Revenue Recognition
PDS recognizes revenue from the license agreements at the time a contract is entered into, the license method is determined (paid in advance or on-going royalty), obligations under the license agreement are satisfied and the realization of revenues is assured which is generally upon the receipt of the license proceeds. PDS may at times enter into license agreements whereby contingent revenues are recognized as one or more contractual milestones are met
p. 9 10Q period ending Nov 30, 2012
During the three & six months ending Nov 30, 2012 PDS entered into licensing agreements, pursuant to which PDS received aggregate proceeds of $4,370,000 and $4,820,000
The announcement about the Sierra Wireless MMP License came out in December 2012, followed by motions dismissing the ITC (and Northern CA) also in December. HOWEVER,
according to the documents filed with the ITC, the contract between PDS and Sierra was signed 11/26/12..
UTC agreement was announced in Oct. 2012 (contract date unknown)
Oracle was announced in Nov 2012 (contract date unknown)
Sierra contract was executed Nov. 26 (see ITC file ID 499157) with announcement in Dec.
If all three of those contracts were signed after the first three months of the new fiscal year, what licenses accounted for the $4,370,000 aggregate proceeds reported for the first three months ? Could it be that UTC and Oracle contracts had effective dates in the first three months but no PR was announced until second quarter?
According to the Sierra License agreement they had to choose between a lump sum payment or a Running Royalty payment that included past and future licensed product royalties. They elected the lump sum because there was an Addendum F (redacted) and signed. The addendum goes on to say:
2.1 Upon Payment by Licensee and receipt by Licensor of the Purchase Price as provided herein:
2.1.1 The Effective Date shall be established and shall be the date of such receipt.
So, is the actual contract date (nov 26, 2012) the effective date, or is this date trumped by 2.1.1 of the Lump Sum addendum above. If the contract date is what is used for reporting revenue then Sierra $$ should have been reported for the quarter ending Nov 30. If, on the other hand, the receipt of the money becomes the effective date, then the money was received in Dec and should have been reported in the quarterly report ending Feb 28, 2013.
The reason I know the money was received in Dec 2012 is 10.6 of the license agreement states that within (5) court days following receipt of the licensee fee,Licensor will file motion to dismiss the claims in No District of CA and the parties will file a joint motion to terminate the ITC. Notice to terminate was filed at the ITC on Dec 12, 2012
From the 10Q ending Feb 28, 2013
During the three and nine months ended February 28, 2013, PDS entered into licensing agreements with third parties, pursuant to which PDS recognized revenues of $0 and $4,820,000, respectively.
During the three and nine months ended February 28, 2013, PDS recognized revenues of $1,500,000 for license agreements previously entered into by TPL.
Could this $1,500,000 be the Sierra License money?
