Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 27, 2020 | Jul. 29, 2019 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | QUEST PATENT RESEARCH CORP | ||
Entity Central Index Key | 0000824416 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false | ||
Entity Common Stock, Shares Outstanding | 383,038,334 | ||
Entity Filer Number | 33-18099 | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | NY | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 8,426,843 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 537,198 | $ 166,911 |
Accounts receivable | 1,850,375 | |
Other current assets | 17,180 | 2,343 |
Total current assets | 2,404,753 | 169,254 |
Patents, net of accumulated amortization of $1,617,762 and $1,088,280, respectively | 2,754,354 | 2,045,618 |
Total assets | 5,159,107 | 2,214,872 |
Current liabilities | ||
Accounts payable and accrued liabilities | 3,362,932 | 338,748 |
Loans payable - third party | 147,000 | 163,000 |
Purchase price of patents, current portion | 569,386 | 100,000 |
Loan payable - related party, net of unamortized discount and debt issuance costs of $189,705 and $379,948, respectively | 4,483,105 | 4,292,862 |
Accrued interest - loans payable related party | 117,780 | 117,780 |
Accrued interest - loans payable third party | 270,185 | 281,514 |
Derivative liability | 595,000 | 540,000 |
Total current liabilities | 9,545,388 | 5,833,904 |
Non-current liabilities | ||
Contingent funding liabilities | 20,378 | 150,000 |
Purchase price of patents, net of unamortized discount of $282,503 and $105,172, respectively | 1,442,497 | 769,829 |
Total liabilities | 11,008,263 | 6,753,733 |
Stockholders' deficit | ||
Preferred stock, par value $0.00003 per share - authorized 10,000,000 shares - no shares issued and outstanding | ||
Common stock, par value $0.00003 per share; authorized 10,000,000,000 at December 31, 2019 and 2018; shares issued and outstanding 383,038,334 at December 31, 2019 and 2018 | 11,491 | 11,491 |
Additional paid-in capital | 14,107,782 | 14,107,782 |
Accumulated deficit | (19,968,668) | (18,659,892) |
Total Quest Patent Research Corporation deficit | (5,849,395) | (4,540,619) |
Non-controlling interest in subsidiary | 239 | 1,758 |
Total stockholders' deficit | (5,849,156) | (4,538,861) |
Total liabilities and stockholders' deficit | $ 5,159,107 | $ 2,214,872 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Patents, net of accumulated amortization | $ 1,617,762 | $ 1,088,280 |
Loan payable - related party unamortized discount, current | 189,705 | 379,948 |
Purchase price of patents unamortized discount | $ 282,503 | $ 105,171 |
Preferred stock, par value | $ 0.00003 | $ 0.00003 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.00003 | $ 0.00003 |
Common stock, shares authorized | 10,000,000,000 | 10,000,000,000 |
Common stock, shares issued | 383,038,334 | 383,038,334 |
Common stock, shares outstanding | 383,038,334 | 383,038,334 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | ||
Patent licensing fees | $ 4,117,895 | $ 7,049,000 |
Licensed packaging sales | 25,274 | 20,004 |
Total revenue | 4,143,169 | 7,069,004 |
Cost of revenues: | ||
Cost of sales | 4,520 | 3,689 |
Litigation and licensing expenses | 3,383,948 | 6,071,608 |
Management support services | 2,093 | 6,774 |
Selling, general and administrative expenses | 1,222,024 | 957,571 |
Total operating expenses | 4,612,585 | 7,039,642 |
Income (loss) from operations | (469,416) | 29,362 |
Other expense | ||
Loss on derivative liability | (55,000) | (450,000) |
Gain on forgiveness of debt | 27,628 | |
Interest expense | (808,273) | (651,088) |
Total other expense | (835,645) | (1,101,088) |
Net loss before income tax | (1,305,061) | (1,071,726) |
Income tax | (5,234) | (1,040,134) |
Net loss | (1,310,295) | (2,111,860) |
Net income attributable to non-controlling interest in subsidiary | 1,519 | 1,461 |
Net Loss Attributable to Quest Patent Research Corporation | $ (1,308,776) | $ (2,110,399) |
Net loss per share - Basic and Diluted | $ 0 | $ (0.01) |
Weighted average shares outstanding - Basic and Diluted | 383,038,334 | 383,038,334 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Deficit - USD ($) | Common Stock | Additional Paid-in Capital | Deficit | Non-controlling Interest in Subsidiaries | Total |
Beginning Balance at Dec. 31, 2017 | $ 11,491 | $ 14,107,782 | $ (16,549,493) | $ 3,219 | $ (2,427,001) |
Beginning Balance, shares at Dec. 31, 2017 | 383,038,334 | ||||
Net loss | (2,110,399) | (1,461) | (2,111,860) | ||
Ending Balance at Dec. 31, 2018 | $ 11,491 | 14,107,782 | (18,659,892) | 1,758 | (4,538,861) |
Ending Balance, shares at Dec. 31, 2018 | 383,038,334 | ||||
Net loss | (1,308,776) | (1,519) | (1,310,295) | ||
Ending Balance at Dec. 31, 2019 | $ 11,491 | $ 14,107,782 | $ (19,968,668) | $ 239 | $ (5,849,156) |
Ending Balance, shares at Dec. 31, 2019 | 383,038,334 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (1,310,295) | $ (2,111,860) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of debt discount | 349,691 | 207,306 |
Loss on derivative liability | 55,000 | 450,000 |
Loss (gain) on forgiveness of debt | (27,628) | |
Depreciation and amortization | 529,486 | 437,720 |
Changes in operating assets and liabilities | ||
Accounts receivable | (1,850,375) | 2,846 |
Accrued interest - loans payable related party | (25,000) | 427,482 |
Accrued interest - loans payable third party | 16,300 | 16,300 |
Other current assets | (14,837) | 179 |
Accounts payable and accrued expenses | 3,024,181 | 191,392 |
Net cash provided by/(used in) operating activities | 746,523 | (378,635) |
Cash flows from investing activities: | ||
Purchase of patents | (75,000) | (20,000) |
Net cash used in investing activities | (75,000) | (20,000) |
Cash flows from financing activities: | ||
Proceeds from loans | 250,000 | |
Repayment of purchase price of patents | (155,614) | |
Loan payable - third party | (16,000) | |
Proceeds/(repayment) from sale of future revenues | (129,622) | 150,000 |
Net cash from/(used in) financing activities | (301,236) | 400,000 |
Net increase (decrease) in cash and cash equivalents | 370,287 | 1,365 |
Cash and cash equivalents at beginning of year | 166,911 | 165,546 |
Cash and cash equivalents at end of year | 537,198 | 166,911 |
Non Cash Investing and Financing Activities | ||
Accounts payable for patent purchase, net of imputed interest of $336,781 and $0, respectively | 1,238,219 | |
Supplemental disclosure of cash flow information | ||
Income taxes, including foreign taxing authorities withheld taxes of $5,000 and $1,039,900 during the years ended December 31, 2019, and 2018 respectively. | 5,234 | 1,040,134 |
Interest | $ 467,280 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Statement of Cash Flows [Abstract] | ||
Net of imputed interest | $ 336,781 | $ 0 |
Foreign taxing authorities withheld taxes | $ 5,000 | $ 1,039,900 |
Description of Business and Bas
Description of Business and Basis of Presentation | 12 Months Ended |
Dec. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 – DESCRIPTION OF BUSINESS The Company is a Delaware corporation, incorporated on July 17, 1987 and has been engaged in the intellectual property monetization business since 2008. As used herein, the "Company" refers to Quest Patent Research Corporation and its wholly and majority-owned and controlled operating subsidiaries unless the context indicates otherwise. All intellectual property acquisition, development, licensing and enforcement activities are conducted by the Company's wholly and majority-owned and controlled operating subsidiaries. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation and financial statement presentation The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of December 31, 2019 and 2018. The consolidated financial statements include the accounts and operations of: Quest Patent Research Corporation ("The Company") Quest Licensing Corporation (NY) (wholly owned) Quest Licensing Corporation (DE) (wholly owned) Quest Packaging Solutions Corporation (90% owned) Quest Nettech Corporation (65% owned) Semcon IP, Inc. (wholly owned) Mariner IC, Inc. (wholly owned) IC Kinetics, Inc. (wholly owned) CXT Systems, Inc. (wholly owned) Photonic Imaging Solutions Inc. (wholly owned) M-RED Inc. (wholly owned) Prior to April 2019, the operations of Wynn Technologies, Inc. were not included in the Company's consolidated financial statements as there were significant contingencies related to its control of Wynn Technologies, Inc. The sole asset of Wynn Technologies, Inc. was US Patent No. RE38,137E. Wynn Technologies, Inc. could not transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,137E without the express written consent of Sol Li, owner of 35% of Wynn Technologies, Inc., unless, as of the date of such transfer, assignment, sale, hypothecation or other encumbrance, Mr. Li had received a total of at least $250,000. US Patent No. RE38,137E expired on September 28, 2015. The Company accounted for its 65% interest in Wynn Technologies, Inc. under the equity method whereby the investment accounts were increased for contributions by the Company plus its 60% share of income pursuant to the contractual agreement which provides that Sol Li, owner of 35% of Wynn Technologies, Inc. retained 40% of the income, and reduced for distributions and its 60% share of losses incurred, respectively, with the restriction whereby the account balances cannot go below zero. On April 11, 2019, Quest NetTech Corporation merged with Wynn Technologies, Inc. with Quest NetTech Corporation being the surviving entity. Pursuant to the merger agreement, we issued to Mr. Li a 35% interest in Quest NetTech Corporation. Significant intercompany transaction and balances have been eliminated in consolidation. Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturity dates of three months or less when purchased, to be cash equivalents. Accounts Receivable Accounts receivable, which generally relate to licensed sales, are presented on the balance sheet net of estimated uncollectible amounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company recorded an allowance for doubtful accounts of $0 as of December 31, 2019 and December 31, 2018, respectively. Intangible Assets Intangible assets consist of patents which are amortized using the straight-line method over their estimated useful lives or statutory lives whichever is shorter and are reviewed for impairment upon any triggering event that may give rise to the assets ultimate recoverability as prescribed under the guidance related to impairment of long-lived assets. 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. Patents include the cost of patents or patent rights (hereinafter, collectively "patents") acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years. Certain patent application and prosecution costs incurred to secure additional patent claims, that based on management's estimates are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. Impairment of long-lived assets Long-lived assets, including intangible assets with a finite life, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Derivative Financial Instruments The Company evaluates the embedded conversion feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a Black Scholes model, in accordance with ASC 815-15 "Derivative and Hedging" to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months after the balance sheet date. Fair value of financial instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is used which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 4 for information about derivative liabilities. The fair value hierarchy based on the three levels of inputs that may be used to measure fair value are as follows: Level 1 Level 2 Level 3 The carrying value reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short-term borrowings approximate fair value due to the short-term nature of these items. Revenue Recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers ● Step 1: Identify the contract with the customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when the company satisfies a performance obligation A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606's definition of a "distinct" good or service (or bundle of goods or services) if both of the following criteria are met: ● The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct). ● The entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following: ● Variable consideration ● Constraining estimates of variable consideration ● The existence of a significant financing component in the contract ● Noncash consideration ● Consideration payable to a customer Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. In general, the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers. Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise of consideration, whether a license to intellectual property or an entitlement to payment of a percentage of net proceeds, is distinct from other promised goods or services, evaluating whether consideration transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for licensed sales. Patent Licensing Fees Revenue is recognized upon transfer of control of promised bundled intellectual property rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those intellectual property rights. Revenue contracts that provide promises to grant "the right" to use intellectual property rights as they exist at the point in time at which the intellectual property rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company's operating subsidiaries. Intellectual property rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual intellectual property rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised intellectual property rights are inputs and (ii) the Company's promise to transfer each individual intellectual property right described above to the customer is not separately identifiable from other promises to transfer intellectual property rights in the contract. Since the promised intellectual property rights are not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights that is distinct, and accounted for all of the intellectual property rights promised in the contract as a single performance obligation. The intellectual property rights granted were "functional IP rights" that have significant standalone functionality. The Company's subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. The Company's subsidiaries have no further obligation with respect to the grant of intellectual property rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e. transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the intellectual property rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts within 30-90 days of execution of the contract. Contractual payments made by licensees are generally non-refundable. We do not have any significant payment terms, as payment is received shortly after goods are delivered or services are provided, therefore there is no significant financing component or consideration payable to the customer in these transactions. Licensed Sales The balance of our revenue, from licensed sales, is not significant but includes sales-based revenue contracts pursuant to purchase orders. There is only one distinct performance obligation in each purchase order, transfer of the promised good to the customer, and the customer can benefit from the good together with other resources readily available to the customer. For licensed sales, the transaction price is allocated to the performance obligation on a relative standalone selling price basis per the purchase order, and the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimates are generally based on historical levels of activity, if available. Notwithstanding, revenue is recognized for a licensed sale when the performance obligation has been satisfied – transfer of the good to the customer. The purchase order generally provides for payment of contractual amounts within 30 days of transfer of the goods to the customer, therefore there is no significant financing component or consideration payable to the customer in these transactions. Cost of Revenues Cost of revenues include the costs and expenses incurred in connection with our patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent litigation funding fees, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption "Cost of revenues" in the accompanying consolidated statements of operations. No such fees are recognized as cost of revenue to the extent that the Company has no obligation with respect to such fees prior to a settlement or license. Inventor Royalties, Litigation Funding Fees and Contingent Legal Expenses. In connection with the investment in certain patents and patent rights, certain of the Company's operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. The Company's operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded. The Company's operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities. The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company's operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. Research and development Research and development costs are expensed as incurred. We did not incur any research and development costs in the years ended December 31, 2019 and 2018. Income Taxes Deferred income tax assets and liabilities are recognized for the expected future income tax consequences of events that have been included in the consolidated financial statements or income tax returns. Deferred income tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities using tax rates in effect for the years in which the differences are expected to reverse. In evaluating the ultimate realization of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. Management establishes a valuation allowance if it is more likely than not that all or a portion of the deferred income tax assets will not be utilized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income, which must occur prior to the expiration of the net operating loss carryforwards. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of December 31, 2019 and 2018. The Company records revenues on a gross basis, before deduction for income taxes. The Company incurred foreign income tax expenses of approximately $5,000 and $1,040,000 for the years ended December 31, 2019 and 2018, respectively. Stock-based compensation The Company recognizes stock-based compensation pursuant to ASC 718, "Compensation — Stock Compensation," which prescribes accounting and reporting standards for all stock-based payment transactions in which employee services, and, since January 1, 2019, non-employee services, are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Stock-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Earnings (loss) per share Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of shares of the Company's common stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if our share-based awards and convertible securities were exercised or converted into common stock. The dilutive effect of our share-based awards is computed using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted earnings per share calculation. Because the Company incurred losses in all period covered by the financial statements and would be anti-dilutive, the diluted earnings per shares is the same as the basic earnings per share. The 50,000,000 shares of common stock issuable upon exercise of outstanding warrants and options are excluded from the computation of loss per share because the result would have been antidilutive. Leases In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842), to provide a new comprehensive model for lease accounting under this guidance, lessees and lessors should apply a "right-of-use" model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance-sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. The Company adopted Topic 842 as of January 1, 2019 using the modified retrospective transition method with no impact on the consolidated financial position or results of operations. Concentration of credit risk The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any such losses in these accounts. Segment reporting The Company reports each material operating segment in accordance with ASC 280, "Segment Reporting." Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is the chief executive officer. The Company operates in two operational segments; intellectual property licensing and licensed packaging sales. Licensed packaging sales segment is not reported separately as revenue constitutes less than 10% of the combined revenue of all segments, reported profit is less than the combined profit of all operating segments that did not report a loss, and assets are less than 10% of the combined assets of all operating segments. Certain corporate expenses are not allocated to segments. Recent Accounting Pronouncements Management does not believe that there are any recently issued, but not effective, accounting standards which, if currently adopted, would have a material effect on the Company's financial statements. Going Concern During the period from 2008, when the Company changed its business to become an intellectual property management company, through 2019, the Company generated a cumulative loss of approximately $19,969,000. The Company's total current assets were approximately $2,405,000 at December 31, 2019. At December 31, 2019, the Company had a working capital deficiency of approximately $7,141,000, and it had negative working capital at December 31, 2018 and 2017. The Company requires funding for its operations. Because of the Company's continuing losses, the working capital deficiency, the uncertainty of future revenue, the Company's low stock price and the absence of a trading market in its common stock, the ability of the Company to raise funds in equity market or from lenders is severely impaired, and there exists substantial doubt about the ability of the Company to continue as a going concern. Although the Company may seek to raise funds and to obtain third party funding for litigation to enforce its intellectual property rights, the availability of such funds in uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Short Term Debt and Long-term L
Short Term Debt and Long-term Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
SHORT-TERM DEBT AND LONG-TERM LIABILITIES | NOTE 3 – SHORT TERM DEBT AND LONG-TERM LIABILITIES The following table shows the Company's debt at December 31, 2019 and 2018. December 31, December 31, 2019 2018 Short-term debt: Loans payable – third party $ 147,000 $ 163,000 Purchase price of patents – current portion 569,386 100,000 Net short-term debt 716,386 263,000 Loan payable – related party Gross 4,672,810 4,672,810 Accrued Interest 117,780 117,780 Unamortized discount (189,705 ) (379,948 ) Net loans payable – related party $ 4,600,885 $ 4,410,642 Long-term liabilities: Purchase price of patents Gross 1,725,000 875,000 Unamortized discount (282,503 ) (105,171 ) Net purchase price of patents – long-term $ 1,442,497 $ 769,829 Contingent funding liabilities: Gross 20,378 150,000 Net contingent funding liabilities $ 20,378 $ 150,000 Short-term debt The loan payable – third party is a demand loan made by former officers and directors, now unrelated third parties, and shareholders in the amount of $147,000. During the year ended December 31, 2019 the Company paid $16,000. The loans are payable on demand plus accrued interest at 10% per annum. The loan payable – related party at December 31, 2019 represents the principal amount of the Company's 10% note to Intelligent Partners, as transferee of the notes issued to United Wireless Holdings, Inc. ("United Wireless"), in the principal amount of $4,672,810 pursuant to securities purchase agreement dated October 22, 2015. The note payable to Intelligent Partners, as transferee of United Wireless, has been classified as a current liability as of December 31, 2019. Interest on all notes issued pursuant to the securities purchase agreement, accrued through September 30, 2018, with accrued interest being added to principal on September 30, 2016, 2017 and 2018. Accordingly, the accrued interest is included in loans payable, related party. Since September 30, 2018, the Company has been required to pay interest quarterly. During the year ended December 31, 2019 the Company paid approximately $467,000 in interest on the notes. Because of its right to elect a director of the Company, United Wireless is treated as a related party. Prior to the stock purchase agreement with United Wireless, the Company had no relationship with United Wireless. Pursuant to the securities purchase agreement and the related agreements that were executed contemporaneously with the securities purchase agreement: ● The Company borrowed a total of $250,000, $1,150,000 and $1,250,000 from United Wireless in 2018, 2017 and 2016, respectively, for which the Company issued its 10% promissory note due September 30, 2020. Notes in the amount of $1,000,000 were issued on October 22, 2015, September 30, 2016 and November 15, 2017 to pay Intellectual Ventures Assets 16, LLC ("Intellectual Ventures") on account of the three installments of the purchase price of the patents purchased from Intellectual Venture (see Note 6), and the balance was paid in cash to the Company for working capital. ● The Company sold United Wireless 50,000,000 shares of common stock for $250,000 on October 22, 2015. ● The Company granted United Wireless an option to purchase 50,000,000 shares of common stock at varying exercise prices. See Note 5. ● The Company entered into a monetization proceeds agreement pursuant to which United Wireless received the right to receive 15% of the net monetization proceeds received from (a) the patents acquired by the Company from Intellectual Ventures and (b) the patents in the Company's mobile data and financial data intellectual property portfolios. ● The Company's obligations under the agreements with United Wireless, including the notes and the monetization proceeds agreement, are secured by a pledge of the stock of the three subsidiaries that hold the patents acquired from Intellectual Ventures and by the proceeds from the intellectual property represented by (i) the patents acquired from Intellectual Ventures and (ii) the intellectual property in the mobile data and financial data portfolios. ● Although the notes have no conversion rights, if a Conversion Eligible Event of Default occurs, the notes become convertible at a conversion price equal to 90% of the closing sale price of the Company's common stock on the principal market on which the common stock is trading on the trading day immediately preceding the date the holder gives notice of conversion. Management has evaluated the conversion feature for derivative accounting consideration under ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity's Own Stock and concluded that it meets the criteria for classification in stockholders' equity. The note contains a limitation on conversion whereby it is convertible except to the extent that the number of shares of the Company's common stock to be issued upon such conversion exceeds the number of authorized but unissued shares of Common Stock; provided, that the Company shall then promptly seek stockholder approval of an amendment to the Company's Certificate of Incorporation increasing its authorized Common Stock to at least the sum of the number of shares of Common Stock outstanding plus the Required Reserve Amount. As a result of the potential inability to have sufficient available authorized common stock due to the reserve requirement, certain other outstanding instruments have been accounted for as derivative liabilities since January 22, 2016 (see Note 4). As a result of fluctuations in the Company's stock price, from time to time, but never for a period exceeding 135 days, the Company had insufficient authorized shares of common stock necessary for United Wireless to convert its notes and exercise its options. On June 15, 2017, the Company amended its certificate of incorporation to increase its authorized common stock to 10,000,000,000 shares. ● The Company has agreed that, as long as United Wireless' stockholding in the Company exceed 10%, United has the right to designate one member of the board of directors and at such time and for as long as United's stockholdings exceed 24.9%, United may nominate a second director to the board. Unless a Conversion Eligible Event of Default shall have occurred, United Wireless agreed not to seek to elect a majority of the board for a period of at least three years from the closing date. Although United Wireless transferred the shares of common stock to its stockholders as a dividend and transferred the options to an affiliate, United Wireless advised the Company that it did not assign the right to designate directors. ● The holders of the notes also have the right to demand redemption of the notes at 110% of the principal amount of the note in the event of a change of control of the Company. The fair value of the options (see Note 5) granted to United Wireless was $220,000 on grant date. Management has evaluated the option for derivative accounting consideration under ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity's Own Stock and concluded that the option meets the criteria for classification in stockholders' equity. Therefore, derivative accounting is not applicable for the option. The fair value of the investment proceeds was allocated among the notes, common stock, and options as follows: Relative fair value of options $ 191,860 Relative fair value of stock $ 218,024 Relative fair value of note payable $ 1,090,116 In connection with the funding which the Company obtained from United Wireless to purchase the patents, the Company entered into a monetization agreement with United Wireless pursuant to which the Company agreed to pay United Wireless 15% of the net monetization proceeds from the patents acquired in October 2015 and the intellectual property in the Company's mobile data and financial data portfolios. This obligation was recorded as 15% of the purchase price of the patents, or $450,000, and is reflected as net monetization obligations. The Company granted to United Wireless a security interest in the stock of the three subsidiaries which own the patents acquired in October 2015 and the proceeds from these patents and the intellectual property in the Company's mobile data and financial data portfolios as s security for the Company's obligations to United Wireless. The allocation of proceeds resulted in a discount from the note payable of $188,023. In addition, the Company recognized a discount associated with the monetization agreement of $450,000. These discounts and debt issuance costs of $60,958, total $698,981, will be amortized and charged to interest expense over the life of the notes using the effective interest rate method. As of December 31, 2019 and December 31, 2018, $509,276 and $319,033 of the discount and debt issuance cost have been amortized, respectively. The effective interest rate on the notes, including the discount, is 33%. Long term liabilities The purchase price of patents at December 31, 2019 represents the non-current portion of minimum payments due under the agreements between: (i) CXT Systems, Inc. ("CXT"), a wholly owned subsidiary, and Intellectual Ventures Assets 34, LLC and Intellectual Ventures 37, LLC ("IV 34/37") pursuant to which at closing CXT acquired by assignment all right, title, and interest in a portfolio of thirteen United States patents (the "CXT Portfolio"). Under the agreement, CXT will distribute 50% of net recoveries, as defined, to IV 34/37. CXT advanced $25,000 to IV 34/37 at closing, and agreed, pursuant to an amendment dated January 26, 2018, that in the event that, on December 31, 2018, December 31, 2019 and December 31, 2020, cumulative distributions 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 34/36. As of December 31, 2019, $600,000 and $194,386 of the minimum future cumulative distributions were presented as long-term and short-term debt, respectively, based on payment due dates. No affiliate of CXT has guaranteed the minimum payments. CXT's obligations under the agreement are secured by a security interest in the proceeds (from litigation or otherwise) from the CXT Portfolio. During the year ended December 31, 2019, CXT paid approximately $156,000 under the agreement. (ii) M-RED Inc. ("M-RED"), a wholly-owned subsidiary, and Intellectual Ventures Assets 113 LLC and Intellectual Ventures Assets 108 LLC ("IV 113/108") pursuant to which at closing M-RED paid IV 113/108 $75,000 and IV 113/108 transferred to M-RED all right, title and interest in a portfolio of sixty United States patents and eight foreign patents (the "M-RED Portfolio"). Under the agreement, M-RED will distribute 50% of net proceeds, as defined, to IV 113/108, as long as we generate revenue from the M-RED Portfolio. The agreement with IV 113/108 provides that if, on September 30, 2020, September 30, 2021 and September 30, 2022, cumulative distributions to IV 113/108 total less than $450,000, $975,000 and $1,575,000, respectively, M-RED shall pay the difference between such cumulative amounts and the amount paid to IV 113/108 within ten days after the applicable date; with any advances being credited toward future distributions to IV 113/108. As of December 31, 2019, $1,125,000 and $375,000 of the minimum future cumulative distributions were presented as long-term and short-term debt, respectively, based on payment due dates. No affiliate of M-RED has guaranteed the minimum payments. M-RED's obligations under the agreement with IV 113/108 are secured by a security interest in the proceeds (from litigation or otherwise) from the M-RED Portfolio. In December 2018, the Company entered into a funding agreement whereby a third party agreed to provide funds in the amount of $150,000, in support of the structured licensing programs of PIS and M-RED. Under the funding agreement, the third party receives an interest in the proceeds from the programs, and we have no other obligation to the third party. Our relationship with the investor meets the criteria in ASC 470-10-25 - Sales of Future Revenues or Various Other Measures of Income ("ASC 470"), which relates to cash received from an investor in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent, or contractual right for a defined period. Under this guidance, we recognized the fair value of our contingent obligation to the investor, as of the acquisition date, as long-term debt in our consolidated balance sheet. This initial fair value measurement is based on the perspective of a market participant and includes significant unobservable inputs which are classified as Level 3 inputs within the fair value hierarchy and are discussed further within Note 2. At each subsequent reporting period, we will measure the long-term debt at fair value based on the discounted expected future cash flows over the life of the obligation. Our repayment obligations are contingent upon future patent licensing fee revenues generated from the licensing programs. Under ASC 470, amounts recorded as debt shall be amortized under the interest method. The Company made an accounting policy election to utilize the prospective method when there is a change in the estimated future cash flows, whereby a new effective interest rate is determined based on the revised estimate of remaining cash flows. The new rate is the discount rate that equates the present value of the revised estimate of remaining cash flows with the carrying amount of the debt, and it will be used to recognize interest expense for the remaining periods. Under this method, the effective interest rate is not constant, and any change in expected cash flows is recognized prospectively as an adjustment to the effective yield. As of December 31, 2019, the effective interest rate was approximately 8.5%. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt and is used to compute the amount of interest to be recognized each period. During the year ended December 31, 2019, we paid the third party approximately $130,000 under the funding agreement. Any future payments made to the investor will decrease the long-term debt balance accordingly. For the year ended December 31, 2019, the amortization amount is deemed immaterial. