NOTE 4 – INTANGIBLE ASSETS

 

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

 

 

Other than the Company’s 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 recorded an impairment charge to its intangible assets during the three months ended June 30, 2016 in the amount of $620,696 associated with the end of life of one of the Company’s portfolios, compared to an impairment charge during the three months ended June 30, 2015 in the amount of $766,498 associated with the reduction in the carrying value of one the Company’s portfolios.  Further, the Company recorded an impairment charge to its intangible assets during the six months ended June 30, 2016 in the amount of $993,890 associated with the end of life of three of the Company’s portfolios, compared to an impairment charge during the six months ended June 30, 2015 in the amount of $766,498 associated with the reduction in the carrying value of one the Company’s portfolios.

 

Patent and website amortization expense for the three and six months ended June 30, 2016 was $1,961,411 and $3,987,310, respectively and patent and website amortization expense for the three and six months ended June 30, 2015 was $3,029,000 and $5,627,461, respectively, net of foreign currency translation adjustments. Future amortization of intangible assets, net of 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, LLC, which owns medical technology patents;

-      In June 2016, we acquired two patent portfolios from Siemens covering W-CDMA and GSM cellular technology.

 

As of June 30, 2016, the Company’s patent portfolios consist of 545 U.S. and foreign patents and patent rights and 69 patent applications. 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 May 29, 2032.  A summary of the Company’s patent portfolios is as follows:

 

 

On May 16, 2016, the Company assigned the Selene patents to SRI International, the original owner, following the Company’s decision to end of life the enforcement action related to the Selene portfolio. In addition, the carrying value is $0 on the Company’s books for both of the Sampo IP, LLC and Cyberfone Systems, LLC portfolios.