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INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2011
INTANGIBLE ASSETS  
INTANGIBLE ASSETS

5.                INTANGIBLE ASSETS

 

Intangible assets consist of the following:

 

 

 

December 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

License agreement

 

$

500,000

 

$

500,000

 

Trademarks and patents

 

508,743

 

508,743

 

 

 

1,008,743

 

1,008,743

 

Accumulated amortization

 

(678,614

)

(625,507

)

 

 

$

330,129

 

$

383,236

 

 

In 1995, the Company entered into a license agreement with the Chief Executive Officer of the Company for the exclusive right to manufacture, market, and distribute products utilizing automated retraction technology.  This license agreement was amended July 3, 2008 to include certain additional patent applications owned by such officer in the definition of “Patent Properties” so that such additional patent applications would be covered by the license.  This technology is the subject of various patents and patent applications owned by such officer of the Company.  The initial licensing fee of $500,000 is being amortized over 17 years.  The license agreement also provides for quarterly payments of a 5% royalty fee on gross sales.  The royalty fee expense is recognized in the period in which it is earned.  Royalty fees of $2,643,209; $2,940,948; and $2,806,223 are included in Cost of sales for the years ended December 31, 2011, 2010, and 2009, respectively.  Royalties payable under this agreement aggregated $122,939 and $949,619 at December 31, 2011 and 2010, respectively.  Gross sales upon which royalties are based were $52,864,158; $58,795,279; and $56,124,453 for 2011, 2010, and 2009, respectively.  Royalties were also paid on litigation proceeds, net of legal fees, on a gross amount of $2.4 million in 2010 and $6.0 million in 2011.  A small amount of royalties was paid on royalties from a licensing agreement with a third party.

 

In the third quarter of 2009, the Company announced several cost cutting and cash saving initiatives to conserve its cash.  As a part of those initiatives, the Chief Executive Officer waived payment to him of $1,000,000 in royalty fees.  Therefore, the royalty fees of $2,806,223 for 2009 resulted in a cash outlay of $1,806,223.

 

Amortization expense for the years ended December 31, 2011, 2010, and 2009, was $43,934; $43,440; and $43,440, respectively.  Future amortization expense for the years 2012 through 2016 is estimated to be $43,933 per year.