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE LIABILITIES | NOTE 4 – DERIVATIVE LIABILITIES Because there is not a fixed conversion price, remaining compliant with the reserve requirement under the notes held by Intelligent Partners as transferee of United Wireless, is outside of the control of the Company. As a result of this, the Company has a potential inability to have sufficient available authorized common shares to settle certain outstanding instruments beginning with the date that the reserve requirement went into effect on January 22, 2016. There is no limit on the number of shares issuable under the note, and absent an increase in the stock price or an increase in authorized shares, there are potentially not enough authorized shares to satisfy the exercise of the options, thus the Company determined the options qualify as derivative liabilities under ASC Topic 815. On January 22, 2016, the Company reclassified all non-employee warrants and options as derivative liabilities and revalued them at their fair values at each balance sheet date. Any change in fair value was recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. As of December 31, 2019, and December 31, 2018, the aggregate fair value of the outstanding derivative liability was approximately $595,000 and $540,000, respectively. The Company estimated the fair value of the derivative liability using the Black-Scholes option pricing model using the following key assumptions during the years ended December 31, 2019 and 2018: Year Ended December 31, 2019 2018 Volatility 207-426 % 388-426 % Risk-free interest rate 0.24 % 0.64 % Expected dividends - - % Expected term 0.75-4.70 1.75-4.70 The following schedule summarizes the valuation of financial instruments that are remeasured on a recurring basis at fair value in the balance sheets as of December 31, 2019 and 2018: Fair Value Measurements as of December 31, 2019 December 31, 2018 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets None - - - - - - Total assets — — — — — — Liabilities Conversion option derivative liability — — 595,000 — — 540,000 Total liabilities $ — $ — $ 595,000 $ — $ — $ 540,000 The following table sets forth a reconciliation of changes in the fair value of derivative liabilities classified as Level 3 in the fair value hierarchy: Significant Unobservable Inputs (Level 3) as Balance - December 31, 2017 $ 90,000 Change in fair value 450,000 Balance – December 31, 2018 540,000 Change in fair value 55,000 Balance - December 31, 2019 $ 595,000 |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 5 – STOCKHOLDERS' EQUITY A summary of the status of the Company's stock options and changes is set forth below: Number of Options Weighted Average Exercise Weighted Average Remaining Contractual Life Balance - December 31, 2017 50,000,000 0.03 2.75 Granted - - - Cancelled - - - Expired - - - Exercised - - - Balance - December 31, 2018 50,000,000 0.03 1.75 Granted - - - Cancelled - - - Expired - - - Exercised - - - Balance - December 31, 2019 50,000,000 0.03 0.75 Options exercisable at end of year 50,000,000 0.03 - Warrants Pursuant to the restated employment agreement with the Company's chief executive officer, the Company granted to the chief executive office warrants to purchase 60,000,000 shares at $0.004 per share, representing the warrants that had been previously covered in his prior employment agreement dated January 1, 2014. These warrants are deemed to have been outstanding since January 1, 2014. The warrants expired unexercised on March 1, 2018. As of December 31, 2019, there was no unamortized warrant expense. A summary of the status of the Company's stock warrants and changes is set forth below: Number of Weighted Weighted Balance - December 31, 2017 65,000,000 0.004 0.17 Granted - - - Cancelled - - - Expired 65,000,000 - - Exercised - - - Balance - December 31, 2018 - - - Granted - - - Cancelled - - - Expired - - - Exercised - - - Balance - December 31, 2019 - - - Warrants exercisable at end of year - - - |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 6 – INTANGIBLE ASSETS Intangible assets include patents purchased and are recorded based at their acquisition cost. Intangible assets consisted of the following: Weighted December 31, amortization 2019 2018 (years) Patents $ 5,595,000 $ 4,020,000 9.8 Less: net monetization obligations (509,811 ) (509,811 ) Imputed interest (713,073 ) (376,291 ) Subtotal 4,372,116 3,133,898 Less: accumulated amortization (1,617,762 ) (1,088,280 ) Net value of intangible assets $ 2,754,354 $ 2,045,618 6.52 Intangible assets are comprised of patents with estimated useful lives. The intangible assets at December 31, 2019 represent: · 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; · patents acquired in July 2017 pursuant to an obligation to pay 50% of net revenues to IV 34/37, against which $25,000 was paid in July 2017 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 34/36; the useful lives of the patents, at the date of acquisition, was 5-6 years; · 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; · patents (which were fully depreciated at the date of acquisition) 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; · patents acquired in March 2019 pursuant to an obligation to pay 50% of net revenues to IV 113/108, against which $75,000 was paid in March 2019 and provided that in the event that, on September 30, 2020, September 30, 2021 and September 30, 2022, cumulative distributions to IV 113/108 total less than $450,000, $975,000 and $1,575,000, respectively, M-RED shall pay the difference between such cumulative amounts and the amount paid to IV 113/108 within ten days after the applicable date; with any advances being credited toward future distributions to IV 113/108; the useful lives of the patents, at the date of acquisition, was approximately 9 years. 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 as reflected in the accompanying consolidated statements of operations. The Company assesses intangible assets for any impairment to the carrying values. As of December 31, 2019, management concluded that there was no impairment to the acquired assets. At December 31, 2019, the book value of the Company's intellectual property was $2,754,354. Amortization expense for patents comprised $529,486 and $437,720 for the years ended December 31, 2019 and 2018, respectively. Future amortization of intangible assets is as follows: Year ended December 31, 2020 $ 553,779 2021 549,345 2022 495,742 2023 323,071 2024 and thereafter 832,417 Total $ 2,754,354 As discussed in Note 3, 15% of the proceeds from the patents acquired from Intellectual Ventures in October 2015 will be paid to our lender, United Wireless. This monetization obligation was recognized as a discount to the loan and will be 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 operating expenses. The Company granted IV 34/37 a security interest in the patents transferred to the Company 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: Current Liabilities: 2019 2018 Purchase price of patents, current portion 569,386 $ 100,000 Unamortized discount Non-current liabilities: Purchase price of patents, long term 1,725,000 $ 875,000 Unamortized discount (282,503 ) (105,172 ) Total current and non-current 2,011,883 869,828 Effective interest rate of Amortized over 2 years 9.6-12.5 % 9.2-9.6 % Because the non-current minimum payment obligations of $1,725,000 are due over the next three years, the Company imputed interest of 10% and the interest will be accreted up to the maturity date. |
Non-Controlling Interest
Non-Controlling Interest | 12 Months Ended |
Dec. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
NON-CONTROLLING INTEREST | NOTE 7 – NON-CONTROLLING INTEREST The following table reconciles equity attributable to the non-controlling interest related to Quest Packaging Solutions Corporation. December 31, 2019 2018 Balance, beginning of year $ 1,758 $ 3,219 Net income (loss) attributable to non-controlling interest $ (1,519 ) $ (1,461 ) Balance, end of year $ 239 $ 1,758 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 8 – INCOME TAXES The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. As of December 31, 2019, the Company has generated approximately $7,542,223 of net operating loss ("NOL") carry forwards which will begin to expire in 2024. Internal Revenue Code section 382 ("Section 382") restricts the use of these net operating losses in future periods if the Company has a "substantial change in ownership" as defined by Section 382. The Company has had significant equity transactions in both the current and prior periods. Due to this equity activity and the restrictions resulting under Section 382, most of the Company's NOLs may not be available to offset future taxable income. Therefore, the Company has fully reserved the deferred tax asset resulting from the net operating loss carry forwards. Deferred tax asset consisted primarily of the following: December 31, 2019 2018 Net operating loss carry forward $ 1,960,978 $ 1,770,729 Intangible Assets 331,704 195,999 Valuation allowance $ (2,292,682 ) $ (1,966,728 ) Balance, end of year $ - $ - Tax expense consisted primarily of the following: December 31, 2019 2018 Federal $ $ - State 234 234 Foreign 5,000 1,039,900 Deferred - - Total $ 5,234 $ 1,040,134 The Company's tax expense does not reflect the statutory rate since the Company's deferred tax asset is fully offset by a valuation allowance. The statute of limitations is open for the tax years ending December 31, 2016 and thereafter. The Company's foreign tax expense reflects the tax withheld by the foreign jurisdiction on royalty income received by the Company and not exempt under the United States tax treaty, if any, with the respective foreign jurisdiction. In 2019 the Company was subject to foreign source withholding tax of 10% in the People's Republic of China. In 2018 the Company was subject to foreign source withholding tax of 10% and 20% in the People's Republic of China and the Republic of China, respectively. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS The Company has at various times entered into transactions with related parties, including officers, directors and major shareholders, wherein these parties have provided services, advanced or loaned money, or both, to the Company needed to support its daily operations. The Company discloses all related party transactions. See Notes 3 and 6 in connection with transactions with United Wireless. During periods ended December 31, 2019 and 2018, the Company incurred interest expense on the Company's 10% notes issued to United Wireless and held by Intelligent Partners, an affiliate of United Wireless and a related party, pursuant to the securities purchase agreement dated October 22, 2015. The interest expense was approximately $467,000 and $510,000 for the year ended December 31, 2019 and 2018, respectively. On each of September 30, 2017 and 2018, accrued interest was added to the principal amount of the note. Subsequent to September 30, 2018, the Company is to pay interest quarterly. See Note 10 with respect to the employment agreement with the Company's president and chief executive officer. During 2019, the Company contracted with an entity owned by the chief technology officer for the provision of information technology services to the Company. The cost of these services was approximately $464 and $794 for the year ended December 31, 2019 and 2018, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 10 – COMMITMENTS AND CONTINGENCIES Employment Agreements Pursuant to a restated employment agreement, dated November 30, 2014, with the Company's president and chief executive officer, the Company agreed to employ him as president and chief executive officer for a term of three years, commencing January 1, 2014, and continuing on a year-to-year basis unless terminated by either party on not less than 90 days' notice prior to the expiration of the initial term or any one-year extension. The agreement provides for an initial annual salary of $252,000, which may be increased, but not decreased, by the board or the compensation committee. In March 2016, the Company's board of directors increased the chief executive officer's annual salary to $300,000, effective January 1, 2016. The chief executive officer is entitled to a bonus if we meet or exceed performance criteria established by the compensation committee. In August 2016, the Company's board of directors approved annual bonus compensation equal to 30% of the amount by which our consolidated income before income taxes exceeds $500,000, but, if the Company is subject to the limitation on deductibility of executive compensation pursuant to Section 162(m) of the Internal Revenue Code, the bonus cannot exceed the amount which would be deductible pursuant to Section 162(m). The chief executive officer is also eligible to participate in any executive incentive plans which the Company may adopt. Inventor Royalties, Contingent Litigation Funding Fees and Contingent Legal Expenses In connection with the investment in certain patents and patent rights, certain of the Company's operating subsidiaries executed agreements which grant to the former owners of the respective patents or patent rights, the right to receive inventor royalties based on future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. The Company's operating subsidiaries may engage third party funding sources to provide funding for patent licensing and enforcement. The agreements with the third party funding sources may provide that the funding source receive a portion of any negotiated fees, settlements or judgments. In certain instances, these third party funding sources are entitled to receive a significant percentage of any proceeds realized until the third party funder has recouped agreed upon amounts based on formulas set forth in the underlying funding agreement, which may reduce or delay and proceeds due to the Company. The Company's operating subsidiaries may retain the services of law firms in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby the law firms are paid on a scaled percentage of any negotiated fees, settlements or judgments awarded based on how and when the fees, settlements or judgments are obtained. Depending on the amount of any recovery, it is possible that all the proceeds from a specific settlement may be paid to the funding source and legal counsel. The economic terms of the inventor agreements, funding agreements and contingent legal fee arrangements associated with the patent portfolios owned or controlled by the Company's operating subsidiaries, if any, including royalty rates, proceeds sharing rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by the operating subsidiaries. Inventor royalties, payments to noncontrolling interests, payments to third party funding providers and contingent legal fees expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor royalties, payments to third party funding sources and contingent legal fees expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. In March 2014, the Company entered into a funding agreement whereby a third party agreed to provide funds to us to enable us to implement a structured licensing program, including litigation if necessary, for the Mobile Data. Under the funding agreement, the third party receives an interest in the proceeds from the program, and we have no other obligation to the third party. In April and June 2014, as part of a structured licensing program for the Mobile Data portfolio, Quest Licensing Corporation brought patent infringement suits in the U.S. District for the District of Delaware against Bloomberg LP et. al., FactSet Research Systems Inc., Interactive Data Corporation, SunGard Data Systems Inc. and The Charles Schwab Corporation et. al. In June and August 2016, Quest Licensing Corporation entered into a settlement agreement with SunGard Data Systems Inc. and FactSet Research Systems Inc. On January 19, 2017, the court in the Mobile Data Portfolio litigation granted the remaining defendants' motion for summary judgment of non-infringement. On June 8, 2018 the appellate court affirmed the lower court's decision. On June 9, 2018 Quest Licensing Corporation filed a petition for rehearing with the appellate court. On July 30, 2018 the appellate court denied Quest Licensing Corporations petition for rehearing and the funding agreement terminated. In December 2018, the Company entered into a funding agreement whereby a third party agreed to provide funds, in the amount of $150,000, in support of the structured licensing programs of PIS and M-RED. Under the funding agreement, the third party receives an interest in the proceeds from the programs, and the Company has no other obligation to the third party. As of December 31, 2019, the Company paid the third party approximately $130,000 under the agreement. Patent Enforcement and Other Litigation Certain of the Company's operating subsidiaries are engaged in litigation to enforce their patents and patent rights. In connection with these patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against the Company or its operating subsidiaries or award attorney's fees and/or expenses to a defendant(s), which could be material, and if required to be paid by the Company or its operating subsidiaries, could materially harm the Company's operating results and financial position. Since the operating subsidiaries do not have any assets other than the patents, and the Company does not have any available financial resources to pay any judgment which a defendant may obtain against a subsidiary, such a judgement may result in the bankruptcy of the subsidiary and/or the loss of the patents, which are the subsidiaries' only assets. On January 19, 2017, the court in the Mobile Data Portfolio litigation granted the defendants' motion for summary judgment of non-infringement. On January 31, 2017, Quest Licensing Corporation filed a notice of appeal with the United States Court of Appeals for the Federal Circuit. Following the court's decision granting the defendant's motion for summary judgment, the defendants moved for an award of attorneys' fees under Section 285 of the patent act which provides that "the court in exceptional cases may award reasonable attorney fees to the prevailing party." Such a motion, if granted, would result in a judgment against Quest Licensing Corporation, which does not have the financial resources to enable it to pay any judgment which may be rendered against it, and, the defendants may seek to enforce their judgment by seeking to foreclose on the patents owned by the subsidiary or seek to force the subsidiary into bankruptcy and purchase the patents in the bankruptcy proceeding, either of which could result in a default under the Company's agreement with United Wireless. The possible amount of any judgment cannot be estimated and the funding source for the litigation will not provide the Company with funds to pay an adverse judgment. On June 29, 2017, the defendants' motion for attorney fees in the Mobile Data litigation was denied, without prejudice. Defendants may renew their motion thirty days from the decision of the appellate court on Quest Licensing Corporation's appeal. On June 8, 2018 the appellate court affirmed the lower court's decision. On June 9, 2018 Quest Licensing Corporation filed a petition for rehearing with the appellate court. On July 30, 2018 the appellate court denied Quest Licensing Corporations petition for rehearing. On August 8, 2018, the defendants' renewed their motion for an award of attorneys' fees under Section 285 of the Patent Act. On March 27, 2019 the court in the Mobile Data Portfolio litigation denied the defendants' motion for attorney fees under Section 285 of the Patent Act. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 11 – SUBSEQUENT EVENTS No significant subsequent events. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Principles of consolidation and financial statement presentation | Principles of consolidation and financial statement presentation The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("US GAAP") and present the consolidated financial statements of the Company and its wholly owned and majority owned subsidiaries as of December 31, 2019 and 2018. The consolidated financial statements include the accounts and operations of: Quest Patent Research Corporation ("The Company") Quest Licensing Corporation (NY) (wholly owned) Quest Licensing Corporation (DE) (wholly owned) Quest Packaging Solutions Corporation (90% owned) Quest Nettech Corporation (65% owned) Semcon IP, Inc. (wholly owned) Mariner IC, Inc. (wholly owned) IC Kinetics, Inc. (wholly owned) CXT Systems, Inc. (wholly owned) Photonic Imaging Solutions Inc. (wholly owned) M-RED Inc. (wholly owned) Prior to April 2019, the operations of Wynn Technologies, Inc. were not included in the Company's consolidated financial statements as there were significant contingencies related to its control of Wynn Technologies, Inc. The sole asset of Wynn Technologies, Inc. was US Patent No. RE38,137E. Wynn Technologies, Inc. could not transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,137E without the express written consent of Sol Li, owner of 35% of Wynn Technologies, Inc., unless, as of the date of such transfer, assignment, sale, hypothecation or other encumbrance, Mr. Li had received a total of at least $250,000. US Patent No. RE38,137E expired on September 28, 2015. The Company accounted for its 65% interest in Wynn Technologies, Inc. under the equity method whereby the investment accounts were increased for contributions by the Company plus its 60% share of income pursuant to the contractual agreement which provides that Sol Li, owner of 35% of Wynn Technologies, Inc. retained 40% of the income, and reduced for distributions and its 60% share of losses incurred, respectively, with the restriction whereby the account balances cannot go below zero. On April 11, 2019, Quest NetTech Corporation merged with Wynn Technologies, Inc. with Quest NetTech Corporation being the surviving entity. Pursuant to the merger agreement, we issued to Mr. Li a 35% interest in Quest NetTech Corporation. Significant intercompany transaction and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturity dates of three months or less when purchased, to be cash equivalents. |
Accounts Receivable | Accounts Receivable Accounts receivable, which generally relate to licensed sales, are presented on the balance sheet net of estimated uncollectible amounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company recorded an allowance for doubtful accounts of $0 as of December 31, 2019 and December 31, 2018, respectively. |
Intangible Assets | Intangible Assets Intangible assets consist of patents which are amortized using the straight-line method over their estimated useful lives or statutory lives whichever is shorter and are reviewed for impairment upon any triggering event that may give rise to the assets ultimate recoverability as prescribed under the guidance related to impairment of long-lived assets. 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. Patents include the cost of patents or patent rights (hereinafter, collectively "patents") acquired from third-parties or acquired in connection with business combinations. Patent acquisition costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to ten years. Certain patent application and prosecution costs incurred to secure additional patent claims, that based on management's estimates are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. |
Impairment of long-lived assets | Impairment of long-lived assets Long-lived assets, including intangible assets with a finite life, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. |
Derivative Financial Instruments | Derivative Financial Instruments The Company evaluates the embedded conversion feature within its convertible debt instruments under ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition of a liability and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a Black Scholes model, in accordance with ASC 815-15 "Derivative and Hedging" to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within 12 months after the balance sheet date. |
Fair value of financial instruments | Fair value of financial instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy is used which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 4 for information about derivative liabilities. The fair value hierarchy based on the three levels of inputs that may be used to measure fair value are as follows: Level 1 Level 2 Level 3 The carrying value reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short-term borrowings approximate fair value due to the short-term nature of these items. |
