Revenue Sharing, Note Purchase Agreement, and Long-Term Debt

12 Months Ended

Dec. 31, 2015

Revenue Sharing Note Purchase Agreement and Long-Term Debt [Abstract]

REVENUE SHARING, NOTE PURCHASE AGREEMENT, AND LONG-TERM DEBT

6. REVENUE SHARING, NOTE PURCHASE AGREEMENT, AND LONG-TERM DEBT

Revenue Sharing and Note Purchase Agreement

On December 24, 2014, the Company entered into an Amended and Restated Revenue Sharing and Note Purchase Agreement (the “Revenue Sharing Agreement”), with AND34 Funding LLC (“AND34”) (acting as the “Revenue Participants,” the “Note Purchasers,” and the “Collateral Agent”), which was retroactively effective as of February 14, 2014. Under the Revenue Sharing Agreement, the Company granted AND34 a perpetual predetermined share in the rights of the Company’s specified future revenues from patents currently owned by the Company (the “Patents”) in exchange for $3,500,000, which was recorded as an “Advance from Revenue Sharing Agreement.” on the accompanying consolidated balance sheet. The advance will be repaid over the period in which the Company generates any future monetization revenues in excess of any of the outstanding long-term debt and accrued interest to AND34. Under the terms of the Revenue Sharing Agreement with AND34, Andrea has agreed to issue and sell to AND34 Notes up to an aggregate outstanding amount of $10,700,000 during the four years after the closing date or such greater amount as AND34 may agree in its sole discretion. The proceeds of the Notes will be used to pay certain initial expenses related to the agreement, and going forward will be used for expenses of the Company incurred in pursuing patent monetization. AND34’s rights to the Company’s monetization revenues from the Patents and the Notes are secured by the Patents.

Any Monetization Revenues (as defined in the Revenue Sharing Agreement) will first be applied 100% to the payment of accrued and unpaid interest on, and then to repay outstanding principal of, the Notes. After the Notes are paid in full, the Monetization Revenues will be allocated amongst the Revenue Participants and the Company in accordance with certain predetermined percentages (based on aggregate amounts received by the Revenue Participants) ranging from 100% to the Revenue Participants (such percentage to be allocated to the Revenue Participants until they have received Monetization Revenues of $3,500,000 to repay the Advance from Revenue Sharing Agreement) to ultimately 20% to the Revenue Participants. Monetization Revenues is defined in the Revenue Sharing Agreement to include, but is not limited to, amounts that the Company receives from third parties with respect to the Patents, which may include new license revenues, certain product revenue, payments and judgments. Monetization Revenues and associated expenses are included in the Company’s Patent Monetization Segment (Note 13).

The Revenue Sharing Agreement contains many stipulations between the parties regarding the handling of various matters related to the monetization of the Patents. The Revenue Participants and the Company will account for the tax treatment as set forth in the Revenue Sharing Agreement. Following an Event of Default under the Revenue Sharing Agreement, the Note Purchasers and Revenue Participants may proceed to protect and enforce their rights by suit or other appropriate proceeding, either for specific performance or the exercise of any power granted under the Revenue Sharing Agreement or ancillary documents including the Notes.

Advance from Revenue Sharing Agreement

	December 31,
	2015			2014
Advance from Revenue Sharing Agreement	$	312,067		$	3,500,000
Less: short-term Advance from Revenue Sharing Agreement		(196,477	)		-
Long-term Advance from Revenue Sharing Agreement, net of short-term
Advance from Revenue Sharing Agreement	$	115,590		$	3,500,000

Amounts reported as short-term Advance from the Revenue Sharing Agreement reflect amount expected to be paid in the next twelve months.

Long-term debt

	December 31,
	2015			2014
Note Payable	$	1,900,000		$	900,000
PIK interest		775			9,875
Total long-term debt		1,900,775			909,875
Less: current maturities of long-term debt		(1,900,775	)		-
Long-term debt, net of current maturities	$	-		$	909,875

The unpaid principal amount of the Notes (including any PIK Interest) will have an interest rate equal to LIBOR (as defined in the Revenue Sharing Agreement) plus 2% per annum, (3% at December 31, 2015 and 2014); provided that upon and during the continuance of an Event of Default (as set forth in the Revenue Sharing Agreement), the interest rate will increase an additional 2% per annum. Interest may be paid in cash at the option of the Company and otherwise shall be paid by increasing the principal amount of the Notes by the amount of such interest (“PIK Interest”). The principal balance of the Notes and all unpaid interest thereon will be due the earlier of receipt of Monetization Revenues or on June 30, 2020. The Company may prepay the Notes from time to time in whole or in part, without penalty or premium. During the years ended December 31, 2015 and December 31, 2014, $7,700,000 and $900,000, respectively, of notes payable were issued to AND34. Amounts reported as current maturities of long-term debt reflect amount expected to be paid in the next twelve months.