In connection with this license agreement, the Company became obligated to the former co-inventor of the patent portfolio technology for $207,600 pursuant to a July 2004 agreement under which the Company was obligated to pay a percentage of licensing proceeds to the co-inventor. The amount due was payable in four installments of $51,900. The co-inventor of the patent portfolio technology filed a lawsuit against the Company seeking damages and/or enforcement of a 2004 agreement (see Note 8). On February 14, 2007, a settlement of the litigation was finalized. Terms of the settlement require the Company to pay $3,400,000 in cash on February 14, 2007 and $3,000,000 on May 1, 2007, make a donation of $15,000 on February 14, 2007 on behalf of Russell H. Fish III to Maasai Power and Education Project, Inc., and pay Fish the equivalent of 4% of 50% of the next $100 million of gross license fees as they are collected by Phoenix Digital and as distributions are made to Patriot, after excluding the first $20 million collected by Phoenix Digital after December 1, 2006. Patriot's commitment to make payments to Fish related to such future license revenues will not exceed $2 million. At February 28, 2007, the Company has accrued the May 1, 2007 payment of $3,000,000 as a settlement fee payable. A liability for gross license fees due of approximately $244,000 is included in accrued expenses at February 28, 2007. During the three and nine month periods ended February 28, 2007, the Company recorded approximately $304,000 and $6,604,000 related to settlement and license expenses.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />