercise price of warrants (in dollar per share) | $ / shares | $ 3.75 | ||||||||||||||||||||||||||||||||||||||||||||
Dividend issued (percentage) | 200.00% | ||||||||||||||||||||||||||||||||||||||||||||
Compensation expenses | $ 28,663 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise stock options (in shares) | shares | 29,230 | ||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ 18,977,794 | $ 21,404,469 | |||||||||||||||||||||||||||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.001 | |||||||||||||||||||||||||||||||||||||||
Extinguishment of Debt, Amount | $ 654,000 | ||||||||||||||||||||||||||||||||||||||||||||
Loss on debt extinguishment | $ 654,000 | ||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes Payable | |||||||||||||||||||||||||||||||||||||||||||||
Number of warrants to purchase common stock | shares | 258,998 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise price of warrants (in dollar per share) | $ / shares | $ 8.25 | ||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | $ 5,550,000 | ||||||||||||||||||||||||||||||||||||||||||||
Term of warrants | 2 years | ||||||||||||||||||||||||||||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | ||||||||||||||||||||||||||||||||||||||||||||
Warrants value | $ 169,015 | ||||||||||||||||||||||||||||||||||||||||||||
Conversion price (in dollars per share) | $ / shares | $ 7.50 | ||||||||||||||||||||||||||||||||||||||||||||
Interest rate of loan (as a percent) | 11.00% | ||||||||||||||||||||||||||||||||||||||||||||
Director | |||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 45,995 | ||||||||||||||||||||||||||||||||||||||||||||
Vesting period (in months) | 12 months | ||||||||||||||||||||||||||||||||||||||||||||
Restricted common stock issued (in shares) | shares | 6,178 | ||||||||||||||||||||||||||||||||||||||||||||
Number of board members | item | 2 | ||||||||||||||||||||||||||||||||||||||||||||
Compensation expenses | $ 13,415 | ||||||||||||||||||||||||||||||||||||||||||||
Number of grants | item | 2 | 2 | |||||||||||||||||||||||||||||||||||||||||||
Private Placement | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued for warrants exercised (in shares) | shares | 511,790 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise price of warrants (in dollar per share) | $ / shares | $ 3.75 | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 100,000 | 16,666 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 161,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 1.61 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise stock options (in shares) | shares | 33,968 | 84,652 | |||||||||||||||||||||||||||||||||||||||||||
Common Stock | Former Member Board of Directors and Former CFO | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 26,722 | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Former Consultant | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 60,000 | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Private Placement | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 48,078 | ||||||||||||||||||||||||||||||||||||||||||||
Series A preferred stock | Private Placement | |||||||||||||||||||||||||||||||||||||||||||||
Number of warrants to purchase common stock | shares | 2,047,158 | ||||||||||||||||||||||||||||||||||||||||||||
Series B Convertible Preferred Stock | |||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock converted to Common Stock | shares | 16,666 | ||||||||||||||||||||||||||||||||||||||||||||
Conversion of Stock, Shares Converted | shares | 16,666 | ||||||||||||||||||||||||||||||||||||||||||||
TT IP LLC | |||||||||||||||||||||||||||||||||||||||||||||
Restricted common stock issued (in shares) | shares | 300,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value of restricted common stock | $ 718,500 | ||||||||||||||||||||||||||||||||||||||||||||
Liquidity, Dynamic, Sarif | Series B Convertible Preferred Stock | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 782,000 | ||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 2,807,380 | ||||||||||||||||||||||||||||||||||||||||||||
Selene Communication Technologies | |||||||||||||||||||||||||||||||||||||||||||||
Restricted common stock issued (in shares) | shares | 200,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value of restricted common stock | $ 980,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 4.90 | ||||||||||||||||||||||||||||||||||||||||||||
Clouding IP, LLC | |||||||||||||||||||||||||||||||||||||||||||||
Consideration paid | $ 2,400,000 | ||||||||||||||||||||||||||||||||||||||||||||
Cash | 1,400,000 | ||||||||||||||||||||||||||||||||||||||||||||
Notes issued | $ 1,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 25,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value of restricted common stock | $ 281,000 | ||||||||||||||||||||||||||||||||||||||||||||
GRQ | Series B Convertible Preferred Stock | |||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 1,103,581 | ||||||||||||||||||||||||||||||||||||||||||||
MedTech | |||||||||||||||||||||||||||||||||||||||||||||
Consideration paid | $ 100,000 | $ 1,000,000 | |||||||||||||||||||||||||||||||||||||||||||
Additional payment amount | $ 1,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Cash payments made (in payments) | payment | 9 | ||||||||||||||||||||||||||||||||||||||||||||
Recovery threshold (as a percent) | 200.00% | ||||||||||||||||||||||||||||||||||||||||||||
Restricted common stock issued (in shares) | shares | 200,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value of restricted common stock | $ 654,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 3.27 | ||||||||||||||||||||||||||||||||||||||||||||
Alex Partners LLC and Del Mar Consulting Group | |||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 334,500 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 2.23 | ||||||||||||||||||||||||||||||||||||||||||||
Alex Partners LLC and Del Mar Consulting Group | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||
Dominion Harbor Group, LLC | |||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 513,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 1.71 | ||||||||||||||||||||||||||||||||||||||||||||
Dominion Harbor Group, LLC | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 300,000 | ||||||||||||||||||||||||||||||||||||||||||||
Patents | U.S. | |||||||||||||||||||||||||||||||||||||||||||||
Number of patents (in patents) | patent | 14 | ||||||||||||||||||||||||||||||||||||||||||||
Relay IP | Patents | U.S. | |||||||||||||||||||||||||||||||||||||||||||||
Acquisition of patents | $ 350,000 | ||||||||||||||||||||||||||||||||||||||||||||
CyberFone Acquisition Corp | |||||||||||||||||||||||||||||||||||||||||||||
Ownership interest held (as a percent) | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||
Asset Purchase Agreement | Clouding IP, LLC | |||||||||||||||||||||||||||||||||||||||||||||
Restricted common stock issued (in shares) | shares | 50,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value of restricted common stock | $ 281,000 | $ 281,000 | |||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 5.62 | $ 5.62 | |||||||||||||||||||||||||||||||||||||||||||
CyberFone Agreement | CyberFone Acquisition Corp | |||||||||||||||||||||||||||||||||||||||||||||
Patent acquired, value | $ 1,135,512 | ||||||||||||||||||||||||||||||||||||||||||||
CyberFone Agreement | CyberFone Acquisition Corp | CyberFone Sellers | |||||||||||||||||||||||||||||||||||||||||||||
Percent of membership interest | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||
CyberFone Agreement | CyberFone Acquisition Corp | Patents | U.S. | |||||||||||||||||||||||||||||||||||||||||||||
Number of patents (in patents) | patent | 10 | ||||||||||||||||||||||||||||||||||||||||||||
CyberFone Agreement | CyberFone Acquisition Corp | Patents | Foreign | |||||||||||||||||||||||||||||||||||||||||||||
Number of patents (in patents) | patent | 27 | ||||||||||||||||||||||||||||||||||||||||||||
CyberFone Agreement | CyberFone Acquisition Corp | Patent Pending | |||||||||||||||||||||||||||||||||||||||||||||
Number of pending patents (in patents) | 1 | ||||||||||||||||||||||||||||||||||||||||||||
Settlement and license agreement | |||||||||||||||||||||||||||||||||||||||||||||
Patent acquired, value | $ 700,000 | ||||||||||||||||||||||||||||||||||||||||||||
Value transferred in lieu of additional cash payment | $ 1,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Settlement and license agreement | Patents | U.S. | |||||||||||||||||||||||||||||||||||||||||||||
Number of patents (in patents) | patent | 2 | 3 | |||||||||||||||||||||||||||||||||||||||||||
Patent purchase agreement | Delphi Technologies, Inc | |||||||||||||||||||||||||||||||||||||||||||||
Acquisition of patents | $ 1,700,000 | ||||||||||||||||||||||||||||||||||||||||||||
Consulting agreement | GRQ | |||||||||||||||||||||||||||||||||||||||||||||
Vest upon execution (percentage) | 50.00% | ||||||||||||||||||||||||||||||||||||||||||||
Vest after execution (percentage) | 50.00% | ||||||||||||||||||||||||||||||||||||||||||||
Number of equal monthly installments | installment | 6 | ||||||||||||||||||||||||||||||||||||||||||||
Consulting agreement | GRQ | Series B Convertible Preferred Stock | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 50,000 | 150,000 | |||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 345,334 | ||||||||||||||||||||||||||||||||||||||||||||
Number of shares of common stock issued upon conversion of preferred stock | shares | 2 | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock consideration (in shares) | shares | 200,000 | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock converted to Common Stock | shares | 183,330 | ||||||||||||||||||||||||||||||||||||||||||||
Conversion of Stock, Shares Converted | shares | 183,330 | ||||||||||||||||||||||||||||||||||||||||||||
Consulting agreement | GRQ | Series B Convertible Preferred Stock | First Tranche | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fortress Purchase Agreement | |||||||||||||||||||||||||||||||||||||||||||||
Number of warrants to purchase common stock | shares | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||
Stock issued for warrants exercised (in shares) | shares | 134,409 | ||||||||||||||||||||||||||||||||||||||||||||
Exercise price of warrants (in dollar per share) | $ / shares | $ 7.44 | ||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | $ 15,000,000 | $ 5,000,000 | |||||||||||||||||||||||||||||||||||||||||||
Revenues | $ 15,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Term of warrants | 5 years | ||||||||||||||||||||||||||||||||||||||||||||
Augme Technologies | Asset Purchase Agreement | |||||||||||||||||||||||||||||||||||||||||||||
Consideration paid | $ 10,000 | ||||||||||||||||||||||||||||||||||||||||||||
Term of service agreement | 2 years | ||||||||||||||||||||||||||||||||||||||||||||
TLI Communications LLC | |||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | shares | 60,000 | ||||||||||||||||||||||||||||||||||||||||||||
Stock Value | $ 818,000 | ||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 13.63 | ||||||||||||||||||||||||||||||||||||||||||||
Ownership interest held (as a percent) | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||
Orthophoenix LLC | |||||||||||||||||||||||||||||||||||||||||||||
Ownership interest held (as a percent) | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||
TLIF Member | |||||||||||||||||||||||||||||||||||||||||||||
Ownership interest held (as a percent) | 100.00% | ||||||||||||||||||||||||||||||||||||||||||||
MedTech GmbH | |||||||||||||||||||||||||||||||||||||||||||||
Restricted common stock issued (in shares) | shares | 200,000 | ||||||||||||||||||||||||||||||||||||||||||||
Percentage of shares (as a percent) | 100.00% |
SUMMARY OF SIGNIFICANT ACCOUN26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash, Accounts Receivable, Concentration of Revenue and Geographic Area (Details) | 12 Months Ended | |
Dec. 31, 2015USD ($)agreementitem | Dec. 31, 2014USD ($)agreement | |
Cash | ||
Number of financial institution for maintaining balances of cash and cash equivalents | item | 1 | |
Accounts Receivable | ||
Allowance for bad debts | $ 375,750 | $ 0 |
Net accounts receivable | $ 136,842 | $ 216,997 |
Concentration of Revenue and Geographic Area | ||
Revenues from five licenses (as a percent) | 62.00% | 88.00% |
Customer concentration risk | ||
Concentration of Revenue and Geographic Area | ||
Number of licenses | agreement | 5 | 5 |
Maximum | ||
Cash | ||
Insured by FDIC | $ 250,000 |
SUMMARY OF SIGNIFICANT ACCOUN27
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition, Prepaid Expenses, Bonds Posted With Courts (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Revenue Recognition | |||
Concentration risk (as a percent) | 62.00% | 88.00% | |
Prepaid Expenses | |||
Prepaid expenses | $ 338,598 | $ 438,391 | |
Bonds Posted With Courts | |||
Bonds posted with courts | $ 1,748,311 | $ 1,945,196 | |
IP Liquidity case | Forecast | |||
Bonds Posted With Courts | |||
Amount returned due to resolution of case | $ 523,835 | ||
Revenue | Patents | |||
Revenue Recognition | |||
Concentration risk (as a percent) | 100.00% | 100.00% |
SUMMARY OF SIGNIFICANT ACCOUN28
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Related Party Transactions Consulting and Share Agreements (Details) | Oct. 14, 2015$ / shares | May. 01, 2014$ / sharesshares | Nov. 18, 2013USD ($)installment$ / sharesshares | Nov. 11, 2013shares | Aug. 02, 2013USD ($) | May. 31, 2013USD ($)$ / sharesshares | May. 13, 2013 | Nov. 14, 2012shares | Apr. 07, 2015period | Apr. 15, 2014period | Aug. 31, 2013$ / sharesshares | Jul. 29, 2013$ / sharesshares | Apr. 30, 2013$ / sharesshares |
Related Party Transactions | |||||||||||||
Option term | 10 years | ||||||||||||
Option price (in dollars per share) | $ / shares | $ 1.86 | ||||||||||||
Number of monthly installments | period | 12 | 12 | |||||||||||
Price per unit | $ / shares | 2.60 | 2.60 | 2.60 | 5.20 | |||||||||
Units purchased | 1,999,996 | 307,692 | 11,392 | 4,808 | |||||||||
Private Placement | |||||||||||||
Related Party Transactions | |||||||||||||
Price per unit | $ / shares | 6.50 | ||||||||||||
Conversion percentage | 25.00% | ||||||||||||
Chief Executive Officer | |||||||||||||
Related Party Transactions | |||||||||||||
Common stock issued (in shares) | 100,000 | ||||||||||||
Base salary | $ | $ 480,000 | ||||||||||||
Increase in salary (as a percent) | 3.00% | ||||||||||||
Bonus amount | $ | $ 350,000 | ||||||||||||
Option term | 10 years | ||||||||||||
Option price (in dollars per share) | $ / shares | $ 5.93 | ||||||||||||
Number of monthly installments | installment | 24 | ||||||||||||
Chief Executive Officer | Sampo Share Exchange | |||||||||||||
Related Party Transactions | |||||||||||||
Common stock issued (in shares) | 307,692 | ||||||||||||
Principal Owner | Sampo Share Exchange | |||||||||||||
Related Party Transactions | |||||||||||||
Common stock issued (in shares) | 38,461 | ||||||||||||
Founder and Former Chief Executive Officer | Advisory Services Agreement | |||||||||||||
Related Party Transactions | |||||||||||||
Length of agreement | 6 years | ||||||||||||
Founder and Former Chief Executive Officer | Advisory Services Agreement | Minimum | |||||||||||||
Related Party Transactions | |||||||||||||
Percent of gross proceeds (as a percent) | 10.00% | ||||||||||||
