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Note 13 - Commitments and Contingencies | 12 Months Ended
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Jan. 31, 2014
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies Disclosure [Text Block] |
13. | Commitments and Contingencies
Rental commitments under non-cancelable operating leases, principally on our office space, were 0.7 million at January 31, 2014, payable as follows (in thousands):
|  | Operating Leases |
Fiscal Year: |  |  |  |
2015 |  | $ | 248 |
2016 |  |  | 256 |
2017 |  |  | 152 |
Total minimum lease payments |  | $ | 656 |
Rental expense for the years ended January 31, 2014 and 2013 was approximately $0.3 million. The lease may be terminated at our option in June 2014 and includes an early termination penalty. We continue to evaluate options including but not limited to subleasing the facility space or terminating lease after June 30, 2014. Purchase Commitments with Suppliers The Company has historically issued purchase orders to its suppliers with delivery dates from four to six weeks from the purchase order date. In addition, the Company has typically provided significant suppliers with rolling six-month forecasts of material and finished goods requirements for planning and long-lead time parts procurement purposes only. The Company generally accepts delivery of materials pursuant to its purchase orders subject to various contract provisions that allow it to delay receipt of such order or allow it to cancel orders beyond certain agreed lead times. Such cancellations may or may not include cancellation costs payable by the Company. In the past, the Company has been required to take delivery of materials from its suppliers that were in excess of its requirements and the Company has previously recognized charges and expenses related to such excess material. In the third quarter of fiscal 2014, we began the process of cancelling purchase orders beyond the forecasted unit volume contained in Lenovo’s rolling forecast upon the receipt of their notification that it will cease purchasing our product and as a result of the termination of the Lenovo relation will not longer be a purchasing material (See Note 2). Executive Severance Commitments We have a severance compensation agreement with our key executive. This agreement requires us to pay this executive, in the event of a termination of employment following a change of control of the Company or other circumstances, the amount of his then current annual base salary and the amount of any bonus amount the executive would have achieved for the year in which the termination occurs plus the acceleration of unvested options. We have not recorded any liability in the consolidated financial statements for this agreement. Although the contemplated sale of shares of common stock and the issuance of the Warrants and possible issuance of the Additional Warrant Shares by the Company to Broadwood could result in a change of control for purposes of the severance compensation agreements, the executive who is party to this agreement has waived his right to receive payments under this agreement in the event that a change of control occurs as a result of the sale of shares and the issuance of Warrants and Additional Warrants to Broadwood. Additionally, as a result of the Company’s sale of the 6,250,000 shares of common stock to Elkhorn Partners Limited Partnership (“Elkhorn”), subsequent to fiscal year end (see Note 14), Elkhorn’s beneficial ownership of the Company has increased from approximately 9% to approximately 49% of the Company’s outstanding voting stock, making Elkhorn the Company’s largest shareholder and resulting in a change of control of for purposes of the severance compensation agreement. The executive who is party to this agreement has waived his right to receive payments under this agreement as a result of the change in Elkhorn’s beneficial ownership of the Company. Letter of Credit During the first quarter of fiscal 2010, the Company obtained a $77,000 letter of credit from Silicon Valley Bank (“SVB”) to allow for continuous and unlapsed compliance with a lease provision for the Company’s corporate offices. The letter of credit expires on August 1, 2014. Executive and Board of Directors Compensation On November 2, 2013, the Company approved a deferred compensation plan for its Chief Executive Officer and Board of Directors. As of January 31, 2014, no compensation expense has been accrued under this deferred compensation plan as its goal was not achieved. Legal Contingencies On April 26, 2011, Chicony, the contract manufacturer of the Bronx product that was the subject of a product recall, filed a complaint against us for breach of contract, seeking payment of $1.2 million for the alleged non-payment by us of amounts alleged by Chicony to be due it for products purchased from it by the Company. We denied liability and filed a cross-complaint on May 13, 2011 seeking the recovery of damages of $4.9 million caused by Chicony's failure to adhere to our technical specifications when manufacturing the Bronx product, which we believe resulted in the recall of the product. On April 16, 2013, the court approved our first-amended cross-complaint, which added intentional interference to our complaint and increased the damages we were seeking to at least $15.0 million. The trial date was held in October, 2013. In an effort to resolve this litigation before the previous trial date of April, 2013, we sent Chicony a settlement offer, which has since lapsed. On February 4, 2014, a jury returned a verdict in our favor and awarded us damages of approximately $10.8 million, offset by previously accrued liabilities of $1.1 million for a net award of approximately $9.7 million. Because the award may be appealed, we will not recognize the award in our financial statements until the award is realized per applicable accounting standards. If and once realized, a portion of our award may be payable to our attorneys pursuant to an alternative professional fee arrangement. In addition, we may be entitled to reimbursement of attorney’s and other fees pending final judgment. Together, these matters may increase or decrease the net financial impact of this verdict on the Company. If and once realized, we anticipate that the award will reduce our accumulated deficit and provide us with a cash infusion. We continue to explore opportunities to expand, protect, and monetize our patent portfolio, and we look forward to the possibility of using a portion of the award to expand and accelerate these efforts. On September 1, 2011, subsequent to receiving an infringement notification from us, ACCO Brands USA LLC and its Kensington Computer Products Group division (collectively “Kensington”) filed a lawsuit against us alleging that five of our patents relating to power technology are invalid and/or not infringed by products made and/or sold by Kensington. On February 29, 2012, we denied these claims and filed a cross-complaint alleging infringement by Kensington of each of these five patents. A number of these patents are currently the subject of re-examination proceedings initiated by Kensington or other third parties. On February 4, 2014, Kensington entered into a settlement and licensing agreement with the Company with an effective date of February 1, 2014 that dismisses all claims between the two parties arising from the litigation referenced above. On March 6, 2012, we filed a lawsuit against EDAC Power Electronics Co. Ltd (“EDAC”) for breach of contract seeking payment of $2.5 million for the failure to deliver goods ordered by us in the time, place, manner and price indicated by each purchase order. As previously reported, the parties entered into a Settlement Agreement on July 24, 2012, ending the litigation between the parties. The settlement involved no cash payments by either of the parties, but allowed us to recover previously incurred product and freight costs and to discharge net liabilities of $1.4 million from our consolidated balance sheet that would otherwise have been due to EDAC had it prevailed in the lawsuit. The settlement resulted in a decrease to cost of revenue of $1.4 million during the fiscal year ended January 31, 2013. In addition to the pending matters described above, we are, from time to time, involved in various legal proceedings incidental to the conduct of our business. We are unable to predict the ultimate outcome of these matters.

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