Commitments and Contingencies

6 Months Ended

Jun. 29, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Operating Leases

We lease our offices and production facilities under non-cancelable operating leases in Santa Barbara, CA and Austin, TX that expire in November 2016 and March 2017, respectively. The leases contain minimum rent escalation clauses that require additional rental amounts after the first year. Rent expense for these leases with minimum annual rent escalation is recognized on a straight line basis over the minimum lease term. These leases also require us to pay utilities, insurance, taxes and other operating expenses and contain one five-year renewal option. The January 1, 2012 partial sublease of our Santa Barbara facility has offset some of these expenses.

For the three and six months ended June 29, 2013 rent expense was $225,000 and $446,000, respectively, and for the three and six months ended June 30, 2012 rent expense was $200,000 and $509,000, respectively.

Patents and Licenses

We have entered into various licensing agreements requiring royalty payments ranging from 0.13% to 2.5% of specified product sales. Certain of these agreements contain provisions for the payment of guaranteed or minimum royalty amounts. In the event that we fail to pay minimum annual royalties, these licenses may automatically become non-exclusive or be terminated. These royalty obligations terminate at various times from 2013 to 2020. Royalty expense totaled $6,000 and $12,000 in the second quarter and year to date in 2013, respectively, compared to $4,000 and $10,000 in the same periods in 2012, respectively. Under the terms of certain royalty agreements, royalty payments made may be subject to audit. There have been no audits to date and we do not expect future audit adjustments to be significant.

The minimum lease payments under operating leases and license obligations are as follows:

Years ending December 31,	Licenses		Operating Leases
Remainder of 2013	$	—	$	826,000
2014		30,000		1,698,000
2015		45,000		1,750,000
2016		45,000		1,680,000
2017		45,000		88,000
Thereafter		45,000		—
Total payments	$	210,000	$	6,042,000