Restricted Cash – As of June 30, 2016, cash of $217,769 ($293,043 – December 31, 2015) is restricted for payments of costs and expenses associated with one of the Company’s IP monetization programs.

Derivative Instruments - The Company maintains an overall interest rate risk management strategy that incorporates the use of interest rate swap contracts to minimize significant fluctuations in cash flows that are caused by interest rate volatility. The Company has one interest rate swap that changes variable rates into fixed rates on one term loan. The swap qualifies as a Level 2 fair value financial instrument. The swap agreement is not held for trading purposes and the Company does not intend to sell the derivative swap financial instrument. The Company records interest swap agreements on the balance sheet at fair value because such agreements qualify as cash flow hedges under accounting principles generally accepted in the United States of America. Gains and losses on these instruments are recorded in other comprehensive loss until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss (“AOCI“) to the consolidated statement of operations on the same line item as the underlying transaction. The valuation of the interest rate swap is derived from proprietary models of Citizens Bank (defined below) based upon recognized financial principles and reasonable estimates about relevant future market conditions and may reflect certain other financial factors such as anticipated profit or hedging, transactional, and other costs. The notional amounts of the swap decreases over the life of the agreements. The Company is exposed to a credit loss in the event of nonperformance by the counter parties to the interest rate swap agreement. However, the Company does not anticipate non-performance by the counter parties. The cumulative net loss attributable to the cash flow hedge recorded in accumulated other comprehensive loss and other liabilities at June 30, 2016 is approximately $98,000 ($64,000 - December 31, 2015), which is included in other long-term liabilities on the accompanying balance sheets.

The Company has a notional amount of approximately $994,000 as of June 30, 2016 on its interest rate swap agreement for its debt with RBS Citizens, N.A. (“Citizens Bank“) (see Note 4) which changes a variable rate into a fixed rate on a term loan as follows:

Notional		Variable
Amount		Rate			Fixed Cost			Maturity Date
$	994,391		3.61	%		5.87	%		August 30, 2021

Contingent Legal Expenses

Contingent Legal Expenses - Contingent legal fees associated with our commercial litigation involving our IP are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, the Company may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement that will be paid out from the proceeds from settlements or licenses that arise pursuant to an enforcement action, which will be expensed as legal fees in the period in which the payment of such fees is probable. Any unamortized patent acquisition costs will be expensed in the period in which a conclusion is reached in an enforcement action that does not yield future royalties potential.

Concentration of Credit Risk

Concentration of Credit Risk - The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

During the six months ended June 30, 2016 and 2015, one customer accounted for 25% and 22%, respectively, of the Company’s consolidated revenue and accounted for 25% and 14%, respectively, of the Company’s accounts receivable balance as of June 30, 2016 and June 30, 2015. In addition, during the six months ended June 30, 2016, an additional customer accounted for 12% of the Company’s consolidated revenue and accounted for 10% of the Company’s accounts receivable balance as of June 30, 2016. The risk with respect to accounts receivables is mitigated by credit evaluations the Company performs on its customers, the short duration of its payment terms for the significant majority of its customer contracts and by the diversification of its customer base.

Continuing Operations

Continuing Operations – While the Company’s net losses have significantly decreased during the first six months of 2016, the Company had incurred net losses in previous years and there is no assurance that the improved results of the first six months of 2016 will be maintained. The Company’s ability to fund its current and future commitments out of its available cash and cash generated from its operations depends on a number of factors. Some of these factors include the Company’s ability to (i) increase sales of the Company’s digital products; (ii) decrease legal and professional expenses for the Company’s intellectual property monetization business; and (iii) continue to generate operating profits from the Company’s packaging and plastic printing operations. During 2015, the Company raised gross proceeds of $1.1 million from the sale of its equity. As of June 30, 2016, the Company had approximately $771,000 in unrestricted cash and $218,000 in restricted cash and up to $800,000 available under a revolving credit line at its packaging subsidiary, which may not be sufficient to cover the Company’s future working capital requirements if these and other factors are not met. If the Company cannot generate sufficient cash from its operations in 2016, the Company will need to raise additional funds in the future in order to fund its working capital needs and pursue its business plan, although there can be no assurances, management believes that sources for these additional funds will be available through either current or future investors.