Intangible Assets and Royalty Agreement

Intangible assets activity is summarized as follows:



	June 30, 2013								December 31, 2012
	Weighted Average Amortization Lives	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Impairment Adjustment			Accumulated Amortization			Net Carrying Value
Intangible assets subject to amortization:
License-Shriners Hsp for Children & USF Research (a)	10 years	$	996,000	$	(637,433	)	$	358,567	$	996,000	$	—		$	(587,633	)	$	408,367
License - SaluMedica LLC Spine Repair (b)	10 years	1,547,324		(1,547,324		)	—		2,399,000		(851,676		)	(1,547,324		)	—
License - Polyvinyl Alcohol Cryogel (c)	10 years	1,720,181		(1,287,824		)	432,357		2,667,000		(946,819		)	(1,223,561		)	496,620
Customer Relationships (d)	14 years	3,520,000		(628,572		)	2,891,428		3,520,000		—			(502,857		)	3,017,143
Supplier Relationships (d)	14 years	241,000		(43,036		)	197,964		241,000		—			(34,428		)	206,572
Patents & Know-How (d)	14 years	5,530,000		(987,500		)	4,542,500		5,530,000		—			(790,000		)	4,740,000
Micronized Processing Know-How (d)	14 years	2,160,000		(231,428		)	1,928,572		2,160,000		—			(154,286		)	2,005,714
Licenses/Permits (d)	3 years	13,000		(10,833		)	2,167		13,000		—			(8,667		)	4,333
Patent Application Cost ( e )	17 years	342,695		(5,040		)	337,655		—		—			—			—
		16,070,200		(5,378,990		)	10,691,210		17,526,000		(1,798,495		)	(4,848,756		)	10,878,749
Intangible assets not subject to amortization:
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
		$	17,103,200	$	(5,378,990	)	$	11,724,210	$	18,559,000	$	(1,798,495	)	$	(4,848,756	)	$	11,911,749

(a)

On January 29, 2007, the Company acquired a license from Shriners Hospitals for Children and University of South Florida Research Foundation, Inc. The acquisition price of this license was a one-time fee of $100,000 and 1,120,000 shares of common stock valued at $896,000 (based upon the estimated fair value of the common stock on the transaction date). 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.


(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. In September 2012, the cost of this license was deemed to be impaired and reduced to its fair value.

(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 hydrogel. The acquisition price of the asset was 400,000 shares of common stock valued at $2,596,000 (based upon the closing price of the common stock on the transaction date). 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 an additional 100,000 shares of common stock to the licensor valued at $71,000. In September 2012, the cost of the license was deemed to be impaired and reduced to its fair value. At June 30, 2013 and December 31, 2012, 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.

(e) Capitalized external legal and other registration costs in connection with internally developed tissue based patents.

Future Amortization Expense

Expected future amortization of intangible assets is as follows:



	Estimated Amortization Expense
Year ending December 31,	Estimated Amortization Expense
2013 (a)	$	535,266
2014	1,066,205
2015	1,044,151
2016	997,156
2017	906,960
Thereafter	6,141,472
	$	10,691,210


(a)	Estimated amortization expense for the year ending December 31, 2013 includes only amortization to be recorded after June 30, 2013.