Founder and Former Chief Executive Officer | Advisory Services Agreement | Maximum | |||||||||||||
Related Party Transactions | |||||||||||||
Percent of gross proceeds (as a percent) | 20.00% | ||||||||||||
Beneficial Owner | Private Placement | |||||||||||||
Related Party Transactions | |||||||||||||
Common stock issued for cash | $ | $ 150,000 | $ 100,000 | |||||||||||
Beneficial Owner | Feinberg Agreement | |||||||||||||
Related Party Transactions | |||||||||||||
Common stock issued (in shares) | 100,000 | ||||||||||||
Vesting on first anniversary (as a percent) | 50.00% | ||||||||||||
Vesting on second anniversary (as a percent) | 50.00% | ||||||||||||
Kairix | |||||||||||||
Related Party Transactions | |||||||||||||
Common stock issued for service (in shares) | 300,000 | ||||||||||||
Vesting on first anniversary (as a percent) | 33.00% | ||||||||||||
Vesting on second anniversary (as a percent) | 33.00% | ||||||||||||
Vesting on third anniversary (as a percent) | 34.00% | ||||||||||||
Cancelled (in shares) | 300,000 | ||||||||||||
Director | Private Placement | |||||||||||||
Related Party Transactions | |||||||||||||
Units purchased | 5,000 | ||||||||||||
Director And Officer | Private Placement | |||||||||||||
Related Party Transactions | |||||||||||||
Units purchased | 30,769 |
SUMMARY OF SIGNIFICANT ACCOUN29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Related Party Transactions Acquisitions (Details) | Apr. 01, 2015USD ($) | May. 02, 2014USD ($)installmentpaymentshares | May. 02, 2013USD ($)payment | Dec. 31, 2015USD ($) |
Acquisitions Member | ||||
Purchase Agreements | 3 | |||
Dynamic Advances | ||||
Ownership interest held (as a percent) | 100.00% | |||
Cash payments made (in payments) | payment | 2 | |||
Consideration paid | $ 52,250,000 | $ 6,653,078 | ||
Maximum possible amount of future payments | $ 250,000,000 | |||
IP Liquidity | ||||
Ownership interest held (as a percent) | 100.00% | |||
Cash payments made (in payments) | payment | 2 | |||
Consideration paid | $ 2,850,000 | $ 5,225,000 | ||
Maximum possible amount of future payments | $ 250,000,000 | |||
Sarif | ||||
Ownership interest held (as a percent) | 100.00% | |||
Cash payments made (in payments) | payment | 2 | |||
Consideration paid | $ 550,000 | $ 552,024 | ||
Maximum possible amount of future payments | $ 250,000,000 | |||
Related Party | ||||
Purchase Agreements | 3 | |||
Related Party | Dynamic Advances | ||||
Ownership interest held (as a percent) | 100.00% | |||
Cash payments made (in payments) | installment | 2 | |||
Consideration paid | $ 2,375,000 | |||
Second payment amount after June 30, 2014 | $ 2,850,000 | |||
Preferred stock, shares issued | shares | 195,500 | |||
Maximum possible amount of future payments | $ 250,000,000 | |||
Related Party | IP Liquidity | ||||
Ownership interest held (as a percent) | 100.00% | |||
Cash payments made (in payments) | installment | 2 | |||
Consideration paid | $ 2,375,000 | |||
Second payment amount after June 30, 2014 | $ 2,850,000 | |||
Preferred stock, shares issued | shares | 195,500 | |||
Maximum possible amount of future payments | $ 250,000,000 | |||
Related Party | Sarif | ||||
Ownership interest held (as a percent) | 100.00% | |||
Cash payments made (in payments) | installment | 2 | |||
Consideration paid | $ 250,000 | |||
Second payment amount after June 30, 2014 | $ 300,000 | |||
Maximum possible amount of future payments | $ 250,000,000 |
SUMMARY OF SIGNIFICANT ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Related Party Transactions Pay Proceeds Agreement (Details) - Pay Proceeds Agreement Member - Acquisitions Member | May. 02, 2014USD ($) |
Maximum | |
Recovery amount | $ 250,000,000 |
$10,000,000 or less | Maximum | |
Recovery amount | $ 10,000,000 |
$10,000,000 to $40,000,000 | |
Net recovery proceeds due to sellers (as a percent) | 40.00% |
$10,000,000 to $40,000,000 | Minimum | |
Recovery amount | $ 10,000,000 |
$10,000,000 to $40,000,000 | Maximum | |
Recovery amount | $ 40,000,000 |
$40000000 | |
Net recovery proceeds due to sellers (as a percent) | 50.00% |
Over $40,000,000 | Minimum | |
Recovery amount | $ 40,000,000 |
Related Party | Maximum | |
Recovery amount | 250,000,000 |
Related Party | $10,000,000 or less | Maximum | |
Recovery amount | $ 10,000,000 |
Related Party | $10,000,000 to $40,000,000 | |
Net recovery proceeds due to sellers (as a percent) | 40.00% |
Related Party | Over $40,000,000 | |
Net recovery proceeds due to sellers (as a percent) | 50.00% |
Related Party | Over $40,000,000 | Maximum | |
Recovery amount | $ 40,000,000 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Related Party Transactions Other Items (Details) | Oct. 23, 2015USD ($) | Oct. 10, 2014USD ($)installment | Aug. 29, 2014USD ($)shares | Jun. 17, 2014patent | May. 02, 2014 | Nov. 13, 2013patent | Oct. 10, 2013USD ($)shares | Sep. 30, 2015USD ($) |
Related Party Transactions | ||||||||
Number of patents | patent | 4 | |||||||
Extinguishment of Debt, Amount | $ 654,000 | |||||||
Founder and Former Chief Executive Officer | ||||||||
Related Party Transactions | ||||||||
Funding percentage | 50.00% | |||||||
Founder and Former Chief Executive Officer | MedTech | ||||||||
Related Party Transactions | ||||||||
Consideration paid | $ 100,000 | $ 1,000,000 | ||||||
Percentage of shares (as a percent) | 100.00% | |||||||
Additional payment amount | $ 1,000,000 | |||||||
Business Acquisition Cash Payments | installment | 9 | |||||||
Recovery threshold (as a percent) | 200.00% | |||||||
Ownership interest held (as a percent) | 45.00% | |||||||
Restricted shares granted (in shares) | shares | 200,000 | |||||||
Extinguishment of Debt, Amount | $ 654,000 | |||||||
Founder and Former Chief Executive Officer | Medtech And Orthophoenix | ||||||||
Related Party Transactions | ||||||||
Percentage of shares (as a percent) | 100.00% | |||||||
Founder and Former Chief Executive Officer | Clouding IP, LLC | ||||||||
Related Party Transactions | ||||||||
Consideration paid | $ 2,400,000 | |||||||
Cash | 1,400,000 | |||||||
Notes issued | $ 1,000,000 | |||||||
Stock issued (in shares) | shares | 25,000 | |||||||
Selene Communication Technologies | ||||||||
Related Party Transactions | ||||||||
Number of patents | patent | 3 |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value of Financial Instruments, Income Taxes (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | |
Fair Value of Financial Instruments | |||
Bonds posted with courts | $ 1,748,311 | $ 1,945,196 | |
Earnout liability, short-term | 33,646 | 2,092,000 | $ 2,148,000 |
Earnout liability, long-term | 3,281,238 | 7,360,000 | |
Gain on exchange in fair value adjustment | 6,317,116 | ||
Impairment of patent | $ 5,793,409 | ||
Income Taxes | |||
Deferred tax asset | 12,437,741 | ||
Income tax payable | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basic and Diluted Net Loss per Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Computation of basic and diluted loss per share | ||
Net loss attributable to Marathon Patent Group, Inc. | $ (16,939,859) | $ (3,153,615) |
Denominator | ||
Weighted Average Common Shares - Basic (shares) | 14,208,787 | 11,660,879 |
Weighted Average Common Shares -Diluted (shares) | 14,208,787 | 11,660,879 |
Earnings (Loss) per common share: | ||
Earnings (Loss) - Basic (per share) | $ (1.19) | $ (0.27) |
Earnings (Loss) - Diluted (per share) | $ (1.19) | $ (0.27) |
Warrants | ||
Computation of basic and diluted loss per share | ||
Anti-dilutive securities excluded from computation of diluted shares outstanding (in shares) | 2,021,308 | |
Options | ||
Computation of basic and diluted loss per share | ||
Anti-dilutive securities excluded from computation of diluted shares outstanding (in shares) | 3,383,267 | |
Convertible Notes | ||
Computation of basic and diluted loss per share | ||
Anti-dilutive securities excluded from computation of diluted shares outstanding (in shares) | 66,667 | |
Series B preferred stock | ||
Computation of basic and diluted loss per share | ||
Anti-dilutive securities excluded from computation of diluted shares outstanding (in shares) | 782,004 |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill, Other Intangible Assets, Stock-based Compensation, Reclassification (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Intangible Assets | ||
Impairment of patent | $ 5,793,409 | |
Goodwill | ||
Impairment of Goodwill | $ 2,144,488 | |
Stock-based Compensation | ||
Expected forfeiture rate (as a percent) | 10.3975% | |
Compensation expenses | $ 28,663 | |
Liquidity and Capital Resources | ||
Cash and cash equivalents | 2,600,000 | |
Working capital | $ 12,200,000 |
ACQUISITIONS - CyberFone System
ACQUISITIONS - CyberFone Systems, LLC (Details) | Nov. 13, 2013USD ($)patent | Jun. 21, 2013USD ($) | Apr. 22, 2013USD ($)patent$ / sharesshares | Dec. 31, 2014USD ($) | Dec. 31, 2015USD ($) |
Number of patents (in patents) | patent | 4 | ||||
Common stock issued in acquisition | $ 718,500 | $ 2,078,800 | |||
Goodwill | 4,894,208 | $ 4,482,845 | |||
Goodwill impairment | 2,144,488 | ||||
CyberFone | |||||
Ownership interest held (as a percent) | 100.00% | ||||
Number of pending patents (in patents) | 1 | ||||
Consideration paid | $ 500,000 | ||||
Promissory note issued | $ 500,000 | ||||
Promissory note payment | $ 500,000 | ||||
Recovery percentage payout period | 30 days | ||||
Recovery of licensing or enforcement activities on patents | $ 4,000,000 | ||||
Intangible assets | 1,135,512 | ||||
Goodwill | 2,144,488 | ||||
Net purchase price | $ 3,280,000 | ||||
Goodwill impairment | $ 2,144,488 | ||||
CyberFone | United States | |||||
Number of patents (in patents) | patent | 10 | ||||
CyberFone | Foreign | |||||
Number of patents (in patents) | patent | 27 | ||||
CyberFone | Post-Split | |||||
Common stock issued (in shares) | shares | 923,076 | ||||
Fair value on grant date (in dollars per share) | $ / shares | $ 2.47 | ||||
Common stock issued in acquisition | $ 2,280,000 |
ACQUISITIONS - Dynamic Advances
ACQUISITIONS - Dynamic Advances, IP Liquidity and Sarif Biomedical (Details) | Apr. 01, 2015USD ($) | May. 02, 2014USD ($)paymentshares | May. 02, 2013USD ($)payment | Sep. 30, 2014USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) |
Acquisitions Member | ||||||
Purchase Agreements | 3 | |||||
Dynamic Advances | ||||||
Ownership interest held (as a percent) | 100.00% | |||||
Cash payments made (in payments) | payment | 2 | |||||
Consideration paid | $ 52,250,000 | $ 6,653,078 | ||||
Maximum possible amount of future payments | $ 250,000,000 | |||||
Promissory note issued | 2,375,000 | |||||
Promissory note amount upon late payment | $ 2,850,000 | |||||
Payment agreement to extend maturity date | $ 249,375 | |||||
Note term | 30 days | |||||
Dynamic Advances | Series B Convertible Preferred Stock | ||||||
Preferred stock, shares issued | shares | 391,000 | |||||
IP Liquidity | ||||||
Ownership interest held (as a percent) | 100.00% | |||||
Cash payments made (in payments) | payment | 2 | |||||
Consideration paid | $ 2,850,000 | $ 5,225,000 | ||||
Maximum possible amount of future payments | 250,000,000 | |||||
Promissory note issued | 2,375,000 | |||||
Promissory note amount upon late payment | $ 2,850,000 | |||||
Payment agreement to extend maturity date | $ 249,375 | |||||
Note term | 30 days | |||||
Consideration paid, including capitalized costs | 6,653,078 | |||||
IP Liquidity | Series B Convertible Preferred Stock | ||||||
Preferred stock, shares issued | shares | 391,000 | |||||
Sarif | ||||||
Ownership interest held (as a percent) | 100.00% | |||||
Cash payments made (in payments) | payment | 2 | |||||
Consideration paid | $ 550,000 | $ 552,024 | ||||
Maximum possible amount of future payments | 250,000,000 | |||||
Promissory note issued | 250,000 | |||||
Promissory note amount upon late payment | $ 300,000 | |||||
Payment agreement to extend maturity date | $ 26,250 | |||||
Note term | 30 days |
ACQUISITIONS - Dynamic Advanc37
ACQUISITIONS - Dynamic Advances, IP Liquidity and Sarif Biomedical 2 (Details) - Acquisitions Member | Nov. 02, 2014 | May. 02, 2014USD ($) |
Pay Proceeds Agreement Member | Maximum | ||
Recovery amount | $ 250,000,000 | |
Registration Rights Agreement Member | Maximum | ||
Registration statements required to be filed (in statements) | 3 | |
Filing period | 60 days | |
$10,000,000 or less | Pay Proceeds Agreement Member | Maximum | ||
Recovery amount | $ 10,000,000 | |
$10,000,000 to $40,000,000 | Pay Proceeds Agreement Member | ||
Net recovery proceeds due to sellers (as a percent) | 40.00% | |
$10,000,000 to $40,000,000 | Pay Proceeds Agreement Member | Minimum | ||
Recovery amount | $ 10,000,000 | |
$10,000,000 to $40,000,000 | Pay Proceeds Agreement Member | Maximum | ||
Recovery amount | $ 40,000,000 | |
Over $40,000,000 | Pay Proceeds Agreement Member | ||
Net recovery proceeds due to sellers (as a percent) | 50.00% | |
Over $40,000,000 | Pay Proceeds Agreement Member | Minimum | ||
Recovery amount | $ 40,000,000 | |
Series B Convertible Preferred Stock | Registration Rights Agreement Member | Minimum | ||
Percentage of registrable shares covered in resale registration statement (as a percent) | 10.00% |
ACQUISITIONS (Details)
ACQUISITIONS (Details) | Nov. 15, 2015USD ($) | Apr. 23, 2015USD ($)patent | Oct. 13, 2014USD ($) | Sep. 19, 2014USD ($)$ / sharesshares | Aug. 29, 2014USD ($)$ / sharesshares | Jun. 17, 2014USD ($)patent$ / sharesshares | Nov. 13, 2013USD ($)patent | Apr. 30, 2015patent | Sep. 30, 2013USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($)$ / shares | Sep. 30, 2014USD ($) | Aug. 31, 2014USD ($) |
Number of patents (in patents) | patent | 4 | ||||||||||||
Common stock issued in acquisition | $ 718,500 | $ 2,078,800 | |||||||||||
Loss on debt extinguishment | $ (1,416,915) | ||||||||||||
Acquisition of patents | $ 1,100,000 | 7,816,832 | |||||||||||
Goodwill impairment | 2,144,488 | ||||||||||||
Goodwill | 4,482,845 | 4,894,208 | |||||||||||
Earnout liability, short-term | 33,646 | 2,092,000 | $ 2,148,000 | ||||||||||
Earnout liability, long-term | 3,281,238 | 7,360,000 | |||||||||||
Gain on exchange in fair value adjustment | 6,317,116 | ||||||||||||
Impairment of patent | 5,793,409 | ||||||||||||
Disposal of IP Liquidity patents | $ 2,451,550 | ||||||||||||
Selene Communication Technologies | |||||||||||||
Number of patents (in patents) | patent | 3 | ||||||||||||
Common stock issued (in shares) | shares | 200,000 | ||||||||||||
Consideration paid | $ 50,000 | ||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 4.90 | ||||||||||||
Common stock issued in acquisition | $ 980,000 | ||||||||||||
Intangible assets | 910,000 | ||||||||||||
Net working capital | 37,000 | ||||||||||||
Goodwill | 83,000 | ||||||||||||
Net purchase price | $ 1,030,000 | ||||||||||||
Clouding Corp | |||||||||||||
Promissory note payment | $ 1,000,000 | ||||||||||||
Intangible assets | $ 14,500,000 | ||||||||||||
Goodwill | 1,296,000 | ||||||||||||
Net purchase price | $ 15,796,000 | ||||||||||||
Cash | $ 1,400,000 | ||||||||||||
Promissory Note | 1,000,000 | ||||||||||||
Common Stock | 281,000 | ||||||||||||
Earn Out Liability | 13,115,000 | ||||||||||||
Net purchase price | 15,796,000 | ||||||||||||
TLI Communications LLC | |||||||||||||
Ownership interest held (as a percent) | 100.00% | ||||||||||||
Common stock issued (in shares) | shares | 60,000 | ||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 13.63 | ||||||||||||
Common stock issued in acquisition | $ 818,000 | ||||||||||||
Intangible assets | 940,000 | ||||||||||||
Goodwill | 228,000 | ||||||||||||
Net purchase price | $ 1,168,000 | ||||||||||||
Medtech Entities | |||||||||||||
Ownership interest held (as a percent) | 100.00% | ||||||||||||
Consideration paid | $ 1,000,000 | ||||||||||||
Promissory note issued | 9,000,000 | ||||||||||||
Intangible assets | 12,800,000 | ||||||||||||
Goodwill | 2,700,000 | ||||||||||||
Net purchase price | 15,500,000 | ||||||||||||
Patent purchase agreement | |||||||||||||
Fair value of patent assets acquired | (9,068,504) | ||||||||||||
Notes Payable | $ (10,000,000) | ||||||||||||
Patent purchase agreement | Clouding Corp | |||||||||||||
Consideration paid | 1,400,000 | ||||||||||||
Promissory note issued | $ 1,000,000 | ||||||||||||
Restricted common stock issued (in shares) | shares | 50,000 | ||||||||||||
Net recovery proceeds due to sellers (as a percent) | 50.00% | ||||||||||||
Fair value of restricted common stock | $ 281,000 | ||||||||||||
Net revenues | $ 4,000,000 | ||||||||||||
Interests Sale Agreement Member | Clouding Corp | |||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 5.62 | ||||||||||||
Common stock issued in acquisition | $ 281,000 | ||||||||||||
Interests Sale Agreement Member | TLI Communications LLC | |||||||||||||
Common stock issued (in shares) | shares | 120,000 | ||||||||||||
Consideration paid | $ 350,000 | ||||||||||||
Net recovery proceeds due to sellers (as a percent) | 50.00% | ||||||||||||
Accrued payments related to acquisition | $ 1,401,844 | ||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 6.815 | ||||||||||||
Common stock issued in acquisition | $ 818,000 | ||||||||||||
Interests Sale Agreement Member | Medtech Entities | |||||||||||||
Outstanding amount after renegotiation | 6,250,000 | ||||||||||||
Debt reduction available upon early repayment | $ 750,000 | ||||||||||||
Bridgestone | |||||||||||||
Number of patents (in patents) | patent | 43 | ||||||||||||
Bridgestone | Patent purchase agreement | |||||||||||||
Number of patents (in patents) | patent | 43 | ||||||||||||
Acquisition of patents | $ 3,500,000 | ||||||||||||
Number of installments (in payments) | 2 | ||||||||||||
Maximum possible amount of future payments | $ 7,500,000 | ||||||||||||
Fair value of patent assets acquired | $ 11,000,000 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Intangible Assets | $ 41,014,992 | $ 49,914,360 |
Accumulated Amortization & Impairment | (15,557,353) | (6,550,528) |
Intangible assets, net | 25,457,639 | 43,363,832 |
Patent Impairment | $ 5,793,409 | $ 0 |
Minimum | ||
Weighted average useful life, intangibles | 1 year | |
Maximum | ||
Weighted average useful life, intangibles | 13 years |
INTANGIBLE ASSETS - Future amor
INTANGIBLE ASSETS - Future amortization of current intangible assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Future amortization of intangible assets, net | ||
2,016 | $ 7,495,068 | |
2,017 | 5,312,559 | |
2,018 | 3,715,236 | |
2,019 | 2,879,831 | |
2,020 | 2,143,028 | |
2021 and therafter | 3,911,917 | |
Total | 25,457,639 | |
Amortization and depreciation | $ 10,825,164 | $ 5,528,280 |
INTANGIBLE ASSETS - Intangible
INTANGIBLE ASSETS - Intangible Asset Acquisitions (Details) - patent | Nov. 13, 2013 | Apr. 30, 2015 | Oct. 31, 2014 |
Number of patents | 4 | ||
Bridgestone | |||
Number of patents | 43 | ||
Medtech Entities | |||
Number of patents | 3 |
STOCKHOLDERS' EQUITY Common Sto
STOCKHOLDERS' EQUITY Common Stock Warrants (Details) - Common Stock Warrant - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Warrants | ||
Warrants, beginning balance | 1,926,308 | |
Granted | 100,000 | |
Cancelled | 0 | |
Exercised | 5,000 | |
Warrants, ending balance | 2,021,308 | 1,926,308 |
Warrants Exercisable | 2,021,308 | |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price, Warrants Outstanding, Beginning Balance | $ 4.10 | |
Weighted Average Exercise Price, Warrants Granted | 7.44 | |
Weighted Average Exercise Price, Warrants Exercised | 3.75 | |
Weighted Average Exercise Price, Warrants Outstanding, Ending Balance | 4.27 | $ 4.10 |
Weighted average fair value of warrants granted during the period | $ 3.19 | |
Weighted Average Remaining Life | ||
Weighted Average Remaining Life, beginning | 1 year 6 months 18 days | |
Weighted Average Remaining Life (in years) | 4 years 29 days | |
Weighted Average Remaining Life, ending | 10 months 13 days |
STOCKHOLDERS' EQUITY (Details 1
STOCKHOLDERS' EQUITY (Details 1) - $ / shares | Oct. 14, 2015 | Sep. 16, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 |
Number of Options | |||||
Granted | 80,000 | ||||
Exercised | 29,230 | ||||
Weighted Average Exercise Price | |||||
Granted | $ 1.86 | ||||
Common Stock Option | |||||
Number of Options | |||||
Options outstanding, beginning | 3,017,690 | ||||
Granted | 880,000 | ||||
Forfeited | 480,455 | ||||
Exercised | 33,968 | ||||
Options outstanding, ending | 3,017,690 | 3,383,267 | 3,017,690 | ||
Options Exercisable | 1,925,963 | ||||
Options expected to vest | 1,457,304 | ||||
Weighted Average Exercise Price | |||||
Weighted average exercise price, beginning balance | $ 4.64 | ||||
Granted | 3.81 | ||||
Forfeited | 5.56 | ||||
Exercised | 3.24 | ||||
Weighted average exercise price, ending balance | $ 4.64 | 4.25 | $ 4.64 | ||
Weighted average fair value of options granted during the period | $ 1.48 | ||||
Weighted Average Remaining Life | |||||
Weighted Average Remaining Life, beginning | 7 years 9 months 7 days | ||||
Weighted Average Remaining Life, ending | 7 years 1 month 10 days |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) | Dec. 09, 2015USD ($)$ / sharesshares | Nov. 04, 2015USD ($)$ / sharesshares | Oct. 20, 2015shares | Oct. 14, 2015installmentshares | Sep. 21, 2015USD ($)$ / sharesshares | Mar. 13, 2015shares | Jan. 29, 2015shares | Dec. 22, 2014$ / shares | Oct. 06, 2014shares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 19, 2014USD ($)$ / sharesshares | Sep. 16, 2014USD ($)itemshares | Jul. 18, 2014shares | Jun. 30, 2014USD ($)$ / sharesshares | Jun. 02, 2014shares | May. 02, 2014USD ($)shares | Apr. 22, 2014USD ($)$ / shares | Nov. 13, 2013USD ($)shares | Nov. 12, 2013USD ($)shares | Jul. 29, 2013USD ($)$ / sharesshares | Jul. 25, 2013USD ($)$ / sharesshares | Jun. 28, 2013USD ($)item$ / sharesshares | Jun. 24, 2013 | Jun. 11, 2013USD ($)$ / sharesshares | May. 31, 2013USD ($)$ / sharesitemshares | May. 22, 2013USD ($)$ / sharesshares | Apr. 17, 2013USD ($)$ / sharesshares | Oct. 01, 2012 | Aug. 31, 2013USD ($)$ / sharesshares | Jun. 30, 2013USD ($)$ / sharesshares | Sep. 30, 2015shares | Jun. 30, 2015shares | Mar. 31, 2015shares | Dec. 31, 2014$ / sharesshares | Sep. 30, 2014$ / sharesshares | Sep. 30, 2013USD ($)$ / sharesshares | Jun. 30, 2013$ / shares | Dec. 31, 2013USD ($) | Dec. 31, 2013USD ($) | Dec. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014USD ($)$ / sharesshares | Sep. 17, 2015payment | Apr. 07, 2015period | Sep. 17, 2014shares | Apr. 15, 2014period | Jul. 18, 2013$ / shares | Apr. 30, 2013USD ($)$ / sharesshares | Dec. 07, 2011$ / sharesshares | Dec. 06, 2011$ / sharesshares |
Common stock, shares authorized | 200,000,000 | 200,000,000 | 200,000,000 | 200,000,000 | 75,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.001 | |||||||||||||||||||||||||||||||||||||||||||
Preferred stock, shares authorized | 100,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued for warrants exercised (in shares) | 5,000 | 29,230 | |||||||||||||||||||||||||||||||||||||||||||||||
Warrant price | $ / shares | $ 3.75 | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock, Dividend Rate, Percentage | 200.00% | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued in acquisition | $ | $ 718,500 | $ 2,078,800 | |||||||||||||||||||||||||||||||||||||||||||||||
Number of monthly installments | period | 12 | 12 | |||||||||||||||||||||||||||||||||||||||||||||||
Fair market value of restricted shares issued | $ | $ 718,500 | ||||||||||||||||||||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 900,500 | ||||||||||||||||||||||||||||||||||||||||||||||||
Vesting period (in months) | 12 months | 12 months | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units | 11,392 | 1,999,996 | 307,692 | 4,808 | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units, Gross Proceeds | $ | $ 29,620 | $ 5,200,000 | $ 800,000 | $ 25,000 | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units, Price Per Unit | $ / shares | 2.60 | 2.60 | 2.60 | 5.20 | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units, Common Shares | 1 | 1 | 1 | 2 | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units, Term Of Warrant | 3 years | 3 years | 3 years | 5 years | |||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units, Number of Securities Called by Each Warrant | 0.5 | 0.5 | 0.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Common Stock Subscription Units, Warrant Exercise Price | $ / shares | 3.25 | 3.25 | 3.25 | 3.90 | |||||||||||||||||||||||||||||||||||||||||||||
Consulting Agreement Term | 1 year | 1 year | 12 months | ||||||||||||||||||||||||||||||||||||||||||||||
Number of consultants | item | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Retainage Deposit | $ | $ 30,000 | $ 5,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Maximum beneficial ownership percentage | 9.99% | ||||||||||||||||||||||||||||||||||||||||||||||||
Timeframe to file registration statement | 45 days | ||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of purchase price | 1.00% | ||||||||||||||||||||||||||||||||||||||||||||||||
Placement agent fees | $ | $ 170,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Number Of Broker-Dealers | item | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 385,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Exercise stock options (in shares) | 29,230 | ||||||||||||||||||||||||||||||||||||||||||||||||
Payments of Stock Issuance Costs | $ | $ 35,029 | ||||||||||||||||||||||||||||||||||||||||||||||||
Legal Fees | $ | $ 42,375 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Services, Amortization | $ | $ 153,128 | $ 78,750 | |||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expense | |||||||||||||||||||||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 135,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Services | $ | $ 306,256 | ||||||||||||||||||||||||||||||||||||||||||||||||
Vest Immediately | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued for services (in shares) | 15,384 | ||||||||||||||||||||||||||||||||||||||||||||||||
Vest Over Twelve Months | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued for services (in shares) | 46,154 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Reverse stock split ratio (as a percent) | .07692 | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock Dividend Ratio (as a percent) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued for warrants exercised (in shares) | 5,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | 9,616 | 923,076 | |||||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 2.47 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued in acquisition | $ | $ 2,280,000 | $ 19 | |||||||||||||||||||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 513,000 | $ 334,500 | $ 818,000 | $ 30,000 | $ 306,251 | $ 58,000 | $ 34,480 | $ 21 | |||||||||||||||||||||||||||||||||||||||||
Stock issued for services (in shares) | 300,000 | 150,000 | 60,000 | 60,000 | 8,760 | 134,616 | 46,154 | 61,538 | 23,076 | 11,538 | 210,000 | ||||||||||||||||||||||||||||||||||||||
Shares issued, value per share | $ / shares | $ 1.71 | $ 2.23 | $ 13.63 | $ 3.425 | $ 2.275 | $ 2.925 | $ 2.515 | $ 3 | $ 2.515 | ||||||||||||||||||||||||||||||||||||||||
Proceeds from Issuance of Common Stock | $ | $ 25,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued | 134,409 | 48,078 | |||||||||||||||||||||||||||||||||||||||||||||||
Exercise stock options (in shares) | 26,722 | 33,968 | 84,652 | ||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||
Restricted shares issued (in shares) | 50,000 | 200,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Shares issued, value per share | $ / shares | $ 5.62 | $ 4.90 | $ 5.62 | ||||||||||||||||||||||||||||||||||||||||||||||
Fair value of restricted issuance | $ | $ 281,000 | $ 980,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock [Member] | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Restricted shares issued (in shares) | 300,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued, value per share | $ / shares | $ 2.395 | ||||||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer and Director | Restricted Stock [Member] | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 192,308 | ||||||||||||||||||||||||||||||||||||||||||||||||
Fair market value of restricted stock award (in dollars per share) | $ / shares | $ 2.635 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aggregate value of restricted stock award | $ | $ 506,250 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | $ | $ 506,250 | ||||||||||||||||||||||||||||||||||||||||||||||||
Director | |||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued in acquisition | $ | $ 45,995 | ||||||||||||||||||||||||||||||||||||||||||||||||
Vesting period (in months) | 12 months | ||||||||||||||||||||||||||||||||||||||||||||||||
Number of Board Members | item | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Director | Restricted Stock [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||
Granted | 6,178 | ||||||||||||||||||||||||||||||||||||||||||||||||
Director | Restricted Stock [Member] | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Aggregate value of restricted stock award | $ | $ 45,995 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consultants | |||||||||||||||||||||||||||||||||||||||||||||||||
Number of monthly installments | installment | 24 | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A preferred stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||||||||||||||||||||||||||||||||||||||
Series B preferred stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | 782,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued in acquisition | $ | $ 2,807,380 | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock converted to Common Stock | 16,666 | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B preferred stock | GRQ | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | 50,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued in acquisition | $ | $ 345,334 | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred shares agreement | 200,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Percent vested upon execution of the GRQ Consulting Agreement | 50.00% | ||||||||||||||||||||||||||||||||||||||||||||||||
Percent vested after execution | 50.00% | ||||||||||||||||||||||||||||||||||||||||||||||||
Number of monthly installments | payment | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||
Restricted shares issued (in shares) | 100,000 | 150,000 | |||||||||||||||||||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 1,103,581 | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock converted to Common Stock | 183,330 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock issued (in shares) | 100,000 | 16,666 | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||
Fair value on grant date (in dollars per share) | $ / shares | $ 1.61 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common stock issued in acquisition | $ | $ 161,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Exercise stock options (in shares) | 33,968 | 84,652 |
STOCKHOLDERS' EQUITY - Warrants
STOCKHOLDERS' EQUITY - Warrants (Details Narrative) - Common Stock Warrant - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Warrants to purchase shares of common stock | 100,000 | |
Warrants exercised | 5,000 | |
Warrants cancelled | 0 | |
Stock compensation expense | $ 3,465 | |
Unrecognized compensation expense, warrants | $ 0 | |
Class of Warrant or Right, Outstanding | 2,021,308 | 1,926,308 |
STOCKHOLDERS' EQUITY - Options
STOCKHOLDERS' EQUITY - Options (Details Narrative) | Oct. 14, 2015periodinstallment$ / sharesshares | Sep. 16, 2015$ / sharesshares | Apr. 07, 2015USD ($)period$ / sharesshares | Mar. 18, 2015installment$ / sharesshares | Mar. 06, 2015installment$ / sharesshares | Feb. 05, 2015period$ / sharesshares | Jan. 20, 2015 | Oct. 31, 2014period$ / sharesshares | Sep. 16, 2014period$ / sharesshares | Aug. 29, 2014period$ / sharesshares | Jul. 18, 2014shares | Jun. 18, 2014shares | Jun. 15, 2014period$ / sharesshares | May. 15, 2014period$ / sharesshares | May. 14, 2014period$ / sharesshares | Apr. 15, 2014period$ / sharesshares | Nov. 18, 2013USD ($)installment$ / sharesshares | Nov. 11, 2013USD ($)$ / sharesshares | Aug. 19, 2013item$ / sharesshares | Jun. 28, 2013item | Jun. 25, 2013item$ / sharesshares | Jun. 19, 2013periodemployeeitem$ / sharesshares | Jun. 11, 2013perioddirector$ / sharesshares | May. 22, 2013 | Apr. 17, 2013 | Mar. 08, 2013$ / sharesshares | Mar. 01, 2013period$ / sharesshares | Jan. 28, 2013period$ / sharesshares | Nov. 14, 2012period$ / sharesshares | Dec. 31, 2015USD ($) | Sep. 15, 2015period | Dec. 31, 2014USD ($) |
Consulting Agreement Term | 1 year | 1 year | 12 months | |||||||||||||||||||||||||||||
Granted | shares | 80,000 | |||||||||||||||||||||||||||||||
Number of consultants | item | 2 | |||||||||||||||||||||||||||||||
Option term | 10 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 1.86 | |||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 900,500 | |||||||||||||||||||||||||||||||
Number of monthly installments | period | 12 | 12 | ||||||||||||||||||||||||||||||
Expected term | 6 years 6 months | 6 years 6 months | 5 years 9 months | |||||||||||||||||||||||||||||
Volatility | 49.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.57% | |||||||||||||||||||||||||||||||
Unrecognized compensation expense, options | $ | $ 2,856,485 | |||||||||||||||||||||||||||||||
Intrinsic value, stock options outstanding | $ | $ 0 | |||||||||||||||||||||||||||||||
Consultants | ||||||||||||||||||||||||||||||||
Granted | shares | 70,000 | |||||||||||||||||||||||||||||||
Option term | 10 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 1.86 | |||||||||||||||||||||||||||||||
Number of monthly installments | installment | 24 | |||||||||||||||||||||||||||||||
Expected term | 6 years 6 months | |||||||||||||||||||||||||||||||
Volatility | 49.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.57% | |||||||||||||||||||||||||||||||
Stock Option | ||||||||||||||||||||||||||||||||
Consulting Agreement Term | 3 years | |||||||||||||||||||||||||||||||
Granted | shares | 280,000 | 20,000 | 20,000 | 25,000 | 160,000 | 60,000 | 290,000 | 40,000 | 20,000 | 600,000 | 607,692 | 134,614 | 46,154 | |||||||||||||||||||
Number of term options | item | 2 | 4 | 2 | |||||||||||||||||||||||||||||
Number of consultants | item | 2 | 4 | ||||||||||||||||||||||||||||||
Option term | 10 years | 10 years | 5 years | 5 years | 5 years | 10 years | 5 years | 10 years | 5 years | 10 years | 5 years | 5 years | 5 years | 5 years | 5 years | |||||||||||||||||
Option price | $ / shares | $ 2.03 | $ 6.76 | $ 6.61 | $ 7.37 | $ 6.80 | $ 6.40 | $ 7.445 | $ 5.62 | $ 5.05 | $ 3.295 | $ 2.85 | $ 2.925 | $ 3.425 | $ 2.47 | ||||||||||||||||||
Vesting on first anniversary (as a percent) | 33.00% | 33.00% | 33.00% | 33.00% | ||||||||||||||||||||||||||||
Vesting on second anniversary (as a percent) | 33.00% | 33.00% | 33.00% | |||||||||||||||||||||||||||||
Vesting on third anniversary (as a percent) | 34.00% | 34.00% | 34.00% | 34.00% | ||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 984,447 | |||||||||||||||||||||||||||||||
Number of employee | employee | 2 | |||||||||||||||||||||||||||||||
Percent vested upon execution of the GRQ Consulting Agreement | 25.00% | |||||||||||||||||||||||||||||||
Percent vested after execution | 2.083% | |||||||||||||||||||||||||||||||
Number of monthly installments | 24 | 12 | 12 | 24 | 12 | 24 | 12 | |||||||||||||||||||||||||
Cancelled | shares | 600,000 | |||||||||||||||||||||||||||||||
Number of annual installments | period | 36 | 36 | ||||||||||||||||||||||||||||||
Expected term | 5 years 6 months | 3 years | 3 years | 3 years 3 months | 3 years | 3 years 3 months | 3 years | 2 years 6 months | ||||||||||||||||||||||||
Volatility | 47.00% | 41.00% | 41.00% | 47.00% | 62.00% | 53.00% | 49.00% | 50.00% | 51.00% | 100.00% | ||||||||||||||||||||||
Discount rate | 1.72% | 0.92% | 1.16% | 0.92% | 1.95% | 1.78% | 1.04% | 1.05% | 0.84% | |||||||||||||||||||||||
Risk free interest rate | 0.65% | |||||||||||||||||||||||||||||||
Monthly retainer | $ | $ 27,000 | |||||||||||||||||||||||||||||||
Stock Option | Chief Financial Officer | ||||||||||||||||||||||||||||||||
Employment Agreement Term | 2 years | 1 year | ||||||||||||||||||||||||||||||
Granted | shares | 19,114 | 230,000 | 76,924 | |||||||||||||||||||||||||||||
Option term | 10 years | 10 years | ||||||||||||||||||||||||||||||
Option price | $ / shares | $ 2.95 | $ 3.25 | ||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 511,036 | |||||||||||||||||||||||||||||||
Number of monthly installments | installment | 24 | |||||||||||||||||||||||||||||||
Number of annual installments | period | 3 | |||||||||||||||||||||||||||||||
Expected term | 5 years | |||||||||||||||||||||||||||||||
Volatility | 101.00% | |||||||||||||||||||||||||||||||
Risk free interest rate | 1.40% | |||||||||||||||||||||||||||||||
Stock Option | Chief Technology Officer | ||||||||||||||||||||||||||||||||
Granted | shares | 19,230 | 153,846 | ||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 5.525 | |||||||||||||||||||||||||||||||
Number of monthly installments | period | 24 | |||||||||||||||||||||||||||||||
Cancelled | shares | 134,616 | |||||||||||||||||||||||||||||||
Stock Option | Chief Operating Officer | ||||||||||||||||||||||||||||||||
Employment Agreement Term | 2 years | |||||||||||||||||||||||||||||||
Granted | shares | 76,924 | 76,924 | ||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 2.47 | $ 5.525 | ||||||||||||||||||||||||||||||
Number of monthly installments | period | 24 | 24 | ||||||||||||||||||||||||||||||
Stock Option | Chief Executive Officer | ||||||||||||||||||||||||||||||||
Employment Agreement Term | 2 years | |||||||||||||||||||||||||||||||
Granted | shares | 200,000 | 307,692 | ||||||||||||||||||||||||||||||
Option term | 10 years | 10 years | ||||||||||||||||||||||||||||||
Option price | $ / shares | $ 2.965 | $ 3.25 | ||||||||||||||||||||||||||||||
Value of stock issued for services | $ | $ 442,692 | |||||||||||||||||||||||||||||||
Number of monthly installments | 24 | 24 | ||||||||||||||||||||||||||||||
Expected term | 5 years | 5 years | ||||||||||||||||||||||||||||||
Volatility | 100.00% | 192.00% | ||||||||||||||||||||||||||||||
Risk free interest rate | 1.33% | 0.61% | ||||||||||||||||||||||||||||||
Stock Option | Chief Executive Officer And Two Directors | ||||||||||||||||||||||||||||||||
Granted | shares | 353,846 | |||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 2.625 | |||||||||||||||||||||||||||||||
