Intangible Assets and Royalty Agreement

Intangible assets are summarized as follows (in thousands):



	Weighted Average Amortization Lives	September 30, 2017			December 31, 2016
		Cost			Cost
Licenses (a) (b) (c) (d)	7 years	$	1,009		$	1,399
Patents & Know-How (b) (c) (d)	19 years	8,712			14,839
Customer & Supplier Relationships (b) (d)	13 years	4,271			9,091
Tradenames & Trademarks (d)	indefinite	1,008			1,458
Non-compete agreements	4 years	120			830
In Process Research & Development (b)	various	25			25
Patents in Process (c)	various	1,742			2,618
Total		16,887			30,260
Less Accumulated amortization and impairment charges		(6,510		)	(6,992		)
Net		$	10,377		$	23,268

(a)

On January 29, 2007, the Company acquired a license from Shriners Hospitals for Children and University of South Florida Research Foundation, Inc. in the amount of $996,000. 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. As of September 30, 2017, the license was fully amortized.


(b)	On January 5, 2011, the Company acquired Surgical Biologics, LLC. As a result, the Company recorded intangible assets for Customer & Supplier Relationships of $3,761,000, Patents & Know-How of $7,690,000, Licenses of $13,000, Tradenames & Trademarks of $1,008,000 and In-Process Research & Development of $25,000.

(c)

Patents in Process consist of capitalized external legal and other registration costs in connection with internally developed tissue-based patents that are pending. Once issued, the costs associated with a given patent will be included in Patents & Know-How under intangible assets subject to amortization. For the nine months ended September 30, 2017, approximately $663,000 of costs associated with patents granted during the period were capitalized and included in Patents & Know-How subject to amortization over the life of the patents.


(d)	On January 13, 2016, the Company acquired Stability, Inc. As a result, the Company recorded intangible assets for Patents & Know-How of $6,790,000, Customer & Supplier Relationships of $5,330,000, Non-compete agreements of $830,000, Tradenames & Trademarks of $450,000 and Licenses of $390,000.

On September 30, 2017, the Company completed the Stability Divestiture which resulted in the transfer of intangible assets acquired in 2016 and the acquisition of a Distribution Agreement valued at $510,000 and a Non-compete Agreement valued at $120,000.

Gross amortization expense for the nine months ended September 30, 2017 and 2016, was approximately $1,451,000 and $1,889,000, respectively, and $418,000 and $631,000 for the three months ended September 30, 2017 and 2016, respectively. For the three and nine months ended September 30, 2017, approximately $1,932,000 of accumulated amortization expense was eliminated in connection with the Stability Divestiture.

Expected future amortization of intangible assets as of September 30, 2017, is as follows (in thousands):



Year ending December 31,	Estimated Amortization Expense
2017 (a)	$	237
2018	950
2019	950
2020	950
2021	942
Thereafter	5,340
	$	9,369

(a) Estimated amortization expense for the year ending December 31, 2017, includes only amortization to be recorded after September 30, 2017.