Quarterly report pursuant to Section 13 or 15(d)

Intangible Assets

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Intangible Assets
9 Months Ended
Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

NOTE 4 – INTANGIBLE ASSETS

 

Intangible assets include patents purchased and patents acquired in lieu of cash in licensing transactions. Patents purchased are recorded based at their acquisition cost and patents acquired in lieu of cash are recorded at their fair market value. Intangible assets consisted of the following:

 

    September 30, 2017     December 31, 2016  
             
Intangible Assets   $ 20,403,408     $ 23,637,813  
Accumulated Amortization & Impairment     (12,813,195 )     (11,323,185 )
                 
Intangible assets, net   $ 7,590,213     $ 12,314,628  

 

Intangible assets are comprised of patents with estimated useful lives between approximately 1 to 16 years. Once placed in service, the Company will amortize the costs of intangible assets over their estimated useful lives on a straight-line basis. During the three and nine months ended September 30, 2017, respectively, the Company capitalized a total of $0 and $0 in patent acquisition costs and during the three and nine months ended September 30, 2016, respectively, the Company capitalized a total of $3,550,000 and $6,450,000 in patent acquisition costs. 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 as an operating expense as reflected in the accompanying consolidated condensed statements of operations. The Company assesses fair market value for any impairment to the carrying values. The Company recorded impairment charges to its intangible assets during the three and nine months ended September 30, 2017 in the amount of $723,218 and $723,218, respectively, compared to impairment charges associated with the end of life of a number of the Company’s portfolios during the three and nine months ended September 30, 2016 in the amounts of $5,531,383 and $6,525,273, respectively.

 

Patent amortization expense for the three and nine months ended September 30, 2017 was $457,419 and $1,803,264, respectively, and for the three and nine months ended September 30, 2016, patent amortization expense was $2,030,886 and $6,018,196, respectively. All patent amortization expense figures are net of foreign currency translation adjustments. Future amortization of intangible assets, net of foreign currency translation adjustments is as follows:

 

2017   $ 401,804  
2018     1,517,219  
2019     1,447,660  
2020     1,154,767  
2021     1,004,600  
2022 and thereafter     2,064,163  
Total   $ 7,590,213  

 

As of September 30, 2017, our operating subsidiaries owned 170 patents, as set forth below, and had economic rights to over 10,000 additional patents, both of which include U.S. patents and certain foreign counterparts. In the aggregate, the earliest date for expiration of a patent in the Company’s patent portfolio has passed (the patent is expired, but patent rules allow for nine-year look-back for royalties), the median expiration date for patents in the Company’s portfolio is September 13, 2021, and the latest expiration date for a patent in any of the Company’s patent portfolios is February 27, 2033. 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
Clouding Corp.     25       2/3/18       9/10/21       5/29/29     Network and data management
CRFD Research, Inc.     5       5/25/21       9/17/21       8/19/23     Web page content translator and device-to-device transfer system
Dynamic Advances, LLC     2       11/6/21       9/7/23       7/9/25     Natural language interface
Magnus IP     55       1/28/22       9/27/25       12/9/31     Network Management/Connected Home Devices
Medtech Group Acquisition Corp.     45       Expired       12/8/18       8/9/29     Medical technology
Signal IP, Inc.     2       8/28/20       8/17/21       8/6/22     Automotive
Traverse Technologies     20       2/27/22       2/25/29       2/27/33     Li-Ion Battery/High Capacity Electrodes
Soems Acquisition     16       11/11/17       4/6/19       7/18/24     N/A
              Median       09/13/21              

 

On October 20, 2017, the Company assigned the patent held by Dynamic Advances LLC, Magnus IP GmbH and Traverse Technologies Corp. (all wholly-owned subsidiaries of the Company) to DBD.

 

On October 27, 2017, the Company assigned the economic rights to its more than 10,000 patents to Luxone.