Quarterly report pursuant to Section 13 or 15(d)

INTANGIBLE ASSETS

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INTANGIBLE ASSETS
6 Months Ended
Jun. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
NOTE 4 - INTANGIBLE ASSETS

 

Intangible assets of the Company, including adjustments for currency translation adjustments, consisted of the following:

 

    June 30, 2015     December 31, 2014  
Intangible Assets   $ 58,641,082     $ 49,914,360  
Accumulated Amortization & Impairment     (12,043,560 )     (6,550,528 )
Intangible assets, net   $ 46,597,522     $ 43,363,832  

 

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. As of June 30, 2015, based on changes in the expected timing of proceeds from the Clouding portfolio of patents, the Company assessed the Clouding portfolio of patents for impairment and took an impairment charge in the carrying value of the Clouding assets in the amount of $766,498. As of December 31, 2014, management concluded that there was no impairment to the acquired assets.

 

 

2015       $ 5,540,859  
2016         10,413,062  
2017         7,998,735  
2018         6,374,412  
2019         5,468,467  
2020 and thereafter         10,801,987  
Total       $ 46,597,522  

 

Patent amortization expense for the three and six months ended June 30, 2015 was $3,029,000 and $5,627,461, respectively and Patent amortization expense for the three and six months ended June 30, 2014 was $938,679 and $1,392,326, respectively, net of foreign currency translation adjustments. Gross future amortization of intangible assets, not incorporating foreign currency translation adjustments, is as follows:

 

The Company made the following patent purchases:

 

- In April 2013, the Company through its subsidiary, Relay IP, Inc. acquired a US patent for $350,000;
- In April 2013, the Company acquired 10 US patents, 27 foreign patents and 1 patent pending from CyberFone Systems valued at $1,135,512;

 

- In June 2013, in connection with the closing of a licensing agreement with Siemens Technology, we acquired a patent portfolio from that company valued at $1,000,000;

 

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

 

- In November 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;

 

- In December 2013, the Company acquired certain 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 December 2013, in connection with a licensing agreement with Zhone, the Company acquired a portfolio of patents from Zhone;

 

- In December 2013, in connection with a settlement and license agreement, we agreed to settle and release another defendant for past and future use of our patents, whereby the defendant agreed to assign and transfer 2 U.S. patents and rights to the Company;

 

- In May 2014, we acquired ownership rights of Dynamic Advances, LLC, a Texas limited liability company, IP Liquidity Ventures, LLC, a Delaware limited liability company, and Sarif Biomedical, LLC, a Delaware limited liability company, all of which hold patent portfolios or contract rights to the revenue generated from the patent portfolios;

 

- In June 2014, we acquired Selene Communication Technologies, LLC, which holds multiple patents in the search and network intrusion field;

 

- In August 2014, we acquired patents from Clouding IP LLC, with such patents related to network and data management technology;

 

- In September 2014, we acquired TLI Communications, which owns a single patent in the telecommunication field;

 

- In October 2014, we acquired three patent portfolios from MedTech Development, which owns medical technology patents;

 

- In April 2015, we acquired forty-three international patents from Bridgestone Americas Tire Operation LLC, with such patents related to tire pressure monitoring sensors and systems.

 

As of June 30, 2015, the Company’s patent portfolios consist of 371 U.S. and foreign active patents and contract rights to ten patents. 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 July 29, 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 IP Inc.     17   09/15/16 09/15/15 01/22/18 Communication and PBX equipment
Clouding Corp.     60   Expired 10/05/21 03/29/29 Network and data management
CRFD Research, Inc.     5   09/17/21 08/11/22 08/19/23 Web page content translator and device-to-device transfer system
Cyberfone Systems, LLC     37   Expired 09/15/15 11/11/17 Telephony and data transactions
Dynamic Advances, LLC     4   Expired 10/02/17 03/06/23 Natural language interface
E2E Processing, Inc.     4   04/27/20 11/17/23 07/18/24 Manufacturing schedules using adaptive learning
Hybrid Sequence IP, Inc.     2   11/14/15 09/09/16 07/17/17 Asynchronous communications
IP Liquidity Ventures, LLC     49   Expired 06/06/15 07/26/20 Pharmaceuticals / tire pressure systems
Loopback Technologies, Inc.     10   Expired 09/25/17 08/27/22 Automotive
Medtech Group Acquisition Corp.     137   Expired 06/01/18 07/29/29 Medical technology
Relay IP, Inc.     1   Expired Expired Expired Multicasting
Sampo IP, LLC     3   03/13/18 03/13/18 11/16/23 Centrifugal communications
Sarif Biomedical LLC     5   Expired Expired Expired Microsurgery equipment
Selene Communication Technologies, LLC     3   05/05/18 11/23/20 11/28/21 Communications
Signal IP, Inc.     7   Expired 12/01/15 08/06/22 Automotive
TLI Communications, LLC     6   06/17/17 06/17/17 06/17/17 Telecommunications
Vantage Point Technology, Inc.     31   Expired 12/21/16 03/09/18 Computer networking and operations