Note 3 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 3 —  Commitments and Contingencies

Leases

The Company has entered into a lease for office, warehouse and laboratory facilities for approximately 13,079 square feet at 8708 Technology Forest Pl., Ste 100, The Woodlands, Texas 77381 under a third party non-cancelable operating lease through April 30, 2016.  Further, the Company has also entered into a lease for office, warehouse and laboratory facilities for approximately 7,186 square feet at 3200 Research Forest Drive, Suite B2, The Woodlands, Texas 77381 under a third party non-cancelable operating lease through May 31, 2016. Future minimum lease commitments as of June 30, 2013 are as follows:

Year Ending December 31
Six months ending 2013	$	172,100
2014	339,503
2015	345,528
2016	133,184
2017	--
2018	--
Thereafter	--
Total	$	990,315

The lease for 8708 Technology Forest Pl., Ste 100, The Woodlands, Texas 77381 provides the Company with a right to extend the lease term for two additional five year terms or one term of ten years, at the Company’s option.  

Eco-System Partner Royalty Obligation

In April 2013, we entered into an agreement with an Eco-System Partner (the “Agreement”), whereby we will receive $10 million of cash proceeds to assist us in increasing our production capacity. The Agreement requires us to have the capability to produce at least 1 million sensor units per month (as defined in the Agreement) by April 2014.  Upon achieving the minimum production capability and meeting the required quality standards specified in the Agreement, we will record non-recurring engineering revenue for the total amount of cash proceeds received.  As of June 30, 2013, we have received $5 million, which is recorded as deferred revenue in the accompanying balance sheet.

Upon achieving the deliverables of the Agreement, we will pay a commission to the Eco-System Partner of 10%, on revenue derived from the sales of UniBoss sensors directly to the Eco-System Partner or to those of the Eco-System Partner’s manufacturing partners that use the Eco-System Partner’s Preferred Price and Capacity License Agreement.  The commission amount is capped at $18.5 million.

Litigation

On or around December 12, 2012, we were served with notice of two lawsuits filed by Conductive Inkjet Technology Limited (“CIT”) in the Patent Courts in the United Kingdom.  The two cases are respectively claim nos. HC12E02467 and HC12F02468 (the “UK Actions”).  The first action, which is case number HC12F02468, seeks relief for (1) breach of contract, (2) causing loss by unlawful means, and (3) breach of confidence.  The second action, which is case number HC12E02467, asserts that we included CIT’s confidential information in two PCT patent applications that we filed.  The UK Actions seek a finding that we violated a duty of confidence to CIT, an order that confidential materials be returned to CIT, an order that we change the inventorship on the two PCT applications to include CIT, an inquiry into damages, other forms of injunctive and declaratory relief, and the award of attorney fees and costs.  On January 3, 2013, we filed an Acknowledgement of Service with the court and indicated that we intended to contest the jurisdiction of the United Kingdom court over these matters. A hearing date on our contest of jurisdiction took place on April 22-23, 2013.  A decision on jurisdiction is expected in a few months.   

On January 18, 2013, we filed a verified petition and applications for temporary and permanent injunction against CIT in the 284th Judicial District in Montgomery County, Texas (the “Texas Action”).  The case was assigned cause number 13-01-00561.  In the Texas Action, we asked the court to provide the following relief: issue a preliminary ruling that Montgomery County, Texas is the exclusive venue for the UK Actions, issue a preliminary ruling that CIT violated the terms of an agreement with us (the “2010 Agreement”) by filing the UK Actions, enter a judgment that we did not violate any duty of confidentiality to CIT, enter a judgment against CIT for breach of contract and award additional relief as set forth in the verified petition, including costs, pre and post judgment interest, and attorney’s fees.  A hearing on the temporary injunction application was set for January 31, 2013.

On January 25, 2013, CIT removed the Texas Action from state court to federal court in the Southern District of Texas based on CIT’s non-Texas resident status.  The case was assigned to Federal Judge Sim Lake.  On February 4, 2013, we filed a motion to remand the Texas Action back to state court.  On February 8, 2013, CIT filed a motion to dismiss the Texas Action followed on February 11, 2013 with a response to our motion to remand.  On April 30, 2013, the Federal Court remanded the case back to state court in Montgomery County.  On May 24, 2013, we filed a motion for early partial summary judgment based on the fact that the cases in the UK were in violation of the 2010 Agreement.   On June 27, 2013, the Court denied the motion for early relief.  The case is currently pending on the merits.

We believe these allegations to be without merit and intend to vigorously defend this action.  The potential impact of this action, which seeks unspecified damages, attorneys’ fees and expenses, is uncertain.

Class Action Litigation 

In June 2013, two purported class action complaints were filed in the United States District Court, Southern District of New York and the United States District Court, Southern District of Texas against the Company and our CEO, CFO, and Chairman. The Southern District of New York complaint was voluntarily dismissed by plaintiff on July 2, 2013.  The surviving complaint alleges that we and our officers and directors violated the federal securities laws, specifically Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by making purportedly false and misleading statements concerning our licensing agreements and product development.  The complaint seeks unspecified damages on behalf of a purported class of purchasers of our common stock during the period from December 7, 2012 to May 31, 2013.  We will vigorously defend against this lawsuit.  The Company has directors' and officers' and corporate liability insurance to cover risks associated with securities claims filed against the Company or its directors and officers and has notified its insurers of the complaints filed against the Company.  Based on the very early stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from an adverse judgment or a settlement of this matter.