The Company leases 14,782 square feet of office and laboratory space located in Austin, Texas. On April 20, 2018, the Company entered into an amendment to its existing operating lease which extended the lease term from May 31, 2018 to May 21, 2021. The annual base rent in the first year of the lease extension is $184,775 and increases by $7,391 in each succeeding year of the lease extension. In addition, the Company is required to pay its proportionate share of operating costs for the building under this triple net lease. Future minimum payments under the lease, as amended, are as follows:

 

 

The Company incurred rent expense of $60,373 and $118,176 for the three and six months ended June 30, 2018, respectively, and $59,718 and $117,074 for the three and six months ended June 30, 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 June 30, 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 $462,199. The Company is accruing interest for future payments related to the issued patent associated with the agreement.

 

 

In 2017, the Company entered into arbitration with Libra Industries, Inc. (

), its prior contract manufacturer, with both parties asserting claims against the other party. At December 31, 2017, the Company recorded a $100,000 accrual for the arbitration based on an expired settlement offer made by the Company to Libra. On June 21, 2018, the arbitrator issued a final and binding award on all issues except as to attorney’s fees and costs. In the Final Award, the arbitrator denied Libra’s claims and awarded the Company $163,105 on it claims. On July 15, 2018, the arbitrator issued a Supplemental Final Award on Attorney’s Fees and Costs, awarding the Company an additional $165,346. As a result, during the three months ended June 30, 2018, the Company reversed the previously recorded $100,000 accrual resulting in a reduction to general and administrative expense and recognized the Final Award of $163,105 as a reduction in cost of product revenue and the Supplemental Final Award on Attorney’s Fees and Costs of $165,347 as a reduction in general and administrative expense. At June 30, 2018, the total award of $328,451 is included within prepayments and other current assets on the Company’s Balance Sheet. The Company received full payment on the total award on August 2, 2018.

  

On April 11, 2018, the Company received $203,121 pursuant to a Judgment of Garnishment dated March 23, 2018 and related to the non-payment of an overdue accounts receivable balance by a former customer of the Company. The judgment included the past due balance of $162,000 plus late fees and recovery of legal costs. At March 31, 2018, the Company had fully reserved the $162,000 balance in its allowance for doubtful accounts. The Company did not reverse the allowance for doubtful accounts at March 31,2018 as the funds could be subject to clawback during the quarter ending June 30, 2018 if the former customer filed for bankruptcy. The former customer did not file for bankruptcy during the quarter ended June 30, 2018 and, as a result, the Company reversed the allowance for doubtful accounts of $162,000 with a corresponding reduction in sales and marketing expense, recognized interest income of $35,064 associated with late fees and a reduction in general and administrative expense of $6,057 for the partial recovery of legal fees.