Annual report pursuant to Section 13 and 15(d)

Intellectual Property

Intellectual Property
12 Months Ended
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Intellectual Property

4.         Intellectual Property


On July 3, 2014, five of the founding stockholders contributed the rights to certain intellectual property to the Company in exchange for the issuance of 4,101,822 shares with a fair value of approximately $1.1 million. This contribution was recorded as an intangible asset with an offset to additional paid in capital for $0.6 million and deferred taxes for $0.4 million. The fair market value of the intellectual property was determined by management with the assistance of an independent valuation specialist using an equal weighting of the incremental cash flow and relief from royalty methodologies.


Both methodologies used a discount rate of 50%. The discounted cash flow approach used a 10-year forecast and a 20% probability of achieving commercial success. The forecast assumed 85% of revenue is generated from sales of lead processed in Company owned and operated recycling plants and 15% of revenue is generated from license fees. The relief from royalty method used revenues equal to 50% of management’s discounted cash flow forecast and a license rate of 1.5% of revenue.


The increase of $200,000 and $146,400 in 2016 and 2015 was due to fees associated with additional patent and trademark filings. The intellectual property balance is being amortized straight-line over a 10-year period.


Intellectual property, net, is comprised of the following for the dates indicated (in thousands):


    2016     2015  
Intellectual property   $ 1,419     $ 1,219  
Accumulated amortization     (282 )     (154 )
Intellectual property, net   $ 1,137     $ 1,065  


Aggregate amortization expense for the year ended December 31, 2016 and 2015 was $128,000 and $110,000, respectively.