Note 6 - License Agreement

12 Months Ended

Dec. 31, 2012

Intangible Assets Disclosure [Text Block]

NOTE 6 – License Agreement:

On January 4, 2011 , the Company entered into a License and Distribution Agreement, as amended, (the “License Agreement”) with EyeLevel Interactive, LLC, which has since been assigned by EyeLevel Interactive, LLC to an affiliate of it named EyeLevel Interactive North America, LLC (“Licensor”), a leading technology company, pursuant to which the Company was granted a license to market, promote, sell and distribute garments utilizing certain intellectual property of Licensor (the “Products”) to the Company’s current and potential clients. The License Agreement expires three years and 180 days following the Effective Date (the “Term”). The Company may renew the License Agreement for additional three year terms by giving written notice to Licensor at least 90 days prior to the expiration of the then current term, provided the Company has met certain sales requirements relating to the Products and is not otherwise in default under the License Agreement or any manufacturing agreement with Licensor. Any renewal of the License Agreement will be on Licensor’s then current form, provided that the license fee, the restrictive covenants and certain other provisions of the License Agreement will be incorporated into the new form of agreement. The License Fee shall be payable on the first day of the renewal term.

In conjunction with the execution of the License Agreement, the Company paid Licensor a license fee (the “License Fee”) equal to (1) $2.0 million cash, plus (2) a warrant to acquire 360,000 shares of the Company’s common stock (the “Warrant”) at the greater of the Company’s closing price as quoted on the Nasdaq Stock Market or the book value per share of the Company’s common stock as of the Effective Date. This Warrant was exercisable until January 4, 2016, and had an exercise price of $10.63 per share. On March 6, 2012, Licensor exercised its warrant and acquired 44,912 shares of the Company’s stock in exchange for the surrender of the remainder of the warrant. In the event the Company achieves a specified level of Gross Sales (as calculated pursuant to the License Agreement), during the initial Term, from the sale of Products, the Company will be required to pay Licensor an additional cash license fee. If the Company does not attain such level of Gross Sales during the initial Term, the Company may terminate the License Agreement. In addition to the License Fee, the Company shall pay Licensor a monthly royalty fee based upon Gross Sales from the sale of Products for the immediately preceding month of operation, subject to a minimum required payment if the License Agreement is not terminated prior to the end of the then current term.

Although we believe that this new product line provides us with an opportunity for significant growth in our Uniforms and Related Products segment in the future, we have not been able to generate any significant revenues from the product line during the last two years.  We have attempted to negotiate an extension of the initial term of the licensing agreement and are continuing to pursue this extension.  However, we have not been successful to this point and cannot be assured that we will ultimately be able to negotiate an extension on reasonable terms.    Additionally, we have been involved in two significant test programs with two separate customers during 2012.  One of these programs was with a major retailer in the northeast in the fourth quarter.  The test was adversely affected by hurricane Sandy, and as a result, the customer determined that it did not have sufficient data to conclude on moving forward with a full program.  We are in the process of developing another test program with this customer in 2013.  Additionally, while the feedback from the other test program has been positive, the customer has been slow to move to a full revenue producing program at this point.  As a result of these items and the lack of an extension of the initial term at this point, we concluded that we did not have adequate, verifiable cash flows to support recovery of the intangible asset on our statement of financial position at December 31, 2012.  Therefore, we recorded a pre-tax, non-cash impairment charge of $1,226,000 in the fourth quarter of 2012 to write off the remaining balance of the licensing agreement.