Note 4 - Intangible Assets

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

NOTE 4 – INTANGIBLE ASSETS

On September 12, 2016, the Company executed an agreement dated August 31, 2016, to acquire assets, including a patent related to LED Lighting, from Tesla Digital, Inc., a Canadian Corporation, and Stevan (Steve) Pokrajac (the “Sellers”).

Material consideration given by Company was: (a) Shares of CEN common stock equal to $5 million upon commencement of public trading (b) The transfer of real properties located at 135 North Rear Road, Lakeshore, Ontario, Canada having a fair value of $2,161,467 and 1517-1525 Ridge Road having a purchase cost (including other related disbursements) to the Company of $202,666.

The patent remains in the name of Tesla Digital, Inc. until full settlement of the terms of the agreement. In the interim, pursuant to an updated agreement executed on April 15, 2019 between the Company and the Sellers, CEN has reaffirmed the rights to use the patented technology.

In addition, the Company agreed to employ Stevan Pokrajac, by an LED subsidiary that the Company plans to form, but which has not yet been formed, in connection with the development of the acquired technology with compensation equal to $200,000 per year, commencing with the start of operations.

In March 2018, the Tesla agreement was amended to replace the $5 million stock consideration commitment with a commitment to issue one million registered shares of CEN common stock with a closing date of September 30, 2018. On October 4, 2018, this agreement was amended to extend the closing date to December 15, 2018. On April 3, 2019, the Company entered into an amendment which extended the closing date of the agreement to December 31, 2019. On March 16, 2020 the Company entered into an amendment extending the closing date until December 31, 2021. The March 2018 modification of the agreement converted a fixed value of shares to a fixed number of shares. Accordingly, the liability was reduced and additional paid in capital was increased by $4,380,000 to reflect the fair value of the shares committed at the date of the amendment. As of both March 31, 2021 and December 31, 2020, the fair value of this liability was $1,380,000. This liability will be remeasured at each reporting

date using the current fair value of CEN’s common shares.

On October 7, 2021, the agreement was amended and finalized to increase the number of CEN common shares to be transferred to five million. Upon closing of the agreement, the CEN common stock, valued at $2,042,500 based upon the October 7, 2021 closing market price, was transferred to the Sellers and the transfer of the patent and real property was completed. Of this amount, $1,634,000 represented additional stock compensation expense for the additional four million shares issued. In addition, the Sellers assumed the mortgage and associated accrued interest on certain real property that was included in the original agreement, of $302,186, resulting in a net loss on final settlement of the lighting patent purchase of $1,331,814.

The Company intends to explore using the patented LED Lighting Technology across manufacturing operations and licensing opportunities across multiple industries such as horticultural, automotive, industrial and commercial lighting. The assets acquired, other than the patent, included certain machinery and raw materials, which were old and non-functioning and accordingly, had no fair value.

The intangible asset consists of the following at:

	2022		2021		Estimated Useful Life (years)
Lighting patent	$	6,797,000	$	6,797,000		16
Product technology		276,080		276,080		n/a
Customer relationships		149,872		149,872		7
Capitalized software development costs		105,730		105,730		n/a
Trade names		23,664		23,664		3
Total identifiable intangible assets		7,352,346		7,352,346
Less: Accumulated amortization		2,364,221		2,280,315
Net	$	4,988,125	$	5,072,031

As of December 31, 2021 and 2020, there is no impairment expense recognized based on the Company’s expectations that it will be able to monetize the intangible assets. Expected amortization expense for the lighting patent is $424,812 per year through 2031, with the remaining $283,215 to be amortized in 2032. Expected amortization expense for the customer relationships and trade names acquired as part of the CCM acquisition on July 9, 2021 are expected to be approximately $29,300 per year through 2023, 25,400 in 2024, $21,400 in 2025 and 2026, with the remaining $32,100 to be amortized through 2028. The product technology and capitalized software development costs are not yet available for general release to customers and thus are not yet amortized.