INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2020

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 7. - INTANGIBLE ASSETS 

Intangible assets are recorded at cost and consist primarily of (1) expenditures incurred with third-parties related to the processing of patent claims and trademarks with government authorities, as well as costs to acquire patent rights from third-parties, (2) license fees paid for third-party intellectual property, (3) costs to become a signatory under the tobacco MSA, and (4) license fees paid to acquire a predicate cigarette product. The amounts capitalized relate to intellectual property that the Company owns or to which it has exclusive rights. The Company’s intellectual property capitalized costs are amortized using the straight-line method over the remaining statutory life of the granted patent assets in each of the Company’s patent families, which have estimated expiration dates ranging from 2020 to 2036. Periodic maintenance or renewal fees are expensed as incurred. Annual minimum license fees are charged to expense. License fees paid for third-party intellectual property are amortized on a straight-line basis over the last to expire patents, which patent expiration dates are expected to range from 2020 through 2036. The Company believes costs associated with becoming a signatory to the MSA and acquiring a predicate cigarette product have an indefinite life and as such, no amortization is taken.

Total intangible assets at June 30, 2020 and December 31, 2019 consisted of the following:

	June 30,		December 31,
	2020		2019
Intangible assets, net
Patent and trademark costs	$	5,512	$	5,712
Less: accumulated amortization and impairment		(2,774)		(2,839)
Patent and trademark costs, net		2,738		2,873
License fees		3,776		3,777
Less: accumulated amortization		(827)		(708)
License fees, net		2,949		3,069
MSA signatory costs		2,202		2,202
License fee for predicate cigarette brand		350		350
	$	8,239	$	8,494

Amortization expense relating to the above intangible assets for the three and six months ended June 30, 2020 amounted to $189 and $361 respectively ($223 and $438 for the three and six months ended June 30, 2019 respectively). Impairment expense for the three and six months ended June 30, 2020 amounted to $146 (cost of approximately $448 less accumulated amortization of approximately $302). The impairment related to patent intellectual property that would be expired before the Company planned to commercialize.