Annual report pursuant to Section 13 and 15(d)

Note 6 - Intangible Assets

v3.8.0.1
Note 6 - Intangible Assets
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Intangible Assets Disclosure [Text Block]
Note
6:
  
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 consisted of the following:
 
    As of December 31, 2017
    Gross Carrying
Amount		   Accumulated
Amortization		   Net Carrying
Value
Amortized intangible assets:                        
Reacquired franchise rights   $
1,673,000
     $
657,943
     $
1,015,057
  
Customer relationships    
701,000
      
674,667
      
26,333
  
Reacquired development rights    
1,162,000
      
443,348
      
718,652
  
    $
3,536,000
     $
1,775,958
     $
1,760,042
  
 
    As of December 31, 2016
    Gross Carrying
Amount		   Accumulated
Amortization		   Net Carrying
Value
Amortized intangible assets:                        
Reacquired franchise rights   $
1,673,000
     $
410,688
     $
1,262,312
  
Customer relationships    
701,000
      
509,042
      
191,958
  
Reacquired development rights    
1,162,000
      
277,348
      
884,652
  
    $
3,536,000
     $
1,197,078
     $
2,338,922
  
 
Amortization expense was
$578,880
and
$747,733
for the year ended
December 31, 2017
and
2016,
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. 
No
impairment was recorded for the year ended
December 31, 2017.
 
Estimated amortization expense for
2018
and subsequent years is as follows:
 
2018   $
439,590
  
2019    
413,256
  
2020    
413,256
  
2021    
348,034
  
2022    
133,693
  
Thereafter    
12,213
  
Total   $
1,760,042