| Intangible Assets and Royalty Agreement |
7. | Intangible Assets and Royalty Agreement |
Intangible assets activity is summarized as follows: | | | | | | | | | Average | | Gross | | | | | | | | | Net | | | Gross | | | | | | Net | | | | Amortization | | Carrying | | | Impairment | | | Accumulated | | | Carrying | | | Carrying | | | Accumulated | | | Carrying | | | | Lives | | Value | | | Adjustment | | | Amortization | | | Value | | | Value | | | Amortization | | | Value | | | | | | | | | | | | | | | | | | | | | | | | | | License-Shriners Hsp for Children & USF Research (a) | 10 years | | $ | 996,000 | | | $ | — | | | $ | (587,633 | ) | | $ | 408,367 | | | $ | 996,000 | | | $ | (488,033 | ) | | $ | 507,967 | | License - SaluMedica LLC Spine Repair (b) | 10 years | | | 2,399,000 | | | | (851,676 | ) | | | (1,547,324 | ) | | | — | | | | 2,399,000 | | | | (1,313,573 | ) | | | 1,085,427 | | License - Polyvinyl Alcohol Cryogel (c) | 10 years | | | 2,667,000 | | | | (946,819 | ) | | | (1,223,561 | ) | | | 496,620 | | | | 2,667,000 | | | | (998,932 | ) | | | 1,668,068 | | Customer Relationships (d) | 14 years | | | 3,520,000 | | | | — | | | | (502,857 | ) | | | 3,017,143 | | | | 3,520,000 | | | | (251,429 | ) | | | 3,268,571 | | Supplier Relationships (d) | 14 years | | | 241,000 | | | | — | | | | (34,429 | ) | | | 206,571 | | | | 241,000 | | | | (17,215 | ) | | | 223,785 | | Patents & Know-How (d) | 14 years | | | 5,530,000 | | | | — | | | | (790,000 | ) | | | 4,740,000 | | | | 5,530,000 | | | | (395,000 | ) | | | 5,135,000 | | Micronized Processing Know-How (d) | 14 years | | | 2,160,000 | | | | — | | | | (154,286 | ) | | | 2,005,714 | | | | 2,160,000 | | | | — | | | | 2,160,000 | | Licenses/Permits (d) | 3 years | | | 13,000 | | | | — | | | | (8,667 | ) | | | 4,333 | | | | 13,000 | | | | (4,333 | ) | | | 8,667 | | | | | | | 17,526,000 | | | | (1,798,495 | ) | | | (4,848,756 | ) | | | 10,878,749 | | | | 17,526,000 | | | | (3,468,515 | ) | | | 14,057,485 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trade Names/Trademarks (d) | indefinite | | | 1,008,000 | | | | — | | | | — | | | | 1,008,000 | | | | 1,008,000 | | | | — | | | | 1,008,000 | | In-process Research & Development-Other (d) | indefinite | | | 25,000 | | | | — | | | | — | | | | 25,000 | | | | 25,000 | | | | — | | | | 25,000 | | | | | | $ | 18,559,000 | | | $ | (1,798,495 | ) | | $ | (4,848,756 | ) | | $ | 11,911,749 | | | $ | 18,559,000 | | | $ | (3,468,515 | ) | | $ | 15,090,485 | |
(a) On January 29, 2007, the Company acquired a license from Shriners Hospitals for Children and University of South Florida Research Foundation, Inc. Within 30 days after the receipt by the Company of approval by the FDA allowing the sale of the first licensed product, the Company is required to pay an additional $200,000 to the licensor. Due to its contingent nature, this amount is not recorded as a liability. The Company will also be required to pay a royalty of 3% on all commercial sales revenue from the licensed products. The Company is also obligated to pay a $50,000 minimum annual royalty payment over the life of the license.
(b) License from SaluMedica, LLC (SaluMedica) for the use of certain developed technologies related to spine repair. This license was acquired through the acquisition of SpineMedica Corp.
(c) On March 31, 2008, the Company entered into a license agreement for the use of certain developed technologies related to surgical sheets made of polyvinyl alcohol cryogel. The agreement also provides for the issuance of an additional 600,000 shares upon the Company meeting certain milestones related to future sales. On December 31, 2009 the Company completed the sale of its first commercial product and met its first milestone under this agreement. As a result the Company issued 100,000 shares of common stock to the licensor valued at $71,000. At December 31, 2012 or 2011, there are no additional amounts accrued for this obligation due to its contingent nature.
(d) On January 5, 2011, the Company acquired Surgical Biologics, LLC. As a result, the Company recorded intangible assets for customer and supplier relationships, patents and know-how, licenses/permits, trade names and trademarks and in-process research and development. Expected future amortization of intangible assets is as follows:
| | | Estimated | | | | | Amortization | | Year ending December 31, | | Expense | | 2013 | | $ | 1,050,380 | | 2014 | | | 1,046,047 | | 2015 | | | 1,022,651 | | 2016 | | | 976,998 | | 2017 | | | 886,927 | | Thereafter | | | 5,895,746 | | | | | $ | 10,878,749 | |
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