Annual report pursuant to Section 13 and 15(d)

Note 6 - Intangible Assets

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Note 6 - Intangible Assets
12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Intangible Assets Disclosure [Text Block]
Note
6:
Intangible Assets
 
During the year
ended
December
31,
2015,
the Company entered into several agreements to repurchase regional developer licenses, reacquiring rights in Los Angeles County, San Diego County, and Orange County, California, Erie County, Monroe County, Nassau County, Suffolk County, and Albany County, New York, and the regional developer license in New Jersey in exchange for cash consideration of
$1,583,000.
  The Company carried a deferred revenue balance associated with these transactions of
$914,000,
representing license fees collected upon the execution of the regional developer agreements.  In accordance with ASC
952
-
605,
the Company accounted for the development rights associated with the unsold or undeveloped franchises as cancellations, 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.   During the year ended
December
31,
2015,
the revenue recognized as excess deferred regional developer fees totaled
$254,250.
The remaining balance was accounted for as consideration paid for the reacquired development rights. As the deferred revenue with respect to these regional developer rights had previously been taken into account for income tax purposes, the tax basis in the reacquired development rights is equal to the cash consideration paid.
 
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 consisted of the following:
 
    As of December 31, 2016
    Gross Carrying
Amount
  Accumulated
Amortization
  Net Carrying
Value
Amortized intangible assets:                        
Reacquired franchise rights   $
1,911,750
    $
444,795
    $
1,466,955
 
Customer relationships    
701,000
     
509,042
     
191,958
 
Reacquired development rights    
923,250
     
243,241
     
680,009
 
    $
3,536,000
    $
1,197,078
    $
2,338,922
 
 
Amortization expense was
$747,733
and
$476,161
for the year ended
December
31,
2016
and
2015,
respectively.
 
The Company evaluates the recoverability of finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets
may
not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. The Company recorded an impairment charge as a result of the closure of a clinic acquired in
2015
of
$38,185
related to certain reacquired franchise rights and customer relationships during the year ended
December
31,
2016
which is included on the loss on disposition or impairment line of the statement of consolidated operations.
   
Estimated amortization expense for
2017
and subsequent years is as follows:
 
2017   $
578,881
 
2018    
439,589
 
2019    
413,256
 
2020    
413,256
 
2021    
348,034
 
Thereafter    
145,906
 
Total   $
2,338,922