Revenue Recognition | Revenue Recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers ● Step 1: Identify the contract with the customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when the company satisfies a performance obligation A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606's definition of a "distinct" good or service (or bundle of goods or services) if both of the following criteria are met: ● The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct). ● The entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following: ● Variable consideration ● Constraining estimates of variable consideration ● The existence of a significant financing component in the contract ● Noncash consideration ● Consideration payable to a customer Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. In general, the Company is required to make certain judgments and estimates in connection with the accounting for revenue contracts with customers. Such areas may include identifying performance obligations in the contract, estimating the timing of satisfaction of performance obligations, determining whether a promise of consideration, whether a license to intellectual property or an entitlement to payment of a percentage of net proceeds, is distinct from other promised goods or services, evaluating whether consideration transfers to a customer at a point in time or over time, allocating the transaction price to separate performance obligations, determining whether contracts contain a significant financing component, and estimating revenues recognized at a point in time for licensed sales. Patent Licensing Fees Revenue is recognized upon transfer of control of promised bundled intellectual property rights and other contractual performance obligations to licensees in an amount that reflects the consideration we expect to receive in exchange for those intellectual property rights. Revenue contracts that provide promises to grant "the right" to use intellectual property rights as they exist at the point in time at which the intellectual property rights are granted, are accounted for as performance obligations satisfied at a point in time and revenue is recognized at the point in time that the applicable performance obligations are satisfied and all other revenue recognition criteria have been met. For the periods presented, revenue contracts executed by the Company primarily provided for the payment of contractually determined, one-time, paid-up license fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company's operating subsidiaries. Intellectual property rights granted included the following, as applicable: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted were perpetual in nature, extending until the legal expiration date of the related patents. The individual intellectual property rights are not accounted for as separate performance obligations, as (i) the nature of the promise, within the context of the contract, is to transfer combined items to which the promised intellectual property rights are inputs and (ii) the Company's promise to transfer each individual intellectual property right described above to the customer is not separately identifiable from other promises to transfer intellectual property rights in the contract. Since the promised intellectual property rights are not individually distinct, the Company combined each individual IP right in the contract into a bundle of IP rights that is distinct, and accounted for all of the intellectual property rights promised in the contract as a single performance obligation. The intellectual property rights granted were "functional IP rights" that have significant standalone functionality. The Company's subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. The Company's subsidiaries have no further obligation with respect to the grant of intellectual property rights, including no express or implied obligation to maintain or upgrade the technology, or provide future support or services. The contracts provide for the grant (i.e. transfer of control) of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the contract. Licensees legally obtain control of the intellectual property rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met. Revenue contracts generally provide for payment of contractual amounts within 30-90 days of execution of the contract. Contractual payments made by licensees are generally non-refundable. We do not have any significant payment terms, as payment is received shortly after goods are delivered or services are provided, therefore there is no significant financing component or consideration payable to the customer in these transactions. Licensed Sales The balance of our revenue, from licensed sales, is not significant but includes sales-based revenue contracts pursuant to purchase orders. There is only one distinct performance obligation in each purchase order, transfer of the promised good to the customer, and the customer can benefit from the good together with other resources readily available to the customer. For licensed sales, the transaction price is allocated to the performance obligation on a relative standalone selling price basis per the purchase order, and the Company includes in the transaction price some or all of an amount of estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimates are generally based on historical levels of activity, if available. Notwithstanding, revenue is recognized for a licensed sale when the performance obligation has been satisfied – transfer of the good to the customer. The purchase order generally provides for payment of contractual amounts within 30 days of transfer of the goods to the customer, therefore there is no significant financing component or consideration payable to the customer in these transactions. Cost of Revenues Cost of revenues include the costs and expenses incurred in connection with our patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent litigation funding fees, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption "Cost of revenues" in the accompanying consolidated statements of operations. No such fees are recognized as cost of revenue to the extent that the Company has no obligation with respect to such fees prior to a settlement or license. |
Inventor Royalties, Litigation Funding Fees and Contingent Legal Expenses. | Inventor Royalties, Litigation Funding Fees and Contingent Legal Expenses. In connection with the investment in certain patents and patent rights, certain of the Company's operating subsidiaries may execute related agreements which grant to the inventors and/or former owners of the respective patents or patent rights, the right to receive a percentage of future net revenues (as defined in the respective agreements) generated as a result of licensing and otherwise enforcing the respective patents or patent portfolios. The Company's operating subsidiaries may retain the services of law firms that specialize in patent licensing and enforcement and patent law in connection with their licensing and enforcement activities. These law firms may be retained on a contingent fee basis whereby such law firms are paid a percentage of any negotiated fees, settlements or judgments awarded. The Company's operating subsidiaries may engage with funding sources that specialize in providing financing for patent licensing and enforcement. These litigation finance firms may be engaged on a non-recourse basis whereby such litigation finance firms are paid a percentage of any negotiated fees, settlements or judgments awarded in exchange for providing funding for legal fees and out of pocket expenses incurred as a result of the licensing and enforcement activities. The economic terms of the inventor agreements, operating agreements, contingent legal fee arrangements and litigation financing agreements associated with the patent portfolios owned or controlled by the Company's operating subsidiaries, if any, including royalty rates, contingent fee rates and other terms, vary across the patent portfolios owned or controlled by such operating subsidiaries. Inventor/former owner royalties, payments to non-controlling interests, contingent legal fees expenses and litigation finance expenses fluctuate period to period, based on the amount of revenues recognized each period, the terms and conditions of revenue agreements executed each period and the mix of specific patent portfolios with varying economic terms and obligations generating revenues each period. Inventor/former owner royalties, contingent legal fees expenses and litigation finance expenses will continue to fluctuate and may continue to vary significantly period to period, based primarily on these factors. |
Research and development | Research and development Research and development costs are expensed as incurred. We did not incur any research and development costs in the years ended December 31, 2019 and 2018. |
Income Tax | Income Taxes Deferred income tax assets and liabilities are recognized for the expected future income tax consequences of events that have been included in the consolidated financial statements or income tax returns. Deferred income tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities using tax rates in effect for the years in which the differences are expected to reverse. In evaluating the ultimate realization of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. Management establishes a valuation allowance if it is more likely than not that all or a portion of the deferred income tax assets will not be utilized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income, which must occur prior to the expiration of the net operating loss carryforwards. The Company also follows the guidance related to accounting for income tax uncertainties. In accounting for uncertainty in income taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. No liability for unrecognized tax benefits was recorded as of December 31, 2019 and 2018. The Company records revenues on a gross basis, before deduction for income taxes. The Company incurred foreign income tax expenses of approximately $5,000 and $1,040,000 for the years ended December 31, 2019 and 2018, respectively. |
Stock-based compensation | Stock-based compensation The Company recognizes stock-based compensation pursuant to ASC 718, "Compensation — Stock Compensation," which prescribes accounting and reporting standards for all stock-based payment transactions in which employee services, and, since January 1, 2019, non-employee services, are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options and other equity instruments such as employee stock ownership plans and stock appreciation rights. Stock-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). |
Earnings (loss) per share | Earnings (loss) per share Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of shares of the Company's common stock outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if our share-based awards and convertible securities were exercised or converted into common stock. The dilutive effect of our share-based awards is computed using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted earnings per share calculation. Because the Company incurred losses in all period covered by the financial statements and would be anti-dilutive, the diluted earnings per shares is the same as the basic earnings per share. The 50,000,000 shares of common stock issuable upon exercise of outstanding warrants and options are excluded from the computation of loss per share because the result would have been antidilutive. |
Leases | Leases In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842), to provide a new comprehensive model for lease accounting under this guidance, lessees and lessors should apply a "right-of-use" model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance-sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. The Company adopted Topic 842 as of January 1, 2019 using the modified retrospective transition method with no impact on the consolidated financial position or results of operations. |
Concentration of credit risk | Concentration of credit risk The Company maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Company has not experienced any such losses in these accounts. |
