Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

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, warehouse facilities and equipment under long-term operating leases expiring at various dates through December 2025. The majority of our lease obligations relates to our lease agreement for the facility in Fremont, California with approximately 19,467 square feet. The original lease 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 total $382,000 during 2014 and 2015. In September 2014, we signed an amendment to the current lease to further reduce square footage to 19,467 square feet and to extend the term of the lease two more years. Total rent expenses under these operating leases were $260,000, $638,000 and $447,000 for the years ended December 31, 2014, 2013 and 2012, respectively. Total minimum lease payments under these leases as of December 31, 2014 are summarized below (in thousands):

	Lease Payments
2015	$	260
2016		165
2017		159
2018		30
2019		26
Thereafter		126
	$	766

Royalty Agreement

We entered into a royalty agreement with a competitor 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 was $577,000 which was net of claim for credit of $223,000 and $530,000 which was net of claim for credit of $270,000 for the years ended December 31, 2014 and 2013, respectively. Royalty expense was $1.4 million for the year ended December 31, 2012. These expenses were included in cost of revenue. Total royalty payments under this agreement as of December 31, 2014 are summarized below (in thousands):

	Royalty Payments
2015		800
2016		575
2017		575
2018		575
	$	2,525

- Definition

The entire disclosure for commitments and contingencies.

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