Replies to post #71 on IDCC Premium Board (IDCC)

[rmarchma]

Count re accounting for the Pantech license

I pretty much agree with your referenced assessment, except for a couple of minor points. But first, the relevant sections from the CC as follows:

"Michael Ciarmoli - Boenning & Scattergood

Then just another one you mentioned Pantech potentially being a $100 million opportunity, and I guess that license agreement goes out to 2016. Can you give us any sort of indication of where those revenues are now? I mean, what their handset penetration looks like, how you see that kind of customer relationship, the revenue related to that building over time?

Scott McQuilkin

This is Scott. It's pretty straightforward. For the license we're going to receive about $90 million in cash payments plus common stock, which we valued at $22 million, so that's about $112 million over the license term. The payments are fixed according to a schedule, and we're recognizing those pro rata over the remaining license term.

Thomas Davey - Sidoti & Company

Okay. All right. Then you said you had recognized some revenue from Pantech in the third quarter that's worth about $112 million. How much in revenue can we expect to see in a full quarter from Pantech?

Scott McQuilkin

I think the easy math to do there is you take the $112 million I mentioned responding to Mike's question and it's a little over seven years, so you just do the division. I think it comes pretty close to about $4 million a quarter."


My Notes:
Since the license was signed on Sept. 23, 2009 and goes through the end of 2016, its fixed term is technically 29 Quarters and 1 week, (rather than 28 Quarters). The total fixed amount assigned to the contract was $112m divided by 29 Quarters = $3.86m per full quarter or almost $4m per quarter.

Since IDCC has already received cash of $15m and Panteck stock worth $22m, there is a remaining balance as you indicated of $75m due in fixed cash installments. However, rather than recording the entire $75m balance due as an Account Receivable and Deferred Revenue, IDCC's accounting policy on fixed installments is to record only the amount due within 1 year as a Receivable and Deferred Revenue. Since I highly doubt that all the remaining $75m is due within one year, the initial accounting entry to record the Receivable/Deferred part of this transaction will probably be in a different amount than the $75m that you indicated.