|3 Months Ended|
Mar. 31, 2022
Note 7. Intangible Assets
ESG Clean Energy License
The Company’s intangible assets include costs associated with securing in August 2021 an Exclusive Intellectual Property License Agreement with ESG Clean Energy, LLC (“ESG”), pursuant to which the Company received (i) an exclusive license to ESG’s patent rights and know-how related to stationary electric power generation (not in connection with vehicles), including methods to utilize heat and capture carbon dioxide in Canada, and (ii) a non-exclusive license to the intellectual property in up to 25 sites in the United States that are operated by the Company or its affiliates.
In consideration of the licenses, the Company paid an up-front royalty of $1,500,000 and the Company is obligated to make additional royalty payments as follows: (i) an additional $1,500,000 on or before January 31, 2022, which may be paid in whole or in part in the form of Viking’s common stock based on the price of Viking’s common stock on August 18, 2021, at ESG’s election; (ii) an additional $2,000,000 on or before April 20, 2022, which may be paid in whole or in part in the form of Viking’s common stock based on the price of Viking’s common stock on August 18, 2021, at ESG’s election; and (iii) continuing royalties of not more than 15% of the net revenues of Viking generated using the intellectual property, with the continuing royalty percentage to be jointly determined by the parties collaboratively based on the parties’ development of realistic cashflow models resulting from initial projects utilizing the intellectual property, and with the parties utilizing mediation if they cannot jointly agree to the continuing royalty percentage.
With respect to the payments noted in (i) and (ii) above, totaling $3,500,000, on or about November 22, 2021, the Company paid $500,000 to or on behalf of ESG and ESG elected to accept $2,750,000 in shares of Viking’s common stock at the applicable conversion price, resulting in 6,942,691 shares, leaving a balance owing by Viking of $250,000 which was paid by Viking in January 2022.
Viking’s exclusivity with respect to Canada shall terminate if minimum continuing royalty payments to ESG are not at least equal to the following minimum payments based on the date that ESG first begins capturing carbon dioxide and selling for commercial purposes one or more commodities from a system installed and operated by ESG using the Intellectual Property (the “Trigger Date”):
If the continuing royalty percentage is adjusted jointly by the parties downward from the maximum of 15%, then the minimum continuing royalty payments for any given year from the Trigger Date shall also be adjusted downward proportionally.
The Company recognized amortization expense of $76,116 for the three months ended March 31, 2022. The estimated future amortization expense for each of the next five years is $304,465 per year.
The ESG Clean Energy intangible asset consisted of the following at March 31, 2022 and December 31, 2021:
Other intangibles – Simson-Maxwell – Customer Relationships and Brand
On October 18, 2021, the Company completed the acquisition of Simson-Maxwell, and allocated a portion of the purchase price to Customer Relationships with a fair value of $1,677,453 and an estimated useful life of 10 years, and the Simmax Brand with a fair value of $2,230,673 and an indefinite useful life.
The Company recognized amortization expense for the Customer Relationship intangible of $41,361 for the three months ended March 31, 2022. The estimated future amortization expense for each of the next five years is $167,745 per year.
As the Simmax Brand intangible fair value is deemed to have an indefinite like, the Company periodically reviews its fair value to determine if an impairment charge should be recognized. The Company did not recognize any impairment for the three months ended March 31, 2022.
The Other intangibles – Simson-Maxwell consisted of the following at March 31, 2022 and December 31, 2021:
The entire disclosure for all or part of the information related to intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef