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5. INTANGIBLE ASSETS AND ASSET ACQUISITION
 12 Months Ended
Dec. 31, 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 $369,508 and $261,736 for the years ended December 31, 2014 and 2013.

 

Definite life intangible assets consist of the following:

 

   

December 31,

2014

  

December 31,

2013

         
Intellectual property and patents   $      2,848,300   $      2,848,300

 

Less: Accumulated Amortization

  

 

631,244

  

 

261,736

Intangible Assets, net   $      2,217,056   $      2,586,564

 

 

Indefinite life intangible assets consist of the following:

 

   

December 31,

2014

  

December 31,

2013

         
Trademarks   $         440,000   $          440,000

 

   

December 31,

2014

  

December 31,

2013

         

Total Intangible Assets

   $         2,657,056   $          3,026,564

 

Approximate amortization over the next five years is as follows:

 

Year Ending December 31,   Amount
2015   $ 370,000
2016      370,000
2017      370,000
2018      370,000
2019      370,000
Thereafter   367,000
    $2,217,000