XML 71 R10.htm IDEA: XBRL DOCUMENT

4. INTANGIBLE ASSETS AND ASSET ACQUISITION

12 Months Ended

Dec. 31, 2013

Notes to Financial Statements

NOTE 4. INTANGIBLE ASSETS AND ASSET ACQUISITION

On April 15, 2013 the Company completed the acquisition of binary ionization technology and related patents and other assets consisting of personal property and inventory related to implementation of the Binary Ionization Technology related to these patents from L-3 Applied Technologies, Inc. ("L-3"). All of these assets are pledged as collateral for the convertible notes issued as described below in Note 6.

The purchase price allocation was obtained from an independent valuation firm The following sets forth the components of the final purchase price allocation:

Purchase Price
Cash payment		$	3,500,000
Warranty expense			10,000
Total purchase price		$	3,510,000

Assets Purchased
Inventory		$	71,700
Fixed assets			150,000
Patents			2,848,300
Trademarks			440,000
Total Assets Acquired		$	3,510,000

The intangible assets purchased consist of Patents and Trademarks. The patents are being amortized over the estimated remaining lives of the related patents, which is 7.7 years. The trademarks have an indefinite life. Amortization expense was $261,736 and $0 for the years ended December 31, 2013 and 2012.

Definite life intangible assets consist of the following:

		December 31, 2013				December 31, 2012

Intellectual property and patents and trademarks		$	2,959,400			$	111,100
Less: Accumulated Amortization and Impairment Loss			372,836				111,100
Intangible Assets, net		$	2,586,564			$	-

The Company’s definite life intangible assets at December 31, 2012 were being amortized over their estimated useful lives of ten years. At December 31, 2012, the Company determined that the fair value of the intangible assets was impaired. Accordingly, an impairment charge of $69,439 was recorded during the year ended December 31, 2012 on the Company’s definite-life intangibles, reducing the carrying value of these intangible assets to $0. Amortization expense was $11,110 for the year ended December 31, 2012.

Indefinite life intangible assets consist of the following:

		December 31, 2013				December 31, 2012

Trademarks		$	440,000			$	-
Total Trademarks		$	440,000			$	-