Segment reporting | Segment reporting The Company reports each material operating segment in accordance with ASC 280, "Segment Reporting." Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is the chief executive officer. The Company operates in two operational segments; intellectual property licensing and licensed packaging sales. Licensed packaging sales segment is not reported separately as revenue constitutes less than 10% of the combined revenue of all segments, reported profit is less than the combined profit of all operating segments that did not report a loss, and assets are less than 10% of the combined assets of all operating segments. Certain corporate expenses are not allocated to segments. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Management does not believe that there are any recently issued, but not effective, accounting standards which, if currently adopted, would have a material effect on the Company's financial statements. |
Going Concern | Going Concern During the period from 2008, when the Company changed its business to become an intellectual property management company, through 2019, the Company generated a cumulative loss of approximately $19,969,000. The Company's total current assets were approximately $2,405,000 at December 31, 2019. At December 31, 2019, the Company had a working capital deficiency of approximately $7,141,000, and it had negative working capital at December 31, 2018 and 2017. The Company requires funding for its operations. Because of the Company's continuing losses, the working capital deficiency, the uncertainty of future revenue, the Company's low stock price and the absence of a trading market in its common stock, the ability of the Company to raise funds in equity market or from lenders is severely impaired, and there exists substantial doubt about the ability of the Company to continue as a going concern. Although the Company may seek to raise funds and to obtain third party funding for litigation to enforce its intellectual property rights, the availability of such funds in uncertain. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Short-Term Debt and Long-Term L
Short-Term Debt and Long-Term Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of short-term and long-term debt | December 31, December 31, 2019 2018 Short-term debt: Loans payable – third party $ 147,000 $ 163,000 Purchase price of patents – current portion 569,386 100,000 Net short-term debt 716,386 263,000 Loan payable – related party Gross 4,672,810 4,672,810 Accrued Interest 117,780 117,780 Unamortized discount (189,705 ) (379,948 ) Net loans payable – related party $ 4,600,885 $ 4,410,642 Long-term liabilities: Purchase price of patents Gross 1,725,000 875,000 Unamortized discount (282,503 ) (105,171 ) Net purchase price of patents – long-term $ 1,442,497 $ 769,829 Contingent funding liabilities: Gross 20,378 150,000 Net contingent funding liabilities $ 20,378 $ 150,000 |
Schedule of fair value of the investment proceeds was allocated among the notes, common stock, and options | Relative fair value of options $ 191,860 Relative fair value of stock $ 218,024 Relative fair value of note payable $ 1,090,116 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair value of derivative liability using black-scholes option pricing model | Year Ended December 31, 2019 2018 Volatility 207-426 % 388-426 % Risk-free interest rate 0.24 % 0.64 % Expected dividends - - % Expected term 0.75-4.70 1.75-4.70 |
Schedule of valuation of financial instruments | Fair Value Measurements as of December 31, 2019 December 31, 2018 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets None - - - - - - Total assets — — — — — — Liabilities Conversion option derivative liability — — 595,000 — — 540,000 Total liabilities $ — $ — $ 595,000 $ — $ — $ 540,000 |
Schedule of reconciliation of changes in fair value of derivative liabilities classified as Level 3 | Significant Unobservable Inputs (Level 3) as Balance - December 31, 2017 $ 90,000 Change in fair value 450,000 Balance – December 31, 2018 540,000 Change in fair value 55,000 Balance - December 31, 2019 $ 595,000 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Warrant [Member] | |
Schedule of stock options and warrants | Number of Weighted Weighted Balance - December 31, 2017 65,000,000 0.004 0.17 Granted - - - Cancelled - - - Expired 65,000,000 - - Exercised - - - Balance - December 31, 2018 - - - Granted - - - Cancelled - - - Expired - - - Exercised - - - Balance - December 31, 2019 - - - Warrants exercisable at end of year - - - |
Stock options [Member] | |
Schedule of stock options and warrants | Number of Options Weighted Average Exercise Weighted Average Remaining Contractual Life Balance - December 31, 2017 50,000,000 0.03 2.75 Granted - - - Cancelled - - - Expired - - - Exercised - - - Balance - December 31, 2018 50,000,000 0.03 1.75 Granted - - - Cancelled - - - Expired - - - Exercised - - - Balance - December 31, 2019 50,000,000 0.03 0.75 Options exercisable at end of year 50,000,000 0.03 - |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Weighted December 31, amortization 2019 2018 (years) Patents $ 5,595,000 $ 4,020,000 9.8 Less: net monetization obligations (509,811 ) (509,811 ) Imputed interest (713,073 ) (376,291 ) Subtotal 4,372,116 3,133,898 Less: accumulated amortization (1,617,762 ) (1,088,280 ) Net value of intangible assets $ 2,754,354 $ 2,045,618 6.52 |
Schedule of annual amortization expense | Year ended December 31, 2020 $ 553,779 2021 549,345 2022 495,742 2023 323,071 2024 and thereafter 832,417 Total $ 2,754,354 |
Schedule of purchase price of the patents | Current Liabilities: 2019 2018 Purchase price of patents, current portion 569,386 $ 100,000 Unamortized discount Non-current liabilities: Purchase price of patents, long term 1,725,000 $ 875,000 Unamortized discount (282,503 ) (105,172 ) Total current and non-current 2,011,883 869,828 Effective interest rate of Amortized over 2 years 9.6-12.5 % 9.2-9.6 % |
Non-Controlling Interest (Table
Non-Controlling Interest (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
Schedule of equity attributable to the non-controlling interest | December 31, 2019 2018 Balance, beginning of year $ 1,758 $ 3,219 Net income (loss) attributable to non-controlling interest $ (1,519 ) $ (1,461 ) Balance, end of year $ 239 $ 1,758 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets | December 31, 2019 2018 Net operating loss carry forward $ 1,960,978 $ 1,770,729 Intangible Assets 331,704 195,999 Valuation allowance $ (2,292,682 ) $ (1,966,728 ) Balance, end of year $ - $ - |
Schedule of tax expense | December 31, 2019 2018 Federal $ $ - State 234 234 Foreign 5,000 1,039,900 Deferred - - Total $ 5,234 $ 1,040,134 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) | Apr. 11, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Summary of Significant Accounting Policies (Textual) | |||
Accumulated deficit | $ (19,968,668) | $ (18,659,892) | |
Negative working capital | 7,141,000 | 7,141,000 | |
Foreign income tax expenses | $ 5,000 | 1,040,000 | |
Shares of common stock exercised | 50,000,000 | ||
Licensed packaging sales segment, description | Licensed packaging sales segment is not reported separately as revenue constitutes less than 10% of the combined revenue of all segments, reported profit is less than the combined profit of all operating segments that did not report a loss, and assets are less than 10% of the combined assets of all operating segments. Certain corporate expenses are not allocated to segments. | ||
Total current assets | $ 2,404,753 | 169,254 | |
Allowance for doubtful accounts | $ 0 | $ 0 | |
Patents [Member] | Minimum [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Patents economic useful lives | 1 year | ||
Patents [Member] | Maximum [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Patents economic useful lives | 10 years | ||
Wynn Technologies Inc. [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Patents, description | The sole asset of Wynn Technologies, Inc. was US Patent No. RE38,137E. Wynn Technologies, Inc. could not transfer, assign, sell, hypothecate or otherwise encumber US Patent No. RE38,137E without the express written consent of Sol Li, owner of 35% of Wynn Technologies, Inc., unless, as of the date of such transfer, assignment, sale, hypothecation or other encumbrance, Mr. Li had received a total of at least $250,000. US Patent No. RE38,137E expired on September 28, 2015. The Company accounted for its 65% interest in Wynn Technologies, Inc. under the equity method whereby the investment accounts were increased for contributions by the Company plus its 60% share of income pursuant to the contractual agreement which provides that Sol Li, owner of 35% of Wynn Technologies, Inc. retained 40% of the income, and reduced for distributions and its 60% share of losses incurred, respectively, with the restriction whereby the account balances cannot go below zero. | ||
Ownership interest, description | Quest NetTech Corporation merged with Wynn Technologies, Inc. with Quest NetTech Corporation being the surviving entity. Pursuant to the merger agreement, we issued to Mr. Li a 35% interest in Quest NetTech Corporation. | ||
Quest Packaging Solutions Corporation [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Ownership percentage | 90.00% | ||
Quest Nettech Corporation [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Ownership percentage | 65.00% |
Short Term Debt and Long-term_2
Short Term Debt and Long-term Liabilities (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Short-term debt: | ||
Loans payable - third party | $ 147,000 | $ 163,000 |
Purchase price of patents - current portion | 569,386 | 100,000 |
Net short-term debt | 716,386 | 263,000 |
Loan payable - related party | ||
Gross | 4,672,810 | 4,672,810 |
Accrued Interest | 117,780 | 117,780 |
Unamortized discount | (189,705) | (379,948) |
Net loans payable - related party | 4,600,885 | 4,410,642 |
Purchase price of patents | ||
Gross | 1,725,000 | 875,000 |
Unamortized discount | (282,503) | (105,171) |
Net purchase price of patents - long-term | 1,442,497 | 769,829 |
Contingent funding liabilities: | ||
Gross | 20,378 | 150,000 |
Net contingent funding liabilities | $ 20,378 | $ 150,000 |
Short Term Debt and Long-Term_3
Short Term Debt and Long-Term Liabilities (Details 1) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Debt Disclosure [Abstract] | |
Relative fair value of options | $ 191,860 |
Relative fair value of stock | 218,024 |
Relative fair value of note payable | $ 1,090,116 |
Short Term Debt and Long-term_4
Short Term Debt and Long-term Liabilities (Details Textual) - USD ($) | 1 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2020 | Oct. 31, 2015 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jun. 15, 2017 | Oct. 22, 2015 | |
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Loans payable - third party | $ 147,000 | $ 163,000 | ||||||
Company paid loan payable | 16,000 | |||||||
Company borrowed amount | $ (16,000) | |||||||
Accrued interest percentage | 10.00% | |||||||
Common stock, shares authorized | 10,000,000,000 | 10,000,000,000 | ||||||
Percentage of note | 10.00% | |||||||
Percentage of promissory note | 10.00% | |||||||
Discount and debt issuance cost amortized | $ 282,503 | $ 105,171 | ||||||
Percentage of net monetization | 15.00% | |||||||
Accrued interest | $ 467,000 | |||||||
Licensing programs fund | 150,000 | |||||||
Funding agreement | $ 130,000 | |||||||
Effective interest rate | 8.50% | |||||||
Board of Directors [Member] | ||||||||
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Percentage of promissory note | 24.90% | |||||||
United Wireless Holdings, Inc. [Member] | ||||||||
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Company paid loan payable | $ 250,000 | |||||||
Company borrowed amount | $ 250,000 | $ 1,150,000 | $ 1,250,000 | |||||
Option to purchase common stock exercise prices | 50,000,000 | |||||||
Fair value of options grant | $ 220,000 | |||||||
Principal amount | $ 1,000,000 | |||||||
Common stock, shares authorized | 10,000,000,000 | 50,000,000 | ||||||
Percentage of note | 10.00% | 10.00% | ||||||
Percentage of promissory note | 90.00% | |||||||
Discount and debt issuance cost amortized | $ 509,276 | $ 319,033 | ||||||
Percentage of effective interest rate including discount | 33.00% | |||||||
Company received amount | $ 450,000 | |||||||
Percentage of net monetization | 15.00% | 15.00% | ||||||
Proceeds from notes payable | $ 188,023 | |||||||
Debt issuance cost | 60,958 | |||||||
Amortized and charged to interest expense | 698,981 | |||||||
