NOTE 6 – IMPAIRMENT OF ASSETS

Our assets impaired during the quarter ended May 30, 2015 were comprised of the following (in thousands):



Description		Amount
Long-term receivables from FC
Organizational Products (FCOP)	$	541
Capitalized curriculum		414
Prepaid expenses and other long-term assets		127
	$	1,082

The following is a description of the facts and circumstances regarding the impairment of these assets.

Long-Term FCOP Receivables – During the quarter ended May 30, 2015 we determined that the operating agreements between the Company and FCOP allow us to collect reimbursement for certain rental expenses prior to the annual required distribution of earnings to FCOP’s creditors. Such rents were previously treated as lower in priority and therefore, were considered long-term receivables. Although this determination is expected to improve our cash flows and collections of rents receivable from FCOP in the short term, it also reduces the amount of cash we are expecting to receive from the required distribution of earnings to pay long-term receivable balances. After this determination was made, the present value of our previously recorded long-term receivables was more than the present value of expected corresponding cash flows. Accordingly, we recalculated our discount on the long-term receivables and impaired the remaining balance.

Capitalized Curriculum – During the third quarter of fiscal 2015, we determined that it would be beneficial to discontinue a component of one of our existing offerings and we received legal notice that another offering contained names trademarked by another entity. Since the Company currently offers a similar program, the decision was made to discontinue the offering rather than modify the curriculum as required by applicable trademark law. Accordingly, we impaired the remaining unamortized carrying value of these offerings. These items were classified as components of other long-term assets on our consolidated balance sheets.

Prepaid Expenses and Other Long-Term Assets – In connection with a component of one of our offerings that was discontinued (as described above), we had prepaid royalties by an unrelated developer. Based on the decision to impair the curriculum, we determined that recovery of the prepaid royalties was remote and we expensed the carrying value of these prepaid assets. Approximately $60,000 of this balance was previously included in other long-term assets.