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Goodwill and Intangible Assets | 9 Months Ended
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Sep. 30, 2013
Goodwill and Intangible Assets [Abstract] |
Goodwill and Intangible Assets | 3. Goodwill and Intangible Assets Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Intangible assets include acquired other intangibles of customer lists and non-compete agreements and patent and patent rights recorded at estimated fair values in accordance with purchase accounting guidelines for acquisitions. In addition, other intangible assets includes costs for patent and patent rights purchased directly by the Company and patent application costs, such as legal and filing fees. Intangible assets are amortized over the expected useful life of the asset. The Company accounts for other intangible amortization as an operating expense, unless the underlying asset is directly associated with the production or delivery of a product. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, are expensed as incurred. To date, the amount of related amortization expense for other intangible assets directly attributable to revenue recognized is not material. The Company accounts for purchases of intangible assets in accordance with the provisions of ASC 350 "Intangibles" ("ASC 350") and ASC 360 "Fixed Assets" ("ASC 360"). The useful lives of intangible assets are determined at the date of purchase and are periodically evaluated for reasonableness. The assets will be tested for impairment at least annually, if determined to have an indefinite life, or whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. Costs to investigate potential purchases of intangible assets will be treated as expense when incurred, until or unless the purchase of the respective assets will be deemed viable, after which time the costs to further investigate and purchase the assets will be capitalized. Subsequent to purchase, legal and associated costs incurred in prosecuting alleged infringements of the patents will be recognized as expense when incurred. For the nine months ended September 30, 2013 and 2012, the Company spent approximately $72,000 and $103,000 on patent application costs and $2,500,000 and $0 on patent and patent rights acquisition costs, respectively. In addition, the Company acquired patents as a result of its acquisition of DSS Technology Management which were valued in conjunction with the Company's purchase accounting at approximately $27,852,000 (see Note 6). The patents and patent rights acquired have estimated economic useful lives of approximately 2.5 to 7.5 years. The Company recorded goodwill of approximately $12.2 million in connection with its acquisition of DSS Technology Management in July 2013. The goodwill was recorded due to the establishment of a deferred tax liability which resulted from the increase in basis of the DSS Technology Management tangible and intangible assets, excluding goodwill, for book purposes but not for tax purposes. Under the acquisition method of accounting, the impact on the acquiring company's deferred tax assets is recorded outside of acquisition accounting. Accordingly, the valuation allowance on the Company's deferred tax assets was partially released to offset part of the increase in deferred tax liability and resulted in an estimated financial statement income tax benefit of approximately $9.2 million, which was recorded in the statement of operations for the three and nine month periods ending September 30, 2013. The goodwill is not deductible for income tax purposes. Refer to Note 6 to these consolidated financial statements for additions to patents and goodwill in connection with the Company's acquisition of DSS Technology Management and the related application of the acquisition method of accounting. Intangible assets are comprised of the following:
|  |  |  | September 30, 2013 |  |  | December 31, 2012 |
|  | Useful Life |  | Gross Carrying Amount |  |  | Accumulated Amortizaton |  |  | Net Carrying Amount |  |  | Gross Carrying Amount |  |  | Accumulated Amortizaton |  |  | Net Carrying Amount |
Acquired intangibles- customer lists and non-compete agreements |  | 5 -10 years |  | $ | 1,997,300 |  |  | $ | 1,296,743 |  |  | $ | 700,557 |  |  | $ | 2,405,300 |  |  | $ | 1,243,865 |  |  | $ | 1,161,435 |
Acquired intangibles-patents and patent rights |  | Varied (1) |  |  | 30,361,883 |  |  |  | 961,894 |  |  |  | 29,399,989 |  |  |  | - |  |  |  | - |  |  |  | - |
Patent application costs |  | Varied (1) |  |  | 1,009,220 |  |  |  | 334,772 |  |  |  | 674,448 |  |  |  | 956,714 |  |  |  | 265,472 |  |  |  | 691,242 |
|  |  |  | $ | 33,368,403 |  |  | $ | 2,593,409 |  |  | $ | 30,774,994 |  |  | $ | 3,362,014 |  |  | $ | 1,509,337 |  |  | $ | 1,852,677 |
(1) patent application costs, patent and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of September 30, 2013, the weighted average remaining useful life of these assets in service was approximately 7.0 years. Amortization expense for the nine months ended September 30, 2013 amounted to $1,213,872 ($228,078 - 2012). Approximate expected amortization for each of the five succeeding fiscal years is as follows:
2014 |  | $ | 4,583,000 |
2015 |  | $ | 4,497,000 |
2016 |  | $ | 4,349,000 |
2017 |  | $ | 4,276,000 |
2018 |  | $ | 4,230,000 |
The changes in the carrying amount of goodwill for the nine months ended September 30, 2013, are as follows.
|  | Packaging Segment |  |  | Printing Segment |  |  | Plastics Segment |  |  | Technology Segment |  |  | Total |
Balance as of January 1, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 1,768,400 |  |  | $ | 630,524 |  |  | $ | 684,949 |  |  | $ | 238,926 |  |  | $ | 3,322,799 |
Accumulated impairment losses |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
|  |  | 1,768,400 |  |  |  | 630,524 |  |  |  | 684,949 |  |  |  | 238,926 |  |  |  | 3,322,799 |
Goodwill acquired during the year |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12,221,443 |  |  |  | 12,221,443 |
Impairment losses |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (238,926 | ) |  |  | (238,926 | )
Balance as of September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 1,768,400 |  |  |  | 630,524 |  |  |  | 684,949 |  |  |  | 12,460,369 |  |  |  | 15,544,242 |
Accumulated impairment losses |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (238,926 | ) |  |  | (238,926 | )
|  | $ | 1,768,400 |  |  | $ | 630,524 |  |  | $ | 684,949 |  |  | $ | 12,221,443 |  |  | $ | 15,305,316 |
During the nine months ended September 30, 2013, the Company determined that the intangible assets the Company recorded as a result of its acquisition of ExtraDev, Inc. in May 2011 were impaired as a result of a decline of customers for its historical IT hosting and custom programming and services businesses due to increased competition, including competition from Microsoft, and ExtraDev's focus on new products such as the Company's AuthentiGuard Suite, which has reduced resources directed to supporting its IT hosting and custom programming businesses. As a result of this decline, the Company performed a present value analysis of the expected future cash flows of the revenues and expenses associated with ExtraDev's historical business and determined that the intangible assets that the Company had recorded as a result of the acquisition of ExtraDev were likely impaired. As a result, the Company wrote-off approximately $239,000 of goodwill, customer lists with a gross value of $258,000 and a net book value $198,000, and non-compete agreements with a gross value of $150,000 and a net book value of $80,000 associated with ExtraDev, Inc. in the third quarter of 2013.

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16323-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13816-109267 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16373-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16265-109275 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13854-109267 + Details
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