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

6.         Intellectual Property


On April 13, 2017, the Company entered into an agreement to purchase all the capital shares of Ebonex IPR Limited, a company registered in England and Wales. Ebonex IPR Limited is a pre-revenue IP-based company that has developed patented technology in the field of advanced materials and manufacturing methods for advanced lead acid batteries. Total consideration was $2.5 million, consisting of cash, transaction costs and 123,776 shares of the Company’s common stock, which at the time had a closing market price of $17.36 per share. In accordance with ASC Topic 805-50, “Business Combinations – Related Issues”, the Company accounted for the transaction as an asset acquisition and allocated the consideration to the relative fair value of the assets acquired. The Company determined that the transaction was an asset acquisition rather than a business combination following the guidance in the above-mentioned standard. In order to be treated as a business combination, the acquired assets and assumed liabilities must constitute a business. A business requires a set of inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. Ebonex IPR Limited has no processes such as strategic management processes, operational processes, or employees. Further, Ebonex IPR Limited provides no goods or services to customers, nor has it any investment or other revenues. Therefore, the Company concluded that the acquired assets and assumed liabilities do not constitute a business and are instead treated as an asset acquisition. Assets acquired consisted of a patent portfolio. The fair value of the patent portfolio, of $112,000, was determined by management with the assistance of an independent valuation specialist using an income approach. Included in the purchase were certain fixed assets that have been determined by management to have no immediate value and were not considered in the valuation of Ebonex IPR.


The Company initially recorded the transaction as an increase of $2.5 million to intellectual property, net on the balance sheet. Subsequently, due to the fair value of the patent portfolio being significantly less than total consideration, the early development stage of the technology acquired and the uncertainties inherent in research and development, the Company recorded a non-cash impairment charge of $2.4 million during the three-month period ended June 30, 2017.


The remaining $0.1 million is being amortized straight-line over a 10-year period.


The increase of $0.5 million (excluding the Ebonex transaction detailed above), $0.2 million and $0.1 million in 2017, 2016 and 2015, respectively, 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):


    2017     2016  
Intellectual property   $ 1,906     $ 1,419  
Accumulated amortization     (445 )     (282 )
Intellectual property, net   $ 1,461     $ 1,137  


Aggregate amortization expense for the year ended December 31, 2017, 2016 and 2015 was $0.2 million, $0.1 million and $0.1 million, respectively.


Estimated future amortization is as follows as of December 31, 2017 (in thousands).:


2018       191  
2019       191  
2020       191  
2021       191  
2022       191  
Thereafter       506  
Total estimated future amortization     $ 1,461