Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

NOTE 5 - INTANGIBLE ASSETS AND GOODWILL

During 2016 and 2015, the Company spent approximately $74,000 and $5,000, respectively, on 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, 2016						December 31, 2015
	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		1,721,357		275,943		1,997,300		1,635,257		362,043
Acquired intangibles-patents and patent rights	Varied	(1)		3,155,000		2,092,767		1,062,233		3,650,000		1,562,526		2,087,474
Patent application costs	Varied	(2)		1,136,465		578,623		557,842		1,062,958		494,931		568,027
			$	6,288,765	$	4,392,747	$	1,896,018	$	6,710,258	$	3,692,714	$	3,017,544

(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, 2016, the weighted average remaining useful life of these assets in service was approximately 2.4 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, 2016, the weighted average remaining useful life of these assets in service was approximately 8.6 years.

Amortization expense for the year ended December 31, 2016 amounted to approximately $700,000 ($896,000 –2015).

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

Year	Amount
2017	$	681,000
2018	$	537,000
2019	$	272,000
2020	$	182,000
2021	$	77,000

Goodwill

The Company performed its annual goodwill impairment test as of December 31, 2016. 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 its 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. During the Company’s annual assessment of goodwill in 2015, the Company considered the negative trends in patent litigation which have reduced the success of patent owners in protecting their patents in the federal court system, among other factors. In performing Step 2, the Company determined the carrying amount of the goodwill exceeded the implied fair value of the goodwill by $9,600,000 and accordingly recorded approximately $9,600,000 of a goodwill impairment charge to the goodwill assigned to its DSS Technology Management division.

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, 2016 and 2015 are as follows:

	Packaging		Plastics		Technolgy Management			Total
Balance as of January 1, 2015
Goodwill	$	1,768,400	$	684,949	$	12,831,774		$	15,285,123
Accumulated impairment losses		-		-		(3,238,926	)		(3,238,926	)
		1,768,400		684,949		9,592,848			12,046,197
Goodwill acquired during the year		-		-		-			-
Impairment losses		-		-		(9,592,848	)		(9,592,848	)
Balance as of December 31, 2015
Goodwill		1,768,400		684,949		12,831,774			15,285,123
Accumulated impairment losses		-		-		(12,831,774	)		(12,831,774	)
		1,768,400		684,949		-			2,453,349
Goodwill acquired during the year		-		-		-			-
Impairment losses		-		-		-			-
Balance as of December 31, 2016
Goodwill		1,768,400		684,949		12,831,774			15,285,123
Accumulated impairment losses		-		-		(12,831,774	)		(12,831,774	)
	$	1,768,400	$	684,949	$	-		$	2,453,349