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

6 Months Ended

Jun. 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 June 30, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Reacquired franchise rights	$	1,741,076	$	310,266	$	1,430,810
Customer relationships		648,875		337,158		311,717
Reacquired development rights		1,162,000		177,295		984,705
	$	3,551,951	$	824,719	$	2,727,232

Unamortized intangible assets:
Goodwill						2,945,263
Total intangible assets					$	5,672,495

Amortization expense was $174,882 and $348,559 for the three and six months ended June 30, 2016, respectively. Amortization expense was $88,947 and $125,614 for the three and six months ended June 30, 2015, respectively.

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

2016 (remaining)	$	373,709
2017		556,919
2018		438,542
2019		422,981
2020		422,981
Thereafter		512,100
Total	$	2,727,232