Discount of monetization agreement | $ 450,000 | |||||||
Effective interest rate | 110.00% | |||||||
United Wireless Holdings, Inc. [Member] | Subsequent Event [Member] | ||||||||
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Percentage of promissory note | 10.00% | |||||||
United Wireless Holdings, Inc. [Member] | Securities Purchase Agreement [Member] | ||||||||
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Principal amount | $ 4,672,810 | |||||||
CXT Systems, Inc. [Member] | ||||||||
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Minimum future cumulative distributions | $ 600,000 | |||||||
Minimum future cumulative distributions, short-term | $ 194,386 | |||||||
Description of minimum payments due under agreement | Wholly owned subsidiary, and Intellectual Ventures Assets 34, LLC and Intellectual Ventures 37, LLC (“IV 34/37”) pursuant to which at closing CXT acquired by assignment all right, title, and interest in a portfolio of thirteen United States patents (the “CXT Portfolio”). Under the agreement, CXT will distribute 50% of net recoveries, as defined, to IV 34/37. CXT advanced $25,000 to IV 34/37 at closing, and agreed, pursuant to an amendment dated January 26, 2018, that in the event that, on December 31, 2018, December 31, 2019 and December 31, 2020, cumulative distributions 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 34/36. | |||||||
Discount of monetization agreement | $ 156,000 | |||||||
M-RED Inc. [Member] | ||||||||
Short-Term Debt and Long-Term Liabilities (Textual) | ||||||||
Minimum future cumulative distributions | 1,125,000 | |||||||
Minimum future cumulative distributions, short-term | $ 375,000 | |||||||
Description of minimum payments due under agreement | Wholly-owned subsidiary, and Intellectual Ventures Assets 113 LLC and Intellectual Ventures Assets 108 LLC (“IV 113/108”) pursuant to which at closing M-RED paid IV 113/108 $75,000 and IV 113/108 transferred to M-RED all right, title and interest in a portfolio of sixty United States patents and eight foreign patents (the “M-RED Portfolio”). Under the agreement, M-RED will distribute 50% of net proceeds, as defined, to IV 113/108, as long as we generate revenue from the M-RED Portfolio. The agreement with IV 113/108 provides that if, on September 30, 2020, September 30, 2021 and September 30, 2022, cumulative distributions to IV 113/108 total less than $450,000, $975,000 and $1,575,000, respectively, M-RED shall pay the difference between such cumulative amounts and the amount paid to IV 113/108 within ten days after the applicable date; with any advances being credited toward future distributions to IV 113/108. |
Derivative Liabilities (Details
Derivative Liabilities (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Derivative [Line Items] | ||
Risk-free interest rate | 0.24% | 0.64% |
Expected dividends | 0.00% | 0.00% |
Minimum [Member] | ||
Derivative [Line Items] | ||
Volatility | 207.00% | 388.00% |
Expected term | 9 months | 1 year 9 months |
Maximum [Member] | ||
Derivative [Line Items] | ||
Volatility | 426.00% | 426.00% |
Expected term | 4 years 8 months 12 days | 4 years 8 months 12 days |
Derivative Liabilities (Detai_2
Derivative Liabilities (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Level 1 [Member] | ||
Assets | ||
None | ||
Total assets | ||
Liabilities | ||
Conversion option derivative liability | ||
Total liabilities | ||
Level 2 [Member] | ||
Assets | ||
None | ||
Total assets | ||
Liabilities | ||
Conversion option derivative liability | ||
Total liabilities | ||
Level 3 [Member] | ||
Assets | ||
None | ||
Total assets | ||
Liabilities | ||
Conversion option derivative liability | 595,000 | 540,000 |
Total liabilities | $ 595,000 | $ 540,000 |
Derivative Liabilities (Detai_3
Derivative Liabilities (Details 2) - Level 3 [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Derivative [Line Items] | ||
Beginning balance | $ 540,000 | $ 90,000 |
Change in fair value | 55,000 | 450,000 |
Ending balance | $ 595,000 | $ 540,000 |
Derivative Liabilities (Detai_4
Derivative Liabilities (Details Textual) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Derivative Liabilities (Textual) | ||
Aggregate fair value of outstanding derivative liability | $ 595,000 | $ 540,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - Stock Options [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of Options | ||
Beginning Balance | 50,000,000 | 50,000,000 |
Granted | ||
Cancelled | ||
Expired | ||
Exercised | ||
Ending Balance | 50,000,000 | 50,000,000 |
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.03 | $ 0.03 |
Granted | ||
Expired | ||
Exercised | ||
Cancelled | ||
Ending Balance | $ 0.03 | $ 0.03 |
Weighted Average Remaining Contractual Life (Years) | ||
Weighted Average Remaining Contractual Life (Years) | 9 months | 1 year 9 months |
Options exercisable at end of year, Number of Options | 50,000,000 | |
Options exercisable at end of year, Weighted Average Exercise Price | $ 0.03 |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) - Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of Warrants | ||
Beginning Balance | 65,000,000 | |
Granted | ||
Cancelled | ||
Expired | 65,000,000 | |
Exercised | ||
Ending Balance | ||
Weighted Average Exercise Price | ||
Beginning Balance | $ 0.004 | |
Granted | ||
Cancelled | ||
Expired | ||
Exercised | ||
Ending Balance | ||
Weighted Average Remaining Contractual Life (Years) | ||
Weighted Average Remaining Contractual Life (Years) | 2 months 1 day | |
Warrants exercisable at end of year, Weighted Average Remaining Contractual Life |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) - Chief Executive Officer [Member] | 12 Months Ended |
Dec. 31, 2019$ / sharesshares | |
Stockholders' Equity (Textual) | |
Warrants to purchase shares | shares | 60,000,000 |
Warrants price per share | $ / shares | $ 0.004 |
Warrants expired date | Mar. 1, 2018 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Summary of intangible assets | ||
Patents | $ 5,595,000 | $ 4,020,000 |
Less: net monetization obligations | (509,811) | (509,811) |
Imputed interest | (713,073) | (376,291) |
Subtotal | 4,372,116 | 3,133,898 |
Less: accumulated amortization | (1,617,762) | (1,088,280) |
Net value of intangible assets | $ 2,754,354 | $ 2,045,618 |
Weighted average amortization period (years) | 6 years 6 months 7 days | |
Patents [Member] | ||
Summary of intangible assets | ||
Weighted average amortization period (years) | 9 years 9 months 18 days |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - Patents [Member] | Dec. 31, 2019USD ($) |
Year ended December 31, | |
2020 | $ 553,779 |
2021 | 549,345 |
2022 | 495,742 |
2023 | 323,071 |
2024 and thereafter | 832,417 |
Total | $ 2,754,354 |
Intangible Assets (Details 2)
Intangible Assets (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Current Liabilities: | ||
Purchase price of patents, current portion | $ 569,386 | $ 100,000 |
Non-current liabilities: | ||
Unamortized discount | (282,503) | (105,171) |
Patents [Member] | ||
Current Liabilities: | ||
Purchase price of patents, current portion | 569,386 | 100,000 |
Unamortized discount | ||
Non-current liabilities: | ||
Purchase price of patents, long term | 1,725,000 | 875,000 |
Unamortized discount | (282,503) | (105,172) |
Total current and non-current | $ 2,011,883 | $ 869,828 |
Patents [Member] | Minimum [Member] | ||
Non-current liabilities: | ||
Effective interest rate of Amortized over 2 years | 9.60% | 9.20% |
Patents [Member] | Maximum [Member] | ||
Non-current liabilities: | ||
Effective interest rate of Amortized over 2 years | 12.50% | 9.60% |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Intangible Assets (Textual) | ||
Book value of intellectual property | $ 2,754,354 | |
Amortization expense | $ 529,486 | $ 437,720 |
Percentage of patents acquired | 7.50% | |
Percentage of net monetization | 15.00% | |
Imputed interest | 10.00% | |
Non-current minimum payment obligations | $ 1,725,000 | |
Description of due term | Due over the next three years | |
Securities Purchase Agreement [Member] | ||
Intangible Assets (Textual) | ||
Percentage of patents acquired | 15.00% | |
Patents [Member] | ||
Intangible Assets (Textual) | ||
Intangible assets, description | Intangible assets are comprised of patents with estimated useful lives. The intangible assets at December 31, 2019 represent: · 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; · patents acquired in July 2017 pursuant to an obligation to pay 50% of net revenues to IV 34/37, against which $25,000 was paid in July 2017 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 34/36; the useful lives of the patents, at the date of acquisition, was 5-6 years; · 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; · patents (which were fully depreciated at the date of acquisition) 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; · patents acquired in March 2019 pursuant to an obligation to pay 50% of net revenues to IV 113/108, against which $75,000 was paid in March 2019 and provided that in the event that, on September 30, 2020, September 30, 2021 and September 30, 2022, cumulative distributions to IV 113/108 total less than $450,000, $975,000 and $1,575,000, respectively, M-RED shall pay the difference between such cumulative amounts and the amount paid to IV 113/108 within ten days after the applicable date; with any advances being credited toward future distributions to IV 113/108; the useful lives of the patents, at the date of acquisition, was approximately 9 years. | |
Effective interest rate of amortized periods | 2 years | |
Patents [Member] | Minimum [Member] | ||
Intangible Assets (Textual) | ||
Patents useful lives | 6 years | |
Patents [Member] | Maximum [Member] | ||
Intangible Assets (Textual) | ||
Patents useful lives | 10 years |
Non-Controlling Interest (Detai
Non-Controlling Interest (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Non-Controlling Interest [Abstract] | ||
Balance, beginning of year | $ 1,758 | $ 3,219 |
Net income (loss) attributable to non-controlling interest | (1,519) | (1,461) |
Balance, end of year | $ 239 | $ 1,758 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carry forward | $ 1,960,978 | $ 1,770,729 |
Intangible Assets | 331,704 | 195,999 |
Valuation allowance | (2,292,682) | (1,966,728) |
Balance, end of year |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal | ||
State | 234 | 234 |
Foreign | 5,000 | 1,039,900 |
Deferred | ||
Total | $ 5,234 | $ 1,040,134 |
Income Taxes (Details Textual)
Income Taxes (Details Textual) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Income Taxes (Textual) | |
Net operating loss | $ 7,542,223 |
Descriptions of foreign source withholding tax | In 2019 the Company was subject to foreign source withholding tax of 10% in the People’s Republic of China. In 2018 the Company was subject to foreign source withholding tax of 10% and 20% in the People’s Republic of China and the Republic of China, respectively. |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transactions (Textual) | ||
Cost of information technology services | $ 464 | $ 794 |
Percentage of note | 10.00% | |
Interest expense | $ 467,000 | $ 510,000 |
United Wireless Holdings, Inc. [Member] | ||
Related Party Transactions (Textual) | ||
Percentage of note | 10.00% | 10.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | Nov. 30, 2014 | Aug. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2019 | Dec. 31, 2018 |
Commitments and Contingencies (Textual) | |||||
Third party funding source advanced for costs and expenses | $ 130,000 | $ 150,000 | |||
Chief Executive Officer [Member] | |||||
Commitments and Contingencies (Textual) | |||||
Term of agreement, description | The Company agreed to employ him as president and chief executive officer for a term of three years, commencing January 1, 2014, and continuing on a year-to-year basis unless terminated by either party on not less than 90 days' notice prior to the expiration of the initial term or any one-year extension. | ||||
Initial annual salary | $ 252,000 | ||||
Officer’s annual salary | $ 300,000 | ||||
Annual bonus compensation, description | The Company’s board of directors approved annual bonus compensation equal to 30% of the amount by which our consolidated income before income taxes exceeds $500,000. |