Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.19.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

On July 19, 2018, the Company entered into an office lease agreement for its headquarters commencing October 1, 2018 through June 2023. The annual rent is approximately $0.7 million, payable in equal monthly installments, unless earlier terminated by either party in accordance with the lease. The annual rent is subject to an approximate 3.5% increase at each anniversary of the commencement date during the term of the agreement. The agreement also required a security deposit of $214,000, which is included in other non-current assets in the accompanying condensed consolidated balance sheets.

The following table sets forth the Company’s aggregate future minimum payments under its operating lease commitments as of December 31, 2018 (in thousands):

Year ending December 31,
 
2019
$
747

2020
$
773

2021
$
801

2022
$
829

2023
$
425

Total
$
3,575


 
The Company was also party to certain office lease agreements in New York, NY and Menlo Park CA, which expired during 2018 and 2017, respectively.

For the years ended December 31, 2018, 2017 and 2016, aggregate rent expense was approximately $632,000, $754,000 and $782,000, respectively.

The Company accounts for its leases under the straight-line method of accounting. Deferred rent payable was $74,000 and $36,000 as of December 31, 2018 and 2017, respectively, and is included in other current liabilities on the consolidated balance sheets.

Rental income for the years ended December 31, 2018, 2017 and 2016 was $244,000, $350,000 and $394,000, respectively.

Sublease income is recorded as a reduction in rental expense. Future minimum lease payments to be received under existing sublease agreements as of December 31, 2018 is immaterial.

CONTRACTUAL OBLIGATIONS

Finjan Mobile

On April 21, 2017, the Company and Finjan Mobile, a wholly-owned subsidiary of the Company, entered into a Confidential Avira VPN Platform Distribution Agreement (the “Distribution Agreement”) with Avira, Inc., a Delaware corporation (“Avira”). Pursuant to the Distribution Agreement, Avira will provide its Virtual Private Network (“VPN”) platform and technical support (“VPN Platform”) to Finjan Mobile, and Finjan Mobile will use the VPN Platform as part of its Vital Security™ suite of product offerings. Avira also granted Finjan Mobile related license rights in connection with the Distribution Agreement and starting July 1, 2017, Finjan Mobile will pay Avira $3.9 million in fees under the Distribution Agreement, payable in 12 quarterly installments of $325,000 over the next 3 years. The Company has analyzed the terms of the agreement and has accounted for the transaction as a service agreement, to be expensed over the service period. As of December 31, 2018, the Company has a $2.0 million contractual obligation due over the next 6 quarters.

Finjan Blue

As described in Note 3, pursuant to the Patent Assignment Agreement, Finjan Blue acquired select IBM patents in the security sector (the “IBM Security Patents”) in exchange for $8.5 million cash, payable as follows: (i) $2.0 million upon execution of the Patent Assignment Agreement and (ii) $6.5 million over the subsequent four years. The Company’s initial $2.0 million payment was made on August 24, 2017 and a second payment on August 24, 2018. As of December 31, 2018, the Company has a $5.5 million obligation due over the next 3 years, which has been recorded at its present value as a component of other liabilities on the accompanying consolidated balance sheets.

IBM will support Finjan Blue in its development and licensing of the IBM Security Patents and provide assistance for such efforts as needed for the term of the Agreement and Finjan Blue will reimburse IBM for reasonable time and out of pocket costs for such assistance, however IBM will not receive further proceeds from such efforts. IBM does have reservation of rights with respect to the IBM Security Patents for its current licensees and open source initiatives.