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5. INTANGIBLE ASSETS AND ASSET ACQUISITION
 6 Months Ended
Jun. 30, 2014
Notes to Financial Statements  
NOTE 5. 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 $184,755 and $76,955 for the six months ended June 30, 2014 and 2013.

 

Definite life intangible assets consist of the following:

 

   

June 30,

2014

    

December 31,

2013

  
    (Unaudited)        
Intellectual property and patents and trademarks   $ 2,959,400     $ 2,959,400  
Less: Accumulated Amortization     557,590       372,836  
Definite Life Intangible Assets, net   $ 2,401,810     $ 2,586,564  

 

Indefinite life intangible assets consist of the following:

 

   

June 30,

2014

    

December 31,

2013

  
    (Unaudited)        
Trademarks   $ 440,000     $ 440,000  
Total Trademarks   $ 440,000     $ 440,000  
                 
Total Intangible Assets, net   $ 2,841,810     $ 3,026,564