Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

Note 17. Commitments and Contingencies

Legal Matters

We are subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Leases

We lease certain office space, manufacturing facilities and equipment under long-term operating leases expiring at various dates through February 2016. The majority of our lease obligation relates to our lease agreement for the facility at Fremont, California with approximately 27,760 square feet commenced on December 1, 2008 for a term of seven years, with an option by us to cancel the lease after five years, upon forfeiture of the security deposit and payment of one-half of the fifth year’s rent. On June 28, 2013, we sent a notice to terminate the lease effective November 30, 2013 with an early termination penalty of $142,000 which was recorded as an expense in the third quarter of 2013. On August 2, 2013, we signed a new lease agreement for the current facility with reduced footage of 20,767 square feet, which commenced on December 1, 2013 for a term of two years. The reduced square footage, the reduced rate per square foot, and the expected reduced operating costs, would save us approximately $382,000 during 2014 and 2015.Total rent expenses under these operating leases were $638,000, $447,000 and $460,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Total minimum lease payments under these leases as of December 31, 2013 are summarized below (in thousands):

	Lease Payments
2014	$	174
2015		152
2016		22
2017		21
Thereafter		68
	$	437

Royalty Agreement

We entered into a royalty agreement with a vendor effective December 3, 2010 with a term of eight years, terminating December 31, 2018. We and our related companies are granted a worldwide, nonexclusive, royalty bearing, irrevocable license to certain patents for the term on the agreement. We shall pay a total of $7.0 million royalty payment over eight years that began in 2011 based on future royalty bearing sales. This agreement contains a clause that allows us to claim for credit, starting in 2013, in the event that the royalty bearing sales for the year is lower than a pre-determined amount set forth in this agreement. Royalty expense under this agreement for 2013 was $530,000, which was net of claim for credit of $270,000, and $1.4 million and $1.3 million for the years ended December 31, 2012 and 2011, respectively, and was included in cost of revenue. Total royalty payments under this agreement as of December 31, 2013 are summarized below (in thousands):

	Royalty Payments
2014	$	800
2015		800
2016		575
2017		575
2018		575
	$	3,325

- Definition

The entire disclosure for commitments and contingencies.

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