LICENSE AND ROYALTY FEES

9 Months Ended

Sep. 30, 2012

License and Royalty Fees Disclosure [Text Block]

NOTE 9 -

LICENSE AND ROYALTY FEES

Lawrence Livermore

The Company on September 14, 2001, entered into a Limited Exclusive Patent License Agreement for Optical Coherence Tomography for Human and Animal Dentistry with The Regents of the University of California (Lawrence Livermore National Laboratories). Pursuant to this license agreement, the Company entered into an installment note with Lawrence Livermore National Laboratories. In the license agreement, the Company agreed to pay to Lawrence Livermore a total of $175,000 in installments commencing September 2001. The $175,000 note did not include annual minimum royalty fees or interest. The first installment was a license issue fee of $15,000 which was paid by the Company. The second installment of $50,000 was the second part of the issue fee that was to be paid in nine monthly installments commencing April 2003 was partially paid by the Company ($26,000). The last installment was originally due December 31, 2005 but it was extended by Lawrence Livermore to October 1, 2006 in the amount of $110,000. The total due under the license agreement was $134,000, prior to a payment made by the Company in October 2006 of $50,000.

Upon payment of this amount, the parties agreed to amend the agreement they had for payment of the balance of $84,000 along with the unpaid royalty fees of $380,000 for 2003, 2004 and 2005 as noted below. The Company incurred $10,000 of maintenance fees in February 2007 and paid these on February 28, 2007.

In addition to the license fee, the Company agreed to pay minimum royalties to Lawrence Livermore beginning in 2004. The Company prior to the amendment to the agreement had not paid any of the royalties to Lawrence Livermore.

The royalties due were for 2003 $30,000, for 2004 $100,000 and for 2005 $250,000. These fees were to be paid February 28 of each year for the prior calendar year. The royalties due were $380,000.

The parties agreed on December 22, 2006 to amend the agreement. The Company agreed to pay Lawrence Livermore a total of $144,000 in three installments; $10,000 by February 28, 2007 (which was for maintenance fees for 2007 and paid by the Company), $84,000 by July 28, 2007 (which was paid by the Company on July 9, 2007), and the final $50,000 by December 31, 2007 (which was paid by the Company on December 11, 2007). The $380,000 of minimum royalties have been forgiven by Lawrence Livermore and reclassified to additional paid in capital as of December 22, 2006.

On January 1, 2008, the Company paid minimum annual royalty fees of $20,000 for 2008.

On February 18, 2009, the Company and Lawrence Livermore entered into an Amended License Agreement, which has been amended nine times, most recently in Amendment Nine dated June 23, 2011 whereby, the Lawrence Livermore extended the due dates of the minimum royalty fees for 2009 ($20,000), 2010 ($20,000), 2011 ($20,000) and 2012 ($20,000) until June 30, 2012 and The remaining minimum royalty fees for 2013 and thereafter are due as follows: 2013 ($60,000) due February 28, 2013; 2014 ($100,000) due February 28, 2014; and 2015 and thereafter for the life of the Agreement ($250,000) due February 28, 2015, and February 28 of each year thereafter for the life of the Agreement.

The $80,000 that remains outstanding to Lawrence Livermore is accrued for as of September 30, 2012.

LightLab

The Company entered into a Non-Exclusive License Agreement for Imaging Patents between themselves and LightLab Imaging, LLC entered into August 8, 2001.

The License Agreement had an original term of 5 years, commencing two years after the original agreement date, which would expire August 8, 2008, and the license could be renewed. The minimum royalty requirements were based on Net Sales by the Company. Since the Company generated no sales in the periods, there were no amounts due. On December 19, 2006, the Company and LightLab Imaging, Inc. negotiated an amendment whereby the new term of the agreement is, unless terminated by either party to remain in effect for three years following whichever of the following events occurs first: i) the Company’s release of a licensed product; ii) the Company’s first commercial sale of a licensed product, or; iii) July 1, 2007 (July 1, 2010). The Company on September 18, 2007 paid LightLab Imaging, LLC $50,000. This Agreement has terminated and will not be renewed as the main scanning patent licensed in this Agreement expires in 2011, before the Company intends to introduce its OCT product into the market.

There were no amounts outstanding to LightLab as of September 30, 2012.

University of Florida

On May 31, 2007, the Company entered into an exclusive licensing agreement for the field of dentistry with The University of Florida Research Foundation for novel technology relevant to the imaging probe of its Dental Imaging System. The Agreement carries a $1,000 initial licensing fee with royalty payments to commence in 2008.

The Company has paid the minimum fees in 2008 and the minimum royalty for 2009, amounting to $630 originally due by December 31, 2009 has been deferred until the first anniversary of the first commercial sale and is in accounts payable as it is unpaid as of September 30, 2012. The Company paid some patent fees in 2009, 2010 and 2011 to the University of Florida. In addition, the first year of sale under the agreement has been amended to 2012 from 2009.

University of California – San Francisco

On July 9, 2008, the Company entered an exclusive license agreement for near-infrared transillumination for the imaging of early dental decay with The Regents of the University of California. The agreement requires the payment of an initial non-refundable license fee of $10,000 and annual maintenance fees of $5,000. The agreement also requires the payment of certain milestone payments based on patent allowance and FDA approval.

The Company has amended this agreement six times, most recently on December 8, 2011, whereby milestones were updated to provide adequate time for the Company to complete development, obtain FDA clearance and transition to marketing and manufacturing. Minimum royalties are required as follows:

First year of sales, or no later than 2012	$	10,000
Second year		50,000
Third year		100,000
Fourth year		150,000
Fifth and subsequent years		200,000

The latest amendment deferred payment of the annual license maintenance fees due July 9, 2009, July 9, 2010 and July 9, 2011 ($5,000 per year for a total of $15,000) until May 31, 2012 and are included in accrued expenses.

RAPTOR RESOURCES HOLDINGS INC. 10-Q