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Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 6 - INTANGIBLE ASSETS AND GOODWILL

During 2017 and 2016, the Company spent approximately $12,000 and $74,000, respectively, on capitalized patent prosecution costs.

On November 10, 2016, the Company purchased a portfolio of 122 LED patents and a corresponding license from Intellectual Discovery Co. Ltd. for $3,000,000 with funds it had received from a third party, resulting in a net book value of $0 when purchased.

In May, 2016, the Company received proceeds of $495,000 for the sale of certain patents that were included in a pool of acquired patents. The Company evaluates acquired patents as related pools of assets for purposes of amortization and impairment, as well as operational evaluation and use. Accordingly, the proceeds received from the sale of the patents will reduce the cost of the pool of assets until the carrying value of the pool is reduced to zero. Any excess proceeds from future sales will result in a gain. The Company also considers the impact that the sale of a portion of the pool has on expected future recoverability on the pool. No impairment was considered necessary as a result of this evaluation.

Intangible assets are comprised of the following:

		December 31, 2017						December 31, 2016
	Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Acquired intangibles - customer lists and non-compete agreements	5-10 years		1,997,300		1,810,750		186,550		1,997,300		1,721,357		275,943
Acquired intangibles - patents and patent rights	Varied (1)		3,155,000		2,603,942		551,058		3,155,000		2,092,767		1,062,233
Patent application costs	Varied (2)		1,148,017		664,873		483,144		1,136,465		578,623		557,842
		$	6,300,317	$	5,079,565	$	1,220,752	$	6,288,765	$	4,392,747	$	1,896,018

⁽¹⁾

Acquired patents and patent rights are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2017, the weighted average remaining useful life of these assets in service was approximately 1.7 years.

⁽²⁾

Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2017, the weighted average remaining useful life of these assets in service was approximately 6.3 years.

Amortization expense for the year ended December 31, 2017 amounted to approximately $687,000 ($700,000 –2016).

Expected amortization for each of the five succeeding fiscal years is as follows:

Year	Amount

2018	$	542,089
2019	$	277,570
2020	$	183,606
2021	$	81,731
2022	$	80,102

Goodwill

The Company performed its annual goodwill impairment test as of December 31, 2017. The Company has goodwill attributed to two of its reporting units which are its Packaging and Plastics reporting units respectively. The Company performed the first step of the goodwill impairment test by comparing the fair value of each of its reporting units with their carrying amounts including goodwill. In performing this step, the Company determined estimates of fair value using a discounted cash flow model for each of these reporting units. The Company determined that it’s Packaging and Plastic reporting units each had to fair values in excess of their carrying value and therefore, did not have an indication of goodwill impairment.

There are inherent assumptions and estimates used in developing future cash flows requiring management’s judgment in applying these assumptions and estimates to the analysis of identifiable intangibles and asset impairment including projecting revenues, timing and amount of claim or settlements related to patent infringement cases, royalty rates, interest rates, and the cost of capital. Many of the factors used in assessing fair value are outside the Company’s control and it is reasonably likely that assumptions and estimates will change in future periods. These changes can result in future impairments.

The changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016 are as follows:

	Packaging		Plastics		Total

Balance as of January 1, 2016
Goodwill	$	1,768,400	$	684,949	$	2,453,349
Accumulated impairment losses		-		-		-
		1,768,400		684,949		2,453,349

Balance as of December 31, 2016
Goodwill		1,768,400		684,949		2,453,349
Accumulated impairment losses		-		-		-
		1,768,400		684,949		2,453,349

Balance as of December 31, 2017
Goodwill		1,768,648		684,949		2,453,597
Accumulated impairment losses		-		-		-
	$	1,768,648	$	684,949	$	2,453,597