Note I – Commitments and Contingencies

The Company engages law firms with respect to its patent litigation on a full contingency basis ranging from 15-40% (with certain exceptions) of the net recovery (after deduction of expenses) depending on the stage of the proceeding in which the result (settlement or judgment) is achieved. The Company is responsible for all or a portion of the expenses incurred with respect to such litigation. With respect to proceedings at the U.S. Patent and Trademark Office, the Company engages law firms on a fixed fee basis.

On March 31, 2025, the Company acquired its Smart Home Patent Portfolio from IoT and M2M Technologies, LLC for a purchase price of $400,000. In addition, the Company is obligated to pay the seller an additional $50,000 contingent upon the occurrence of certain future events. The Company is also obligated to pay the seller 12.5% of the first $100 million of net proceeds (after the deduction of expenses) and 5% of the net proceeds in excess of $100 million from Monetization Activities (as defined) related to the patent portfolio.

In connection with the Company’s acquisition of its HFT Patent Portfolio in March 2022, the Company is obligated to pay the seller an additional $500,000 in cash and $375,000 of the Company’s common stock (up to a maximum of 375,000 shares) upon achieving certain milestones with respect to the HFT Patent Portfolio. The Company also has an additional obligation to pay the seller 15% of the first $50 million of net proceeds (after deduction of expenses) generated by the patent portfolio and 17.5% of net proceeds greater than $50 million.

In connection with the Company’s acquisition of its Cox Patent Portfolio in February 2013, the Company is obligated to pay Dr. Cox 12.5% of the net proceeds (after deduction of expenses) generated by the Company from licensing, sale or enforcement of the patent portfolio.

In connection with the Company’s acquisition of its M2M/IoT Patent Portfolio in December 2017, the Company is obligated to pay M2M 14% of the first $100 million of net proceeds (after deduction of expenses) and 5% of net proceeds greater than $100 million from Monetization Activities (as defined in the acquisition agreement) related to the M2M/IoT Patent Portfolio. In addition, M2M will be entitled to receive from the Company $250,000 of additional consideration upon the occurrence of certain future events related to the patent portfolio.

The Company has a 401(k) Plan which allows participants to make contributions by salary reduction pursuant to Section 401(a) of the Internal Revenue Code. The Company also may make discretionary annual matching 401(k) and additional contributions in amounts determined by the Board of Directors, subject to Section 401(a) statutory limits. The 401(k) Plan expense for the years ended December 31, 2025 and 2024 was $86,000 and $76,000, respectively, all of which was accrued as of December 31, 2025 and 2024 and is recorded within accrued payroll on the Company’s consolidated balance sheets.

The Company has one operating lease for its principal office space in New Canaan, Connecticut that was executed on May 1, 2022 and set to expire on April 30, 2025. It was accounted for under ASC 842. On April 23, 2025, the Company extended its lease for one year to April 30, 2026 and the Company accounted for the extension as a short-term lease. The Company pays a base rent of $5,500 for such office space.

There are no material residual guarantees associated with the Company’s lease and there are no significant restrictions or covenants included in the Company’s lease.

At inception, the calculated incremental borrowing rate was approximately 4.2%, which was calculated based on the remaining initial lease term of 4 years.

The remaining lease term as of December 31, 2025 under the extension of the initial lease was approximately 4 months.

Right-of-use lease assets and related lease obligations for the Company’s operating lease was recorded in the consolidated balance sheet as follows:

The table below presents certain information related to the Company’s lease costs for the year ended December 31, 2025 and 2024: