The Company has entered into a lease for 14,782 square feet of office and laboratory space located in Austin, Texas. The triple net lease has a term of 48 months and commenced on June 1, 2014. The annual base rent in the first year of the lease was $154,324 and increases by $3,548 in each succeeding year of the lease. In addition, the Company is required to pay its proportionate share of operating costs for the building. At March 31, 2018, the remaining annual base rent commitments under the lease are $27,495. The Company incurred rent expense of $57,802 and $57,656 for the three months ended March 31, 2018 and 2017, respectively.

 

 

In 2015, the Company entered into licensing agreements which expire on February 7, 2033. Per the agreements, the Company has an exclusive royalty-free license which enhances its intellectual property portfolio related to semiconductor power switches. The agreements include both fixed and variable payments. The variable payments are a function of the number of associated patent filings pending and patents issued under the agreements. The Company will pay $10,000 for each patent filing pending and $20,000 for each patent issued within 20 days of December 21, 2017 and each subsequent year of the agreement, up to a maximum of $100,000 per year (i.e. five issued patents). At March 31, 2018, two patents associated with the agreements had been issued and the corresponding long-term liability for the estimated present value of future payments under the licensing agreement is $459,216. The Company is accruing interest for future payments related to the issued patent associated with the agreement.

 

Legal Proceedings 

 

The Company is in arbitration with Libra Industries, Inc.(Libra), its prior contract manufacturer, with both parties asserting claims against the other party. The arbitration hearing is April 23, 2018 to April 25, 2018 in Travis County, Texas. At this time, the Company is unable to estimate the possible loss, if any, associated with this proceeding. At March 31, 2018 and December 31, 2017, the Company recorded a $100,000 accrual based on an expired settlement offer made by the Company to Libra.