v3.4.0.3

7. Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

In connection with the March 6, 2014 Participation Agreement (see Note 3) recognizing Ronco as a Variable Interest Entity, we recognized certain identifiable intangibles, other than goodwill, totaling $3,700,000 as well as goodwill totaling $15,963,074. Identifiable intangibles other than goodwill consists of patents of $2,000,000 with a weighted average amortization period of nine years, and trademarks of $1,700,000, which are not subject to amortization.

In addition, in connection with the Merger Agreement completed April 2, 2014 (see Note 4), we recognized certain identifiable intangibles other than goodwill. Identifiable intangibles other than goodwill consists of eDiets’ customer relationships of $1,200,000, eDiets’ domain names of $1,100,000, and eDiets’ trade names of $850,000, which are being amortized over a weighted-average period of five years. In addition, we recognized the Company’s asseenontv.com website of $3,000,000 and goodwill of $3,214,097, both are not subject to amortization. The website was subsequently sold following the period covered by this report. See note 18.

The fair values assigned to the intangible assets recognized in these transactions were based on estimates of our management.

On September 30, 2014, the Company recognized an impairment loss on goodwill and other intangible assets of approximately $19,177,000 and $2,793,000, respectively. The Company determined that significant qualitative conditions existed on September 30, 2014 to warrant an impairment test as of that date, rather than waiting 12 months from the date goodwill was recognized to do an annual test. The following are the conditions that led to that determination:

· Poor overall financial performance of each reporting unit

· The Company was in technical default on Senior Secured Debt

· Insufficient working capital

· Decreased share price

The Company recognized an impairment loss on goodwill and other intangible assets of approximately $19,177,000 and $2,793,000, respectively for the three and nine months ended September 30, 2014. Goodwill was fully impaired and other intangible assets were partially impaired. See below table for the impairment loss recognized on other intangible assets.

The following table summarizes our intangible assets at September 30, 2014.

Intangible Asset	December 31, 2013			Participation Agreement			Reverse Merger			Post Combination			Total			Accumulated Amortization			Impairment Loss			Carrying Value
Finite lived intangibles:
Patents	$	–		$	2,000,000		$	–		$	–		$	2,000,000		$	(129,629	)	$	–		$	1,870,371
Customer relationships		–			–			1,200,000			–			1,200,000			(120,000	)		(1,038,415	)		41,585
Domain names		–			–			1,100,000			–			1,100,000			(110,000	)		(990,000	)		–
Trade names		–			–			850,000			–			850,000			(85,000	)		(765,000	)		–
		–			2,000,000			3,150,000			–			5,150,000			(444,629	)		(2,793,415	)		1,911,956
Indefinite lived intangibles:
Trademarks		–			1,700,000			–			–			1,700,000			–			–			1,700,000
asseenontv.com URL		–			–			3,000,000			–			3,000,000			–			–			3,000,000
		–			1,700,000			3,000,000			–			4,700,000			–			–			4,700,000
Intangible, net	$	–		$	3,700,000		$	6,150,000		$	–		$	9,850,000		$	(444,629	)	$	(2,793,415	)	$	6,611,956

A summary of future amortization expense is as follows:

Year 1		$	222,222
Year 2			222,222
Year 3			222,222
Year 4			222,222
Year 5			222,222
Thereafter			759,261
		$	1,870,371

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The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 30
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