COMMITMENTS AND CONTINGENCIES
|3 Months Ended|
Mar. 31, 2020
|Commitments and Contingencies Disclosure [Abstract]|
|COMMITMENTS AND CONTINGENCIES||COMMITMENTS AND CONTINGENCIES
On July 19, 2018, the Company entered into an office lease agreement for its headquarters through June 30, 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 Company has a sub-lease with a related party that has lease terms that are month-to-month based on the legally enforceable terms of the agreement as of January 1, 2019. In accordance with ASC 842-10-55-12, leases between related parties should be classified in accordance with the lease classification criteria applicable to all other leases on the basis of the legally enforceable terms and conditions of the lease. As a result, the Company elected not to apply the recognition requirements of ASC 842 for short-term leases, however, the lease costs that pertain to the short-term leases are disclosed in the components of lease costs table below.
The balance sheet classification of the Company’s right-of-use asset and lease liabilities was as follows (in thousands):
The components of lease expenses, net which were included in total expenses in the Company’s condensed consolidated statements of operations, were as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2020 and 2019 were $0.2 million and $0.1 million, respectively, and were included in net cash used in operating activities in the Company's condensed consolidated statement of cash flows. A non-cash lease expense of $0.1 million for three months ended March 31, 2020 and 2019 was included in net adjustments to reconcile net loss to net cash used in operating activities in the Company's condensed consolidated statement of cash flows.
As of March 31, 2020, the maturities of the Company’s operating lease liabilities were as follows (in thousands):
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of ASC 842. As of March 31, 2020, the weighted average remaining lease term is 3.25 years and the weighted average discount rate used to determine the operating lease liabilities was 11%.
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 utilize the VPN Platform as part of its VitalSecurity™ 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 began paying Avira $3.9 million in fees under the Distribution Agreement, payable in 12 quarterly installments of $0.3 million over the subsequent 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 period of service. As of March 31, 2020, the Company has a $0.3 million contractual obligation due April 2020.
The Company and Finjan Blue entered into a Patent Assignment Agreement with IBM effective as of August 24, 2017. Pursuant to the Patent Assignment Agreement, Finjan Blue acquired 41 select issued and pending 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 made its second payment of $1.0 million on August 24, 2018 and a third payment of $1.5 million on September 9, 2019. As of March 31, 2020, the Company has a remaining balance due of $4.0 million.
The IBM Security Patents from the Patent Assignment Agreement have been recorded at their present value of $7.0 million in the first quarter of 2018, recognizing a present value adjustment of $1.4 million. Accretion related to the present value and amortization expense is recognized over the expected useful life. Accretion and amortization expense was $0.1 million and $0.5 million for the three months ended March 31, 2020, respectively and $0.1 million and $0.4 million for the three months ended March 31, 2019, respectively.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.
The entire disclosure for significant arrangements with third parties, which includes operating lease arrangements and arrangements in which the entity has agreed to expend funds to procure goods or services, or has agreed to commit resources to supply goods or services, and operating lease arrangements. Descriptions may include identification of the specific goods and services, period of time covered, minimum quantities and amounts, and cancellation rights.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef