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Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

NOTE 13—COMMITMENTS AND CONTINGENCIES

(a) Leases of Property and Equipment

Office rental and automobile leasing expenses for 2013 and 2014 were $1,239 and $1,103 respectively (includes $260 and $237 for discontinued operations for 2013 and 2014, respectively). The Company and its subsidiaries lease office space, cars and equipment under operating lease agreements. Those leases will expire on different dates from 2016 to 2020 for continuing operations and from 2016 to 2017 for discontinued operations. Future minimum lease payments on non-cancelable operating leases as of December 31, 2014 are as follows:

	Discontinued operations		Continuing operations		Total
Years ending December 31,
2015	$	241	$	786	$	1,027
2016		184		292		476
2017		—		147		147
2018		—		107		107
2019		—		109		109
2020 and thereafter		—		27		27
	$	425	$	1,468	$	1,893

Future minimum lease payments for discontinued operations have been accrued and are included in Other current liabilities in discontinued operations (see Note 3).

(b) Guarantees

The Company’s DSIT subsidiary provides various performance, advance and tender guarantees as required in the normal course of its operations. As at December 31, 2014, such guarantees totaled approximately $3,335, which are due to expire on different dates from 2015 to 2017. As a security for these guarantees, DSIT has deposited with Israeli banks $1,117 ($467 presented as current restricted deposits and $650 as non-current restricted deposits.

See Note 10(a) with respect to guarantees on the Company’s lines of credit.

(i) In June 2012, the Company's DSIT and USSI subsidiaries were awarded a joint $900 grant from the Israel-United States Binational Industrial Research and Development (“BIRD”) Foundation for the joint development of the next generation integrated passive/active threat detection system for underwater site protection. In September 2012, a Cooperation and Project Funding Agreement was signed between the companies and the BIRD Foundation which allowed for the commencement of the funding expected to take place over a 24 month period. DSIT anticipates receipt of a majority of the grant based on the expected allocation of project costs between DSIT and USSI. In both 2013 and 2014, the Company received $180 and $201, respectively, ($113 and $126, respectively, by DSIT and $67 and $75, respectively, by USSI) from the BIRD Foundation. Grant amounts from the BIRD Foundation are netted against research and development expense.

Under the terms of the grant agreement between BIRD, DSIT and USSI, both DSIT and USSI will have to repay the grant based on 5% of gross sales of the commercialized product. If repaid within one year of the successful completion of the project, the total repayment amount is equal to the grant amount. The companies are entitled to extend the repayment period to two years in return for total repayment of 113% of the grant amount, to three years in return for total repayment of 125%, to four years in return for total repayment of 138%, or to five years or more in return for total repayment of 150% of the grant amount. The companies are entitled to prepay the repayment of the grant amount at any time.

It is unclear at this time how the suspension of operations at USSI (see Notes 3 and 21) will impact BIRD funding of DSIT development costs or whether future BIRD funding on the development of PAUSS may be at risk.

(ii) In September 2013, DSIT and Ramot, the technology transfer company of Tel-Aviv University, were jointly awarded a grant from MEIMAD. MEIMAD is a collaborative program between the Israeli Ministry of Defense, the Office of the Chief Scientist at the Ministry of Economy and the Ministry of Finance, to jointly promote new ideas and technologies that can serve both commercial applications and military needs. The grant is for a 30-month project (16 months for the first stage and 14 months for the second stage) for the joint development of a next generation Fiber-Optic Based Perimeter Security System Interrogator. The total amount of the grant is approximately $325 for the two stages of the project representing a 50% participation in DSIT's expenses. Through December 31, 2014, DSIT has received approximately $275 of this grant.

In July 2014, DSIT received approval for a new grant from MEIMAD. This grant is for the development of a fiber optic sensing system to be used in structural health monitoring of airborne structures (such as planes and Unmanned Aerial Vehicles (UAV's)). The total grant expected to be received is approximately $245 over a two-year period representing a 50% participation in DSIT's expenses. DSIT has not yet received any funds from this grant.

Grants from MEIMAD are subject to repayment by way of royalties based on 5% of gross sales of the commercialized product, if any.

(iii) GridSense is required to pay a royalty on any project sale of a particular product of not less than $100 to two employees. The royalty rate is on a sliding scale from 1.5% to 6.0%. The royalty amount for the years ended December 31, 2013 and 2014 was $25 and $0, respectively.

(iv) In April 2012, USSI and Northrop Grumman Guidance and Electronics Company, Inc. signed a license agreement involving several of Northrop Grumman’s fiber-optic technology patents. The license agreement calls for an initial payment of $150 and for a royalty payment of 10% of the net selling price of each unit of licensed products used or sold during the term of the agreement, subject to an annual minimum royalty of $50 for the first ten years of the license term. Future minimum royalty payments have been accrued and are included in Other current liabilities in discontinued operations (see Note 3).