The Joint Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Intangible Assets

Note 5 - Intangible Assets

9 Months Ended

Sep. 30, 2016

Intangible Assets Disclosure [Text Block]

Note 5: Intangible Assets

On January 1, 2016, the Company entered into an agreement under which it repurchased the regional development rights to develop franchises in San Bernardino and Riverside Counties in California. The total consideration for the transaction was $275,000, paid in cash.

The Company carried a deferred revenue balance associated with these transactions of $36,250, representing license fees collected upon the execution of the regional developer agreements. The Company accounted for the development rights associated with the unsold or undeveloped franchises as a cancellation, and the respective deferred revenue was netted against the aggregate purchase price or recognized as revenue to the extent deferred revenue was in excess of the cash consideration paid.

On June 1, 2016, the Company entered into an agreement under which it repurchased the regional development rights to develop franchises in Virginia. The total consideration for the transaction was $50,000, paid in cash.

The Company carried a deferred revenue balance associated with these transactions of $188,500, representing license fees collected upon the execution of the regional developer agreements. The Company accounted for the development rights associated with the unsold or undeveloped franchises as a cancellation, and the respective deferred revenue was netted against the aggregate purchase price or recognized as revenue to the extent deferred revenue was in excess of the cash consideration paid.

Intangible assets consist of the following:

	As of September 30, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Reacquired franchise rights	$	1,711,001	$	380,788	$	1,330,213
Customer relationships		728,000		437,167		290,833
Reacquired development rights		1,162,000		210,268		951,732
	$	3,601,001	$	1,028,223	$	2,572,778

Amortization expense was $203,503 and $552,062 for the three and nine months ended September 30, 2016, respectively. Amortization expense was $164,193 and $289,807 for the three and nine months ended September 30, 2015, respectively.

Estimated amortization expense for 2016 and subsequent years is as follows:

2016 (remaining)	$	195,671
2017		592,185
2018		445,018
2019		418,685
2020		418,685
Thereafter		502,534
Total	$	2,572,778