Note 16. Commitments and Contingencies

Operating Lease

The Company leases its principal executive offices in Newark, California, under a non-cancelable operating lease which expires in 2021. The Company recognizes rent expense on a straight-line basis over the expected lease term. The difference between cash payments required and rent expense is recorded as deferred rent. Rent expense for the Company’s facilities was $0.3 million for each of the years ended December 31, 2015, 2016 and 2017.

The following is a schedule of future minimum lease payments under the non-cancelable operating lease at December 31, 2017 (in thousands):

2018	$	336
2019		346
2020		357
2021		305
Total	$	1,344

Contingencies

On November 6, 2017 three individuals, Ken Fisher, Kevin Baxter and Fred Holmes (the “Contractors”), filed a complaint with the Superior Court of California, County of Alameda, alleging breach of contract, a breach of the implied covenant of good faith and fair dealing and violation of Section 17200 et seq. of the California Business and Professions Code, purportedly predicated on an alleged breach of Section 10b-5 of the Securities Exchange Act of 1934. The Contractors filed a First Amended Complaint on November 22, 2017, adding four more claims: anticipatory breach of contract, conversion, unjust enrichment, and promissory estoppel. The Contractors then filed an "Amendment to Complaint" on December 8, 2017, which purported to dismiss their section 17200 claim. On March 2, 2018, the Contractors filed and served a Second Amended Complaint, which asserts claims for breach of contract, anticipatory breach of contract, breach of the implied covenant of good faith and fair dealing, and conversion. The claims are all based on the Contractors’ assertion that they were entitled to be granted options to purchase 350,000 shares of our common stock on the basis of a term sheet between us and the Contractors signed in July 2007. The Contractors claim that our subsequent one-for-five and one-for-17 reverse stock splits should not apply to their option awards. On the basis of their allegations, the Contractors have petitioned for “millions of dollars” in damages and other costs and expenses, including attorneys’ fees. We believe that the Contractors’ claims are without merit and are disputing them vigorously.

From time to time, we may become in involved in lawsuits as well as subject to various legal proceedings, claims, threats of litigation, and investigations in the ordinary course of business, including claims of alleged infringement of third-party patents and other intellectual property rights, commercial, employment, and other matters. While certain matters to which we are a party may specify the damages claimed, such claims may not represent reasonably possible losses. Given the inherent uncertainties of litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated.

An unfavorable outcome on any litigation matters could require us to pay substantial damages, or, in connection with any intellectual property infringement claims, could require us to pay ongoing royalty payments or could prevent us from selling certain of our products. As a result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters could have a material adverse effect on our business, operating results, financial condition and cash flows.