Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

NOTE 6 - INTANGIBLE ASSETS AND GOODWILL

During 2018 and 2017, the Company spent approximately $20,000 and $12,000, respectively, on capitalized patent prosecution costs.

On June 26, 2018, the Company entered into an agreement with Fortress Credit Co LLC (“Fortress”), which among other things transferred to Fortress all of the remaining economic rights to certain of the Company’s semi-conductor related patents (See Note 7). As a result, the Company wrote-off these patents which had an aggregated gross cost of $2,655,000 and a net unamortized carrying amount of $295,470 on the agreement date.

On July 31, 2018, the Company entered into a Non-Compete Letter Agreement (the “Agreement”) with its former President and Chief Executive Officer of its wholly owned subsidiary, Premier Packaging Corporation. The Agreement called for payments of $16,000 per month, for a period of 19 months, as consideration for the two-year non-competition and non-solicitation restrictive covenants. The Company recorded the aggregate cost of the Agreement of $304,000 as an intangible asset to be amortized over the 24-month period commencing August 1, 2018.

On October 24, 2018, the Company’s subsidiary, DSS Asia Limited acquired Guangzhou Hotapps Technology Ltd., (“Guangzhou Hotapps”) a Chinese company, in exchange for a 2-year, $100,000 unsecured promissory note. In connection with this acquisition, the Company acquired the license to do business in China to which the Company allocated a value of $85,734 as well as a related deferred tax liability of $33,333 due to outside basis differences and recorded as an intangible asset that it will amortize over a five-year period.

Intangible assets are comprised of the following:

		December 31, 2018						December 31, 2017
	Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Acquired intangibles - customer lists, licenses and non-compete agreements	5-10 years		1,284,065		823,884		460,181		1,997,300		1,810,750		186,550
Acquired intangibles - patents and patent rights			500,000		500,000		-		3,155,000		2,603,942		551,058
Patent application costs	Varied (1)		1,168,155		746,925		421,230		1,148,017		664,873		483,144
		$	2,952,220	$	2,070,809	$	881,411	$	6,300,317	$	5,079,565	$	1,220,752

⁽¹⁾ Patent application costs are amortized over their expected useful life which is generally the remaining legal life of the patent. As of December 31, 2018, the weighted average remaining useful life of these assets in service was approximately 6.9 years.

Amortization expense for the year ended December 31, 2018 amounted to approximately $487,000 ($687,000 –2017).

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

Year	Amount
2019	$	345,100
2020	$	209,800
2021	$	100,100
2022	$	101,500
2023	$	42,700

Goodwill

The Company performed its annual goodwill impairment test as of December 31, 2018. 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, 2018 and 2017 are as follows:

	Packaging		Plastics		Total
Balance as of January 1, 2017
Goodwill	$	1,768,648	$	684,949	$	2,453,597
Accumulated impairment losses		-		-		-
		1,768,648		684,949		2,453,597
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
Balance as of December 31, 2018
Goodwill		1,768,648		684,949		2,453,597
Accumulated impairment losses		-		-		-
	$	1,768,648	$	684,949	$	2,453,597