Quarterly report pursuant to Section 13 or 15(d)

INTANGIBLE ASSETS

v2.4.0.8
INTANGIBLE ASSETS
9 Months Ended
Sep. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

Intangible assets of the Company consisted of the following:

 

    September 30, 2014     December 31, 2013  
Patent Rights   $ 37,413,122     $ 7,204,937  
Website     21,160     $ -  
Accumulated Amortization     (3,919,917 )     (1,047,278 )
Intangible assets, net   $ 33,514,365     $ 6,157,659  

 

Other than the website as set forth in the table above, intangible assets are comprised of patents with estimated useful lives between approximately 1 to 15 years. The website was determined to have an estimated useful life of 3 years. Once placed in service, the Company will amortize the costs of intangible assets over their estimated useful lives on a straight-line basis.  Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. Amortization of patents is included in operating expenses as reflected in the accompanying consolidated statements of operations. The Company assesses fair market value for any impairment to the carrying values.  As of September 30, 2014 and December 31, 2013 management concluded that there was no impairment to the acquired assets.

 

Patent and website amortization expense for the nine months ended September 30, 2014 and 2013 was $2,872,638 and $860,657, respectively. Future amortization of intangible assets, net is as follows:

 

2014   $ 1,807,196  
2015     7,034,286  
2016     6,175,226  
2017     4,258,350  
2018     3,556,298  
2019 and thereafter     10,683,009  
Total   $ 33,514,365  

  

The Company made the following patent purchases:

 

-   On April 16, 2013, the Company through its subsidiary, Relay IP, Inc. acquired a US patent for $350,000.

-   On April 22, 2013, the Company acquired 10 US patents, 27 foreign patents and 1 patent pending from CyberFone Systems valued at $1,135,512 (see note 3).

-   In September 2013, in two transactions, the Company acquired 14 US patents for a total purchase price of $1,100,000.

-   On November 13, 2013, the Company acquired four patents for 150,000 shares of the Company’s common stock, which the Company valued at $718,500 based on the fair market value of the stock issued.

-   On December 16, 2013, the Company acquired 15 US and 2 foreign patents from Delphi Technologies, Inc. for $1,700,000 pursuant to a Patent Purchase Agreement entered into on October 31, 2013 and Amended on December 16, 2013.

 

In connection with a settlement and license agreement dated June 4, 2013, the Company agreed to settle and release a certain defendant for past and future use of the Company’s patents. The defendant agreed to assign and transfer 3 US patents and rights valued at $1,000,000.

 

In connection with a settlement and license agreement dated December 22, 2013, the Company agreed to settle and release another defendant for past and future use of the Company’s patents, whereby the defendant agreed to assign and transfer 2 US patents and rights to the Company. The Company valued the two patents at an aggregate of $700,000.

 

As of September 30, 2014, the Company’s patent portfolios consist of 203 U.S. and foreign patents, twenty-two open patent applications and contract rights to 6 patents. During the second quarter of 2013, the Company began to generate revenue from its patent portfolio.  In the aggregate, the earliest date for expiration of a patent in the Company’s patent portfolio is past (the patent is expired, but patent rules allow for six year look-back for royalties), the median expiration date for patents in the Company’s portfolio is June 17, 2017, and the latest expiration date for a patent in any of the Company’s patent portfolios is March 9, 2029.  A summary of the Company’s patent portfolios is as follows:

 

Subsidiary Number of Patents Earliest Expiration Date  Median Expiration Date Latest Expiration Date Subject Matter
Bismarck 14 09/15/15 09/15/15 01/22/18 Communication and PBX equipment
Clouding 70 Expired 10/05/21 03/09/29 Network and data management
CRFD Research 4 09/17/21 08/11/22 08/19/23 Web page content translator and device-to-device transfer system
Cyberfone 38 Expired 09/15/15 06/07/20 Telephony and data transactions
Dynamic Advances 4 Expired 10/02/17 03/06/23 Natural language interface
E2E 4 04/27/20 11/17/23 07/18/24 Manufacturing schedules using adaptive learning
Loopback 10 Expired 09/25/17 08/27/22 Automotive
Hybrid 2 11/14/15 09/09/16 07/17/17 Asynchronous communications
IP Liquidity 6 Expired 06/06/15 07/26/20 Pharmaceuticals / tire pressure systems
Relay 1 Expired Expired Expired Multicasting
Sampo 3 03/13/18 03/13/18 11/13/20 Centrifugal communications
Sarif Biomedical 5 09/07/13 09/07/13 09/07/13 Microsurgery equipment
Selene 3 05/05/18 11/23/20 11/28/21 Communications
Signal 7 03/10/14 12/01/15 08/06/22 Automotive
TLI Communications 1 06/17/17 06/17/17 06/17/17 Telecommunications
Vantage Point 37 Expired 12/21/16 03/09/18 Computer networking and operations