NOTE 6 – INTANGIBLE ASSETS

Intangible assets include patents purchased and are recorded based at their acquisition cost. Intangible assets consisted of the following:

							Weighted average
	September 30,			December 31,			amortization period
	2018			2017			(years)
Patents	$	4,020,000		$	4,000,000			9.8
Less: net monetization obligations		(509,811	)		(509,811	)
Imputed interest		(376,291	)		(376,291	)
Subtotal		3,133,898			3,113,898
Less: accumulated amortization		(983,850	)		(650,560	)
Net value of intangible assets	$	2,150,048		$	2,463,338			8.2

Intangible assets are comprised of patents with estimated useful lives. The intangible assets at September 30, 2018 represent: (1) patents acquired in October 2015 for a purchase price of $3,000,000, the useful lives of the patents, at the date of purchase, was 6-10 years, (2) patents acquired in July 2017 pursuant to an obligation to distribute 50% of net revenues to IV 34/37, against which $25,000 was advanced at closing and provided that in the event that, on December 31, 2018, December 31, 2019 and December 31, 2020, cumulative distributions of 50% of net revenues to IV 34/37 total less than $100,000, $375,000 and $975,000, respectively, CXT shall pay the difference necessary to achieve the applicable minimum payment amount within ten days after the applicable date; with any advances being credited toward future distributions to IV 34/37; the useful lives of the patents, at the date of acquisition, was 5-6 years, (3) patents (which were fully depreciated at the date of acquisition) acquired in January 2018 pursuant to an agreement with to Intellectual Ventures Assets 62 LLC and Intellectual Ventures Assets 71 LLC “(IV 62/71”), pursuant to which CXT has an obligation to distribute 50% of net revenues to IV 62/71 against which CXT advanced $10,000 at closing; and (4) patents acquired in January 2018 by Photonic Imaging Solutions Inc. (“PIS”) from Intellectual Ventures Assets 64 LLC (“IV 64”) pursuant to which PIS is to pay IV 64 (a) 70% of the first $1,500,000 of net revenue, (b) 30% of the next $1,500,000 of net revenue and (c) 50% of net revenue in excess of $3,000,000, against which PIS advanced $10,000 at closing. The Company amortizes the costs of intangible assets over their estimated useful lives on a straight-line basis. Costs incurred to acquire patents, including legal costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent. Amortization of patents is included as a selling, general and administrative expense in the accompanying consolidated statements of operations.

The Company assesses intangible assets for any impairment to the carrying values. As of September 30, 2018, and December 31, 2017, management concluded that there was no impairment to the acquired assets. At September 30, 2018 and December 31, 2017, the net book value of the Company’s intellectual property was $2,150,048 and $2,463,338, respectively.

Amortization expense for patents comprised $333,290 and $331,275 for the nine months ended September 30, 2018 and the year ended December 31, 2017, respectively. Future amortization of intangible assets is as follows:

Year ended December 31,
2018	$	104,430
2019		417,719
2020		417,719
2021		413,658
2022 and thereafter		796,522
Total	$	2,150,048

Pursuant to the securities purchase agreement dated October 22, 2015 more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, 15% of the net monetization proceeds from the patents acquired in October 2015 will be paid to the lender, United Wireless. This monetization obligation was recognized as a discount to the loan and is being amortized over the life of the loan using the effective interest method. In addition, the Company entered into a monetization agreement with United Wireless pursuant to which the Company agreed to pay United Wireless 7.5% of the net monetization proceeds from the patents acquired by CXT in July 2017. This obligation was recorded as an expense and is reflected in interest expense during the third quarter of 2017.

The Company granted IV 34/37 a security interest in the patents assigned to CXT as security for the payment of the balance of the purchase price. The security interest of IV 34/37 is senior to the security interest of United Wireless in the proceeds derived from such patents.

The balance of the purchase price of the patents is reflected as follows:

	September 30, 2018			December 31, 2017
Current Liabilities:
Purchase price of patents, current portion		100,000		$	100,000
Unamortized discount
Non-current liabilities:
Purchase price of patents, long term		875,000		$	875,000
Unamortized discount		(123,321	)		(175,243	)
Total current and non-current		851,679			799,757
Effective interest rate of Amortized over 2-3 years					9.2-9.6	%

Because the non-current minimum payment obligations of $875,000 are due over the next three years, the Company imputed interest of 10% and the interest will be accreted up to the maturity date.