Number of directors | director | 2 | |||||||||||||||||||||||||||||||
Number of monthly installments | period | 24 | |||||||||||||||||||||||||||||||
Stock Option | Existing Employees | ||||||||||||||||||||||||||||||||
Granted | shares | 80,000 | |||||||||||||||||||||||||||||||
Option term | 10 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 4.165 | |||||||||||||||||||||||||||||||
Vesting on first anniversary (as a percent) | 33.00% | |||||||||||||||||||||||||||||||
Vesting on second anniversary (as a percent) | 33.00% | |||||||||||||||||||||||||||||||
Vesting on third anniversary (as a percent) | 34.00% | |||||||||||||||||||||||||||||||
Number of annual installments | period | 3 | |||||||||||||||||||||||||||||||
Expected term | 6 years 6 months | |||||||||||||||||||||||||||||||
Volatility | 63.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.97% | |||||||||||||||||||||||||||||||
Stock Option | Director | ||||||||||||||||||||||||||||||||
Granted | shares | 7,608 | 15,384 | ||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 3.25 | |||||||||||||||||||||||||||||||
Vesting on first anniversary (as a percent) | 33.00% | |||||||||||||||||||||||||||||||
Vesting on second anniversary (as a percent) | 33.00% | |||||||||||||||||||||||||||||||
Vesting on third anniversary (as a percent) | 34.00% | |||||||||||||||||||||||||||||||
Stock Option | Consultants | ||||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Stock Option | Consultant One Member | ||||||||||||||||||||||||||||||||
Granted | shares | 30,770 | |||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 2.625 | |||||||||||||||||||||||||||||||
Number of monthly installments | period | 24 | |||||||||||||||||||||||||||||||
Stock Option | Minimum | ||||||||||||||||||||||||||||||||
Percent Of Gross Proceeds | 2.00% | |||||||||||||||||||||||||||||||
Stock Option | Maximum | ||||||||||||||||||||||||||||||||
Percent Of Gross Proceeds | 5.00% | |||||||||||||||||||||||||||||||
Stock Option 2 | ||||||||||||||||||||||||||||||||
Granted | shares | 100,000 | |||||||||||||||||||||||||||||||
Option term | 10 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 6.40 | |||||||||||||||||||||||||||||||
Number of annual installments | period | 36 | |||||||||||||||||||||||||||||||
Expected term | 5 years 9 months | |||||||||||||||||||||||||||||||
Volatility | 53.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.78% | |||||||||||||||||||||||||||||||
Stock Option 2 | Consultants | ||||||||||||||||||||||||||||||||
Granted | shares | 160,000 | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 4.165 | |||||||||||||||||||||||||||||||
Vesting on first anniversary (as a percent) | 33.00% | |||||||||||||||||||||||||||||||
Vesting on second anniversary (as a percent) | 33.00% | |||||||||||||||||||||||||||||||
Vesting on third anniversary (as a percent) | 34.00% | |||||||||||||||||||||||||||||||
Number of annual installments | period | 3 | |||||||||||||||||||||||||||||||
Expected term | 3 years 6 months | |||||||||||||||||||||||||||||||
Volatility | 50.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.00% | |||||||||||||||||||||||||||||||
Stock Option 3 | ||||||||||||||||||||||||||||||||
Granted | shares | 680,000 | 290,000 | ||||||||||||||||||||||||||||||
Option term | 10 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 6.40 | $ 4.165 | ||||||||||||||||||||||||||||||
Number of monthly installments | period | 24 | |||||||||||||||||||||||||||||||
Number of annual installments | period | 36 | |||||||||||||||||||||||||||||||
Expected term | 5 years 9 months | 6 years 6 months | ||||||||||||||||||||||||||||||
Volatility | 53.00% | 63.00% | ||||||||||||||||||||||||||||||
Discount rate | 1.78% | 1.97% | ||||||||||||||||||||||||||||||
Stock Option 4 | ||||||||||||||||||||||||||||||||
Granted | shares | 30,000 | |||||||||||||||||||||||||||||||
Option term | 5 years | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 6.40 | |||||||||||||||||||||||||||||||
Number of monthly installments | period | 24 | |||||||||||||||||||||||||||||||
Expected term | 3 years 3 months | |||||||||||||||||||||||||||||||
Volatility | 49.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.03% | |||||||||||||||||||||||||||||||
Time Based Shares | ||||||||||||||||||||||||||||||||
Granted | shares | 70,000 | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 6.76 | |||||||||||||||||||||||||||||||
Expected term | 6 years 3 months | |||||||||||||||||||||||||||||||
Volatility | 53.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.53% | |||||||||||||||||||||||||||||||
Time Based Shares | Minimum | ||||||||||||||||||||||||||||||||
Option price | $ / shares | $ 8.99 | |||||||||||||||||||||||||||||||
Performance Shares | ||||||||||||||||||||||||||||||||
Granted | shares | 70,000 | |||||||||||||||||||||||||||||||
Option price | $ / shares | $ 6.76 | |||||||||||||||||||||||||||||||
Expected term | 10 years | |||||||||||||||||||||||||||||||
Volatility | 61.00% | |||||||||||||||||||||||||||||||
Discount rate | 1.89% | |||||||||||||||||||||||||||||||
Performance Shares | Minimum | ||||||||||||||||||||||||||||||||
Option price | $ / shares | $ 10.14 |
COMMITMENTS AND CONTINGENCIES47
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | May. 01, 2014 | Dec. 31, 2015 |
COMMITMENTS AND CONTINGENCIES | ||
Lease term | 7 years | |
Security deposit | $ 7,564 | |
Rent payment grace period | 5 months | |
Lease termination option available | 42nd month of the lease | |
Minimum future lease payments, net of rent abatement | ||
2,016 | $ 68,244 | |
2,017 | 71,288 | |
2,018 | 74,540 | |
2,019 | 77,872 | |
Thereafter | 108,840 | |
Total | $ 400,784 |
INCOME TAXES - Current and defe
INCOME TAXES - Current and deferred provision (benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Current: | ||
Federal | $ (28,000) | |
State | 48,188 | |
Total | 20,188 | |
Deferred: | ||
Federal | (6,046,674) | $ (3,942,754) |
State | (1,171,260) | (824,804) |
Foreign | (958,702) | (184,751) |
Total | (8,176,636) | (4,952,309) |
Net income tax benefit | $ (8,156,448) | $ (4,952,309) |
INCOME TAXES - Effective tax ra
INCOME TAXES - Effective tax rate and statutory federal rate (in dollars) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Reconciliation of effective tax rate and statutory federal rate (in dollars) | ||
Tax benefit computed at "expected" statutory rate | $ (8,533,296) | $ (2,742,728) |
State income taxes, net of benefit | (818,432) | (48,135) |
Permanent differences : | ||
Deemed Dividend | 738,904 | 432,307 |
Stock based compensation and consulting | 208,481 | 581,216 |
Other permanent differences | 247,895 | 2,535 |
Change in valuation allowance | (3,177,504) | |
Net income tax benefit | $ (8,156,448) | $ (4,952,309) |
INCOME TAXES - Effective tax 50
INCOME TAXES - Effective tax rate and statutory federal rate (in percent) (Details) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Reconciliation of effective tax rate and statutory federal rate (as a percent) | ||
Computed "expected" tax expense (benefit) | (34.00%) | (34.00%) |
State income taxes | (3.26%) | (0.60%) |
Permanent differences | 4.75% | 12.60% |
Change in valuation allowance | (39.40%) | |
Effective tax rate | (32.51%) | (61.39%) |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets: | ||
Total deferred tax assets | $ 12,437,741 | $ 4,789,293 |
Total deferred tax liabilities | (1,044,997) | (1,823,884) |
Net deferred tax asset | $ 11,392,744 | $ 2,965,409 |
INCOME TAXES - Net operating lo
INCOME TAXES - Net operating loss carryforward (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2015USD ($) | |
INCOME TAXES | |
Net operating loss carryforward, federal | $ 21.6 |
Net operating loss carryforward, state | $ 20.2 |
Net operating loss carryforward begin expiring | Jan. 1, 2032 |